RMH TELESERVICES INC, 424B1, 1996-09-20

RMH TELESERVICES INC
424B1, 1996-09-20
BUSINESS SERVICES, NEC

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<PAGE> 1
Filed Pursuant to Rule 424B
Registration No. 333-07501
PROSPECTUS

2,800,000 SHARES

LOGO

RMH TELESERVICES, INC.

COMMON STOCK

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All of the shares of Common Stock being offered hereby are being sold by
RMH Teleservices, Inc. (the "Company"). Of the net proceeds from the sale of the
Common Stock by the Company, approximately $12.7 million will be paid to
officers, directors and shareholders of the Company and approximately $11.2
million will be used to repay debt incurred in May 1996 to redeem Common Stock.
See "Use of Proceeds" and "Certain Transactions -- Recapitalization."

Prior to this offering, there has not been a public market for the Common
Stock of the Company. See "Underwriting" for information relating to the factors
considered in determining the initial public offering price. The Common Stock
has been approved for listing on The Nasdaq Stock Market's National Market under
the symbol "RMHT."
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share $12.50 $0.87 $11.63
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Total(3) $35,000,000 $2,436,000 $32,564,000
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses estimated at $900,000 payable by the Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
420,000 additional shares of Common Stock solely to cover over-allotments,
if any. See "Underwriting." If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, and Proceeds to
Company will be $40,250,000, $2,801,400 and $37,448,600, respectively.

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The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
September 24, 1996, at the office of Smith Barney Inc., 333 West 34th Street,
New York, New York 10001.

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SMITH BARNEY INC. HAMBRECHT & QUIST

September 18, 1996
<PAGE> 2

[The pictures to be inserted are a collage of three photographs. The first
photograph depicts a training class for telemarketing sales representatives. The
second photograph is a picture of selected components of the Company's systems
and technology including a call processor and file server. The third photograph
is of a call center operation.]

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus. As
used in this Prospectus, references to a fiscal year are to the Company's fiscal
year ended September 30 of such year.

THE COMPANY

RMH Teleservices, Inc. (the "Company") is a leading provider of outbound
teleservices to major corporations in the insurance and financial services
industries. The Company distinguishes itself through its high quality service
and disciplined management approach which has led to long-term client
relationships and sustained profitable growth. The Company originated
relationships with Mass Marketing Insurance Group ("MMIG"), J.C. Penney Life
Insurance Company ("J.C. Penney"), AT&T/Universal Card Services ("AT&T") and
Advanta Corp. ("Advanta") over five years ago. The Company's revenue and
operating income, all of which has been generated internally, have increased
148% and 252%, respectively, over the last two years. The Company's revenue and
operating income in fiscal 1995 were $25.5 million and $2.0 million,
respectively, reflecting increases of 49% and 149% when compared to fiscal 1994.
The Company's revenue and operating income in fiscal 1994 increased 66% and 41%,
respectively, when compared to fiscal 1993. As a result of the payment of
special bonuses, interest expense on the Founders' Note (as defined in "Certain
Transactions -- Recapitalization") and an extraordinary charge, a net loss is
expected for fiscal 1996.

The Company, which has established inbound as well as outbound call center
capabilities, recently began to capitalize on the increased demand for call
center services by the telecommunications industry. The Company opened its
eighth call center in April 1996 and currently operates 744 workstations. The
Company intends to add a total of 48 additional workstations in three existing
call centers and open a new call center with 80 workstations by the end of
calendar 1996, for a total of 872 workstations. As of June 30, 1996, the Company
employed 1,484 people, 184 of whom are licensed to sell insurance in a total of
41 states.

According to Direct Marketing Magazine, the teleservices industry has grown
from $34 billion in 1984 to approximately $77 billion in 1994, of which only a
small percentage is currently being outsourced to independent providers. The
rapid growth of the industry is primarily due to the increased
cost-effectiveness of personalized teleservices programs over traditional
marketing channels. Growth in the market for outsourced call center services is
accelerating as large corporations focus on their core competencies and turn to
independent providers with the industry expertise, sophisticated technology and
resources to service their long-term needs efficiently. The Company believes
that the demand for call center services will continue to increase in its core
markets and will expand to include new industries and broader applications.

The Company's objective is to become the leading national provider of
outsourced teleservices. The Company intends to pursue this objective through
the following operating and growth strategies.

OPERATING STRATEGY. The Company selectively develops client relationships
and concentrates on improving productivity through the following operating
strategies:

- Proactive Account Management. The Company focuses on developing
long-term relationships with its clients and strengthening those
relationships through its account management. As a result of taking this
partnering approach, the Company believes that it is better able to
improve service quality, predict revenues and maximize utilization of its
facilities, equipment and personnel.

- Innovative Human Resource Management. By hiring qualified applicants,
training them effectively and providing an innovative compensation package
that includes health insurance to qualifying full-time employees, the
Company believes that it is able to increase employee retention, reduce
recruiting and training expenditures and improve productivity.

- Strategic Investments in Technology. The Company invests in proven
state-of-the-art technologies and develops proprietary software to enhance
efficiency and provide high quality services.

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GROWTH STRATEGY. The Company seeks to capitalize on its operational
strengths to participate in the growth of the teleservices industry and the
accelerating trend towards outsourcing among large corporations. The Company's
growth strategy includes the following key elements:

- Deploy a National Account Sales Team. In fiscal 1996, the Company
initiated a national account sales program to focus its direct sales
efforts on developing long-term relationships with the leading users of
teleservices in targeted industries.

- Expand Client Relationships in Core Industries. As a recognized provider
of high quality services to the insurance and financial services
industries, the Company seeks to expand its business with existing
clients and to establish new relationships in these industries.

- Increase Penetration of the Telecommunications Industry. The Company is
targeting its sales efforts on the telecommunications industry to
capitalize on that industry's rapid increase in demand for teleservices.
The Company recently completed several programs for a major
telecommunications client.

- Expand Inbound Teleservices. In response to the increased demand for
inbound teleservices and requests from existing clients, the Company
intends to increase its inbound service offerings. The Company has
developed an inbound customer service program for Blue Cross/Blue Shield
of Florida for which it won the Gold Cup Award from Telemarketing
Magazine in October 1995.

- Expand Business-to-Business Teleservices. The Company is pursuing the
growing opportunities for the development of long-term relationships and
large-scale campaigns in the business-to-business segment.

- Selectively Pursue Strategic Acquisitions. The Company intends to
explore possible acquisitions of companies with demonstrated competencies
and existing client relationships in areas of strategic interest to the
Company.

The Company was founded in 1983 by Raymond J. Hansell, Vice Chairman and
Chief Executive Officer, and MarySue Lucci, Director, President and Chief
Operating Officer (the "Founders"). In May 1996, the Company completed a
leveraged recapitalization (the "Recapitalization") pursuant to which Advanta
Partners LP ("Advanta Partners"), a venture capital affiliate of Advanta, became
the largest equity holder of the Company. The Company completed the
Recapitalization to permit Advanta Partners to invest substantial financial and
other resources in the Company and to permit the Founders to realize a portion
of the economic value of their initial investment in the Company. In connection
with the Recapitalization (i) the Company redeemed 8,500,000 shares of Common
Stock held by the Founders, (ii) Advanta Partners purchased 1,594,112 shares of
Class A Common Stock, 1,279,573 shares of Class B Common Stock and 6,226,316
shares of the Company's Series B Preferred Stock (the "Series B Preferred
Stock"), (iii) Glengar International Investments Limited ("Glengar") purchased
126,315 shares of Class A Common Stock and 273,684 shares of Series B Preferred
Stock and (iv) the Company borrowed $11.2 million under a credit facility
entered into with a bank. See "Certain Transactions -- Recapitalization." The
Company is a Pennsylvania corporation and its principal business office is
located at 40 Morris Avenue, Bryn Mawr, Pennsylvania 19010. Its telephone number
is (610) 520-5300.

THE OFFERING

Common Stock offered by the
Company.......................... 2,800,000 shares

Common Stock to be outstanding
after this offering.............. 7,700,000 shares(1)

Use of Proceeds.................. To repay indebtedness incurred in
connection with the
Recapitalization; to redeem the Company's
Series B Preferred Stock; to pay bonuses to
the Founders pursuant to their employment
agreements; and for working capital and
other general corporate purposes, including
possible future acquisitions.

Proposed Nasdaq National Market
symbol........................... RMHT
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(1) Does not include 275,100 shares issuable upon exercise of outstanding stock
options at the initial public offering price or 142,105 shares issuable upon
exercise of an outstanding warrant at $.01 per share.

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<PAGE> 5

SUMMARY FINANCIAL DATA

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 30, 1996
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ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................................. $ 820 $ 7,070
Total assets................................................................ 10,907 17,982
Long-term debt and capitalized lease obligations, less
current maturities........................................................ 12,470 8
Founders' note.............................................................. 2,036 --
Redeemable Preferred and Common Stock and warrant........................... 7,654 --
Shareholders' equity (deficit).............................................. (16,640) 14,550
</TABLE>

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(1) Operating income reflects Founders' compensation of $370,000, $308,000,
$386,000, $660,000, and $766,000 for fiscal 1991, fiscal 1992, fiscal 1993,
fiscal 1994 and fiscal 1995, respectively, and $554,000 and $512,000 for the
nine months ended June 30, 1995 and 1996, respectively. Pursuant to
employment contracts entered into in May 1996 in connection with the
Recapitalization, Founders' compensation is fixed at a combined base amount
of $400,000 per year for three years (subject to annual adjustment based on
the inflation rate), plus a discretionary bonus which is not expected to
exceed 20% of base compensation.
(2) The Company operated as an S Corporation for income tax purposes since April
1, 1990 and terminated such status in connection with the Recapitalization.
See "Certain Transactions -- Recapitalization" and Note 2 of Notes to
Financial Statements for information concerning the computation of pro forma
net income and pro forma and supplemental pro forma net income per share.
(3) Adjusted to give effect to the exchange of Common Stock for the Founders'
Note (as defined under "Certain Transactions -- Recapitalization") and the
Company's Series A Preferred Stock, the elimination of the mandatory
redemption provision of the Redeemable Common Stock and warrant and the sale
by the Company of the 2,800,000 shares of Common Stock offered hereby and
the application of the estimated net proceeds therefrom as set forth in "Use
of Proceeds."

Except as otherwise indicated, all information in this Prospectus reflects
the following transactions which will occur on or before the completion of this
offering: (i) the issuance of 80,000 shares of Common Stock in exchange for all
outstanding shares of the Company's Series A Preferred Stock (the "Series A
Preferred Stock"); (ii) the issuance of 320,000 shares of Common Stock in
exchange for the Founders' Note; and (iii) the issuance of 1,279,573 shares of
Common Stock upon conversion of all outstanding shares of Class B Common Stock.
See "Certain Transactions" and "Description of Capital Stock." In addition,
except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option, an outstanding warrant to
purchase 142,105 shares of Common Stock or outstanding stock options to purchase
275,100 shares of Common Stock. See "Management -- 1996 Stock Incentive Plan,"
"Description of Capital Stock" and "Underwriting."

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<PAGE> 6

RISK FACTORS

In addition to the other information in this Prospectus, the following
matters should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results and the timing of certain events could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth in the following risk factors and elsewhere
in this Prospectus.

CERTAIN CHARGES; EXPECTED LOSS IN QUARTER ENDING SEPTEMBER 30, 1996 AND FISCAL
1996

As a result of the payment of the special bonuses to the Founders in the
aggregate amount of $6.0 million, interest expense on the Founders' Note of
approximately $1.2 million and an extraordinary charge of approximately $1.0
million resulting from the early extinguishment of bank indebtedness, the
Company expects to incur certain pre-tax charges of approximately $8.2 million
for the quarter in which this offering is completed. These charges are expected
to result in a net loss for that quarter and for fiscal 1996. See "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Certain Transactions" and Note 11 of Notes to Financial
Statements.

BENEFITS TO FOUNDERS, ADVANTA PARTNERS AND GLENGAR

In connection with this offering, certain officers, directors and
shareholders of the Company will receive substantial benefits. The Founders will
receive one-time bonuses of $3.0 million each pursuant to their employment
agreements with the Company. In addition, the Company intends to use a portion
of the proceeds of this offering to redeem all of the Company's outstanding
Series B Preferred Stock for an aggregate of $6.5 million (which is equal to the
amount paid for the Series B Preferred Stock in May 1996 pursuant to the
Recapitalization), plus accrued dividends, and to repay bank indebtedness.
Advanta Partners owns 96% of the outstanding Series B Preferred Stock and the
balance is owned by Glengar. The bank indebtedness is secured in part by a
pledge of all of the outstanding capital stock of the Company held by the
Founders, Advanta Partners and Glengar. The repayment of bank indebtedness will
reduce these shareholders' exposure resulting from such pledge. See "Use of
Proceeds," "Management," "Principal Shareholders" and "Certain Transactions."

CONTROL BY EXISTING SHAREHOLDERS

Upon completion of this offering, the Founders, Advanta Partners and
Glengar will own an aggregate of 60.8% of the outstanding Common Stock.
Consequently, the Founders, Advanta Partners and Glengar will continue to be
able to elect the Company's directors, to determine the outcome of corporate
actions requiring shareholder approval (which can be obtained without a
shareholders' meeting by written consent of holders of a majority of the Common
Stock) and otherwise to control the business affairs of the Company. Of the
current members of the Company's Board of Directors, Messrs. Brenner and Hollin
are senior management personnel of Advanta Partners and Mr. Lubner is the
nominee of Glengar. The Founders and Advanta Partners have entered into a voting
agreement, effective upon the completion of this offering, pursuant to which
Advanta Partners, on the one hand, and the Founders, on the other, agree to vote
for two nominees of the other to the Company's Board of Directors. Each party's
rights under such agreement terminate when such party's ownership of Common
Stock becomes less than 25% of such ownership immediately after completion of
this offering. See "Management" and "Principal Shareholders."

RELIANCE ON PRINCIPAL CLIENT RELATIONSHIPS

Because a substantial portion of the Company's revenues is generated from a
few key clients, the loss of all or a substantial portion of the business
resulting from these clients could have a material adverse effect on the
Company. MMIG, AT&T, J.C. Penney and Advanta accounted for 29.2%, 14.6%, 12.7%
and 8.3% of the Company's revenues, respectively, for fiscal 1995 and accounted
for 39.4%, 21.4%, 9.8% and 11.1% of the

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Company's revenues, respectively, for the nine months ended June 30, 1996. In
addition, First USA Inc. accounted for 18.8% of the Company's revenues for
fiscal 1995. None of the Company's clients is contractually obligated to
continue to use the Company's services, and there can be no assurance that such
use will continue at historic levels or at all. All services provided to MMIG,
AT&T and J.C. Penney are invoiced to J.C. Penney, as a result of which adverse
developments with respect to J.C. Penney's creditworthiness could have a
material adverse effect on the Company. See "Business -- The Company's
Services." There is no assurance that other clients or potential clients of the
Company will not reduce the level of business they otherwise would provide to
the Company as a result of the recent purchase by Advanta Partners, which is a
venture capital affiliate of Advanta, of an ownership interest in the Company
pursuant to the Recapitalization. See "Principal Shareholders" and "Certain
Transactions."

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company has experienced and expects to continue to experience
fluctuations in quarterly results of operations. The Company's results of
operations depend on numerous factors, including the timing of clients'
telemarketing campaigns, the commencement and expiration of contracts, the
Company's revenue mix, the timing and amount of new business generated by the
Company, the timing of the opening of call centers or the expansion of existing
centers, the timing of additional selling, general and administrative expenses
and competitive conditions in the teleservices industry. As a result, the
Company believes that period-to-period comparisons of results of operations are
not necessarily meaningful and should not be relied upon as an indication of
future results of operations. The Company's planned operating expenditures are
based on revenue forecasts, and if revenues are below expectations in any given
quarter, operating results are likely to be materially adversely affected. There
can be no assurance that, in the future, the Company will experience revenue
growth or be profitable on a quarterly or annual basis. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

DEPENDENCE ON CERTAIN INDUSTRIES

The Company's success is dependent in large part on continued demand for
the Company's services from businesses within the insurance and financial
services industries, which accounted for 59.3% and 39.7%, respectively, of the
Company's revenues for fiscal 1995 and 74.0% and 19.2%, respectively, of the
Company's revenues for the nine months ended June 30, 1996. A trend in either of
these industries to reduce or eliminate their use of teleservices could have a
material adverse effect on the Company. See "Business -- The Company's
Services."

CHALLENGES OF MANAGING GROWTH

The Company has experienced rapid growth over the past several years and it
anticipates continued future growth. The Company's continued rapid growth can be
expected to place significant strain on the Company's management, operations,
employees and resources. There can be no assurance that the Company will be able
to maintain or accelerate its current growth, effectively manage its expanding
operations or achieve planned growth on a timely or profitable basis. In
addition, growth in the Company's business may result in geographic expansion
that may make effective oversight of its call centers more difficult and
expensive. There is no assurance that, as the Company seeks to expand its
business by serving new industries, increasing its provision of
business-to-business and inbound teleservices or acquiring other companies, it
will be able to maintain its historical profit margins, which may be adversely
affected by, among other factors, the pricing of such business and additional
technological and other costs involved in servicing such business. In addition,
there can be no assurance that the Company will successfully integrate any
acquired business into the Company or that any acquired business will be
profitable. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

DEPENDENCE ON KEY PERSONNEL

The Company relies on its executive officers and other key operations and
technical personnel, particularly Raymond J. Hansell, the Company's Vice
Chairman and Chief Executive Officer, and MarySue Lucci, the Company's President
and Chief Operating Officer. Although the Company maintains key man life

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insurance policies on the lives of the Founders, the loss of the services of
either of the Founders could have a material adverse effect on the Company.
Furthermore, there can be no assurance that the Company will be able to retain
its existing key personnel or recruit additional key personnel as needed.
Although the Company has entered into employment contracts with the Founders
that contain non-competition provisions and has entered into non-competition
agreements with its sales force, the Company does not have non-competition
agreements with its other executive officers and key personnel. See
"Management."

DEPENDENCE ON LABOR FORCE

By its nature, the teleservices industry is very labor intensive.
Telemarketing sales representatives ("TSRs"), who make up the majority of the
Company's workforce, generally receive modest hourly wages. The industry's labor
force is characterized by a high turnover rate, which increases the Company's
recruiting and training costs. Some of the Company's telemarketing activities,
particularly insurance product sales and inbound customer service, require
highly trained employees. The Company competes for qualified personnel with
other teleservices firms and other businesses. An increase in hourly wages,
costs of employee benefits or employment taxes could materially adversely affect
the Company. While the Company believes that its compensation policies are
attractive by industry standards, there can be no assurance that the Company
will be able to continue to hire and retain a sufficient number of qualified
personnel to support its anticipated growth. If the Company were unable to
recruit and retain a sufficient number of qualified employees, its business
could be materially adversely affected. See "Business -- The Company's
Operations -- Personnel and Training."

RELIANCE ON AUTOMATED SYSTEMS; TECHNOLOGY RISKS

The Company's business is highly dependent on its automated systems,
including its proprietary telemarketing software, predictive dialing equipment,
automated telemarketing workstations and telecommunications systems. The
temporary or permanent loss of all or a portion of the operation of these
systems, software and equipment, for any cause, could have a material adverse
effect on the Company. In the future, the Company's ability to compete
effectively against others in the teleservices industry is dependent upon its
continuing to make substantial investments in advanced computer and
telecommunications technology, including predictive dialers, automated call
distributors and digital switches. The inability of equipment vendors to supply,
on a timely basis, the systems on which the Company depends could have a
material adverse effect on the Company. Moreover, the technologies upon which
the Company is dependent are rapidly evolving and characterized by short product
life cycles, which require the Company to anticipate and adapt to technological
shifts. There can be no assurance that the Company will be successful in
anticipating or adapting to technological changes or in selecting and developing
new and enhanced technologies on a timely basis. See "Business -- Business
Strategy" and "-- The Company's Operations -- Technology."

