<PAGE>   1
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K   

                                   ---------

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED JUNE 30, 1997

                                   ---------

                          COMMISSION FILE NO. 33-63838

                             NEODATA SERVICES, INC.
                            (a Delaware Corporation)
                I.R.S. EMPLOYER IDENTIFICATION NUMBER 75-2333190
                           833 W. SOUTH BOULDER ROAD
                           LOUISVILLE, COLORADO 80027
                                 (303) 666-7000

          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 REQUIREMENT 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/

   AS OF AUGUST 22, 1997, THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING
STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT WAS $0.

   AS OF AUGUST 22, 1997, THE REGISTRANT HAD OUTSTANDING 1,173 SHARES OF ITS
COMMON STOCK, $.01 PAR VALUE PER SHARE.

                      DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE
                                      ----

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<PAGE>   2
                                     PART I

ITEM 1.      BUSINESS

GENERAL

   Neodata(R) Services, Inc. (the "Company"), the sole direct operating
subsidiary of Neodata Corporation ("Holding"), provides comprehensive,
integrated outsourced services to organizations using direct marketing. These
services include magazine, book, and product fulfillment, product warehousing
and distribution, telephone customer service, marketing database management,
and loyalty program management. The Company's services are employed by various
organizations using direct marketing and are adaptable to a broad variety of
products and marketing activities.  The Company's fulfillment services include
processing incoming and outgoing mail, responding to customer mail, telephone,
or on-line inquiries, preparing renewal notifications, maintaining and managing
client lists of customers and related databases, preparing mailing labels,
generating statistical and informational reports for clients, and billing and
collecting monies. The Company also offers its clients marketing database
management (which is principally used by clients to identify the most likely
purchasers of the clients' products or services), product promotion, order
taking, warehouse storage, product distribution, collection, and follow-up
consumer services.

   The Company's client base includes magazine and book publishers, consumer
packaged goods companies, financial service companies, telecommunications
companies, airlines, and membership and non-profit organizations.

BACKGROUND

   Formation. Holding was formed in 1990 by a group of investors led by Hicks,
Muse, Tate & Furst Incorporated ("Hicks, Muse") to acquire the magazine
fulfillment division ("Subscription Fulfillment") of A.C. Nielsen Company
("Nielsen") and TMI Corporation ("Telemedia") (collectively referred to as the
"Services Acquisition"). A Holding subsidiary ("Product") acquired the book and
product distribution assets of Meredith Corporation ("Meredith") in 1991 (the
"Product Acquisition"), and in 1992 Holding acquired the stock of Wiland
Services, Inc. ("Database"). Each of these acquired companies had an
established reputation and long operating history in one or more specialized
areas of the direct marketing services industry.  On May 5, 1993, Holding and
the Company engaged in a series of transactions that resulted in all of the
operations and substantially all of the assets of Holding, the Company, and
their respective subsidiaries (collectively, the "Neodata Companies") being
held by the Company and its subsidiaries (the "Mergers").

   The Transaction. On May 5, 1993, the Neodata Companies implemented a plan
(the "Transaction") which included, among other things, the sale of $163.0
million aggregate principal amount of the Company's 12% Senior Deferred Coupon
Notes (the "Notes"), the issuance of Holding common stock ("Holding Common
Stock") to certain affiliates of Hicks, Muse and to Electronic Data Systems
Corporation ("EDS"), the repayment of substantially all of the outstanding debt
of the Neodata Companies, the Company's entering into a revolving credit
facility, and the Mergers. In addition, the Company and EDS entered into an
Amended and Restated Agreement for Information Technology which required EDS to
manage the Company's data processing centers and to develop the Neodata
Customer Oriented Relational Environment System ("NCORE").

   The Restructuring.  During 1993, management reviewed the existing operations
and focus of the Company and adopted a plan (the "Restructuring") which
included, among other things, a new service delivery plan to transform the
Company's function-based operating divisions into customer-based service
centers ("CSCs"). The Company's 1993 operating results included Restructuring
charges of $20,280,000.  See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations -- The
Restructuring" and Note 20 to the Company's Consolidated Financial Statements.

   The Recapitalization. The Company, Holding, and EDS entered into a
transaction (the "Recapitalization") in November of 1994 which reduced the
Company's obligations owed to EDS by approximately $28.3 million and resulted
in the issuance of additional Holding equity and the recapitalization of other
Holding equity.  In connection with the Recapitalization the Company entered
into a new Agreement for Information Technology Services (the






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"Amended IT Agreement") with EDS. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Technology Agreement" and Notes 17 and 20 to the Company's
Consolidated Financial Statements.

   Impairment of NCORE. In connection with the Recapitalization and the Amended
IT Agreement with EDS, the Company determined that the full value of NCORE
would not be recoverable. As a result, a $31.2 million write down of the NCORE
development asset was recorded in the fourth quarter of 1994. Costs capitalized
in connection with the development of NCORE were funded under a long-term
obligation to EDS which was released as part of the Recapitalization. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Impairment of NCORE" and Note 20 to the
Company's Consolidated Financial Statements.

RECENT ACQUISITIONS

   In May 1996, the Company acquired the product distribution assets of an
operating division of Newfield Publications (the "Newfield Acquisition"). The
Newfield Acquisition included distribution machinery and equipment, a six-year
lease on a 235,000 square foot distribution facility in Fairfield, Ohio, and
the transfer of 55 employees from Newfield Publications to Neodata.  Pursuant
to the Newfield Acquisition the Company signed a five year distribution
contract with Newfield Publications. See Note 3 to the Company's Consolidated
Financial Statements.

   In July 1996, the Company acquired the subscription fulfillment assets of
International Subscription Services Limited ("ISS"), a United Kingdom based
subscription fulfillment subsidiary of The Economist Newspaper Limited (the
"ISS Acquisition").  ISS provides magazine subscription fulfillment services to
The Economist Newspaper Limited in Europe and to other publications unrelated
to The Economist Newspaper Limited.  The ISS Acquisition included subscription
fulfillment systems and equipment, a lease on a 10,000 square foot facility
near London, England, and the transfer of 70 employees from ISS to Neodata.
Pursuant to the ISS acquisition the Company signed a three-year subscription
fulfillment contract with The Economist Newspaper Limited.

   In February 1997, Neodata Creative Services, Inc. ("Creative Services"), a
newly formed wholly-owned subsidiary of the Company, acquired substantially all
of the business assets and assumed the associated liabilities of The Lacek
Group, Inc., as well as all of the outstanding stock of Lacek Systems and
Software, Inc., and Lacek Travel Services, Inc. ("Lacek" and the "Lacek
Acquisition").  Lacek, with approximately 95 employees, is a leading provider
of loyalty marketing services to clients in the United States and the Far East.

RECENT DEVELOPMENTS

   On August 7, 1997, Holding entered into an Agreement and Plan of Merger with
EDS and Ramcad Corporation, a wholly-owned subsidiary of EDS ("Ramcad"),
pursuant to which Ramcad will merge with and into Holding, with Holding
surviving as a wholly-owned subsidiary of EDS (the "EDS Acquisition").  See
"Item 13. Certain Relationships and Related Transactions - The EDS
Acquisition."

DIRECT MARKETING INDUSTRY

   Direct marketing is any direct communication to a consumer or business that
is designed to generate a response in the form of an order, a request for
further information, increase customer loyalty, and/or result in a visit to a
store or other place of business for purchase of a specific product or service.
Direct marketing has been utilized extensively in the magazine, book
publishing, catalog, and non-profit industries for over ten years.  Its use by
companies in other industries, such as consumer goods, telecommunications,
financial services, retail, and government, has been increasing in recent
years. While the Company primarily serves the publishing and consumer goods
industries, the Company is able to provide services to direct marketers in any
industry, and its client base has broadened from the increased utilization of
direct marketing by non-traditional users.

   As the usage of direct marketing increases, direct marketing programs are
becoming more sophisticated. Complex continuity and loyalty programs utilizing
integrated coupon and premium fulfillment, distribution,





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<PAGE>   4
telephone customer service, and database analysis are being used to open new
channels of distribution and to increase customer loyalty. Increasingly
sophisticated database modeling and list optimization techniques are being used
to better target existing and potential customers. The trend to outsource
direct marketing functions is driven by economies of scale, investment
requirements in technology and capital equipment, and postal savings gained by
co-mingling of mail and parcels. Both suppliers and users in the direct
marketing industry are consolidating in order to take advantage of these
factors. The international direct marketing industry is also developing
rapidly. Like the American market in the 1980s, Europe, Central and South
America, and the Far East are discovering the benefits of direct marketing. The
Company believes it is well positioned to capitalize on these industry trends.

PRODUCTS AND SERVICES

   The Company provides its integrated direct marketing products and services
through its five operating divisions: Publishing Industry, Consumer Products
Industry, Services Industries, International, and Lacek.  The Company's
principal competencies include: Fulfillment Services (magazine, book, and
product), Distribution Services (book and product), Telephone Services
(Customer Service and Consumer Response), Database Marketing and Modeling
Services, and Loyalty Program Development and Management.  In addition, the
Company provides Marketing, Promotional Services, and Internet Services to a
significant number of clients in various industries.

  Fulfillment Services

   The Company provides fulfillment services to publishers of magazines, books,
videos, and music, membership organizations, on-line subscription service
providers, and consumer products companies such as food, beverage, tobacco, and
apparel companies.  Fulfillment services include processing new orders and
subscriptions, mailing of billing and renewal notices, processing payments,
responding to inquiries about account status, preparing mailing labels,
updating databases, and producing information reports. The Company serves
approximately 150 publishers of approximately 500 publications with
approximately 115 million subscribers, as well as consumer products and
services companies who serve over 40 million customers. Typical subscription
fulfillment contract terms are for three years, and many of the Company's
clients have continuously renewed.  Consumer products contract terms range from
one to three years.

   Fulfillment programs also include negative-option clubs, continuity
programs, and one-shot sales programs. Negative-option clubs mail announcements
that describe the next product that will automatically be shipped to the
customer unless the customer directs the club otherwise. Continuity programs
involve a series of sales of products to a customer over a period of time. With
continuity programs, a customer is enrolled until either the program's
completion or the customer cancels. The Company handles all of a continuity
club's contacts with its customers, including mailing the periodic offering
bulletins, processing customer billings, and receiving payments and customer
inquiries. A one-shot product program is a single sale, such as the sale of a
reference book rather than the sale of a series of books or products.
Fulfillment clients also benefit from the automation and economies of scale
offered through the Company's mail and distribution operations.

  Distribution Services

   The Company offers warehousing and distribution services to direct marketing
clients such as book clubs, music/video clubs, continuity (mail order) clubs,
and consumer packaged goods companies that make repetitive mailings, periodic
product offerings, and promotional shipments to their members or customers. The
Company's distribution services consist of customer invoicing, inventory
management and warehousing, order packaging and labeling, and package sorting
and mailing. The Company also provides its clients with daily reports of
inventory levels and shipments which enable clients to accurately and
efficiently manage their marketing operations.

   The Company utilizes computer-operated automated package sorting and
manifest systems in its distribution centers in Iowa and Ohio. These systems
read bar codes applied to ordered merchandise, sort the merchandise by zip
code, and prepare detailed shipping instructions. Packages are delivered
directly to U.S. Postal Service bulk mail centers, resulting in significant
postal discounts and more rapid shipment to clients' customers. The Company is
currently the only service bureau to offer such a capability and ships, on
average, approximately 73,000 packages





                                      3
<PAGE>   5
per day from its outbound warehouse/distribution centers in Iowa and Ohio. This
combination of automation and economies of scale gives the Company significant
competitive advantages.

  Telephone Services

   The Company provides telephone customer service and consumer response
services to a variety of clients as an integral component of its fulfillment
programs as well as on a standalone basis.  Telephone services consist of
answering customer-initiated calls, including the processing of customer
inquiries, lead generation, customer service, and orders received via telephone
numbers presented in radio, television, newsprint, direct mail, product
packaging, or catalog advertising. In addition, the Company provides direct
sales and order processing, credit card promotions, product/service
introductions, fundraising, subscription sales and renewals (primarily for
magazine and book publishers), qualifications of sales leads, market surveys,
dealer locator, consumer affairs, and order capture for a variety of clients.

   The Company's inbound services operate 24 hours a day, 365 days a year.
Because of the sophistication of the Company's telephone switching systems, it
is possible to direct calls to one or more service centers simultaneously.

  Database Marketing and Modeling Services

   The Company provides a variety of database marketing and modeling services
to its clients on a standalone or an integrated basis.  These services include
list fulfillment, merge/purge services, database development and maintenance,
and modeling services.

   List fulfillment services allow the client to extract a subset of their
customer files for rental to a third party. Clients can request segments of
their files based on geographic, demographic, or a wide variety of other
parameters for overnight delivery to a third party. The Company's "List
Lightning" product provides fast and flexible fulfillment of list rental
requests.

   Merge/purge refers to a process of combining and cleansing multiple lists
from multiple sources.  The process can be used to merge up to 100 lists
together and to purge duplicate, undeliverable, or undesirable names. The
process provides accounting support to ensure authorized usage of the lists and
proper payment to list owners.

   The Company builds and maintains customer and promotional databases for a
number of its clients.  A customer or prospect database can be built utilizing
existing customer files, promotional and sales history, and other sources of
marketing data.  As new customers or prospects are added or deleted and monthly
sales transactions are received, the database is updated. This active database
is then used to drive a variety of promotional, analytical, or modeling
functions, all intended to better target direct marketing programs.

   The Company provides quantitative research, segmentation, and response
analysis through the development of sophisticated statistical models for its
clients. These models are used to identify both high-potential and unprofitable
segments of an existing marketing database on a product-specific basis.  By
utilizing the client's current customer database and marketing history, in
addition to certain demographic, behavioral, and other "overlaid" data
available from third parties, models predict buyer behavior in order to
increase the effectiveness of the client's direct marketing programs.

  Loyalty Program Development and Management

   The Company offers loyalty program development and management to clients in
the travel, hospitality, financial services, telecommunications, and health
care industries through its Lacek subsidiary.  Loyalty programs are generally
designed to identify and track the purchases of a company's best customers, and
to retain and expand the company's relationship with these customers through
the use of special incentives, premiums, or promotional materials.  The Company
offers a wide range of services related to loyalty programs including program
design and consulting, database management and analysis, creative services, and
mailing services.  The Company has developed a proprietary software program
designed for loyalty program management which the Company believes





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<PAGE>   6
to be the most sophisticated and powerful tool of its kind.  This program is
used by the Company to manage its loyalty programs and is also sold to
organizations wishing to manage their own programs.

  Marketing and Promotional Services

   The Company provides promotional mailing and outbound telephone services to
direct marketing clients for the promotion and solicitation of new business.
The Company provides extensive personalized printing and mailing services to
its clients. Mailing services include first-time promotional offers, upgrade
promotions, renewals, and ongoing or continuity offers. In addition to cost-
effective print addressing and mailing services, the Company offers its clients
significant postal savings through the co-mingling of client outbound mail.

   Outbound telephone customer services entail the calling of potential
customers, and include both business-to-business telemarketing and
business-to-consumer telemarketing.  In most cases, the Company works with its
clients in designing marketing strategies, preparing telemarketing
presentations and scripts, and training the Company's telephone sales
representatives to sell clients' products.

  Internet Services

   The Company offers Internet fulfillment and customer service, providing
clients the option of routing new subscription requests, product orders, and
customer service requests directly to the Company via the Internet. This
alternative medium to mail or telephone allows clients to offer on-line
promotions and services via the Internet. Transactions received via the
Internet are directly entered into the Company's existing fulfillment systems
for processing. The Company processed over 1 million transactions in fiscal
1997 and usage of this service continues to increase dramatically as clients
expand their Internet presence and marketing initiatives.

COMPETITION

   The Company has several competitors which provide a similar range of
services and integrated program support, as well as numerous competitors for
each of the primary services it offers. Some of these competitors offer
services the Company does not provide, and some have substantially greater
financial and other resources than the Company. There can be no assurance that
the Company will not encounter increased competition in the future.

   Although the primary service areas in which the Company competes tend to be
highly fragmented, there is a trend toward the consolidation of previously
fragmented services into a single comprehensive provider through mergers,
acquisitions, and strategic alliances. The primary purpose of the consolidation
of previously fragmented services is to provide the convenience of "one stop
shopping" for total program management, to increase economies of scale and
improve speed of execution, and to increase the types of services that can be
cross-sold to an existing client base or offered to new clients by the
provider. In addition to building vertical expertise and expanding capacity, an
important challenge for providers in the Company's field is to satisfy client
demands for new and improved technology and greater operational efficiencies.
The primary competitors offering integrated services are DIMAC Corporation (a
subsidiary of Heritage Media Corporation), DiMark, Inc. (a subsidiary of Harte
Hanks), Carlsson Marketing, and Maritz.

   The primary subscription fulfillment competitor of the Company is
Communications Data Services, Inc. (a subsidiary of the Hearst Corporation).
Other major competitors are Palm Coast Data (a subsidiary of Heritage Media
Corporation) and Kable News Company. The Company competes with a number of
product fulfillment, distribution, and database marketing firms, including both
in-house and contract companies. The Company's primary product fulfillment and
distribution competitors include R.R. Donnelley & Sons Company, Young America,
Gage Marketing Group, LCS Industries, Inc., and MBS/Multimode, Inc. (a
subsidiary of DIMAC Corporation). The Company's primary database marketing
competitors include Acxiom Corporation, Direct Marketing Technology Inc.,
Metromail Corporation, May & Speh, Inc., and Database America Companies, Inc.





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<PAGE>   7
SIGNIFICANT CLIENT

   Since December 1993, the Company has performed product fulfillment,
distribution, telephone customer service, and other services under successive
contracts with Philip Morris Incorporated ("Philip Morris").  The Company's
current contract with Philip Morris expires in January 1998. Due to
uncertainties arising from proposed legislation relating to the tobacco
industry, there can be no assurances that revenues derived from this client
subsequent to January 1998 will be consistent with revenues derived in the
past, or that additional contracts with this client will be obtained subsequent
to January 1998. Revenues related to these services provided accounted for
approximately 15%, 17%, 18%, and 9% of the Company's revenues in the years
ended June 30, 1997 and 1996 and in the years ended December 31, 1995 and 1994,
respectively.

EMPLOYEES

   The Company currently employs approximately 4,700 people, of whom
approximately 300 are temporary employees used to meet seasonal needs. Of the
4,700 employees, approximately 4,610 are located in the United States and
approximately 90 are located in the United Kingdom. All employees are currently
non-union. Management believes its relationship with its employees is
satisfactory.

GOVERNMENT REGULATION

The direct marketing industry is affected by a variety of regulatory issues,
including Federal Trade Commission ("FTC") regulations, U.S. Postal Service
("USPS") reclassification and postal reform, sales and use tax legislation, as
well as legislation on a variety of privacy acts.

The Telemarketing Sales Rule (the "Rule") became effective December 31, 1995.
The Rule was written by the FTC to comply with the requirements of the 1994
Telemarketing Fraud and Abuse Prevention Act, which placed certain restrictions
on telemarketing activities.  Many state legislatures have enacted or are
considering legislation which places restrictions on telemarketing activities
in addition to those required under the Rule.  The Company believes it is in
compliance with all requirements of the Rule and applicable state statutes.

   In 1996 and 1997, various Postal Classification Reform requirements
("Classification Reform") were implemented by the USPS. The Company has met the
Classification Reform requirements in its various mail preparation and
sortation systems. The impact of Classification Reform includes modification to
computer software, additional procedures to ensure address accuracy, changes to
physical makeup of mail, and maximizing automation in order to gain USPS
discounts.  The Company expects to meet all future Classification Reform
requirements.

The United States House of Representatives is presently reviewing proposed
legislation that may make comprehensive and substantial modifications to the
management and pricing mechanisms developed as part of the Postal
Reorganization Act of 1970. The proposed legislation, known as the "Postal
Pricing Reform Act of 1997," proposes comprehensive and substantial changes for
setting postal rates.

New bills are regularly introduced in Congress and state legislatures that
propose restrictions concerning distribution of personal information, privacy
in telecommunications and Internet communications, and taxation of periodicals,
direct mail merchandise, and Internet transactions.  A recently proposed
settlement between certain state Attorneys General and the tobacco industry
would, among other things, result in significant changes in the manufacture,
marketing, and distribution of tobacco products in the United States.  The
Company cannot predict what effect, if any, the proposed settlement or related
legislation would have on its relationship with Philip Morris, a significant
client of the Company.  See "Item 1. Business - Significant Client."

ENVIRONMENTAL REGULATION

   Based upon current knowledge, the Company believes it is in material
compliance with all environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control problems, if
any, which the Company may encounter in the future cannot be predicted,
primarily because of the increasing number,





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<PAGE>   8
complexity, and changing character of environmental requirements that may be
enacted or of the standards being promulgated by federal and state authorities.

SEASONALITY

   Certain elements of the Company's business are subject to seasonal
variations.  Both revenues and cash needs tend to be higher in the latter part
of the third calendar quarter and in the fourth calendar quarter. This increase
is generally associated with the holiday activities of the direct marketing
industry and back-to-school promotional periods.

ITEM 2.      PROPERTIES

PRINCIPAL PROPERTIES

   The Company operates facilities in the United States, the United Kingdom,
Ireland, and other countries. The following table sets forth information
regarding the principal leased and owned properties:

<TABLE>
<CAPTION>
     PRINCIPAL USE                      LOCATION                           SIZE (SQ. FT.)      OWNED OR LEASED
     -------------                      --------                           --------------      ---------------
   <S>                             <C>                                         <C>                <C>
   Corporate Offices               Louisville, Colorado                         97,048            Owned
   Customer Service                Louisville, Colorado                        207,923            Leased
   Customer Service                Louisville, Colorado                        193,500            Leased
   Customer Service                Longmont, Colorado                          152,200            Leased
   Customer Service                Longmont, Colorado                          152,218            Leased
   Customer Service                Fairfield, Ohio                             235,000            Leased
   Customer Service                Urbandale, Iowa                             214,000            Leased
   Customer Service                Clarion, Iowa                               210,400            Owned
   Customer Service                Des Moines, Iowa                            173,033            Leased
   Customer Service                Knoxville, Iowa                              10,864            Leased
   Customer Service                Phoenix, Arizona                             65,900            Leased
   Customer Service                Phoenix, Arizona                             23,595            Leased
   Customer Service                Phoenix, Arizona                             18,562            Leased
   Customer Service                Phoenix, Arizona                              8,268            Leased
   Customer Service                Fredericksburg, Virginia                     51,848            Owned
   Customer Service                Romford, Essex, England                      10,227            Leased
   Customer Service                Kilmallock, Ireland                           8,500            Owned
   Customer Service                Newcastle West, Ireland                       7,878            Owned
   Office Space                    Des Moines, Iowa                            154,000            Owned
   Office Space                    Boulder, Colorado                            74,119            Leased
   Office Space                    Boulder, Colorado                            34,026            Leased
   Office Space                    Minneapolis, Minnesota                       20,310            Leased
   Office Space                    Limerick, Ireland                             5,890            Leased
   Warehouse                       Broomfield, Colorado                         74,736            Leased
   Warehouse                       Urbandale, Iowa                             150,000            Leased
   Warehouse                       Des Moines, Iowa                             11,000            Leased
   Warehouse                       Des Moines, Iowa                              6,000            Leased
</TABLE>





                                      7
<PAGE>   9
ITEM 3.      LEGAL PROCEEDINGS

   The Company is a party to various lawsuits in the ordinary course of
business. The Company believes that the outcome of these lawsuits, individually
or in the aggregate, will not have a material adverse effect on its business or
financial condition or on future results of operations or liquidity.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   No matters were submitted to a vote of security holders of the Company
during the quarter ended June 30, 1997.





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<PAGE>   10
                                    PART II

ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
             MATTERS

   Information required by this Item is not included because there were no
equity securities of the Company sold during the year ended June 30, 1997. As
of August 22, 1997, Holding was the sole holder of record of the Company's
common equity.

ITEM 6.      SELECTED FINANCIAL DATA

   The selected financial data information below presents financial information
of the Company, Holding, and their predecessors for the periods indicated. The
information presented below should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and
related notes, included herein.


