NCO GROUP INC, S-3/A, 1998-06-02

NCO GROUP INC
S-3/A, 1998-06-02
CONSUMER CREDIT REPORTING, COLLECTION AGENCIES

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As filed with the Securities and Exchange Commission on June 2, 1998
Registration No. 333-51787

================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2
TO

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

NCO GROUP, INC.
(Exact name of Registrant as specified in its charter)

Pennsylvania 23-2858652
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)

515 Pennsylvania Avenue
Fort Washington, Pennsylvania 19034
Telephone (215) 793-9300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

Michael J. Barrist, Chairman of the Board,
President and Chief Executive Officer
NCO Group, Inc.
515 Pennsylvania Avenue
Fort Washington, Pennsylvania 19034
Telephone (215) 793-9300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:

Francis E. Dehel, Esquire Lawrence R. Seidman, Esquire
Blank Rome Comisky & McCauley LLP Piper & Marbury L.L.P.
One Logan Square 36 South Charles Street
Philadelphia, Pennsylvania 19103 Baltimore, Maryland 21201

Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

================================================================================
<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION, DATED JUNE 2, 1998

4,329,110 Shares

[GRAPHIC OMITTED]

Common Stock

Of the 4,329,110 shares of Common Stock offered hereby (the "Offering"),
4,000,000 shares are being sold by NCO Group, Inc. ("NCO" or the "Company") and
329,110 shares are being sold by certain shareholders of the Company (the
"Selling Shareholders"). The Company will not receive any of the proceeds from
the sale of the shares by the Selling Shareholders. See "Principal and Selling
Shareholders."

The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "NCOG." On June 1, 1998, the last sale price of the Common
Stock as reported on the Nasdaq National Market was $22.00 per share. See
"Price Range of Common Stock."

See "Risk Factors" commencing on page 9 of this Prospectus for a
discussion of certain factors that should be considered by prospective
purchasers of the Common Stock offered hereby.
----------------
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.

<PAGE>

<TABLE>
<CAPTION>
================================================================================================
Price to Underwriting Proceeds to Proceeds to
Public Discount (1) Company (2) Selling Shareholders
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share ......... $ 21.50 $ 1.075 $ 20.425 $ 20.425
- ------------------------------------------------------------------------------------------------
Total (3) ......... $93,075,865 $4,653,793 $81,700,000 $6,722,072
================================================================================================
</TABLE>

(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.

(2) Before deducting offering expenses payable by the Company, estimated at
$600,000.

(3) The Company and certain Selling Shareholders have granted to the
Underwriters a 30-day option to purchase up to an additional 469,366 and
180,000 shares, respectively, of Common Stock at the Price to Public shown
above solely to cover over-allotments, if any. If the Underwriters
exercise this option in full, the total Price to Public, Underwriting
Discount, Proceeds to Company and Proceeds to Selling Shareholders will be
$107,037,234, $5,351,862, $91,286,800, and $10,398,572, respectively. See
"Principal and Selling Shareholders" and "Underwriting."

The shares of Common Stock are offered by the several Underwriters named
herein when, as and if delivered to and accepted by the Underwriters and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the certificates representing the shares will be made against
payment therefor at the office of NationsBanc Montgomery Securities LLC on or
about June 5, 1998.

----------------
NationsBanc Montgomery Securities LLC
BT Alex. Brown
Janney Montgomery Scott Inc.
The Robinson-Humphrey Company

June 2, 1998

<PAGE>

[Pictures depicting certain of the Company's call centers and the
Company's Computer Center. The Company's logo also appears on this page.]

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS, IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION
M. SEE "UNDERWRITING."

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE AND
PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE
COMMON STOCK MAINTAINED BY THE UNDERWRITERS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, contained
elsewhere in this Prospectus. Unless otherwise indicated, all references in
this Prospectus to the "Company" or "NCO" mean NCO Group, Inc., a Pennsylvania
corporation and its subsidiaries and predecessors. Unless otherwise indicated,
all information in this Prospectus: (i) assumes no exercise of the
Underwriters' over-allotment option; (ii) gives effect to a 3-for-2 stock split
effected in December 1997; but (iii) does not give effect to the acquisition of
FCA International Ltd. ("FCA") and the pending acquisition of MedSource, Inc.
("MedSource").

Unless otherwise indicated: (i) 1997 pro forma information assumes that
the acquisitions of Goodyear & Associates, Inc. ("Goodyear"), Tele-Research
Center, Inc. ("Tele-Research"), CMS A/R Services ("CMS A/R"), the Collections
Division of CRW Financial, Inc. ("CRWCD"), Credit Acceptance Corporation
("CAC") and ADVANTAGE Financial Services, Inc. ("AFS") (collectively, the "1997
Acquisitions"), the acquisitions of the Collection Division of American
Financial Enterprises, Inc. ("AFECD") and The Response Center ("TRC")
(collectively, the "1998 Acquisitions") and the FCA and MedSource acquisitions
occurred on January 1, 1997; (ii) 1998 pro forma information assumes that the
TRC, FCA and MedSource acquisitions occurred on January 1, 1998; and (iii)
information with respect to MedSource gives pro forma effect to acquisitions
completed by MedSource in 1997 as if such acquisitions had occurred on January
1, 1997.

The Company

NCO is a leading provider of accounts receivable management and other
outsourced services. The Company develops and implements customized management
solutions for clients. The Company provides these services on a national basis
from 22 call centers located in 14 states using advanced workstations and
sophisticated call management systems comprised of predictive dialers,
automated call distribution systems, digital switching and customized computer
software. Through extensive utilization of technology and intensive management
of human resources, the Company has achieved rapid growth in recent years. As a
result of rapid internal growth and selected strategic acquisitions, the
Company's revenue has grown from $7.4 million in 1993 to $188.4 million in 1997
on a pro forma basis. Since April 1994, the Company has completed 13
acquisitions (including FCA) which have enabled it to increase its penetration
of existing markets, establish a presence in certain new markets and realize
significant operating efficiencies. In addition, the Company has leveraged its
infrastructure by offering additional services including customer service call
centers, market research and other outsourced administrative services. The
Company believes that it is currently among the five largest accounts
receivable management companies in the United States.

The Company provides its services principally to clients in the financial
services, healthcare, retail and commercial, education, telecommunications,
utilities and government sectors. The Company has over 8,000 clients, including
Bell Atlantic Corporation, Mellon Bank Corporation, NationsBank Corporation,
Citicorp, MCI Communications Corporation, Federal Express Corporation and
Airborne Freight Corporation. No client accounted for more than 3.6% of the
Company's revenue (no more than 2.8% on a pro forma basis) in 1997. For its
accounts receivable management services, the Company generates substantially
all of its revenue on a contingency fee basis. The Company seeks to be a low
cost provider, and as such its fees typically range from 15% to 35% of the
amount recovered on behalf of the Company's clients. For many of its other
outsourced services, the Company is paid on a fixed fee basis. While NCO's
contracts are relatively short-term, the Company seeks to develop long-term
relationships with its clients and works closely with them to provide quality,
customized solutions.

Increasingly, companies are outsourcing many non-core functions to focus
on revenue generating activities, reduce costs and improve productivity. In
particular, many corporations are recognizing the advantages of outsourcing
accounts receivable management and other services as a result of numerous
factors including: (i) the increasing complexity of such functions; (ii)
changing regulations and increased competition in certain industries; and (iii)
the development of sophisticated call management systems

3
<PAGE>

requiring substantial capital investment, technical capabilities and human
resource commitments. Consequently, industry-wide revenues rose 10.7% to $5.5
billion in 1996 from $5.0 billion in 1995, according to estimates published by
M. Kaulkin & Associates, Inc. ("MKA"), an industry consultant. While
significant economies of scale exist for large accounts receivable management
companies, the industry remains highly fragmented. Based on information
obtained from the American Collectors Association, Inc. ("ACA"), an industry
trade group, there are approximately 6,500 accounts receivable management
companies in operation in the United States, the majority of which are small,
local businesses. Given the financial and competitive constraints facing these
small companies and the limited number of liquidity options for the owners of
such businesses, the Company believes that the industry will continue to
experience consolidation in the future. See "Business -- Industry Background."

The Company strives to be a cost-effective, client service driven provider
of accounts receivable management and other outsourced services to companies
with substantial outsourcing needs. The Company's business strategy encompasses
a number of key elements which management believes are necessary to ensure
quality service and to achieve consistently strong financial performance.
First, the Company focuses on the efficient utilization of its technology and
infrastructure to constantly improve productivity. The Company's infrastructure
enables it to perform large scale accounts receivable management programs cost
effectively and to rapidly and efficiently integrate the Company's
acquisitions. Second, NCO is committed to client service. Management believes
that the Company's emphasis on designing and implementing customized accounts
receivable management programs for its clients provides it with a significant
competitive advantage. Third, the Company seeks to be a low cost provider of
accounts receivable management services by centralizing all administrative
functions and minimizing overhead at all branch locations. Lastly, the Company
is targeting larger clients which offer significant cross-selling opportunities
and have greater outsourcing requirements. See "Business -- Business Strategy."

The Company seeks to continue its rapid expansion through both internal
and external growth. The Company has experienced and expects to continue to
experience strong internal growth by continually striving to increase its
market share, expand its industry-specific market expertise and develop and
offer new value-added outsourced services. In addition, the Company intends to
continue to take advantage of the fragmented nature of the accounts receivable
management industry by making strategic acquisitions. Through selected
acquisitions, the Company will seek to serve new geographic markets, expand its
presence in its existing markets and add complementary services.

The Company's principal executive offices are located at 515 Pennsylvania
Avenue, Fort Washington, Pennsylvania 19034, and its telephone number is (215)
793-9300.

FCA and MedSource Acquisitions

On May 6, 1998, the Company acquired approximately 98.7% of the
outstanding stock of FCA pursuant to a cash tender offer. In addition, on May
4, 1998, the Company entered into a definitive agreement to acquire all of the
outstanding stock of MedSource which is expected to close in the second quarter
of 1998. There can be no assurance that the Company will close the MedSource
acquisition.

FCA International Ltd. In March 1998, the Company entered into an agreement
with FCA pursuant to which NCO made a cash tender offer (the "FCA Tender Offer")
for all of the outstanding common shares of FCA at $9.60 per share, Canadian
(equivalent to $6.77 in U.S. dollars based upon the exchange rate as of the date
of the agreement). The purchase price was approximately $69.9 million, of which
$69.1 million was paid with borrowings under the Company's revolving credit
facility. Pursuant to the FCA Tender Offer, the Company acquired approximately
98.7% of the outstanding stock of FCA. The Company intends to exercise its
statutory rights to acquire the remaining outstanding shares of FCA not tendered
on the same terms as the FCA Tender Offer. However, the remaining holders of FCA
shares may have the right to dissent to such transaction and demand payment for
the fair value of their FCA shares.

4
<PAGE>

offices into 17 branch locations including three new major branches in Mobile,
Alabama, Brantford, Ontario and Vancouver, British Columbia. For the fiscal
year ended June 30, 1997 and the nine months ended March 31, 1998, FCA's
revenues were approximately $62.8 million and $45.0 million, respectively,
based upon the applicable exchange rate. Approximately 45% of FCA's
consolidated revenues in 1997 was derived from U.S. operations, 40% from
Canadian operations and 15% from operations in the United Kingdom. The
acquisition of FCA will give the Company the leading market presence in Canada,
significantly expand its U.S. operations and provide a platform for further
expansion into Europe from the United Kingdom. The Company also expects to
realize substantial cost savings from integrating FCA with its operations.

MedSource Acquisition. On May 4, 1998, the Company entered into a
definitive agreement to acquire all of the outstanding stock of MedSource for
approximately $18.1 million in cash. In connection with the acquisition, the
Company will repay debt of approximately $16.9 million. The closing is subject
to the satisfaction of certain closing conditions, including regulatory
approval and other customary conditions.

Founded in 1997, MedSource provides traditional accounts receivable
management services and pre-delinquency outsourcing services primarily to
hospitals located throughout the United States. Pre-delinquency outsourcing
services include insurance billing and follow-up, insurance claim resolution,
private pay collections, and outsourcing of central business office functions.
Since its inception, MedSource has completed four acquisitions of other
accounts receivable management companies which specialize in providing services
to the healthcare industry. Headquartered in Goodlettsville, Tennessee,
MedSource has additional offices located in Phoenix, Arizona; Springfield,
Missouri; Chicago Heights, Illinois; Waterford, Michigan; Johnstown,
Pennsylvania; and Mount Laurel, New Jersey. For the fiscal year ended December
31, 1997 (on a pro forma basis) and the three months ended March 31, 1998,
MedSource's revenues were approximately $22.7 million and $5.3 million,
respectively. The acquisition of MedSource significantly enhances NCO's market
position as a leading provider of accounts receivable management services to
the healthcare sector.

The Company regularly reviews various strategic acquisition opportunities
and periodically engages in discussions regarding such possible acquisitions.

5
<PAGE>

The Offering

<TABLE>
<S> <C>
Common Stock offered by the Company ....................... 4,000,000 shares
Common Stock offered by the Selling Shareholders .......... 329,110 shares
Common Stock to be outstanding after the Offering ......... 17,391,884 shares (1)
Use of proceeds ........................................... For repayment of bank debt incurred in con-
nection with the FCA Tender Offer and to
finance a portion of the pending MedSource
acquisition.
Nasdaq National Market symbol ............................. NCOG
</TABLE>

- -------------
(1) Excludes: (i) an aggregate of 2,052,659 shares of Common Stock reserved for
issuance under the Company's 1995 Stock Option Plan, 1996 Stock Option
Plan and 1996 Non-Employee Director Stock Option Plan; (ii) 63,755 shares
of Common Stock reserved for issuance upon the conversion of the Company's
$900,000 Convertible Note issued as partial consideration for the Goodyear
acquisition; and (iii) 375,000 shares of Common Stock reserved for
issuance upon the exercise of warrants issued as partial consideration for
the CRWCD acquisition. See "Pending and Recent Acquisitions."

6
<PAGE>

SUMMARY FINANCIAL DATA
(Amounts in thousands, except per share data)

<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- -------------- -------------- ------------------------------
Pro Forma As
Actual Adjusted(1)(2)
------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue ........................... $7,445 $8,578 $ 12,733 $ 30,760 $ 85,284 $188,395
Operating costs and expenses:
Payroll and related expenses ..... 4,123 4,558 6,797 14,651 42,502 94,315
Selling, general and
administrative expenses ......... 2,391 2,674 4,042 10,033 27,947 62,525
Depreciation and amortization
expenses ........................ 141 215 348 1,254 3,369 11,540
Reorganization charge ............ -- -- -- -- -- 1,517
------ ------ --------- --------- -------- --------
Income from operations ............ 790 1,131 1,546 4,822 11,466 18,498
Other income (expense) ............ 11 (45) (180) (575) 388 (91)
------ ------ --------- --------- -------- --------
Income before provision for
income taxes ..................... 801 1,086 1,366 4,247 11,854 18,407
Income tax expense(4) ............. 320 434 546 1,706 4,780 8,176
------ ------ --------- --------- -------- --------
Net income(4) ..................... $ 481 $ 652 $ 820 $ 2,541 $ 7,074 $ 10,231
====== ====== ========= ========= ======== ========
Net income per share:
Basic(4) ............................................. $ 0.12 $ 0.34 $ 0.59 $ 0.61
========= ========= ======== ========
Diluted(4) ........................................... $ 0.12 $ 0.34 $ 0.57 $ 0.59
========= ========= ======== ========
Weighted average shares
outstanding:
Basic ................................................ 7,093(5) 7,630(5) 11,941 16,732
Diluted .............................................. 7,093(5) 7,658(5) 12,560 17,364

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1998
-----------------------------
Pro Forma As
1997 Actual Adjusted(2)(3)
---------- ------------ ---------------
<S> <C> <C> <C>
Statement of Income Data:
Revenue ........................... $18,077 $ 27,609 $48,399
Operating costs and expenses:
Payroll and related expenses ..... 9,046 14,144 24,832
Selling, general and
administrative expenses ......... 5,932 8,568 15,173
Depreciation and amortization
expenses ........................ 716 1,155 2,094
Reorganization charge ............ -- -- --
------- -------- -------
Income from operations ............ 2,383 3,742 6,300
Other income (expense) ............ (82) 153 (140)
------- -------- -------
Income before provision for
income taxes ..................... 2,301 3,895 6,160
Income tax expense(4) ............. 994 1,579 2,866
------- -------- -------
Net income(4) ..................... $ 1,307 $ 2,316 $ 3,294
======= ======== =======
Net income per share:
Basic(4) ....................... $ 0.12 $ 0.17 $ 0.19
======= ======== =======
Diluted(4) ..................... $ 0.12 $ 0.17 $ 0.19
======= ======== =======
Weighted average shares
outstanding:
Basic .......................... 10,656 13,240 17,240
Diluted ........................ 11,230 13,801 17,801

</TABLE>

<TABLE>
<CAPTION>
March 31, 1998
-------------------------------------
Pro Pro Forma As
Actual Forma(6) Adjusted(7)
---------- ---------- -------------
<S> <C> <C> <C>
Balance Sheet Data:

Cash and cash equivalents ........... $ 16,088 $ 6,893 $ 6,893
Working capital ..................... 22,173 (56) 2,826
Total assets ........................ 105,708 227,420 227,420
Long-term debt, net of current portion 923 94,715 16,592
Shareholders' equity ................ 91,956 91,956 173,056
</TABLE>

7
<PAGE>

- -----------
(1) Assumes that the 1997 Acquisitions, the 1998 Acquisitions and the FCA and
MedSource acquisitions occurred on January 1, 1997. Gives effect to: (i)
the elimination of payroll and related expenses relating to certain
redundant collection and administrative personnel costs immediately
eliminated at the time of the 1997 Acquisitions and the 1998 Acquisitions
and expenses identified during the due diligence process which will be
eliminated upon the closing of the FCA and MedSource acquisitions; (ii)
the elimination of certain rental expenses and related operating costs
attributable to facilities which were closed at the time of the 1997
Acquisitions and the 1998 Acquisitions and facilities identified during
the due diligence process which will be closed upon the completion of the
FCA and MedSource acquisitions; (iii) the increase in amortization expense
resulting from the acquisitions; (iv) the elimination of depreciation and
amortization expense related to assets revalued or not acquired; (v)
interest expense on borrowings related to the acquisitions; (vi) the
estimated income tax expense, after giving consideration to non-deductible
goodwill expense; (vii) the elimination of interest expense on debt
assumed to be repaid with a portion of the proceeds from the Offering;
(viii) the issuance of 517,767 shares of Common Stock and warrants
exercisable for 375,000 shares of Common Stock in connection with the
acquisition of CRWCD; (ix) the issuance of 1,425,753 shares of Common
Stock in the July 1997 Offering at the public offering price of $19.67 per
share which, net of the underwriting discount and offering expenses paid
by the Company, would be sufficient to repay acquisition related debt of
$8.4 million and to fund the acquisitions of AFECD and TRC; (x) the
issuance of 46,442 shares of Common Stock issued in connection with the
acquisition of AFS; and (xi) the issuance of 4.0 million shares of Common
Stock at the public offering price of $21.50 per share, net of the
underwriting discount and estimated offering expenses payable by the
Company, which would be sufficient to repay certain acquisition related
debt.