RELIANCE ON TELECOMMUNICATIONS SERVICES

The Company's ability to offer its services at competitive rates is highly
dependent upon the cost of long distance and local telephone service provided by
various local and long distance telephone companies. Any change in the
telecommunications market that would affect the Company's ability to obtain
favorable rates on telephone calling services could have a material adverse
effect on the Company. Moreover, any significant interruption in telephone
service or developments that could limit the ability of telephone companies to
provide the Company with increased capacity in the future could adversely affect
the Company's existing operations and prospects for future growth. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

COMPETITION WITHIN THE TELESERVICES INDUSTRY

The teleservices industry is highly competitive. The Company competes with
numerous independent teleservices providers, many of which are as large as or
larger than the Company, as well as the in-house telemarketing operations of
many of its clients or potential clients. Most businesses that are significant
consumers of teleservices utilize more than one teleservices firm at a time and
reallocate work among various firms from time to time. A significant amount of
such work is contracted on an individual project basis, with

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the effect that the Company and other firms seeking such business are frequently
required to compete with each other as individual projects are initiated. There
can be no assurance that the Company will be able to compete effectively against
its current competitors or that additional competitors, some of which may have
greater resources than the Company, will not enter the industry and compete
effectively against the Company. Furthermore, as competition in the industry
increases, the Company may face increased pricing pressure. To the extent the
Company is unable to compete successfully against its existing and future
competitors, its business may be materially adversely affected. See
"Business -- Competition."

COMPETITION FROM OTHER INDUSTRIES; RISKS AFFECTING THE TELESERVICES INDUSTRY

Providers of teleservices compete with providers of other marketing formats
and, in particular, other forms of direct marketing activities, such as direct
mail. In recent years, there have been significant advances in new forms of
direct marketing, such as the development of interactive shopping and data
collection through television, the Internet and other media. To the extent that
new information technologies permit the development of new direct marketing
techniques, they could have a material adverse effect on the demand for
teleservices. In addition, the introduction of new telephone-based technologies
could reduce the demand for certain of the Company's services. As the
teleservices industry continues to grow, the effectiveness of teleservices as a
direct marketing tool may decrease as a result of consumer saturation and
increased consumer resistance to telemarketing generally. See
"Business -- Industry Overview."

GOVERNMENT REGULATION

The telemarketing industry has become subject to an increasing amount of
federal and state regulation in the past five years. The Federal Telephone
Consumer Protection Act of 1991 (the "TCPA") and Federal Communications
Commission ("FCC") regulations limit the hours during which teleservices
providers may call consumers and prohibit the use of automated telephone dialing
equipment to call certain telephone numbers. The TCPA creates a right of action
for both consumers and state attorneys general. The Federal Telemarketing and
Consumer Fraud and Abuse Prevention Act of 1994 (the "TCFAPA") and Federal Trade
Commission ("FTC") regulations prohibit deceptive, unfair or abusive practices
in telemarketing sales. Both the FTC and state attorneys general have authority
to prosecute telemarketing activities that constitute "unfair or deceptive acts
or practices." Additionally, some states have enacted laws and others are
considering enacting laws targeted directly at telemarketing practices. Most of
these statutes allow a private right of action for the recovery of damages or
provide for enforcement by state agencies permitting the recovery of significant
civil or criminal penalties, costs and attorneys' fees. There can be no
assurance that any such laws, if enacted, will not adversely affect or limit the
Company's current or future operations. Several of the industries served by the
Company, particularly the insurance and financial services industries, are
subject to government regulation. Although compliance with these regulations is
generally the responsibility of the Company's clients, the Company could be
subject to a variety of enforcement or private actions for its failure or the
failure of its clients to comply with such regulations. The Company and its
employees who sell insurance products are required to be licensed by various
state insurance commissions for the particular type of insurance product to be
sold and participate in regular continuing education programs, which currently
are provided by the Company. The Company's participation in such insurance
programs requires the Company to comply with certain state regulations, changes
in which could materially increase the Company's operating costs associated with
complying with such regulations. In the financial services industry, the Company
is subject to various federal regulations governing the use of information
disclosed by credit card holders. See "Business -- Government Regulation."

NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after this offering. The initial public offering price was
determined through negotiation between the Company and the Representatives of
the Underwriters and may bear no relationship to the price at which the Common
Stock will trade after this offering. See "Underwriting" for a discussion of the
factors considered in determining the initial public

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offering price. The market price of the Common Stock may be volatile and may be
significantly affected by factors such as actual or anticipated fluctuations in
the Company's operating results, announcements of new services by the Company or
its competitors, developments with respect to conditions and trends in the call
center services industry or in the industries served by the Company,
governmental regulation, general market conditions and other factors, many of
which are beyond the Company's control. In addition, the stock market has from
time to time experienced significant price and volume fluctuations that have
adversely affected the market prices of securities of companies irrespective of
such companies' operating performances.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of the Common Stock in the public market
following this offering could adversely affect the market price of the Common
Stock. Upon the completion of this offering, 7,700,000 shares of Common Stock
will be outstanding. Of these shares, the 2,800,000 shares of Common Stock sold
in this offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"). The remaining 4,900,000 shares of Common Stock outstanding as of the date
of this Prospectus are "restricted securities" as defined by Rule 144 under the
Securities Act ("Rule 144"). Of these, the 1,500,000 shares held by the Founders
would be able to be sold in accordance with the provisions of Rule 144 beginning
90 days from the date of this Prospectus. The Founders have agreed that prior to
September 1998 they will not sell or otherwise dispose of in an unregistered
transaction any of the 400,000 shares of Common Stock they will receive upon the
exchange and conversion of the Series A Preferred Stock and the Founders' Note.
See "Certain Transactions -- Recapitalization." The balance of the restricted
securities cannot be sold in accordance with the provisions of Rule 144 until
May 1998 at the earliest unless registered pursuant to the Securities Act.

Upon the completion of this offering, there will be 275,100 shares of
Common Stock issuable upon exercise of outstanding options under the 1996 Stock
Incentive Plan and 142,105 shares of Common Stock issuable upon exercise of an
outstanding warrant. The Company intends to file a registration statement on
Form S-8 covering the shares of Common Stock issuable upon exercise of options
within one year from the date of this Prospectus. The shares registered under
such registration statement will be available for resale in the open market upon
the exercise of options, subject to Rule 144 volume limitations applicable to
affiliates. The holder of the Company's outstanding warrant has the right to
have the shares issuable upon exercise thereof included in future registration
statements filed by the Company, subject to specified limitations.

The Company and its directors, executive officers and existing
securityholders have agreed that, for a period of 180 days after the date of
this Prospectus, they will not, without the prior written consent of Smith
Barney Inc., offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for any shares of Common Stock except, in the case of the Company and Advanta
Partners, in certain limited circumstances.

AUTHORIZATION OF PREFERRED STOCK; ANTI-TAKEOVER PROTECTIONS

The Company's Articles of Incorporation, as amended (the "Articles"),
authorize the issuance of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without shareholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of the Common Stock (including those of the purchasers in
this offering). Holders of the Common Stock will have no preemptive rights to
subscribe for a pro rata portion of any capital stock which may be issued by the
Company. In the event of issuance, the preferred stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. Although the Company has no present intention
to issue any shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. See "Description of Capital Stock."
Furthermore, the Company is subject to certain anti-takeover provisions of the
Pennsylvania Business Corporation Law of 1988, as amended. The existence of
these provisions, as well as the Company's classified Board of Directors and the
control of the Company by the Founders, Advanta Partners and Glengar, would be
expected to have an anti-takeover effect, including possibly discouraging
takeover attempts that might result in

10
<PAGE> 11

a premium over the market price for the shares of Common Stock. See
"Management," "Principal Shareholders" and "Description of Capital
Stock -- Certain Provisions that May Have an Anti-Takeover Effect."

DILUTION

The initial public offering price is substantially higher than the net
tangible book value (deficit) per share of the Common Stock. Purchasers of
shares of Common Stock in this offering will, therefore, suffer immediate and
substantial dilution of $11.14 in the net tangible book value per share of
Common Stock. To the extent that the currently outstanding warrant to purchase
shares of the Common Stock is exercised, investors will experience further
dilution. See "Dilution."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
being offered hereby are estimated to be $31.7 million ($36.5 million if the
Underwriters' over-allotment option is exercised in full), after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by the Company. The Company will use a portion of the proceeds to repay the full
principal amount and accrued interest on its existing bank term loan (the "Term
Loan"), to repay all or a portion of the then outstanding principal amount and
accrued interest on the Company's existing revolving line of credit (the
"Revolver" and, collectively with the Term Loan, the "Credit Facility"), and to
redeem all of the outstanding shares of the Company's Series B Preferred Stock
(the "Series B Preferred Stock") for an aggregate redemption price of $6.5
million plus accrued dividends. Aggregate accrued dividends on the Series B
Preferred Stock will be approximately $160,986 as of the date of this
Prospectus. A portion of the proceeds will be used to pay special bonuses in the
aggregate amount of $6.0 million to the Founders pursuant to the employment
agreements that they entered into with the Company in connection with the
Recapitalization. See "Management -- Employment Agreements" and "Certain
Transactions -- Recapitalization." The remainder of the net proceeds will be
added to working capital to be used for general corporate purposes, including
possible acquisitions. No active negotiations relating to acquisitions are
currently taking place. Pending such uses, the Company intends to invest the net
proceeds in investment grade, interest-bearing securities.

The Term Loan and the $6.0 million Revolver were obtained in connection
with the Recapitalization from Chemical Bank, New York, New York. The Company
borrowed $11.2 million under the Term Loan to finance the cash portion of the
redemption of 8,500,000 shares of the Common Stock held by the Founders and to
repay certain indebtedness of the Company. As of June 30, 1996, the Company's
indebtedness under the Term Loan amounted to $14.0 million. The $2.8 million
borrowed under the Term Loan after the completion of the Recapitalization were
used for general corporate purposes. No draws had been made on the Revolver as
of June 30, 1996. Borrowings under the Credit Facility accrue interest at the
bank's base rate plus 1.5% or LIBOR plus 3.0% (8.5% as of June 30, 1996). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions -- Recapitalization."

DIVIDEND POLICY

The Company intends to retain future earnings to finance its growth and
development and therefore does not expect to pay cash dividends on its Common
Stock in the foreseeable future. In addition, the Credit Facility prohibits the
payment of cash dividends without the prior written consent of the lender. No
dividends have been paid on the Common Stock subsequent to fiscal 1993. For
information regarding certain payments to the Founders in connection with the
Recapitalization, see "Certain Transactions -- Recapitalization."

11
<PAGE> 12

CAPITALIZATION

The following table sets forth, as of June 30, 1996: (i) the actual
capitalization of the Company and (ii) the capitalization of the Company as
adjusted to give effect to the exchange of the Founders' Note and Series A
Preferred Stock for 400,000 shares of Common Stock, the elimination of the
mandatory redemption provision of the Redeemable Common Stock and warrant, the
sale by the Company of 2,800,000 shares of Common Stock offered hereby and the
application of the estimated net proceeds as set forth in "Use of Proceeds."
This table should be reviewed in conjunction with the Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Borrowings on lines of credit.......................................... $ -- $ --
Current portion of long-term debt and capitalized lease
obligations(1)...................................................... 1,156 56
------- -------
Total short-term debt.......................................... $ 1,156 $ 56
======= =======
Long-term debt and capitalized lease obligations, net of current
portion(1)............................................................. $12,470 $ 8
------- -------
Redeemable warrant(2).................................................... 450 --
------- -------
Founders' Note(2)........................................................ 2,036 --
------- -------
Redeemable Preferred Stock(2)(3)......................................... 4,339 --
------- -------
Redeemable Common Stock(2)(4)............................................ 2,865 --
------- -------
Shareholders' equity (deficit):
Preferred Stock, $1.00 par value; 2,500,000 shares authorized, no
shares issued and outstanding....................................... --
Common Stock, no par value; 20,000,000 shares authorized, 3,000,000
shares (actual), and 7,700,000 shares (as adjusted) issued and
outstanding(2)(5)................................................... 5,717 41,270
Common stock warrant outstanding....................................... -- 450
Retained earnings (deficit)............................................ (22,357) (27,170)
------- -------
Total shareholders' equity (deficit)........................... (16,640) 14,550
------- -------
Total capitalization........................................... $ 5,520 $14,558
======= =======
</TABLE>

- ---------------

(1) See Notes 4 and 6 of Notes to Financial Statements for information
concerning the Company's long-term debt and capitalized lease obligations.
(2) See Notes 3 and 4 of Notes to Financial Statements for a description of the
Founders' Note, redeemable warrant, Redeemable Preferred Stock, Redeemable
Common Stock and Common Stock.
(3) Represents 1,000,000 shares of Series A Preferred Stock and 6,500,000 shares
of Series B Preferred Stock with an aggregate liquidation value of
$7,500,000.
(4) Represents 1,500,000 shares of Class A Common Stock.
(5) The 3,000,000 shares (actual) consist of 1,720,427 shares of Class A Common
Stock and 1,279,573 shares of Class B Common Stock, all of which will be
reclassified to Common Stock upon the completion of this offering. See
"Description of Capital Stock."

12
<PAGE> 13

DILUTION

The net tangible book value (deficit) of the Company at June 30, 1996, was
$(17,135,492) or $(5.71) per share. Net tangible book value per share is
determined by dividing the net tangible book value (deficit) of the Company
(total tangible assets less total liabilities) by the number of shares of Common
Stock outstanding on an historical basis. Without taking into effect any changes
in net tangible book value after June 30, 1996, other than to give effect to the
sale of the Common Stock offered hereby and the application of the estimated net
proceeds therefrom, the Company's adjusted pro forma net tangible book value as
of June 30, 1996, would have been $7,862,189 or $1.36 per share. This represents
an immediate increase in net tangible book value per share of $7.07 to existing
holders and immediate dilution in net tangible book value of $11.14 per share to
new investors purchasing Common Stock in this offering. The following table
illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share.................... $12.50
Net tangible book value (deficit) per share
before this offering................................... $ (5.71)
-------
Increase per share attributable to new investors......... 7.07
-------
Pro forma net tangible book value per share after this
offering(1).............................................. 1.36
------
Dilution per share to new investors(2)..................... $11.14
======
</TABLE>

- ---------------

(1) Pro forma net tangible book value per share after this offering does not
give effect to the exchange of the Founders' Note and Series A Preferred
Stock for 400,000 shares of Common Stock and the elimination of the
mandatory redemption provision of the Redeemable Common Stock and warrant,
which will occur upon the completion of this offering. The impact of such
transactions is to decrease the dilution to the new investors by $.53 per
share.

(2) If the Underwriters' over-allotment option is exercised in full, dilution
per share to new investors would be $10.45.

The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing shareholders
and by new investors, after giving effect to the exchange of the Founders' Note
and Series A Preferred Stock for 400,000 shares of Common Stock which will occur
upon completion of this offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders..................... 4,900,000 63.6% $10,743,674 23.5% $ 2.19
New investors............................. 2,800,000 36.4 35,000,000 76.5 12.50
--------- ----- ----------- -----
Total........................... 7,700,000 100.0% $45,743,674 100.0%
========= ===== =========== =====
</TABLE>

The foregoing tables do not include (i) 142,105 shares of Common Stock
issuable upon exercise of the warrant held by the lender under the Credit
Facility, at an exercise price per share of $.01, (ii) 275,100 shares of Common
Stock issuable upon exercise of outstanding options at the initial public
offering price, and (iii) 674,900 shares of Common Stock reserved for future
option or stock awards under the Company's 1996 Stock Incentive Plan. Because
the warrant has an exercise price that is significantly below the initial public
offering price, there will be $.03 per share of additional dilution to new
investors upon exercise of the warrant. See "Management -- 1996 Stock Incentive
Plan" and "Description of Capital Stock."

13
<PAGE> 14

SELECTED FINANCIAL INFORMATION

(IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected financial information as of and for fiscal 1993, fiscal 1994
and fiscal 1995 and the nine months ended June 30, 1996 is derived from the
audited Financial Statements of the Company included elsewhere in this
Prospectus. The selected financial information as of and for fiscal 1991 and
fiscal 1992 is derived from the unaudited financial statements of the Company
not included herein. The selected financial information for the nine months
ended June 30, 1995 has been derived from the unaudited financial statements of
the Company and, in the opinion of management, includes all adjustments
(consisting only of normal recurring adjustments) which are necessary to present
fairly the results of operations and financial position of the Company for those
periods in accordance with generally accepted accounting principles. The
selected financial information for the nine months ended June 30, 1996 is not
necessarily indicative of the results to be expected for the full year. The
following selected financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
--------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................................. $6,217 $6,988 $10,292 $17,105 $25,545 $18,447 $23,562
------ ------ ------- ------- ------- ------- -------
Operating expenses:
Cost of services...................................... 4,697 5,189 7,642 13,286 18,210 13,102 16,325
Selling, general and administrative(1)................ 1,094 1,428 2,076 3,007 5,312 3,619 4,807
------ ------ ------- ------- ------- ------- -------
Total operating expenses..................... 5,791 6,617 9,718 16,293 23,522 16,721 21,132
------ ------ ------- ------- ------- ------- -------
Operating income...................................... 426 371 574 812 2,023 1,726 2,430
Interest expense...................................... 129 125 137 170 261 182 375
------ ------ ------- ------- ------- ------- -------
Income before income taxes............................ 297 246 437 642 1,762 1,544 2,055
Income taxes(2)....................................... -- -- -- 40 21 19 391
------ ------ ------- ------- ------- ------- -------
Net income................................... $ 297 $ 246 $ 437 $ 602 $ 1,741 $ 1,525 $ 1,664
------ ------ ------- ------- ------- ------- -------
Pro forma net income available to Common
shareholders(2)..................................... $ 1,048 $ 1,136
======= =======
Pro forma net income per share available to Common
shareholders(2)..................................... $ 0.23 $ 0.24
======= =======
Shares used in computing pro forma net income per
share(2)............................................ 4,642 4,642
======= =======
Supplemental pro forma net income per share(2)........ $ 0.18 $ 0.22
======= =======
Shares used in computing supplemental pro forma net
income per share(2)................................. 6,682 6,682
======= =======
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, 1996
------------------------------------------ -------------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED(3)
------ ------ ------ ------ ------ -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................................... $ 80 $ 21 $ 282 $ 829 $1,061 $ 820 $ 7,070
Total assets........................................ 2,145 2,364 3,743 5,576 8,757 10,907 17,982
Long-term debt, less current maturities............. 149 51 20 355 592 12,462 --
Capitalized lease obligations, less current
maturities........................................ 389 287 525 623 436 8 8
Loans payable to shareholders....................... 118 125 125 125 133 -- --
Redeemable warrant.................................. -- -- -- -- 450 --
Founders' Note...................................... -- -- -- -- -- 2,036 --
Redeemable Preferred Stock.......................... -- -- -- -- -- 4,339 --
Redeemable Common Stock............................. -- -- -- -- -- 2,865 --
Shareholders' equity (deficit)...................... 641 887 1,325 1,927 3,668 (16,640) 14,550
</TABLE>

- ---------------
(1) Selling, general and administrative expenses include Founders' compensation
of $370,000, $308,000, $386,000, $660,000, and $766,000 for fiscal 1991,
fiscal 1992, fiscal 1993, fiscal 1994 and fiscal 1995, respectively, and
$554,000 and $512,000 for the nine months ended June 30, 1995 and 1996,
respectively. Pursuant to employment contracts entered into in May 1996 in
connection with the Recapitalization, the Founders' compensation is fixed at
a combined base amount of $400,000 per year for three years (subject to
annual adjustment based on the inflation rate), plus a discretionary bonus
which is not expected to exceed 20% of base compensation.
(2) The Company operated as an S Corporation for income tax purposes since April
1, 1990 and terminated such status in connection with the Recapitalization.
See "Certain Transactions -- Recapitalization" and Note 2 of Notes to
Financial Statements for information concerning the computation of pro forma
net income and pro forma and supplemental pro forma net income per share.
(3) Adjusted to give effect to the exchange of Common Stock for the Founders'
Note and Series A Preferred Stock, the elimination of the mandatory
redemption provision of the Redeemable Common Stock and warrant and the sale
by the Company of the 2,800,000 shares of Common Stock offered hereby and
the application of the estimated net proceeds therefrom as set forth in "Use
of Proceeds."

14
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion of the Company's historical results of operations
and its liquidity and capital resources should be read in conjunction with
"Selected Financial Information" and the Financial Statements of the Company and
Notes thereto appearing elsewhere in the Prospectus.

OVERVIEW

The Company is a leading provider of outbound teleservices to major
corporations in the insurance and financial services industries. Founded in 1983
by Raymond J. Hansell and MarySue Lucci to provide direct marketing and sales
consulting, the Company opened its first call center focusing on
business-to-business teleservices in 1985 to support the marketing efforts of
its consulting customers. By the late 1980s, outbound business-to-consumer
teleservices had become the predominant business of the Company. On May 24,
1996, the Company completed the Recapitalization which included the purchase of
a significant equity interest in the Company by Advanta Partners. See "Certain
Transactions -- Recapitalization."