<TABLE>
<CAPTION>
                                                                  COMPANY                             HOLDING (1)
                                         --------------------------------------------------------     -----------
                                         YEAR ENDED JUNE 30,                 YEAR ENDED DECEMBER 31,          
                                         -------------------      ---------------------------------------------
      (DOLLARS IN THOUSANDS)              1997       1996         1995          1994         1993       1992(2)
                                          ----       ----         ----          ----         ----       -------
  <S>                                  <C>          <C>          <C>          <C>          <C>         <C>
  STATEMENT OF OPERATIONS DATA:
  Revenue                               $264,631    $237,061     $244,255     $221,132     $192,004    $170,934
    Expenses(3)                          226,060     208,694      215,641      201,436      179,060     154,262
    Restructuring charges(4)               1,896       1,667        1,667       (1,236)      20,280          --
    Impairment of assets(5)                   --          --           --       31,155       37,011          --
    Depreciation and amortization(6)      16,378      14,665       14,761       13,246       29,270      23,184
                                        --------    --------     --------     --------     --------    --------
  Income (loss) from operations before
    interest expense and other            20,297      12,035       12,186      (23,469)     (73,617)     (6,512)
  Interest expense and other(7)           24,985      23,863       23,015       19,444       15,550      13,218
                                        --------    --------     --------     --------     --------    --------
    Net loss before extraordinary loss    (4,688)    (11,828)     (10,829)     (42,913)     (89,167)    (19,730)
  Extraordinary loss - early
    extinguishment of debt(8)               (313)         --           --           --       (7,089)         --
                                        --------    --------     --------     --------     --------    --------
    Net loss                            $ (5,001)   $(11,828)    $(10,829)    $(42,913)    $(96,256)   $(19,730)
                                        ========    ========     ========     ========     ========    ========
  STATEMENT OF CASH FLOWS DATA:
  Net cash provided by (used in)
    operating activities                $  4,523    $ 25,412     $ 25,906     $   (574)    $ 13,465    $ 11,278
  Net cash used in investing activities  (22,463)    (12,165)     (11,639)     (17,343)     (17,838)    (38,663)
  Net cash provided by (used in)
    financing activities                  18,065     (14,921)     (16,478)      16,290        7,874      27,799
  BALANCE SHEET DATA:
  Working capital(9)                    $ 16,925    $ 21,404     $ 22,205     $ 37,493     $ 22,894    $ 13,046
  Total assets                           163,195     139,537      148,756      164,174      154,641     186,166
  Long-term debt and capital lease
    obligations, net of current 
    maturities                           192,153     184,651      178,852      182,362      134,749     100,785
  Total liabilities                      271,792     241,914      244,683      247,593      221,268     184,928
  Stockholders' (deficit) equity        (108,597)   (102,377)     (95,927)     (83,419)     (66,627)      1,238
  OTHER DATA:
  Amortization of computer software
    and intangible assets included in
    depreciation and amortization
    shown above                         $  7,869    $  5,399     $  4,892     $  3,631     $ 20,846    $ 17,060
  EBITDA(10)                              36,675      26,700       26,947       20,932       (7,336)     16,672
----------                                                                                                                     
</TABLE>





                                      9
<PAGE>   11
(1)    Prior to the consummation of the Mergers on May 5, 1993, the domestic
       operations of the Company were conducted by four wholly-owned
       subsidiaries of Holding. Holding did not conduct any material operations
       separate from those of such subsidiaries. As a result of the Mergers,
       the Company is the sole direct operating subsidiary of Holding and all
       operations of the Neodata Companies are conducted through the Company.
       Consequently, the financial information presented in respect of Holding
       for the periods indicated is comparable to the financial information for
       the Company as it is currently constituted.  See "Item 1. Business -
       Background."

(2)    Includes three months of operations of Database.

(3)    Includes only operating and production expenses, selling, general and
       administrative expenses, and provision for doubtful accounts receivable
       and excludes restructuring charges, impairment of assets, depreciation
       and amortization, and interest expense and other.

(4)    For 1993 and 1994, consists primarily of employee separation costs,
       facility closings, recruiting, relocation, asset write- downs and other
       costs associated with the Company's decision to engage in the
       Restructuring. For 1995, fiscal 1996 and fiscal 1997, consists of costs
       for the closure of facilities in Ireland. See "Item 1. Business -
       Background - The Restructuring" and "Item 7. Management's Discussion and
       Analysis of Financial Condition and Results of Operations - Results of
       Operations - The Restructuring" and Note 20 to the Company's
       Consolidated Financial Statements.

(5)    Consists of the fourth quarter 1994 write-off of approximately $31.2
       million of costs capitalized in connection with the development of
       NCORE, and of the fourth quarter 1993 write-off of approximately $37.0
       million of the remaining book value of intangible assets. See "Item 7.
       Management's Discussion and Analysis of Financial Condition and Results
       of Operations - Results of Operations - The Restructuring" and "-
       Impairment of NCORE." See also Note 20 to the Company's Consolidated
       Financial Statements.

(6)    Consists of (a) depreciation and amortization of property, plant and
       equipment, (b) amortization of computer software, and (c) amortization
       of intangible assets.

(7)    "Other" consists of the write-off of $1.2 million in 1992 of costs
       incurred during that year related to a proposed public offering of
       Holding Common Stock which was not consummated.

(8)    In fiscal 1997, the Company incurred a charge to operations of $0.3
       million as the result of the write-off of debt issuance costs under its
       previous line of credit facility.  See Note 11 to the Company's
       Consolidated Financial Statements.  In 1993, the Company incurred a
       one-time charge to operations of $7.1 million as a result of the
       Transaction consisting of (a) the write-off of debt issuance costs of
       $2.1 million relating to the early retirement of certain debt, (b) the
       write-off of original issue discount of $2.8 million upon the early
       retirement of certain debt and (c) payment of prepayment penalties of
       $2.2 million on the early retirement of certain debt.

(9)    Excess of current assets over current liabilities.

(10)   Earnings before interest, taxes, depreciation and amortization
       ("EBITDA").  EBITDA also excludes charges for impairment of assets.  The
       Company considers EBITDA an important indicator of the operational
       strength and performance of its business.  EBITDA, however, should not
       be considered as an alternative to operating or net income as an
       indicator of the performance of the Company's businesses or as an
       alternative to cash flows from operating activities as a measure of
       liquidity, in each case determined in accordance with generally accepted
       accounting principles.





                                     10
<PAGE>   12
ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

   This discussion and analysis should be read in conjunction with the Selected
Financial Data and the Consolidated Financial Statements and notes thereto of
the Company included elsewhere in this report.

   The Company began operations on August 27, 1990 with the acquisition of
Subscription Fulfillment and Telemedia. On June 26, 1991, Holding acquired
Product. On September 30, 1992, Holding acquired Database. These acquisitions
have been accounted for as purchases and are included in results of operations
from the respective dates of acquisition. The purchase price of each
acquisition was allocated to the assets and liabilities based upon the fair
market values of such assets and liabilities. Holding acquired Telemedia and
Database by means of stock acquisitions. Subscription Fulfillment and Product
were each purchased as operating divisions. As a consequence, independent
financial statements did not exist for these operating divisions and adequate
allocations related to infrastructure, primarily selling, general and
administrative expenses were excluded from such divisions' results. Therefore,
the historical results of such divisions prior to their acquisition by Holding
may not be representative of their post-acquisition results.

   In April 1996, the Company changed its fiscal year end from December 31 to
June 30.  References to "fiscal 1997" relate to the year ended June 30, 1997.
References to "fiscal 1996" relate to the year ended June 30, 1996.

RESULTS OF OPERATIONS

IMPAIRMENT OF NCORE

   The Company reviewed NCORE between November 1994 and January 1995 and
determined that the full value of NCORE would not be recoverable. A $31.2
million writedown of NCORE was recorded in the fourth quarter of 1994. No
subsequent additions to or writedowns of NCORE have been recorded and
management does not anticipate any further additions or writedowns in future
periods.  See Note 20 to the Company's Consolidated Financial Statements.

RESTRUCTURING CHARGES

   During 1993, management reviewed the Company's business, including the
management, products, technology, service levels, facilities, systems, and
business strategy of the Company. The result of this review was a plan to
implement the Restructuring, which refined the strategic direction of the
Company.  Expense savings associated with the elimination of nonessential
functions and excess facilities and other costs were largely offset by
transition inefficiencies through the end of 1994.  Efficiencies anticipated
with the transition to CSCs were gradually realized through 1995 and fiscal
1996. No further cash payments or noncash charges are anticipated relating to
the Restructuring.

   In the fourth quarter of 1995, the Company adopted a plan to close its
facilities in Kilmallock and Newcastle West, Ireland.  The plan included
separating 110 employees.  The cost associated with these separations was
approximately $1.7 million, all of which was paid in 1995.

   In March 1997, the Company adopted a plan to close its remaining facilities
in Ireland.  The plan included separating approximately 110 employees and
disposing of substantially all of the Company's remaining Ireland assets.
Accordingly, the Company incurred a charge to earnings of $1.9 million during
fiscal 1997 for the estimated net cost of the closure, of which $1.7 million
was paid in fiscal 1997.

   See "Item 1. Business -- Background -- The Restructuring" and Note 20 to the
Company's Consolidated Financial Statements.





                                     11
<PAGE>   13
THE YEAR ENDED JUNE 30, 1997, COMPARED TO THE YEAR ENDED JUNE 30, 1996

   Revenue.  Revenue increased by 11.6%, or $27.5 million, from $237.1 million
in fiscal 1996 to $264.6 million in fiscal 1997.  Approximately $15.4 million
of the increase was due to revenues from new clients, and approximately $6.8
million and $3.6 million of the increase was due to the Lacek and ISS
Acquisitions, respectively.  The remainder of the increase was due to a net
increase in revenue from existing clients, offset by decreases in distribution
revenues resulting from Meredith's sale of its book club and continuity
business, in addition to the downsizing in May 1996 of certain unprofitable
telephone customer service operations.

   Expenses.  Expenses increased $17.4 million, or 8.3%, from $208.7 million in
fiscal 1996 to $226.1 million in fiscal 1997, and decreased as a percentage of
revenue from 88.0% to 85.4%. "Expenses" as set forth in the Selected Financial
Data are comprised of the line items "operating and production" and "selling,
general and administrative," as set forth in the Company's Consolidated
Financial Statements.

   Operating and production expenses (excluding depreciation and amortization)
increased by $12.1 million, or 7.0%, from $173.3 million in fiscal 1996 to
$185.4 million in  fiscal 1997 and decreased as a percentage of revenue from
73.1% to 70.1%. The increase in operating and production expenses was due
primarily to the increased revenues described above.  The decrease as a
percentage of revenue was due primarily to improvements in operating efficiency
and the discontinuation of unprofitable telephone customer service business,
offset by wage increases in some of the Company's CSCs.

   Selling, general and administrative expenses (including provision for
doubtful accounts receivable) increased $5.2 million, or 14.7%, from $35.4
million in fiscal 1996 to $40.6 million in fiscal 1997, and increased as a
percentage of revenue from 14.9% to 15.3%. The increase was due primarily to
increased sales and marketing efforts, increased general corporate expenses,
and the ISS and Lacek Acquisitions.

   Depreciation and Amortization.  Charges for depreciation and amortization
increased from $14.7 million in fiscal 1996 to $16.4 million in fiscal 1997.
The increase was due to increased amortization of computer software of $2.0
million and increased amortization of intangible assets of $0.4 million, offset
by decreased depreciation and amortization of property, plant, and equipment of
$0.7 million.

   Income before Interest Expense and Other.  The Company reported income from
operations of $20.3 million in fiscal 1997, an increase of $8.3 million over
fiscal 1996. The increase is due to increased revenues and operating margins,
offset by increased selling, general and administrative expenses, all as
described above.

   Interest Expense and Other.  Interest expense and other increased 4.7%, or
$1.1 million, from $23.9 million in fiscal 1996 to $25.0 million in fiscal
1997. The increase in interest expense and other was due mainly to an increase
of $1.4 million in interest on the Notes as a result of the Notes being at
their full accreted value of $163.0 million throughout fiscal 1997, offset by a
net decrease in other interest expense.  Interest expense was accreted as an
addition to the Notes through May 1996.

   Extraordinary Loss.  In fiscal 1997, the Company recognized a $0.3 million
extraordinary loss as a result of the write-off of unamortized debt issuance
costs related to the Company's previous line of credit facility.  See Note 11
to the Company's Consolidated Financial Statements.

   Net Loss.  The Company reported a net loss of $5.0 million for fiscal 1997,
a decrease of $6.8 million from fiscal 1996. The decreased loss was the result
of increased revenues and operating margins, offset by increased selling,
general and administrative, depreciation and amortization, and interest and
other expenses, in addition to the extraordinary loss, all as described above.

   Income Taxes.  The Company has not accrued federal income taxes since its
inception and does not expect to incur a federal income tax liability in the
immediate future.  However, during the years ended June 30, 1997 and December
31, 1995 the Company paid $68,000 and $129,000, respectively, in alternative
minimum tax.  See Note 15 to the Company's Consolidated Financial Statements.





                                     12
<PAGE>   14
   The affiliated group filing consolidated federal income tax returns of
Holding and its subsidiaries, including the Company (the "Affiliated Group"),
has incurred net operating losses for federal income tax purposes of $42.3
million for the period from inception through June 30, 1997. These federal
income tax net operating losses are primarily a result of the write-off of
intangible assets and software arising from the Mergers. Under certain
circumstances, a change of control of the Company would result in a loss or a
substantial limitation of the Company's tax loss carryforwards.

  THE YEAR ENDED DECEMBER 31, 1995, COMPARED TO THE YEAR ENDED DECEMBER 31, 1994

   Revenue.  Revenue increased by 10.4%, or $23.2 million, from $221.1 million
in 1994 to $244.3 million in 1995. The increase was the result of increased
demand from existing clients of approximately $35.6 million, including an
increase of approximately $23.7 million from Philip Morris, partially offset by
the loss of certain other clients totaling approximately $12.4 million.  See
"Item 1. Business -- Clients" and "-- Revenues."

   Expenses.  Expenses increased $14.2 million, or 7.1%, from $201.4 million in
1994 to $215.6 million in 1995, but decreased as a percentage of revenue from
91.1% in 1994 to 88.2% in 1995.

   Operating and production expenses (excluding depreciation, amortization and
interest expense) increased by $14.7 million, or 8.8%, from $167.4 million in
1994 to $182.1 million in 1995 but decreased as a percentage of revenue from
75.7% in 1994 to 74.5% in 1995. This increase was primarily the result of
operating volumes from new business and growth from existing clients.  The
decrease as a percentage of revenues was due to operating efficiencies gained
in the transition to CSCs. See "Item 1. Business --The Restructuring and "--The
Restructuring."

   Selling, general, and administrative expenses (including provision for
doubtful accounts receivable) decreased $.5 million, or 1.3%, from $34.1
million in 1994 to $33.6 million in 1995, and decreased as a percentage of
revenue from 15.4% in 1994 to 13.7% in 1995. The decrease was primarily due to
the implementation of cost controls.

   Restructuring Charges. The Company recorded $1.7 million in restructuring
charges during 1995. Adjustments during 1994 to reserves established for the
1993 Restructuring amounted to approximately $1.2 million.

   Depreciation and Amortization.  Charges for depreciation and amortization
expenses increased by 11.4%, or $1.6 million, from $13.2 million in 1994 to
$14.8 million in 1995. The increase was due primarily to additions to plant,
property, equipment and capitalized software.

   Income (Loss) before Interest Expense and Other.  The Company reported
income from operations of $12.2 million for the fiscal year ended 1995, an
increase of $35.7 million compared to the loss of $23.5 million for the fiscal
year ended 1994. The decreased loss was due to the $31.2 million impairment of
NCORE recognized in 1994, as well as the increase in revenues combined with the
decreases in selling, general, and administrative expenses as described above.

   Interest Expense and Other.  Interest expense and other was $23.0 million
for the fiscal year ended 1995, an increase of $3.6 million, or 18.4%, from
$19.4 million for the fiscal year ended 1994. The increase in interest expense
and other was due primarily to an increase of $1.8 million in accreted interest
related to the Notes, as well as an increase of $1.0 million in interest
expense under capital lease obligations. Under the terms of the Notes,
approximately $17.2 million in interest was accreted in 1995 as an addition to
the Notes rather than being paid in cash.

   Net Loss.  The Company reported a net loss of $10.8 million in the year
ending December 31, 1995, as compared to a net loss of $42.9 million incurred
in the year ended December 31, 1994. The decreased loss of $32.1 million is the
result of the NCORE impairment recognized in 1994 as well as increased volumes
and decreased selling, general, and administrative expenses, offset by
increased depreciation, amortization, and interest expenses, all as described
above.





                                     13
<PAGE>   15
LIQUIDITY AND CAPITAL RESOURCES

   Cash provided by operations for fiscal 1997 was approximately $4.5 million,
a decrease of $20.9 million, or 82.2%, from $25.4 million in fiscal 1996.  The
decrease was primarily due to the commencement in November 1996 of semi-annual
cash interest payments of $9.8 million under the Notes.  Working capital
decreased $4.5 million, from $21.4 million at June 30, 1996 to $16.9 million at
June 30, 1997, due mainly to increases in book overdrafts and the current
portion of long-term debt.

   Cash used in investing for fiscal 1997 was approximately $22.5 million, an
increase of $10.3 million from $12.2 million in fiscal 1996.  The increase is
due primarily to cash payments related to the ISS and Lacek Acquisitions
totaling $8.4 million.  Pursuant to the terms of the Lacek Acquisition, the
Company was also required to deposit $3.0 million into an escrow account as
security for additional consideration, all or part of which may be paid in
fiscal 1998 contingent upon the Lacek Companies achieving certain performance
targets. Further additional consideration (in excess of the $3.0 million
deposited into escrow) of up to $9.0 million is payable through June 2000
contingent upon the Lacek Companies achieving certain performance targets.  The
Company believes that the total amount of additional consideration to be paid,
if any, cannot be reasonably estimated at this time.

   Cash provided by operations for the year ended December 31, 1995 was
approximately $25.9 million, an increase of $26.5 million from the cash used in
operations of $0.6 million for the year ended December 31, 1994. The increase
over 1994 was primarily due to increased volumes and improved collections of
accounts receivable. Working capital decreased $15.3 million from $37.5 million
at December 31, 1994 to $22.2 million at December 31, 1995, due mainly to a
reduction in accounts receivable.

   In accordance with the terms of the Notes, interest expense was added to the
balance of the Notes during the period from issuance through May 1, 1996 and
accrued for payment thereafter. Interest is calculated monthly on the accreted
value of the Notes, using an annual interest rate of 12.0% compounded
semi-annually. The Notes mature on May 1, 2003, when the principal balance of
$163.0 million becomes due and payable.  However, upon consummation of the EDS
Acquisition, which will constitute a "Change of Control" under the Indenture,
the Company will be required pursuant to the terms of the Indenture to offer to
repurchase the Notes within 30 days following consummation of the EDS
Acquisition.

   In fiscal 1997, the Company entered into the Senior Credit Facility, which
provides a senior revolving line of credit in the aggregate principal amount of
up to $40.0 million, as determined pursuant to a borrowing base formula. The
Senior Credit Facility replaced the Company's previous line of credit facility.
In connection with the Lacek Acquisition, the Company entered into the
Acquisition Credit Facility. The Acquisition Credit Facility provides for
advances, subject to lender approval, of up to $6.3 million and expires in
August 1998.  At June 30, 1997, $4.3 million was outstanding against the
Acquisition Credit Facility.  The Company anticipates that the Senior Credit
Facility and the Acquisition Credit Facility will be refinanced or paid off
entirely upon consummation of the EDS Acquisition.

   In April 1993, the Company entered into the Centennial Building Capital
Lease in the amount of $9.0 million for an operating facility in Louisville,
Colorado.  Certain of the existing Company facilities were consolidated into
the new facility. In December 1994, the Company completed construction on a
second phase addition to the Centennial Building, which houses two additional
CSCs. In connection therewith, the Company entered into an additional capital
lease obligation of $12.0 million pursuant to the amended Centennial Building
Capital Lease. During fiscal 1997, the lessor modified the financial covenants
under the Centennial Building Capital Lease to be similar to the financial
covenants under the Senior Credit Facility.

   The Indenture, the Senior Credit Facility, the Acquisition Credit Facility,
and the Centennial Building Capital Lease contain certain covenants that, among
other things, limit the Company's ability to incur additional debt, create
liens, pay cash dividends (with certain exceptions), enter into sale/leaseback
transactions, or enter into certain other transactions, and which require the
Company to meet certain financial provisions. A failure by the Company to
comply with the applicable restrictions could lead to a default under the terms
of the Indenture, the Senior Credit Facility, and the Centennial Building
Capital Lease. In the event of such default, the holders of indebtedness under
the Indenture and the Senior Credit Facility could elect to declare all of the
funds borrowed pursuant thereto to be





                                     14
<PAGE>   16
due and payable together with accrued and unpaid interest. In addition, the
Lessor under the Centennial Building Capital Lease could accelerate lease
payments payable for the lease term or require the Company to repurchase the
Centennial Buildings at a defined price. In any such event, there can be no
assurance that the Company would be able to make any such payment or borrow
sufficient funds from alternative sources on terms satisfactory to the Company
in order to make such payment.

   For the year ended June 30, 1998, management expects operations, together
with borrowings under the Senior Credit Facility, and, following the EDS
Acquisition, intercompany borrowings, will generate sufficient cash flows to
meet anticipated operating cash needs, including interest payments under the
Notes. This expectation is based upon management's assessment of various
financial and operational factors including, but not limited to, assumptions
relating to sales volumes and prices, productivity and efficiency rates, labor,
employee benefits and other fixed and variable costs, working capital
requirements, capital expenditures, and, prior to the EDS Acquisition,
available borrowings under the Senior Credit Facility. Should sufficient funds
not be available from operations and, prior to the EDS Acquisition, from the
Senior Credit Facility to fund the interest payments, maintain working capital,
update technology, invest in productivity projects and meet other growth
requirements, other options would include: i) curtailing discretionary capital
expenditures; ii) reducing the costs associated with facilities management
services; iii) downsizing the Company's selling, general and administrative
overhead and iv) effecting sale/leaseback transactions to the extent permitted
under the Indenture and the Senior Credit Facility.

   Inflation has not had a material impact on operations through June 30, 1997.
The Company's management does not anticipate that inflation will have a
significant impact on continuing operations.

   Technology Agreement. Pursuant to the Amended IT Agreement, EDS provides
information technology services (the "IT Services") to the Company. Under the
Amended IT Agreement, the Company has control over the management direction of
the IT Services and EDS' delivery of the IT Services. The Amended IT Agreement
amended, restated and supersedes the terms and conditions of all prior
information technology services agreements between the Company and EDS as of
the effective date of the Amended IT Agreement.

   The Amended IT Agreement provides for an initial term commencing January 1,
1995 and concluding on March 31, 2003 unless earlier terminated or subsequently
renewed. Under the Amended IT Agreement, EDS supplies all of the Company's
information technology, equipment, and services needs with certain exceptions.
Certain information technology functions formerly performed by the Company are
included in the IT Services.  Effective January 1, 1995, approximately 112
Company employees were transferred to EDS, as well as certain operating lease
obligations for equipment and software.

   The Company compensates EDS for IT Services on a "cost-plus" basis. The term
"cost-plus" means that the Company reimburses EDS for EDS's direct
out-of-pocket expenses incurred by EDS in performing the IT Services and pays
EDS an amount based on a percentage of the reimbursed costs.

   Fees incurred under the Amended IT Agreement for the year ended June 30,
1997 were $48.3 million, including $7.5 million of capitalized expenditures.
Fees incurred under the Amended IT Agreement for the year ended June 30, 1996
were $47.2 million, including $8.4 million of capitalized expenditures. Fees
incurred under the Amended IT Agreement for the year ended December 31, 1995
were $44.8 million, including $7.6 million of capitalized expenditures. Fees
incurred under the then-existing EDS information technology services agreement
for the year ended December 31, 1994 were $31.7 million, including $5.3 million
of capitalized expenditures.  The increase from 1994 to 1995 was primarily due
to the transfers of employees and operating leases discussed above.

   The Company expects to spend approximately $50.4 million in fiscal 1998 with
respect to IT Services on a cost-plus basis as discussed above, including
approximately $6.5 million of capital expenditures. Amounts expended for
facilities management services may vary in accordance with the amount and kind
of services rendered, but are generally expected to remain flat or grow
commensurate with the growth in revenue for the foreseeable future.

   The Company anticipates that the Amended IT Agreement will remain in effect
following the consummation of the EDS Acquisition.





                                     15
<PAGE>   17
Service Credits.  In connection with the Product Acquisition, the Company
entered into an agreement granting credits to Meredith against future services
to be provided by the Company through August 1998. In the event that revenue
from Meredith is insufficient to offset the scheduled service credits, the
Company is obligated to pay cash to Meredith in the amount of the remaining
service credits. Based on the anticipated level of revenues from Meredith, the
Company believes that the scheduled service credits due to Meredith will be
fully offset by such revenues.  Total service credits due to Meredith at June
30, 1997 and 1996 amounted to $1.5 million and $2.9 million, respectively,
which equal the present value of the credits discounted at 14.5%.

   In connection with the Newfield and ISS Acquisitions, the Company granted
service credits totaling $2.2 million and $0.8 million, respectively.  The
Newfield and ISS service credits are scheduled over five and three year
periods, respectively.  The Company is not obligated to pay cash in the event
that the related revenues are insufficient to offset the scheduled Newfield or
ISS service credits.

   Holding Obligation.  At June 30, 1997, Holding owed Meredith approximately
$3.5 million pursuant to a note executed in connection with the acquisition of
Product. Holding is a holding company with no independent operations. The Board
of Directors of the Company may, from time to time, declare dividends to the
extent of legally available funds to Holding in amounts sufficient to make
payments on such note.  See Note 18 to the Company's Consolidated Financial
Statements.

   Ireland Grants.  Under the terms of a grant agreement with the Industrial
Development Agency of Ireland (the "IDA"), the IDA may demand reimbursement of
certain amounts previously advanced to the Company if the Company's employment
levels in Ireland are not sufficient.  In March 1997, the Company adopted a
plan to close its remaining facilities in Ireland.  As a result, the Company
will be required to repay approximately $1.7 million to the IDA in fiscal 1998.
See Notes 14 and 20 to the Company's Consolidated Financial Statements.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   The information called for by this Item is contained in a separate section
of this report. See Index of Consolidated Financial Statements and Consolidated
Financial Statement Schedule on page F-1.

ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE

  None.





                                     16
<PAGE>   18
                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Set forth below are the names, ages, and positions of the executive officers
and directors of the Company and the directors of Holding as of August 22,
1997. All directors of Holding and the Company serve for the term for which
they are elected or until their successors are duly elected and qualified or
until death, retirement, resignation, or removal. All executive officers hold
office at the pleasure of the board of directors.