(2) Includes reorganization charges and other costs of $1.9 million and $90,000
for the year ended December 31, 1997 and the three months ended March 31,
1998, respectively. Net income per share - basic and net income per share
- diluted would have been $0.69 and $0.66, respectively, and $0.19 and
$0.19, respectively, on a pro forma basis assuming those charges had not
been incurred.

(3) Assumes that the TRC, FCA and MedSource acquisitions occurred on January 1,
1998. Gives effect to: (i) the elimination of payroll and related expenses
relating to certain redundant collection and administrative personnel
costs immediately eliminated at the time of the TRC acquisition and
expenses identified during the due diligence process which will be
eliminated upon the closing of the FCA and MedSource acquisitions; (ii)
the elimination of certain rental expenses and related operating costs
attributable to facilities which were identified during the due diligence
process and will be closed upon the completion of the FCA and MedSource
acquisitions; (iii) the increase in amortization expense resulting from
the TRC, FCA and MedSource acquisitions; (iv) the elimination of
depreciation and amortization expense related to assets revalued or not
acquired; (v) interest expense on borrowings related to the FCA and
MedSource acquisitions; (vi) the estimated income tax expense, after
giving consideration to non-deductible goodwill expense; (vii) the
elimination of interest expense on debt assumed to be repaid with a
portion of the proceeds from the Offering; and (viii) the issuance of 4.0
million shares of Common Stock at the public offering price of $21.50 per
share, net of the underwriting discount and estimated offering expenses
payable by the Company, which would be sufficient to repay certain
acquisition related debt.

(4) The Company was taxed as an S Corporation prior to September 3, 1996.
Accordingly, income tax expense and net income have been provided on a pro
forma basis as if the Company had been subject to income taxes in all
periods presented.

(5) Assumes that the Company issued 374,637 shares of Common Stock at $8.67 per
share to fund the distribution of undistributed S Corporation earnings of
$3.2 million through September 3, 1996, the termination date of the
Company's S Corporation status, to existing shareholders of the Company.

(6) Gives effect to: (i) the acquisition of FCA for approximately $69.9 million
in cash, which was borrowed against the Company's credit facility, and the
recognition of certain acquisition related liabilities; and (ii) the
pending acquisition of MedSource for approximately $18.1 million in cash,
of which $5.1 million was assumed to be borrowed against the Company's
credit facility, and the recognition of certain acquisition related
liabilities. The Company expects to recognize goodwill of $58.4 million
and $36.3 million for the FCA and MedSource acquisitions, respectively.

(7) Gives effect to the issuance of 4.0 million shares of Common Stock at the
public offering price of $21.50 per share and the application of the net
proceeds therefrom. See "Use of Proceeds."

8
<PAGE>

RISK FACTORS

Certain statements included in this Prospectus, including, without
limitation, statements regarding the anticipated growth in the amount of
accounts receivable placed for third-party management, the continuation of
trends favoring outsourcing of other administrative functions, the Company's
objective to grow through strategic acquisitions, the Company's ability to
realize operating efficiencies upon the completion of the recent acquisitions
and other acquisitions that may occur in the future, the Company's ability to
expand its service offerings, the anticipated changes in revenues from acquired
companies and trends in the Company's future operating performance, and
statements as to the Company's or management's beliefs, expectations or
opinions are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934 (the "Exchange Act") which are intended to be
covered by safe harbors created thereby. The factors discussed below and
elsewhere in this Prospectus could cause actual results and developments to be
materially different from those expressed in or implied by such forward-looking
statements. Accordingly, in addition to the other information contained in
"Pending and Recent Acquisitions," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this
Prospectus, the following factors should be considered carefully in evaluating
an investment in the shares of Common Stock offered by this Prospectus.

Risks Associated with Pending and Recent Acquisitions

The 1998 Acquisitions and the FCA and MedSource acquisitions had combined
revenues of $94.5 million in 1997 compared to the Company's revenue of $85.3
million in 1997. The Company is currently in the process of integrating the
acquisitions of AFS, CAC, and the 1998 Acquisitions. The Company acquired
approximately 98.7% of the outstanding stock of FCA pursuant to the FCA Tender
Offer. There can be no assurance that the Company will successfully consummate
the MedSource acquisition. The integration of these companies could divert
management's attention from the daily operation of the Company, require
additional management, operational and financial resources, and place
significant demands on the Company's management and infrastructure. There can
be no assurance that the recently acquired businesses and the MedSource
acquisition will be successfully integrated with that of the Company, that the
Company will be able to realize operating efficiencies or eliminate redundant
costs, or that their businesses will be operated profitably. Further, there can
be no assurance that clients of the acquired companies will continue to do
business with the Company, or that the Company will be able to retain key
employees of the acquired companies. In addition, there can be no assurance
that the acquired companies will not have additional liabilities or
contingencies that were unanticipated by the Company at the time of the
acquisitions.

Risks Associated with the FCA Acquisition

There are several risks associated with the acquisition of FCA including
the ability to operate FCA's business profitably and the fact that FCA has
significant operations outside of the United States. FCA has had net losses of
$4.4 million, and $1.4 million for its fiscal years ended June 30, 1996 and
1997, respectively. There can be no assurance that the Company will be able to
operate FCA's business profitably following the acquisition of FCA. To date,
all of the Company's operations have been conducted in the United States. FCA
is headquartered in Canada and also has offices in the United Kingdom and, as a
result of such acquisition, a portion of the Company's operations would be
conducted outside the United States. There are a number of risks inherent in
international operations including government controls, regulatory requirements
that may be more onerous than those imposed in the United States, difficulties
in managing international operations and fluctuations in currency exchange
rates. See "Pending and Recent Acquisitions -- FCA International Ltd."

9
<PAGE>

Risks Associated with Rapid Growth

The Company has experienced rapid growth over the past several years which
has placed significant demands on its administrative, operational and financial
resources. The Company seeks to continue such rapid growth which could place
additional demands on its resources. Future internal growth will depend on a
number of factors, including the effective and timely initiation and
development of client relationships, the Company's ability to maintain the
quality of services it provides to its clients and the recruitment, motivation
and retention of qualified personnel. Sustaining growth will also require the
implementation of enhancements to its operational and financial systems and
will require additional management, operational and financial resources. There
can be no assurance that the Company will be able to manage its expanding
operations effectively or that it will be able to maintain or accelerate its
growth, and any failure to do so could have a materially adverse effect on the
Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Growth Strategy."

Risks Associated with Future Acquisitions

A primary element of the Company's growth strategy is to continue to
pursue strategic acquisitions that expand and complement the Company's
business. The Company regularly reviews various strategic acquisition
opportunities and periodically engages in discussions regarding such possible
acquisitions. There can be no assurance that the Company will be able to
identify additional acquisition candidates on terms favorable to the Company or
in a timely manner, enter into acceptable agreements or close any such
transactions. There can also be no assurance that the Company will be able to
continue to execute its acquisition strategy, and any failure to do so could
have a materially adverse effect on the Company's business, financial
condition, results of operations and ability to sustain growth. In addition,
the Company believes that it will compete for attractive acquisition candidates
with other companies, consolidators or investors in the accounts receivable
management industry. Increased competition for such acquisition candidates
could have the effect of increasing the cost to the Company of pursuing this
growth strategy or could reduce the number of attractive candidates to be
acquired. Future acquisitions could divert management's attention from the
daily operations of the Company and otherwise require additional management,
operational and financial resources. Moreover, there is no assurance that the
Company will successfully integrate businesses acquired in the future into its
business or operate such acquired businesses profitably. Acquisitions also may
involve a number of additional risks including: adverse short term effects on
the Company's operating results; dependence on retaining key personnel;
amortization of acquired intangible assets; and risks associated with
unanticipated problems, liabilities or contingencies. See "Business -- Growth
Strategy."

The Company may require additional debt or equity financing to fund any
future acquisitions, which may not be available on terms favorable to the
Company, if at all. To the extent the Company uses its capital stock for all or
a portion of the consideration to be paid for future acquisitions, dilution may
be experienced by existing shareholders, including the purchasers of Common
Stock in this Offering. In the event that the Company's capital stock does not
maintain sufficient value or potential acquisition candidates are unwilling to
accept the Company's capital stock as consideration for the sale of their
businesses, the Company may be required to utilize more of its cash resources,
if available, in order to continue its acquisition program. If the Company does
not have sufficient cash resources or is unable to use its capital stock as
consideration for acquisitions, its growth through acquisitions could be
limited. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

Fluctuations in Quarterly Operating Results

The Company may experience quarterly variations in operating results as a
result of many factors, including the costs and timing of completion and
integration of acquisitions, the timing of clients' accounts receivable
management programs, the commencement of new contracts, the termination of
existing contracts, costs to support growth by acquisition or otherwise, the
effect of the change of business mix on margins and the timing of additional
selling, general and administrative expenses to support new business. In
connection with certain contracts, the Company could incur costs in periods
prior to recognizing revenue under those contracts which may adversely affect
the Company's operating results in a particular quarter. The Company's planned
operating

10
<PAGE>

expenditures are based on revenue forecasts, and if revenues are below
expectations in any given quarter, operating results would likely be materially
adversely affected. While the effects of seasonality on the Company's business
historically have been obscured by its rapid growth, the Company's business
tends to be slower in the third and fourth quarters of the year due to the
summer and holiday seasons. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Dependence on Key Personnel

The Company is highly dependent upon the continued services and experience
of its senior management team, including Michael J. Barrist, Chairman of the
Board, President and Chief Executive Officer. The loss of the services of Mr.
Barrist or other members of its senior management could have a materially
adverse effect on the Company. The Company has employment contracts with Mr.
Barrist and certain other key executive officers which expire in 2001. In
addition, the Company has a $2.0 million key person life insurance policy on
Mr. Barrist. See "Management."

Dependence on Certain Sectors; Contract Risks

Most of the Company's revenues are derived from clients in the financial
services, healthcare, retail and commercial, education, telecommunications,
utilities and government sectors. A significant downturn in any of these
sectors or any trends to reduce or eliminate the use of third-party accounts
receivable management services could have a materially adverse impact on the
Company's business, results of operations and financial condition. The Company
enters into contracts with most of its clients which define, among other
things, fee arrangements, scope of services and termination provisions. Clients
may usually terminate such contracts on 30 or 60 days notice. Accordingly,
there can be no assurance that existing clients will continue to use the
Company's services at historical levels, if at all. Under the terms of these
contracts, clients are not required to place accounts with the Company but do
so on a discretionary basis. In addition, substantially all of the Company's
contracts are on a contingent fee basis in which the Company recognizes
revenues only as accounts are recovered. See "Business -- Client
Relationships."

Competition

The accounts receivable management industry is highly competitive. The
Company competes with approximately 6,500 service providers, including large
national corporations such as Outsourcing Solutions Inc., GC Services, Inc. and
Equifax Inc. and many regional and local firms. Some of the Company's
competitors have substantially greater resources, offer more diversified
services and operate in broader geographic areas than the Company. In addition,
the accounts receivable management services offered by the Company, in many
instances, are performed in-house. Moreover, many larger clients retain
multiple accounts receivable management providers which exposes the Company to
continuous competition in order to remain a preferred vendor. There can be no
assurance that outsourcing of the accounts receivable management function will
continue or that the Company's clients which currently outsource such services
will not bring them in-house. The Company also competes with other firms, such
as SITEL Corporation, APAC Teleservices, Inc. and TeleTech Holdings, Inc., in
providing teleservices. As a result of these factors, there can be no assurance
that the Company will be able to compete successfully with its existing or
future competitors. See "Business -- Competition."

Risk of Business Interruption; Reliance on Computer and Telecommunications
Infrastructure

The Company's success is dependent in large part on its continued
investment in sophisticated telecommunications and computer systems, including
predictive dialers, automated call distribution systems and digital switching.
The Company has invested significantly in technology in an effort to remain
competitive and anticipates that it will be necessary to continue to do so in
the future. Moreover, computer and telecommunication technologies are evolving
rapidly and are characterized by short product life cycles, which require the
Company to anticipate technological developments. There can be no assurance
that the Company will be successful in anticipating, managing or adopting such
technological changes on a timely basis or that the Company will have the
capital resources available to invest in new technologies. In addition, the
Company's business is highly

11
<PAGE>

dependent on its computer and telecommunications equipment and software
systems, the temporary or permanent loss of which, through casualty or
operating malfunction, could have a materially adverse effect on the Company's
business. The Company's business is materially dependent on service provided by
various local and long distance telephone companies. A significant increase in
the cost of telephone services that is not recoverable through an increase in
the price of the Company's services, or any significant interruption in
telephone services, could have a materially adverse impact on the Company. See
"Business -- Operations."

Risks Associated with Year 2000

NCO has implemented a program to evaluate and address the impact of the
year 2000 on its information systems in order to ensure that its network,
computer systems and software will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality
and without inaccurate results related to such data. The Company does not
expect year 2000 compliance costs to have a material adverse impact on the
Company's business or results of operations. No assurance can be given,
however, that unanticipated or undiscovered year 2000 compliance problems will
not have a material adverse effect on the Company's business or results of
operations. In addition, if the Company's clients or significant suppliers and
contractors do not successfully achieve year 2000 compliance, the Company's
business and results of operations could be adversely affected, resulting from,
among other things, the Company's inability to properly exchange and/or receive
data. See "Management's Discussion and Analysis and Results of Operations --
Year 2000 System Modifications."

Dependence on Labor Force

The accounts receivable management industry is very labor intensive and
experiences high personnel turnover. Many of the Company's employees receive
modest hourly wages, and a portion of these employees are employed on a
part-time basis. A higher turnover rate among the Company's employees would
increase the Company's recruiting and training costs and could adversely impact
the quality of services the Company provides to its clients. If the Company
were unable to recruit and retain a sufficient number of employees, it would be
forced to limit its growth or possibly curtail its operations. Growth in the
Company's business will require it to recruit and train qualified personnel at
an accelerated rate from time to time. There can be no assurance that the
Company will be able to continue to hire, train and retain a sufficient number
of qualified employees. Additionally, an increase in hourly wages, costs of
employee benefits or employment taxes also could materially adversely affect
the Company. See "Business -- Personnel and Training."

Government Regulation

The accounts receivable management and telemarketing industries are
regulated under various federal and state statutes. In particular, the Company
is subject to the federal Fair Debt Collection Practices Act (the "FDCPA")
which establishes specific guidelines and procedures which debt collectors must
follow in communicating with consumer debtors, including the time, place and
manner of such communications. The Company is also subject to the Fair Credit
Reporting Act which regulates the consumer credit reporting industry and which
may impose liability on the Company to the extent that the adverse credit
information reported on a consumer to a credit bureau is false or inaccurate.
The accounts receivable management business is also subject to state
regulation, and some states require that the Company be licensed as a debt
collection company. With respect to the other teleservices offered by the
Company, including telemarketing, the federal Telemarketing and Consumer Fraud
and Abuse Prevention Act of 1994 broadly authorizes the Federal Trade
Commission (the "FTC") to issue regulations prohibiting misrepresentations in
telemarketing sales. The FTC's telemarketing sales rules prohibit
misrepresentations of the cost, terms, restrictions, performance or duration of
products or services offered by telephone solicitation and specifically address
other perceived telemarketing abuses in the offering of prizes and the sale of
business opportunities or investments. The federal Telephone Consumer
Protection Act of 1991 (the "TCPA") limits the hours during which telemarketers
may call consumers and prohibits the use of automated telephone dialing
equipment to call certain telephone numbers. A number of states also regulate
telemarketing and some states have enacted restrictions similar to the federal
TCPA. The failure to comply with applicable statutes and regulations could have
a materially adverse effect on the Company. There can be no assurance that
additional federal or state legislation, or changes in regulatory
implementation, would not limit the activities of the Company in the future or
significantly increase the cost of regulatory compliance.

12
<PAGE>

The collection of accounts receivable by collection agencies in Canada is
regulated at the provincial and territorial level in substantially the same
fashion as is accomplished by federal and state laws in the United States. The
manner in which the Company carries on the business of collecting accounts is
subject, in all provinces and territories, to established rules of common law
or civil law and statute. Such laws establish rules and procedures governing
the tracing, contacting and dealing with debtors in relation to the collection
of outstanding accounts. These rules and procedures prohibit debt collectors
from engaging in intimidating, misleading and fraudulent behavior when
attempting to recover outstanding debts. In Canada, the Company's collection
operations are subject to licensing requirements and periodic audits by
government agencies and other regulatory bodies. Generally, such licenses are
subject to annual renewal. If the Company engages in other teleservice
activities in Canada, including telemarketing, there are several provincial and
territorial consumer protection laws of more general application. This
legislation defines and prohibits unfair practices by telemarketers, such as,
the use of undue pressure and the use of false, misleading or deceptive
consumer representations.

In addition, accounts receivable management and telemarketing industries
are regulated in the United Kingdom, including a licensing requirement. If the
Company expands its international operations, it may become subject to
additional government controls and regulations in other countries, which may be
more onerous than those in the United States.

Several of the industries served by the Company are also subject to
varying degrees of 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. See
"Business -- Regulation."

Possible Volatility of Stock Price

Numerous factors, including announcements of fluctuations in the Company's
or its competitors' operating results, market conditions for accounts
receivable management, telemarketing industry or business services stocks in
general, the timing and announcement of acquisitions by the Company or its
competitors or government regulatory action, could have a significant impact on
the future price of the Common Stock. In addition, the stock market in recent
years has experienced significant price and volume fluctuations that often have
been unrelated or disproportionate to the operating performance of companies.
These broad fluctuations may adversely affect the market price of the Common
Stock. There can be no assurance that purchasers of Common Stock in this
Offering will be able to resell their Common Stock at prices equal to or
greater than the offering price hereunder.