The Company's business has grown rapidly, resulting in increases in
revenues and operating income during each of the last three fiscal years. The
increase in revenues from $10.3 million in fiscal 1993 to $25.5 million in
fiscal 1995, has largely been driven by increases in call volumes from existing
clients, primarily in the insurance industry, coupled with the development of
new clients primarily in the financial services industry. Operating income
increased from $574,000 or 5.6% of revenues in fiscal 1993 to $2.0 million or
7.9% of revenues in fiscal 1995.

The increase in operating income over the three-year period resulted from
both the growth in revenues and the reduction in cost of services as a
percentage of revenues. Cost of services, which primarily consists of labor,
telephone and other call center-related operating and support expenses, declined
from 74.3% of revenues in fiscal 1993 to 71.3% of revenues in fiscal 1995. These
costs have decreased as a percentage of revenues as the Company has expanded its
call center locations to lower cost geographic areas, improved its operating
efficiencies and negotiated more favorable long distance rates. Selling, general
and administrative expenses are comprised principally of corporate expenses,
including management, sales and marketing activities, account management
services, accounting and finance, human resources, information services and
other administrative costs. Corporate expenses include, among other items,
compensation to Founders which amounted to $386,000, $660,000, $766,000 and
$512,000 for fiscal 1993, fiscal 1994, fiscal 1995 and the nine months ended
June 30, 1996. See Note 1 to "Selected Financial Information." Pursuant to
employment contracts entered into in May 1996 in connection with the
Recapitalization, the Founders' compensation is fixed at a combined base amount
of $400,000 per year for three years (subject to annual adjustments based on the
inflation rate), plus a discretionary bonus which is not expected to exceed 20%
of base compensation.

The Company was subject to taxation under Subchapter S of the Internal
Revenue Code of 1986, as amended, from April 1, 1990 to May 24, 1996. As a
result, the net income of the Company, for federal and certain state tax
purposes, was taxed directly to the Company's Founders from April 1, 1990 to May
24, 1996 rather than the Company. Upon completion of the Recapitalization, the
Company terminated its Subchapter S status. Net income for fiscal 1995 and for
the nine months ended June 30, 1996 reflects a pro forma income tax provision at
an effective rate of 40.5% as if the Company had been subject to federal and
state income taxes as a Subchapter C corporation.

15
<PAGE> 16

RESULTS OF OPERATIONS

The following table sets forth statements of operations and other data as a
percentage of revenues from services provided by the Company for the periods
indicated:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
JUNE 30,
------------------------ -------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Operating expenses:
Cost of services................................. 74.3 77.7 71.3 71.0 69.3
Selling, general and administrative(1)........... 20.1 17.6 20.8 19.6 20.4
----- ----- ----- ----- -----
Total operating expense....................... 94.4 95.3 92.1 90.6 89.7
----- ----- ----- ----- -----
Operating income.............................. 5.6 4.7 7.9 9.4 10.3
Interest expense................................... 1.3 1.0 1.0 1.0 1.6
----- ----- ----- ----- -----
Income before income taxes.................... 4.3 3.7 6.9 8.4 8.7
Income taxes....................................... -- .2 .1 .1 1.6
----- ----- ----- ----- -----
Net income......................................... 4.3% 3.5% 6.8% 8.3% 7.1%
===== ===== ===== ===== =====
</TABLE>

- ---------------

(1) Compensation to Founders represents 3.8%, 3.9% and 3.0% of revenues for
fiscal 1993, fiscal 1994 and fiscal 1995, respectively, and 3.0% and 2.2%
for the nine months ended June 30, 1995 and 1996, respectively.

NINE MONTHS ENDED JUNE 30, 1996 COMPARED TO NINE MONTHS ENDED JUNE 30, 1995

Revenues. Revenues increased to $23.6 million for the nine months ended
June 30, 1996 from $18.4 million for the nine months ended June 30, 1995, an
increase of $5.1 million or 27.7%. Of such increase in revenues, $2.2 million
was attributable to increased calling volumes from existing clients, $1.3
million to new clients in the financial services industry and $1.6 million to a
new client in the telecommunications industry. To meet the demands of increased
call volumes, the Company added a new 80-workstation call center in November
1995 and another 80-workstation call center in April 1996 and expanded capacity
in four existing call centers by an aggregate of 64 workstations during
February, March and May 1996.

Cost of Services. Cost of services increased to $16.3 million in the nine
months ended June 30, 1996 from $13.1 million for the nine months ended June 30,
1995. As a percentage of revenues, cost of services decreased to 69.3% in the
1996 period from 71.0% in the 1995 period. Of this decrease, $500,000 was the
result of lower long distance rates and $2.7 million was the result of the
spreading of fixed costs over a larger revenue base.

Selling, General and Administrative. Selling, general and administrative
expenses increased to $4.8 million for the nine months ended June 30, 1996 from
$3.6 million for the nine months ended June 30, 1995. As a percentage of
revenues, selling, general and administrative expenses increased to 20.4% in the
1996 period from 19.6% in the 1995 period. Of such increase, $262,000 was due to
the addition of 20 administrative personnel and $926,000 was due to corporate
expenses associated with the Company's growth.

Interest Expense. Interest expense rose to $374,000 for the nine months
ended June 30, 1996 from $182,000 for the nine months ended June 30, 1995. Of
such increase, $169,000 reflects interest on debt incurred in connection with
the Recapitalization and $23,000 reflects the financing of equipment purchases
related primarily to the opening of two additional call centers and the
expansion of four other call centers.

Income Taxes. Income taxes increased to $392,000 for the nine months ended
June 30, 1996 from $19,000 for the nine months ended June 30, 1995. The income
tax provision for the nine months ended June 30, 1996 reflects a deferred tax
provision of $242,000 recorded upon the termination of the Company's S
Corporation status on May 24, 1996 and a tax provision on the pre-tax income
earned from May 24, 1996 through June 30, 1996.

16
<PAGE> 17

FISCAL 1995 COMPARED TO FISCAL 1994

Revenues. Revenues increased to $25.5 million for fiscal 1995 from $17.1
million for fiscal 1994, an increase of $8.4 million or 49.3%. Of such increase
in revenues, $2.7 million was attributable primarily to increased calling
volumes from existing insurance clients and $5.7 million was attributable to the
addition of new clients in the financial services industry. To meet the demands
of increased call volumes, the Company added two new 64-workstation call centers
in April 1994 and February 1995, respectively.

Cost of Services. Cost of services increased to $18.2 million for fiscal
1995 from $13.3 million for fiscal 1994. As a percentage of revenues, cost of
services decreased to 71.3% in fiscal 1995 from 77.7% in fiscal 1994. This
decrease was primarily the result of realizing substantial operating
efficiencies, the most significant of which, resulting in a $1.4 million
decrease in such costs, was a reduction in long distance telephone rates.

Selling, General and Administrative. Selling, general and administrative
expenses increased to $5.3 million for fiscal 1995 from $3.0 million for fiscal
1994. As a percentage of revenues, selling, general and administrative expenses
increased to 20.8% for fiscal 1995 from 17.6% for fiscal 1994. Of such increase,
$427,000 was due to the addition of 31 administrative personnel, $1.7 million
was due to corporate expenses associated with the Company's growth and $223,000
was due to an increase in Founders' compensation.

Interest Expense. Interest expense rose to $262,000 for fiscal 1995 from
$170,000 for fiscal 1994. The increase reflects the financing of equipment
purchases related to the opening of two additional call centers and related to
the relocation of the Company's corporate headquarters.

FISCAL 1994 COMPARED TO FISCAL 1993

Revenues. Revenues increased to $17.1 million for fiscal 1994 from $10.3
million for fiscal 1993, an increase of $6.8 million or 66.2%. Of such increase
in revenues, $4.3 million was attributable to increased calling volumes from
existing clients and $2.5 million was attributable to the addition of new
clients in the financial services industry.

Cost of Services. Cost of services increased to $13.3 million for fiscal
1994 from $7.6 million for fiscal 1993. As a percentage of revenues, cost of
services increased to 77.7% for fiscal 1994 from 74.3% for fiscal 1993. This
increase primarily reflected increases in operations staff to facilitate growth
and enhance the Company's training and quality assurance programs.

Selling, General and Administrative. Selling, general and administrative
expenses increased to $3.0 million for fiscal 1994 from $2.1 million for fiscal
1993. As a percentage of revenues, selling, general and administrative expenses
decreased to 17.6% for fiscal 1994 from 20.2% for fiscal 1993 due to the
spreading of fixed costs over a larger revenue base.

Interest Expense. Interest expense rose to $170,000 in fiscal 1994 from
$137,000 in fiscal 1993.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary sources of liquidity have been cash
flow from operations and borrowings under its credit facilities. These funds,
combined with borrowings under capitalized lease obligations, have provided the
liquidity to finance the growth of the Company. Current liquidity is provided
from cash flow from operations and available borrowing capacity under the Credit
Facility.

Cash provided by operating activities was $2.4 million for the nine months
ended June 30, 1996 compared to $114,000 for the same period in 1995, and cash
provided by operating activities was $497,000, $659,000 and $1.7 million for
fiscal 1993, fiscal 1994 and fiscal 1995, respectively. The increases were due
to higher net income before depreciation and amortization, which were partially
offset by cash used for working capital.

Cash used in investing activities was $2.0 million for the nine months
ended June 30, 1996 compared to $892,000 for the same period in 1995, and was
$176,000, $339,000 and $2.2 million for fiscal 1993, fiscal 1994 and fiscal
1995, respectively. The increases were due to increasing levels of property and
equipment purchases to support the growth in the Company's teleservices
activities. Expenditures for fiscal 1995 included

17
<PAGE> 18

approximately $500,000 related to the Company's relocation of its corporate
headquarters to Bryn Mawr, Pennsylvania and expansion of its data processing
capability. From October 1, 1993 through June 30, 1996, the Company's capital
expenditures totaled $4.5 million. During that period, the Company increased its
number of workstations by 416.

Cash provided by financing activities was $20,000 for the nine months ended
June 30, 1996 compared to $727,000 provided by financing activities for the same
period in 1995, and cash used in financing activities was $260,000 and $44,000
for fiscal 1993 and fiscal 1994, respectively. For fiscal 1995, cash provided by
financing activities was $285,000. The cash provided by financing activities
represented borrowings under bank lines of credit, term loans and capitalized
lease obligations, offset for the nine month period ended June 30, 1996 by cash
used to redeem a portion of the Founders' Common Stock and a $4.6 million
distribution of accounts receivable to the Founders.

Immediately prior to the Recapitalization, the Company distributed to the
Founders $4.6 million of accounts receivable. As part of the Recapitalization,
the Company distributed $16.0 million in cash, $1.0 million in Series A
Preferred Stock, and the Founders' Note in the initial principal amount of $3.0
million (subject to increase by $1.0 million if adjusted earnings of the Company
from May 24, 1996 through September 30, 1996 meet a defined level) in redemption
of an aggregate of 8,500,000 shares of Common Stock owned by the Founders. In
addition, Advanta Partners and Glengar invested $9.5 million in Series B
Preferred Stock and Class A and Class B Common Stock. Upon completion of this
offering, the Founders have agreed to exchange the Series A Preferred Stock and
the Founders' Note (including the $1.0 million adjustment regardless of whether
the defined earnings level is met) for 400,000 shares of Common Stock. In
addition, all shares of Class B Common Stock will be converted into Common Stock
upon completion of this offering. See "Certain Transactions."

In conjunction with the Recapitalization, the Company entered into the
Credit Facility with Chemical Bank, which provides for the $14.0 million Term
Loan and the $6.0 million Revolver. The Term Loan and Revolver are secured by
all of the assets of the Company and a pledge of all the shares of the Company's
capital stock held by the Founders, Advanta Partners and Glengar. In addition,
the loan agreement contains financial covenants and certain restrictions on the
Company's ability to pay dividends on the Common Stock, incur debt and make
capital expenditures and acquisitions. Borrowings on the Revolver are limited to
85% of eligible accounts receivable. The Term Loan and Revolver bear interest at
the bank's base rate plus 1.5% or LIBOR plus 3.0% (8.5% as of June 30, 1996).
The Term Loan commences amortization of principal on December 31, 1996 and
matures on June 30, 2002. The Revolver expires on May 24, 2001. As of June 30,
1996, the Company had borrowed the full $14.0 million amount of the Term Loan
and had not made any draws on the Revolver. The Company intends to use a portion
of the proceeds of this offering to repay all amounts outstanding under the Term
Loan and all or a portion of amounts outstanding under the Revolver. See "Use of
Proceeds."

The Company's teleservices operations will continue to require significant
capital expenditures. Capital expenditures, including capitalized leases, were
$926,000 in fiscal 1993, $1.1 million in fiscal 1994 and $2.4 million in fiscal
1995. The Company expects to spend approximately $2.4 million on capital
expenditures in fiscal 1996 (of which $2.0 million has been spent through June
30, 1996), primarily for the addition of two call centers and capacity expansion
at four existing centers from 80 to 96 workstations.

The Company believes that funds generated from operations, together with
the net proceeds to the Company from this offering and available credit under
the Revolver, will be sufficient to finance its current operations and planned
capital expenditures at least through the end of fiscal 1997.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth statement of operations data for each of the
four quarters of fiscal 1995 and the first three quarters of fiscal 1996, as
well as such data expressed as a percentage of revenues. This quarterly
information is unaudited, but has been prepared on a basis consistent with the
audited Financial Statements of the Company presented elsewhere in this
Prospectus and, in the Company's opinion, includes all adjustments

18
<PAGE> 19

(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information for the quarters presented. The results for any
quarter are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1994 1995 1995 1995 1995 1996 1996
-------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.............................. $5,632 $5,683 $7,132 $ 7,098 $7,278 $7,506 $8,778
------ ------ ------ ------ ------ ------
Operating expenses:
Cost of services.................... 3,941 4,240 4,921 5,107 5,127 5,309 5,889
Selling, general and
administrative................... 1,064 1,208 1,348 1,693 1,575 1,545 1,688
------ ------ ------ ------ ------ ------
Total operating expenses......... 5,005 5,448 6,269 6,800 6,702 6,854 7,577
------ ------ ------ ------ ------ ------
Operating income................. 627 235 863 298 576 652 1,201
Interest expense...................... 54 57 71 80 75 71 227
------ ------ ------ ------ ------ ------
Income before income taxes....... $ 573 $ 178 $ 792 $ 218 $ 501 $ 581 $ 974
====== ====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1994 1995 1995 1995 1995 1996 1996
-------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- -----
Operating expenses:
Cost of services.................... 70.0 74.6 69.0 72.0 70.5 70.7 67.1
Selling, general and
administrative................... 18.9 21.3 18.9 23.8 21.6 20.6 19.2
----- ----- ----- ----- ----- -----
Total operating expenses......... 88.9 95.9 87.9 95.8 92.1 91.3 86.3
----- ----- ----- ----- ----- -----
Operating income................. 11.1 4.1 12.1 4.2 7.9 8.7 13.7
Interest expense...................... 1.0 1.0 1.0 1.1 1.0 1.0 2.6
----- ----- ----- ----- ----- -----
Income before income taxes....... 10.1% 3.1% 11.1% 3.1% 6.9% 7.7% 11.1%
===== ===== ===== ===== ===== =====
</TABLE>

The Company has experienced and expects to continue to experience quarterly
variations in operating results, principally as a result of the timing of
clients' telemarketing campaigns, the commencement and expiration of contracts,
the timing and amount of new business generated by the Company, the Company's
revenue mix, the timing of the opening of call centers or expansion of existing
centers, the timing of additional selling, general and administrative expenses
and competitive conditions in the teleservices industry. The variations in
quarterly results during fiscal 1995 are primarily due to the opening of the
Reading, Pennsylvania call center in February 1995, an increase in management
compensation and the write-off of leasehold improvements associated with the
relocation of the Company's headquarters in September 1995.

In connection with this offering, the Company will incur certain pre-tax
charges of approximately $8.2 million in the quarter ending September 30, 1996.
These charges consist of special bonuses of $6.0 million to the Founders
pursuant to their employment agreements, interest expense on the Founders' Note
of approximately $1.2 million and an extraordinary charge of approximately $1.0
million resulting from the early extinguishment of the Term Loan. These charges
are expected to result in a net loss for the quarter and for fiscal 1996. See
"Certain Transactions -- Recapitalization" and Note 11 of Notes to Financial
Statements.

19
<PAGE> 20

BUSINESS

GENERAL

The Company provides outbound teleservices to major corporations in the
insurance and financial services industries. The Company distinguishes itself
through its high quality service and disciplined management approach which has
led to long-term client relationships and sustained profitable growth. The
Company originated relationships with MMIG, J.C. Penney, AT&T and Advanta over
five years ago and, since fiscal 1991, the Company's aggregate volume with these
clients has grown each year. The Company's revenue and operating income, all of
which has been generated internally, have increased 148% and 252%, respectively,
over the last two years. The Company's revenue and operating income in fiscal
1995 were $25.5 million and $2.0 million, respectively, reflecting increases of
49% and 149% when compared to fiscal 1994. The Company's revenue and operating
income in fiscal 1994 increased 66% and 41%, respectively, when compared to
fiscal 1993. As a result of the payment of special bonuses, interest expense on
the Founders' Note and an extraordinary charge, a net loss is expected for
fiscal 1996.

INDUSTRY OVERVIEW

The teleservices industry includes outbound and inbound telephone
marketing, as well as customer support and service programs and other
value-added services. Teleservices provide customized service with higher
response rates and higher customer acquisition and retention rates at a lower
cost per transaction than other marketing media. As a result, call centers have
become robust channels for the marketing and sale of a wide variety of products
and services as sophisticated telemarketers are able to market effectively and
collect valuable customer data. According to Direct Marketing Magazine,
telemarketing expenditures in the United States grew from approximately $34
billion in 1984 to approximately $77 billion in 1994. The call center services
industry is extremely fragmented and includes a large number of small,
independent organizations. A small percentage of teleservices business is
currently being outsourced to independent providers, and the Company believes
that both the total market and the percentage of this market that is outsourced
will increase as businesses continue to recognize the benefits of such services.

Many large companies have begun to outsource their telemarketing and
customer support services in order to access the industry expertise, breadth of
services and specialized capabilities of large-scale,
technologically-sophisticated teleservices providers such as the Company. Using
such providers enables these companies to concentrate on their core businesses
and improve the quality and cost-effectiveness of their customer contact
functions. As a result, the Company believes that the enhanced quality and
economic advantages provided by independent teleservices companies will
accelerate the outsourcing trend in the industry. In addition, the Company
believes that the deregulation of the telecommunications industry and the
expected deregulation of the public utilities industry will significantly
increase the demand for telemarketing services.

The Company believes that businesses considering outsourcing their
telemarketing activities increasingly are seeking to partner with a teleservices
company that possesses industry expertise and the resources to serve their
long-term needs efficiently. Additionally, because teleservices involve direct
interaction with a client's customers, the teleservices provider's reputation
for quality is critical to winning new clients. As a recognized provider of high
quality teleservices, the Company has positioned itself as an attractive partner
to large users of call center services.

BUSINESS STRATEGY

The Company's objective is to leverage its position as a recognized
provider of high quality outbound teleservices to become the leading national
teleservices provider of outsourced call center services. The Company
distinguishes itself through selective partnering with its clients, a
disciplined approach to managing growth profitably, and an emphasis on total
quality management.

20
<PAGE> 21

Operating Strategy

The Company has achieved strong financial and operating performance in
recent years through the following elements of its operating strategy:

- Proactive Account Management. The Company focuses on developing
long-term relationships with its clients. As a result of taking this
partnering approach, the Company believes that it is better able to
improve service quality, predict revenues and maximize the utilization of
its facilities, equipment and personnel. Management expects that the
Company's emphasis on its account management functions will continue to
help it foster and strengthen its client relationships. The Company's
account managers work to enhance the effectiveness of client campaigns by
proactively providing consulting, monitoring and reporting services.

- Innovative Human Resource Management. The Company's ability to provide
high quality service to its clients is dependent on its success in
selecting, training and managing its employees. The Company uses a
structured hiring program, including comprehensive screening and testing,
to select qualified applicants. Through a rigorous training program,
employees strengthen their sales skills. In addition, the Company believes
it has reduced employee turnover by maintaining a relatively high
proportion of full-time employees and offering an innovative compensation
and benefits package that includes health insurance to qualifying
full-time TSRs. As a result, the Company is better able to retain
employees, reduce its recruiting and training expenditures and improve
productivity.

- Strategic Investments in Technology. The Company has invested in proven
state-of-the-art technologies and developed proprietary software to
provide real-time access to comprehensive information regarding the
Company's telemarketing campaigns and customer sales. The Company was an
early user of predictive dialing technology, was an early adopter of
centralized data management systems and recently implemented an optical
disk archiving system. The Company intends to continue to invest in
technology to enhance efficiency and provide high quality services.