<TABLE>
<CAPTION>
 NAME                           AGE                       POSITIONS
 ----                           ---                       ---------
 <S>                             <C> <C>
 A. Laurence Jones . . . . .     44  Director, President, and Chief Executive Officer of Holding and the
                                     Company
 Nicholas J. Cuccaro . . . .     54  Senior Vice President, Chief Financial Officer, Secretary, and
                                     Treasurer of Holding and the Company
 Frances M. Anhut  . . . . .     44  Senior Vice President - Strategic Marketing of the Company
 Edward R. Flaherty  . . . .     39  Senior Vice President - Service Industries Group of the Company
 Ed L. Frazier . . . . . . .     50  Senior Vice President - Chief Information Officer of the Company
 Kevin G. Heery  . . . . . .     47  Senior Vice President - International Division of the Company
 Mark A. Lacek . . . . . . .     41  Senior Vice President - Services Subsidiary of the Company
 Susan L. Morse  . . . . . .     50  Senior Vice President - Human Resources of the Company
 Richard L. Rosy . . . . . .     49  Senior Vice President - Consumer Products Group of the Company
 Nancy S. Talmey . . . . . .     47  Senior Vice President - Publishing Group of the Company
 Kurt J. Burghardt . . . . .     62  Director of Holding and the Company
 Jack D. Furst . . . . . . .     38  Director of Holding and the Company
 Thomas O. Harbison  . . . .     53  Director of Holding and the Company
 Thomas O. Hicks . . . . . .     51  Director of Holding and the Company
 Bruce W. Schnitzer  . . . .     53  Director of Holding and the Company
</TABLE>

   A. Laurence Jones was elected a Director of Holding effective December 14,
1993. Mr. Jones was elected President and Chief Executive Officer and Director
of Holding on March 10, 1994 and of the Company on June 30, 1993. Mr. Jones
served as President and Chief Executive Officer of GovPX, a provider of U.S.
Treasury data and pricing services, from January 1992 to August 1993. From 1987
to January 1992, Mr. Jones held the position of Sr. Vice President with
Automatic Data Processing, Inc. as the General Manager of their Institutional
Markets Division. Between 1977 and 1987, Mr. Jones held management positions at
Wang Laboratories.

   Nicholas J. Cuccaro was elected as Senior Vice President and Chief Financial
Officer of Holding and the Company effective June 1994 and was elected
Secretary and Treasurer of Holding and the Company effective March 1995.  From
1985 to June 1994, Mr. Cuccaro served as Vice President of Finance and
Administration and Chief Financial Officer of Jupiter Technology, Inc.  Mr.
Cuccaro also served as Chief Financial Officer in other technology companies
after having begun his career in public accounting with Deloitte & Touche. Mr.
Cuccaro is a Certified Public Accountant.

   Frances M. Anhut was elected as Senior Vice President of Sales and Marketing
of the Company in March 1994, and subsequently changed to Senior Vice President
of Strategic Marketing in January 1996 to reflect changes brought about by the
Company's realignment into industry divisions. Prior to joining the Company,
Ms. Anhut served as Executive Vice President of Praxis International and
President of its Market Pulse Division since June 1990. From 1984 to June 1990,
Ms. Anhut held various positions with Computer Corporation of America,
including that of Vice President of Sales and Vice President of North American
Operations.

   Edward R. Flaherty was elected as Senior Vice President, Services Industries
Division of the Company in September 1996.  Prior to joining the Company Mr.
Flaherty held various positions with Citibank, N.A. for 12 years, serving most
recently as Vice President and Marketing Director of Citibank's Mastercard/Visa
business.  Mr. Flaherty is a Certified Public Accountant.





                                     17
<PAGE>   19
Ed L. Frazier was elected as Senior Vice President and Chief Information
Officer of the Company in November 1995. Prior to that time Mr. Frazier held
various positions with TRW Information Systems and Services, including
Corporate Director of Technical Services, since 1989. From 1973 to 1989, Mr.
Frazier held various positions with Chilton Corporation, including Vice
President, Data Processing Division.

   Kevin G. Heery was appointed as Senior Vice President of the International
Division of the Company in July 1996. Prior to joining the Company in 1995, Mr.
Heery served for four years as Director of International Marketing and Sales
for the European operations of A.T. Cross.  From 1989 to 1991, Mr. Heery held
the position of Chief Executive Officer of Galvia, an Ireland-based healthcare
provider.

   Mark A. Lacek was appointed as Senior Vice President, Services Subsidiary of
the Company in February, 1997.  Mr. Lacek is President of The Lacek Group, a
loyalty marketing company, which the Company acquired in February 1997.  Prior
to starting The Lacek Group in 1993, Mr. Lacek was Director of Global Business
Marketing for Northwest Airlines.

   Susan L. Morse was elected as Senior Vice President, Human Resources of the
Company in October 1993. Prior to joining the Company, Ms. Morse held various
positions with Wang Laboratories, Inc. since 1979, including Director of Human
Resources.

   Richard L. Rosy was elected as Senior Vice President of Sales of the Company
in March 1992, and subsequently changed to Senior Vice President, Consumer
Products Group in January, 1996, to reflect changes brought about by the
Company's reorganization into industry divisions.  Prior to joining the Company
in 1992, Mr. Rosy served as Vice President of Sales and Marketing for A.B. Dick
Company, where he held various positions since 1972.

   Nancy S. Talmey was elected as Vice President of Client Services of the
Company in 1994, and subsequently changed to Senior Vice President, Publishing
Group in January, 1996, to reflect changes brought about by the Company's
realignment into industry divisions.  Ms. Talmey joined the Company in 1983.

   Kurt J. Burghardt was elected a director of Holding and the Company in
August 1990. From 1977 to his joining the Company in August 1990, Mr. Burghardt
served as President of the Neodata Services Division of Nielsen and was
Executive Vice President of Nielsen. Mr. Burghardt began his career in 1960
with Nielsen.

   Jack D. Furst was elected a director of Holding in August 1990 and a
director of the Company in April 1993. Mr. Furst is a Managing Director and
Principal of Hicks, Muse. From 1990 until 1992, Mr. Furst was Vice President,
Treasurer and Assistant Secretary of the Company. Prior to joining Hicks, Muse,
Mr. Furst was a Vice President and subsequently a partner of Hicks & Haas from
1987 to May 1989.  Mr. Furst serves on the board of directors of International
Wire Holding Corp., Cooperative Computing, Inc., Crain Industries, and DESA
International, Inc.

   Thomas O. Harbison was elected a director of Holding in August 1990 and a
director of the Company in 1990. He served as President and Chief Executive
Officer of Holding and Chairman and Chief Executive Officer of the Company from
August 1990 until June 1993. He also served as the Chairman of Holding from
June, 1993 until September 1993. From February 1983 to April 1989, he was
President of Telemedia and from 1989 through May 5, 1993, he was Chairman and
Chief Executive Officer of that company.  Since October 1995, Mr.  Harbison has
served as President of the CustomerSolutions Strategic Business Line of EDS.

   Thomas O. Hicks was elected as Chairman of Holding in June 1990 and a
director of the Company in April 1993. Effective June 1, 1993, Mr. Hicks
resigned as Chairman of Holding (but continues to serve as a Director thereof).
Mr. Hicks is Chairman and Chief Executive Officer of Hicks, Muse, a private
investment firm in Dallas and New York specializing in strategic investments,
leveraged acquisitions and recapitalizations. From 1984 to May 1989, Mr. Hicks
was Co-Chairman of the Board and Co-Chief Executive Officer of Hicks & Haas
Incorporated, a Dallas-based private investment firm ("Hicks & Haas"). Mr.
Hicks also serves as a director of Sybron International Corporation, Berg
Electronics, Inc., Chancellor Media Corporation, International Home Foods, MVS
Corporation, Corp Group Limited, Capstar Broadcasting Corporation, and D.A.C.
Vision, Inc.





                                     18
<PAGE>   20
   Bruce W. Schnitzer was elected a director of Holding in August 1990 and a
director of the Company in April 1993. Since 1987, Mr.  Schnitzer has served as
Chairman of the Board of Wand Partners Inc. which serves as the general partner
of Wand Investments L.P., a private investment firm located in New York City.
Mr. Schnitzer also serves as a director of the following publicly-held U.S.
companies: Chartwell Re Corporation, a property and casualty insurance holding
company, PennCorp Financial Group, AMRESCO Inc., and Nestor, Inc.  Mr.
Schnitzer is also Chairman and director of the London-based New London Capital,
plc.

COMMITTEES

   Each of the boards of directors of Holding and the Company has established
an Executive Committee comprised of Messrs. Hicks and Furst, which committee
possesses the powers and discharges the duties of the Board of Directors during
the interim between meetings of the full board. Each of the boards of directors
of Holding and the Company has also established an Audit Committee comprised of
Messrs. Burghardt and Schnitzer and a Compensation Committee comprised of
Messrs. Hicks and Furst. The boards of directors of Holding and the Company
hold meetings of the committees on a regular basis.

STOCKHOLDERS' AGREEMENT

   In connection with the Recapitalization, Holding entered into a
Stockholders' Agreement with Hicks, Muse, EDS, certain affiliates of Hicks,
Muse, certain executive officers of Holding, and certain other stockholders of
Holding (the "Stockholders' Agreement").  The Stockholders' Agreement provides
that each party thereto will take action within its respective power, including
voting of capital stock of Holding, required to cause all members of the Board
of Directors of Holding to at all times consist of persons designated by Hicks,
Muse.

   In consideration for the execution and delivery of the Stockholders'
Agreement by Holding, each other party to the Stockholders' Agreement waived
any and all rights that such party possessed (with respect to registration
rights or otherwise) pursuant to that certain Amended and Restated
Stockholders' Agreement dated as of May 5, 1993 among Holding and each of the
parties thereto.

   Messrs. Furst, Burghardt, Hicks, and Harbison serve on the board of
directors of Holding pursuant to the terms of the Stockholders' Agreement as
the nominees of Hicks, Muse. The Hicks, Muse Voting Agreement (as defined)
requires Mr. Harbison be one of Hicks, Muse's nominees to Holding's Board of
Directors, subject to certain conditions. See "Item 13. Certain Relationships
and Related Transactions - Hicks, Muse Voting Agreement." Mr. Jones serves on
the Board of Directors pursuant to the terms of the Stockholders' Agreement as
the Chief Executive Officer of Holding.

   Upon consummation of the EDS Acquisition, the Stockholders' Agreement will
be terminated.

ITEM 11.     EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

   Current directors, other than Mr. Burghardt, receive no compensation for
their services as Directors; however, Directors of the Neodata Companies are
entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the Board of
Directors or committees thereof.  Mr. Burghardt receives director's fees
$12,000 per year plus $1,000 for each Board meeting attended.





                                     19
<PAGE>   21
COMPENSATION OF EXECUTIVE OFFICERS

                           SUMMARY COMPENSATION TABLE

   The following table sets forth the cash and noncash compensation for the
years ended June 30, 1997 and 1996 and for the years ended December 31, 1995
and 1994 awarded to or earned by the Chief Executive Officer of the Company and
the four other most highly compensated executive officers of the Company
serving as such at June 30, 1997 (collectively, the "named executive
officers").

<TABLE>
<CAPTION>
                                                                           ANNUAL              LONG-TERM
                                                                        COMPENSATION          COMPENSATION
                                                                        ------------          ------------
                                                                               OTHER ANNUAL    SECURITIES       ALL OTHER
                                                YEAR       SALARY     BONUS    COMPENSATION    UNDERLYING     COMPENSATION
         NAME AND PRINCIPAL POSITION            ENDED       ($)        ($)         ($)        OPTIONS(#)(1)        ($)
         ---------------------------            -----       ---        ---         ---        -------------        ---
 <S>                                          <C>          <C>        <C>       <C>           <C>              <C>
 A. LAURENCE JONES                            June 1997    375,000    431,252       --(2)            450,000    18,130(3)
   Director, President and Chief Executive    June 1996    350,000    270,812       --(2)     20,673/355,578    11,297
   Officer of Holding and the Company         Dec. 1995    350,000    124,687       --(2)                  0    10,272
                                              Dec. 1994    350,000          0       --(2)     20,673/355,578    13,555

 NICHOLAS J. CUCCARO                          June 1997    195,000     88,725       --(2)            225,000     5,500(4)
   Senior Vice President, Chief Financial     June 1996    183,539     71,592       --(2)       1,509/25,952     4,145
   Officer of Holding and the Company         Dec. 1995    180,100     63,830       --(2)                  0     4,386
                                              Dec. 1994     96,284     12,500   74,424          1,509/25,952   114,582


 FRANCES M. ANHUT                             June 1997    180,000     81,360       --(2)            140,000     4,569(5)
   Senior Vice President - Strategic          June 1996    180,000     50,569       --(2)       1,207/20,761    10,779
   Marketing of the Company                   Dec. 1995    180,000     24,469       --(2)                  0    69,091
                                              Dec. 1994    158,173          0   17,629          1,207/20,761    24,280


 NANCY S. TALMEY                              June 1997    175,000     76,825       --(2)            180,000       340(6)
   Senior Vice President - Publishing         June 1996    162,500     41,900       --(2)          402/6,920       291
   Group of the Company                       Dec. 1995    150,000     27,000       --(2)                  0       226
                                              Dec. 1994    116,467          0       --(2)                  0       230

 ED L. FRAZIER (7)                            June 1997    160,000     71,740       --(2)            150,000    19,739(8)
   Senior Vice President - Chief              June 1996     96,139     52,502       --(2)                  0    35,072
   Information Officer of the Company         Dec. 1995     14,770     15,702       --(2)                  0        57
                                              Dec. 1994          0          0        0                     0         0        
----------                                                                                                                  
</TABLE>

(1)    For fiscal 1997, represents options to purchase Holding nonvoting common
       stock ("Holding Nonvoting Common Stock"). For fiscal 1996, represents
       repricing of options to purchase Holding voting common stock ("Holding
       Voting Common Stock") and Holding Series 2 Preferred Stock,
       respectively. For 1994, represents options to purchase Holding Voting
       Common Stock and Holding Series 2 Preferred Stock, respectively.

(2)    Holding and the Company provide to certain executive officers the use of
       automobiles, club memberships, insurance policies, and certain other
       benefits. The aggregate incremental costs of these benefits to Holding
       and the Company for such officer did not exceed the lesser of either
       $50,000 or 10.0% of the total of annual salary and bonus reported for
       such officer.

(3)    Represents (i) $14,914 of matching contributions to a defined
       contribution supplemental retirement plan, (ii) $591 in premiums for
       group term life insurance pursuant to the group insurance plan of the
       Company that are taxable as compensation to the executive, and (iii)
       $2,625 in premiums paid by or on behalf of the Company for an additional
       life insurance policy for the benefit of the executive under terms of
       his employment agreement.





                                     20
<PAGE>   22
(4)    Represents (i) $3,285 of matching contributions to a defined
       contribution supplemental retirement plan, (ii) $650 in premiums for
       group term life insurance pursuant to the group insurance plan of the
       Company that are taxable as compensation to the executive, and (iii)
       $1,565 in premiums paid by or on behalf of the Company for an additional
       life insurance policy for the benefit of the executive under terms of
       his employment agreement.

(5)    Represents (i) $1,683 of matching contributions to a defined
       contribution supplemental retirement plan, (ii) $256 in premiums for
       group term life insurance pursuant to the group insurance plan of the
       Company that are taxable as compensation to the executive, and (iii)
       $5,530 in premiums paid by or on behalf of the Company for an additional
       life insurance policy for the benefit of the executive under terms of
       her employment agreement.

(6)    Represents premiums for group term life insurance pursuant to the group
       insurance plan of the Company that are taxable as compensation to the
       executive.

(7)    Mr. Frazier joined the Company in 1995.

(8)    Represents (i) $466 in premiums for group term life insurance pursuant
       to the group insurance plan of the Company that are taxable as
       compensation to the executive, and (ii) $19,273 in  relocation hardships
       paid by the Company.

OPTION GRANTS TABLE

   The following table sets forth certain information regarding the grant of
options to named executive officers during fiscal 1997.

<TABLE>
<CAPTION>
                                INDIVIDUAL GRANTS                                       POTENTIAL REALIZABLE
 ------------------------------------------------------------------------------------     VALUE AT ASSUMED                    
                         NUMBER OF                                                        ANNUAL RATES OF
                        SECURITIES       % OF TOTAL                                         STOCK PRICE
                        UNDERLYING        OPTIONS                                         APPRECIATION FOR
                          OPTIONS        GRANTED TO        EXERCISE                        OPTION TERM (2)
                          GRANTED         EMPLOYEES         PRICE                        -------------------
       NAME               (#) (1)      IN FISCAL YEAR      ($/SH)     EXPIRATION DATE    5% ($)      10% ($)
       ----               -------      --------------      ------     ---------------    ------      -------
 <S>                      <C>          <C>                 <C>         <C>               <C>        <C>
 A. Laurence Jones        450,000          18.74            $0.50       July 1, 2005      141,503    358,583
 Nicholas J. Cuccaro      225,000           9.37            $0.50       July 1, 2005       70,751    179,291
 Nancy S. Talmey          180,000           7.50            $0.50       July 1, 2005       56,601    143,433
 Ed. L. Frazier           150,000           6.25            $0.50       Nov. 29, 2005      47,168    119,528
 Frances M. Anhut         140,000           5.83            $0.50       July 1, 2005       44,023    111,559
</TABLE>

(1)    Represents options to purchase shares of Holding Nonvoting Common Stock.
       The options vest in three equal installments commencing on the date of
       grant, subject to acceleration or cancellation under certain
       circumstances, including a change of control.  All options to acquire
       Nonvoting Common Stock have been accelerated in connection with the EDS
       Acquisition.

(2)    A market price of $0.50 per share is assumed for purposes of this
       calculation.





                                     21
<PAGE>   23
OPTION EXERCISES AND YEAR-END VALUES

   The following table summarizes the value of options to acquire Holding
Common Stock held by the named executive officers as of June 30, 1997.

              AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                            FY-END OPTION VALUES(1)

<TABLE>
<CAPTION>
                                                            NUMBER OF SECURITIES         VALUE OF UNEXERCISED
                                                           UNDERLYING UNEXERCISED            IN-THE-MONEY
                                                            OPTIONS AT FY-END (#)       OPTIONS AT FY-END($)(2)
 NAME                                                   EXERCISABLE/UNEXERCISABLE(3)   EXERCISABLE/UNEXERCISABLE
 ----                                                   ----------------------------   -------------------------
 <S>                                                        <C>                             <C>
 A. Laurence Jones . . . . . . . . . . . . . . . . . .             20,673/ 0*                       0/ 0
                                                                  355,578/ 0**              3,377,991/ 0
                                                            150,000/ 300,000***                     0/ 0

 Nicholas J. Cuccaro . . . . . . . . . . . . . . . . .              1,509/ 0*                       0/ 0
                                                                   25,952/ 0**                246,544/ 0
                                                             75,000/ 150,000***                     0/ 0

 Nancy S. Talmey . . . . . . . . . . . . . . . . . . .                402/ 0*                       0/ 0
                                                                    6,920/ 0**                 65,740/ 0
                                                             60,000/ 120,000***                     0/ 0

 Frances M. Anhut  . . . . . . . . . . . . . . . . . .              1,207/ 0*                       0/ 0
                                                                   20,761/ 0**                197,230/ 0
                                                              46,667/ 93,333***                     0/ 0

 Ed L. Frazier . . . . . . . . . . . . . . . . . . . .       50,000/ 100,000***                     0/ 0
</TABLE>

__________

   *  Represents options to purchase Holding Voting Common Stock.

  **  Represents options to purchase Holding Series 2 Preferred Stock.

 ***  Represents options to purchase Holding Nonvoting Common Stock.


(1)   No options were exercised by a named executive officer during the year
      ended June 30, 1997.

(2)   Value is calculated on the basis of the remainder of the per share fair
      market value of Holding Common Stock, and Holding Series 2 Preferred
      Stock, as applicable, minus the exercise price multiplied by the number
      of shares of Holding Common Stock, and Holding Series 2 Preferred Stock,
      as applicable underlying the option. The per share fair market value of
      Holding Common Stock used in making the calculation is $0.50. The per
      share fair market value of Holding Series 2 Preferred Stock used in
      making the calculation is $10.00. All amounts are rounded to the nearest
      dollar.

(3)   All outstanding options have been accelerated in connection with the EDS
      Acquisition and, upon the consummation of the EDS Acquisition, such
      options will represent only the right to receive the consideration to be
      paid to the shareholders of Holding as a result of the EDS Acquisition,
      less any applicable exercise price.





                                     22
<PAGE>   24
OPTION REPRICING TABLE

   The following table sets forth certain information regarding the repricing
of options to named executive officers during the preceding ten years.

                           TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
                                                                                              LENGTH OF
                                                NUMBER OF                                     ORIGINAL
                                                SECURITIES        EXERCISE                   OPTION TERM
                                                UNDERLYING        PRICE AT        NEW       REMAINING AT
                                                 OPTIONS          TIME OF       EXERCISE       DATE OF
        NAME                 DATE (1)        REPRICED (#) (2)    REPRICING     PRICE (3)      REPRICING
        ----                 --------        ----------------    ---------     ---------      ---------
 <S>                       <C>               <C>                   <C>           <C>            <C>
 A. Laurence Jones         June 26, 1996     20,673/ 355,578       $1.60         $0.50          7.52
 Nicholas J. Cuccaro       June 26, 1996      1,509/ 25,952        $1.60         $0.50          7.99
 Frances M. Anhut          June 26, 1996      1,207/ 20,761        $1.60         $0.50          7.71
 Nancy S. Talmey           June 26, 1996        402/ 6,920         $1.00         $0.50          4.17
 Ed L. Frazier                  --                  --               --            --            --
</TABLE>

(1)   The Board of Directors and Stockholders of Holding approved the option
      repricings during fiscal 1997, to be effective as of June 26, 1996.  A
      total of 1,598,111 options with exercise prices ranging from $1.00 to
      $1.60 were repriced to $0.50 per option.  These options are exercisable
      for an aggregate total of 32,150 and 552,985 shares of Holding Voting
      Common Stock and Holding Series 2 Preferred Stock, respectively.

(2)   Represents options to purchase Holding Voting Common Stock and Holding
      Series 2 Preferred Stock, respectively.

(3)   There is no established market price for any of Holding's equity
      securities.  In the judgment of the Compensation Committee, the fair
      market value per option did not exceed the new exercise price at the
      effective date of the repricing.

Board of Directors Compensation Committee Report on Option Repricings

   Holdings and the Compensation Committee believe that stock options are an
effective incentive for optionees to create value for Holding's stockholders.
In order to increase the incentive for its optionees to create value, Holdings
believed it was necessary to reduce the option price to a level which was
closer to the options' fair market value.  While the Compensation Committee
believes that the fair market value per option did not exceed the new exercise
price at the effective date of the repricing, the repricing significantly
increases the optionees' opportunity to add to the value of their own
respective equity interests.

Members of the Compensation Committee:         Thomas O. Hicks
                                               Jack D. Furst

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS

   Mr. Jones has entered into an employment contract (the "Jones Employment
Contract") with the Company. No fixed term of employment is provided by the
Jones Employment Contract. The Jones Employment Contract provides for an annual
base salary of $375,000. The Jones Employment Contract provides for the
eligibility of the executive for an annual merit bonus as established by the
Board of Directors pursuant to the Company's cash bonus plan as in effect from
time to time. The Jones Employment Contract provides that upon (i) a
termination of the executive's employment by the Company for any reason other
than cause, (ii) the executive's death, disability, or retirement, or (iii)
upon the termination of employment by the executive for good reason, Mr. Jones
is entitled to receive severance pay in an amount equal to his base salary for
a period equal to the longer of eighteen months or three years from the date of
the Jones Employment Contract, a prorated bonus for the year of the executive's
termination, and certain other benefits.  The Jones Employment Contract
provides that in the event of the sale of the





                                     23
<PAGE>   25
Company, the Company may terminate Mr. Jones and provide the severance benefits
discussed above or require Mr. Jones to continue to work for a specified
transition period and, unless agreed otherwise, provide the severance benefits
discussed above at the expiration of the transition period for a period of
eighteen months. Notwithstanding the foregoing, following the termination of
Mr.  Jones' employment after a sale of the Company, Mr. Jones will receive a
one-time bonus of $750,000 in lieu of a prorated bonus for the year of the
termination.  For purposes of the Jones Employment Contract, (i) "cause"
includes conviction of a felony, use of illegal drugs, fraud, or willful
neglect of duties, (ii) "good reason" includes adverse change of title, duties,
responsibilities, compensation, or benefits, and (iii) a "sale of the Company"
occurs when (a) Hicks, Muse owns less than 25% of the outstanding common stock
of Holding and has an unrecovered investment in Holding and its Subsidiaries
amounting to less than $1 million, (b) Hicks, Muse receives, for its shares of
Holding Common Stock, cash and/or marketable securities equal to at least 75%
of the total value of Holding Common Stock, (c) a person or group other than
Hicks, Muse acquires a majority of the outstanding voting stock of Holding or
the Company, (d) Holding or the Company sells substantially all of its assets
to someone other than Hicks, Muse, or (e) a majority of the board of Holding or
the Company consists of persons nominated by anyone other than the then-current
board.

   The Company has employment agreements with Messrs. Cuccaro, Flaherty,
Frazier, Heery, Lacek, and Rosy, and Mss. Anhut, Morse, and Talmey
(collectively, the "Senior Vice Presidents") with variable terms. The
agreements provide for annual base salaries and additional annual merit bonuses
as established by the Board of Directors. Under certain circumstances,
including termination without cause (as defined), Senior Vice Presidents will
be entitled to receive (i) monthly severance payments in an amount equal to
their monthly base salary for a period of 6-12 months, (ii) a pro-rated portion
of the bonus that would have been payable for the year in which such
termination occurs, and (iii) certain other benefits.