Shares Eligible for Future Sale

Sales of the Company's Common Stock could adversely affect the market
price of the Company's Common Stock and could impair the Company's future
ability to raise capital through the sale of equity securities. Upon completion
of the Offering, the Company will have 17,391,884 shares of Common Stock
outstanding. Of these shares, all of the 4,329,110 shares sold in the Offering
will be, and the 8,625,000 shares sold in prior public offerings are, available
for resale in the public market without restriction, except for any such shares
purchased by affiliates of the Company. The Selling Shareholders and certain
other shareholders have agreed, subject to certain limitations, not to offer,
sell or otherwise dispose of any shares of Common Stock for a period of 90 days
after the closing of the Offering without the prior written consent of
NationsBanc Montgomery Securities LLC. Following the expiration of this 90-day
period, such persons will hold an aggregate of 4,193,423 outstanding shares of
Common Stock (4,013,423 shares if the over-allotment option is exercised in
full) which may be resold under Rule 144. Upon completion of the Offering, the
Company also will continue to have outstanding a $900,000 Convertible Note
convertible into 63,755 shares of Common Stock at any time on or before January
22, 2002 and a warrant to purchase 375,000 shares of Common Stock exercisable
at any time on or before January 31, 2002. The holders of the Convertible Note
and the warrants will continue to be entitled to certain demand and/or
piggy-back registration rights following the completion of the Offering. The
earn-out payable in connection with the TRC acquisition provides, among other
things, that the seller may elect to be paid the earn-out in the form of a
convertible note, convertible into NCO Common Stock at a price equal to $3.00
above NCO's trailing thirty day average closing per share price. In addition,
the Company will have 2,052,659

13
<PAGE>

shares of Common Stock reserved for issuance to its employees, directors,
consultants and advisors under the Company's 1995 Stock Option Plan, 1996 Stock
Option Plan and the 1996 Non-Employee Director Stock Option Plan upon the
completion of this Offering.

Anti-Takeover Provisions

The Company's Amended and Restated Articles of Incorporation (the
"Articles") and Bylaws (the "Bylaws") contain provisions which may be deemed to
be "anti-takeover" in nature in that such provisions may deter, discourage or
make more difficult the assumption of control of the Company by another
corporation or person through a tender offer, merger, proxy contest or similar
transaction. The Articles permit the Board of Directors to establish the
rights, preferences, privileges and restrictions of, and to issue, up to
5,000,000 shares of Preferred Stock without shareholder approval. The Company's
Bylaws also provide for the staggered election of directors to serve for one-,
two- and three-year terms, and for successive three-year terms thereafter,
subject to removal only for cause upon the vote of not less than 65% of the
shares of Common Stock represented at a shareholders' meeting. Certain
provisions of the Articles and Bylaws may not be amended except by a similar
65% vote. In addition, the Company is subject to certain anti-takeover
provisions of the Pennsylvania Business Corporation Law.

14
<PAGE>

PENDING AND RECENT ACQUISITIONS

Since 1994, the Company has completed 13 strategic acquisitions (including
FCA) which have expanded its client base and geographic presence, increased its
presence in key industries and substantially increased its revenues and
profits. A key element of the Company's growth strategy is to continue to
pursue selected strategic acquisitions to serve new geographic markets or
industries, expand its presence in its existing markets and add complementary
service applications. The Company regularly reviews various strategic
acquisition opportunities and periodically engages in discussions regarding
such possible acquisitions. The following is a summary of the pending MedSource
acquisition, the FCA acquisition, the 1998 Acquisitions and the 1997
Acquisitions.

MedSource, Inc.

The Company has entered into an agreement to acquire all of the
outstanding stock of MedSource for approximately $18.1 million in cash. In
connection with the acquisition, the Company will repay debt of approximately
$16.9 million. The closing is subject to the satisfaction of certain closing
conditions, including regulatory approval and other customary conditions.

FCA International Ltd.

In March 1998, the Company entered into an agreement with FCA pursuant to
which NCO made a cash tender offer for all of the outstanding common shares of
FCA at $9.60 per share, Canadian (equivalent to $6.77 in U.S. dollars based upon
the exchange rate as of the date of the agreement). The purchase price was
approximately $69.9 million, of which $69.1 million was paid with borrowings
under the Company's revolving credit facility. Pursuant to the FCA Tender Offer,
the Company acquired approximately 98.7% of the outstanding stock of FCA. The
Company intends to exercise its statutory rights to acquire the remaining
outstanding shares of FCA not tendered on the same terms as the FCA Tender
Offer. However, the remaining holders of FCA shares may have the right to
dissent to such transaction and demand payment for the fair value of their FCA
shares.

Founded in 1926, FCA is the largest accounts receivable management company
in Canada with significant operations in the United States and the United
Kingdom. FCA provides accounts receivable management services principally to
the government, financial, education, telecommunications, utilities,
healthcare, retail and commercial sectors. FCA has undergone a major
reorganization, consolidating 88 branch offices into 17 branch locations
including three new major branches in Mobile, Alabama, Brantford, Ontario and
Vancouver, British Columbia. For the fiscal year ended June 30, 1997 and the
nine months ended March 31, 1998, FCA's revenues were approximately $62.8
million and $45.0 million, respectively, based upon the applicable exchange
rate. Approximately 45% of FCA's consolidated revenue in 1997 was derived from
U.S. operations, 40% from Canadian operations and 15% from operations in the
United Kingdom. The acquisition of FCA will give the Company the leading market
presence in Canada, significantly expand its U.S. operations and provide a
platform for further expansion into Europe from the United Kingdom. The Company
also expects to realize substantial cost savings from integrating FCA with its
operations.

15
<PAGE>

The Response Center

On February 6, 1998, the Company purchased certain assets of TRC, which
was an operating division of TeleSpectrum Worldwide, Inc., for $15.0 million in
cash plus a performance based earn-out. TRC provided full-service custom market
research services to the telecommunications, financial services, utilities,
healthcare, pharmaceutical and consumer products sectors. Its capabilities
included problem conceptualization, program design, data gathering (by
telephone, mail, and focus groups), as well as data tabulation, results
analysis and consulting. TRC, with offices in Upper Darby, Pennsylvania, and
Philadelphia, Pennsylvania, had revenues of approximately $8.0 million for the
year ended December 31, 1997.

Collection Division of American Financial Enterprises, Inc.

On January 1, 1998, the Company purchased certain assets of AFECD for $1.7
million in cash. AFECD, an accounts receivable management company, expanded
NCO's penetration into the governmental and insurance sectors. AFECD's revenues
for the year ended December 31, 1997 were approximately $1.7 million.

ADVANTAGE Financial Services, Inc.

On October 1, 1997, the Company purchased all of the outstanding stock of
AFS for $2.9 million in cash, a $1.0 million Note and 46,442 shares of the
Company's Common Stock. The Note bears interest payable monthly at a rate of
8.0% per annum with one-half of the principal paid in April 1998 and the
balance due in January 1999. The acquisition was valued at approximately $5.0
million. AFS, an accounts receivable management company with offices in Dayton,
Ohio and Bristol, Tennessee, allowed NCO further penetration into the medical,
telecommunications and commercial sectors. AFS's revenues for the year ended
December 31, 1996 were approximately $5.1 million.

Credit Acceptance Corporation

On October 1, 1997, the Company purchased all of the outstanding stock of
CAC for $1.8 million in cash. CAC, an accounts receivable management company
located in Pittsburgh, Pennsylvania, allowed NCO further penetration into the
healthcare sector. CAC's revenues for the year ended December 31, 1996 were
approximately $2.3 million.

Collection Division of CRW Financial, Inc.

On February 2, 1997, NCO purchased substantially all of the assets of
CRWCD for $3.8 million in cash, 517,767 shares of Common Stock and warrants to
purchase 375,000 shares of Common Stock at an exercise price of $18.42 per
share. The purchase price was valued at approximately $12.8 million. CRWCD
provided accounts receivable management services principally to the
telecommunications, education, financial, government and utility sectors
throughout the United States. In addition, CRWCD had a commercial collections
division. CRWCD's revenues for the year ended December 31, 1996 were
approximately $25.9 million.

CMS A/R Services

On January 31, 1997, NCO purchased substantially all of the assets of CMS
A/R for $5.1 million in cash. CMS A/R, located in Jackson, Michigan,
specialized in providing a wide range of accounts receivable management and
administrative services to the utility sector, including traditional recovery
of delinquent accounts, outsourced administrative services, early stage
accounts receivable management and database management services. CMS A/R's
revenues for the year ended December 31, 1996 were approximately $6.8 million.

16
<PAGE>

Tele-Research Center, Inc.

On January 30, 1997, NCO purchased certain of the assets of Tele-Research
for $2.2 million in cash including contingent consideration paid. Tele-Research
located in Philadelphia, Pennsylvania, provided market research, data
collection and other teleservices to market research companies as well as
end-users. Tele-Research's revenues for the year ended December 31, 1996 were
approximately $1.8 million.

Goodyear & Associates, Inc.

On January 22, 1997, NCO purchased all of the outstanding stock of
Goodyear for $4.5 million in cash and a $900,000 Convertible Note. The Note is
convertible at any time into 63,755 shares of the Company's Common Stock and
bears interest payable monthly at a rate of 8.0% per annum with principal due
in January 2002. Goodyear, based in Charlotte, North Carolina, provided
accounts receivable management services principally to the telecommunications,
education and utility sectors. Goodyear's revenues for the year ended December
31, 1996 were approximately $5.5 million.

17
<PAGE>

USE OF PROCEEDS

The net proceeds from the sale of the 4,000,000 shares of Common Stock
offered by the Company hereby are estimated to be approximately $81.1 million
after deducting the underwriting discount and estimated expenses of the
Offering and based on the public offering price of $21.50 per share. The
Company will not receive any proceeds from the sale of Common Stock by the
Selling Shareholders.

Approximately $74.0 million of the net proceeds will be used to repay debt
under the Company's Credit Agreement with Mellon Bank, N.A. ("Mellon") incurred
in connection with the acquisition of FCA, including $4.9 million used to repay
certain outstanding indebtedness of FCA. The Company entered into the Credit
Agreement in July 1995 to obtain working capital and acquisition financing and
to refinance certain existing debt. The Credit Agreement, as amended, provides
a revolving line of credit which permits borrowings of up to $75.0 million at
an interest rate ranging from LIBOR plus 0.75% to LIBOR plus 2.0% (LIBOR was
5.69% at March 31, 1998). See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

The Company intends to use the remaining net proceeds of approximately
$7.1 million, together with borrowings under the Credit Agreement, to finance
the MedSource acquisition, which acquisition is expected to close in the second
quarter of 1998. The acquisition is subject to the satisfaction of certain
closing conditions, including regulatory approval and other customary
conditions.

Pending the uses described above, the Company intends to invest the net
proceeds in short-term, investment-grade securities.

DIVIDEND POLICY

The Company does not anticipate paying cash dividends on its Common Stock
in the foreseeable future. In addition, the Company's Credit Agreement
prohibits the Company from paying cash dividends without the lender's prior
consent. The Company currently intends to retain future earnings to finance its
operations and fund the growth of its business. Any payment of future dividends
will be at the discretion of the Board of Directors of the Company and will
depend upon, among other things, the Company's earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions with
respect to the payment of dividends and other factors that the Company's Board
of Directors deems relevant.

18
<PAGE>

PRICE RANGE OF COMMON STOCK

The following table sets forth the range of high and low closing sale
prices for the Common Stock as reported on the Nasdaq National Market since the
Company's initial public offering on November 6, 1996. The Common Stock is
traded under the symbol "NCOG". The table has been adjusted to reflect the
3-for-2 stock split paid in December 1997.

High Low
----------- -----------
1996
Fourth Quarter (from November 6) ......... $ 12.96 $ 11.00
1997
First Quarter ............................ 18.92 11.17
Second Quarter ........................... 22.50 12.17
Third Quarter ............................ 26.50 20.58
Fourth Quarter ........................... 28.33 21.00
1998
First Quarter ............................ 29.25 21.87
Second Quarter (through June 1) .......... 28.00 22.00

On June 1, 1998, the last reported sale price of the Common Stock on the
Nasdaq National Market was $22.00 per share. As of June 1, 1998, the Company's
Common Stock was held by approximately 54 holders of record. Based on
information obtained from the Company's transfer agent, the Company believes
that there are approximately 2,500 beneficial owners of its Common Stock.

19
<PAGE>

CAPITALIZATION

The following table sets forth as of March 31, 1998: (a) the actual
capitalization of the Company; (b) the pro forma capitalization of the Company
giving effect to the FCA and MedSource acquisitions; and (c) the pro forma
capitalization of the Company as adjusted to give effect to the sale by the
Company of 4,000,000 shares of Common Stock in the Offering (at the public
offering price of $21.50 per share) and the application of the net proceeds
therefrom as set forth in "Use of Proceeds." This table should be reviewed in
conjunction with the Company's historical and pro forma financial statements
and related notes appearing elsewhere in this Prospectus or incorporated herein
by reference.

<TABLE>
<CAPTION>
March 31, 1998
---------------------------------------------
Pro Forma
Actual Pro Forma(1) As Adjusted(2)
---------- -------------- ---------------
(In thousands)
<S> <C> <C> <C>
Long-term debt, net of current portion ........................ $ 923 $ 94,715 $ 16,592
Capitalized lease obligations, net of current portion ......... 225 909 814
Deferred taxes and other liabilities .......................... 2,284 2,287 2,287
------- -------- --------
Total long-term liabilities ............................. 3,432 97,911 19,693
Shareholders' equity:
Preferred Stock, no par value, 5,000,000 shares
authorized; no shares issued and outstanding .............. -- -- --
Common Stock, no par value, 37,500,000 shares
authorized;
13,391,884 shares issued and outstanding, actual,
17,391,884 shares issued and outstanding, as
adjusted (3) ........................................... 80,802 80,802 161,902
Unexercised warrants (4) ................................... 875 875 875
Retained earnings .......................................... 10,279 10,279 10,279
------- -------- --------
Total shareholders' equity .............................. 91,956 91,956 173,056
------- -------- --------
Total capitalization .................................... $95,388 $189,867 $192,749
======= ======== ========
</TABLE>

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

(1) Gives effect to: (i) the acquisition of FCA for approximately $69.9 million
in cash, which was borrowed against the Company's credit facility, and the
recognition of certain acquisition related liabilities; and (ii) the
pending acquisition of MedSource, for approximately $18.1 million in cash,
of which $5.1 million was assumed to be borrowed from the Company's credit
facility, and the recognition of certain acquisition related liabilities.
The Company expects to recognize goodwill of $58.4 million and $36.3
million for the FCA and MedSource acquisitions, respectively.

(2) Gives effect to the issuance of 4.0 million shares of Common Stock at the
public offering price of $21.50 per share and the application of the net
proceeds therefrom. See "Use of Proceeds."

(3) Excludes: (i) an aggregate of 2,052,659 shares of Common Stock reserved for
issuance under the Company's 1995 Stock Option Plan, 1996 Stock Option
Plan and 1996 Non-Employee Director Stock Option Plan; (ii) 63,755 shares
of Common Stock reserved for issuance upon the conversion of the Company's
$900,000 Convertible Note issued as partial consideration for the Goodyear
acquisition; and (iii) 375,000 shares of Common Stock reserved for
issuance upon the exercise of warrants at an exercise price of $18.42 per
share issued by the Company as partial consideration for the CRWCD
acquisition.

(4) Reflects 375,000 shares of Common Stock reserved for issuance upon the
exercise of warrants at an exercise price of $18.42 per share issued by
the Company as partial consideration for the CRWCD acquisition.