- Systematic Call Center Site Selection. The Company takes a systematic
approach to selecting call center locations to minimize operating costs
and provide access to a quality labor force. To facilitate the management
of each call center and to generate operational efficiencies, the
Company's strategy is to locate its call centers in geographic clusters.
Prior to opening a call center, the Company analyzes the demographics of
the targeted geographic area in order to determine the quality, quantity
and availability of the local labor pool. The Company is currently
evaluating several additional regions in which to locate future call
centers.

Growth Strategy

The Company seeks to capitalize on its operational strengths to participate
in the growth of the teleservices industry and the accelerating trend towards
outsourcing among large corporations. The Company's growth strategy includes the
following key elements:

- Deploy a National Account Sales Team. The Company believes that
effective marketing to the major users of teleservices in existing and
emerging industries requires the sophisticated selling skills and the
structured processes of a national account sales team. The Company
initiated a national account sales program during fiscal 1996 to focus its
direct sales efforts on developing relationships with the leading users of
teleservices in targeted industries. As part of this initiative, the
Company hired a new Vice President of Sales and Marketing with extensive
experience in directing a national accounts sales program and expanded its
direct sales and marketing staff. This program will be the basis for
expanding the Company's client relationships in the areas described below.

- Expand Client Relationships in Core Industries. The Company believes
that the current trends causing rapid growth in the teleservices market
will enable the Company to continue to grow by building on its existing
reputation as a recognized provider of high quality outbound teleservices
to the insurance and financial services industries. The Company intends to
continue to expand its relationships with existing clients to increase
both the call volume allocated to the Company in existing

21
<PAGE> 22

programs and the number of client programs in which the Company
participates. In addition, the Company intends to continue to pursue
relationships with new clients in these industries.

- Increase Penetration of the Telecommunications Industry. The Company
believes that the combination of deregulation and the proliferation of new
products and services in the telecommunications industry will greatly
increase demand for teleservices. The telecommunications industry
primarily uses teleservices to market long distance services and calling
features (e.g., call waiting, caller identification and voicemail) to
businesses and consumers. The Company recently completed several programs
for a major telecommunications client and is currently in discussions with
this client and a number of prospective clients in that industry with
respect to providing outbound teleservices.

- Expand Inbound Teleservices. In response to the growth in the market for
inbound teleservices and requests from existing clients, the Company
intends to increase its inbound service offerings. The Company has
demonstrated its expertise in this area through its customer service
program for Blue Cross/Blue Shield of Florida ("BC/BS-FL"), for which it
earned a Gold Cup Award from Telemarketing Magazine in October 1995.
Management has had discussions with a number of existing outbound
teleservices clients with respect to providing inbound teleservices.

- Expand Business-to-Business Teleservices. The Company believes that
general trends towards outsourcing teleservices and the rapid growth in
demand for teleservices from the telecommunications and other industries
have created the opportunity for long-term client relationships and
large-scale campaigns in the business-to-business market. The Company
intends to use its prior business-to-business experience and current
business-to-consumer expertise to pursue these opportunities on a basis
that will permit it to leverage its workstation capacity effectively.

- Selectively Pursue Strategic Acquisitions. The Company believes that the
current fragmented nature of the teleservices industry provides an
opportunity for growth through acquisition. The Company intends to explore
possible acquisitions of companies with demonstrated competencies and
existing client relationships in areas of strategic interest to the
Company, including companies with an emphasis on inbound teleservices.

THE COMPANY'S SERVICES

Outbound Teleservices

Historically, the Company has concentrated on providing outbound
business-to-consumer teleservices. In this market, the Company has sought and
established relationships with large corporate clients, many of which have been
clients of the Company for over five years.

Outbound teleservices refers to the service the Company performs when its
TSRs place calls to parties targeted by the client to offer products or services
or to obtain information. At the beginning of a typical outbound program, the
Company receives customer data files that the client has selected to match the
demographic profile of the targeted customer for the product or service being
offered. These files contain each targeted customer's name, address, phone
number and other relevant data. The Company's data management system sorts the
records, removes information regarding customers whom the Company is prohibited
from contacting and assigns each file electronically to one of its outbound call
centers. Actual telephone calling at the centers is controlled by computerized
call management systems that utilize predictive dialers to automatically dial
the telephone numbers in the files. The call management system then forwards all
connected calls, along with the customer's name and other information,
electronically to the workstation of a TSR who has been trained for the client's
program. The TSR then uses a prepared script to solicit an order for the product
or service or to request information that will be added to the client's
database. Information regarding sales and other aspects of the program is
captured by the Company's proprietary software systems and made available to
clients in customized report formats.

Insurance. The Company is a major telemarketer of insurance products
throughout the United States. Management believes this sector to be the most
attractive area in business-to-consumer telemarketing from the perspective of
the teleservices provider due to its large size, relative predictability and
relative lack of seasonality. The Company works with large consumer insurance
companies and their agents to market such products as accidental death and
dismemberment policies, graded benefit life insurance and other niche

<PAGE> 23

insurance products primarily to credit card customers. The Company has also
assisted clients in marketing supplemental dental and vision coverage to credit
card holders.

As of June 30, 1996, the Company employed 184 insurance agents licensed to
sell insurance in a total of 41 states. The Company's significant relationships
in this industry include those with MMIG, AT&T, J.C. Penney and Advanta, which
were responsible for 29.2%, 14.6%, 12.7% and 8.3%, respectively, of the
Company's revenues for fiscal 1995 (including services to Advanta related to
financial services products). The Company originated its relationship with MMIG
over eight years ago and originated its relationship with J.C. Penney, AT&T and
Advanta over five years ago. The Company's aggregate revenues from these key
clients have grown each year since fiscal 1991. In fiscal 1995 and the nine
months ended June 30, 1996, 59.3% and 74.0%, respectively, of the Company's
revenues were generated from services related to insurance products.

Financial Services. The Company provides teleservices to several of the
largest credit card issuers, banks and other financial institutions in the
United States. The Company's services include customer account acquisition,
customer retention programs, and programs to sell credit card enhancement
features such as higher credit limits, lower interest rates and lower fees. The
Company also cross-sells additional services such as home equity loans and
related banking services. In fiscal 1995 and the nine months ended June 30,
1996, 39.7% and 19.2%, respectively, of the Company's revenues were generated
from services related to financial services products.

Telecommunications. The Company expects the demand for teleservices within
the telecommunications industry to increase as the industry continues to be
deregulated and as the number of products (e.g., long distance, cellular, paging
and "800" services) and call features (e.g., call waiting, caller identification
and voice mail) increases. The Company recently completed several programs for a
major telecommunications client and is in discussions with this client and a
number of prospective clients in the industry to provide outbound
business-to-consumer and business-to-business services.

Other Industries. The Company is currently marketing travel club and
dining club programs to credit card holders on behalf of one of its clients. In
addition, the Company believes that the utilities, on-line services and cable
industries, among others, provide significant opportunities for future growth.
The Company is in discussions with targeted customers in these industries.

Inbound Teleservices

Inbound teleservices involves the processing of incoming calls, often
placed by customers using toll-free numbers, to a customer service
representative for service, order fulfillment or product information. Inbound
teleservices include activities such as customer care services, credit card and
loan application processing and catalog sales. More sophisticated inbound
programs assist clients in responding to customer inquiries, offering technical
and product support services and assessing overall customer satisfaction.

The Company currently operates a 24-seat dedicated inbound customer service
center in its Lansdowne, Pennsylvania call center facility and intends to
install additional inbound facilities as the Company's inbound business expands.
The Company has developed an inbound customer service program for BC/BS-FL
pursuant to which the Company's TSRs respond to customer inquiries and
complaints following important changes in certain of BC/BS-FL's group medical
plans. The Company intends to expand its inbound business and has had
discussions with a number of existing outbound teleservices clients with respect
to providing such services.

Business-to-Business Teleservices

The Company believes that the dynamics of the business-to-business
teleservices marketplace have now changed so as to permit the development of the
type of long-term client relationships and large-scale campaigns that have
formed the core of the Company's business-to-consumer services. The Company
expects that the demand for business-to-business applications will grow rapidly,
especially among telecommunications companies, as many large companies recognize
that telemarketing is a more efficient method of reaching business customers
than a field sales force. Growth in the business-to-business teleservices market
will enable the Company to leverage its existing workstation capacity because
such services are provided primarily during

23
<PAGE> 24

the day while business-to-consumer services are provided primarily during the
evening. The Company believes that its prior experience in business-to-business
teleservices and current expertise in business-to-consumer teleservices position
it to take advantage of the growth in this market.

THE COMPANY'S OPERATIONS

Sales, Marketing and Account Management

During fiscal 1996, the Company initiated a national account sales program
to focus its direct sales efforts on developing relationships with the leading
users of teleservices in its targeted industries. As part of this initiative,
the Company hired a new Vice President of Sales and Marketing with extensive
experience in directing a national account sales program and expanded its sales
and marketing staff. Supporting this initiative, the Company will continue to
market its services by attending trade shows, advertising in industry
publications, responding to requests for proposals, pursuing client referrals
and cross-selling to existing clients.

A critical element of the Company's effort to build long-term client
relationships is its account management program. To improve the effectiveness of
the client's program, account managers offer proactive advice and consulting
services. The account managers initially provide advice on all aspects of
program implementation, including scripting, performance specifications and
reporting, and then manage the process on behalf of the client through
interaction with each of the Company's internal departments. Periodic internal
audits are performed by the account manager to determine compliance with the
applicable program specifications. The Company believes that this detailed
attention to account management has contributed significantly to retaining
clients, expanding business from existing clients and attracting new clients.

Call Centers

The Company believes that its call center selection process has helped
lower its operating costs and enhances the quality of its labor force by
locating centers in areas in which there is an ample supply of qualified labor.
Prior to opening a call center, the Company obtains a detailed demographic
analysis of targeted geographic areas to determine the quality, quantity and
availability of the local labor pool. This analysis is followed by interviews
with major employers in the area to obtain additional information regarding the
quality and quantity of the labor pool. If the area is determined to be
suitable, the Company seeks to locate sites that are safe and easily accessible,
and that provide a working environment that is conducive to employee
productivity. Once a site is selected, it is generally available for operations
within 60 to 90 days. T-1 telecommunications lines are installed at each new
call center to provide a direct data connection between the center and the
Company's corporate headquarters in suburban Philadelphia, Pennsylvania.
Security features are installed at each call center in order to provide
protection for client data.

The Company operates eight call centers at which there were an aggregate of
744 workstations, as of June 30, 1996, as detailed below:

<TABLE>
<CAPTION>
DATE OF INITIAL DATE OF MOST CURRENT
LOCATION OPENING WORKSTATIONS RECENT EXPANSION WORKSTATIONS
------------------------------ -------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
Bryn Mawr, PA(1).............. March 1985 15 February 1996 96
Lansdowne, PA(2).............. October 1990 80 November 1991 120
Pleasantville, NJ............. November 1992 64 February 1996 96
Scranton, PA.................. July 1993 64 May 1996 96
Wilkes-Barre, PA.............. April 1994 64 March 1996 96
Reading, PA................... February 1995 64 May 1995 80
Ocean Township, NJ............ November 1995 80 80
Allentown, PA................. April 1996 80 80
---
Total: 744
==========
</TABLE>

- ---------------

(1) Facilities transferred from Wynnewood, PA (the original headquarters) to
Bryn Mawr in September 1995.
(2) Includes a 24-seat inbound capability.

24
<PAGE> 25

The Company believes that the geographic clustering of call centers
enhances its operating efficiency by facilitating oversight of the centers by
regional and corporate supervisory personnel. By December 31, 1996, the Company
intends to open a new 80-workstation call center and expand the capacity of
three existing call centers from 80 to 96 workstations, which would result in a
total of 872 workstations. In addition, the Company is currently evaluating
several additional regions in which to locate future call centers.

Personnel and Training

The Company emphasizes the recruitment, training and development of its
TSRs, which management believes enables the Company to increase productivity,
reduce employee turnover and enhance the quality of its services. TSRs are
selected through a three-step process that includes an initial telephone
screening interview, followed by an in-person interview and extensive testing to
gauge competence, suitability for telemarketing projects and integrity.

Newly-hired TSRs receive an intensive three-day training course that
emphasizes modeling and role-playing as well as instruction on effective sales
techniques and product knowledge. New TSRs are closely monitored for an initial
30-day period and thereafter receive ongoing coaching and training. As of June
30, 1996, the Company employed 184 licensed insurance agents specializing in the
marketing of insurance-related products. These licensed agents receive
continuing insurance-related education to comply with applicable state licensing
requirements. To further assure the continuity and consistency of management
practices, each call center has dedicated recruiting and training personnel who
report directly to corporate management. The Company also provides significant
ongoing training to its supervisory and management personnel on coaching,
counseling and total quality management techniques.

The Company has developed an innovative compensation and performance
recognition plan in order to motivate employees and reduce turnover. The Company
generally targets base TSR compensation at higher levels than is paid by other
businesses competing for the same labor pool. In addition, the Company recently
implemented a benefits package, including health insurance, for qualifying
full-time TSRs. For performance recognition, the Company pays cash bonuses to
TSRs who achieve sales targets and quality benchmarks and also offers non-cash
incentives and creative programs to improve performance and maintain morale.
Although it is typical in the teleservices industry for TSRs to be part-time
employees, over 70% of the Company's TSRs are full-time employees (working at
least 33 hours per week.). The Company believes that its relatively high
proportion of full-time employees provides a more stable workforce and reduces
the Company's recruiting and training expenditures.

As of June 30, 1996, the Company employed 1,484 persons, of whom more than
1,250 were TSRs. None of the Company's employees is represented by a labor
union. The Company considers its relations with its employees to be good.

Quality Assurance

The Company believes that its reputation for quality services is critical
to acquiring and retaining clients. The Company is committed to the principles
of total quality management in order to continuously improve its operational
processes. The Company establishes both internal and external benchmarks as a
means to measure continuous improvement. The Company measures the quality of its
services on the basis of sales per hour, level of customer inquiries, call
abandonment rates and other quality performance criteria. In order to provide
ongoing improvement to the TSRs' performance and to assure compliance with the
Company's quality standards, quality assurance personnel monitor each TSR on a
frequent basis and provide coaching to the TSR based on this review. Clients
also participate in the monitoring process. Sales confirmations are recorded
with the customer's consent to ensure accuracy and to provide a record of the
sale. Company personnel review all sales confirmation tapes for compliance with
client specifications. In addition, these tapes are selectively reviewed in
order to provide additional coaching to TSRs. The Company's information systems
enable it to provide its clients with customized reports on the status of an
ongoing telemarketing campaign and can transmit information electronically to
clients if desired. Access to this data enables the Company's clients to modify
or enhance an ongoing campaign in order to improve its effectiveness. Each
Company call center has

25
<PAGE> 26

dedicated quality assurance personnel who provide on-going employee training and
coaching to the center's TSRs.

Technology

The Company was an early user of predictive dialing technology and was an
early adopter of centralized management systems. The Company continues to invest
strategically in proven systems and software technologies in order to enhance
operational efficiency and maintain high quality services. These technologies
reduce the cost per call and improve sales and customer service by providing the
Company's TSRs and account management personnel with enhanced real-time access
to customer and production information. As of June 30, 1996, the Company's
management information systems department consisted of 31 technical
professionals who maintain, upgrade and expand the Company's systems. The
Company's call management and database systems have been designed to ensure
quality service to its clients and to provide effective tools for the management
of the Company's business.

The Company uses UNIX-based predictive dialing systems at each call center,
which are linked via a wide-area network to network servers at the Company's
corporate headquarters. The Company's call center and network systems both use a
flexible database architecture permitting the easy sharing of data among users
of the system. As a result, the Company's scalable systems can be configured to
work cost-effectively at low and high volumes and permit the efficient addition
of capacity.

To effectively manage and control calling campaigns, the Company has
developed its own proprietary software. The Company uses its Track System to
monitor the status and performance of each client program throughout its life
cycle. Information relating to each customer file (including a complete record
of each sale transaction) is archived to the Customer Information System, which
includes a dedicated server and an optical disk storage system. This system is
designed to respond to a client request to review details of a particular sales
call in minutes and is able to identify the program, the date and time of the
call and the TSR who recorded the sale. The Company has implemented procedures
to protect the integrity of data against power loss, fire and other casualty.

COMPETITION

The teleservices industry is intensely competitive and the Company's
principal competition in its primary markets comes from large teleservices
organizations, including APAC TeleServices, Inc., ICT Group, Inc., SITEL
Corporation, ITI Marketing Services, Inc. and Ed Blank Associates, Inc. In
addition, the Company competes with the in-house telemarketing operations of
many of its clients or potential clients. The Company also competes with direct
mail, television, radio and other advertising media, as well as emerging direct
marketing channels, such as interactive shopping and data collection through the
television, the Internet and other media.

Competition with other teleservices organizations is based primarily upon
performance (measures include sales per hour, contact rate, conversion ratio and
cost per sale), technological and reporting capabilities, industry experience,
quality of client services and staff and price. The Company believes that it
generally compares favorably with its competitors with respect to each of these
factors.

GOVERNMENT REGULATION

Telemarketing sales practices are regulated at both the federal and state
level. The TCPA, enforced by the FCC, imposes restrictions on unsolicited
automated telephone calls to residential telephone subscribers. Under the TCPA
and the regulations promulgated thereunder, it is unlawful to initiate telephone
solicitations to residential telephone subscribers before 8:00 a.m. or after
9:00 p.m., local time at the subscriber's location, or to use automated
telephone dialing systems or artificial or prerecorded voices to call certain
subscribers. Additionally, the TCPA regulations require telemarketing firms to
develop a written policy implementing a "do not call" list and to train its
telemarketing personnel to comply with these restrictions. The TCPA creates a
right of action for both consumers and state attorneys general. A court may
award damages or impose penalties of $500 per violation, which may be trebled
for willful or knowing violations. Currently, the Company

26
<PAGE> 27

trains its service representatives to comply with the regulations of the TCPA
and programs its call management system to avoid initiating telephone calls
during restricted hours or to individuals maintained on the Company's "do not
call" list.

The FTC regulates both general sales practices and telemarketing
specifically. Under the Federal Trade Commission Act (the "FTC Act"), the FTC
has broad authority to prohibit a variety of advertising or marketing practices
that may constitute "unfair or deceptive acts and practices." Pursuant to its
general enforcement powers, the FTC can obtain a variety of types of equitable
relief, including injunctions, refunds, disgorgement, the posting of bonds, and
bars from continuing to do business for a violation of the acts and regulations
it enforces.

The FTC also administers the TCFAPA under which the FTC has issued
regulations prohibiting a variety of deceptive, unfair or abusive practices in
telemarketing sales. Generally, these rules prohibit misrepresentations of the
cost, quantity, terms, restrictions, performance or characteristics of products
or services offered by telephone solicitation or of refund, cancellation or
exchange policies. The regulations also regulate the use of prize promotions in
telemarketing to prevent deception and require that a telemarketer identify
promptly and clearly the seller on whose behalf the telemarketer is calling, the
purpose of the call, the nature of the goods or services offered and, if
applicable, that no purchase or payment is necessary to win a prize. The
regulations also require that a telemarketer maintain records on various aspects
of its business.

Most states have enacted statutes similar to the FTC Act prohibiting unfair
or deceptive acts and practices. For example, telephone sales in certain states
are not final until a written contract is delivered to and signed by the buyer,
and such a contract often may be canceled within three business days. At least
one state also prohibits telemarketers from requiring credit card payment, and
several other states require certain telemarketers to obtain licenses, post
bonds or submit sales scripts to the state's attorney general. Under these
general enabling statutes, depending on the willfulness and severity of the
violation, penalties can include imprisonment, fines and a range of equitable
remedies such as consumer redress or the posting of bonds before continuing in
business. Additionally, some states have enacted laws and others are considering
enacting laws targeted directly at telemarketing practices. Most of these
statutes allow a private right of action for the recovery of damages or provide
for enforcement by state agencies permitting the recovery of significant civil
or criminal penalties, costs and attorneys' fees. There can be no assurance that
any such laws, if enacted, will not adversely affect or limit the Company's
current or future operations.

The industries served by the Company are also subject to government
regulation, and, from time to time, bills are introduced in Congress which, if
enacted, would affect the Company's operations. The Company and its employees
who sell insurance products are required to be licensed by various state
insurance commissions for the particular type of insurance product to be sold
and to participate in regular continuing education programs, which currently are
paid for by the Company.

The Company believes that it is in compliance with all applicable
regulations.