   The Company also has change in control employment agreements (the "Change in
Control Agreements") with each of the Senior Vice Presidents, with the
exception of Mssrs. Heery and Lacek.  The Change in Control Agreements provide
that for a period of eighteen months (the "Retention Period") following a sale
of the Company (as defined), if the Company terminates the employee for reasons
other than cause (as defined), the employee shall receive severance pay equal
to the employee's aggregate base salary through the remainder of the Retention
Period. The Change in Control Agreements also provide that in the event of a
sale of the Company (as defined) in which the holders of Holding Preferred
Stock receive at least $125,000,000 in the aggregate, the employee shall
receive a retention bonus equal to the 100% of the employee's then-existing
base salary.  The Company's aggregate obligation under the Change in Control
Agreements is limited to $3,000,000.  The EDS Acquisition does not constitute a
sale of the Company as defined under the Change in Control Agreements.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

   Mr. Furst, who is also a director of Holding and the Company, is Managing
Director of Hicks, Muse. Mr. Hicks, who is also a director of Holding and the
Company, is Chairman and Chief Executive Officer of Hicks, Muse. The Company
has engaged Hicks, Muse to provide financial advisory services during the
ten-year period ending August 22, 2000, in consideration for which Hicks, Muse
will receive aggregate fees of approximately $1,800,000, which is currently
payable in forty equal quarterly installments of $45,000.  Hicks, Muse is also
entitled to reimbursement for all reasonable and customary disbursements and
out-of-pocket expenses incurred in the performance of those financial advisory
services and will be indemnified by the Company against certain liabilities and
expenses. During the year ended June 30, 1997, Hicks, Muse received fees
pursuant to such agreement of $180,000.  The financial advisory agreement will
be terminated upon consummation of the EDS Acquisition.





                                     24
<PAGE>   26
ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   All of the issued and outstanding shares of common stock of the Company are
held by Holding. The following table sets forth certain information as of
August 22, 1997, regarding the beneficial ownership of the equity securities of
Holding by each person who is known by Holding to beneficially own more than 5%
of any class of Holding's voting securities, by the directors of the Company,
and by the executive officers of the Company named in the Summary Compensation
Table, individually, and by the directors and all executive officers of the
Company as a group.

<TABLE>
<CAPTION>
                                 NAME AND ADDRESS OF                         AMOUNT/NATURE        PERCENT OF
  TITLE OF CLASS                  BENEFICIAL OWNER                            OF OWNERSHIP           CLASS
  --------------                  ----------------                            ------------           -----
<S>                               <C>                                           <C>                  <C>
 5% STOCKHOLDERS OF VOTING SECURITIES:

 Common Stock                     Thomas O. Hicks                               363,312(1)          84.52%
                                  200 Crescent Court, Suite 1600
                                  Dallas, TX 75201

 Common Stock                     HMC/Neodata, L.P.                             147,065             37.86%
                                  200 Crescent Court, Suite 1600
                                  Dallas, TX 75201

 Common Stock                     HM/Neodata DBMS, L.P.                          98,210             25.29%
                                  200 Crescent Court, Suite 1600
                                  Dallas, TX 75201

 Common Stock                     Bruce W. Schnitzer                             47,094(2)          12.10%
                                  630 5th Avenue, Suite 2435
                                  New York, NY 10111

 Common Stock                     Wand/Neodata Investments, L.P.                 47,094(3)          12.10%
                                  30 Rockefeller Plaza, Suite 3226
                                  New York, NY 10112

 Common Stock                     Thomas O. Harbison                             22,901(4)           5.79%
                                  5400 Legacy Drive, H1-5B-29
                                  Plano, TX 75024

 Common Stock                     Steven L. Korby                                19,912              5.07%
                                  15110 North Dallas Parkway
                                  Dallas, TX 75248

 MANAGEMENT AND
   DIRECTORS:
 Common Stock                     A. Laurence Jones                             170,673(5)          30.53%
                                  (director of Holding and the Company
                                  and named executive officer)

 Common Stock                     Nicholas J. Cuccaro                            76,509(6)          16.46%
                                  (named executive officer)

 Common Stock                     Nancy S. Talmey                                60,402(7)          13.46%
                                  (named executive officer)

 Common Stock                     Ed. L. Frazier                                 50,000(8)          11.41%
                                  (named executive officer)

 Common Stock                     Frances M. Anhut                               47,874(9)          10.97%
                                  (named executive officer)

 Common Stock                     Thomas O. Hicks                               513,312(10)         88.53%
                                  (director of Holding and the Company)
</TABLE>





                                     25
<PAGE>   27
<TABLE>
<S>                       <C>                                                     <C>                 <C>
Common Stock              Bruce W. Schnitzer                                         47,094(2)        12.10%
                          (director of Holding and the Company)

Common Stock              Thomas O. Harbison                                         22,901(4)         5.79%
                          (director of Holding and the Company)

Common Stock              Jack D. Furst                                               1,998                *
                          (director of Holding and the Company)

Common Stock              Kurt J. Burghardt                                             805                *
                          (director of Holding and the Company)

Common Stock              DIRECTORS AND EXECUTIVE OFFICERS                          869,677           94.57%
                          AS A GROUP

Series 2                  A. Laurence Jones                                         355,578(11)        5.05%
  Preferred Stock         (director of Holding and the Company
                          and named executive officer)

Series 2                  Nicholas J. Cuccaro                                        25,952(11)            *
  Preferred Stock         (named executive officer)

Series 2                  Frances M. Anhut                                           20,761(11)            *
  Preferred Stock         (named executive officer)

Series 2                  Nancy S. Talmey                                             6,920(11)            *
  Preferred Stock         (named executive officer)

Series 2                  Thomas O. Hicks                                         6,248,971(12)       84.53%
  Preferred Stock         (director of Holding and the Company)

Series 2                  Bruce W. Schnitzer                                        810,017(13)       12.10%
  Preferred Stock         (director of Holding and the Company)

Series 2                  Thomas O. Harbison                                        393,899(14)        5.79%
  Preferred Stock         (director of Holding and the Company)

Series 2                  Jack D. Furst                                              34,358                *
  Preferred Stock         (director of Holding and the Company)

Series 2                  Kurt J. Burghardt                                          13,841                *
  Preferred Stock         (director of Holding and the Company)

Series 2                  DIRECTORS AND EXECUTIVE OFFICERS                        6,731,105           88.69%
  Preferred Stock         AS A GROUP
----------                           
</TABLE>

  *   Represents less than 1%.

(1)   Includes (i) 4,459 shares of Voting Common Stock held directly of record
      by Thomas O. Hicks or by trusts pursuant to which Mr.  Hicks is sole
      trustee and has sole investment and voting power, (ii) 147,065 shares of
      Voting Common Stock held directly of record by HMC/Neodata, (iii) 98,210
      shares of Voting Common Stock held directly of record by HM/DBMS, (iv) 47
      shares of Voting Common Stock held directly of record by an employee of
      Hicks, Muse, for which Mr. Hicks has sole investment and voting power,
      and (v) 113,531 shares of Voting Common Stock beneficially owned by other
      stockholders (including, among others, Wand and Messrs. Furst and Turner)
      who are obligated pursuant to the Stockholders Agreement to vote their
      shares of Holding Common Stock in favor of nominees of HMC/Neodata for
      election to Holding's board of directors.

      HMC/Neodata is a limited partnership in which the sole general partner is
      HMC Partners, L.P., a limited partnership in which the managing general
      partner is Hicks, Muse. Mr. Hicks is a controlling stockholder of Hicks,
      Muse and is also its Chairman of the Board, President, Chief Operating
      Officer,  Chief Executive Officer, and Secretary. Accordingly, Mr. Hicks
      may be deemed to be the beneficial owner of Common Stock held by
      HMC/Neodata. John R. Muse, Jack D. Furst, Charles W. Tate, Lawrence D.
      Stuart, Michael J. Levitt, and Alan B. Menkes are officers, directors and
      minority stockholders of Hicks, Muse and as such may be deemed to share





                                     26
<PAGE>   28
      with Mr. Hicks the power to vote or dispose of Common Stock held by
      HMC/Neodata. HMC/Neodata and each of Messrs. Hicks, Muse, Furst, Tate,
      Stuart, Levitt, and Menkes disclaims the existence of a group and
      disclaims beneficial ownership of Common Stock not held directly of
      record by it or him.

      HM/DBMS is a limited partnership in which the sole general partner is HMC
      Partners, L.P., a limited partnership in which the managing general
      partner is Hicks, Muse. Mr. Hicks may be deemed to be the beneficial
      owner of Common Stock held by HM/DBMS.  Messrs. Muse, Furst, Tate,
      Stuart, Levitt, and Menkes may be deemed to share with Mr. Hicks the
      power to vote or dispose of Common Stock held by HM/DBMS. HM/DBMS and
      each of Messrs. Hicks, Muse, Furst, Tate, Stuart, Levitt, and Menkes
      disclaims the existence of a group and disclaims beneficial ownership of
      Common Stock not held directly of record by it or him.

      Mr. Hicks may be deemed to be the beneficial owner of Common Stock held
      by Hicks, Muse. Messrs. Muse and Furst may be deemed to share with Mr.
      Hicks the power to vote or dispose of Common Stock held by Hicks, Muse.
      Hicks, Muse and each of Messrs.  Hicks, Muse, Furst, Tate, Stuart,
      Levitt, and Menkes disclaims the existence of a group and disclaims
      beneficial ownership of Common Stock not held directly of record by it or
      him.

(2)   Mr. Schnitzer holds no shares of Common Stock directly. Includes (i)
      46,381 shares of Voting Common Stock held directly of record by Wand and
      (ii) 713 shares of Voting Common Stock issuable to Wand pursuant to a
      warrant issued in connection with the formation of the Company. Mr.
      Schnitzer is a director, an executive officer, and the controlling
      stockholder of the general partner of Wand and has investment and voting
      power with respect to shares of Common Stock held by Wand. Accordingly,
      Mr.  Schnitzer disclaims beneficial ownership of Common Stock not held
      directly of record by it or him.

(3)   Includes (i) 46,381 shares of Voting Common Stock held directly of record
      by Wand and (ii) 713 shares of Voting Common Stock issuable to Wand
      pursuant to a warrant issued in connection with the formation of the
      Company.

(4)   Includes (i) 15,808 shares of Voting Common Stock held directly of record
      by Harbison Family Living Trust pursuant to which Mr. Harbison has
      investment and voting power with respect to shares of Common Stock held
      by it, (ii) 2,012 shares of Voting Common Stock that are immediately
      issuable pursuant to options granted under the Harbison Employment
      Agreement, and (iii) 5,081 shares of Voting Common Stock that are
      immediately issuable pursuant to an option.

(5)   Represents 20,673 and 150,000 shares of Voting and Nonvoting Common
      Stock, respectively, that are immediately issuable pursuant to options.

(6)   Represents 1,509 and 75,000 shares of Voting and Nonvoting Common Stock,
      respectively, that are immediately issuable pursuant to options.

(7)   Represents 402 and 60,000 shares of Voting and Nonvoting Common Stock,
      respectively, that are immediately issuable pursuant to options.

(8)   Represents shares of Nonvoting Common Stock that are immediately issuable
      pursuant to an option.

(10)  Includes (i) 4,459 shares of Voting Common Stock held directly of record
      by Thomas O. Hicks or by trusts pursuant to which Mr.  Hicks is sole
      trustee and has sole investment and voting power, (ii) 147,065 shares of
      Voting Common Stock held directly of record by HMC/Neodata, (iii) 98,210
      shares of Voting Common Stock held directly of record by HM/DBMS, (iv) 47
      shares of Voting Common Stock held directly of record by an employee of
      Hicks, Muse, for which Mr. Hicks has sole investment and voting power,
      and (v) 263,731 shares of Voting and Nonvoting Common Stock beneficially
      owned by other  stockholders (including, among others, Wand and Messrs.
      Furst and Turner) who are obligated pursuant to the Stockholders
      Agreement to vote their shares of Holding Common Stock in favor of
      nominees of HMC/Neodata for election to Holding's board of directors.





                                     27
<PAGE>   29
(11)  Represents shares of Series 2 Preferred Stock that are immediately
      issuable pursuant to an option.

(12)  Includes (i) 76,695 shares of Series 2 Preferred Stock held directly of
      record by Thomas O. Hicks or by trusts pursuant to which Mr. Hicks is
      sole trustee and has sole investment and voting power, (ii) 2,529,522
      shares of Series 2 Preferred Stock held directly of record by
      HMC/Neodata, (iii) 1,689,212 shares of Series 2 Preferred Stock held
      directly of record by HM/DBMS, (iv) 808 shares of Series 2 Preferred
      Stock held directly of record of an employee of Hicks, Muse for which Mr.
      Hicks has sole investment and voting power, and (v) 1,952,734 shares of
      Series 2 Preferred Stock beneficially owned by other stockholders
      (including, among others, Wand and Messrs. Furst, Jones and Turner) who
      are obligated pursuant to the Stockholders Agreement to vote their shares
      of Series 2 Preferred Stock in favor of nominees of HMC/Neodata for
      election to Holding's board of directors. See Footnote 1 for additional
      information concerning Mr. Hicks.

(13)  Mr. Schnitzer holds no shares of Series 2 Preferred Stock directly.
      Includes (i) 797,753 shares of Series 2 Preferred Stock held directly of
      record by Wand and (ii) 12,264 shares of Series 2 Preferred Stock
      issuable to Wand pursuant to a warrant in connection with the formation
      of the Company. Mr. Schnitzer is a director, and executive officer, and
      the controlling stockholder of the general partner of Wand and has
      investment and voting power with respect to shares of Series 2 Preferred
      Stock held by Wand. Accordingly, Mr. Schnitzer disclaims beneficial
      ownership of Series 2 Preferred Stock not held directly of record by it
      or him.

(14)  Includes (i) 271,895 shares of Series 2 Preferred Stock held directly of
      record by The Harbison Family Living Trust pursuant to which Mr. Harbison
      has investment and voting power with respect to shares of Series 2
      Preferred Stock held by it, (ii) 34,602 shares of Series 2 Preferred
      Stock that are immediately issuable pursuant to options granted under the
      Harbison Employment Agreement and (iii) 87,402 shares of Series 2
      Preferred Stock that are immediately issuable pursuant to an option.

CHANGE OF CONTROL

   Upon consummation of the EDS Acquisition, Holding will become a wholly-owned
subsidiary of EDS.  As a result, the Company will undergo a change of control.
See "Item 13. Certain Relationships and Related Transactions - The EDS
Acquisition."

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

FINANCIAL ADVISORY AGREEMENTS

   The Company has engaged each of Hicks, Muse and Wand to provide financial
advisory services during the ten-year period ending August 22, 2000, in
consideration for which Hicks, Muse and Wand will receive aggregate fees of
approximately $1,800,000 and $350,000, respectively, which fees are currently
payable in forty equal quarterly installments of $45,000 and $8,750,
respectively.  Hicks, Muse and Wand are also entitled to reimbursement for all
reasonable and customary disbursements and out-of-pocket expenses incurred in
the performance of those financial advisory services and will be indemnified by
the Company against certain liabilities and expenses. During the year ended
June 30, 1997, Hicks, Muse and Wand received fees pursuant to such agreements
of $180,000 and $35,000, respectively.  Upon consummation of the EDS
Acquisition, the foregoing agreements will be terminated.

RELATIONSHIP WITH EDS

   The Company, Holding and EDS consummated the Recapitalization of Holding in
November 1994. This transaction reduced the Company's obligations owed to EDS
relating to NCORE by approximately $28.3 million. The transaction resulted in
the issuance of additional Holding equity and the recapitalization of other
Holding equity but had no effect on the Company's common equity ownership. See
"Item 1. Business -- Background -- The Recapitalization" and Note 20 to the
Company's Consolidated Financial Statements.

   Pursuant to the Amended IT Agreement, EDS will (i) continue to supply to the
Company IT Services and (ii) assist the Company in reducing costs and improving
its business operations. Under the Amended IT Agreement, the Company has
control over the management direction of the IT Services and EDS' delivery of
the IT Services. The





                                     28
<PAGE>   30
Amended IT Agreement amended, restated and supersedes the terms and conditions
of all prior information technology services agreements between the Company and
EDS as of the effective date of the Amended IT Agreement.

   The Amended IT Agreement provides for an initial term commencing January 1,
1995 and concluding on March 31, 2003 unless earlier terminated or subsequently
renewed in accordance with the terms of the Amended IT Agreement. Under the
Amended IT Agreement, EDS supplies all of the Company's information technology,
equipment, and services needs. Excluded from the IT Services to be provided are
the Company's existing information technology functions in Ireland; advanced
function printing technicians, letter shop printing functions, and
corporate-wide data entry systems (with certain exceptions); and any new
business, entities, units or subsidiaries acquired or formed by Services
subsequent to the effective date of the Amended IT Agreement which are operated
independently from the Company's then existing information technology
functions.  Certain information technology functions formerly performed by the
Company are included in the IT Services.  Effective January 1, 1995,
approximately 112 Company employees were transferred to EDS, as well as certain
operating lease obligations for equipment and software. The Amended IT
Agreement eliminated funding for NCORE.

   The Company compensates EDS for IT Services on a "cost-plus" basis. The term
"cost-plus" means that the Company reimburses EDS for EDS' direct out-of-pocket
expenses incurred by EDS in performing the IT Services and pays EDS an amount
based on a percentage of the reimbursed costs.

   Fees incurred under the Amended IT Agreement for the year ended June 30,
1997 were $48,301,000, including $7,500,000 of capitalized expenditures.  Fees
incurred under the Amended IT Agreement for the year ended June 30, 1996 were
$47,177,000, including $8,380,000 of capitalized expenditures. Fees incurred
under the Amended IT Agreement for the year ended December 31, 1995 were
$44,773,000, including $7,553,000 of capitalized expenditures. Fees incurred
under the then-existing EDS information technology services agreement for the
year ended December 31, 1994 were $31,664,000, including $5,271,000 of
capitalized expenditures.

   The Company expects to spend approximately $50,400,000 in fiscal 1998 with
respect to information technology services on a cost- plus basis as discussed
above, including approximately $6,500,000 in capital expenditures. Amounts
expended for facilities management services may vary in accordance with the
amount and kind of services rendered, but are generally expected to remain flat
or grow slightly commensurate with the growth in revenue for the foreseeable
future.

   It is expected that the Amended IT Agreement will remain in effect after the
consummation of the EDS Acquisition.

   Mr. Harbison, who is a director of Holding and the Company, is currently
serving as President of the CustomerSolutions Strategic Business Line of EDS.

THE EDS ACQUISITION

   On August 7, 1997, Holding entered into an Agreement and Plan of Merger with
EDS and Ramcad Corporation, a wholly-owned subsidiary of EDS, pursuant to which
Ramcad Corporation will merge with and into Holding, with Holding surviving as
a wholly-owned subsidiary of EDS (the "EDS Merger").  Pursuant to the EDS
Merger, all outstanding capital stock of Holding not presently owned by EDS
will be converted into the right to receive $2.60 per share, in the case of
Voting Common Stock and Nonvoting Common Stock, and approximately $7.67 per
share, in the case of Series 2 Preferred Stock.  All outstanding options and
warrants will be converted into the right to receive the consideration
applicable to the shares of stock underlying such options and warrants, less
any applicable exercise price.  The EDS Acquisition is scheduled to close on
August 29, 1997.

THE TAX SHARING AGREEMENT

   Holding and its subsidiaries file consolidated federal income tax returns
and are parties to a tax sharing agreement for the purpose of allocating the
federal income tax liability of the group among its members. The tax sharing
agreement generally allocates the consolidated federal income tax liability to
each member according to the





                                     29
<PAGE>   31
ratio of what that member's tax liability would be if it filed separate federal
income tax returns (subject to certain modifications) to the similarly computed
separate return tax liabilities of all of the members of the group. Pursuant to
the agreement, a member is permitted to utilize the net operating loss of
another member (a "Loss Member") to reduce its share of consolidated federal
income tax liability and is not required to compensate the Loss Member for such
tax benefit unless and to the extent that the Loss Member generates taxable
income which would have permitted the Loss Member to utilize the net operating
loss in a separate federal income tax return.

HICKS, MUSE VOTING AGREEMENT

   Mr. Harbison has entered into a letter agreement with Hicks, Muse (the
"Hicks, Muse Voting Agreement"). The Hicks, Muse Voting Agreement provides
that, so long as either HMC/Neodata or HM/DBMS has the right, pursuant to the
Stockholders' Agreement, to designate certain members of Holding's Board of
Directors, Hicks, Muse will cause Mr. Harbison to be one of such designees.
Such obligation of Hicks, Muse (i) shall terminate in the event that Mr.
Harbison owns less than 10,059 shares of Holding Common Stock and (ii) shall be
suspended during such period of time as certain former shareholders of
Telemedia who are parties to the Stockholders Agreement designate someone other
than Mr. Harbison to act in such capacity.  Such agreement will terminate
pursuant to its terms upon consummation of the EDS Acquisition.





                                     30
<PAGE>   32



ITEM 14.     EXHIBITS,  FINANCIAL STATEMENT SCHEDULES,  AND REPORTS ON FORM
             8-K

   The following financial statements, financial statement schedule, and
exhibits are filed as part of this report.

FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

   See Index to Consolidated Financial Statements and Consolidated Financial
Statement Schedule on page F-1 of this report.

EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.                                                         EXHIBIT
-----------                                                         -------
<S>      <C> <C>
2.1      --  Agreement and Plan of Merger, dated August 7, 1997, by and among Holding, EDS, and Ramcad Corporation*

3.1      --  Certificate of Incorporation of the Company. (incorporated by reference from Exhibit 3.1 to the Company's Registration
             Statement on  Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration
             No. 33-63838))

3.2      --  By-Laws of the Company. (incorporated by reference from Exhibit 3.2 to the Company's Registration Statement on Form S-1
             as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

4.1      --  Indenture, dated as of May 5, 1993, between the Company, as Issuer, and Ameritrust Texas National Association, as
             Trustee. (incorporated by reference from Exhibit 4.1 to the Company's Registration Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

4.2      --  Form of 12% Series B Senior Deferred Coupon Note due 2003. (incorporated by reference from Exhibit 4.3 to the Company's
             Registration Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993
             (Registration  No. 33-63838))

10.1     --  Registration Rights Agreement, dated as of May 5, 1993, between the  Company and Morgan Stanley & Co. Incorporated.
             (incorporated by reference from Exhibit 10.6 to the Company's Registration Statement  on Form S-1 as declared effective
             by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.2     --  Tax Sharing Agreement, dated as of May 5, 1993, among the Company, Holding, Neodata Mailing Services, Inc. and Neodata
             Distribution         Services, Inc. (incorporated by reference from Exhibit 10.7 to the  Company's Registration
             Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration
             No. 33-63838))

10.3+    --  Amended and Restated Employment Agreement, dated as of June 1, 1993, among Mr. Thomas O. Harbison, the Company, and
             Holding. (incorporated by reference from Exhibit 10.57 to the Company's Registration  Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.4+    --  Letter Agreement between Hicks, Muse & Co. (TX) Incorporated and Mr. Thomas O. Harbison executed in connection with the
             Amended and Restated Employment Agreement. (incorporated by reference from Exhibit 10.58 to the Company's Registration
             Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration
             No. 33-63838))

10.5+    --  Stock Option Agreement, dated as of January 1, 1994, between Mr. A. Laurence Jones and Holding. (incorporated by
             reference from Exhibit 10.12 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended
             December 31, 1993)
</TABLE>





                                     31
<PAGE>   33
<TABLE>
<CAPTION>
EXHIBIT NO.                                                         EXHIBIT
-----------                                                         -------
<S>      <C> <C>
10.6+    --  Stock Option Agreement, dated as of January 1, 1994, between Mr. William J. Turner and Holding. (incorporated by
             reference from Exhibit 10.14 to the Company's Annual Report on Form 10-K (File No.       33-63838) for the fiscal year
             ended December 31, 1993)

10.7+    --  Amendment and Restatement of Neodata Corporation Employee Investment Plan, dated as of January 1, 1994. (incorporated
             by reference from Exhibit 10.23 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year
             ended December 31, 1993)

10.8+    --  Neodata Corporation Amended and Restated Employee Incentive Plan, dated as of March 9, 1994 (incorporated by reference
             from Exhibit 10.24 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended December
             31, 1993)

10.9+    --  Neodata Corporation Supplemental Executive Investment Plan, effective as of January 1, 1994. (incorporated by reference
             from Exhibit 10.25 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended December
             31, 1993)

10.10+   --  Financial Advisory Agreement, dated as of August 22, 1990, among Hicks, Muse, Holding, and the Company. (incorporated
             by reference from Exhibit 10.14 to the Company's Registration Statement on Form S-1 as declared effective by the
             Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.11+   --  Amendment Number One to Financial Advisory Agreement, dated as of September 30, 1992, among Hicks, Muse, Holding, and
             the Company. (incorporated by reference from Exhibit 10.15 to the Company's Registration Statement on Form S-1 as
             declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.12+   --  Amendment Number Two to Financial Advisory Agreement, dated as of May 5, 1993, among Hicks, Muse, Holding, and the
             Company. (incorporated by reference from Exhibit 10.16 to the Company's Registration Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.13    --  Circulation Fulfillment Service Agreement, dated June 26, 1991, between the Company (formerly Neodata
             Books/Distribution Services, Inc. by name change and merger) and Meredith. (incorporated by reference from Exhibit
             10.48 to the Company's Registration Statement on Form S-1 as declared effective by the Securities and Exchange
             Commission on August 24, 1993 (Registration No. 33-63838))

10.14    --  Fulfillment Agreement, dated as of June 26, 1991, between the Company (formerly Neodata Books/Distribution Services,
             Inc. by name change and merger) and Meredith. (incorporated by reference from Exhibit 10.49 to the Company's
             Registration Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993
             (Registration No. 33-63838))

10.15    --  Securities Purchase Agreement, dated as of May 5, 1993, among Holding, HM/DBMS, and Wand. (incorporated by reference
             from Exhibit 10.50 to the Company's Registration Statement on Form S-1 as declared effective by the Securities and
             Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.16    --  Amended and Restated Stockholders Agreement, dated as of May 5, 1993, among Holding, HMC/Neodata, HM/DBMS, Wand, and
             certain other stockholders of Holding. (incorporated by reference from Exhibit 10.51 to the Company's Registration
             Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration
             No. 33-63838))