20
<PAGE>

SELECTED FINANCIAL DATA

(Amounts in thousands, except per share data)

The selected financial data of the Company for each of the five years in
the period ended December 31, 1997 are derived from the financial statements of
the Company which have been audited by Coopers & Lybrand L.L.P., independent
accountants. The selected financial data as of March 31, 1998 and for the three
months ended March 31, 1997 and 1998 are derived from the unaudited financial
statements of the Company and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) which are
necessary to present fairly the results of operations and financial position
for such periods. The results for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full year. The Pro
Forma Consolidated Financial Statements do not purport to represent what NCO's
actual results of operations or financial position would have been had the
acquisitions occurred as of such dates, or to project NCO's results of
operations or financial position for any period or date, nor does it give
effect to any matters other than those described in the notes thereto. The
following data should be read in conjunction with the Company's actual
consolidated financial statements incorporated by reference in this Prospectus
and the Company's pro forma consolidated financial statements and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------
1993 1994 1995 1996
---------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
Statement of Income Data:
Revenue ...................................... $ 7,445 $ 8,578 $ 12,733 $ 30,760
Operating costs and expenses:
Payroll and related expenses ................ 4,123 4,558 6,797 14,651
Selling, general and administrative
expenses ................................... 2,391 2,674 4,042 10,033
Depreciation and amortization expenses 141 215 348 1,254
Reorganization charge ....................... -- -- -- --
------- ------- -------- --------
Income from operations ....................... 790 1,131 1,546 4,822
Other income (expense) ....................... 11 (45) (180) (575)
------- ------- -------- --------
Income before provision for income taxes 801 1,086 1,366 4,247
Income tax expense (4) ....................... 320 434 546 1,706
------- ------- -------- --------
Net income (4) ............................... $ 481 $ 652 $ 820 $ 2,541
======= ======= ======== ========
Net income per share:
Basic (4) ................................... $ 0.12 $ 0.34
======== ========
Diluted (4) ................................. $ 0.12 $ 0.34
======== ========
Weighted average shares outstanding:
Basic ....................................... 7,093(5) 7,630(5)
Diluted ..................................... 7,093(5) 7,658(5)

December 31,
------------------------------------------------------
1993 1994 1995 1996
-------- -------- ---------- ----------
Balance Sheet Data:

Cash and cash equivalents ................... $ 562 $ 526 $ 805 $ 12,059
Working capital ............................. 445 473 812 13,629
Total assets ................................ 1,990 3,359 6,644 35,826
Long-term debt, net of current portion . 59 732 2,593 1,092
Shareholders' equity ........................ 876 1,423 2,051 30,648

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
For the Years Ended December 31, Three Months Ended March 31,
-------------------------------- ---------------------------------------------
1997 1998
-------------------------------- --------------------------------
Pro Forma As Pro Forma As
Actual Adjusted (1)(2) 1997 Actual Adjusted (2) (3)
------------- ----------------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenue ...................................... $ 85,284 $188,395 $ 18,077 $ 27,609 $ 48,399
Operating costs and expenses:
Payroll and related expenses ................ 42,502 94,315 9,046 14,144 24,832
Selling, general and administrative
expenses ................................... 27,947 62,525 5,932 8,568 15,173
Depreciation and amortization expenses 3,369 11,540 716 1,155 2,094
Reorganization charge ....................... -- 1,517 -- -- --
--------- -------- -------- -------- --------
Income from operations ....................... 11,466 18,498 2,383 3,742 6,300
Other income (expense) ....................... 388 (91) (82) 153 (140)
--------- -------- -------- -------- --------
Income before provision for income taxes 11,854 18,407 2,301 3,895 6,160
Income tax expense (4) ....................... 4,780 8,176 994 1,579 2,866
--------- -------- -------- -------- --------
Net income (4) ............................... $ 7,074 $ 10,231 $ 1,307 $ 2,316 $ 3,294
========= ======== ======== ======== ========
Net income per share:
Basic (4) ................................... $ 0.59 $ 0.61 $ 0.12 $ 0.17 $ 0.19
========= ======== ======== ======== ========
Diluted (4) ................................. $ 0.57 $ 0.59 $ 0.12 $ 0.17 $ 0.19
========= ======== ======== ======== ========
Weighted average shares outstanding:
Basic ....................................... 11,941 16,732 10,656 13,240 17,240
Diluted ..................................... 12,560 17,364 11,230 13,801 17,801

</TABLE>
<TABLE>
<CAPTION>
March 31, 1998
-----------------------------------------------
Pro Pro Forma As
1997 Actual Forma (6) Adjusted (7)
--------- --------- ------------- -----------------
Balance Sheet Data:
<S> <C> <C> <C> <C>
Cash and cash equivalents ................... $ 29,539 $ 16,088 $ 6,893 $ 6,893
Working capital ............................. 36,440 22,173 (56) 2,826
Total assets ................................ 101,636 105,708 227,420 227,420
Long-term debt, net of current portion . 1,437 923 94,715 16,592
Shareholders' equity ........................ 89,334 91,956 91,956 173,056
</TABLE>

21
<PAGE>

- ------------
(1) Assumes that the 1997 Acquisitions, the 1998 Acquisitions and the FCA and
MedSource acquisitions occurred on January 1, 1997. Gives effect to: (i)
the elimination of payroll and related expenses relating to certain
redundant collection and administrative personnel costs immediately
eliminated at the time of the 1997 Acquisitions and the 1998 Acquisitions
and expenses identified during the due diligence process which will be
eliminated upon the closing of the FCA and MedSource acquisitions; (ii)
the elimination of certain rental expenses and related operating costs
attributable to facilities which were closed at the time of the 1997
Acquisitions and the 1998 Acquisitions and facilities identified during
the due diligence process which will be closed upon the completion of the
FCA and MedSource acquisitions; (iii) the increase in amortization expense
resulting from the acquisitions; (iv) the elimination of depreciation and
amortization expense related to assets revalued or not acquired; (v)
interest expense on borrowings related to the acquisitions; (vi) the
estimated income tax expense, after giving consideration to non-deductible
goodwill expense; (vii) the elimination of interest expense on debt
assumed to be repaid with a portion of the proceeds from the Offering;
(viii) the issuance of 517,767 shares of Common Stock and warrants
exercisable for 375,000 shares of Common Stock in connection with the
acquisition of CRWCD; (ix) the issuance of 1,425,753 shares of Common
Stock in the July 1997 Offering at the public offering price of $19.67 per
share which, net of the underwriting discount and offering expenses paid
by the Company, would be sufficient to repay acquisition related debt of
$8.4 million and to fund the acquisitions of AFECD and TRC; (x) the
issuance of 46,442 shares of Common Stock issued in connection with the
acquisition of AFS; and (xi) the issuance of 4.0 million shares of Common
Stock at the public offering price of $21.50 per share, net of the
underwriting discount and estimated offering expenses payable by the
Company, which would be sufficient to repay certain acquisition related
debt.

(2) Includes reorganization charges and other costs of $1.9 million and $90,000
for the year ended December 31, 1997 and the three months ended March 31,
1998, respectively. Net income per share -- basic and net income per share
-- diluted would have been $0.69 and $0.66, respectively, and $0.19 and
$0.19, respectively, on a pro forma basis assuming those charges had not
been incurred.

(7) Gives effect to the issuance of 4.0 million shares of Common Stock at the
public offering price of $21.50 per share and the application of the net
proceeds therefrom. See "Use of Proceeds."

22
<PAGE>

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

Overview

NCO is a leading provider of accounts receivable management and other
outsourced services such as customer service call centers, market research and
other outsourced administrative services. In 1997, accounts receivable
management services comprised more than 89.6% of the Company's revenue. As a
result of rapid internal growth and selected strategic acquisitions, the
Company's revenue has grown from $7.4 million in 1993 to $188.4 million in 1997
on a pro forma basis.

The Company has historically generated substantially all of its revenue
from the recovery of delinquent accounts receivable on a contingency fee basis.
Contingency fees typically range from 15% to 35% of the amount recovered on
behalf of the Company's clients, but can range from 6% for the management of
accounts placed early in the recovery cycle to 50% for accounts which have been
serviced extensively by the client or by other third-party providers. In
addition, the Company generates revenue from fixed fee services for certain
accounts receivable management and other related services. Revenue is earned
and recognized upon collection of accounts receivable for contingency fee
services and as work is performed for fixed fee services. The Company enters
into contracts with most of its clients which define, among other things, fee
arrangements, scope of services and termination provisions. Clients may usually
terminate such contracts on 30 or 60 days notice. In the event of termination,
however, clients typically do not withdraw accounts referred to the Company
prior to the date of termination, thus providing the Company with an ongoing
stream of revenue from such accounts which diminishes over time.

The Company's costs consist principally of payroll and related costs,
selling, general and administrative costs, and depreciation and amortization.
Payroll and related expenses consist of wages and salaries, commissions,
bonuses and benefits for all employees of the Company, including management and
administrative personnel. As the Company has grown, payroll costs as a
percentage of revenue have gradually declined. Selling, general and
administrative expenses, which include postage, telephone and mailing costs,
and other costs of collections as well as expenses which directly support the
operations of the business including facilities costs, equipment maintenance,
sales and marketing, data processing, professional fees and other management
costs, have remained relatively constant as a percentage of revenue since 1993.

To date, all of the Company's acquisitions have been accounted for under
the purchase method of accounting with the results of the acquired companies
included in the Company's statements of income beginning on the date of
acquisition. In pursuing acquisitions, the Company typically seeks to serve new
geographic markets or industries, expand its presence in its existing markets
and add complementary services. Upon completion of an acquisition, the Company
immediately focuses on achieving operating efficiencies by eliminating
redundant expenses and reducing certain other expenses to levels consistent
with the Company's current operating results. Included elsewhere in this
prospectus are Pro Forma Consolidated Financial Statements which show the
effect of the 1997 Acquisitions, the 1998 Acquisitions, the FCA and MedSource
acquisitions as if the results of each acquired company had been included in
the Company's statements of income for the periods presented.

For the periods shown prior to September 3, 1996, the Company had been
treated for federal and state income tax purposes as an S Corporation. As a
result, the Company's shareholders, rather than the Company, were taxed
directly on the earnings of the Company for federal and certain state income
tax purposes. The Company terminated its status as an S Corporation effective
September 3, 1996 and is now subject to federal and state income taxes at
applicable C Corporation rates. Accordingly, the income tax expense has been
calculated as if the Company were subject to federal and state income taxes for
all prior periods.

23
<PAGE>

Results of Operations

The following table sets forth income statement data on an historical and
pro forma basis as a percentage of revenue:

<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1995 1996 1997
----------- ----------- ------------------------
Pro
Actual Forma
----------- -----------
<S> <C> <C> <C> <C>
Revenue ....................................... 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Payroll and related expenses ................. 53.4 47.6 49.8 50.1
Selling, general and administrative
expenses .................................... 31.7 32.6 32.8 33.2
Depreciation and amortization expenses. . 2.7 4.1 4.0 6.1
Reorganization charge ........................ -- -- -- 0.8
------ ------ ------ ------
Total operating costs and expenses. ......... 87.8 84.3 86.6 90.2
------ ------ ------ ------
Income from operations ........................ 12.2 15.7 13.4 9.8
Other income (expense) ........................ ( 1.4) ( 1.9) 0.5 ( 3.3)
------ ------ ------ ------
Income before income tax expense .............. 10.8 13.8 13.9 6.5
Income tax expense (1) ........................ 4.3 5.5 5.6 3.0
------ ------ ------ ------
Net income .................................... 6.5% 8.3% 8.3% 3.5%
====== ====== ====== ======
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1997 1998
----------- ------------------------
Pro
Actual Forma
----------- -----------
<S> <C> <C> <C>
Revenue ....................................... 100.0% 100.0% 100.0%
Operating costs and expenses:
Payroll and related expenses ................. 50.0 51.2 51.3
Selling, general and administrative
expenses .................................... 32.8 31.0 31.4
Depreciation and amortization expenses. . 4.0 4.2 4.3
Reorganization charge ........................ -- -- --
------ ------ ------
Total operating costs and expenses. ......... 86.8 86.4 87.0
------ ------ ------
Income from operations ........................ 13.2 13.6 13.0
Other income (expense) ........................ ( 0.5) 0.6 ( 3.7)
------ ------ ------
Income before income tax expense .............. 12.7 14.2 9.3
Income tax expense (1) ........................ 5.5 5.7 4.5
------ ------ ------
Net income .................................... 7.2% 8.5% 4.8%
====== ====== ======
</TABLE>

- ------------
(1) The Company was taxed as an S Corporation prior to September 3, 1996.
Accordingly, income tax expense and net income have been provided as if
the Company had been subject to income taxes in all periods presented.

Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997

Revenue. Revenue increased $9.5 million or 52.7% to $27.6 million for the
three months ended March 31, 1998 from $18.1 million for the comparable period
in 1997. Of this increase, $3.6 million was attributable to the addition of new
clients and growth in business from existing clients. Revenue attributable to
the Goodyear, Tele-Research and CMS A/R acquisitions completed in January 1997
represented $908,000 of the increase and $1.2 million of the increase was
attributable to the CRWCD acquisition completed in February 1997. In addition,
$2.1 million of the increase was attributable to the AFS and CAC acquisitions
completed in October 1997 and $1.7 million of the increase was attributable to
the AFECD and TRC acquisitions completed in the first quarter of 1998.

Payroll and related expenses. Payroll and related expenses increased $5.1
million to $14.1 million for the three months ended March 31, 1998 from $9.0
million for the comparable period in 1997, and increased as a percentage of
revenue to 51.2% from 50.0%. Payroll and related expenses increased as a
percentage of revenue primarily as a result of the market research division
having a higher payroll cost structure than that of the remainder of the
Company. In addition, there were additional payroll costs attributable to the
start up of a contract with the United States Department of Education (the "DOE
Contract") which required the Company to hire and train a certain number of
collection personnel prior to realizing any revenue under the contract. These
higher costs were partially offset by lower payroll costs in the AFS and CAC
acquisitions and by spreading the cost of management and administrative
personnel over a larger revenue base.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $2.7 million to $8.6 million for the three
months ended March 31, 1998 from $5.9 million for the comparable period in
1997, and decreased as a percentage of revenue to 31.0% from 32.8%. A portion
of the decrease was attributable to the market research division having a lower
selling, general and administrative expense structure than that of the
remainder of the business. In addition, additional operating efficiencies were
obtained by spreading selling, general and administrative expenses over a
larger revenue base.

Depreciation and amortization. Depreciation and amortization increased to
$1.2 million for the three months ended March 31, 1998 from $716,000 for the
comparable period in 1997. Of this increase, $90,000 was

24
<PAGE>

attributable to the CAC and AFS acquisitions, and $120,000 was attributable to
the AFECD and TRC acquisitions. The remaining $274,000 primarily consisted of
depreciation resulting from normal capital expenditures incurred in the
ordinary course of business.

Other income (expense). Interest and investment income increased $139,000
to $232,000 for the three months ended March 31, 1998 from $93,000 for the
comparable period in 1997. This increase was primarily attributable to the
investment of funds remaining from the 1997 Offering, as well as an increase in
operating funds and funds held in trust for clients. Interest expense decreased
to $78,000 for the three months ended March 31, 1998 from $175,000 for the
comparable period in 1997. During the first quarter of 1997, the Company
borrowed $8.4 million on its revolving credit facility to partially finance the
Goodyear, Tele-Research, CMS A/R and CRWCD acquisitions, and issued a $900,000
convertible note payable in connection with the Goodyear acquisition in January
1997. The revolving credit facility was repaid with a portion of the proceeds
from the 1997 Offering. In addition, the $1.0 million convertible note payable
issued in connection with the Management Adjustment Bureau, Inc. ("MAB")
acquisition in September 1996 was converted to Common Stock in connection with
the 1997 Offering.

Income tax expense. Income tax expense increased to $1.6 million, or 40.5%
of income before taxes, for the three months ended March 31, 1998 from
$994,000, or 43.2% of income before taxes, for the comparable period in 1997.
Income taxes were computed after giving effect to non-deductible goodwill
expenses resulting from certain of the acquired companies.

Net income. Net income increased $1.0 million or 77.2% to $2.3 million for
the three months ended March 31, 1998 from $1.3 million for the comparable
period in 1997.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Revenue. Revenue increased $54.5 million or 177.3% to $85.3 million for
1997 from $30.8 million in 1996. Of this increase in revenue, $8.7 million of
revenue was attributable to the acquisition of MAB completed in September 1996
and $37.1 million of revenue was attributable to the 1997 Acquisitions. The
addition of new clients and growth in business from existing clients
represented $8.7 million of the increase in revenue.

Payroll and related expenses. Payroll and related expenses increased $27.9
million to $42.5 million for 1997 from $14.7 million in 1996, and increased as
a percentage of revenue to 49.8% from 47.6%. Payroll and related expenses
increased as a percentage of revenue primarily as a result of the businesses
acquired in the MAB acquisition and the 1997 Acquisitions which closed in the
first quarter of 1997 having higher cost structures than that of the Company.
This increase was partially offset by spreading the cost of management and
administrative personnel over a larger revenue base. In addition, in the fourth
quarter of 1997 there was $339,000 of additional payroll expense attributable
to the start up of the DOE Contract which required the Company to hire and
train a certain number of collection personnel prior to realizing any revenue
under the contract.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $17.9 million to $27.9 million for 1997 from
$10.0 million in 1996. Selling, general and administrative expenses increased
slightly as a percentage of revenue to 32.8% from 32.6% due to start up costs
attributable to the DOE Contract of $274,000. Also, the business acquired in
the 1997 Acquisitions had a higher cost structure than that of the Company and
the Company has continued to experience increased costs as a result of changes
in business mix which require the increased use of national databases and
credit reporting services. The increases were offset by realizing operating
efficiencies and by spreading selling, general and administrative expenses over
a larger revenue base.

Depreciation and amortization. Depreciation and amortization increased to
$3.4 million for 1997 from $1.3 million in 1996. Of this increase, $1.8 million
was a result of the MAB acquisition and the 1997 Acquisitions. The remaining
$260,000 consisted of amortization of deferred financing charges and
depreciation resulting from capital expenditures incurred in the normal course
of business.

Other income (expense). Interest and investment income increased $778,000
to $1.0 million for 1997 from the comparable period in 1996. This increase was
primarily attributable to the investment of funds remaining from the Company's
public offering completed in July 1997 (the "1997 Offering"), as well as an
increase in

25
<PAGE>

operating funds and funds held in trust for clients. Interest expense decreased
to $591,000 for 1997 from $818,000 in 1996. Although the Company's revolving
credit facility had been repaid with a portion of the net proceeds from the
Company's initial public offering completed in November 1996 (the "IPO"), the
Company borrowed $8.4 million on its revolving credit facility to partially
finance the 1997 Acquisitions which closed in the first quarter of 1997, and
issued a $900,000 convertible note payable in connection with the Goodyear
acquisition in January 1997. The revolving credit facility was repaid with a
portion of the proceeds from the 1997 Offering. In addition, the $1.0 million
convertible note payable issued in connection with the MAB acquisition in
September 1996 was converted to Common Stock in connection with the 1997
Offering. As a result of the disposal of certain fixed assets in the move of
the Company's corporate headquarters in July 1997, the Company incurred a loss
on the disposal of fixed assets in the amount of $41,000.

Income tax expense. Income tax expense for 1997 was $4.8 million or 40.3%
of income before taxes and was computed after giving effect to non-deductible
goodwill expenses resulting from certain of the acquired companies. In 1996,
the Company was an S Corporation until September 3, 1996 and, accordingly,
there was no income tax expense until that time. The income tax expense of $1.7
million for 1996 (assuming the Company was taxed as a C Corporation for the
entire year) was computed utilizing an assumed rate of 40.0% after giving
effect to non-deductible goodwill.

Net income. Net income in 1997 increased to $7.1 million from net income
of $2.5 million in 1996, a 178.4% increase.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Revenue. Revenue increased $18.0 million or 141.6% to $30.8 million in
1996 from $12.7 million in 1995. Of this increase, $5.0 million was
attributable to the MAB acquisition completed in September 1996, $6.8 million
was attributable to the Trans Union Corporation Collections Division ("TCD")
acquisition completed in January 1996, and $1.3 million was attributable to a
full year of revenue from the Eastern Business Services, Inc. ("Eastern")
acquisition in 1996 versus three months in 1995. Additionally, $4.8 million of
the increase was due to internal growth from the addition of new clients and a
growth in business from existing clients. Of this internal growth, $2.9 million
of the increase was due to a full 12 months of revenue in 1996 from a contract
awarded to the Company by a government agency in April 1995. Revenue from other
related services, which became an area of focus in 1996, increased $1.2 million
to $1.5 million in 1996 from $259,000 in 1995.