FACILITIES

The Company's corporate headquarters facility is located in Bryn Mawr,
Pennsylvania in an approximately 45,000 square-foot building leased to the
Company through December 1998. The Company leases all of the facilities used in
its call center operations. The Company believes that its existing facilities
are suitable and adequate for its current operations, but additional facilities
will be required to support growth. The Company believes that suitable
additional or alternative space will be available as needed on commercially
reasonable terms.

LITIGATION

From time to time, the Company is involved in litigation incidental to its
business. In the view of management, no litigation to which the Company is
currently a party is likely to have a material adverse effect on the Company, if
decided adversely to the Company.

27
<PAGE> 28

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The individuals who serve or who have agreed to serve as executive officers
and directors of the Company upon completion of this offering are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Anthony P. Brenner.......... 38 Chairman of the Board
Raymond J. Hansell.......... 47 Vice Chairman of the Board and Chief Executive Officer
MarySue Lucci............... 48 Director, President and Chief Operating Officer
Michael J. Scharff.......... 50 Executive Vice President
Richard C. Altus............ 38 Vice President and Chief Financial Officer
Richard P. Keenan........... 50 Vice President of Sales and Marketing
William D. Mulvihill........ 55 Vice President of Account Management
David Clautice.............. 55 Vice President of Management Information Systems
Mitchell L. Hollin.......... 33 Director
Derek Lubner................ 33 Director
Herbert Kurtz............... 70 Director
David P. Madigan............ 57 Director
</TABLE>

Mr. Brenner has served as the Chairman of the Company's Board of Directors
since May 1996. Since May 1994, Mr. Brenner has been Senior Managing Director of
Advanta Partners and also a member of its Board of Directors. Mr. Brenner has
resigned from his position with Advanta Partners effective September 30, 1996 to
pursue independent business activities. Prior to the formation of Advanta
Partners in May 1994, Mr. Brenner was President of Cedar Point Partners LP, a
private equity investment firm he founded in 1989.

Mr. Hansell currently serves as Vice Chairman and Chief Executive Officer
of the Company. From November 1994 until the Recapitalization in May 1996, Mr.
Hansell served as the Chairman of the Board of Directors of the Company and from
the Company's founding in 1983 until November 1994, he served as the Company's
President. Mr. Hansell has been an active industry leader and served on the
operating committee of the Direct Marketing Association's Telephone Marketing
Council from 1993 to 1995. Mr. Hansell was named a Top Ten Telepro by
Teleprofessional Magazine in October 1995 for his contributions to the industry.
Prior to co-founding the Company, Mr. Hansell served in various managerial sales
and marketing positions at Shared Medical Systems, NCR and Automatic Data
Processing.

Ms. Lucci has served as the Company's President since November 1994 and
Chief Operating Officer since December 1995, prior to which she had served as an
Executive Vice President for more than five years and as the Company's Treasurer
from the Company's founding in 1983 until November 1994. Ms. Lucci also has
acted as a director and the Secretary of the Company since its founding in 1983.
Ms. Lucci was recently a recipient of the 1996 Distinguished Women in
Telemarketing Award by Telemarketing Magazine. From 1981 to 1983, Ms. Lucci was
Vice President of New Product Publications Development for Clement
Communications, a national business marketing publisher. From 1969 to 1981, Ms.
Lucci was employed by Colonial Penn Insurance Company, a leading direct marketer
of insurance products, where she managed marketing, training and customer
service functions, most recently as a Vice President.

Mr. Hansell and Ms. Lucci are husband and wife.

Mr. Scharff is the Company's Executive Vice President and, since November
1994, has been Treasurer of the Company. Mr. Scharff was Senior Vice President
of Finance of the Company from November 1995 to September 1996 and Vice
President of Finance of the Company from November 1994 to November 1995. From
January 1994 to November 1994, Mr. Scharff was an Assistant Vice President of
the Company and, from the time he joined the Company in October 1988 until
January 1994, Mr. Scharff served as the Company's Controller. From 1984 until
joining the Company, Mr. Scharff was the President of Audobon Automotive Supply
Co., an automotive parts distributor. Mr. Scharff was a divisional controller of
Safeguard Business Systems from 1979 to 1984.

28
<PAGE> 29

Mr. Altus joined the Company as Vice President and Chief Financial Officer
in September 1996. From April 1996 until he joined the Company, Mr. Altus served
as Executive Vice President and Chief Financial Officer of Nobel Education
Dynamics, Inc., a provider of child care and elementary education services. From
1988 to March 1996, Mr. Altus served as Vice President of Finance and Chief
Financial Officer of GBC Technologies, Inc., a wholesale distributor of computer
products. Prior to 1988, he was employed by KPMG Peat Marwick for seven years in
various accounting and consulting positions.

Mr. Keenan is the Company's Vice President of Sales and Marketing. For 18
years prior to joining the Company in March 1996, Mr. Keenan was employed by
Tektronix, Inc., a computer software and graphics company serving most recently
as Tektronix's Regional Sales Manager for the Eastern United States in charge of
a national account sales program for that region. For seven years prior thereto,
Mr. Keenan served in various sales and management capacities at NCR.

Mr. Mulvihill is the Company's Vice President of Account Management. From
August 1994 until he joined the Company in June 1996, Mr. Mulvihill was an
independent consultant. From October 1993 until August 1994, Mr. Mulvihill
served as a Team Leader in the telemarketing group at Towers Perrin, a national
management and benefits consulting firm. From 1982 until joining Towers Perrin,
Mr. Mulvihill served as Vice President of Customer Service for Users, Inc., an
information systems company.

Mr. Clautice serves as the Company's Vice President of Management
Information Systems. From June 1995 to December 1995, Mr. Clautice served as the
Company's Director of Methods and Procedures. Prior to joining the Company in
June 1995, Mr. Clautice was President of Clautice Associates, Inc., an
information systems consulting firm he founded in 1974. From 1974 to 1985, Mr.
Clautice was President of Electronic Processing Center, a data processing
service organization.

Mr. Hollin was elected to the Company's Board of Directors in May 1996. Mr.
Hollin has been a Managing Director of Advanta Partners since its founding in
May 1994. Prior to that time, Mr. Hollin was a Partner and Vice President of
Cedar Point Partners LP which he joined in 1991.

Mr. Lubner was elected to the Company's Board of Directors in May 1996 as
the nominee of Glengar. Since June 1995, Mr. Lubner has served as the Marketing
Director of Concepts and Interpretations, a developer of leisure attractions
based in England. From June 1993 to June 1995, Mr. Lubner served as a director
of Two Heads Publishing, a book publisher based in England. Prior to joining Two
Heads Publishing, Mr. Lubner served as marketing coordinator of Belron
International, a windshield replacement company headquartered in England.

Mr. Kurtz has consented to become a member of the Company's Board of
Directors upon completion of this offering. Since July 1996 he has served as an
independent consultant. From 1984 until July 1996, Mr. Kurtz was the Chief
Operating Officer of Cynwyd Investments, a real estate management and
development firm. From 1983 until joining Cynwyd Investments in 1984, Mr. Kurtz
was a partner in Asher & Company Ltd., the Company's independent auditors prior
to the Recapitalization. Mr. Kurtz no longer has any affiliation with Asher &
Company Ltd. From 1981 to 1983, Mr. Kurtz was Chairman and Chief Executive
Officer of Ups 'n Downs, a retail clothing firm and subsidiary of Tootal Ltd., a
company listed on the London Stock Exchange. From 1961 to 1980, Mr. Kurtz served
in a number of executive positions, in his final years as Chief Operating
Officer and Director, with Rockower Brothers, Inc., a retail clothing firm then
listed on the New York Stock Exchange.

Mr. Madigan has consented to become a member of the Company's Board of
Directors upon completion of this offering. Mr. Madigan is Senior Vice President
and Chief Operations Officer of Personal Lines Direct Marketing Operations for
CNA Insurance Companies. From 1989 until he joined CNA in October 1994, Mr.
Madigan served as a Senior Vice President of The Mutual Assurance Company, an
underwriter of property and casualty insurance, and from March 1992 to October
1994, he also served as President and Chief Executive Officer of American
Loyalty Insurance Company, a wholly-owned subsidiary of The Mutual Assurance
Company.

29
<PAGE> 30

CLASSIFIED BOARD; COMMITTEES

The Company's Board of Directors is divided into three classes. Each class
holds office until the third annual meeting for the election of directors
following the election of such class, except that the initial terms of the Class
I, Class II and Class III directors expire in 1997, 1998 and 1999, respectively.
Mr. Brenner is the Class I director, Ms. Lucci and Mr. Hollin are the Class II
directors, and Messrs. Lubner and Hansell are the Class III directors. It is
expected that Mr. Kurtz will be a Class II director and Mr. Madigan will be a
Class I director.

The Board of Directors intends to establish a Compensation Committee and an
Audit Committee. The Compensation Committee will determine salaries and bonuses
and other compensation matters for officers of the Company, determine employee
health and benefit plans, and administer the Company's 1996 Stock Incentive Plan
and any similar plans created in the future. The Audit Committee will recommend
the appointment of the Company's independent public accountants and will review
the scope and results of audits, internal accounting controls and tax and other
accounting related matters.

Officers of the Company are elected by the Board of Directors and serve at
the discretion of the Board.

DIRECTOR COMPENSATION

The Company's directors, other than Messrs. Brenner, Hansell and Hollin and
Ms. Lucci, will be entitled to receive a fee of $2,500 for attendance at each
quarterly meeting and a fee of $750 for attendance at each special meeting of
the Board of Directors. In addition, each director, other than Messrs. Brenner,
Hansell and Hollin and Ms. Lucci, will receive options to purchase 3,000 shares
of Common Stock in 1996 and options to purchase 2,000 shares of Common Stock
annually thereafter. Such options are expected to have an exercise price equal
to the market value of the Common Stock on the date of grant, to have a term of
ten years and to vest in equal amounts on the first three anniversaries of the
date of grant.

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to
compensation paid or accrued by the Company for fiscal 1995 to the Company's
Chief Executive Officer and to each of the other executive officers of the
Company whose salary and bonus for fiscal 1995 exceeded $100,000 for all
services rendered in all capacities to the Company (the "Named Executive
Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1)
- ----------------------------------------------------------- -------- -------- ---------------
<S> <C> <C> <C>
Raymond J. Hansell......................................... $159,895 $368,727 $ 6,070
Vice Chairman and Chief Executive Officer
MarySue Lucci.............................................. $159,895 $ 63,464 $ 7,767
President and Chief Operating Officer
Michael J. Scharff......................................... $ 89,343 $ 11,453 $ 5,617
Senior Vice President of Finance
John F. Owens (2).......................................... $114,265 $ 11,202 $ 123
Vice President of Telemarketing Operations
</TABLE>

- ---------------

(1) Represents the amount in premiums paid by the Company with respect to a life
insurance for the benefit of the referenced officer and the amount
contributed by the Company to the 401(k) account of the referenced officer.
(2) Mr. Owens served as the Company's Vice President of Telemarketing Operations
until December 1995 and currently is employed on a part-time basis.

EMPLOYMENT AGREEMENTS

On May 24, 1996, the Company entered into an employment agreement with Mr.
Hansell providing for Mr. Hansell's employment as Chief Executive Officer of the
Company. The initial term of the agreement is to expire on May 31, 1999;
however, the agreement will be extended for an additional two years unless
either party provides notice of termination to the other at least 180 days
before the expiration of such term. At any time during the extended term, either
party may terminate upon 180 days' notice. Under the terms of the

30
<PAGE> 31

employment agreement, Mr. Hansell is to be paid an annual salary of $200,000,
which will be adjusted annually to reflect increases in the consumer price
index. The employment agreement also entitles Mr. Hansell to a discretionary
annual bonus and a one-time lump sum payment of $3.0 million in the event the
Company sells equity interests in an initial public offering within six months
from the date of the agreement. See "Use of Proceeds" and "Certain
Transactions." In addition, in the event Mr. Hansell's employment is terminated
without cause (as defined in the agreement), the Company is obligated to
continue to pay Mr. Hansell's annual salary, fringe benefits and all other
compensation and benefits other than the discretionary bonus, as such amounts
would have accrued through the end of the initial term of the agreement or, if
such termination occurs during the extended term of the agreement, through the
end of such term. The employment agreement contains provisions regarding the
protection of confidential information and assignment of inventions to the
Company, and a covenant not to compete from the date of the agreement until the
later to occur of the seventh anniversary thereof or the second anniversary of
Mr. Hansell's termination for any reason.

The Company has also entered into an employment agreement with Ms. Lucci
providing for her employment with the Company as President and Chief Operating
Officer. The terms of Ms. Lucci's employment agreement are otherwise
substantially identical to those contained in Mr. Hansell's employment
agreement.

1996 STOCK INCENTIVE PLAN

Under the Company's 1996 Stock Incentive Plan (the "Plan"), a variety of
awards, including stock options, stock appreciation rights and restricted and
unrestricted stock grants may be made to the Company's employees, officers,
consultants and advisors who are expected to contribute to the Company's future
growth and success. There are 950,000 shares of Common Stock reserved for
issuance under the Plan. The Compensation Committee will administer the Plan and
determine the price and other terms upon which awards shall be made. Stock
options may be granted either in the form of incentive stock options or non-
statutory stock options. The option exercise price of incentive stock options
may not be less than the fair market value of the Common Stock on the date of
the grant. While the Company currently anticipates that most grants under this
Plan will consist of stock options, the Company may grant stock appreciation
rights, which represent rights to receive any excess in value of shares of
Common Stock over the exercise price; restricted stock awards, which entitle
recipients to acquire shares of Common Stock, subject to the right of the
Company to repurchase all or a part of such shares at their purchase price in
the event that the conditions specified in the award are not satisfied; or
unrestricted stock awards, which represent grants of shares to participants free
of any restrictions under the Plan. Options or other awards that are granted
under the Plan but expire unexercised are available for future grants. Options
to purchase 275,100 shares of Common Stock have been granted under the Plan to
employees and directors (other than the Founders and affiliates of Advanta
Partners) at an exercise price equal to the initial public offering price per
share and a vesting schedule that is dependent upon the optionholders' tenure
with the Company.

VOTING AGREEMENT

The Founders and Advanta Partners have entered into a voting agreement (the
"Voting Agreement"), effective upon the completion of this offering, pursuant to
which Advanta Partners, on the one hand, and the Founders, on the other, agree
to vote for two nominees of the other to the Company's Board of Directors. Each
party's rights under the Voting Agreement terminate when such party's ownership
of Common Stock becomes less than 25% of such ownership immediately after the
completion of this offering.

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<PAGE> 32

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the ownership
of the Common Stock as of June 30, 1996, and as adjusted to give effect to the
exchange of the Founders' Note and Series A Preferred Stock for 400,000 shares
of Common Stock and the sale of the 2,800,000 shares of Common Stock offered
pursuant to this Prospectus, (i) by each of the Company's Named Executive
Officers and directors; (ii) all of the executive officers and directors as a
group; and (iii) each person known to the Company to beneficially own more than
five percent of the outstanding shares of Common Stock.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES TO BE BENEFICIALLY
PRIOR TO THE OFFERING OWNED AFTER OFFERING
EXECUTIVE OFFICERS, DIRECTORS -------------------------- --------------------------
AND BENEFICIAL OWNERS NUMBER OF SHARES PERCENT NUMBER OF SHARES PERCENT
- ----------------------------- ---------------- ------- ---------------- -------
<S> <C> <C> <C> <C>
Advanta Partners LP(1).......................... 2,873,685 63.9% 2,873,685 37.3%
Anthony P. Brenner(1)(2)........................ 2,873,685 63.9 2,873,685 37.3%
Mitchell L. Hollin(1)(3)........................ 2,873,685 63.9 2,873,685 37.3%
Raymond J. Hansell(4)........................... 1,500,000 33.3 1,900,000(5) 24.7%
MarySue Lucci(4)................................ 1,500,000 33.3 1,900,000(5) 24.7%
Derek Lubner (6)................................ -0- -0- -0- -0-
Herbert Kurtz................................... -0- -0- -0- -0-
David P. Madigan................................ -0- -0- -0- -0-
Michael J. Scharff.............................. -0- -0- -0- -0-
John F. Owens................................... -0- -0- -0- -0-
All Executive Officers and Directors as a Group
(9 persons)(2)(3)(4)(5)....................... 4,373,685 97.2% 4,773,685 62.0%
</TABLE>

- ---------------

(1) The address of this beneficial owner is Five Horsham Business Center, 300
Welsh Road, Horsham, PA 19044.
(2) Includes 2,873,685 shares of Common Stock owned by Advanta Partners of which
Mr. Brenner is the Senior Managing Director. Mr. Brenner could be deemed to
beneficially own these shares. In connection with Mr. Brenner's resignation
from Advanta Partners, upon the completion of this offering, Advanta
Partners will transfer to Mr. Brenner ownership of 219,142 shares of Common
Stock.
(3) Includes 2,873,685 shares of Common Stock owned by Advanta Partners, of
which Mr. Hollin is a Managing Director. Mr. Hollin could be deemed to
beneficially own these shares.
(4) Of the shares indicated, one half are owned by Mr. Hansell and one half are
owned by Ms. Lucci. Their address is 40 Morris Avenue, Bryn Mawr, PA 19010.
Includes 15,000 shares that Mr. Hansell intends to give as gifts to certain
friends and family members in September 1996.
(5) Includes 320,000 shares of Common Stock to be issued upon the exchange of
the Founders' Note and 80,000 shares of Common Stock to be issued upon the
exchange of all of the outstanding Series A Preferred Stock.
(6) Mr. Lubner is the nominee of Glengar pursuant to a shareholders' agreement.
See "Certain Transactions -- Recapitalization."

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<PAGE> 33

CERTAIN TRANSACTIONS

RECAPITALIZATION

General

On May 24, 1996, the Company completed the Recapitalization as provided
under the terms of a Recapitalization and Stock Purchase Agreement (the
"Recapitalization Agreement"). In accordance with the Recapitalization
Agreement: (i) the Company redeemed 8,500,000 shares of the Class A Common Stock
held by the Founders at an aggregate redemption price consisting of (A) $16.0
million (as adjusted as described below) in cash (the "Initial Cash Redemption
Price"), (B) a 6% Subordinated Promissory Note due May 2004 of the Company in
favor of the Founders in the initial principal amount of $3.0 million (subject
to increase as set forth below) (the "Founders' Note") and (C) 1,000,000 shares
of Series A Preferred Stock of the Company with a stated value of $1.00 per
share; (ii) Advanta Partners purchased 1,594,112 shares of Class A Common Stock
and 1,279,573 shares of Class B Common Stock for an aggregate purchase price of
$2,873,685 and 6,226,316 shares of Series B Preferred Stock for an aggregate
purchase price of $6,226,316; and (iii) Glengar purchased 126,315 shares of
Class A Common Stock for an aggregate purchase price of $126,315 and 273,684
shares of Series B Preferred Stock for an aggregate purchase price of $273,684.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation" and "Description of Capital Stock -- Preferred Stock." Total amounts
due on account of interest and dividends to be paid to the Founders, Advanta
Partners and Glengar pursuant to the Founders' Note, the Series A Preferred
Stock and the Series B Preferred Stock from May 24, 1996 through the date of
this Prospectus will equal $74,301, $18,575 and $160,986, respectively. In
connection with the Recapitalization, the Company entered into the Credit
Facility under which it initially borrowed $11.2 million to finance the Initial
Cash Redemption Price and repay certain indebtedness of the Company. The Company
also issued a warrant to the Credit Facility lender. See "Description of Capital
Stock -- Warrant."

On May 23, 1996, the Company distributed to the Founders as a dividend $4.6
million in accounts receivable, which were substantially all of the Company's
outstanding accounts receivable. In connection with this distribution, the
Company agreed to use its best efforts to collect such accounts receivable,
without fee or commission, and remit the proceeds of such accounts receivable to
the Founders. At June 30, 1996, the Company had collected $936,411, but had not
yet remitted such amount to the Founders. See Note 3 of Notes to Financial
Statements.

Post-Closing Adjustments to Redemption Price

Under the terms of the Recapitalization Agreement the Initial Cash
Redemption Price was subject to increase or decrease by the amount that actual
working capital on May 24, 1996 and actual capital expenditures of the Company
for the period from October 1, 1995 through May 24, 1996 are determined to have
been greater or less than specified targets for such measures (the "Redemption
Price Adjustment"). In August 1996, the Company paid $436,980 to the Founders in
full satisfaction of the Redemption Price Adjustment. In addition, the principal
amount of the Founders' Note is subject to increase by $1.0 million (the
"Additional Amount") if the Company's adjusted earnings for the period May 24,
1996 through September 30, 1996 meet a defined level.