10.17    --  Securities Purchase and Exchange Agreement, dated as of May 5, 1993, between Holding and EDS. (incorporated by
             reference from Exhibit 10.52 to the Company's Registration Statement on Form S-1 as declared effective by the
             Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))
</TABLE>





                                     32
<PAGE>   34
<TABLE>
<CAPTION>
EXHIBIT NO.                                                         EXHIBIT
-----------                                                         -------
<S>      <C> <C>
10.18    --  Securityholders Agreement, dated as of May 5, 1993, among Holding, HMC/Neodata, HM/DBMS, and EDS. (incorporated by
             reference from Exhibit 10.53 to the Company's Registration Statement on Form S-1 as declared effective by the
             Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.19    --  Securities Repurchase Agreement, dated as of May 5, 1993, among Holding, Continental Bank N.A., and Philadelphia Life.
             (incorporated by reference from Exhibit 10.54 to the Company's Registration Statement on Form S-1 as declared effective
             by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.20    --  Nonexclusive License Agreement, dated as of May 5, 1993 and effective as of April 15, 1993, between the Company and
             EDS. (incorporated by reference from Exhibit 10.56 to the Company's Registration Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.21    --  Financial Advisory Agreement, dated as of August 22, 1990, among Holding, the Company, and Wand. (incorporated by
             reference from Exhibit 10.60 to the Company's Registration Statement on Form S-1 as declared effective by the
             Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.22+   --  Amendment Number One to Financial Advisory Agreement, dated as of September 30, 1992, among Holding, the Company, and
             Wand. (incorporated by reference from Exhibit 10.61 to the Company's Registration Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.23    --  Amended and Restated Lease Agreement, by and among NeoServ (Co.) QRS 10-13, Inc., NeoServ (Co.) QRS 11-18, Inc., and
             the Company dated as of June 8, 1994 (incorporated by reference from Exhibit 10.76 to the Company's Quarterly Report on
             Form 10-Q File No. 33-63838 for the quarterly period ended June 30, 1994)

10.24    --  Construction Agreement, among the Company and Neoserv (Co.) QRS 10-13, Inc., NeoServ (Co.) QRS 11-18, Inc., and the
             Company dated as of June 8, 1994 (incorporated by reference from Exhibit 10.77 to the Company's Quarterly Report on
             Form 10-Q (File No. 33-63838) for the quarterly period ended June 30, 1994)

10.25    --  Amended and Restated Lease Agreement, by and among Neoserv (Co.) QRS 10-13, Inc. and Neoserv (Co.) QRS 10-8 Inc. (as
             landlord) and the Company (as tenant), dated as of June 8, 1994 (incorporated by reference from Exhibit 10.78 to the
             Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended December 31, 1994)

10.26    --  First Amendment to Amended and Restated Lease Agreement, by and among Neoserv (Co.) QRS 10-13, Inc. and Neoserv (Co.)
             QRS 11-8, Inc. (as landlord) and the Company (as tenant) (incorporated by reference from Exhibit 10.79 to the Company's
             Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended December 31, 1994)

10.27    --  Agreement for Information Technology Services, dated as of January 1, 1995, between the Company and EDS (incorporated
             by reference from Exhibit 10.83 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year
             ended December 31, 1995)

10.28    --  Form of Second Amendment to Amended and Restated Lease Agreement, dated as of March 25, 1996, by and among Neoserv
             (Co.) QRS 10-13, Inc. and Neoserv (Co.) QRS 11-8, Inc. (as landlord) and the Company (as tenant) (incorporated by
             reference from Exhibit 10.89 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended
             December 31, 1995)

10.29    --  Stockholders Agreement, dated as of November 28, 1994, among Holding, HMC/Neodata, HM/DBMS, Hicks, Muse, EDS, and other
             stockholders (incorporated by reference from Exhibit 10.40 to the Company's Annual Report on Form 10-K (File No. 33-
             63838) for the transition period ended June 30, 1996)

10.30+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Mr. Nicholas J. Cuccaro
             (incorporated by reference from Exhibit 10.41 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the
             transition period ended June 30, 1996)
</TABLE>





                                     33
<PAGE>   35
<TABLE>
<CAPTION>
EXHIBIT NO.                                                         EXHIBIT
-----------                                                         -------
<S>      <C> <C>
10.31+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Ms. Frances M. Anhut (incorporated
             by reference from Exhibit 10.42 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition
             period ended June 30, 1996)

10.32+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Mr. Ed L. Frazier (incorporated by
             reference from Exhibit 10.43 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period
             ended June 30, 1996)

10.33+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Ms. Susan L. Morse (incorporated by
             reference from Exhibit 10.45 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period
             ended June 30, 1996)

10.34+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Mr. Richard L. Rosy (incorporated by
             reference from Exhibit 10.46 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period
             ended June 30, 1996)

10.35+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Ms. Nancy S. Talmey (incorporated by
             reference from Exhibit 10.47 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period
             ended June 30, 1996)

10.36+   --  Letter Agreement, dated as of June 2, 1994, between the Company and Mr. Nicholas J. Cuccaro (incorporated by reference
             from Exhibit 10.48 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.37+   --  Letter Agreement, dated as of March 15, 1994, between the Company and Ms. Frances M. Anhut (incorporated by reference
             from Exhibit 10.49 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.38+   --  Letter Agreement, dated as of August 14, 1995, between the Company and Mr. Kevin G. Heery(incorporated by reference
             from Exhibit 10.51 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.39+   --  Letter Agreement, dated as of September 23, 1993, between the Company and Ms. Susan L. Morse (incorporated by reference
             from Exhibit 10.52 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.40+   --  Letter Agreement, dated as of February 25, 1992, between the Company and Mr. Richard L. Rosy (incorporated by reference
             from Exhibit 10.53 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.41+   --  Letter Agreement, dated as of December 20, 1994, between the Company and Ms. Nancy S. Talmey (incorporated by reference
             from Exhibit 10.54 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.42    --  Credit Agreement, dated as of January 31, 1997, among Holding, the Company, Various Banks and Bankers Trust Company, as
             Agent (incorporated by reference from Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q (File No. 33-63838)
             for the quarterly period ended December 31, 1996)

10.43    --  Agreement, dated as of December 11, 1996, between the Company and Philip Morris Incorporated (incorporated by reference
             from Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q (File No. 33-63838) for the quarterly period ended
             March 31, 1997)**

10.44    --  Credit Agreement, dated as of February 24, 1997, among Holding, Neodata Creative Services, Inc., Neodata Investment
             Services, Inc. No. 1, Neodata Investment Services, Inc. No. 2, Various Banks and Bankers Trust Company, as Agent
             (incorporated by reference from Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q (File No. 33-63838) for the
             quarterly period ended March 31, 1997)

10.45    --  Third Amendment to Amended and Restated Lease Agreement, dated as of January 31, 1997, by and among Neoserv (Co.) QRS
             10-13, Inc. and Neoserv (Co.) QRS 11-8, Inc. (as landlord) and the Company (as tenant)*

10.46+   --  Letter Agreement, dated as of November 7, 1995, between the Company and Mr. Ed L. Frazier*
</TABLE>





                                     34
<PAGE>   36
<TABLE>
<CAPTION>
EXHIBIT NO.                                                         EXHIBIT
-----------                                                         -------
<S>      <C> <C>
10.47+   --  Letter Agreement, dated as of June 17, 1996, between the Company and Ms. Frances M. Anhut*

10.48+   --  Letter Agreement, dated as of June 17, 1996, between the Company and Ms. Susan L. Morse*

10.49+   --  Letter Agreement, dated as of August 22, 1996, between the Company and Mr. Edward R. Flaherty*

10.50+   --  Letter Agreement, dated as of August 27, 1996, between the Company and Mr. Ed L. Frazier*

10.51+   --  Letter Agreement, dated as of September 18, 1996, between the Company and Mr. Kevin G. Heery*

10.52+   --  Executive Employment Agreement, dated as of December 17, 1996, between the Company and Mr. Edward R. Flaherty*

10.53+   --  Amended and Restated Executive Employment Agreement, dated as of January 1, 1997, between the Company and Mr. A.
             Laurence Jones*

10.54+   --  Executive Employment Agreement, dated as of February 25, 1997, between the Company and Mr. Mark A. Lacek*

10.55+   --  Letter Agreement, dated as of February 27, 1997, between the Company and Ms. Nancy S. Talmey*

21       --  Subsidiaries of the Company*

27       --  Financial Data Schedule*
----------                           
</TABLE>

*  Filed herewith.

** Confidential treatment has been granted with respect to certain portions of
   such agreement and the confidential portions have been filed separately with
   the Commission pursuant to the confidential treatment request.

+  Indicates a management contract or compensatory plan or arrangement.

REPORTS ON FORM 8-K

   None.





                                     35
<PAGE>   37



                             NEODATA SERVICES, INC.

                           ANNUAL REPORT ON FORM 10-K
                            ITEMS 8, 14(A) AND 14(D)

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                   CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

<TABLE>
 <S>                                                                                                  <C>
 CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    F-2

 Consolidated Balance Sheets -- as of June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . .    F-3

 Consolidated Statements of Operations -- for the years ended June 30, 1997 and 1996
   and for the years ended December 31, 1995 and 1994  . . . . . . . . . . . . . . . . . . . . . .    F-4

 Consolidated Statements of Stockholder's Deficit -- for the year ended June 30, 1997,
   the six month period ended June 30, 1996, and for the years ended December 31, 1995 and 1994  .    F-5

 Consolidated Statements of Cash Flows -- for the years ended June 30, 1997 and 1996,
   and for the years ended December 31, 1995 and 1994  . . . . . . . . . . . . . . . . . . . . . .    F-6

 Notes to Consolidated Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . . . . .    F-8

 CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
                                                                                                    
 Schedule II -- Valuation and Qualifying Accounts  . . . . . . . . . . . . . . . . . . . . . . . .    S-1
</TABLE>


   All other schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.





                                     F-1
<PAGE>   38




                       REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS
NEODATA SERVICES, INC.

   We have audited the consolidated financial statements and consolidated
financial statement schedule of Neodata Services, Inc.  listed in the Index
appearing on page F-1 of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.

   We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Neodata Services, Inc. as of June 30, 1997 and 1996, and the consolidated
results of its operations and cash flows for the years then ended and each of
the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
consolidated financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.




COOPERS & LYBRAND L.L.P.

Dallas, Texas
August 6, 1997, except for Footnote 21
which is as of August 18, 1997





                                     F-2
<PAGE>   39




                             NEODATA SERVICES, INC.

                          CONSOLIDATED BALANCE SHEETS
                          AS OF JUNE 30, 1997 AND 1996
                    (IN THOUSANDS, EXCEPT SHARE INFORMATION)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                          1997           1996
                                                                                          ----           ----
<S>                                                                                   <C>            <C>
Current assets:
  Cash  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $  1,786       $  1,304
  Accounts receivable, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . .       67,800         54,996
  Prepaid expenses and other  . . . . . . . . . . . . . . . . . . . . . . . . . . .       10,859          6,088
                                                                                        --------       --------
     Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       80,445         62,388
Property, plant and equipment, net  . . . . . . . . . . . . . . . . . . . . . . . .       47,593         51,649
Computer software, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       18,362         18,819
Excess of cost over acquired net assets, net  . . . . . . . . . . . . . . . . . . .        9,517             --
Debt issue costs and other assets, net  . . . . . . . . . . . . . . . . . . . . . .        7,278          6,681
                                                                                        --------       --------
       Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $163,195       $139,537
                                                                                        ========       ========
                                        
                         LIABILITIES AND STOCKHOLDER'S
DEFICIT
Current liabilities:
  Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 34,329       $ 18,323
  Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       27,387         22,062
  Current maturities of long-term debt and capital lease obligations  . . . . . . .        1,804            599
                                                                                        --------       --------
       Total current liabilities  . . . . . . . . . . . . . . . . . . . . . . . . .       63,520         40,984
Long-term debt and capital lease obligations, net of current maturities . . . . . .      192,153        184,651
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       12,521         10,522
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        3,598          5,757
                                                                                        --------       --------
       Total liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      271,792        241,914
                                                                                        --------       --------
Commitments and contingencies (See Notes 13, 14 and 18)
Stockholder's deficit:
  Common stock, par value $.01 per share, 10,000 shares authorized,
     1,173 shares issued and outstanding  . . . . . . . . . . . . . . . . . . . . .           --             --
  Additional paid-in capital  . . . . . . . . . . . . . . . . . . . . . . . . . . .       28,029         28,029
  Contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       54,946         56,522
  Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (192,019)      (187,018)
  Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . .          447             90
                                                                                        --------       --------
       Total stockholder's deficit  . . . . . . . . . . . . . . . . . . . . . . . .     (108,597)      (102,377)
                                                                                        --------       --------
       Total liabilities and stockholder's deficit  . . . . . . . . . . . . . . . .     $163,195       $139,537
                                                                                        ========       ========
</TABLE>


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





                                     F-3
<PAGE>   40




                           NEODATA SERVICES, INC.

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
             AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
                               (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                          YEAR ENDED JUNE 30,         YEAR ENDED DECEMBER 31, 
                                                          -------------------         -----------------------
                                                          1997           1996           1995          1994
                                                          ----           ----           ----          ----
<S>                                                    <C>             <C>            <C>            <C>
Revenue . . . . . . . . . . . . . . . . . . . .         $264,631       $237,061       $244,255       $221,132
                                                        --------       --------       --------       --------
Expense:
  Operating and production, excluding 
    depreciation and amortization 
    shown below   . . . . . . . . . . . . . . .          185,455        173,289        182,081        167,363
  Selling, general and administrative . . . . .           40,605         35,405         33,560         34,073
  Restructuring charges . . . . . . . . . . . .            1,896          1,667          1,667         (1,236)
  Impairment of NCORE . . . . . . . . . . . . .               --             --             --         31,155
  Depreciation and amortization . . . . . . . .           16,378         14,665         14,761         13,246
                                                        --------       --------       --------       --------
                                                         244,334        225,026        232,069        244,601
                                                        --------       --------       --------       --------

Income (loss) before interest expense 
  and other   . . . . . . . . . . . . . . . . .           20,297         12,035         12,186        (23,469)
Interest expense and other  . . . . . . . . . .           24,985         23,863         23,015         19,444
                                                        --------       --------       --------       --------
       Net loss before extraordinary loss . . .           (4,688)       (11,828)       (10,829)       (42,913)
Extraordinary loss -- early extinguishment 
  of debt . . . . . . . . . . . . . . . . . . .             (313)            --             --             --
                                                        --------       --------       --------       --------
       Net loss . . . . . . . . . . . . . . . .         $ (5,001)      $(11,828)      $(10,829)      $(42,913)
                                                        ========       ========       ========       ========
</TABLE>


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





                                     F-4
<PAGE>   41




                           NEODATA SERVICES, INC.

              CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
               FOR THE YEAR ENDED JUNE 30, 1997, THE SIX MONTH
                     PERIOD ENDED JUNE 30, 1996, AND FOR
                    THE YEARS ENDED DECEMBER 31, 1995 AND
                                    1994
                  (IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
                                                           ADDITIONAL                          CUMULATIVE
                                                 COMMON     PAID-IN  CONTRIBUTED  ACCUMULATED TRANSLATION
                                                 SHARES     CAPITAL    CAPITAL      DEFICIT    ADJUSTMENT     TOTAL
                                                 ------     -------    -------      -------    ----------     -----
 <S>                                              <C>       <C>       <C>         <C>          <C>          <C>
  Balance December 31, 1993                       1,173     $    --   $ 61,145    $(127,576)     $(196)     $(66,627)
    Dividends to Holding to provide for 
      purchase of Holding treasury stock                                  (310)                                 (310)
    Capital contribution from Holding                                       88                                    88
    Dividends to Holding to provide for
      payments on Meredith Note                                         (1,841)                               (1,841)
    Costs associated with a capital 
      contribution                                             (271)                                            (271)
    Capital contribution from EDS as a
      result of the release of certain 
      obligations                                            28,300                                           28,300
    Net loss                                                                        (42,913)                 (42,913)
    Foreign currency translation adjustment                                                        155           155
                                                 ------     -------   --------    ---------      -----     ---------
  Balance, December 31, 1994                      1,173      28,029     59,082     (170,489)       (41)      (83,419)
    Dividends to Holding to provide for
      payments on Meredith Note                                         (1,735)                               (1,735)
    Net loss                                                                        (10,829)                 (10,829)
    Foreign currency translation adjustment                                                         56            56
                                                 ------     -------   --------    ---------      -----     ---------
  Balance, December 31, 1995                      1,173      28,029     57,347     (181,318)        15       (95,927)
    Dividends to Holding to provide for 
      payments on Meredith Note                                           (825)                                 (825)
    Net loss                                                                         (5,700)                  (5,700)
    Foreign currency translation adjustment                                                         75            75
                                                 ------     -------   --------    ---------      -----     ---------
  Balance, June 30, 1996                          1,173      28,029     56,522     (187,018)        90      (102,377)
    Dividends to Holding to provide for
      payments on Meredith Note                                         (1,576)                               (1,576)
    Net loss                                                                         (5,001)                  (5,001)
   Foreign currency translation adjustment                                                         357           357
                                                 ------     -------   --------    ---------      -----     ---------
 Balance, June 30, 1997                           1,173     $28,029   $ 54,946    $(192,019)     $ 447     $(108,597)
                                                 ======     =======   ========    =========      =====     =========
</TABLE>



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





                                     F-5
<PAGE>   42


                             NEODATA SERVICES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
               AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                 YEAR ENDED JUNE 30,     YEAR ENDED DECEMBER 31,
                                                            ------------------------   -------------------------
                                                                1997          1996         1995          1994
                                                                ----          ----         ----          ----
<S>                                                          <C>          <C>            <C>            <C>
Cash flows from operating activities:
  Net loss                                                  $  (5,001)    $ (11,828)     $ (10,829)     $(42,913)
                                                            ---------     ---------      ---------      -------- 
  Adjustments to reconcile net loss to net cash
     (used in) provided by operating activities:
     Depreciation and amortization                             16,378        14,665         14,761        13,246
     Impairment of NCORE                                           --            --             --        31,155
     Extraordinary loss                                           313            --             --            --
     Provision for doubtful accounts receivable                   560         1,642          1,259         1,099
     Accretion of interest on long-term debt                       --        15,032         17,190        15,384
     Loss on disposal of assets                                   542            55             70            82
  Changes in assets and liabilities:
     Accounts receivable                                       (8,134)       (3,277)         4,196       (13,455)
     Prepaid expenses and other                                    77         7,140          3,460        (5,682)
     Debt issue costs and other assets                           (184)        1,097            707           (20)
     Accounts payable                                             116         1,636         (1,347)       12,135
     Accrued liabilities                                          476         2,913         (1,242)       (8,276)
     Customer deposits                                          1,999        (1,648)        (1,330)          726
     Other liabilities                                         (2,619)       (2,021)          (995)       (4,146)
     Other, net                                                    --             6              6            91
                                                            ---------     ---------      ---------      --------
     Total adjustments                                          9,524        37,240         36,735        42,339
                                                            ---------     ---------      ---------      --------
          Net  cash  provided   by  (used  in)  operating       4,523        25,412         25,906          (574)
                                                            ---------     ---------      ---------      -------- 
activities
Cash flows from investing activities:
  Purchases of property, plant and equipment                   (4,383)       (2,760)        (2,586)      (12,101)
  Proceeds from sales of property, plant and equipment            276           197            138            29
  Purchases and development of computer software               (6,963)       (9,602)        (9,191)       (5,271)
  Increase in restricted cash                                  (3,000)           --             --            --
  Payments for acquisitions, net of cash acquired              (8,393)           --             --            --
                                                            ---------     ---------      ---------      -------- 
          Net cash used in investing activities               (22,463)      (12,165)       (11,639)      (17,343)
                                                            ---------     ---------      ---------      -------- 
Cash flows from financing activities:
  Change in book overdrafts                                    12,605        (5,421)         5,603            --
  Borrowings under long-term lines of credit                  187,921       111,350        155,900        69,436
  Payments on long-term lines of credit                      (178,621)     (119,350)      (176,324)      (49,012)
  Debt issue cost                                              (1,189)         (450)          (450)         (374)
  Payments on long-term debt and capital leases                  (665)         (635)          (765)       (2,558)
  Payments for NCORE development                                   --            --             --          (709)
  Dividends to Holding for payments on Meredith Note           (1,986)         (415)          (442)           --
  Dividends to Holding for purchase of Holding
    treasury stock                                                 --            --             --          (310)
  Capital contribution from Holding                                --            --             --            88
  Costs associated with a capital contribution                     --            --             --          (271)
                                                            ---------     ---------      ---------      --------
          Net  cash  provided  by  (used  in)   financing      18,065       (14,921)       (16,478)       16,290
                                                            ---------     ---------      ---------      --------
activities
Change resulting from cumulative translation adjustment           357           262             56           155
                                                            ---------     ---------      ---------      --------
Net change in cash                                                482        (1,412)        (2,155)       (1,472)
Cash at beginning of year                                       1,304         2,716          2,341         3,813
                                                            ---------     ----------     ---------      --------
Cash at end of year                                         $   1,786     $   1,304      $     186      $  2,341
                                                            =========     =========      =========      ========
</TABLE>

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





                                     F-6
<PAGE>   43



                             NEODATA SERVICES, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                   FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
               AND FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
                                 (IN THOUSANDS)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Total cash interest payments were $24,038,000 and $4,452,000 for the years
ended June 30, 1997 and 1996, respectively, and $4,798,000 and $2,717,000 for
the years ended December 31, 1995 and 1994, respectively.

   In fiscal 1997, the Company paid $68,000 in alternative minimum tax.  In
1995, the Company paid $129,000 in alternative minimum tax and $54,000 in state
income taxes.

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

   In July 1996, the Company acquired assets in exchange for service credits
totaling $780,000 (see Notes 3 and 12), which were recorded at their estimated
present value at 12% of $653,000.

   In May 1996, the Company acquired assets in exchange for service credits
totaling $2,200,000 (see Notes 3 and 12), which were recorded at their
estimated present value at 12% of $1,676,000.

   During the year ended December 31, 1995, the Company entered into capital
lease obligations for equipment totaling $400,000.

   The Company satisfied Holding's obligation under the Meredith Note (see
Notes 1 and 16) for the second, third, and fourth quarters of 1995, and for the
first three quarters of 1994, totaling $1,293,000 and $1,389,000, respectively,
by reducing accounts receivable. Amounts due of $452,000 and $410,000 under the
Meredith Note at December 31, 1995 and June 30, 1996, respectively, are
included in accounts payable.

   In November 1994, in connection with the Recapitalization (see Note 20),
Holding issued preferred stock to Electronic Data Systems Corporation ("EDS")
in exchange for a reduction in obligations owed to EDS of $28,300,000.
Liabilities reduced included certain obligations incurred in the development of
NCORE of $26,903,000 and certain current obligations of $1,397,000.

   In December 1994, the Company entered into an additional capital lease
obligation of $11,990,000 under the Centennial Building Capital Lease (see Note
11).

   In connection with the development of the Neodata Customer Oriented
Relational Environment System ("NCORE"), the Company incurred obligations of
$7,777,000 during  1994. (See Note 13).




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






                                     F-7
<PAGE>   44
                             NEODATA SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION

   Neodata Services, Inc. (the "Company"), a wholly owned subsidiary of Neodata
Corporation ("Holding"), provides comprehensive, integrated outsourced services
to organizations using direct marketing. These services include magazine, book,
and product fulfillment, product warehousing and distribution, telephone
customer service, marketing database management, and loyalty program
management. In addition, the Company provides marketing and promotional
services and Internet services to a significant number of clients in various
industries. The Company's services are used by various organizations using
direct marketing and are adaptable to a broad variety of products and marketing
activities.

   The Company was incorporated in August 1990 for the purpose of acquiring
certain net assets of the Neodata Division ("Subscription Fulfillment") of A.C.
Nielsen Company, a subsidiary of Dun & Bradstreet Corporation (the "Services
Acquisition").  Concurrently, Holding acquired 100% of the common stock of TMI
Corporation ("Telemedia" and the "Telemedia Acquisition").  In April 1991,
Holding formed Neodata Product/Distribution Holdings, Inc. and its wholly-owned
subsidiary Neodata Product/Distribution Services, Inc. (collectively "Product")
for the purpose of acquiring substantially all the assets of the Fulfillment
Services Division of Meredith Corporation (the "Product Acquisition").  In
September 1992, Holding formed Neodata Database Marketing Services, Inc.
("Database") for the purpose of acquiring the stock of Wiland Services, Inc.
(the "Database Acquisition").

   In 1993 the Company issued $163,000,000 in Senior Deferred Coupon Notes (the
"Notes"), and Telemedia, Product, and Database were merged into the Company
(the "Mergers"). After the Mergers, the Company included all operations, assets
and liabilities of Holding with the exception of a note payable (the "Meredith
Note"), which totaled approximately $3,492,000 and $4,711,000 at June 30, 1997
and 1996, respectively. The Meredith Note is not reflected in the financial
statements of the Company, as such note is not an obligation of the Company or
any of its subsidiaries. Holding's only asset is its equity investment in the
issued and outstanding shares of common stock of the Company, and it does not
conduct operations other than through the Company. Therefore, the only source
of payment on the Meredith Note is cash generated by the Company.

   In November 1994, the Company, Holding and EDS entered into a transaction
(the "Recapitalization") that resulted in the release of certain financial
obligations owed by the Company to EDS and an increase in EDS' equity ownership
in Holding (see Note 20).