Payroll and related expenses. Payroll and related expenses increased $7.9
million to $14.7 million in 1996 from $6.8 million in 1995, but decreased as a
percentage of revenue to 47.6% from 53.4%. The decrease in payroll and related
expenses as a percentage of revenue was primarily the result of spreading the
relatively fixed costs of management and administrative personnel over a larger
revenue base and the increased utilization of "on-line" computer services and
other outside services, as well as eliminating redundant administrative staff
following the TCD and Eastern acquisitions. These efficiencies were offset in
part by higher payroll and related expenses of MAB as a percentage of its
revenue. The effect of MAB was minimized due to only four months of the
operations of MAB being included in the income statements.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $6.0 million to $10.0 million in 1996, from
$4.0 million in 1995, and increased as a percentage of revenue to 32.6% from
31.7%. A large percentage of the increase was due to the increased costs
associated with litigation management services performed by the Company on
behalf of its clients in states where the laws are more conducive to the
utilization of the legal process for recovery of delinquent accounts. In
addition, the Company experienced increased costs as a result of a change in
business mix which required the increased use of national data bases and credit
reporting services. These increases were offset in part by operating
efficiencies resulting from the TCD acquisition.

Depreciation and amortization. Depreciation and amortization increased to
$1.3 million in 1996 from $348,000 in 1995. Of this increase, $605,000 was a
result of the MAB, TCD and Eastern acquisitions. The remaining $301,000
consisted of amortization of deferred financing charges and depreciation
resulting from capital expenditures incurred in the ordinary course of
business.

Other income (expense). Interest expense increased to $818,000 in 1996
from $180,000 in 1995, primarily due to increased borrowings associated with
the acquisitions of MAB, TCD and Eastern. Also included in other income
(expense) for 1995 was a loss from the disposal of assets of $49,000.

26
<PAGE>

Income tax expense. Income tax expense of $1.7 million and $546,000 in
1996 and 1995, respectively (assuming the Company was taxed as a C Corporation
for each of the respective years), was computed using an assumed tax rate of
40.0% after giving effect to non-deductible goodwill from certain of the
acquired companies.

Net income. Net income increased to $2.5 million in 1996 from $820,000 in
1995, a 210.0% increase.

Quarterly Results

The following table sets forth selected actual historical financial data
for the calendar quarters of 1996 and 1997, and for the first calendar quarter
of 1998. This quarterly information is unaudited but has been prepared on a
basis consistent with the Company's audited financial statements incorporated
by reference herein and, in the Company's opinion, includes all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of results for any
future period.

<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------
1996
--------------------------------------------------
Mar. 31 Jun. 30 Sept. 30 Dec. 31
----------- ----------- ---------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenue .................... $ 6,044 $ 6,499 $ 7,715 $ 10,502
Income from operations ..... 915 1,156 1,183 1,569
Net income ................. 760 1,001 968 906
As a percentage of revenue:
Income from operations ..... 15.1% 17.8% 15.3% 14.9%
Net income ................. 12.6% 15.4% 12.5% 8.6%

<CAPTION>
Quarter Ended
--------------------------------------------------------------------
1997 1998
------------------------------------------------------ ------------
Mar. 31 Jun. 30 Sept. 30 Dec. 31 Mar. 31
------------ ------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenue .................... $ 18,077 $ 21,162 $ 21,739 $ 24,306 $ 27,609
Income from operations ..... 2,383 3,039 3,112 2,932 3,742
Net income ................. 1,307 1,717 2,082 1,968 2,316
As a percentage of revenue:
Income from operations ..... 13.2% 14.4% 14.3% 12.1% 13.6%
Net income ................. 7.2% 8.1% 9.6% 8.1% 8.4%
</TABLE>

The Company has experienced and expects to continue to experience
quarterly variations in operating results as a result of many factors,
including the costs and timing of completion and integration of acquisitions,
the timing of clients' accounts receivable management programs, the
commencement of new contracts, the termination of existing contracts, costs to
support growth by acquisition or otherwise, the effect of the change of
business mix on margins and the timing of additional selling, general and
administrative expenses to support new business. In the fourth quarter of 1996,
income from operations and net income as a percentage of revenue were lower
than in prior quarters of 1996 largely as a result of the higher payroll and
related expenses of MAB as compared to the Company's core business. Similarly,
in the first quarter of 1997, the Company's operating and net margins were
adversely affected by the higher cost structures of MAB and the 1997
Acquisitions which closed in the first quarter of 1997 as compared to the
Company's core business. In addition, in connection with certain customers, the
Company could incur costs in periods prior to recognizing revenue under such
contracts. For example, income from operations and net income in the fourth
quarter of 1997 were adversely affected by start-up costs attributable to the
DOE Contract. Without such costs, the income from operations and net income for
the quarter ended December 31, 1997 would have been 14.6% and 9.6%,
respectively. Additionally, the Company's planned operating expenditures are
based on revenue forecasts, and if revenues are below expectations in any given
quarter, operating results would likely be materially adversely affected. While
the effects of seasonality on the Company's business historically have been
obscured by its rapid growth, the Company's business tends to be slower in the
third and fourth quarters of the year due to the summer and holiday seasons.

<PAGE>

Liquidity and Capital Resources

In July 1997, the Company completed the 1997 Offering, selling 2,166,000
shares of Common Stock and receiving net proceeds of approximately $40.4
million. In November 1996, the Company completed its IPO, selling 3,750,000
shares of Common Stock and receiving net proceeds of approximately $28.8
million.

The Company's primary sources of cash have historically been cash flow
from operations, bank borrowings and, in 1996 and 1997, the net proceeds from
the IPO and the 1997 Offering, respectively. Cash has been used for
acquisitions, S Corporation distributions to shareholders prior to the IPO,
purchases of equipment and working capital to support the Company's growth.

27
<PAGE>

Cash provided by operating activities was $4.9 million during the three
months ended March 31, 1998, and $1.4 million for the comparable period in
1997. The increase in cash provided by operations was primarily due to the
increase in net income to $2.3 million for the three months ended March 31,
1998 compared to $1.3 million for the comparable period in 1997. In addition
the increase in cash provided by operations was also attributable to the
decrease in other current and long term assets by $728,000 for the three months
ended March 31, 1998 compared to $177,000 for the comparable period in 1997,
and the increase in non-cash charges, primarily depreciation and amortization,
to $1.2 million during the three months ended March 31, 1998 compared to
$716,000 for the comparable period in 1997.

Cash provided by operating activities was $6.7 million in 1997 and $2.8
million in 1996. The increase in cash provided by operations was primarily due
to the increase in net income to $7.0 million in 1997 compared to $3.6 million
in 1996, and the increase in non-cash charges, primarily depreciation and
amortization, to $3.4 million in 1997 compared to $1.3 million in 1996. These
increases were offset by a $3.9 million increase in accounts receivable in 1997
compared to a $1.8 million increase in 1996. Approximately $1.0 million of
accounts payable and accrued expenses in acquired companies were reduced in
order to bring the balances in line with NCO's payment policies.

Cash provided by operating activities was $2.8 million in 1996 and $2.0
million in 1995. The increase in cash provided by operations was primarily due
to the increase in net income to $3.6 million in 1996 compared to $1.4 million
in 1995, and the increase in non-cash charges, primarily depreciation and
amortization, to $1.3 million in 1996 compared to $348,000 in 1995. These
increases were offset by a $1.8 million increase in accounts receivable in 1996
compared to a $572,000 increase in 1995 and a $222,000 increase in accounts
payable and accrued expenses in 1996 compared to an $858,000 increase in 1995.

Cash used in investing activities was $18.2 million during the three
months ended March 31, 1998 compared to $15.9 million for the comparable period
in 1997. The increase was primarily due to the cash portion of the purchase
price paid for the acquisitions of AFECD and TRC in the first quarter of 1998
versus the cash portion of the purchase price paid for the acquisitions of
Goodyear, Tele-Research, CMS A/R, and CRWCD during the first quarter of 1997.
In addition, during the three months ended March 31, 1998, capital expenditures
were $1.1 million compared to $312,000 for the comparable period in 1997.

Cash used in investing activities was $29.2 million in 1997 compared to
$13.3 million for 1996. The increase was primarily due to the 1997 Acquisitions
compared with the acquisitions of TCD and MAB in 1996. The Company financed the
1997 Acquisitions with the proceeds of the 1997 Offering and the IPO,
borrowings under the Credit Agreement, seller financing and working capital.
The 1997 Acquisitions collectively resulted in goodwill of $37.0 million.

Cash used in investing activities was $13.3 million in 1996 compared to
$2.1 million in 1995. The increase was primarily due to the acquisitions of MAB
and TCD in 1996. The Company financed these acquisitions with borrowings under
the Credit Agreement and seller financing. The 1996 acquisitions collectively
resulted in goodwill of $14.0 million.

In addition to equipment financed under operating leases, capital
expenditures were $298,000, $976,000 and $3.4 million in 1995, 1996 and 1997,
respectively.

Cash used in financing activities was $108,000 during the three months
ended March 31, 1998 compared to cash provided by financing activities of $8.2
million for the comparable period in 1997. During the first quarter of 1997,
bank borrowings were the Company's primary source of cash from financing
activities and were used for acquisitions. The Company raised net proceeds of
approximately $40.4 million in the 1997 Offering and used a portion of the
proceeds from the IPO and the 1997 Offering to repay $8.4 million of
outstanding indebtedness under its revolving credit facility.

Cash provided by financing activities was $39.9 million in 1997 compared
to $21.8 million in 1996. Net proceeds of $40.4 million from the 1997 Offering
was the Company's primary source of cash from financing activities which was
used for acquisitions and to repay outstanding indebtedness.

Cash provided by financing activities was $21.8 million in 1996 compared
to $280,000 in 1995. Bank borrowings had been the Company's primary source of
cash from financing activities and were used for acquisitions and, along with
cash provided by operations, for distributions to shareholders. The Company
raised net

28
<PAGE>

proceeds of approximately $28.8 million in the IPO of which $15.0 million was
used to repay outstanding indebtedness under the Credit Agreement and
approximately $3.2 million was used to pay undistributed S Corporation
earnings. Total distributions to shareholders were $4.1 million in 1996 and
$1.1 million in 1995.

In March 1998, the Credit Agreement was amended to, among other things,
increase the Company's revolving credit facility with Mellon to provide for
borrowings up to $75.0 million at an interest rate ranging from LIBOR plus
0.75% to LIBOR plus 2.0% (LIBOR was 5.69% at March 31, 1998). The Company has
the right to permanently reduce the revolving credit facility by up to $25.0
million. There were no outstanding borrowings at December 31, 1996 or 1997 or
March 31, 1998. The revolving credit line is collateralized by substantially
all the assets of the Company and includes certain financial covenants such as
maintaining minimum working capital and net worth requirements and includes
restrictions on, among other things, acquisitions, capital expenditures and
distributions to shareholders.

The Company has entered into an agreement to acquire all of the outstanding
stock of MedSource for approximately $18.1 million in cash and the repayment of
certain debt of MedSource of approximately $16.9 million. The Company expects to
finance this acquisition from a portion of the proceeds of this Offering and
borrowings under the Company's revolving credit facility.

The Company believes that funds generated from operations, together with
existing cash, the net proceeds from the Offering and available borrowings
under its Credit Agreement will be sufficient to finance its current operations
and planned capital expenditure requirements and internal growth at least
through the next twelve months. However, the Company could require additional
debt or equity financing if it were to make any other significant acquisitions
for cash.

Year 2000 System Modifications

NCO has implemented a program to evaluate and address the impact of the
year 2000 on its information systems in order to ensure that its network and
software will manage and manipulate data involving the transition of dates from
1999 to 2000 without functional or data abnormality and without inaccurate
results related to such data. This program includes steps to: (a) identify
software that requires date code remediation; (b) establish timelines for
availability of corrective software releases; (c) implement the fix to a test
environment and test the remediated product; (d) integrate the updated software
to NCO's production environment; (e) communicate and work with clients to
implement year 2000 compliant data exchange formats; and (f) provide management
with assurance of a seamless transition to the year 2000. The identification
phase is substantially complete and delivery of the final software updates are
scheduled for the third quarter of 1998. Management expects to complete the
major portion of testing and acceptance procedures in 1998. The Company will
continue to coordinate the year 2000 compliance effort throughout the balance
of 1998 and into 1999 to synchronize data exchange formats with clients.

For the years 1998 and 1999, the Company expects to incur total pre-tax
expenses of approximately $200,000 to $250,000 per year. These costs are
associated with both internal and external staffing resources for the necessary
planning, coordination, remediation, testing, and other expenses to prepare its
systems for the year 2000. However, a portion of these expenses will not be
incremental, but rather represent a redeployment of existing information
technology resources. Management does not expect substantial additional license
fee costs associated directly with year 2000 compliance because the Company's
software vendors are incorporating necessary modifications as part of their
normal system maintenance. The majority of the costs will be incurred through
the modification and testing of electronic data interchange formats with the
Company's clients. The cost of planning and initial remediation incurred
through 1997 has not been significant.

29
<PAGE>

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information."
SFAS No. 131 establishes standards for reporting financial information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
is required to disclose this information for the first time it publishes its
1998 annual report. Management is in the process of evaluating the segment
disclosures for purposes of reporting under SFAS No. 131. Management has not
determined what impact the adoption of SFAS. No. 131 will have on the
consolidated results of operations, financial condition or cash flows.

Forward Looking Statements

Certain statements included in this Management's Discussion and Analysis
of Financial Condition and Results of Operations, as well as elsewhere in this
Prospectus or in the Company's Annual Report on Form 10-K incorporated herein
by reference, including, without limitation, statements regarding the
anticipated growth in the amount of accounts receivable placed for third-party
management, the continuation of trends favoring outsourcing of other
administrative functions, the Company's objective to grow through strategic
acquisitions and its ability to realize operating efficiencies upon the
completion of recent acquisitions and other acquisitions that may occur in the
future, the Company's ability to expand its service offerings, the anticipated
changes in revenues from acquired companies, trends in the Company's future
operating performance and statements as to the Company's or management's
beliefs, expectations and opinions, are forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, which are intended to cover safe harbors created thereby. The actual
results and developments may be materially different from those expressed in or
implied by such forward-looking statements.

30
<PAGE>

BUSINESS

NCO is a leading provider of accounts receivable management and other
outsourced services. The Company develops and implements customized accounts
receivable management solutions for clients' delinquent and current accounts.
The Company provides these services on a national basis from 22 call centers
located in 14 states using advanced workstations and sophisticated call
management systems comprised of predictive dialers, automated call distribution
systems, digital switching and customized computer software. Through extensive
utilization of its technology and intensive management of human resources, the
Company has achieved rapid growth in recent years. As a result of rapid
internal growth and selected strategic acquisitions, the Company's revenue has
grown from $7.4 million in 1993 to $188.4 million in 1997 on a pro forma basis.
Since April 1994, the Company has completed 13 acquisitions (including FCA)
which have enabled it to increase its penetration of existing markets,
establish a presence in certain new markets, offer additional services and
realize significant operating efficiencies. In addition, the Company has
leveraged its infrastructure by offering additional services including customer
service call centers, market research and other outsourced administrative
services. The Company believes that it is currently among the five largest
accounts receivable management companies in the United States.

The Company provides its services principally to clients in the financial
services, healthcare, retail and commercial, education, telecommunications,
utilities and government sectors. The Company has over 8,000 clients, including
Bell Atlantic Corporation, Mellon Bank Corporation, NationsBank Corporation,
Citicorp, MCI Communications Corporation, Federal Express Corporation and
Airborne Freight Corporation. For its accounts receivable management services,
the Company generates substantially all of its revenue on a contingency fee
basis. For many of its other outsourced services, the Company is paid on a
fixed fee basis. While NCO's contracts are relatively short-term, the Company
seeks to develop long-term relationships with its clients and works closely
with them to provide quality customized solutions.

Industry Background

Increasingly, companies are outsourcing many non-core functions to focus
on revenue generating activities, reduce costs and improve productivity. In
particular, many large corporations are recognizing the advantages of
outsourcing accounts receivable management. This trend is being driven by a
number of industry-specific factors. First, the complexity of accounts
receivable management functions in certain industries has increased
dramatically in recent years. For example, with the increasing popularity of
Health Maintenance Organizations ("HMOs") and Preferred Provider Organizations
("PPOs"), healthcare institutions now face the challenge of billing not only
large insurance companies but also individuals who are required to pay small,
one-time co-payments. Second, changing regulations and increased competition in
certain industries such as utilities and telecommunications have created new
outsourcing opportunities. Third, the ability to implement cost-effective
specialized accounts receivable management, customer support and telemarketing
programs has improved dramatically in recent years with the development of
sophisticated call and information systems. These programs require substantial
capital investment, technical capabilities, human resource commitments and
extensive management supervision.

The emphasis on cost-effective outsourcing solutions, the increasing
sophistication of call center technology and the efficacy of third-party
intervention in the recovery process has resulted in the steady growth of the
accounts receivable management industry. According to estimates published by
MKA, industry-wide revenues rose 10.7% to $5.5 billion in 1996 from $5.0
billion in 1995. The leading market segments within the overall accounts
receivable management market are healthcare, financial services,
telecommunications and utilities which represented approximately 35%, 21%, 12%
and 9%, respectively, or an aggregate of 77%, of total industry referrals in
1996.

The accounts receivable management industry is highly fragmented. Based on
information obtained from the ACA, there are approximately 6,500 accounts
receivable management companies in operation in the United States, the majority
of which are small local businesses. The Company believes that many small
accounts receivable management companies have insufficient capital to expand
and invest in call center technology and sophisticated workstations and are
unable to adequately meet the standards demanded by businesses seeking to

31
<PAGE>

outsource their accounts receivable recovery function. In addition, there are a
limited number of options for owners of such businesses to obtain liquidity or
to sell their businesses. As a result, the Company believes that the industry
will continue to experience consolidation in the future and that strategic
acquisition opportunities will continue to become available.

Business Strategy

The Company strives to be a cost-effective, client service driven provider
of accounts receivable management and other related services to companies with
substantial outsourcing needs. To achieve this goal, the Company's business
strategy is based on the following key elements:

Efficient Utilization of Technology and Management Infrastructure to
Improve Productivity. Efficient use of technology and intensive management of
human resources enables the Company to provide cost-effective client solutions
and perform large scale accounts receivable management programs. The Company
has made a substantial investment in its infrastructure and is committed to
utilizing the best available technologies to achieve operational efficiencies.
This investment enables the Company to rapidly and efficiently integrate
acquisitions. For example, in the MAB acquisition, the Company was able to
reduce the workforce by approximately 16% while maintaining the same revenue
base. In the CRWCD acquisition, the Company has been able to reduce the
workforce by approximately 22%. The Company believes that its infrastructure is
capable of supporting additional growth internally or through acquisitions
without commensurate increases in costs.