Exchange of the Founders' Note and Series A Preferred Stock; Conversion of
Class B Common Stock

The Company and the Founders have agreed that the Founders' Note and Series
A Preferred Stock will be exchanged for 400,000 shares of Common Stock upon the
completion of this offering. For this purpose, it was agreed that the Additional
Amount will be included in the principal amount of the Founders' Note regardless
of whether the defined earnings level is met and the Series A Preferred Stock
will be valued at its $1.0 million stated value. Any accrued and unpaid interest
on the Founders' Note and dividends on the Series A Preferred Stock will be paid
in cash. In addition, Advanta Partners and Glengar have agreed to convert all
shares of Class B Common Stock into Common Stock on a one-for-one basis upon
completion of this offering.

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<PAGE> 34

Indemnification

In connection with the Recapitalization, the Founders, on the one hand, and
Advanta Partners, Glengar and the Company, on the other hand, agreed to
indemnify each other against any loss suffered by the indemnified parties
related to the breach of any representation or warranty or non-fulfillment of
any covenant or agreement set forth in the Recapitalization Agreement. The
indemnification obligations apply only if the indemnifiable losses exceed
$100,000 and are limited to an aggregate of $4.6 million (except for losses
resulting from breaches by the Founders of representations, warranties and
covenants with respect to tax matters). The representations and warranties
expire on May 24, 1998, except for those made by the Founders regarding taxes
which survive until the expiration of applicable statutes of limitations.

Shareholders' Agreement

The Company's current shareholders entered into a shareholders' agreement
(the "Shareholders' Agreement") in connection with the Recapitalization. The
majority of the provisions of the Shareholders' Agreement will terminate upon
completion of this offering, including provisions entitling the parties to
nominate directors to the Company's Board of Directors. After the completion of
this offering, and for so long as the Founders and Advanta Partners continue to
own in excess of 50% of the outstanding Common Stock, each of the Founders and
Advanta Partners (i) may not transfer in any one year following this offering
more than 15% of the Common Stock owned by such party at the beginning of such
year, except in a registered public offering, and (ii) may not sell any shares
of Common Stock without offering the other parties the opportunity to purchase
such shares of Common Stock. Transfers by (x) the Founders by will or intestate
succession, (y) Advanta Partners to its affiliates and (z) either of the
Founders or Advanta Partners in any year of less than 5% of the Common Stock
owned by such shareholder at the beginning of that year are not subject to
either of the above-described restrictions.

Fees to Advanta Partners; Advanta Partners' Interest in Other Teleservices
Companies

In connection with the Recapitalization, the Company paid to Advanta
Partners an investment banking/advisory fee of $250,000 and agreed to reimburse
Advanta Partners for certain of its transaction-related expenses. The Company
also entered into a five-year Management Fee Agreement with Advanta Partners
pursuant to which the Company agreed to pay Advanta Partners an annual fee of
$100,000 for technical and management assistance to be rendered by Advanta
Partners to the Company (the "Management Agreement"). The Management Agreement
will be terminated upon completion of this offering. Beginning at that time,
Advanta Partners will provide consulting services to the Company pursuant to a
consulting agreement and will receive annual fees of $50,000 through May 24,
2001. Advanta Partners owns substantial equity interests in two other
teleservices companies. Mr. Brenner has been, and is expected after the
completion of this offering to be replaced as Advanta Partners' designee as, a
director of one of these companies and Mr. Hollin is a director of the other.

TELESERVICES PROVIDED TO ADVANTA

The Company has provided teleservices to Advanta, of which Advanta Partners
is a venture capital affiliate, primarily related to the marketing of insurance
and credit card products. Amounts billed by the Company to Advanta equaled
$608,860 and $2,130,352 in fiscal 1994 and fiscal 1995, respectively, and
$2,615,505 for the nine months ended June 30, 1996. No such amounts were billed
in fiscal 1993.

FOUNDERS' LOANS

The Founders have made long-term unsecured loans to the Company. There have
been no repayment terms established on these loans; however, they are
subordinated to the Company's bank indebtedness and bear interest at a variable
rate (6.5% as of June 30, 1996). The principal amount of this indebtedness was
$125,448, $125,448 and $132,975 at September 30, 1993, 1994 and 1995,
respectively. In addition, the Company has advanced amounts to the Founders with
respect to their personal tax obligations on an interest-free basis. The largest
principal amount outstanding of such indebtedness was $74,500 at June 30, 1996.
The amount of $56,117, representing the amount of outstanding indebtedness of
the Company to the Founders as of June 30, 1996 less the amount of outstanding
indebtedness of the Founders to the Company as of such date, was repaid in full
concurrent with the payment of the Redemption Price Adjustment in August 1996.

34
<PAGE> 35

DESCRIPTION OF CAPITAL STOCK

As of the date of this Prospectus, the authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock, no par value (the "Common
Stock"), divided into two classes consisting of 10,000,000 authorized shares of
(the "Class A Common Stock") and 10,000,000 authorized shares of Class B
Non-Voting Common Stock (the "Class B Common Stock"), and 10,000,000 shares of
Preferred Stock, $1.00 par value (the "Preferred Stock").

As of the date of this Prospectus, the Company has 3,220,427 shares of
Class A Common Stock, 1,279,573 shares of Class B Common Stock, 1,000,000 shares
of Series A Preferred Stock and 6,500,000 shares of Series B Preferred Stock
issued and outstanding. Upon completion of this offering, all of the outstanding
Class B Common Stock and Series A Preferred Stock will be converted into or
exchanged for shares of Common Stock, all of the outstanding Series B Preferred
Stock will be redeemed, 2,500,000 additional shares of undesignated preferred
stock will be authorized, and the provisions dividing the Common Stock into two
classes and establishing the Series A Preferred Stock and Series B Preferred
Stock will be eliminated. See "Use of Proceeds" and "Certain
Transactions -- Recapitalization."

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. All holders of Common
Stock are entitled to share equally in dividends declared on the Common Stock.
Stock dividends may be paid on Common Stock, whether or not there are shares of
Preferred Stock outstanding, as long as they are paid on all classes of Common
Stock, and such dividends must be paid only in shares of the class on which they
are being so paid. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, after payment has been made to the
holders of shares of Preferred Stock, if any, for the full amount to which they
are entitled, the holders of the shares of Common Stock are entitled to share
equally in the assets available for distribution.

The Company will be selling Common Stock pursuant to this offering. All
currently outstanding shares of Common Stock are, and upon issuance as set forth
herein, the shares of Common Stock being sold by the Company will be, duly
authorized, validly issued, fully paid and non-assessable.

PREFERRED STOCK

Series A Preferred Stock

Holders of Series A Preferred Stock are entitled to receive dividends at a
rate of 6% per year, payable quarterly in arrears on the same terms and subject
to certain restrictions. Unpaid dividends continue to accrue and accumulate at
the above-described dividend rate until paid. With respect to the payment of
dividends, the Series A Preferred Stock ranks senior to the Common Stock and the
Series B Preferred Stock. Holders of Series A Preferred Stock have the right to
require the Company to redeem such shares under certain terms and conditions.
The outstanding Series A Preferred Stock will be exchanged for Common Stock at
the initial public offering price upon completion of this offering. See "Certain
Transactions -- Recapitalization."

Series B Preferred Stock

Holders of Series B Preferred Stock are entitled to dividends at a rate of
8% per annum, payable in cash quarterly in arrears. Cash dividends may not be
paid until the date that no shares of Series A Preferred Stock remain
outstanding. If the payment of cash dividends is then prohibited, the Company
will pay dividends currently by the issuance of additional shares of Series B
Preferred Stock whose stated value equals the amount of dividends that otherwise
would be payable. The outstanding Series B Preferred Stock, including accrued
and unpaid dividends, will be redeemed with a portion of the net proceeds of
this offering. See "Use of Proceeds."

Holders of Series A Preferred Stock and Series B Preferred Stock are not
entitled to vote, except on any matter submitted to shareholders that would
create a class of Preferred Stock senior to or pari passu with such class, in
which case two-thirds of the outstanding shares of such class are required to
approve the action.

Undesignated Preferred Stock

Pursuant to an amendment to the Articles to be filed prior to the
completion of this offering, the Board of Directors will be authorized, without
further action by the shareholders, to issue up to 5,000,000 shares of Preferred
Stock in one or more series and to establish the designations, preferences,
qualifications, privileges,

35
<PAGE> 36

limitations, restrictions, options, conversion rights and other special or
relative rights of any series of Preferred Stock so issued. The issuance of
shares of Preferred Stock could adversely affect the voting power and other
rights of holders of Common Shares. Because the terms of the Preferred Stock may
be fixed by the Board of Directors of the Company without shareholder action,
the Preferred Stock could be issued quickly with terms designed to defeat a
proposed takeover of the Company, or to make the removal of management of the
Company more difficult. The authority to issue Preferred Stock or rights to
purchase such stock could be used to discourage a change in control of the
Company. Management of the Company is not aware of any such threatened
transaction to obtain control of the Company, and the Board of Directors has no
current plans to designate and issue any additional shares of Preferred Stock.

WARRANT

In connection with obtaining the Credit Facility, the Company issued to
Chemical Bank a warrant which, upon completion of this offering, will be
exercisable to purchase 142,105 shares of Common Stock at an exercise price of
$.01 per share. The warrant expires on May 31, 2006. The Company has granted to
Chemical Bank certain rights to register under the Securities Act the sale of
shares of Common Stock to be issued upon exercise of the warrant.

CERTAIN PROVISIONS THAT MAY HAVE AN ANTI-TAKEOVER EFFECT

Provisions of the Articles and the Company's Amended and Restated Bylaws
(the "Bylaws") may have an antitakeover effect and may delay, defer or prevent a
tender offer or takeover attempt not approved by the Board of Directors,
including those made at a premium over the prevailing market price of the Common
Stock held by shareholders.

The Company's classified Board of Directors and the authority of the Board
to issue Preferred Stock and establish certain rights, preferences, privileges,
limitations and other special rights therefor without any further vote or action
by the shareholders of the Company could have the effect of delaying, impeding
or discouraging the acquisition of control of the Company in a transaction not
approved by the Board of Directors. The provision of the Bylaws classifying the
Board of Directors may only be repealed or amended by vote of shareholders
entitled to cast 75% of the votes at a shareholders meeting. See
"Management -- Classified Board; Addition of Independent Directors; Committees."
In addition, the Company may obtain shareholder approval for certain actions
without calling a meeting or soliciting proxies because the Articles and Bylaws
permit actions by written consent of shareholders holding a majority of the
shares of Common Stock.

Subchapter F of Chapter 25 of the Pennsylvania Business Corporation Law of
1988, as amended (the "PBCL"), which is applicable to the Company, may have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt that a shareholder might consider in his or her best interest, including
those attempts that might result in a premium over the market price for the
shares held by shareholders. In general, Subchapter F of Chapter 25 of the PBCL
delays for five years and imposes conditions upon "business combinations"
between an "interested shareholder" and the Company, unless prior approval of
the Board of Directors is given. The term "business combination" is defined
broadly to include various merger, consolidation, division, exchange or sale
transactions, including transactions utilizing the Company's assets for purchase
price amortization or refinancing purposes. An "interested shareholder," in
general, would be a beneficial owner of shares entitling that person to cast at
least 20% of the votes that all shareholders would be entitled to cast in an
election of directors of the Company.

LIMITATION OF LIABILITY; INDEMNIFICATION OF OFFICERS AND DIRECTORS

As permitted by the PBCL, the Bylaws provide that a director shall not be
personally liable for monetary damages as such for any action taken, or any
failure to take any action, unless the director breaches or fails to perform the
duties of his or her office under the PBCL, and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. These provisions
of the Bylaws, however, do not apply to the responsibility or liability of a
director pursuant to any criminal statute, or to the liability of a director for
the payment of taxes pursuant to local, Pennsylvania or federal law. These
provisions offer persons who serve on the Board of Directors of the Company
protection against awards of monetary damages for negligence in the performance
of their duties. The Bylaws also provide that every person who is or was a
director or executive officer of the Company, or of any corporation which he
served as such at the request of the Company, shall be

36
<PAGE> 37

indemnified by the Company to the fullest extent permitted by law against all
expenses and liabilities reasonably incurred by or imposed upon him, in
connection with any proceeding to which he may be made, or threatened to be
made, a party, or in which he may become involved by reason of his being or
having been a director or executive officer of the Company, or of such other
Company, whether or not he is a director or executive officer of the Company or
such other Company at the time the expenses or liabilities are incurred.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is StockTrans, Inc.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common
Stock. Sales of substantial amounts of shares of the Common Stock in the public
market following this offering could adversely affect the market price of the
Common Stock, making it more difficult for the Company to sell equity securities
in the future at a time and price which it deems appropriate.

Upon the completion of this offering, assuming no exercise of outstanding
options, the Company will have outstanding 7,700,000 shares of Common Stock. Of
these shares, the 2,800,000 shares of Common Stock sold in this offering will be
freely tradeable without restriction or registration under the Securities Act.
The remaining 4,900,000 shares of Common Stock outstanding as of the date of
this Prospectus are "restricted securities" as defined by Rule 144. Of these,
the 1,500,000 shares held by the Founders (excluding shares to be issued in
exchange for the Founders' Note and Series A Preferred Stock) would be able to
be sold in accordance with the provisions of Rule 144 beginning 90 days after
the date of this Prospectus. The Founders have agreed that prior to September
1998 they will not sell or otherwise dispose of in an unregistered transaction
any of the 400,000 shares of Common Stock they will receive upon conversion and
exchange of the Series A Preferred Stock and the Founders' Note. The balance
cannot be sold until May 1998 at the earliest unless they are registered under
the Securities Act. All of the Company's officers, directors and current
securityholders have agreed not to sell or otherwise dispose of any such shares
for a period of 180 days after the date of this Prospectus without the prior
written consent of Smith Barney Inc., except that Advanta Partners may transfer
such shares to its partners and their affiliates without such consent.

In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least two years (or one year if the currently
proposed amendments to Rule 144 become effective), including an "affiliate," as
that term is defined in the Securities Act, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock (approximately 77,000
shares after the completion of this offering), or the average weekly trading
volume during the four calendar weeks preceding filing of notice of such sale,
subject to certain requirements concerning availability of public information,
manner and notice of sale.

In addition, affiliates must comply with the restrictions and requirements
of Rule 144, other than the two-year holding period requirements, in order to
sell shares of Common Stock which are not restricted securities. Under Rule
144(k), a person who is not an affiliate and has not been an affiliate for at
least three months prior to the sale and who has beneficially owned restricted
shares for at least a three year holding period may resell such shares without
compliance with the foregoing requirements. The Securities and Exchange
Commission is considering a proposal to amend Rule 144 to shorten the two-year
and three-year holding periods referred to above to one and two years,
respectively.

Upon the completion of this offering, there will be 275,100 shares of
Common Stock issuable upon exercise of options granted under the 1996 Stock
Incentive Plan and 142,105 shares of Common Stock issuable upon exercise of the
warrant granted in connection with the Credit Facility. The Company intends to
file a Form S-8 registration statement covering the shares issuable under the
1996 Stock Incentive Plan within one year from the date of this Prospectus. The
shares registered under such registration statement will be available for resale
in the open market upon the exercise of vested options, subject to Rule 144
volume limitations applicable to affiliates. The holder of the warrant has the
right to have the shares issuable upon exercise thereof included in future
registration statements filed by the Company, subject to specified limitations.

37
<PAGE> 38

UNDERWRITING

Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company has agreed to sell to such Underwriter,
shares of Common Stock which equal the number of shares set forth opposite the
name of such Underwriter below.

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
UNDERWRITER SHARES UNDERWRITER SHARES
----------- --------- ----------- ---------
<S> <C> <C> <C>
Smith Barney Inc.......................... 1,007,500 Gruntal & Co., Incorporated............... 35,000
Hambrecht & Quist LLC..................... 1,007,500 Janney Montgomery Scott Inc............... 35,000
Advest, Inc............................... 35,000 Legg Mason Wood Walker, Incorporated...... 35,000
Bear, Stearns & Co. Inc................... 55,000 Merrill Lynch, Pierce, Fenner & Smith
Brean Murray, Foster Securities Inc....... 35,000 Incorporated.............................. 55,000
Alex. Brown & Sons Incorporated........... 55,000 Oppenheimer & Co., Inc.................... 55,000
Burnham Securities Inc.................... 35,000 Pennsylvania Merchant Group Ltd........... 35,000
Dain Bosworth Incorporated................ 35,000 Raymond James & Associates, Inc........... 35,000
Dean Witter Reynolds Inc.................. 55,000 Robertson, Stephens & Company LLC......... 55,000
Dominick & Dominick, Incorporated......... 35,000 The Robinson-Humphrey Company, Inc........ 35,000
Furman Selz LLC........................... 35,000 Unterberg Harris.......................... 35,000
---------
Total......................... 2,800,000
</TABLE>

The Underwriters are obligated to take and pay for all shares of Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc. and Hambrecht & Quist LLC are
acting as Representatives, propose initially to offer part of the shares of
Common Stock directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $0.52 per share under the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $0.10 per share to other Underwriters or to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed by the Underwriters. The Representatives have informed the Company that
the Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.

The Company has granted to the Underwriters an option exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of 420,000
additional shares of Common Stock at the public offering price set forth on the
cover page hereof less underwriting discounts and commissions. The Underwriters
may exercise such option to purchase additional shares solely for the purpose of
covering over-allotments, if any, incurred in connection with the sale of the
shares offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares in such table.

At the Company's request, the Representatives have agreed to reserve up to
100,000 shares of Common Stock for sale at the public offering price to Company
employees and other persons having certain relationships with the Company. The
number of shares available for sale to the general public will be reduced to the
extent these persons purchase such reserved shares. Any reserved shares not
purchased will be offered by the Underwriters to the general public on the same
basis as the other shares offered hereby.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

The Company and its directors, executive officers and current
securityholders have agreed that, for a period of 180 days after the date of
this Prospectus, they will not, without the prior written consent of Smith
Barney Inc., offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for any shares of Common Stock except, in the case of the Company and Advanta
Partners, in certain limited circumstances.

38
<PAGE> 39

Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock has
been determined by negotiations between the Company and the Representatives of
the Underwriters. Among the factors considered in determining the initial public
offering price were the history of, and the prospects for, the Company's
business and the industry in which it competes, an assessment of the Company's
management, its past and present operations, its past and present earnings and
the trend of such earnings, the prospects for earnings of the Company, the
present state of the Company's development, the general condition of the
securities market at the time of this offering and the market prices and
earnings of similar securities of comparable companies at the time of the
offering.

LEGAL MATTERS

Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pennsylvania, has
rendered an opinion that the shares of Common Stock offered hereby will be
legally issued, fully paid and non-assessable. Certain legal matters relating to
this offering will be passed upon for the Underwriters by Pepper, Hamilton &
Scheetz, Philadelphia, Pennsylvania.

EXPERTS

The financial statements included in this Prospectus and elsewhere in the
Registration Statement, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen LLP and Asher & Company, Ltd.,
independent public accountants, and are included herein in reliance upon the
authority of said firms as experts in giving said reports.

INFORMATION CONCERNING INDEPENDENT PUBLIC ACCOUNTANTS

In June 1996, the Company engaged Arthur Andersen LLP as independent public
accountants to audit the Company's financial statements for fiscal 1995,
replacing the firm of Asher & Company, Ltd., which had previously served as the
Company's independent public accountants and had completed its audit of the
Company's financial statements for fiscal 1993 and fiscal 1994. The Company's
decision to change accountants was ratified by the Board of Directors of the
Company.

In connection with the audit of the Company's financial statements for
fiscal 1993 and fiscal 1994, there were no disagreements with Asher & Company,
Ltd. during such two years or during the period through the date of such firm's
replacement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which if not resolved to its
satisfaction would have caused Asher & Company, Ltd. to make reference thereto
in connection with its report. Asher & Company, Ltd.'s reports on the Company's
financial statements for fiscal 1993 and fiscal 1994 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
shares of Common Stock, reference is hereby made to the Registration Statement
and the exhibits and schedules filed as a part thereof. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement, including exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials may also be obtained at
prescribed rates from the Public Reference Section of the Commission,
Washington, D.C. 20549. In addition, registration statements and certain other
filings made with the Commission through its Electronic Data Gathering, Analysis
and Retrieval ("EDGAR") system are publicly available through the Commission's
site

39
<PAGE> 40

on the Internet's World Wide Web, located at http://www.sec.gov. The
Registration Statement, including all exhibits thereto and amendments thereof,
has been filed with the Commission through EDGAR.