   The  Company is affected by a variety of regulatory issues, including
Federal Trade Commission ("FTC") regulations, U.S. Postal Service ("USPS")
reclassification, sales and use tax legislation, as well as legislation on a
variety of privacy acts.  New bills are regularly introduced in Congress and in
state legislatures that propose restrictions concerning distribution of
personal information, privacy in telecommunications, and taxation of
periodicals, direct mail merchandise, and Internet transactions.

2. SIGNIFICANT ACCOUNTING POLICIES

  Fiscal Year

   In April 1996 the Company changed its fiscal year end from December 31 to
June 30 (see Note 4).  References to "fiscal 1997" relate to the year ended
June 30, 1997.





                                     F-8
<PAGE>   45
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


  Principles of Consolidation

   The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. Intercompany transactions and balances have
been eliminated.

  Property, Plant and Equipment

   Property, plant and equipment is stated at cost. Property, plant and
equipment is depreciated over estimated useful lives of approximately five to
thirty-one years using the straight-line method. Assets recorded under capital
leases and leasehold improvements are amortized over the shorter of their
estimated useful lives or the term of the related leases using the straight-
line method.

   The cost of normal maintenance and repairs is charged to expense as
incurred. Significant expenditures which increase the life of an asset are
capitalized and depreciated over the remaining estimated useful life of the
asset. Upon sale or retirement of assets, the costs and related accumulated
depreciation or amortization are eliminated from the respective accounts and
any resulting gains or losses are reflected in operations.

  Computer Software

   The Company capitalizes the costs of internal software development in
accordance with Statement of Financial Accounting Standards No. 86.
Capitalization of software development costs begins upon the establishment of
technological feasibility.  The establishment of technological feasibility and
the ongoing assessment of recoverability of capitalized software development
costs require considerable judgment by management with respect to certain
external factors, including, but not limited to, anticipated future revenues,
estimated economic life and changes in software and hardware technologies. The
Company has also capitalized the direct and indirect allocable costs and
interest costs of internally developed software and the cost of purchased
software to be used for internal use. Currently, the Company is amortizing all
software costs using the straight-line method over estimated economic lives
ranging from one to five years.

  Intangible and Long-Lived Assets

   The excess of cost over fair value of net assets acquired is amortized over
the estimated useful lives of the costs, currently 3 to 15 years.  The Company
evaluates the recoverability of the excess of cost over net assets acquired,
other intangible assets, and other long-lived assets annually to determine if
impairment exists. A quantitative analysis of future undiscounted operating
income (before the amortization of intangible assets) is used to determine the
recoverability of these assets. In addition to reviewing the recoverability of
assets annually, at each quarterly balance sheet date the Company evaluates
whether events, changes of circumstances, or changes in the Company's business
plan indicates that these assets might not be recoverable. If not, further
quantitative analysis of future undiscounted operating income (before the
amortization of intangible assets) is then performed.  Adjustments are made if
the sum of expected future cash flows is less than carrying value.

  Debt Issue Costs

   The costs related to the issuance of the Notes, the Senior Credit Facility,
the Acquisition Credit Facility, and the Centennial Building Capital Lease (see
Note 11) are capitalized and amortized to interest expense using the
straight-line method over the lives of the related debt.





                                     F-9
<PAGE>   46
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



  Translation of Foreign Currencies

   The accounts of the Company's foreign subsidiaries in the United Kingdom and
Ireland are measured using the local currency which has been designated as the
functional currency. Assets and liabilities of those subsidiaries are
translated at the exchange rate in effect at the end of each period. Revenues
and expenses of those subsidiaries are translated at the average exchange rate
for the period. Translation adjustments arising from the use of differing
exchange rates from period to period are included in a cumulative translation
adjustment account in stockholder's deficit.

  Use of Estimates in the Preparation of Financial Statements

   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 at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.

  Significant Client

   The Company enters into contracts with its clients with various terms and
renewal provisions.  Each of these contracts, with the exception of a contract
with a significant client as described in the following paragraph, are subject
to performance standards and certain contracts contain fixed price provisions
subject to cost of living adjustments. There are no annual volumes committed
under these contracts. Revenue is recognized when services are performed.

   Since 1993, the Company has performed product fulfillment, distribution,
telephone customer services and other services under successive contracts with
a significant client.  The current contract with this client expires in January
1998.  The client is billed on a "cost-plus" basis rather than a fixed price
basis.  Revenues are recorded as costs are incurred and include earned fees
based on a percentage of costs incurred to date.  Fees under the contract may
be increased or decreased in accordance with cost or performance incentive
provisions which measure actual performance against established targets.  Such
incentive fee awards or penalties are included in revenues at the time the
amounts can be reasonably determined.  Incentive fee awards recognized in
fiscal 1997 amounted to $420,000. Revenues from services provided were
approximately $40,281,000, $39,373,000, $44,083,000, and $20,375,000 for the
years ended June 30, 1997 and 1996 and the years ended December 31, 1995 and
1994, respectively.  Accounts receivable for revenue, postage, and other
reimbursables from this client at June 30, 1997 and 1996 totaled $3,849,000 and
$4,728,000, respectively.  Revenues for similar services from an affiliate of
this client were approximately $16,037,000, $13,430,000, $12,589,000, and
$10,808,000 for the years ended June 30, 1997 and 1996 and the years ended
December 31, 1995 and 1994, respectively.  Accounts receivable for revenue,
postage, and other reimbursables from this affiliate at June 30, 1996 totaled
$2,816,000; no accounts receivable were outstanding at June 30, 1997.

  Cash and Cash Equivalents

   The Consolidated Statements of Cash Flows classify changes in cash or cash
equivalents (short-term, highly liquid investments readily convertible into
cash with an original maturity of three months or less) according to operating,
investing, or financing activities.  Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash and temporary cash investments.  At times, cash balances held at financial
institutions were in excess of FDIC insurance limits.  The Company places its
temporary cash investments with high-credit, quality financial institutions
and, by policy, limits the amount of credit exposure to any one financial
institution.  The Company believes no significant concentration of credit risk
exists with respect to these cash investments.





                                    F-10
<PAGE>   47
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


  Reclassifications

   Certain balances have been reclassified to conform to the current year
presentation.

  New Accounting Pronouncements

   In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income."  SFAS No. 130 establishes requirements for the disclosure of
comprehensive income.  Comprehensive income includes such items as foreign
currency translation adjustments and unrealized holding gains and losses on
available-for-sale securities which are presented, under current standards, as
a component of Stockholder's equity.

   In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information."  SFAS No. 131 establishes requirements
for disclosure about operating segments in annual financial statements and
selected information in interim financial reports.  It also establishes
standards for disclosures about products and services, geographic areas, and
major customers.  SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise."

   Both SFAS No. 130 and SFAS No. 131 are effective for fiscal years beginning
after December 15, 1997. Management is currently evaluating the requirements of
these standards and has not yet determined their effect, if any, on the
Company's Consolidated Financial Statements.

3. ACQUISITIONS

   In February 1997, Neodata Creative Services, Inc. ("Creative Services"), a
newly formed wholly-owned subsidiary of the Company, acquired substantially all
of the business assets and assumed the associated liabilities of The Lacek
Group, Inc., as well as all of the outstanding stock of Lacek Systems and
Software, Inc., and Lacek Travel Services, Inc. (the "Lacek Companies" and the
"Lacek Acquisition").  The Lacek Acquisition was funded from cash, in addition
to borrowings totaling $4,300,000 under a new line of credit agreement entered
into by Creative Services (the "Acquisition Credit Facility") (see Note 11).
Pursuant to the terms of the Lacek Acquisition, the Company deposited
$3,000,000 into an escrow account as security for additional consideration, all
or part of which may be paid in fiscal 1998 contingent upon the Lacek Companies
achieving certain performance targets.  The escrow deposit is accounted for as
restricted cash and is included in "Prepaid expenses and other" on the
Company's Consolidated Balance Sheet.  Further additional consideration (in
excess of the $3,000,000 deposited into escrow) of up to $9,000,000 is payable
through June 2000 contingent upon the Lacek Companies achieving certain
performance targets.  The Company believes that the total amount of additional
consideration to be paid, if any, cannot be reasonably estimated at this time.

   In July 1996, the Company acquired substantially all of the business assets
of International Subscription Services Limited, a United Kingdom based
subscription fulfillment subsidiary of The Economist Newspaper Limited (the
"ISS Acquisition").  The ISS Acquisition was funded from cash, in addition to
service credits totaling $780,000 over a three-year period (see Note 12), which
were recorded at their estimated present value at 12% of $653,000.

   In May 1996, the Company acquired the product distribution assets of an
operating division of Newfield Publications (the "Newfield Acquisition").  The
Newfield Acquisition was funded through service credits totaling $2,200,000
over a five-year period (see Note 12), which were recorded at their estimated
present value at 12% of $1,676,000.

   Results of operations after the respective acquisition dates are included in
the Company's Consolidated Statements of Operations and Cash Flows.  Pro forma
results of operations have not been presented as the effect of the acquisitions
was not material on a consolidated basis.





                                    F-11
<PAGE>   48
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4. TRANSITION PERIOD

   In April 1996 the Company changed its fiscal year end from December 31 to
June 30.  The change was made in order to conform the Company's fiscal year to
its natural business cycle.  Results of operations for the six-month periods
ended June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
                                                                                1996           1995
                                                                                ----           ----
                                                                                           (UNAUDITED)
<S>                                                                          <C>             <C>
Revenue  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $114,665        $121,859
                                                                             --------        --------
Expense:
  Operating and production . . . . . . . . . . . . . . . . . . . . . . .       81,953          90,745
  Selling, general and administrative  . . . . . . . . . . . . . . . . .       18,662          17,200
  Provision for doubtful accounts receivable . . . . . . . . . . . . . .          680             297
  Depreciation and amortization  . . . . . . . . . . . . . . . . . . . .        7,102           7,198
                                                                             --------        --------
                                                                              108,397         115,440 
                                                                             --------        --------
Income (loss) before interest expense and other  . . . . . . . . . . . .        6,268           6,419
Interest expense and other . . . . . . . . . . . . . . . . . . . . . . .       11,968          11,120
                                                                             --------        --------
                                                                                                     
                                                                                                     
       Net loss  . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ (5,700)       $ (4,701)
                                                                             ========        ========
</TABLE>

5. ACCOUNTS RECEIVABLE

   Accounts receivable at June 30, 1997 and 1996 consist of billed and unbilled
amounts as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                1997           1996
                                                                                ----           ----
<S>                                                                           <C>             <C>
Accounts receivable, trade                                                    $57,956         $46,565
Unbilled revenue                                                                6,548           5,889
Unbilled postage cost and other reimbursables                                   4,540           4,135
                                                                              -------         -------
                                                                               69,044          56,589
Allowance for doubtful accounts                                                (1,244)         (1,593)
                                                                              -------         ------- 
                                                                              $67,800         $54,996
                                                                              =======         =======
</TABLE>

6. PROPERTY, PLANT AND EQUIPMENT

   Property, plant and equipment at June 30, 1997 and 1996 consist of the
following (in thousands):

<TABLE>
<CAPTION>
                                                                                1997           1996
                                                                                ----           ----
<S>                                                                           <C>            <C>
Land                                                                         $  1,412        $  1,414
Machinery and equipment                                                        54,204          53,804
Buildings and improvements                                                     37,052          36,375
                                                                             --------        --------
                                                                               92,668          91,593
Accumulated depreciation and amortization                                     (45,075)        (39,944)
                                                                             --------        -------- 
                                                                             $ 47,593        $ 51,649
                                                                             ========        ========
</TABLE>

___Included in machinery and equipment above is computer and other equipment
held under capital leases with a cost of $447,000 and accumulated depreciation
of $137,000 and $89,000 at June 30, 1997 and 1996, respectively. Included in
buildings and improvements are the Centennial Building Capital Leases (see Note
11) with a cost of $22,299,000 and accumulated depreciation of $3,835,000 and
$2,720,000 at June 30, 1997 and 1996, respectively.

   Repairs and maintenance expense was $4,765,000, $4,194,000, $4,879,000, and
$5,759,000 for the years ended June 30, 1997 and 1996 and the years ended
December 31, 1995 and 1994, respectively.  Depreciation expense





                                    F-12
<PAGE>   49
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


related to property, plant, and equipment was $8,509,000, $9,266,000,
$9,869,000, and $9,615,000 for the years ended June 30, 1997 and 1996 and the
years ended December 31, 1995 and 1994, respectively.

7. COMPUTER SOFTWARE

   Computer software at June 30, 1997 and 1996 consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                1997           1996
                                                                                ----           ----
<S>                                                                          <C>              <C>
Purchased and developed software                                             $ 33,069         $ 26,204
Software acquired in acquisitions                                               6,952            6,952
                                                                             --------         --------
                                                                               40,021           33,156
Accumulated amortization                                                      (21,659)         (14,337)
                                                                             --------         -------- 
                                                                             $ 18,362         $ 18,819
                                                                             ========         ======== 
</TABLE>

   NCORE was developed for the Company by EDS to replace and enhance software
components of existing systems. Associated costs included developed software,
system integration, systems conversion, purchased software packages, and costs
of re-engineering certain input and output business processes. Amortization of
NCORE applications commenced in December 1994.  As discussed in Note 20, the
Company determined that the NCORE development asset was not fully recoverable,
resulting in a $31,155,000 write down of NCORE in the fourth quarter of 1994.

   Amortization expense related to computer software was $7,420,000,
$5,399,000, $4,892,000, and $3,631,000 for the years ended June 30, 1997 and
1996 and the years ended December 31, 1995 and 1994, respectively.

8. EXCESS OF COST OVER ACQUIRED NET ASSETS

   The excess of cost over acquired net assets relates to the Lacek and ISS
Acquisitions (see Note 3), which occurred during fiscal 1997. The excess of
cost over acquired net assets is amortized on a straight-line basis over the
estimated useful lives of the costs, currently 3 to 15 years.  Accumulated
amortization at June 30, 1997 and amortization expense for the year amounted to
$426,000.





                                    F-13
<PAGE>   50
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


9. ACCOUNTS PAYABLE

   Accounts payable at June 30, 1997 and 1996 consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                1997           1996
                                                                                ----           ----
<S>                                                                           <C>             <C>
Accounts payable, trade                                                       $11,696         $ 9,264
Book overdrafts                                                                13,451             846
Amounts due to EDS                                                              9,182           8,213
                                                                              -------         -------
                                                                              $34,329         $18,323
                                                                              =======         =======
</TABLE>

10. ACCRUED LIABILITIES

   Accrued liabilities at June 30, 1997 and 1996 consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                1997           1996
                                                                                ----           ----
<S>                                                                           <C>             <C>
Accrued compensation cost                                                     $ 9,120         $ 6,340
EDS license fee and other                                                         427             656
Accrued taxes                                                                   1,204           1,796
Current portion of Meredith service credits                                     1,456           1,424
Accrued interest                                                                3,375           3,436
Other accrued liabilities                                                      11,805           8,410
                                                                              -------         -------
                                                                              $27,387         $22,062
                                                                              =======         =======
</TABLE>

11. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

   A summary of long-term debt and capital lease obligations at June 30, 1997
and 1996 is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                1997           1996
                                                                                ----           ----
<S>                                                                          <C>             <C>
Notes with interest at 12% and semi-annual interest payments                 $163,000        $163,000
Senior Credit Facility                                                          5,000              --
Acquisition Credit Facility                                                     4,300              --
Centennial Building Capital Lease with imputed interest at 14.5%                7,140           7,248
Centennial Phase II Capital Lease with interest at 10%                         12,874          13,136
Other notes                                                                     1,362           1,441
Capital lease obligations, varying terms through 2001,
  interest from 12.0% to 14.5%                                                    281             425
                                                                             --------        --------
                                                                              193,957         185,250
Less current maturities                                                        (1,804)           (599)
                                                                             --------        -------- 
                                                                             $192,153        $184,651
                                                                             ========        ========
</TABLE>

   In May 1993, the Company issued $163,000,000 aggregate principal amount
($115,057,000 initial accreted value) of the Notes.  Interest on the Notes is
payable at 12% per annum. Interest was accreted on the Notes through May 1,
1996 and accrued for payment thereafter. Semi-annual interest payments of
$9,780,000 commenced on November 1, 1996. The Notes mature on May 1, 2003 and
are general unsecured obligations of the Company.

   The Notes are not subject to redemption prior to May 1, 1998. On and after
such date, the Company may redeem the Notes, in whole or in part, at the
redemption prices set forth below plus accrued and unpaid interest to the date
of redemption. Redemption prices are 106% of par value at May 1, 1998, 103% at
May 1, 1999 and 100% at May 1, 2000 and thereafter. If less than all of the
Notes are to be redeemed, the trustee may elect the Notes or portions thereof
to be redeemed pro rata, by lot or by any other method the trustee shall deem
fair and reasonable. The Notes





                                    F-14
<PAGE>   51
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


contain covenants that, among other things, restrict (with certain exceptions)
the payment of dividends, and limit (with certain exceptions) other
indebtedness, investments, asset sales, consolidations, mergers, and
transactions with shareholders and affiliates.

   In January 1997, the Company and Holding entered into a new five-year senior
revolving line of credit facility (the "Senior Credit Facility") with a new
lender to replace the Company's previous line of credit facility.  The Senior
Credit Facility provides for advances up to $40,000,000, subject to certain
limitations, and is collateralized by the Company's accounts receivable and
Holding's common stock in the Company.  Interest on loans outstanding under the
Senior Credit Facility is based, at the Company's option, on 1) the greater of
the agent bank's prime rate (as defined) plus 1.25% or the certificate of
deposit rate (as defined) plus 1.75%, or 2) LIBOR plus 2.5%.  The Company is
also obligated to pay an unused line fee equal to 0.5% computed on the average
unutilized portion of the facility, in addition to an annual administrative fee
of $75,000.  The Senior Credit Facility includes certain covenants that, among
other things, limit the Company's ability to incur additional debt, create
liens, pay cash dividends (with certain exceptions), or make certain other
payments, and which require the Company to meet certain financial provisions on
a quarterly basis.  Subject to significant limitations, the Company may
complete acquisitions or make investments in subsidiaries.

   At June 30, 1997, $5,000,000 was outstanding under the Senior Credit
Facility.  No amounts were outstanding against the previous line of credit
facility as of June 30, 1996.  Letters of credit outstanding against existing
line of credit facilities were $4,761,000 and $4,886,000 as of June 30, 1997
and 1996, respectively.  Total remaining availability under existing line of
credit facilities was $26,791,000 and $25,114,000 as of June 30, 1997 and 1996,
respectively.

   Debt issue costs of $1,038,000 under the Senior Credit Facility are
amortized using the straight-line method over the term of the agreement.
Unamortized debt issue costs of $313,000 related to the previous line of credit
facility were charged as an extraordinary loss.

   In connection with the Lacek Acquisition (see Note 3), Creative Services
entered into the Acquisition Credit Facility.  The Acquisition Credit Facility
provides for advances, subject to lender approval, of up to $6,300,000, is
collateralized by substantially all the assets of Creative Services, and
expires in August, 1998.  The Acquisition Credit Facility includes certain
covenants that, among other things, prohibit Creative Services from paying
dividends to the Company, limit Creative Services' ability to incur additional
debt, create liens, or make certain other payments, and which require Creative
Services to meet certain financial provisions on a quarterly basis.  At June
30, 1997, $4,300,000 was outstanding against the Acquisition  Credit Facility.
Debt issue costs of $151,000 under the Acquisition Credit Facility are
amortized using the straight-line method over the term of the agreement.

   In April 1993, the Company entered into a capital lease obligation in the
amount of $9,000,000 (the "Centennial Building Capital Lease") for a building
in Louisville, Colorado ("Centennial Phase I").  In December 1994, the
Centennial Building Capital Lease was amended to reflect a major addition to
the building ("Centennial Phase II"). In connection therewith, the Company
entered into an additional capital lease obligation of $11,990,000. Interest on
Centennial Phase I is imputed at approximately 14.5%, and the remaining
obligation at June 30, 1997 and 1996 totaled approximately $7,140,000 and
$7,248,000, respectively. Interest on Centennial Phase II is imputed at 10%,
and the remaining obligation at June 30, 1997 and 1996 totaled approximately
$12,874,000 and $13,136,000, respectively. The Centennial Phase II obligation
includes $1,500,000 originally included in the Centennial Phase I obligation.
The Centennial Building Capital Lease contains certain covenants that, among
other things, limit the Company's ability to incur additional debt, create
liens, pay cash dividends (with certain exceptions), or make certain other
payments, and which require the Company to meet certain financial provisions on
a quarterly basis. During fiscal 1997, the lessor modified the financial
covenants under the Centennial Building Capital Lease to be similar to the
financial covenants under the Senior Credit Facility.

   The initial term of the Centennial Building Capital Lease is 20 years, with
four successive five year renewals. The Company may purchase the Centennial
Building at fair market value during the ninth year of the lease, or at the





                                    F-15
<PAGE>   52
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


end of the first five year renewal period. Total monthly payments amount to
approximately $109,000 and $130,000 for Centennial Phase I and Centennial Phase
II, respectively. On June 1, 2001 and every fifth year thereafter, total annual
payments under the Centennial Building Capital Lease will be increased by the
lesser of 22.10% or the cumulative rate of inflation for the preceding five
years.

   Holding has guaranteed performance on all terms of the Centennial Building
Capital Lease. The Centennial Building Capital Lease is collateralized by the
buildings.

   Future maturities of long-term debt and capital leases are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                    LONG-TERM      CAPITAL
   Year ending June 30:                                                DEBT        LEASES         TOTAL
                                                                       ----        ------         -----
   <S>                                                              <C>           <C>            <C>
     1998                                                            $  1,311     $   2,803      $  4,114
     1999                                                               4,351         2,803         7,154
     2000                                                                  --         2,801         2,801
     2001                                                                  --         2,752         2,752
     2002                                                               5,000         2,716         7,716
     Thereafter                                                       163,000        32,044       195,044
                                                                     --------     ---------      --------
                                                                      173,662        45,919       219,581
   Less amounts representing interest on capital lease obligations         --       (25,624)      (25,624)
   Less current maturities                                             (1,311)         (493)       (1,804)
                                                                     --------     ---------      --------
   Long-term debt and capital lease obligations, net                                                     
     of current maturities                                           $172,351     $  19,802      $192,153
                                                                     ========     =========      ========
</TABLE>

12. OTHER LIABILITIES

   Other liabilities at June 30, 1997 and 1996 consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                              1997            1996
                                                                              ----            ----
      <S>                                                                    <C>             <C>
      Service credits                                                        $ 1,384         $ 2,638
      EDS license fee and contract obligation                                  1,635           2,435
      Other                                                                      579             684
                                                                             -------         -------
                                                                             $ 3,598         $ 5,757
                                                                             =======         =======
</TABLE>

   Pursuant to prior technology agreements (see Note 13), EDS purchased certain
computer equipment used in the Company's data center for $4,603,000 and prepaid
a $1,600,000 license fee for a ten-year license to use certain of the Company's
proprietary data processing information. The license fee is recognized in
income on a straight-line basis over ten years. The proceeds from the sale of
the equipment have been deferred as a long-term contract obligation.

   The amortization on the license fee and obligation is as follows (in
thousands):

<TABLE>
      <S>                                                                                    <C>  
      Year ending June 30:
        1998                                                                                 $  757
        1999                                                                                    757
        2000                                                                                    757
        2001                                                                                    127
                                                                                             ------
                                                                                              2,398
        Less amounts representing interest and current portion                                 (763)
                                                                                             ------ 
                                                                                             $1,635
                                                                                             ======
</TABLE>





                                    F-16
<PAGE>   53
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


13. NCORE DEVELOPMENT AND TECHNOLOGY AGREEMENT

   Through December 31, 1994, the Company incurred liabilities totaling
$29,333,000 related to NCORE development. Payments through December 31, 1994
reduced these liabilities by $2,430,000. In connection with the
Recapitalization, EDS eliminated the Company's remaining liabilities of
$26,903,000 in exchange for Holding preferred stock (see Note 20). This
reduction in liabilities together with a reduction in certain trade payables of
approximately $1,397,000 was accounted for as a capital contribution.

   In connection with the Recapitalization, EDS and the Company entered into
the Amended IT Agreement effective as of January 1, 1995. The Amended IT
Agreement amended and restated the terms upon which EDS will (i) continue to
supply to the Company information technology services (the "IT Services") and
(ii) assist the Company in reducing costs and improving its business
operations. Under the Amended IT Agreement, the Company has control over the
management direction of the IT Services and EDS's delivery of the IT Services.
The Amended IT Agreement amends, restates and supersedes the terms and
conditions of all prior information technology services agreements between the
Company and EDS as of the effective date of the Amended IT Agreement.  Certain
information technology functions formerly performed by the Company are included
in the IT Services.  Effective January 1, 1995, approximately 112 Company
employees were transferred to EDS, as well as certain operating lease
obligations for equipment and software.

   The Amended IT Agreement provides for an initial term concluding on March
31, 2003 unless earlier terminated or subsequently renewed in accordance with
the terms of the Amended IT Agreement. Under the Amended IT Agreement, EDS
supplies to the Company substantially all of the Company's information
technology, equipment, and services needs, with certain exceptions. Any
information technology services of the Company which are beyond the scope of
the Amended IT Agreement must be agreed to in writing in advance by the
parties. If either party materially defaults in the performance of any of its
duties or obligations under the Amended IT Agreement, and such default shall
not be substantially cured within sixty days after written notice is given to
the defaulting party specifying the default, then the other party may terminate
the Amended IT Agreement as of a date specified in such notice of termination.

   The Company compensates EDS for IT Services on a "cost-plus" basis. The term
"cost-plus" means that the Company reimburses EDS for EDS's direct
out-of-pocket expenses incurred by EDS in performing the IT Services and pays
EDS an amount based on a percentage of the reimbursed costs. EDS is required to
use its reasonable efforts to obtain the various third party resources and
services to be provided to the Company at the lowest vendor charges
commercially available to EDS. In addition, EDS must take any and all
reasonable steps to minimize the amount and level of reimbursed service costs
consistent with the performance of its obligations under the Amended IT
Agreement. The Company estimates fiscal 1998 expenditures to be approximately
$50,400,000 under the Amended IT Agreement, including approximately $6,500,000
in capitalized expenditures. EDS has also agreed to provide the Company with
related financing on commercially customary terms and conditions.