Commitment to Client Service. NCO is committed to providing superior
service to its clients. The Company works closely with its clients to identify
particular needs, design appropriate recovery strategies and implement
customized accounts receivable management programs. The Company maintains a
client service department to promptly address client issues, assigns dedicated
field service representatives to assist larger clients and offers clients the
ability to electronically communicate with the Company and monitor operational
activity.

Seek Low Cost Solutions. The Company seeks to be a low cost provider of
accounts receivable management services by centralizing all administrative
functions and minimizing overhead at all branch locations. Specifically, the
Company has centralized such functions as payment processing, information
systems, accounting, sales and marketing, payroll and human resources.

Target Larger Clients. The Company continues to focus on expanding its
base of larger clients while at the same time continuing to pursue mid-size
prospects that have traditionally comprised the Company's client base. While
the Company's traditional clients have provided a stable revenue base, the
Company believes that larger clients offer significant cross-selling
opportunities as they continue to outsource more of their accounts receivable
management, customer support and telemarketing functions. The Company believes
that its size and geographic diversity will help it to obtain larger national
clients.

Growth Strategy

In light of the increasing volume of accounts receivable referred for
third party management, the greater emphasis on the outsourcing of non-core
competencies by businesses and the fragmented nature of the industry, the
Company believes there are significant opportunities to expand its business.
The Company's growth strategy includes the following key elements:

Actively Pursue Strategic Acquisitions. The Company intends to continue to
take advantage of the fragmented nature of the accounts receivable management
industry, along with opportunities in related industries, by continuing to make
strategic acquisitions. Through selected acquisitions, the Company will seek to
serve new geographic markets or industries, expand its presence in its existing
vertical markets and add complementary service applications. For example, the
acquisition of FCA will allow the Company to market its services in Canada and
the United Kingdom and provide it with an opportunity to expand further into
the Canadian and European markets. The Company evaluates acquisitions using
numerous criteria including size, service quality, industry focus,
diversification of client base, management strength, operating characteristics
and the ability to integrate the acquired businesses into the Company's
operations and eliminate redundant costs.

32
<PAGE>

Increase Market Penetration. The Company believes that its long-standing
reputation as a quality provider of cost-effective accounts receivable
management services is one of its most significant competitive advantages and
intends to continue to build upon its reputation. The Company continually
strives to increase its share of its clients' accounts receivable management
business and to obtain new clients that have outsourced or are seeking to
outsource these services. The sectors which the Company focuses on include many
large corporations which rely heavily on third-party providers for a
substantial portion of their accounts receivable management needs. In addition,
the Company believes there is significant opportunity for growth in certain
market segments, such as the retail credit card and insurance sectors and
commercial accounts receivable management, in which it can leverage its
accumulated business expertise and call center infrastructure.

Expand Service Offerings. The Company regularly seeks to leverage its
infrastructure by expanding the array of services offered to clients by
cross-selling existing services and by developing new value-added services that
strengthen its long-term relationship with existing clients. For example, the
Company has already begun providing other outsourced administrative services
such as customer service call centers, market research, and telephone-based
auditing. Additionally, through the CMS A/R acquisition, the Company expanded
into early stage accounts receivable management services and expanded into
telephone-based market research through the acquisition of TRC. Substantially
all of these services are presently provided to clients who utilize NCO's
accounts receivable management services; however, in the future, the Company
plans to continue to market these services to both existing and new clients.

Accounts Receivable Management Services

The Company provides a wide range of accounts receivable management
services to its clients utilizing an extensive technological infrastructure.
Although most of the Company's accounts receivable management services to date
have focused on recovery of traditional delinquent accounts, the Company does
engage in the recovery of current receivables and early stage delinquencies
(generally accounts which are 90 days or less past due). The Company generates
substantially all of its revenue from the recovery of delinquent accounts
receivable on a contingency fee basis. In addition, the Company generates
revenue from fixed fees for certain accounts receivable management and other
related services. Contingency fees typically range from 15% to 35% of the
amount recovered on behalf of the Company's clients, but can range from 6% for
the management of accounts placed early in the accounts receivable cycle to 50%
for accounts which have been serviced extensively by the client or by
third-party providers.

Recovery activities typically include the following:

Management Planning. The Company's approach to accounts receivable
management for each client is determined by a number of factors including
account size and demographics, the client's specific requirements and
management's estimate of the collectability of the account. The Company has
developed a library of standard processes for accounts receivable management
which is based upon its accumulated experience. The Company will integrate
these processes with its client's requirements to create a customized recovery
solution. In many instances, the approach will evolve and change as the
relationship with the client develops and both parties evaluate the most
effective means of recovering accounts receivable. The Company's standard
approach, which may be tailored to the specialized requirements of its clients,
defines and controls the steps that will be undertaken by the Company on behalf
of the client and the manner in which data will be reported to the client.
Through its systemized approach to accounts receivable management, the Company
removes most decision making from the recovery staff and ensures uniform,
cost-effective performance.

Once the approach has been defined, the Company electronically or manually
transfers pertinent client data into its information system. Once the client's
records have been established in the Company's system, the Company commences
the recovery process.

Skip Tracing. In cases where the customer's telephone number or address is
unknown, the Company systematically searches the United States Post Office
National Change of Address service, consumer data bases, electronic telephone
directories, credit agency reports, tax assessor and voter registration
records, motor vehicle registrations, military records and other sources. The
geographic expansion of banks, credit card companies, national and regional
telecommunications companies and managed healthcare providers along with the
mobility of consumers has increased the demand for locating the client's
customers. Once the Company has located the customer, the notification process
can begin.

33
<PAGE>

Account Notification. The Company initiates the recovery process by
forwarding an initial letter which is designed to seek payment of the amount
due or open a dialogue with customers who cannot afford to pay at the current
time. This letter also serves as an official notification to each customer of
their rights as required by the FDCPA. The Company continues the recovery
process with a series of mail and telephone notifications. Telephone
representatives remind the customer of their obligation, inform them that their
account has been placed for collection with the Company and begin a dialogue to
develop a payment program.

Credit Reporting. At a client's request, the Company will electronically
report delinquent accounts to one or more of the national credit bureaus where
it will remain for a period of up to seven years. The denial of future credit
often motivates the payment of all past due accounts.

Litigation Management. When account balances are sufficient, the Company
will also coordinate litigation undertaken by a nationwide network of attorneys
that the Company utilizes on a routine basis. Typically, account balances must
be in excess of $1,000 to warrant litigation and the client is asked to advance
legal costs such as filing fees and court costs. Attorneys generally are
compensated on a contingency fee basis. The Company's collection support staff
manages the Company's attorney relationships and facilitates the transfer of
all necessary documentation.

Payment Process. After the Company receives payment from the customer, it
either remits the amount received net of its fee to the client or remits the
entire amount received to the client and bills the client for its services.

Activity Reports. Clients are provided with a system-generated set of
standardized or customized reports that fully describe all account activity and
current status. These reports are typically generated monthly, however, the
information included in the report and the frequency that the reports are
generated can be modified to meet the needs of the client.

Quality Tracking. The Company emphasizes quality control throughout all
phases of the accounts receivable management process. Some clients may specify
an enhanced level of supervisory review and others may request customized
quality reports. Large national credit grantors will typically have exacting
performance standards which require sophisticated capabilities such as
documented complaint tracking and specialized software to track quality metrics
to facilitate the comparison of the Company's performance to that of its peers.

Other Services

The Company selectively provides other related services which complement
its traditional accounts receivable management business and which leverage its
teleservices infrastructure. The Company believes that the following services
will provide additional growth opportunities for the Company.

Market Research. The Company provides full-service custom market research
services to the telecommunications, financial services, utilities, healthcare,
pharmaceutical and consumer products sectors. Its capabilities include problem
conceptualization, program design, data gathering (by telephone, mail, and
focus groups), as well as data tabulation, results analysis and consulting.

Telemarketing. The Company provides telemarketing services for clients,
including lead generation and qualification and the actual booking of
appointments for a client's sales representatives.

Customer Service Call Center. The Company utilizes its communications and
information system infrastructure to supplement or replace the customer service
function of its clients. For example, the Company is currently engaged by a
large regional utility to provide customer service functions for a segment of
the utility's customer base that is delinquent.

Accounts Receivable Outsourcing. The Company complements existing service
lines by offering adjunct billing services to clients as an outsourcing option.
Additionally, the Company can assist healthcare clients in the billing and
management of third party insurance.

Custom Designed Business Applications. The Company has the ability to
provide outsourced administrative and other back-office responsibilities
currently conducted by its clients. For example, the Company has a contract
with United Healthcare Corporation, a national health insurer, to assume all
administrative operations for its COBRA and individual conversion coverage,
including all responsibility for premium billing and payment processing,
customer service call center and policy fulfillment.

34
<PAGE>

Operations

Technology and Infrastructure. Over the past five years, the Company has
made a substantial investment in its call management systems such as predictive
dialers, automated call distribution systems, digital switching and customized
computer software. As a result, the Company believes it is able to address
accounts receivable management activities more reliably and more efficiently
than many other accounts receivable management companies. The Company's systems
also permit network access to enable clients to electronically communicate with
NCO and monitor operational activity on a real-time basis.

NCO provides its accounts receivable management services through the
operation of 22 state-of-the-art call centers which are electronically linked
through a national, wide area network. The Company utilizes two computer
platform systems. One system consists of two Unix-based NCR 4300 computers
which are linked via network servers to 873 workstations and which provide
necessary redundancy (either computer can operate the system in the event of
the failure of the other) and excess capacity for future growth. The other
system consists of three Unix-based Hewlett-Packard computers which are linked
via network servers to 479 workstations. The computers are linked via network
servers to the Company's 1,352 workstations, which consist of personal
computers and terminals that are linked to the microcomputers, but do not
necessarily have separate processors.

The Company utilizes 20 predictive dialer locations with 542 workstations
to address its low balance, high volume accounts. These systems scan the
Company's database and simultaneously initiate calls on all available telephone
lines and determine if a live connection is made. Upon determining that a live
connection has been made, the computer immediately switches the call to an
available representative and instantaneously displays the associated account
record on the representative's workstation. Calls that reach other signals,
such as a busy signal, telephone company intercept or no answer, are tagged for
statistical analysis and placed in priority recall queues or multiple-pass
calling cycles. The system also automates virtually all recordkeeping and
follow-up activities including letter and report generation. The Company's
automated method of operations dramatically improves the productivity of the
Company's collection staff.

The Company employs a 20 person MIS staff led by a Vice President,
Technology/Chief Information Officer. The Company maintains disaster recovery
contingency plans and has implemented procedures to protect the loss of data
against power loss, fire and other casualty. The Company has implemented a
security system to protect the integrity and confidentiality of its computer
system and data and maintains comprehensive business interruption and critical
systems insurance on its telecommunications and computer systems.

Quality Assurance and Client Service. The Company's reputation for quality
service is critical to acquiring and retaining clients. Therefore, the Company
and its clients monitor the Company's representatives for strict compliance
with the clients' specifications and the Company's policies. The Company
regularly measures the quality of its services by capturing and reviewing such
information as the amount of time spent talking with clients' customers, level
of customer complaints and operating performance. In order to provide ongoing
improvement to the Company's telephone representatives' performance and to
assure compliance with the Company's policies and standards, quality assurance
personnel monitor each telephone representative on a frequent basis and provide
ongoing training to the representative based on this review. The Company's
information systems enable it to provide clients with reports on a real-time
basis as to the status of their accounts and clients can choose to network with
the Company's computer system to access such information directly.

The Company maintains a client service department to promptly address
client issues and questions and alert senior executives of potential problems
that require their attention. In addition to addressing specific issues, a team
of client service representatives will contact accounts on a regular basis in
order to establish a close client rapport, determine the client's overall level
of satisfaction and identify practical methods of improving the client's
satisfaction.

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<PAGE>

Client Relationships

The Company's client base currently includes over 8,000 companies in the
financial services, healthcare, retail and commercial, education,
telecommunications, utilities and government sectors. The Company's 10 largest
clients in 1997 accounted for approximately 21.7% of the Company's revenue on a
pro forma basis. In 1997, no client accounted for more than 3.6% of the
Company's revenue (no more than 2.8% on a pro forma basis). In 1997, the
Company on a pro forma basis derived 32.5% of its placements from financial
institutions (which includes banks and insurance companies), 21.6% from
healthcare organizations, 15.3% from educational organizations, 13.8% from
retail and commercial entities, 5.9% from utilities, 5.6% from government
entities, and 5.3% from telecommunications companies.

The following table sets forth a list of certain of the Company's key
clients:

<TABLE>
<CAPTION>
Financial Services Healthcare Education
- ------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
First Union Corporation Catholic Healthcare Initiatives California Student Aid Commission
Mellon Bank Corporation Hutchinson Hospital Corporation Penn State University
NationsBank Corporation Kaiser Permanente Pennsylvania Higher Education
The Progressive Corporation Medical Center of Delaware Assistance Agency
United Healthcare Corporation Reimbursement Technologies, Inc. Rutgers University
University of Pennsylvania
Retail and Commercial Government and Utilities Telecommunications
- ------------------------------- ---------------------------------- ----------------------------------
Airborne Freight Corporation Commonwealth Edison Company Bell Atlantic Corporation
Emery Worldwide Massachusetts Department of BellSouth Corporation
Federal Express Corporation Revenue Frontier Cellular
The Bon Ton Stores, Inc. New York State Electric & Gas MCI Communications Corporation
Corporation Sprint Corporation
PECO Energy Company
City of Philadelphia
</TABLE>

The Company enters into contracts with most of its clients which define,
among other things, fee arrangements, scope of services and termination
provisions. Clients may usually terminate such contracts on 30 or 60 days
notice. In the event of termination, however, clients typically do not withdraw
accounts referred to the Company prior to the date of termination, thus
providing the Company with an ongoing stream of revenue from such accounts
which diminish over time. Under the terms of the Company's contracts, clients
are not required to place accounts with the Company but do so on a
discretionary basis.

Sales and Marketing

The Company utilizes a focused and highly professional direct selling
effort in which sales representatives personally cultivate relationships with
prospective and existing clients. The Company's sales effort consists of a 31
person direct sales force. Each sales representative is charged with
identifying leads, qualifying prospects and closing sales. When appropriate,
Company operating personnel will join in the sales effort to provide detailed
information and advice regarding the Company's operational capabilities. Sales
and operating personnel also work together to take advantage of potential
cross-selling opportunities. The Company supplements its direct sales effort
with print media and attendance at trade shows.

Many of the Company's prospective clients issue requests-for-proposals
("RFPs") as part of the contract award process. The Company has on staff a
technical writer for the purpose of preparing detailed, professional responses
to RFPs.

Personnel and Training

The Company's success in recruiting, hiring and training a large number of
employees is critical to its ability to provide high quality accounts
receivable management, customer support and teleservices programs to its
clients. The Company seeks to hire personnel with previous experience in
accounts receivable management or as a telephone representative. NCO generally
offers competitive compensation and benefits and offers promotion opportunities
within the Company.

36
<PAGE>

All Company personnel receive a comprehensive training course that
consists of a combination of classroom and practical experience. Prior to
customer contact, new employees receive one week of training in the Company's
operating systems, procedures and telephone techniques and instruction in
applicable federal and state regulatory requirements. Company personnel also
receive a wide variety of continuing professional education consisting of both
classroom and role playing sessions.

As of March 31, 1998, the Company had a total of 1,568 full-time employees
and 704 part-time employees, of which 1,769 were telephone representatives.
None of the Company's employees is represented by a labor union. The Company
believes that its relations with its employees are good.

Competition

The accounts receivable management industry is highly competitive. The
Company competes with approximately 6,500 providers, including large national
corporations such as Outsourcing Solutions Inc., GC Services, Inc., Equifax
Inc. and many regional and local firms. Some of the Company's competitors have
substantially greater resources, offer more diversified services and operate in
broader geographic areas than the Company. In addition, the accounts receivable
management services offered by the Company, in many instances, are performed
in-house. Moreover, many larger clients retain multiple accounts receivable
management and recovery providers which exposes the Company to continuous
competition in order to remain a preferred vendor. The Company believes that
the primary competitive factors in obtaining and retaining clients are the
ability to provide customized solutions to a client's requirements,
personalized service, sophisticated call and information systems, collection
rates and price. The Company also competes with other firms, such as SITEL
Corporation, APAC TeleServices, Inc. and TeleTech Holdings, Inc., in providing
teleservices.

Regulation

The accounts receivable management industry is regulated both at the
federal and state level. The FDCPA regulates any person who regularly collects
or attempts to collect, directly or indirectly, consumer debts owed or asserted
to be owed to another person. The FDCPA establishes specific guidelines and
procedures which debt collectors must follow in communicating with consumer
debtors, including the time, place and manner of such communications. Further,
it prohibits harassment or abuse by debt collectors, including the threat of
violence or criminal prosecution, obscene language or repeated telephone calls
made with the intent to abuse or harass. The FDCPA also places restrictions on
communications with individuals other than consumer debtors in connection with
the collection of any consumer debt and sets forth specific procedures to be
followed when communicating with such third parties for purposes of obtaining
location information about the consumer. Additionally, the FDCPA contains
various notice and disclosure requirements and prohibits unfair or misleading
representations by debt collectors. The Company is also subject to the Fair
Credit Reporting Act which regulates the consumer credit reporting industry and
which may impose liability on the Company to the extent that the adverse credit
information reported on a consumer to a credit bureau is false or inaccurate.
The accounts receivable management business is also subject to state
regulation. Some states require that the Company be licensed as a debt
collection company. Management believes that the Company currently holds
applicable licenses from all states where required.