The Company intends to furnish to its shareholders annual reports
containing financial statements audited by an independent accounting firm and
quarterly reports containing unaudited financial information for the first three
quarters of each fiscal year.

40
<PAGE> 41

RMH TELESERVICES, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Reports of Independent Public Accountants...................................... F-2 and F-3
Balance Sheets................................................................. F-4
Statements of Operations....................................................... F-5
Statements of Shareholders' Equity (Deficit)................................... F-6
Statements of Cash Flows....................................................... F-7
Notes to Financial Statements.................................................. F-8
</TABLE>

F-1
<PAGE> 42

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To RMH Teleservices, Inc.:

We have audited the accompanying balance sheets of RMH Teleservices, Inc.
(a Pennsylvania corporation) as of September 30, 1995 and June 30, 1996, and the
related statements of operations, shareholders' equity (deficit) and cash flows
for the year ended September 30, 1995 and the nine months ended June 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of RMH Teleservices, Inc. as of
September 30, 1995 and June 30, 1996, and the results of its operations and its
cash flows for the year ended September 30, 1995 and the nine months ended June
30, 1996, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Philadelphia, Pa.,
July 19, 1996

F-2
<PAGE> 43

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To RMH Teleservices, Inc.:

We have audited the accompanying balance sheet of RMH Teleservices, Inc. (a
Pennsylvania corporation) as of September 30, 1994, and the related statements
of operations, shareholders' equity and cash flows for each of the two years in
the period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RMH Teleservices, Inc. as of
September 30, 1994, and the results of its operations and its cash flows for
each of the two years in the period then ended in conformity with generally
accepted accounting principles.

ASHER & COMPANY, LTD.

Philadelphia, Pa.,
June 27, 1996

F-3
<PAGE> 44

RMH TELESERVICES, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, 1996
------------------------- -----------------------------------------
1994 1995 ACTUAL
----------- ----------- ------------ PRO FORMA PRO FORMA
(NOTE 11) AS ADJUSTED
----------- (NOTE 11)
(UNAUDITED) ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................................. $ 511,665 $ 322,024 $ 747,118 $ 741,349 $ 5,841,349
Accounts receivable, net of allowance for doubtful
accounts of $2,600, $47,000 and $2,500 in 1994,
1995 and 1996................................... 2,665,602 4,449,351 4,312,729 4,312,729 4,312,729
Receivables from Founders......................... 32,000 34,500 74,500 74,500 74,500
Prepaid expenses.................................. 164,462 182,518 236,423 236,423 236,423
Deferred income taxes............................. -- -- 28,500 28,500 28,500
----------- ----------- ------------ ----------- ------------
Total current assets........................ 3,373,729 4,988,393 5,399,270 5,393,501 10,493,501
----------- ----------- ------------ ----------- ------------
PROPERTY AND EQUIPMENT:
Communications and computer equipment............. 3,147,032 4,959,500 6,511,964 6,511,964 6,511,964
Furniture and fixtures............................ 417,070 732,135 1,064,334 1,064,334 1,064,334
Leasehold improvements............................ 204,490 322,106 494,594 494,594 494,594
----------- ----------- ------------ ----------- ------------
3,768,592 6,013,741 8,070,892 8,070,892 8,070,892
Less -- Accumulated depreciation and
amortization.................................... (1,649,491) (2,349,792) (3,115,279) (3,115,279) (3,115,279)
----------- ----------- ------------ ----------- ------------
Net property and equipment.................. 2,119,101 3,663,949 4,955,613 4,955,613 4,955,613
----------- ----------- ------------ ----------- ------------
OTHER ASSETS........................................ 83,240 104,841 552,449 552,449 53,764
----------- ----------- ------------ ----------- ------------
DEFERRED INCOME TAXES............................... -- -- -- -- 2,479,560
----------- ----------- ------------ ----------- ------------
$ 5,576,070 $ 8,757,183 $ 10,907,332 $10,901,563 $ 17,982,438
========== ========== =========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Borrowings on lines of credit..................... $ 700,000 $ 975,000 $ -- $ -- $ --
Current portion of long-term debt................. 124,568 205,006 1,100,000 1,100,000 --
Current portion of capitalized lease
obligations..................................... 272,243 353,716 55,528 55,528 55,528
Accounts payable.................................. 794,413 1,126,768 189,094 189,094 189,094
Accrued expenses.................................. 613,803 1,206,226 1,731,103 1,725,334 1,675,334
Deferred income taxes............................. 40,000 61,000 -- -- --
Payable to Founders on Common Stock redemption.... -- -- 436,980 436,980 436,980
Payables to Founders.............................. -- -- 1,067,028 1,067,028 1,067,028
----------- ----------- ------------ ----------- ------------
Total current liabilities................... 2,545,027 3,927,716 4,579,733 4,573,964 3,423,964
----------- ----------- ------------ ----------- ------------
LONG-TERM DEBT...................................... 355,444 592,105 12,461,501 12,461,501 --
----------- ----------- ------------ ----------- ------------
CAPITALIZED LEASE OBLIGATIONS....................... 622,916 436,338 8,136 8,136 8,136
----------- ----------- ------------ ----------- ------------
LOANS PAYABLE TO FOUNDERS........................... 125,448 132,975 -- -- --
----------- ----------- ------------ ----------- ------------
DEFERRED INCOME TAXES............................... -- -- 807,831 -- --
----------- ----------- ------------ ----------- ------------
REDEEMABLE WARRANT.................................. -- -- 450,000 -- --
----------- ----------- ------------ ----------- ------------
SUBORDINATED NOTE PAYABLE TO FOUNDERS
(face amount of $3,000,000)....................... -- -- 2,036,212 -- --
----------- ----------- ------------ ----------- ------------
REDEEMABLE PREFERRED STOCK
(liquidation value of $7,500,000)................. -- -- 4,338,505 3,809,399 --
----------- ----------- ------------ ----------- ------------
REDEEMABLE CLASS A VOTING COMMON
STOCK............................................. -- -- 2,865,000 -- --
----------- ----------- ------------ ----------- ------------
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY (DEFICIT):
Class A Voting Common Stock....................... 80,200 80,200 3,278,666 12,311,047 41,270,446
Class B Non-Voting Common Stock................... -- -- 2,438,275 -- --
Common Stock warrant outstanding.................. -- -- -- 450,000 450,000
Retained earnings (deficit)....................... 1,847,035 3,587,849 (22,356,527) (22,712,484) (27,170,108)
----------- ----------- ------------ ----------- ------------
Total shareholders' equity (deficit)........ 1,927,235 3,668,049 (16,639,586) (9,951,437) 14,550,338
----------- ----------- ------------ ----------- ------------
$ 5,576,070 $ 8,757,183 $ 10,907,332 $10,901,563 $ 17,982,438
========== ========== =========== ========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 45

RMH TELESERVICES, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1996
----------- ----------- ----------- 1995 -----------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES...................... $10,292,032 $17,105,333 $25,544,790 $18,446,937 $23,562,206
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Cost of services............ 7,642,130 13,285,998 18,209,525 13,102,443 16,325,265
Selling, general and
administrative........... 2,075,563 3,007,363 5,311,905 3,618,979 4,807,287
----------- ----------- ----------- ----------- -----------
Total operating
expenses.......... 9,717,693 16,293,361 23,521,430 16,721,422 21,132,552
----------- ----------- ----------- ----------- -----------
Operating income.... 574,339 811,972 2,023,360 1,725,515 2,429,654
INTEREST EXPENSE.............. 136,888 169,641 261,546 182,099 374,444
----------- ----------- ----------- ----------- -----------
Income before income
taxes............. 437,451 642,331 1,761,814 1,543,416 2,055,210
INCOME TAXES.................. -- 40,000 21,000 18,500 391,500
----------- ----------- ----------- ----------- -----------
NET INCOME.................... 437,451 602,331 1,740,814 1,524,916 1,663,710
PREFERRED STOCK DIVIDENDS..... -- -- -- -- 86,765
----------- ----------- ----------- ----------- -----------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS................ $ 437,451 $ 602,331 $ 1,740,814 $ 1,524,916 $ 1,576,945
=========== =========== =========== =========== ===========
PRO FORMA DATA (UNAUDITED)
(Note 2):
Historical income before
income taxes............. $ 1,761,814 $ 2,055,210
Pro forma income taxes...... 713,535 832,360
Preferred Stock dividends... -- 86,765
----------- -----------
Pro forma net income
available to Common
shareholders............. $ 1,048,279 $ 1,136,085
=========== ===========
Pro forma net income per
Common share............. $ .23 $ .24
=========== ===========
Shares used in computing pro
forma net income per
Common share............. 4,642,105 4,642,105
=========== ===========
Supplemental pro forma net
income per Common
share.................... $ .18 $ .22
=========== ===========
Shares used in computing
supplemental pro forma
net income per Common
share.................... 6,682,105 6,682,105
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 46

RMH TELESERVICES, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
CLASS A VOTING CLASS B NON-VOTING TOTAL
COMMON STOCK COMMON STOCK RETAINED SHAREHOLDERS'
----------------------- ---------------------- EARNINGS EQUITY
SHARES AMOUNT SHARES AMOUNT (DEFICIT) (DEFICIT)
---------- ---------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1992...... 10,000,000 $ 80,200 -- $ -- $ 807,253 $ 887,453
Net income....................... -- -- -- -- 437,451 437,451
---------- ---------- --------- ---------- ------------ ------------
BALANCE, SEPTEMBER 30, 1993...... 10,000,000 80,200 -- -- 1,244,704 1,324,904
Net income....................... -- -- -- -- 602,331 602,331
---------- ---------- --------- ---------- ------------ ------------
BALANCE, SEPTEMBER 30, 1994...... 10,000,000 80,200 -- -- 1,847,035 1,927,235
Net income....................... -- -- -- -- 1,740,814 1,740,814
---------- ---------- --------- ---------- ------------ ------------
BALANCE, SEPTEMBER 30, 1995...... 10,000,000 80,200 -- -- 3,587,849 3,668,049
Distribution of accounts
receivable..................... -- -- -- -- (4,600,000) (4,600,000)
Sale of Class A and Class B
Common Stock................... 1,720,427 3,278,666 1,279,573 2,438,275 -- 5,716,941
Redemption of Class A Common
Stock.......................... (8,500,000) (68,170) -- -- (20,068,351) (20,136,521)
Reclassification of Redeemable
Class A Common Stock outside of
shareholders' equity........... (1,500,000) (12,030) -- -- (2,852,970) (2,865,000)
Net income....................... -- -- -- -- 1,663,710 1,663,710
Dividends on Series A and Series
B Preferred Stock.............. -- -- -- -- (86,765) (86,765)
---------- ---------- --------- ---------- ------------ ------------
BALANCE, JUNE 30, 1996........... 1,720,427 $3,278,666 1,279,573 $2,438,275 $(22,356,527) $ (16,639,586)
========== ========== ========= ========== ============ ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 47

RMH TELESERVICES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, JUNE 30,
----------------------------------- --------------------------
1993 1994 1995 1996
--------- --------- ----------- 1995 ------------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income...................... $ 437,451 $ 602,331 $ 1,740,814 $ 1,524,916 $ 1,576,945
Adjustments to reconcile net
income to net cash provided
by operating activities --
Depreciation and
amortization............... 452,619 638,734 786,065 506,132 765,487
Loss on disposal of
equipment.................. 4,950 -- 73,230 -- --
Deferred income taxes........ -- 40,000 21,000 (20,674) 241,500
Imputed interest and
dividends.................. -- -- -- -- 54,293
Amortization of deferred
financing costs............ -- -- -- -- 6,945
Changes in operating assets
and liabilities --
Accounts receivable........ (882,547) (965,764) (1,783,749) (2,108,170) 136,622
Prepaid expenses........... (48,697) (69,726) (18,056) (32,614) (53,905)
Other assets............... 4,746 (23,549) (21,601) 33,193 51,077
Accounts payable........... 47,018 486,062 332,355 99,828 (937,674)
Accrued expenses........... 480,974 (48,699) 592,423 111,174 515,599
------ ------ ------- ------- --------
Net cash provided by
operating
activities............ 496,514 659,389 1,722,481 113,785 2,356,889
------ ------ ------- ------- --------
INVESTING ACTIVITIES:
Purchases of property and
equipment.................... (253,152) (338,564) (2,197,482) (891,797) (1,951,716)
Proceeds from disposal of
equipment.................... 77,199 -- -- -- --
------ ------ ------- ------- --------
Net cash used in
investing
activities............ (175,953) (338,564) (2,197,482) (891,797) (1,951,716)
------ ------ ------- ------- --------
FINANCING ACTIVITIES:
Net borrowings (repayments) on
lines of credit.............. 140,000 300,000 275,000 575,000 (975,000)
Proceeds from long-term debt.... -- 513,847 500,000 500,000 15,100,000
Repayments on long-term debt.... (97,880) (85,322) (182,901) (126,700) (1,887,001)
Repayments on capitalized lease
obligations.................. (301,624) (740,700) (311,766) (253,184) (830,880)
Borrowings from Founders........ -- -- 5,027 32,000 1,006,251
Repayments to Founders.......... -- (32,000) -- -- (112,198)
Proceeds from sale of Preferred
and Common Stock............. -- -- -- -- 9,500,000
Redemption of Common Stock...... -- -- -- -- (16,675,621)
Distribution to Founders........ -- -- -- -- (4,600,000)
Deferred financing costs........ -- -- -- -- (505,630)
------ ------ ------- ------- --------
Net cash provided by
(used in) financing
activities............ (259,504) (44,175) 285,360 727,116 19,921
------ ------ ------- ------- --------
NET INCREASE (DECREASE) IN CASH... 61,057 276,650 (189,641) (50,896) 425,094
CASH, BEGINNING OF PERIOD......... 173,958 235,015 511,665 511,665 322,024
------ ------ ------- ------- --------
CASH, END OF PERIOD............... $ 235,015 $ 511,665 $ 322,024 $ 460,769 $ 747,118
====== ====== ======= ======= ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-7
<PAGE> 48

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS
ENDED JUNE 30, 1995 IS UNAUDITED)

1. BACKGROUND:

RMH Teleservices, Inc. (the Company) is a leading provider of outbound
teleservices to major corporations in the insurance and financial services
industries. The Company was founded in 1983 by two individuals (the Founders).
On May 24, 1996, the Company completed a leveraged recapitalization (the
Recapitalization) pursuant to which a portion of the Common Stock owned by the
Founders was redeemed and two investors (the Investors) purchased Preferred and
Common Stock (see Note 3). These transactions were accounted for as a sale of
newly issued stock by the Company and a redemption of previously outstanding
shares. Accordingly, the historical bases of the Company's assets and
liabilities have been retained.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL STATEMENTS

The statements of operations and cash flows for the nine months ended June
30, 1995 are unaudited and, in the opinion of management of the Company, include
all adjustments (consisting of only normal recurring adjustments) necessary for
a fair presentation of the results for that period. The results of operations
for the nine months ended June 30, 1996 are not necessarily indicative of the
results to be expected for the full year.

USE OF ESTIMATES

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

REVENUE RECOGNITION

The Company recognizes revenues on programs as services are performed,
generally based on hours incurred.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation and amortization
are provided over the estimated useful lives of the applicable assets using the
straight-line method. The lives used are as follows:

<TABLE>
<S> <C>
Computer equipment...................................................... 5 years
Communications equipment................................................ 5-7 years
Furniture and fixtures.................................................. 7 years
Leasehold improvements.................................................. Lesser of
lease term
or useful
life
</TABLE>

Repairs and maintenance are charged to expense as incurred, while additions
and betterments are capitalized. Gains or losses on the disposition of property
and equipment are charged to operations.

Equipment under capital leases included in property and equipment is
$2,204,468, $2,425,250 and $2,530,685, with accumulated depreciation of
$830,315, $1,265,307 and $1,556,129 as of September 30, 1994 and 1995 and June
30, 1996, respectively.

INCOME TAXES

Prior to May 24, 1996, the Company was an S Corporation for federal and
Pennsylvania income tax purposes and, accordingly, income was passed through to
the shareholders and taxed at the individual level.

F-8
<PAGE> 49

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company was not an S Corporation in New Jersey and, therefore, the Company
paid income taxes on its taxable income in that state. The S Corporation status
was terminated on May 24, 1996 (see Note 8).

On October 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." SFAS No. 109 requires a change
from the deferred method of accounting for income taxes to the liability method
of accounting for income taxes. Under the liability method, deferred tax assets
and liabilities are recognized for the future tax consequences, measured by
enacted tax rates, attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards, for years
which taxes are expected to be paid or recovered. The impact of adopting SFAS
No. 109 was not material to the statement of operations for the year ended
September 30, 1994.

SUPPLEMENTAL CASH FLOW INFORMATION

For the years ended September 30, 1993, 1994 and 1995, and the nine months
ended June 30, 1995 and 1996, the Company paid interest of $136,888, $165,207,
$252,828, $165,172 and $211,599, respectively. Capitalized lease obligations of
$672,903, $765,689 and $220,782 were incurred on equipment leases entered into
in fiscal 1993, 1994 and 1995, and $154,788 and $105,435 for the nine months
ended June 30, 1995 and 1996, respectively.

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

The Company is dependent on several large customers for a significant
portion of its revenues. Three customers accounted for 31.3%, 23.7% and 21.3% of
revenues for the year ended September 30, 1993. Four customers accounted for
23.7%, 19.2%, 18.8% and 16.2% of revenues for the year ended September 30, 1994
and four customers accounted for 29.2%, 18.8%, 14.6% and 12.7% of revenues for
the year ended September 30, 1995. Three customers accounted for 39.4%, 21.4%
and 11.1% of revenues for the nine months ended June 30, 1996. The loss of one
or more of these customers could have a materially adverse effect on the
Company's business.

As a result of the issuance of the Preferred and Common Stock to one of the
Investors (see Note 3), the Company is now affiliated with one of its customers.
This customer represented 3.6% and 8.3% of revenues for the year ended September
30, 1994 and 1995, respectively, and 11.1% for the nine months ended June 30,
1996. There were no sales to this customer for the year ended September 30,
1993.

In fiscal 1993, 1994 and 1995, revenues from customers within the insurance
industry accounted for 80.9%, 63.3% and 59.3% of revenues, respectively, and
customers within the financial services industry accounted for 18.4%, 36.4% and
39.7% of revenues, respectively. Customers in the insurance and financial
services industry accounted for 74.0% and 19.2%, respectively, of revenues in
the nine months ended June 30, 1996.

Concentration of credit risk is limited to accounts receivable and is
subject to the financial conditions of the Company's customers. Three of the
Company's largest customers are engaged in transactions with each other and
represent a single credit risk to the Company. The Company does not require
collateral or other securities to support customer receivables. At June 30,
1996, the accounts receivable from the customers that represent a single credit
risk were $3,234,496 and the accounts receivable from the customer affiliated
with one of the Investors were $161,691.

CASH

The Company maintains cash accounts, which, at times, may exceed federally
insured limits. The Company has not experienced any losses from maintaining cash
accounts in excess of federally insured limits. Management believes that it is
not exposed to any significant credit risks on its cash accounts.

F-9
<PAGE> 50

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statements at fair value due to the short-term nature
of those instruments. The carrying amount of the long-term debt and capitalized
lease obligations approximates fair value at September 30, 1995 and June 30,
1996.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company is required to adopt this
standard for the year ending September 30, 1997. The Company has elected to
adopt the disclosure requirement of this pronouncement. Accordingly, this
pronouncement will have no impact on the Company's reported financial position
or results of operations.

The Financial Accounting Standards Board has issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." The Company is required to adopt this standard at the beginning
of the fiscal year ending September 30, 1997. Management believes that the
adoption of this standard will have no impact on the Company's reported
financial position or results of operations.

PRO FORMA NET INCOME PER SHARE

Pro forma net income per share was calculated by dividing pro forma net
income available to Common shareholders by 4,642,105 shares. The shares
represent the 4,500,000 shares of Common Stock outstanding and the 142,105
shares of Common Stock issuable upon the exercise of the bank's warrant (see
Note 4).

SUPPLEMENTAL PRO FORMA NET INCOME PER SHARE

Supplemental pro forma net income per share is based on the number of
shares used in the calculation of pro forma net income per share plus 400,000
shares issued in exchange for the Founders' Note and the Series A Preferred, to
repay the Term Loan and redeem the Series B Preferred. Pro forma net income
available to Common shareholders is increased by $155,620 and $309,559 for the
year ended September 30, 1995 and the nine months ended June 30, 1996,
respectively, for the elimination of interest expense, net of tax, and the
elimination of the Preferred Stock dividends.