   Fees incurred under the Amended IT Agreement for the year ended June 30,
1997 were $48,301,000 (including $7,500,000 of capitalized expenditures), of
which $9,182,000 and $427,000 was included at June 30, 1997 in accounts payable
and accrued liabilities, respectively.  Fees incurred under the Amended IT
Agreement for the year ended June 30, 1996 were $47,177,000 (including
$8,380,000 of capitalized expenditures), of which $8,213,000 and $656,000 was
included at June 30, 1996 in accounts payable and accrued liabilities,
respectively. Fees incurred under the Amended IT Agreement for the year ended
December 31, 1995 were $44,773,000 (including $7,553,000 of capitalized
expenditures), of which $12,581,000 and $518,000 was included at year-end in
accounts payable and accrued liabilities, respectively. Fees incurred under the
then-existing EDS information technology services agreement for the year ended
December 31, 1994 were $31,664,000 (including $5,271,000 of capitalized
expenditures), of which $7,208,000 and $592,000 was included at year-end in
accounts payable and accrued liabilities, respectively.





                                    F-17
<PAGE>   54
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


14. COMMITMENTS, CONTINGENCIES, AND RELATED PARTY TRANSACTIONS

  Financial Advisory Agreements

   The Company has engaged each of Hicks, Muse, Tate & Furst Incorporated
("Hicks, Muse") and Wand/Neodata Investments, L.P.  ("Wand"), to provide
financial advisory services during the ten-year period ending August 22, 2000,
in consideration for which Hicks, Muse and Wand will receive aggregate fees of
approximately $1,800,000 and $350,000, respectively, which are currently
payable in quarterly installments of $45,000 and $8,750, respectively. Hicks,
Muse and Wand are also entitled to reimbursement for all reasonable and
customary disbursements and out-of-pocket expenses incurred in the performance
of those financial advisory services and will be indemnified by the Company
against certain liabilities and expenses. Hicks, Muse received fees of $180,000
in each of the years ended June 30, 1997 and 1996 and in the years ended
December 31, 1995 and 1994 pursuant to such agreements. Wand received fees of
$35,000 in each of the years ended June 30, 1997 and 1996 and in the years
ended December 31, 1995 and 1994 pursuant to such agreements.

Leases

   The Company leases various office and warehouse space and certain property
and equipment under noncancelable operating lease agreements. Most leases
contain options to renew at varying terms and some contain purchase options.
Under contracts existing at June 30, 1997, the future minimum annual rentals
applicable to these leases that have initial or remaining lease terms in excess
of one year are as follows (in thousands):

<TABLE>
        <S>                                                                                    <C>
        Year ending June 30:
        1998                                                                                   $ 13,380
        1999                                                                                     12,000
        2000                                                                                     10,855
        2001                                                                                      9,108
        2002                                                                                      5,992
        Thereafter                                                                               25,601
                                                                                               --------
      Total minimum lease payments                                                             $ 76,936
                                                                                               ========
</TABLE>

___Rental expense for operating leases was $14,718,000, $15,918,000,
$14,328,000, and $12,888,000 for the years ended June 30, 1997 and 1996 and the
years ended December 31, 1995 and 1994, respectively.

  Employment Agreements

   The Company has employment agreements with certain executive officers with
variable terms. The agreements provide for annual base salaries and additional
annual merit bonuses as established by the Board of Directors. Under certain
circumstances, including termination without cause (as defined), certain
executive officers will be entitled to receive (i) monthly severance payments
in an amount equal to their monthly base salary for a period of 3-18 months,
(ii) a pro-rated portion of the bonus that would have been payable for the year
in which such termination occurs, and (iii) certain other benefits. The maximum
aggregate commitment for future salaries, excluding bonuses, under these
employment agreements is approximately $2,500,000.

  Ireland Grants

   In November 1994, the Company signed an agreement (the "Agreement") with the
Industrial Development Agency of Ireland (the "IDA") to grant the Company's
foreign subsidiary in Ireland cash payments in various installments.  Through
June 30, 1997, the Company received cash payments totaling approximately
$1,700,000 under the Agreement, which were recorded as deferred income. In
March 1997, the Company adopted a plan to close its remaining facilities in
Ireland (see Note 20).  As a result, the Company will be required to repay
approximately $1,700,000 of grant funds to the IDA in fiscal 1998.





                                    F-18
<PAGE>   55
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



  Telecommunications Agreement

   The Company has entered into a three-year noncancelable agreement with a
telecommunications provider pursuant to which the Company will receive, among
other things, interstate and international telecommunications services at a
discount from the telecommunications provider if certain minimum billing levels
are maintained. This agreement superseded a previously existing agreement with
the same telecommunications provider.  Under the current agreement, minimum
billing levels amount to $3,000,000 for each of the years ended June 30, 1998,
1999, and 2000.  The Company believes that it will satisfy the requirements
under the agreement.

  Real Estate Partnership

   The Company has a minority interest in a real estate partnership which owns
one of the Company's facilities. Rental expense paid to this partnership
amounted to $362,000, $382,000, $412,000, and $400,000 during the years ended
June 30, 1997 and 1996 and the years ended December 31, 1995 and 1994,
respectively.  At June 30, 1997 and 1996, the Company held a note receivable
from the partnership amounting to $129,000.

  Other Contingencies

   In the normal course of business, the Company is subject to certain legal
proceedings. In management's opinion, the outcome of such litigation will not
have a material adverse effect on the Company's financial position or operating
results.

15. INCOME TAXES

   Holding and the Company file a consolidated federal income tax return and
are parties to a tax sharing agreement for the purpose of allocating the
federal income tax liability of the group among its members. The tax sharing
agreement generally allocates the consolidated federal income tax liability to
each member according to the ratio of what that member's tax liability would be
if it filed a separate federal income tax return (subject to certain
modifications) to the similarly computed separate return tax liability of the
members of the group. Pursuant to the agreement, a member is permitted to
utilize the net operating loss of another member (a "Loss Member") to reduce
its share of consolidated federal income tax liability and is not required to
compensate the Loss Member for such tax benefit unless and to the extent that
the Loss Member generates taxable income which would have permitted the Loss
Member to utilize the net operating loss in a separate federal income tax
return.





                                    F-19
<PAGE>   56
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   The Company's principal temporary differences between the financial
reporting and tax basis of assets and liabilities at June 30, 1997 and 1996 are
as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                1997           1996
                                                                                ----           ----
   <S>                                                                       <C>            <C>
   Deferred tax assets:
     Allowance for doubtful accounts                                         $      568     $      795
     Property, plant and equipment depreciation                                   3,174          3,505
     Computer software amortization and intangible and other assets               2,266          4,836
     Original issue discount                                                     18,196         18,196
     Other accrued liabilities                                                    3,952          3,316
     Stock of foreign subsidiaries                                                2,423          2,424
     Alternative minimum tax payments                                               193            137
     Net operating loss carryforwards                                            15,399         17,723
                                                                             ----------     ----------
        Total gross deferred tax assets                                          46,171         50,932
     Valuation allowance                                                        (46,155)       (50,855)
                                                                             ----------     ----------
     Net deferred tax assets                                                         16             77
                                                                             ----------     ----------
   Deferred tax liabilities:
     Service credits                                                                (16)           (77)
                                                                             ----------     ----------
        Total gross deferred tax liabilities                                        (16)           (77)
                                                                             ----------     ----------
     Net deferred income tax asset (liability)                               $        0     $        0
                                                                             ==========     ==========
</TABLE>


   The Company has incurred cumulative losses in recent years. Therefore, in
accordance with SFAS 109, the Company has concluded that a full valuation
allowance must be applied to the gross deferred tax asset, resulting in a net
deferred tax asset of zero, except to the extent that the benefit of operating
loss carryforwards can be used to offset future reversals of existing deferred
tax liabilities. The net increase (decrease) in the valuation allowance for the
year ended June 30, 1997, the six month period ended June 30, 1996, and the
years ended December 31, 1995 and 1994 was $(4,700,000), $1,358,000,
$6,351,000, and $8,350,000, respectively.

   The Company has net operating loss carryforwards for income tax purposes of
approximately $40,500,000 at June 30, 1997 that expire beginning in 2006. Net
operating loss carryforwards for alternative minimum tax purposes at June 30,
1997 are approximately $37,700,000. These carryforwards expire beginning in
2006.

   In 1995, the Internal Revenue Service completed its examination of the
Company's federal income tax returns for the years 1991 through 1993.
Adjustments relating to this examination capitalized amounts originally
expensed and reduced original purchase price allocations.  Additional deferred
tax assets resulting from the audit consist primarily of accrued but unpaid
original issue discount which will be deductible when paid.  The examination
resulted in the payment of $129,000 in alternative minimum tax.

   In fiscal 1997, the Internal Revenue Service began an examination of the
Company's federal income tax returns for 1994 and 1995.  The Internal Revenue
Service has proposed adjustments to reduce the Company's net operating loss
carryforwards by approximately $8,100,000.  The proposed adjustments primarily
reduce certain depreciation and amortization deductions claimed by the Company.
The proposed adjustments are included at June 30, 1997 in the schedule of
principal temporary differences shown above.  The Company anticipates
completion of this examination in fiscal 1998.

   Any future change of control of the Company could, under certain
circumstances, result in the limitation of net operating loss carryforwards.





                                    F-20
<PAGE>   57
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   Reconciliation of the United States federal statutory rate and state income
tax rates to the Company's effective tax rate for the year ended June 30, 1997,
the six month period ended June 30, 1996 and the years ended December 31, 1995
and 1994 is as follows:

<TABLE>
<CAPTION>
                                                           1997         1996        1995        1994
                                                           ----         ----        ----        ----
   <S>                                                    <C>          <C>         <C>        <C>
   U.S. statutory rate of tax                              34.0%        34.0%       34.0%      34.0%
   State income tax rates                                   4.0          4.0         4.0        4.0
   Operating losses with no current tax benefit           (38.0)       (38.0)      (38.0)     (38.0)   
                                                          -----        -----       -----      -----
                                                            0.0%         0.0%        0.0%       0.0%
                                                          =====        =====       =====      =====    
</TABLE>

16. RETIREMENT SAVINGS PLAN

   The Neodata Corporation 401(k) Savings Plan (the "Plan") is a defined
contribution plan and covers all non-union employees of Neodata. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA") as amended and Section 401(k) of the Internal Revenue Code.

   The assets of the Plan are held and the related investment transactions are
executed by the Plan's trustee. Participants in the Plan have four investment
alternatives in which to place their funds and may place their funds in one or
more of these investment alternatives. Administrative fees, including audit and
attorney fees, are paid by the Company on behalf of the Plan. The Company may
make contributions to the Plan at its sole discretion. The Company matches
one-half of participants' contributions to the Plan up to 6% of compensation.
The Company contributed $1,365,000, $1,041,000, $960,000 and $1,012,000 to the
Plan for the years ended June 30, 1997 and 1996 and the years ended December
31, 1995 and 1994, respectively.

17. HOLDING EQUITY

   Holding's only asset is its equity investment in the issued and outstanding
shares of common stock of the Company.  Information relating to Holding equity
is presented to provide a more complete description of the Company's equity
transactions.

Holding Common Stock

   Holding's certificate of incorporation, as amended, authorizes 66,000,000
shares of common stock, of which 63,000,000 shares have voting rights (the
"Voting Common Stock") and 3,000,000 shares do not have voting rights (the
"Nonvoting Common Stock").  Voting Common Stock, as a class, was created
pursuant to the Recapitalization in 1994; all common stock existing previous to
the Recapitalization was retired.  Nonvoting Common Stock, as a class, was
created in fiscal 1997 pursuant to an amendment to Holding's certificate of
incorporation.  As of June 30, 1997 and 1996, outstanding shares of common
stock amounted to 388,395, all of which were Voting Common Stock.

  Holding Class A Convertible Preferred Stock

   Holding's certificate of incorporation, as amended, authorizes 18,000,000
shares of Class A Convertible Preferred Stock, consisting of 9,000,000 shares
designated as Series 1 Preferred Stock and 9,000,000 shares designated as
Series 2 Preferred Stock.  Class A Convertible Preferred Stock may, under
certain conditions, be converted into shares of Voting Common Stock.  Each
share of Series 1 Preferred Stock is convertible into approximately 2.91 shares
of Voting Common Stock, subject to adjustment under certain conditions. Each
share of Series 2 Preferred Stock is convertible into approximately 2.85 shares
of Voting Common Stock.  Each share of the Class A Convertible Preferred Stock
has an initial liquidation preference of $10. Dividends accumulate on the Class
A Convertible Preferred Stock, without interest, at the rate of 10% per year;
such dividends are added to the liquidation preference of the stock whether or
not they have been declared by the Board of Directors.  Cumulated and unpaid
dividends on the Class A Convertible Preferred Stock may, under certain
conditions, be converted into a





                                    F-21
<PAGE>   58
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


number of shares of Voting Common Stock equal to 1) the dollar amount of such
cumulated dividends, divided by 2) the current market price (as defined) per
share of the Voting Common Stock.

   Holding Class A Convertible Preferred Stock has no voting rights except that
holders of Series 1 Preferred Stock have the right to designate an advisory
director who may attend meeting of the board of directors but will not have the
right to vote on any matters.

   As of June 30, 1997 and 1996, outstanding shares of Series 1 and Series 2
Class A Convertible Preferred Stock amounted to 8,600,000 and 6,680,394,
respectively.

  Holding Class B Junior Convertible Preferred Stock

   Holding's certificate of incorporation, as amended, authorizes 3,090,000
shares of Class B Junior Convertible Preferred Stock.  Class B Junior
Convertible Preferred Stock may, under certain conditions, be converted into a
number of shares of Voting Common Stock equal to 1) the number of Class B
shares being converted multiplied by $10, divided by 2) the current market
price (as defined) per share of the Voting Common Stock.  Each share of the
Class B Junior Convertible Preferred Stock has an initial liquidation
preference of $10. Dividends cumulate on the Class B Junior Convertible
Preferred Stock, without interest, at the rate of 10% per year; such dividends
are added to the liquidation preference of the stock whether or not they have
been declared by the Board of Directors.  The liquidation preference of the
Class B Junior Convertible Preferred Stock is junior to that of the Class A
Convertible Preferred Stock. Cumulated and unpaid dividends on the Class B
Junior Convertible Preferred Stock may, under certain conditions, be converted
into a number of shares of Voting Common Stock equal to 1) the dollar amount of
such cumulated dividends, divided by 2) the current market price (as defined)
per share of the Voting Common Stock.

   Class B Junior Convertible Preferred Stock has no voting rights.

   As of June 30, 1997 and 1996, outstanding shares of Class B Junior
Convertible Preferred Stock amounted to 3,090,000.

  Warrants

   In connection with the Company's senior subordinated debt issuance in 1990,
Holding issued warrants (the "Subdebt Warrants"), all of which are exercisable
at no cost. Each Subdebt Warrant is exercisable for approximately 0.02 shares
of Voting Common Stock and 0.34 shares of Series 2 Preferred Stock. The Subdebt
Warrants expire in August 2000. As of June 30, 1997 and 1996, outstanding
Subdebt Warrants amounted to 1,405,000.

   In connection with the Services Acquisition in 1990, Holding issued warrants
(the "Bridge Warrants") at an exercise price of $.10 per warrant to affiliates
of certain stockholders. Each Bridge Warrant is exercisable for approximately
0.02 shares of Voting Common Stock and 0.34 shares of Series 2 Preferred Stock.
The Bridge Warrants expire in August 2000. As of June 30, 1997 and 1996,
outstanding Bridge Warrants amounted to 65,000.

  Options

   1990 Employee Incentive Plan.  In 1990, Holding adopted the 1990 Employee
Incentive Plan (the "1990 Plan"). Under the 1990 Plan, Holding granted to
certain officers and employees both incentive and non-qualified stock options.
The maximum term for incentive options under the 1990 plan is ten years. Each
1990 Plan option is exercisable for approximately 0.02 shares of Voting Common
Stock and 0.34 shares of Series 2 Preferred Stock. All outstanding options are
exercisable in varying amounts beginning one year after grant.  Pursuant to the
Recapitalization, 2,969,000 1990 Plan options having an exercise price of $2.60
per option were canceled and replaced with a like number of options having an
exercise price of $1.60 per option.  Effective June 26, 1996, 1,598,111 1990
Plan options having exercise prices ranging from $1.00 to $1.60 per option and
having a weighted





                                    F-22
<PAGE>   59
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


average fair value of $0.15 per option were repriced to $0.50 per option.  No
more options will be granted under the 1990 Plan.

   1994 Stock Option Plan.  In 1994, Holding adopted the 1994 Stock Option Plan
(the "1994 Plan").  Under the 1994 Plan, the maximum aggregate number of shares
of common stock as to which options may be granted is 2,631,579, subject to
adjustment in the event of a Reorganization (as defined). Under the 1994 Plan,
Holding may grant to officers and any employees both incentive and
non-qualified stock options to acquire shares of Voting or Nonvoting Common
Stock. The maximum term for incentive options under the 1994 plan is ten years.
Incentive stock options and non-qualified stock options must have an exercise
price of at least 100% of fair market value of the shares on the date of grant.
All outstanding options become exercisable in varying amounts as deemed
appropriate by the Board of Directors at the time of the grant or as limited by
Section 422 of the Internal Revenue Code of 1986, as amended. In fiscal 1997,
Holding issued a total of 2,401,500 1994 Plan options with a weighted average
fair value of $0.17 per option to certain Company officers and employees.  Each
of the 1994 Plan options issued to date are exercisable for one share of
Nonvoting Common Stock.

   Other Options.  In 1990 and 1993, Holding granted options at exercise prices
ranging from $1.00 to $1.60 per option to certain executive officers (the
"Other Options"). Each of the Other Options are exercisable for approximately
0.02 shares of Voting Common Stock and 0.34 shares of Series 2 Preferred Stock.

   A summary of Holding's stock option activity is as follows:

<TABLE>
<CAPTION>
                                       1990 PLAN                  1994 PLAN                  OTHER OPTIONS   
                              ------------------------    -----------------------    ------------------------
                                              WEIGHTED                   WEIGHTED                    WEIGHTED
                                              AVERAGE                     AVERAGE                     AVERAGE
                                              EXERCISE                   EXERCISE                    EXERCISE
                                OPTIONS        PRICE        OPTIONS        PRICE        OPTIONS        PRICE
                                -------        -----        -------        -----        -------        -----
<S>                            <C>            <C>           <C>          <C>            <C>          <C> 
Balance, January 1, 1994         909,000       $1.22             --           --        935,526       $1.06
  Granted                      2,732,759       $1.60             --           --             --          --
  Exercised                      (41,998)      $1.00             --           --             --          --
  Canceled                      (445,049)      $1.31             --           --       (247,720)      $1.00
                               ---------                                              ---------
Balance, December 31, 1994     3,154,712       $1.54             --           --        687,806       $1.09
Exercisable, Dec. 31, 1994       478,849       $1.18             --           --        687,806       $1.09

  Canceled                      (475,594)      $1.52             --           --             --          --
                               ---------                                              ---------
Balance, December 31, 1995     2,679,118       $1.54             --           --        687,806       $1.09
Exercisable, Dec. 31, 1995     1,857,379       $1.51             --           --        687,806       $1.09

  Canceled                       (81,000)      $1.39             --           --             --          --
                               ---------                                              ---------
Balance, June 30, 1996         2,598,118       $1.02             --           --        687,806       $1.09
Exercisable, June 30, 1996     2,193,917       $0.94             --           --        687,806       $1.09

  Granted                             --          --      2,401,500        $0.52             --          --
  Canceled                       (13,500)      $0.63          7,500        $0.50             --          --
                               ---------                  ---------                   ---------
Balance, June 30, 1997         2,584,618       $0.94      2,394,000        $0.52        687,806       $1.09
Exercisable, June 30, 1997     2,582,952       $0.94        652,680        $0.50        687,806       $1.09
</TABLE>





                                    F-23
<PAGE>   60
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


   The following summarizes information about Holding's stock options
outstanding at June 30, 1997:

<TABLE>
<CAPTION>
                                                   OUTSTANDING                             EXERCISABLE        
                                  --------------------------------------------     -------------------------
                                                 WEIGHTED
                                                  AVERAGE
                   RANGE OF                      REMAINING         WEIGHTED                      WEIGHTED
                   EXERCISE                     CONTRACTUAL         AVERAGE                       AVERAGE
                    PRICES        OPTIONS      LIFE (YEARS)     EXERCISE PRICE     OPTIONS    EXERCISE PRICE
                    ------        -------      ------------     --------------     -------    --------------
<S>               <C>            <C>                <C>               <C>         <C>               <C>
1990 Plan         $0.50-$1.60    2,584,618          6.17              $0.94       2,582,952         $0.94
1994 Plan         $0.50-$0.75    2,394,000          8.31              $0.52         652,680         $0.50
Other Options     $1.00-$1.60      687,806          2.79              $1.09         687,806         $1.09
</TABLE>

   Holding accounts for stock-based compensation under APB No. 25 and has
elected to comply with SFAS No. 123 through adoption of its disclosure
requirements. Had the compensation cost for Holding's stock options been
determined based on fair value at the grant dates consistent with the method
prescribed by SFAS No. 123, Holding's net income would have been reduced by
approximately $349,000 and $106,000 for the years ended June 30, 1997 and 1996,
respectively.  This pro forma effect was calculated using the Minimum Value
Method, assuming a 7-year expected life, a forfeiture rate of zero, a dividend
yield of zero, and risk-free interest rates at the date of grant ranging from
5.01% to 7.75%.

18. TRANSACTIONS WITH HOLDING

   In 1993, Holding assumed the obligation for the Meredith Note from Product
as a result of the Mergers.  The balance of the Meredith Note was $3,492,000
and $4,711,000 at June 30, 1997 and 1996, respectively. The only source of
payment of the note is cash flow generated by the Company or reductions in the
Company's accounts receivable from Meredith. Cash paid to service the note
payable is reflected in the financing activities section on the statement of
cash flows. The Company satisfied Holding's obligation under the Meredith Note
for the second, third, and fourth quarters of 1995, and for the first three
quarters of 1994, totaling $1,293,000 and $1,389,000, respectively, by reducing
accounts receivable.  Amounts due of $452,000 and $410,000 under the Meredith
Note as of December 31, 1995 and June 30, 1996, respectively, are included in
accounts payable.

   The remaining balance of the Meredith Note, together with interest totaling
$451,000, will be paid in fiscal 1998.

19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

   The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

   For cash and cash equivalents the carrying amount approximates fair value.

   For long-term debt, the fair value of the Company's fixed rate long-term
debt is estimated based on the quoted market prices for the same or similar
issues or on the Company's current incremental rate of borrowing. The variable
rate long-term debt is computed at current quoted market rates.

   The Company enters into forward foreign exchange contracts to protect
against future fluctuations in foreign currency exchange rates.  At June 30,
1997, the Company had no contracts outstanding to buy foreign currency.

   The estimated fair values of the Company's financial instruments at June 30,
1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                                    1997                      1996
                                                                    ----                      ----
                                                            Carrying      Fair        Carrying       Fair
                                                             Amount       Value        Amount        Value
                                                             ------       -----        ------        -----
 <S>                                                         <C>          <C>           <C>         <C>
 Capital leases and long-term debt, including
   current portion, net of original issue discount . .       $193,957     $206,378      $185,250    $187,369
</TABLE>





                                    F-24
<PAGE>   61
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


20. SIGNIFICANT EVENTS

  Restructuring Charges

   In March 1997, the Company adopted a plan to close its remaining facilities
in Ireland.  At June 30, 1997, the Company had separated substantially all its
Ireland employees and was in the process of disposing of substantially all
remaining Ireland assets.  Accordingly, the Company incurred a charge to
earnings of $1,896,000 during fiscal 1997 for the estimated net cost of the
closure, of which $1,675,000 was paid in fiscal 1997.

   In the fourth quarter of 1995, the Company adopted a plan to close its
facilities in Kilmallock and Newcastle West, Ireland.  The plan included
separating 110 employees.  The cost associated with these separations was
approximately $1,667,000, all of which was paid in 1995.

   In 1993 the Company entered a plan (the "Restructuring") whereby it revised
its delivery plan from function-based operations to customer-based service
centers and changed the strategic direction of the NCORE technology. Total
charges related to the Restructuring were $20,280,000, and remaining reserves
related to the Restructuring were $8,987,000 at December 31, 1993.

   A summary of restructuring activity for the years ended December 31, 1994
and 1995, the six month period ended June 30, 1996, and the year ended June 30,
1997 is as follows:

<TABLE>
    <S>                                                                                    <C>
    Restructuring reserves, December 31, 1993                                              $ 8,987
    1994 activity:
      Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (7,261)
      Adjustments to reserves . . . . . . . . . . . . . . . . . . . . . . . . . . .         (1,236)
                                                                                           -------
    Balance, December 31, 1994  . . . . . . . . . . . . . . . . . . . . . . . . . .            490
    1995 activity:
      1995 provision  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,667
      Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (2,038)
      Adjustments to reserves . . . . . . . . . . . . . . . . . . . . . . . . . . .           (119)
                                                                                           -------
    Balance, December 31, 1995  . . . . . . . . . . . . . . . . . . . . . . . . . .             --
    1996 activity                                                                               --
                                                                                           -------
    Balance, June 30, 1996  . . . . . . . . . . . . . . . . . . . . . . . . . . . .             --
    1997 activity:
      1997 provision  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,896
      Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (1,675)
                                                                                           -------
    Balance, June 30, 1997  . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $   221
                                                                                           =======
</TABLE>

  Recapitalization

   The Company, Holding, and EDS entered into a transaction (the
"Recapitalization") in November of 1994 which reduced the Company's obligations
owed to EDS by approximately $28.3 million and resulted in the issuance of
additional Holding equity and the recapitalization of other Holding equity.
Pursuant to the Recapitalization, Voting Common Stock, as a class, was created,
and all previously existing common stock was retired.