With respect to the other teleservices offered by the Company, including
telemarketing, the federal Telemarketing and Consumer Fraud and Abuse
Prevention Act of 1994 (the "TCFAPA") broadly authorizes the Federal Trade
Commission (the "FTC") to issue regulations prohibiting misrepresentations in
telemarketing sales. The FTC's telemarketing sales rules prohibit
misrepresentations of the cost, terms, restrictions, performance or duration of
products or services offered by telephone solicitation and specifically address
other perceived telemarketing abuses in the offering of prizes and the sale of
business opportunities or investments. The federal Telephone Consumer
Protection Act of 1991 (the "TCPA") limits the hours during which telemarketers
may call consumers and prohibits the use of automated telephone dialing
equipment to call certain telephone numbers. A number of states also regulate
telemarketing. For example, some states have enacted restrictions similar to
the federal TCPA. From time to time, Congress and the states consider
legislation that would further regulate the Company's telemarketing operations
and the Company cannot predict whether additional legislation will be enacted
and, if enacted, what effect it would have on the telemarketing industry and
the Company's business.

37
<PAGE>

The collection of accounts receivable by collection agencies in Canada is
regulated at the provincial and territorial level in substantially the same
fashion as is accomplished by federal and state laws in the United States. The
manner in which the Company carries on the business of collecting accounts is
subject, in all provinces and territories, to established rules of common law
or civil law and statute. Such laws establish rules and procedures governing
the tracing, contacting and dealing with debtors in relation to the collection
of outstanding accounts. These rules and procedures prohibit debt collectors
from engaging in intimidating, misleading and fraudulent behaviour when
attempting to recover outstanding debts. In Canada, the Company's collection
operations are subject to licensing requirements and periodic audits by
government agencies and other regulatory bodies. Generally, such licenses are
subject to annual renewal. Management believes that the Company holds all
necessary licenses in those provinces and territories that require them.

If the Company engages in other teleservice activities in Canada,
including telemarketing, there are several provincial and territorial consumer
protection laws of more general application. This legislation defines and
prohibits unfair practices by telemarketers, such as the use of undue pressure
and the use of false, misleading or deceptive consumer representations.

In addition, accounts receivable management and telemarketing industries
are regulated in the United Kingdom, including a licensing requirement. If the
Company expands its international operation, it may become subject to
additional government control and regulation in other countries, which may be
more onerous than those in the United States.

The Company devotes significant and continuous efforts, through training
of personnel and monitoring of compliance, to ensure that it is in compliance
with all federal and state regulatory requirements. The Company believes that
it is in material compliance with all such regulatory requirements.

38
<PAGE>

Facilities

The Company currently operates 22 leased facilities. The chart below
summarizes the Company's current call center facilities:

Approximate
Location of Facility Square Footage
- ----------------------- ---------------
Fort Washington, PA 82,000
San Diego, CA 3,200
Aurora, CO 4,800
Honolulu, HI 2,900
Hutchinson, KS 900
Wichita, KS 10,000
New Orleans, LA 6,900
Odenton, MD 13,400
Jackson, MI 10,800
Charlotte, NC 15,000
Buffalo, NY 30,000
Cleveland, OH 7,000
Dayton, OH 13,100
Tulsa, OK 13,900
Fort Washington, PA 12,300
Pittsburgh, PA 3,600
Philadelphia, PA 4,700
Philadelphia, PA 5,700
Philadelphia, PA 3,200
Upper Darby, PA 11,000
Columbia, SC 10,500
Bristol, TN 4,000

The leases of these facilities expire between 1998 and 2010, and most
contain renewal options. The Company believes that these facilities are
adequate for its current operations, but additional facilities may be required
to support growth. The Company believes that suitable additional or alternative
space will be available as needed on commercially reasonable terms. In
addition, the Company leases sales offices in Little Rock, Arkansas; Tucson,
Arizona; Boston, Massachusetts; Las Vegas, Nevada; Jericho, New York; McAllen
and Stafford, Texas.

Legal Proceedings

The Company is involved in legal proceedings from time to time in the
ordinary course of its business. Management believes that none of these legal
proceedings will have a materially adverse effect on the financial condition or
results of operations of the Company.

<PAGE>

MANAGEMENT

Directors, Executive Officers and Key Employees

The following table sets forth certain information concerning the
Company's directors, executive officers and key employees:

<TABLE>
<CAPTION>
Name Age Position
- ------------------------------- ----- ------------------------------------------------
<S> <C> <C>
Michael J. Barrist ............ 37 Chairman of the Board, President and Chief
Executive Officer
Charles C. Piola, Jr .......... 51 Executive Vice President and Director
Bernard R. Miller ............. 50 Executive Vice President, Development and
Director
Steven L. Winokur ............. 38 Executive Vice President, Finance, Chief Finan-
cial Officer and Treasurer
Joseph C. McGowan ............. 45 Executive Vice President and Chief Operating
Officer
Patrick M. Baldasare .......... 42 President and Chief Executive Officer of NCO
Teleservices, Inc. (Market Research Division)
Steven L. Leckerman ........... 46 Senior Vice President, Collection Operations
Stephen W. Elliott ............ 36 Senior Vice President, Technology and Chief
Information Officer
Eric S. Siegel (1) ............ 41 Director
Allen F. Wise (1) ............. 55 Director
</TABLE>

- ------------
(1) Member of Audit and Compensation Committees.

Michael J. Barrist has served as Chairman of the Board, President and
Chief Executive Officer of the Company since purchasing the Company in 1986.
Mr. Barrist was employed by U.S. Healthcare, Inc. from 1984 to 1986, most
recently as Vice President of Operations, and was employed by Gross & Company,
a certified public accounting firm, from 1980 through 1984. Mr. Barrist is a
certified public accountant.

Charles C. Piola, Jr. joined the Company in 1986 as Executive Vice
President, Sales and Marketing and has served as a director since that time.
Prior to joining the Company, Mr. Piola was the Regional Sales Manager for
Trans World Systems from 1983 to 1986 and IC Systems from 1979 to 1981, both
accounts receivable management companies.

Bernard R. Miller joined the Company as Senior Vice President of
Development in 1994 when NCO acquired certain assets of B. Richard Miller, Inc.
("BRM"), a Philadelphia-based accounts receivable management company owned
principally by Mr. Miller. Mr. Miller became a director in 1996 and an
Executive Vice President in September 1997. Prior to joining the Company, Mr.
Miller served as President and Chief Executive Officer of BRM since founding it
in 1980.

Steven L. Winokur joined the Company in December 1995 as Vice President,
Finance, Chief Financial Officer and Treasurer and became Executive Vice
President in September 1997. Prior to joining the Company, Mr. Winokur acted as
a part-time consultant to the Company since 1986. From February 1992 to
December 1995, Mr. Winokur was the principal of Winokur & Associates, a
certified public accounting firm. From March 1981 to February 1992, Mr. Winokur
was a partner with Gross & Company, a certified public accounting firm, where
he most recently served as Administrative Partner. Mr. Winokur is a certified
public accountant.

40
<PAGE>

Joseph C. McGowan joined the Company in 1990 as Vice President, Operations
and became Executive Vice President and Chief Operating Officer in September
1997. Prior to joining the Company, Mr. McGowan was Assistant Manager of the
Collections Department at Philadelphia Gas Works, a public utility, since 1975.

Patrick M. Baldasare joined the Company as President and Chief Executive
Officer of NCO Teleservices, Inc. (Market Research Division) in February 1998
when the Company acquired certain assets of TRC. Mr. Baldasare has served as
Chief Executive Officer and President of TRC since its founding in 1987. From
1983 through 1987, Mr. Baldasare served as President of Valley Forge
Information Service, the market research division of Burlington Industries.

Steven L. Leckerman joined the Company in September 1995 as Senior Vice
President, Collection Operations. From 1982 to September 1995, Mr. Leckerman
was employed by Allied Bond Corporation, a division of Union Corporation, an
accounts receivable management company, where he served as manager of dialer
and special projects.

Stephen W. Elliott joined the Company in May 1996 as Senior Vice
President, Technology and Chief Information Officer and provided consulting
services to the Company since May 1995. Prior to joining NCO, Mr. Elliott was
employed by Electronic Data Systems, a computer services company, since 1986,
most recently as Senior Account Manager.

Eric S. Siegel was appointed to the Board of Directors of the Company in
December 1996. Mr. Siegel has been president of Siegel Management Company, a
management consulting firm, since 1983. Mr. Siegel also is an adjunct faculty
member at the Wharton School of the University of Pennsylvania and is co-author
of The Ernst & Young Business Plan Guide.

Allen F. Wise was appointed to the Board of Directors of the Company in
December 1996. Mr. Wise has been a director and Chief Executive Officer of
Coventry Corporation, a managed care company, since October 1996. Prior
thereto, he was Executive Vice President of United Healthcare Corporation since
October 1994, President of Wise Health Systems, a healthcare management
company, from September 1993 to October 1994, Chief Executive Officer of
Keystone Health Plan and Chief Operating Officer of Independence Blue Cross
from September 1991 to September 1993 and Vice President of U.S. Healthcare,
Inc. from April 1985 to September 1991. Mr. Wise is also a director of
Transition Systems Inc.

41
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of June 1, 1998, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby by:
(i) each Selling Shareholder; (ii) each person known by the Company to own
beneficially more than 5% of the Company's outstanding Common Stock; (iii) each
of the Company's directors; (iv) the Company's chief executive officer and the
four most highly compensated executive officers; and (v) the Company's
directors and executive officers as a group. Except as otherwise indicated, to
the knowledge of the Company, the beneficial owners of the Common Stock listed
below have sole investment and voting power with respect to such shares.

<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Owned
Prior to the Offering After the Offering
------------------------ Shares Being -----------------------
Name of Beneficial Owner Number Percent Offered Number Percent
- --------------------------------------- ------------ --------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Annette H. Barrist (1) ................ 253,288 1.9% 15,000 238,288 1.4%
Michael J. Barrist (2)(3) ............. 2,632,690 19.6 115,000 2,517,690 14.5
The Dayton Foundation ................. 10,384 * 10,384 -- --
Joseph C. McGowan (4) ................. 45,728 * -- 45,728 *
Bernard R. Miller (5) ................. 231,340 1.7 15,000 216,340 1.2
Charles C. Piola, Jr. (2)(6) .......... 1,193,573 8.9 50,000 1,143,573 6.6
PNC Bancorp, Inc.(7) .................. 1,068,401 8.0 -- 1,068,401 6.1
Provident Investment Counsel,
Inc. (8) ............................. 665,796 5.0 -- 665,796 3.8
Eric S. Siegel (9) .................... 33,586 * -- 33,586 *
Steven L. Winokur (10) ................ 222,709 1.7 -- 222,709 1.3
Allen F. Wise (11) .................... 19,500 * -- 19,500 *
Wright State University Foundation 36,058 * 36,058 -- --
APT Holdings Corporation (12) ......... 102,668 * 102,668 -- --
All directors and executive officers
as a group (7 persons) (13) .......... 4,379,126 32.3 180,000 4,199,126 23.9
</TABLE>

- ------------
*Less than one percent.

(1) Excludes 78,619 shares held in trust for the benefit of members of Mrs.
Barrist's family, as to which Mrs. Barrist disclaims beneficial ownership.
Mrs. Barrist is the mother of Michael J. Barrist. In the event that the
Underwriters over-allotment option is exercised in full, Mrs. Barrist
would sell an additional 15,000 shares and would beneficially own 1.3% of
the outstanding Common Stock.

(2) The address of such person is c/o NCO Group, Inc., 515 Pennsylvania
Avenue, Fort Washington, Pennsylvania 19034.

(3) Includes: (i) 253,288 shares of Common Stock owned by Mrs. Annette Barrist
(including 15,000 shares being sold by her in the Offering) which Mr.
Barrist has the sole right to vote pursuant to an irrevocable proxy; (ii)
77,119 shares held in trust for the benefit of members of Mrs. Annette
Barrist's or Mr. Barrist's family for which Mr. Barrist is a co-trustee;
and (iii) 7,500 shares issuable upon the exercise of options which are
exercisable within 60 days after June 1, 1998. Excludes 179,160 shares
held in trust for the benefit of Mr. Barrist's child, as to which Mr.
Barrist disclaims beneficial ownership. Mrs. Annette Barrist is the mother
of Michael J. Barrist. In the event that the Underwriters' over-allotment
option is exercised in full, Mr. Barrist would sell an additional 115,000
shares (including 15,000 shares being sold by Mrs. Barrist) and would
beneficially own 13.4% of the outstanding Common Stock after the Offering.

(4) Represents shares issuable upon the exercise of options which are
exercisable within 60 days after June 1, 1998.

(5) Includes 30,000 shares issuable upon the exercise of options which are
exercisable within 60 days after June 1, 1998. In the event that the
Underwriters' over-allotment option is exercised in full, Mr. Miller would
sell an additional 15,000 shares and would beneficially own 1.1% of the
outstanding Common Stock after the Offering.

42
<PAGE>

(6) Includes 5,000 shares issuable upon the exercise of options which are
exercisable within 60 days after June 1, 1998. Excludes 179,160 shares
held in trust for the benefit of Mr. Piola's children, as to which Mr.
Piola disclaims beneficial ownership. In the event that the Underwriters'
over-allotment option is exercised in full, Mr. Piola would sell an
additional 50,000 shares and would beneficially own 6.1% of the
outstanding Common Stock after the Offering.

(7) Based upon a Schedule 13D, dated February 13, 1998, provided to the
Company. The address of PNC Bancorp, Inc. is One PNC Plaza, 249 Fifth
Avenue, Pittsburgh, PA 15265.

(8) Based upon a Schedule 13D, dated February 10, 1998, provided to the
Company. The address of Provident Investment Counsel, Inc. is 300 N. Lake
Avenue, Suite 1001, Pasadena, CA 91101.

(9) Includes 30,586 shares issuable upon the exercise of options which are
exercisable within 60 days after June 1, 1998.

(10) Represents: (i) 179,160 shares held in trust for the benefit of Mr.
Barrist's child for which Mr. Winokur is a co-trustee; (ii) 43,249 shares
issuable upon the exercise of options which are exercisable within 60 days
after June 1, 1998; and (iii) 300 shares held in custody for the benefit
of Mr. Winokur's children for which Mr. Winokur is custodian.

(11) Represents shares issuable upon the exercise of options which are
exercisable within 60 days after June 1, 1998.

(12) Represents shares issued upon the exercise of warrants originally issued
to Mellon Bank, N.A. and subsequently assigned to APT Holdings
Corporation, an affiliate.

(13) Includes: (i) 253,288 shares of Common Stock owned by Mrs. Barrist
(including 15,000 shares being sold by her in the Offering) which Mr.
Barrist has the sole right to vote pursuant to an irrevocable proxy; (ii)
77,119 shares held in trust for the benefit of members of Mrs. Annette
Barrist's or Mr. Barrist's family for which Mr. Barrist is a co-trustee;
(iii) 179,160 shares held in trust for the benefit of Mr. Barrist's child
for which Mr. Winokur is a co-trustee; (iv) an aggregate of 181,563 shares
issuable upon exercise of options which are exercisable within 60 days
after June 1, 1998; and (v) 300 shares held in custody for the benefit of
Mr. Winokur's minor children for which Mr. Winokur is custodian. Excludes
179,160 shares held in trust for the benefit of Mr. Piola's children. In
the event that the Underwriters' over-allotment option is exercised in
full, the directors and executive officers as a group would sell an
additional 180,000 shares and would beneficially own 22.3% of the
outstanding Common Stock after the Offering.

43
<PAGE>

UNDERWRITING

The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions in the underwriting agreement (the
"Underwriting Agreement"), by and among the Company, the Selling Shareholders
and the Underwriters, to purchase from the Company and the Selling Shareholders
the number of shares of Common Stock indicated below opposite their respective
names, at the public offering price less the underwriting discount set forth on
the cover page of this Prospectus. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters are committed to purchase all of the shares of Common
Stock, if they purchase any.

Number of
Underwriter Shares
- ------------------------------------------------- ------------
NationsBanc Montgomery Securities LLC ......... 1,731,644
BT Alex. Brown Incorporated ................... 865,822
Janney Montgomery Scott Inc ................... 865,822
The Robinson-Humphrey Company, LLC ............ 865,822
---------
Total ...................................... 4,329,110
=========

The Underwriters have advised the Company and the Selling Shareholders
that the Underwriters propose to offer the Common Stock to the public on the
terms set forth on the cover page of this Prospectus. The Underwriters may
allow selected dealers a concession of not more than $0.62 per share; and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $0.10 per share to certain other dealers. After the public offering, the
public offering price and other selling terms may be changed by the
Underwriters. The Common Stock is offered subject to receipt and acceptance by
the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part.

The Company and certain of the Selling Shareholders have granted an option
to the Underwriters, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to a maximum of 649,366 additional shares of
Common Stock to cover over-allotments, if any, at the same price per share as
the initial shares to be purchased by the Underwriters. To the extent that the
Underwriters exercise such over-allotment option, the Underwriters will be
committed, subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with the Offering.

The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.

The Company, the Selling Shareholders and certain other shareholders of the
Company who, immediately following the Offering (assuming no exercise of the
Underwriters' over-allotment option) collectively will own an aggregate of
4,193,423 outstanding shares of Common Stock, have agreed that for a period of
90 days after the effective date of the Offering they will not, without the
prior written consent of NationsBanc Montgomery Securities LLC, directly or
indirectly, offer for sale, sell, solicit an offer to sell, contract or grant an
option to sell, pledge, transfer, establish an open put equivalent position or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock or securities exchangeable or exercisable or convertible
into shares of Common Stock held by them. The Company has also agreed not to
issue, offer, sell, grant options to purchase or otherwise dispose of any of the
Company's equity securities or any other securities convertible into or
exchangeable with its Common Stock for a period of 90 days after the effective
date of the Offering without the prior written consent of NationsBanc Montgomery
Securities LLC, subject to limited exceptions and grants and exercises of stock
options. In evaluating any request for a waiver of the 90-day lock-up period,
the Underwriters will consider, in accordance with their customary practice, all
relevant facts and circumstances at the time of the request, including, without
limitation, the recent trading market for the Common Stock, the size of the
request and, with respect to a request by the Company to issue additional equity
securities, the purpose of such an issuance.

44
<PAGE>

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the Underwriters are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Underwriters may
reduce that short position by purchasing Common Stock in the open market. The
Underwriters may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

The Underwriters may also impose a penalty bid on certain selling group
members. This means that if the Underwriters purchase shares of Common Stock in
the open market to reduce the Underwriters' short position or to stabilize the
price of the Common Stock, they may reclaim the amount of the selling
concession from the selling group members who sold those shares as part of the
Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security. Neither the Company nor any of the
Underwriters makes any representation or predictions as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be
discontinued without notice.