3. RECAPITALIZATION:

On May 24, 1996, the Company authorized (i) 20,000,000 shares of Common
Stock, no par value, consisting of 10,000,000 shares of Class A Voting Common
Stock (the Class A Common) and 10,000,000 shares of Class B Non-Voting Common
Stock (the Class B Common) and (ii) 10,000,000 shares of Preferred Stock, of
which 1,000,000 shares were designated as Series A Preferred Stock (the Series A
Preferred) and 6,500,000 shares were designated as Series B Preferred Stock (the
Series B Preferred). The previously outstanding Common Stock was converted into
10,000,000 shares of Class A Common. All references in the accompanying
financial statements to the number of Common shares have been retroactively
restated to reflect the recapitalization.

F-10
<PAGE> 51

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

COMMON STOCK REDEMPTION

On May 24, 1996, the Company redeemed 8,500,000 shares of Class A Common
for $19,855,006, as follows:

<TABLE>
<S> <C>
Cash payment............................................................ $16,001,646
Final redemption price adjustment (to be paid in August 1996)........... 436,980
Issuance of 6%, $3,000,000 subordinated note payable to Founders (the
"Founders' Note")..................................................... 2,022,639
Issuance of 1,000,000 shares of 6%, Series A Preferred.................. 524,450
Deferred tax liability for difference in basis of Founders' Note (see
Note 8)............................................................... 476,831
Transaction costs....................................................... 673,975
-----------
$20,136,521
===========
</TABLE>

The face amounts of the Founders' Note and Series A Preferred have been
discounted at estimated market rates of 14% and 15% for interest and dividends,
respectively, on similar-type instruments. The original issue discounts are
being amortized over the terms of the Founders' Note and the Series A Preferred.

On May 23, 1996, the Company distributed $4,600,000 of accounts receivable
to the Founders as a Subchapter S distribution of previously taxed income. The
Company is collecting these receivables on behalf of the Founders and included
in payables to Founders at June 30, 1996 is $936,411 of receivables collected by
the Company but not yet remitted to the Founders (see Note 7).

The Founders' Note currently has a face amount of $3,000,000 and is
subordinated to all other liabilities. The Founders' Note bears interest at an
annual rate of 6%, payable quarterly, and becomes due in two equal installments
on May 24, 2003 and 2004, subject to acceleration upon the occurrence of certain
defined events, including an initial public offering. The provisions of the
Founders' Note, among other things, limit the incurrence of debt, as defined. If
a defined earnings level for the period from May 24, 1996 through September 30,
1996 is met, the face amount of the Founders' Note will increase by $1,000,000
and will be recorded as interest expense (see Note 11). Upon the completion of
the planned initial public offering, the Founders' Note will be satisfied
through the issuance of shares of Common Stock at the initial offering price,
regardless of whether the defined earnings level is met.

The Series A Preferred has 1,000,000 shares outstanding, a face amount of
$1,000,000 and requires a dividend of 6% per year, payable quarterly. The Series
A Preferred has no voting rights and is senior to the Series B Preferred upon
liquidation. The holders of the Series A Preferred may require the Company to
redeem their shares in two equal installments on May 24, 2003 and 2004, subject
to acceleration upon the occurrence of certain defined events. The redemption
price is $1,000,000 plus unpaid dividends.

SALE OF PREFERRED AND COMMON STOCK

On May 24, 1996, the Company issued Preferred and Common Stock for
$9,500,000 to the Investors, as follows:

<TABLE>
<S> <C>
Series B Preferred Stock................................................. $3,783,059
Class A Voting Common Stock.............................................. 3,278,666
Class B Non-Voting Common Stock.......................................... 2,438,275
----------
$9,500,000
==========
</TABLE>

The Company issued 6,500,000 shares of Series B Preferred for an aggregate
of $6,500,000 or $1.00 per share. The Series B Preferred requires a dividend of
8% per year, payable quarterly. The face amount of the Series B Preferred has
been discounted at the estimated market dividend rate of 15% and the discount of

F-11
<PAGE> 52

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

$2,716,941 is being amortized over the expected term. Due to the discount
applied to the face amount of the Series B Preferred, its value for accounting
purposes is $.58 per share. The Series B Preferred has no voting rights, is
senior to the Common Stock upon liquidation and has a liquidation value of
$6,500,000 plus unpaid dividends. The holders of the Series B Preferred may
require the Company to redeem their shares on May 24, 2004, subject to
acceleration upon the occurrence of certain defined events, including an initial
public offering. The redemption price is $6,500,000 plus unpaid dividends.

The Company issued 1,720,427 shares of Class A Common and 1,279,573 shares
of Class B Common for an aggregate of $3,000,000 or $1.00 per share. The Common
Stock was valued at $1.91 per share based on the relative estimated fair values
of the Series B Preferred and Class A and B Common Stock issued to the
Investors. While the Class B Common shares are non-voting, they can be converted
into an equal number of Class A Common shares upon the earlier of an initial
public offering or May 24, 2001.

4. BANK DEBT:

The Company had available lines of credit with a bank of $2,600,000 as of
September 30, 1995, with interest ranging from the prime rate plus 1/2% to 1%.
The average interest rate on outstanding borrowings was 7.75%, 8.17% and 9.60%
for the years ended September 30, 1993, 1994 and 1995, respectively, and was
9.08% through May 24, 1996. The highest outstanding borrowings during fiscal
1995 were $1,575,000 and through May 24, 1996 were $1,475,000. All amounts
outstanding under the lines of credit were repaid on May 24, 1996 with the
proceeds from a credit facility with a new bank.

On May 24, 1996, the Company and its shareholders entered into an agreement
with a bank (the Credit Agreement), which provides the Company with a
$14,000,000 term loan (the Term Loan) and $6,000,000 in revolving credit loans
(the Revolver). On May 24, 1996, the Company borrowed $11,200,000 on the Term
Loan and incurred $505,630 in financing costs, which have been deferred and will
be amortized over the term of the Credit Agreement. The borrowings on the Term
Loan were used to fund a portion of the Common Stock redemption, to repay a bank
line of credit and to buy out certain leases. The Credit Agreement requires an
annual administrative fee of $15,000 and an annual commitment fee of one-half of
1% on the average unused portion of the Revolver.

All borrowings under the Credit Agreement are collateralized by the assets
of the Company and the pledge by the shareholders of their Preferred and Common
Stock in the Company. The interest rate varies based on whether the borrowing is
designated as a Eurodollar loan, the level of market interest rates such as the
prime or LIBO rates, and the ratio of the Company's debt to earnings, as
defined. At June 30, 1996, the interest rate on the Term Loan was 8.5%.

In June 1996, the Company borrowed the final $2,800,000 on the Term Loan.
The Term Loan must be repaid in 23 quarterly installments beginning at $300,000
on December 31, 1996 and increasing to $750,000 on June 30, 2002, the final
payment date. The Term Loan is subject to prepayment based on excess cash flow,
as defined, beginning with the twelve months ending June 30, 1997.

Borrowings on the Revolver are limited to the lesser of $6,000,000 or 85%
of eligible accounts receivable, as defined, less outstanding letters of credit
which cannot exceed $1,000,000. In certain circumstances, amounts outstanding
under the Revolver can be converted to term loans. The Revolver expires on May
24, 2001.

The Company is subject to certain covenants described in the Credit
Agreement. Such covenants, among other things, restrict the Company's ability to
incur debt, pay dividends, or make capital expenditures and acquisitions. The
Company is also subject to a number of restrictive financial covenants, which
include ratios related to debt service, total debt to earnings and interest
coverage, as defined.

F-12
<PAGE> 53

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the Credit Agreement, the bank received a warrant to
purchase 236,842 shares of Class B Common for $.01 per share. The warrant
expires on May 31, 2006 and is exercisable upon the earlier of an initial public
offering or a change in control of the Company, as defined. The number of shares
which can be purchased upon exercise of the warrant is subject to reduction
based on the timing of an initial public offering. If the offering is completed
prior to May 24, 1997, the number of shares subject to the warrant is reduced to
142,105. The bank can require the Company to redeem the warrant prior to an
initial public offering and after May 24, 2001 or upon the occurrence of certain
defined events. The redemption price is equal to the appraised fair market
value, as defined. For financial reporting purposes, the warrant has been valued
at $450,000 based on the estimated fair value of the Class B Common, and has
been recorded as original issue discount on the Term Loan. This original issue
discount is being amortized to interest expense over the term of the Credit
Agreement.

The Company's long-term debt is comprised of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
<S> <C> <C> <C>
Term loan, net of unamortized discount of
$438,499......................................... $ -- $ -- $13,561,501
Note payable to a bank, interest at 7.5%,
collateralized by the assets of the Company and
the personal guarantees of the Founders (repaid
on May 24, 1996)................................. 450,000 350,000 --
Note payable to a bank, interest at 9.5%,
collateralized by all assets of the Company
(repaid on May 24, 1996)......................... -- 441,667 --
Other.............................................. 30,012 5,444 --
--------- --------- -----------
480,012 797,111 13,561,501
Less -- Current portion............................ (124,568) (205,006) (1,100,000)
--------- --------- -----------
$ 355,444 $ 592,105 $12,461,501
========= ========= ==========
</TABLE>

Scheduled annual principal payments on the Term Loan are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
------------------------------------------------------------
<S> <C>
1996 (three months)...................................... $ --
1997..................................................... 1,500,000
1998..................................................... 1,900,000
1999..................................................... 2,450,000
2000..................................................... 2,900,000
2001..................................................... 3,000,000
2002..................................................... 2,250,000
-----------
14,000,000
Less: Unamortized discount.................................. (438,499)
-----------
$13,561,501
==========
</TABLE>

F-13
<PAGE> 54

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. ACCRUED EXPENSES:

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------- JUNE 30,
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Payroll and related benefits.................... $484,645 $ 751,315 $ 545,387
Telecommunications expense...................... 88,042 393,480 705,579
Income taxes.................................... -- -- 141,461
Preferred Stock dividends payable in cash....... -- -- 55,769
Other........................................... 41,116 61,431 282,907
-------- ---------- ----------
$613,803 $1,206,226 $1,731,103
======== ========== ==========
</TABLE>

6. CAPITALIZED LEASE OBLIGATIONS:

The Company has various capitalized lease obligations payable to several
finance companies. The obligations mature between 1996 and 2000 and are
collateralized by computer and other equipment with an aggregate cost of
$2,530,685 as of June 30, 1996.

Minimum future lease payments and imputed interest on the obligations under
the capital leases, together with the present value of the net minimum lease
payments as of June 30, 1996, are as follows:

<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30,
---------------------------------------------------------------
<S> <C>
1996 (3 months)............................................. $ 16,958
1997........................................................ 48,888
1998........................................................ 2,998
--------
Total minimum lease payments................................... 68,844
Less -- Imputed interest...................................... (5,180)
--------
Present value of net minimum lease payments.................... 63,664
Less -- Current portion....................................... (55,528)
--------
$ 8,136
========
</TABLE>

7. LOANS PAYABLE TO FOUNDERS:

The Founders have made long-term unsecured loans to the Company. There have
been no repayment terms established on these loans which are subordinated to
bank debt and bear interest at a variable rate (6.5% as of June 30, 1996). These
loans will be repaid in connection with the payment of the final redemption
price adjustment in August 1996 and, therefore, have been included along with
the $936,411 of cash received by the Company but not remitted to the Founders
(see Note 3), as payables to Founders in the accompanying balance sheet as of
June 30, 1996.

8. INCOME TAXES:

As a result of the sale of Preferred and Common Stock, the Company's S
Corporation status was terminated on May 24, 1996, and a net deferred income tax
liability of $241,500 was recorded as additional income tax expense on that
date. The income tax provision for the nine months ended June 30, 1996 reflects
the deferred tax provision of $241,500 and a tax provision on the pre-tax income
earned from May 24, 1996 through June 30, 1996.

F-14
<PAGE> 55

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The net deferred income tax liability represents the tax effect of the
cumulative differences between the financial reporting and income tax bases of
certain assets and liabilities, as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------- JUNE 30,
1994 1995 1996
-------- -------- ---------
<S> <C> <C> <C>
Current deferred income tax asset (liability):
Cash basis of accounting........................ $(40,000) $(61,000) $ 28,500
-------- -------- ---------
Noncurrent deferred income tax asset (liability):
Cash basis of accounting........................ -- -- 85,500
Depreciation of property and equipment.......... -- -- (416,500)
Difference in basis of Founders' Note (see Note
3)........................................... -- -- (476,831)
-------- -------- ---------
-- -- (807,831)
-------- -------- ---------
Net deferred income tax liability................. $(40,000) $(61,000) $(779,331)
======== ======== =========
</TABLE>

For informational purposes, the accompanying statements of operations for
the year ended September 30, 1995 and the nine months ended June 30, 1996
include an unaudited pro forma adjustment for the income taxes which would have
been recorded if the Company had not been an S Corporation, based on the tax
laws in effect during the respective periods. The income tax provision was
recorded at an effective rate of 40.5%, which consists of the federal statutory
rate of 34.0% plus state income taxes, net of federal tax benefit, of 6.5%.

9. COMMITMENTS AND CONTINGENCIES:

The Company leases its offices and communications and computer equipment
under noncancellable operating leases which expire through 2001. The rental
payments for fiscal 1993, 1994 and 1995 and the nine months ended June 30, 1996,
were approximately $562,000, $753,000, $911,000 and $747,000, respectively.

Aggregate minimum rental payments under the noncancellable operating leases
at June 30, 1996 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30,
-------------------------------------------------------------
<S> <C>
1996 (3 months)........................................... $ 260,655
1997...................................................... 988,473
1998...................................................... 635,959
1999...................................................... 272,298
2000...................................................... 106,994
2001...................................................... 51,072
----------
$2,315,451
==========
</TABLE>

The Company enters into agreements with its telephone long distance
carriers which currently range from one to three years, which provide for, among
other things, annual minimum purchases and termination penalties. The annual
minimum purchases under such agreements total approximately $1,377,000.

The Founders have entered into employment contracts which expire on May 31,
1999. The contracts require an annual base compensation of $200,000 per employee
subject to an annual inflation adjustment, plus a discretionary annual bonus not
expected to exceed 20% of base compensation. In addition, each employee will
receive a bonus of $3,000,000 if an initial public offering occurs by November
24, 1996, or if an initial public offering occurs between November 24, 1996 and
January 24, 2001, an amount equal to $3,000,000 less $60,000 for each month from
November 24, 1996 through the date of the initial public offering.

F-15
<PAGE> 56

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company has entered into an agreement with one of the Investors which
requires the payment of an annual management fee of $100,000, payable quarterly.
The management agreement will be terminated upon completion of the planned
initial public offering. Beginning at that time, the Investors will provide
consulting services to the Company pursuant to a consulting agreement and will
receive annual fees of $50,000. The consulting agreement expires on May 24,
2001.

On May 24, 1996, the shareholders of the Company entered into an agreement
which, among other things, imposes certain restrictions on the transfer and sale
of Preferred and Common Stock, requires the approval of the shareholders for
certain major changes and transactions and designates the composition of the
Board of Directors. The Founders, who at June 30, 1996 owned 1,500,000 shares of
Class A Common, have the right to require the Company to purchase their shares
beginning on May 24, 2002, at appraised fair market value, as defined. Based on
the value per share for accounting purposes of the Class A Common, the
redeemable shares have been valued at $2,865,000 and classified outside of
shareholders' equity. Upon completion of the planned initial public offering,
the right to require the Company to purchase these shares will expire.

From time to time, the Company is involved in certain legal actions arising
in the ordinary course of business. In management's opinion, the outcome of such
actions will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.

10. PROFIT SHARING PLAN:

In fiscal 1995, the Company adopted a defined contribution savings plan
available to substantially all employees under Section 401(k) of the Internal
Revenue Code. Employee contributions are generally limited to 15% of
compensation. On an annual basis, the Company may match a portion of the
participating employee's contribution. The Company's contributions were $8,317
in fiscal 1995 and $15,961 for the nine months ended June 30, 1996. Employees
are fully vested in their contributions, while vesting for the Company's
contributions occurs ratably over seven years beginning in year three.

11. PRO FORMA AND PRO FORMA AS ADJUSTED BALANCE SHEETS:

In connection with the Company's proposed initial public offering of
2,800,000 shares of Common Stock, certain transactions are expected to occur
which have been reflected in the Pro Forma balance sheet.

(i) the Founders' Note of $4,000,000 and the Series A Preferred of
$1,000,000 will be exchanged for 400,000 shares of Common Stock
and the accrued dividends of $5,769 on the Series A Preferred
will be paid;

(ii) the redeemable warrant of $450,000 and Redeemable Class A Common
Stock of $2,865,000 will no longer be subject to redemption by
the holders;

(iii) the outstanding shares of Class B Common will be converted into
Class A Voting Common (and the division of Common Stock into two
classes will be eliminated); and

(iv) the voting agreement entered into by the Founders and the
majority investor will become effective. Pursuant to this voting
agreement, one of the Investors, on the one hand, and the
Founders, on the other, agree to vote for two nominees of the
other to the Company's Board of Directors. Each party's rights
under the voting agreement terminate when such party's ownership
of Common Stock becomes less than 25% of such ownership
immediately after completion of the offering.

F-16
<PAGE> 57

RMH TELESERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Pro Forma As Adjusted balance sheet reflects the above transactions and
the following additional transactions:

(i) receipt by the Company of net proceeds from the offering of
$31,650,000, after deducting the estimated underwriting discounts
and commissions and offering expenses;

(ii) the Term Loan of $14,000,000 will be repaid;

(iii) the Series B Preferred will be redeemed for $6,500,000 plus
accrued dividends of $50,000; and

(iv) a combined $6,000,000 bonus will be paid to two officers pursuant
to their employment agreements.

The accompanying Pro Forma As Adjusted balance sheet reflects the above
transactions as if they had occurred on June 30, 1996. The increase in cash of
$5,094,231 consists of net proceeds from the offering of $31,650,000 less cash
used to repay the term loan ($14,000,000), redeem the Series B Preferred and pay
dividends ($6,550,000), pay the bonus to two officers ($6,000,000) and pay
Series A Preferred dividends ($5,769). The increase in shareholders' equity of
$31,189,924 consists of the net proceeds from the offering of $31,650,000 plus
elimination of the redemption provision of the Class A Common Stock ($2,865,000)
and Redeemable Warrant ($450,000), conversion of the Founders' Note ($3,200,000
estimated fair value of Common Stock issuable upon conversion) and Series A
Preferred ($529,106 carrying value) into Class A Common Stock and the change in
net deferred income taxes ($1,187,391) resulting from the transactions, less the
bonus to be paid to two officers net of the income tax benefit ($3,900,000), the
interest charges on the Founders' Note ($1,163,788, of which $1,000,000
represents the additional interest cost resulting from the increase in the face
value of the Founders' Note -- see Note 3), the extraordinary charge resulting
from the early extinguishment of the Term Loan ($937,184) and the redemption of
the Series B Preferred ($2,690,601 difference in carrying value versus
redemption value).

As a result of the above transactions, the Company will record certain
pre-tax charges of $8.2 million in the quarter in which the offering is
completed, consisting of the special bonuses of $6.0 million, interest expense
on the Founders' Note of $1.2 million and an extraordinary charge of $1.0
million resulting from the early extinguishment of the Term Loan.

F-17
<PAGE> 58

INSIDE BACK COVER OF PROSPECTUS

[THE PICTURE TO BE INSERTED SHOWS THE EXTERIOR FACADE OF THE COMPANY'S
CORPORATE HEADQUARTERS IN BRYN MAWR, PENNSYLVANIA.]
<PAGE> 59

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 6
Use of Proceeds........................ 11
Dividend Policy........................ 11
Capitalization......................... 12
Dilution............................... 13
Selected Financial Information......... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 15
Business............................... 20
Management............................. 28
Principal Shareholders................. 32
Certain Transactions................... 33
Description of Capital Stock........... 35
Shares Eligible for Future Sale........ 37
Underwriting........................... 38
Legal Matters.......................... 39
Experts................................ 39
Information Concerning Independent
Public Accountants................... 39
Additional Information................. 39
Index to Financial Statements.......... F-1
</TABLE>

Until October 14, 1996, all dealers effecting transactions in the Common Stock,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.

- ------------------------------------------------------
- ------------------------------------------------------

2,800,000 SHARES

RMH TELESERVICES, INC.

COMMON STOCK

LOGO

------------

PROSPECTUS

SEPTEMBER 18, 1996

------------

SMITH BARNEY INC.

HAMBRECHT & QUIST

- ------------------------------------------------------
- ------------------------------------------------------