   The Recapitalization was consummated on November 28, 1994, in two steps.
First, Holding and EDS entered into a Securities Exchange Agreement dated
November 15, 1994, pursuant to which EDS (i) released certain financial
obligations relating to the development of NCORE owed by the Company to EDS at
the time of the consummation of the Recapitalization (the "Closing"), (ii)
transferred to Holding all of the Holding common stock then owned by EDS
representing approximately 27.8% (on a fully-diluted basis) of the Holding
common stock outstanding immediately prior to the Recapitalization, and (iii)
terminated portions of the then- existing Technology Agreement and entered into
a new Agreement for Information Technology Services (the "Amended IT
Agreement")





                                    F-25
<PAGE>   62
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


with the Company. In exchange for the above, Holding issued to EDS (a)
8,600,000 shares of Class A Convertible Preferred Stock - Series 1 of Holding
("Series 1 Preferred Stock") having an initial aggregate liquidation preference
of $86.0 million, and, subject to certain antidilution adjustments, convertible
under certain conditions into a number of shares of new Voting Common Stock of
Holding equal to 50.0% of the common stock outstanding (on a fully-diluted
basis, assuming no conversion of the Class B Preferred Stock) immediately
following the Closing, and (b) 3,090,000 shares of Class B Junior Convertible
Preferred Stock (the "Class B Preferred Stock") having an initial aggregate
liquidation preference of $30.9 million and convertible under certain
conditions into a number of shares of Voting Common Stock having a fair market
value equal to the liquidation preference of such Class B Preferred Stock.

   Second, all remaining shares of Holding common stock not owned by EDS
(assuming the exercise of all warrants and options to purchase existing common
stock outstanding on the date of the Closing) were converted into (i) an
aggregate of 500,000 shares of Voting Common Stock equal to 1.0% of the common
stock outstanding (on a fully-diluted basis, assuming no conversion of the
Class B Preferred Stock) immediately following the Closing, and (ii) an
aggregate of 8,600,000 shares of Class A Convertible Preferred Stock - Series 2
of Holding (the "Series 2 Preferred Stock") having an initial aggregate
liquidation preference of $86.0 million and convertible under certain
conditions into shares of Voting Common Stock equal to 49.0% of the common
stock outstanding (on a fully- diluted basis, assuming no conversion of the
Class B Preferred Stock) immediately following the Closing.

  Impairment of NCORE

   During 1993 management reviewed the Company's business including its
technology direction for NCORE. The NCORE development project was originally
expected to result in a major single deliverable software project becoming
available from the development efforts of EDS on behalf of the Company. During
the month of June 1993, management decided to implement a new plan for the
deliverable projects and hardware platform for NCORE that would be focused
primarily on client needs and individual "short-term deliverable" projects that
would utilize the software developed to date to deliver substantially upgraded
services. This new direction for NCORE represented a change in the timing of
expected deliverable projects from that employed by previous management and was
initiated as a result of a determination that the existing development plan was
resulting in a rate of expenditure that was deemed unacceptable. The
deliverable project related to the development of NCORE software still
represented a fully relational database processing software system that would
replace substantially all of the Company's client's operations software.
Management reallocated resources from the project to focus on short-term
deliverable projects and scaled down the rate of expenditures originally
contemplated but not the size of the project. The Company proceeded to focus
its efforts on how to disaggregate the project into specific discrete projects
that could be delivered over a shorter period of time.

   The Company, Holding and EDS consummated the Recapitalization on November
28, 1994, which resulted in the release of certain financial obligations owed
by the Company to EDS. The Recapitalization reduced the Company's obligations
owed to EDS relating to the development of NCORE by approximately $28.3 million
and resulted in the issuance of additional Holding equity and the
recapitalization of other Holding equity. A significant component of the
Recapitalization was the Amended IT Agreement.

   In connection with its decision to effect the Recapitalization and the
Amended IT Agreement with EDS, the Company reevaluated its business plan and
strategic technology direction. As a result of such reevaluation and in view of
the Company's need to focus its financial and management attention on achieving
short-term improvements in financial and operational performance in other areas
of the business, the Company decided to utilize the software developed to date
and discontinue all uncompleted portions of NCORE.  Because of the departure
from the technology employed in the development of NCORE, the Company reviewed
NCORE between November 1994 and January 1995 to determine whether its full
value would be recoverable. In January 1995 management determined that the full
value would not be recoverable, and a $31.2 million writedown of the NCORE
development asset was recorded in the fourth quarter of 1994.  Costs
capitalized in connection with the development of NCORE were funded under a
long-term obligation to EDS, which was released as part of the Recapitalization
and as a result,





                                    F-26
<PAGE>   63
                             NEODATA SERVICES, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


the writedown of these costs does not affect operating cash flows. The value of
certain discrete program components of NCORE together with purchased software
was determined by estimating the future gross revenues from the product reduced
by the estimated future costs of maintenance and customer support required at
the time of sale. The remaining balance of this asset at December 31, 1994 was
$4.2 million and amortization commenced in December 1994 using an estimated
life of five years.

21. OWNERSHIP CHANGE

   On August 7, 1997, Holding entered into an Agreement and Plan of Merger with
EDS and Ramcad Corporation, a wholly-owned subsidiary of EDS, pursuant to which
Ramcad Corporation will merge with and into Holding, with Holding surviving as
a wholly-owned subsidiary of EDS (the "EDS Merger").  Pursuant to the EDS
Merger, all outstanding capital stock of Holding not presently owned by EDS
will be converted into the right to receive $2.60 per share, in the case of
Voting Common Stock and Nonvoting Common Stock, and approximately $7.67 per
share, in the case of Series 2 Preferred Stock.  All outstanding options and
warrants have been accelerated in connection with the EDS Acquisition and, upon
the consummation of the EDS Acquisition, such options and warrants will
represent only the right to receive the consideration to be paid to the
shareholders of Holding as a result of the EDS Acquisition, less any applicable
exercise price.

   Upon consummation of the EDS Acquisition, which will constitute a "Change of
Control" as defined under the Notes, the Company will be required to offer to
repurchase the Notes within 30 days following consummation of the EDS 
Acquisition.

   The EDS Acquisition is scheduled to close on August 29, 1997.





                                    F-27
<PAGE>   64



                                                                     SCHEDULE II

                             NEODATA SERVICES, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                  Column A                     Column B     Column C      Column D      Column E        Column F
                  --------                     --------     --------      --------      --------        --------
                                                                  Additions
                                                                  ---------
                                              Balance at                 Charged to                      Balance
                                               Beginning   Charged to       Other                       at End of
                 Description                  of Period     Expenses     Accounts(2)   Deductions(1)     Period
                 -----------                  ----------    --------     -----------   -------------     ------
<S>                                           <C>           <C>          <C>             <C>             <C>
Allowance for doubtful accounts:
  Current . . . . . . . . . . . . . . . .     $ 1,593       $   560           --         $  (909)        $ 1,244
  Long-term . . . . . . . . . . . . . . .          --            --           --              --              --
                                              -------       -------      -------         --------        -------
Year ended June 30, 1997  . . . . . . . .     $ 1,593       $   560           --         $  (909)        $ 1,244
                                              =======       =======      =======         =======         =======
  Current . . . . . . . . . . . . . . . .     $ 1,819       $   680           --         $  (906)        $ 1,593
  Long-term . . . . . . . . . . . . . . .          --            --           --              --              --
                                              -------       -------      -------         --------        -------
Six month period ended June 30, 1996  . .     $ 1,819       $   680           --         $  (906)        $ 1,593
                                              =======       =======      =======         =======         =======
  Current . . . . . . . . . . . . . . . .     $ 2,284       $ 1,259           --         $(1,724)        $ 1,819
  Long-term . . . . . . . . . . . . . . .          --            --           --              --              --
                                              -------       -------      -------         -------         -------
Year ended December 31, 1995  . . . . . .     $ 2,284       $ 1,259           --         $(1,724)        $ 1,819
                                              =======       =======      =======         =======         =======
  Current . . . . . . . . . . . . . . . .     $ 4,086       $ 1,099           --         $(2,901)         $2,284
  Long-term . . . . . . . . . . . . . . .         476            --           --            (476)             --
                                              -------       -------      -------         -------         -------
Year ended December 31, 1994  . . . . . .     $ 4,562       $ 1,099           --         $(3,377)        $ 2,284
                                              =======       =======      =======         =======         =======
Valuation allowance for NCORE:
Year ended December 31, 1994  . . . . . .          --       $31,155           --              --         $31,155
                                              =======       =======      =======         =======         =======
Valuation for deferred tax asset:
Year ended June 30, 1997  . . . . . . . .     $50,855            --      $(4,700)             --         $46,155
                                              =======       =======      =======         =======         =======
Six month period ended June 30, 1996  . .     $49,497            --      $ 1,358              --         $50,855
                                              =======       =======      =======         =======         =======
Year ended December 31, 1995  . . . . . .     $43,146            --      $ 6,351              --         $49,497
                                              =======       =======      =======         =======         =======
Year ended December 31, 1994  . . . . . .     $34,796            --      $ 8,350              --         $43,146
                                              =======       =======      =======         =======         =======
</TABLE>
---------
(1)          Represents uncollectible accounts written off to the allowance
             account and transfers to long-term valuation accounts.

(2)          Represents changes in the valuation allowance resulting from
             changes in the deferred tax asset.





                                     S-1
<PAGE>   65



                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
                                   
                                   NEODATA SERVICES, INC.
                                   
 Date: August 22, 1997             /s/  A. LAURENCE JONES      
                                   -------------------------------------
                                   A. Laurence Jones
                                   President and Chief Executive Officer
                                   
   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated:
                                   

 Date: August 22, 1997             /s/  A. LAURENCE JONES                       
                                   ---------------------------------------------
                                   A. Laurence Jones                            
                                   President and Chief Executive Officer        
                                   (principal executive officer of the Company) 
                                                                                

 Date: August 22, 1997             /s/  NICHOLAS J. CUCCARO                     
                                   ---------------------------------------------
                                   Nicholas J. Cuccaro
                                   Senior Vice President and Chief Financial 
                                   Officer (principal financial and accounting 
                                   officer of the Company) 
                                    
                                                                                
 Date: August 22, 1997             /s/  KURT J. BURGHARDT                       
                                   ---------------------------------------------
                                   Kurt J. Burghardt                            
                                   Director                                     
                                                                                

 Date: August 22, 1997             /s/  JACK D. FURST                           
                                   ---------------------------------------------
                                   Jack D. Furst                                
                                   Director                                     
                                                                                

 Date: August 22, 1997             /s/  THOMAS O. HARBISON                      
                                   ---------------------------------------------
                                   Thomas O. Harbison                           
                                   Director                                     

                                                                                
 Date: August 22, 1997             /s/  THOMAS O. HICKS                         
                                   ---------------------------------------------
                                   Thomas O. Hicks                              
                                   Director                                     
                                                                                

 Date: August 22, 1997             /s/  BRUCE W. SCHNITZER                      
                                   ---------------------------------------------
                                   Bruce W. Schnitzer                           
                                   Director                                     


          SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
            PURSUANT TO SECTION 15(D) OF THE ACT BY COMPANIES WHICH
        HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT

   The Company has not sent to its security holders any annual report to
security holders covering the Company's last fiscal year or sent any proxy
statement, form of proxy or other proxy soliciting material with respect to any
annual or special meeting of security holders to more than ten of the Company's
security holders.





<PAGE>   66



EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.                                              EXHIBIT INDEX
-----------                                              -------------
<S>      <C> <C>
2.1      --  Agreement and Plan of Merger, dated August 7, 1997, by and among Holding, EDS, and Ramcad Corporation*

3.1      --  Certificate of Incorporation of the Company. (incorporated by reference from Exhibit 3.1 to the Company's Registration
             Statement on  Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration
             No. 33-63838))

3.2      --  By-Laws of the Company. (incorporated by reference from Exhibit 3.2 to the Company's Registration Statement on Form S-1
             as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

4.1      --  Indenture, dated as of May 5, 1993, between the Company, as Issuer, and Ameritrust Texas National Association, as
             Trustee. (incorporated by reference from Exhibit 4.1 to the Company's Registration Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

4.2      --  Form of 12% Series B Senior Deferred Coupon Note due 2003. (incorporated by reference from Exhibit 4.3 to the Company's
             Registration Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993
             (Registration  No. 33-63838))

10.1     --  Registration Rights Agreement, dated as of May 5, 1993, between the  Company and Morgan Stanley & Co. Incorporated.
             (incorporated by reference from Exhibit 10.6 to the Company's Registration Statement  on Form S-1 as declared effective
             by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.2     --  Tax Sharing Agreement, dated as of May 5, 1993, among the Company, Holding, Neodata Mailing Services, Inc. and Neodata
             Distribution         Services, Inc. (incorporated by reference from Exhibit 10.7 to the  Company's Registration
             Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration
             No. 33-63838))

10.3+    --  Amended and Restated Employment Agreement, dated as of June 1, 1993, among Mr. Thomas O. Harbison, the Company, and
             Holding. (incorporated by reference from Exhibit 10.57 to the Company's Registration  Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.4+    --  Letter Agreement between Hicks, Muse & Co. (TX) Incorporated and Mr. Thomas O. Harbison executed in connection with the
             Amended and Restated Employment Agreement. (incorporated by reference from Exhibit 10.58 to the Company's Registration
             Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration
             No. 33-63838))

10.5+    --  Stock Option Agreement, dated as of January 1, 1994, between Mr. A. Laurence Jones and Holding. (incorporated by
             reference from Exhibit 10.12 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended
             December 31, 1993)
</TABLE>





<PAGE>   67
<TABLE>
<CAPTION>
EXHIBIT NO.                                              EXHIBIT INDEX
-----------                                              -------------
<S>      <C> <C>
10.6+    --  Stock Option Agreement, dated as of January 1, 1994, between Mr. William J. Turner and Holding. (incorporated by
             reference from Exhibit 10.14 to the Company's Annual Report on Form 10-K (File No.       33-63838) for the fiscal year
             ended December 31, 1993)

10.7+    --  Amendment and Restatement of Neodata Corporation Employee Investment Plan, dated as of January 1, 1994. (incorporated
             by reference from Exhibit 10.23 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year
             ended December 31, 1993)

10.8+    --  Neodata Corporation Amended and Restated Employee Incentive Plan, dated as of March 9, 1994 (incorporated by reference
             from Exhibit 10.24 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended December
             31, 1993)

10.9+    --  Neodata Corporation Supplemental Executive Investment Plan, effective as of January 1, 1994. (incorporated by reference
             from Exhibit 10.25 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended December
             31, 1993)

10.10+   --  Financial Advisory Agreement, dated as of August 22, 1990, among Hicks, Muse, Holding, and the Company. (incorporated
             by reference from Exhibit 10.14 to the Company's Registration Statement on Form S-1 as declared effective by the
             Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.11+   --  Amendment Number One to Financial Advisory Agreement, dated as of September 30, 1992, among Hicks, Muse, Holding, and
             the Company. (incorporated by reference from Exhibit 10.15 to the Company's Registration Statement on Form S-1 as
             declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.12+   --  Amendment Number Two to Financial Advisory Agreement, dated as of May 5, 1993, among Hicks, Muse, Holding, and the
             Company. (incorporated by reference from Exhibit 10.16 to the Company's Registration Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.13    --  Circulation Fulfillment Service Agreement, dated June 26, 1991, between the Company (formerly Neodata
             Books/Distribution Services, Inc. by name change and merger) and Meredith. (incorporated by reference from Exhibit
             10.48 to the Company's Registration Statement on Form S-1 as declared effective by the Securities and Exchange
             Commission on August 24, 1993 (Registration No. 33-63838))

10.14    --  Fulfillment Agreement, dated as of June 26, 1991, between the Company (formerly Neodata Books/Distribution Services,
             Inc. by name change and merger) and Meredith. (incorporated by reference from Exhibit 10.49 to the Company's
             Registration Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993
             (Registration No. 33-63838))

10.15    --  Securities Purchase Agreement, dated as of May 5, 1993, among Holding, HM/DBMS, and Wand. (incorporated by reference
             from Exhibit 10.50 to the Company's Registration Statement on Form S-1 as declared effective by the Securities and
             Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.16    --  Amended and Restated Stockholders Agreement, dated as of May 5, 1993, among Holding, HMC/Neodata, HM/DBMS, Wand, and
             certain other stockholders of Holding. (incorporated by reference from Exhibit 10.51 to the Company's Registration
             Statement on Form S-1 as declared effective by the Securities and Exchange Commission on August 24, 1993 (Registration
             No. 33-63838))

10.17    --  Securities Purchase and Exchange Agreement, dated as of May 5, 1993, between Holding and EDS. (incorporated by
             reference from Exhibit 10.52 to the Company's Registration Statement on Form S-1 as declared effective by the
             Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))
</TABLE>





<PAGE>   68
<TABLE>
<CAPTION>
EXHIBIT NO.                                              EXHIBIT INDEX
-----------                                              -------------
<S>      <C> <C>
10.18    --  Securityholders Agreement, dated as of May 5, 1993, among Holding, HMC/Neodata, HM/DBMS, and EDS. (incorporated by
             reference from Exhibit 10.53 to the Company's Registration Statement on Form S-1 as declared effective by the
             Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.19    --  Securities Repurchase Agreement, dated as of May 5, 1993, among Holding, Continental Bank N.A., and Philadelphia Life.
             (incorporated by reference from Exhibit 10.54 to the Company's Registration Statement on Form S-1 as declared effective
             by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.20    --  Nonexclusive License Agreement, dated as of May 5, 1993 and effective as of April 15, 1993, between the Company and
             EDS. (incorporated by reference from Exhibit 10.56 to the Company's Registration Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.21    --  Financial Advisory Agreement, dated as of August 22, 1990, among Holding, the Company, and Wand. (incorporated by
             reference from Exhibit 10.60 to the Company's Registration Statement on Form S-1 as declared effective by the
             Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.22+   --  Amendment Number One to Financial Advisory Agreement, dated as of September 30, 1992, among Holding, the Company, and
             Wand. (incorporated by reference from Exhibit 10.61 to the Company's Registration Statement on Form S-1 as declared
             effective by the Securities and Exchange Commission on August 24, 1993 (Registration No. 33-63838))

10.23    --  Amended and Restated Lease Agreement, by and among NeoServ (Co.) QRS 10-13, Inc., NeoServ (Co.) QRS 11-18, Inc., and
             the Company dated as of June 8, 1994 (incorporated by reference from Exhibit 10.76 to the Company's Quarterly Report on
             Form 10-Q File No. 33-63838 for the quarterly period ended June 30, 1994)

10.24    --  Construction Agreement, among the Company and Neoserv (Co.) QRS 10-13, Inc., NeoServ (Co.) QRS 11-18, Inc., and the
             Company dated as of June 8, 1994 (incorporated by reference from Exhibit 10.77 to the Company's Quarterly Report on
             Form 10-Q (File No. 33-63838) for the quarterly period ended June 30, 1994)

10.25    --  Amended and Restated Lease Agreement, by and among Neoserv (Co.) QRS 10-13, Inc. and Neoserv (Co.) QRS 10-8 Inc. (as
             landlord) and the Company (as tenant), dated as of June 8, 1994 (incorporated by reference from Exhibit 10.78 to the
             Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended December 31, 1994)

10.26    --  First Amendment to Amended and Restated Lease Agreement, by and among Neoserv (Co.) QRS 10-13, Inc. and Neoserv (Co.)
             QRS 11-8, Inc. (as landlord) and the Company (as tenant) (incorporated by reference from Exhibit 10.79 to the Company's
             Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended December 31, 1994)

10.27    --  Agreement for Information Technology Services, dated as of January 1, 1995, between the Company and EDS (incorporated
             by reference from Exhibit 10.83 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year
             ended December 31, 1995)

10.28    --  Form of Second Amendment to Amended and Restated Lease Agreement, dated as of March 25, 1996, by and among Neoserv
             (Co.) QRS 10-13, Inc. and Neoserv (Co.) QRS 11-8, Inc. (as landlord) and the Company (as tenant) (incorporated by
             reference from Exhibit 10.89 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the fiscal year ended
             December 31, 1995)

10.29    --  Stockholders Agreement, dated as of November 28, 1994, among Holding, HMC/Neodata, HM/DBMS, Hicks, Muse, EDS, and other
             stockholders (incorporated by reference from Exhibit 10.40 to the Company's Annual Report on Form 10-K (File No. 33-
             63838) for the transition period ended June 30, 1996)

10.30+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Mr. Nicholas J. Cuccaro
             (incorporated by reference from Exhibit 10.41 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the
             transition period ended June 30, 1996)
</TABLE>





<PAGE>   69
<TABLE>
<CAPTION>
EXHIBIT NO.                                              EXHIBIT INDEX
-----------                                              -------------
<S>      <C> <C>
10.31+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Ms. Frances M. Anhut (incorporated
             by reference from Exhibit 10.42 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition
             period ended June 30, 1996)

10.32+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Mr. Ed L. Frazier (incorporated by
             reference from Exhibit 10.43 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period
             ended June 30, 1996)

10.33+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Ms. Susan L. Morse (incorporated by
             reference from Exhibit 10.45 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period
             ended June 30, 1996)

10.34+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Mr. Richard L. Rosy (incorporated by
             reference from Exhibit 10.46 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period
             ended June 30, 1996)

10.35+   --  Executive Employment Agreement, dated as of June 14, 1996, between the Company and Ms. Nancy S. Talmey (incorporated by
             reference from Exhibit 10.47 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period
             ended June 30, 1996)

10.36+   --  Letter Agreement, dated as of June 2, 1994, between the Company and Mr. Nicholas J. Cuccaro (incorporated by reference
             from Exhibit 10.48 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.37+   --  Letter Agreement, dated as of March 15, 1994, between the Company and Ms. Frances M. Anhut (incorporated by reference
             from Exhibit 10.49 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.38+   --  Letter Agreement, dated as of August 14, 1995, between the Company and Mr. Kevin G. Heery(incorporated by reference
             from Exhibit 10.51 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.39+   --  Letter Agreement, dated as of September 23, 1993, between the Company and Ms. Susan L. Morse (incorporated by reference
             from Exhibit 10.52 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.40+   --  Letter Agreement, dated as of February 25, 1992, between the Company and Mr. Richard L. Rosy (incorporated by reference
             from Exhibit 10.53 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.41+   --  Letter Agreement, dated as of December 20, 1994, between the Company and Ms. Nancy S. Talmey (incorporated by reference
             from Exhibit 10.54 to the Company's Annual Report on Form 10-K (File No. 33-63838) for the transition period ended June
             30, 1996)

10.42    --  Credit Agreement, dated as of January 31, 1997, among Holding, the Company, Various Banks and Bankers Trust Company, as
             Agent (incorporated by reference from Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q (File No. 33-63838)
             for the quarterly period ended December 31, 1996)

10.43    --  Agreement, dated as of December 11, 1996, between the Company and Philip Morris Incorporated (incorporated by reference
             from Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q (File No. 33-63838) for the quarterly period ended
             March 31, 1997)**

10.44    --  Credit Agreement, dated as of February 24, 1997, among Holding, Neodata Creative Services, Inc., Neodata Investment
             Services, Inc. No. 1, Neodata Investment Services, Inc. No. 2, Various Banks and Bankers Trust Company, as Agent
             (incorporated by reference from Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q (File No. 33-63838) for the
             quarterly period ended March 31, 1997)

10.45    --  Third Amendment to Amended and Restated Lease Agreement, dated as of January 31, 1997, by and among Neoserv (Co.) QRS
             10-13, Inc. and Neoserv (Co.) QRS 11-8, Inc. (as landlord) and the Company (as tenant)*

10.46+   --  Letter Agreement, dated as of November 7, 1995, between the Company and Mr. Ed L. Frazier*
</TABLE>





<PAGE>   70
<TABLE>
<CAPTION>
EXHIBIT NO.                                              EXHIBIT INDEX
-----------                                              -------------
<S>      <C> <C>
10.47+   --  Letter Agreement, dated as of June 17, 1996, between the Company and Ms. Frances M. Anhut*

10.48+   --  Letter Agreement, dated as of June 17, 1996, between the Company and Ms. Susan L. Morse*

10.49+   --  Letter Agreement, dated as of August 22, 1996, between the Company and Mr. Edward R. Flaherty*

10.50+   --  Letter Agreement, dated as of August 27, 1996, between the Company and Mr. Ed L. Frazier*

10.51+   --  Letter Agreement, dated as of September 18, 1996, between the Company and Mr. Kevin G. Heery*

10.52+   --  Executive Employment Agreement, dated as of December 17, 1996, between the Company and Mr. Edward R. Flaherty*

10.53+   --  Amended and Restated Executive Employment Agreement, dated as of January 1, 1997, between the Company and Mr. A.
             Laurence Jones*

10.54+   --  Executive Employment Agreement, dated as of February 25, 1997, between the Company and Mr. Mark A. Lacek*

10.55+   --  Letter Agreement, dated as of February 27, 1997, between the Company and Ms. Nancy S. Talmey*

21       --  Subsidiaries of the Company*

27       --  Financial Data Schedule*
----------                           
</TABLE>

*  Filed herewith.

** Confidential treatment has been granted with respect to certain portions of
   such agreement and the confidential portions have been filed separately with
   the Commission pursuant to the confidential treatment request.

+  Indicates a management contract or compensatory plan or arrangement.

REPORTS ON FORM 8-K

   None.