The public offering price of the Common Stock has been determined by
negotiations among the Underwriters and the Company, and was based largely upon
the market price for the Common Stock as reported on the Nasdaq National
Market.

Affiliates of the Underwriters may utilize the Company's accounts
receivable management services in the ordinary course of business.

LEGAL MATTERS

An opinion will be rendered by the law firm of Blank Rome Comisky &
McCauley LLP, Philadelphia, Pennsylvania, to the effect that the shares of
Common Stock offered by the Company hereby, when issued and paid for as
contemplated in this Prospectus, will be, and the shares of Common Stock
offered by the Selling Shareholders hereby are, legally issued, fully paid and
non-assessable. Certain legal matters will be passed upon for the Underwriters
by Piper & Marbury L.L.P., Baltimore, Maryland.

EXPERTS

The consolidated balance sheets of the Company as of December 31, 1997 and
1996 and the Company's consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1997 incorporated by reference in this Prospectus and in the Registration
Statement, have been incorporated herein in reliance on the report of Coopers &
Lybrand, L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.

The consolidated financial statements of FCA at June 30, 1996 and 1997 and
FCA's consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended June 30, 1997 incorporated by
reference in this Prospectus and in the Registration Statement have been
audited by Arthur Andersen & Co., independent accountants, as set forth in
their report, and are incorporated by reference herein in reliance upon such
report given upon the authority of said firm as experts in accounting and
auditing.

The consolidated financial statements of MedSource at December 31, 1997
and MedSource's consolidated statements of operations, stockholders equity
(deficit) and cash flows for the year ended December 31, 1997 incorporated by
reference in this Prospectus and in the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as set forth in
their report, and are incorporated by reference herein in reliance upon such
report given upon the authority of said firm as experts in accounting and
auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-3 under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, filed as part of

45
<PAGE>

the Registration Statement, does not contain all of the information included in
the Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. For further information
with respect to the Company and the Common Stock offered hereby, reference is
hereby made to the Registration Statement, including the exhibits and schedules
filed therewith. Statements contained in this Prospectus as to the contents of
any contract, agreement or other document referred to herein are not
necessarily complete and in each such instance, reference is made to the copy
of such contract, agreement or other document filed as an exhibit to the
Registration Statement for a more complete description of the matters involved,
and each such statement shall be deemed qualified in its entirety by such
reference.

The Company is subject to the information requirements of the Exchange
Act, and in accordance therewith, files reports and other information with the
Securities and Exchange Commission. So long as the Company is subject to
periodic reporting requirements of the Exchange Act, it will continue to
furnish the reports and other information required thereby to the Securities
and Exchange Commission. The Company will furnish to its shareholders annual
reports containing financial statements audited by its independent accountants
and will make available copies of quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.

The Registration Statement, including the exhibits and schedules thereto,
and any reports and information filed by the Company may be inspected without
charge and copied at the offices of the Securities and Exchange Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; 7
World Trade Center, 13th Floor, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained at the prescribed rates from the Commission's Public
Reference Section at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. The Commission maintains a Web Site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
Web Site is http://www.sec.gov.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated herein by reference: (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, as amended by Form 10-K/A filed April 30,
1998; (ii) the Company's Current Reports on Form 8-K filed February 24, 1998,
February 25, 1998, April 22, 1998, May 4, 1998 and May 12, 1998; (iii) the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998;
and (iv) the Company's Registration Statement on Form 8-A filed October 29,
1996 registering the Company's Common Stock under Section 12(g) of the Exchange
Act. All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of the Common Stock
registered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing such documents. Any
statements contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus. The Company will provide
without charge to each person to whom this Prospectus is delivered, upon a
written request of such person, a copy of any or all of the foregoing documents
incorporated by reference into this Prospectus (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents). Requests for such copies should be delivered to Steven L.
Winokur, Executive Vice President, Finance, Chief Financial Officer and
Treasurer, 515 Pennsylvania Avenue, Fort Washington, Pennsylvania 19034.

46
<PAGE>

INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

NCO Group, Inc.

<TABLE>
<S> <C>
Pro Forma Consolidated Financial Statements:
Basis of Presentation ................................................................ F-2
Pro Forma Consolidated Balance Sheet as of March 31, 1998 ............................ F-3
Pro Forma Consolidated Statement of Income for the three months ended March 31, 1998 . F-4
Pro Forma Consolidated Statement of Income for the year ended December 31, 1997 ...... F-5
Notes to Pro Forma Consolidated Financial Statements ................................. F-6
</TABLE>

F-1
<PAGE>

Pro Forma Consolidated Financial Statements
Basis of Presentation

The Pro Forma Consolidated Balance Sheet as of March 31, 1998 and the Pro
Forma Consolidated Statements of Income for the three months ended March 31,
1998 and the year ended December 31, 1997 are based on the historical financial
statements of NCO Group, Inc. ("NCO" or the "Company"), Tele-Research Center,
Inc. ("Tele-Research"), CMS A/R Services ("CMS A/R"), the Collection Division
of CRW Financial, Inc. ("CRWCD"), Credit Acceptance Corporation ("CAC"),
ADVANTAGE Financial Services, Inc. ("AFS"), the Collection Division of American
Financial Enterprises, Inc. ("AFECD"), The Response Center ("TRC"), FCA
International Ltd. ("FCA"), and MedSource, Inc. ("MedSource") (collectively,
the "Acquisitions").

The Pro Forma Consolidated Balance Sheet as of March 31, 1998 has been
prepared assuming the FCA and MedSource acquisitions occurred on March 31,
1998. The Pro Forma Consolidated Statement of Income for the three months ended
March 31, 1998 has been prepared assuming the TRC, FCA and MedSource
acquisitions occurred on January 1, 1998. The Pro Forma Consolidated Statement
of Income for the year ended December 31, 1997 has been prepared assuming the
Tele-Research, CMS A/R, CRWCD, CAC, and AFS acquisitions (collectively, the
"1997 Acquisitions"), the AFECD and the TRC acquisitions (collectively, the
"1998 Acquisitions"), and the FCA and MedSource acquisitions, occurred on
January 1, 1997.

The Pro Forma Consolidated Balance Sheet and Statements of Income do not
purport to represent what NCO's actual financial position or results of
operations would have been had the acquisitions occurred as of such dates, or
to project NCO's financial position or results of operations for any period or
date, nor does it give effect to any matters other than those described in the
notes thereto. In addition, the allocations of purchase price to the assets and
liabilities of FCA and MedSource are preliminary and the final allocations may
differ from the amounts reflected herein. The unaudited Pro Forma Consolidated
Balance Sheet and Statements of Income should be read in conjunction with the
Company's consolidated financial statements and notes thereto and the
historical financial statements of FCA, all of which are incorporated herein by
reference.

F-2
<PAGE>

NCO GROUP, INC.
Pro Forma Consolidated Balance Sheet
March 31, 1998
(Unaudited)
(Dollars in thousands)

<TABLE>
<CAPTION>
Historical
----------------------------------
NCO FCA (1) MedSource
---------- --------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................... $ 16,088 $ 2,837 $ 732
Accounts receivable, trade, net ............. 14,848 6,322 3,049
Other current assets ........................ 1,557 3,774 1,054
-------- ------- -------
Total current assets ........................ 32,493 12,933 4,835
Funds held in trust for clients
Property and equipment, net .................. 8,245 6,901 2,121
Other assets:
Intangibles, net of accumulated
amortization ............................... 63,130 1,729 16,224
Deferred financing costs .................... 849 -- 1,821
Deferred taxes .............................. -- -- 37
Other assets ................................ 991 5,076 76
-------- ------- -------
Total other assets ......................... 64,970 6,805 18,158
-------- ------- -------
Total assets ................................. $105,708 $26,639 $25,114
======== ======= =======
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Long-term debt, current portion ............. $ 1,060 $ 2,542 $ 200
Capitalized lease obligations, current
portion .................................... 106 249 140
Corporate taxes payable ..................... 462 -- --
Accounts payable ............................ 2,937 2,854 1,813
Accrued expenses ............................ 2,548 -- 362
Accrued compensation and related
expenses ................................... 2,955 -- 531
Unearned revenue, net of related costs ...... 252 -- --
-------- ------- -------
Total current liabilities ................... 10,320 5,645 3,046
Funds held in trust for clients
Long-term liabilities:
Long term debt, net of current portion ...... 923 2,297 16,495
Capitalized lease obligations, net of
current portion ............................ 225 589 95
Deferred taxes .............................. 2,253 3 --
Unearned revenue, net of related costs ...... 31 -- --
Convertible Preferred Stock .................. -- -- 6,003
Commitments and contingencies
Shareholders' equity ......................... 91,956 18,105 (525)
-------- ------- -------
Total liabilities and shareholders' equity ... $105,708 $26,639 $25,114
======== ======= =======
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Acquisition Offering Pro Forma
Adjustments (2) Pro Forma Adjustments (3) As Adjusted
----------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................... $ (12,764) $ 6,893 $ -- $ 6,893
Accounts receivable, trade, net ............. -- 24,219 -- 24,219
Other current assets ........................ -- 6,385 -- 6,385
--------- -------- --------- --------
Total current assets ........................ (12,764) 37,497 -- 37,497
Funds held in trust for clients
Property and equipment, net .................. (5,571) 11,696 -- 11,696
Other assets:
Intangibles, net of accumulated
amortization ............................... 76,754 157,837 -- 157,837
Deferred financing costs .................... (1,821) 849 -- 849
Deferred taxes .............................. 13,361 13,398 -- 13,398
Other assets ................................ -- 6,143 -- 6,143
--------- -------- --------- --------
Total other assets ......................... 88,294 178,227 -- 178,227
--------- -------- --------- --------
Total assets ................................. $ 69,959 $227,420 $ -- $227,420
========= ======== ========= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Long-term debt, current portion ............. $ -- $ 3,802 $ (2,742) $ 1,060
Capitalized lease obligations, current
portion .................................... -- 495 (140) 355
Corporate taxes payable ..................... -- 462 -- 462
Accounts payable ............................ -- 7,604 -- 7,604
Accrued expenses ............................ 18,542 21,452 -- 21,452
Accrued compensation and related
expenses ................................... -- 3,486 -- 3,486
Unearned revenue, net of related costs ...... -- 252 -- 252
--------- -------- --------- --------
Total current liabilities ................... 18,542 37,553 (2,882) 34,671
Funds held in trust for clients
Long-term liabilities:
Long term debt, net of current portion ...... 75,000 94,715 (78,123) 16,592
Capitalized lease obligations, net of
current portion ............................ -- 909 (95) 814
Deferred taxes .............................. -- 2,256 -- 2,256
Unearned revenue, net of related costs ...... -- 31 -- 31
Convertible Preferred Stock .................. (6,003) -- -- --
Commitments and contingencies
Shareholders' equity ......................... (17,580) 91,956 81,100 173,056
--------- -------- --------- --------
Total liabilities and shareholders' equity ... $ 69,959 $227,420 $ -- $227,420
========= ======== ========= ========
</TABLE>

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

F-3
<PAGE>

NCO GROUP, INC.
Pro Forma Consolidated Statement of Income
For the Three Months Ended March 31, 1998
(Unaudited)
(Amounts in thousands, except per share data)

<TABLE>
<CAPTION>
Historical
-----------------------------------------------
NCO TRC (4) FCA (5) MedSource
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue ....................... $27,609 $788 $14,683 $5,319
Operating costs and
expenses:
Payroll and related
expenses .................... 14,144 429 8,641 3,137
Selling, general and
administrative expenses 8,568 162 5,001 1,778
Depreciation and amorti-
zation expense .............. 1,155 7 599 305
------- ---- ------- ------
Total operating costs
and expenses ............... 23,867 598 14,241 5,220
------- ---- ------- ------
Income from operations ........ 3,742 190 442 99
Other income (expense):
Interest and investment
income ...................... 232 -- 79 10
Interest expense ............. (79) -- (102) (602)
------- ---- ------- ------
Total other income
(expense) .................. 153 -- (23) (592)
------- ---- ------- ------
Income (loss) before provi-
sion for income taxes ........ 3,895 190 419 (493)
Income tax expense
(benefit) .................... 1,579 -- 99 (155)
------- ---- ------- ------
Net income .................... $ 2,316 $190 $ 320 $ (338)
======= ==== ======= ======
Net income per share:
Basic ........................ $ 0.17
=======
Diluted ...................... $ 0.17
=======
Weighted average shares
outstanding:
Basic ........................ 13,240
Diluted ...................... 13,801

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Acquisition Offering Pro Forma
Adjustments Pro Forma Adjustments (12) As Adjusted
--------------------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C>
Revenue ....................... $ -- $ 48,399 $ -- $ 48,399
Operating costs and
expenses:
Payroll and related
expenses .................... (1,519)(6) 24,832 -- 24,832
Selling, general and
administrative expenses (336)(7) 15,173 -- 15,173
Depreciation and amorti-
zation expense .............. 28 (8) 2,094 -- 2,094
----------- -------- ------- ----------
Total operating costs
and expenses ............... (1,827) 42,099 -- 42,099
----------- -------- ------- ----------
Income from operations ........ 1,827 6,300 -- 6,300
Other income (expense):
Interest and investment
income ...................... (69)(9) 252 -- 252
Interest expense ............. (1,264)(10) (2,047) 1,655 (392)
----------- -------- ------- ----------
Total other income
(expense) .................. (1,333) (1,795) 1,655 (140)
----------- -------- ------- ----------
Income (loss) before provi-
sion for income taxes ........ 494 4,505 1,655 6,160
Income tax expense
(benefit) .................... 673 (11) 2,196 670 2,866
----------- -------- ------- ----------
Net income .................... $ (179) $ 2,309 $ 985 $ 3,294
=========== ======== ======= ==========
Net income per share:
Basic ........................ $ 0.17 $ 0.19(29)
======== ==========
Diluted ...................... $ 0.17 $ 0.19(29)
======== ==========
Weighted average shares
outstanding:
Basic ........................ 13,240 17,240(13)
Diluted ...................... 13,801 17,801(13)

</TABLE>

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

F-4
<PAGE>

NCO GROUP, INC.
Pro Forma Consolidated Statement of Income
For the Year Ended December 31, 1997
(Unaudited)
(Amounts in thousands, except per share data)

<TABLE>
<CAPTION>
Historical
-------------------------------------------------------------------
1997 1998
NCO Acquisitions (14) Acquisitions (15) FCA (16)
----------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C>
Revenue .......................... $ 85,284 $ 8,621 $ 9,555 $ 62,224
Operating costs and
expenses:
Payroll and related
expenses ........................ 42,502 5,656 5,789 37,076
Selling, general and
administrative expenses.......... 27,947 3,731 2,129 21,494
Depreciation and amortiza-
tion expense .................... 3,369 257 91 2,522
Reorganization charge ........... -- -- -- 1,517
-------- --------- ------- --------
Total operating costs
and expenses .................... 73,818 9,644 8,009 62,609
-------- --------- ------- --------
Income (loss) from opera-
tions ........................... 11,466 (1,023) 1,546 (385)
Other income (expense):
Interest and investment
income .......................... 1,020 14 -- 409
Interest expense ................ (591) (12) -- (423)
Other ........................... (41) -- -- --
-------- --------- ------- --------
Total other income
(expense) ...................... 388 2 -- (14)
-------- --------- ------- --------
Income before provision for
income taxes .................... 11,854 (1,021) 1,546 (399)
Income tax expense (benefit) 4,780 -- -- 310
-------- --------- ------- --------
Net income (loss) ................ $ 7,074 $ (1,021) $ 1,546 $ (709)
======== ========= ======= ========
Net income per share:
Basic ........................... $ 0.59
========
Diluted ......................... $ 0.57
========
Weighted average shares out-
standing:
Basic ........................... 11,941
Diluted ......................... 12,560

<CAPTION>
MedSource
------------------------------------------------------------------------
Completed Acquisition Acquisition
Historical (17) Acquisitions (18) Adjustments Pro Forma Adjustments
----------------- ------------------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Revenue .......................... $ 12,458 $10,253 $ -- $ 22,711 $ --
Operating costs and
expenses:
Payroll and related
expenses ........................ 5,665 5,826 -- 11,491 (8,199)(21)
Selling, general and
administrative expenses.......... 6,148 2,842 -- 8,990 (1,766)(22)
Depreciation and amortiza-
tion expense .................... 569 132 355(19) 1,056 4,245 (23)
Reorganization charge ........... -- -- -- -- --
-------- ------- -------------- -------- --------
Total operating costs
and expenses .................... 12,382 8,800 355 21,537 (5,720)
-------- ------- -------------- -------- --------
Income (loss) from opera-
tions ........................... 76 1,453 (355) 1,174 5,720
Other income (expense):
Interest and investment
income .......................... 30 45 -- 75
Interest expense ................ (616) (53) (1,446)(20) (2,115) (4,644)(24)
Other ........................... -- -- -- -- --
-------- ------- -------------- -------- --------
<PAGE>

Total other income
(expense) ...................... (586) (8) (1,446) (2,040) (4,644)
-------- --------- -------------- -------- --------
Income before provision for
income taxes .................... (510) 1,445 (1,801) (866) 1,076
Income tax expense (benefit) (150) 583 (614) (181) 780 (25)
-------- -------- -------------- -------- --------
Net income (loss) ................ $ (360) $ 862 $ (1,187) $ (685) $ 296
======== ======== ============== ======== ========
Net income per share:
Basic ...........................
Diluted .........................
Weighted average shares out-
standing:
Basic ...........................
Diluted .........................

<CAPTION>
Offering Pro Forma
Pro Forma Adjustments (27) As Adjusted
----------------- ------------------ ----------------
<S> <C> <C> <C>
Revenue .......................... $ 188,395 $ -- $188,395
Operating costs and
expenses:
Payroll and related
expenses ........................ 94,315 -- 94,315
Selling, general and
administrative expenses.......... 62,525 -- 62,525
Depreciation and amortiza-
tion expense .................... 11,540 -- 11,540
Reorganization charge ........... 1,517 -- 1,517
---------- ------ --------
Total operating costs
and expenses .................... 169,897 -- 169,897
---------- ------ --------
Income (loss) from opera-
tions ........................... 18,498 -- 18,498
Other income (expense):
Interest and investment
income .......................... 1,518 -- 1,518
Interest expense ................ (7,785) 6,217 (1,568)
Other ........................... (41) -- (41)
---------- ------ --------
Total other income
(expense) ...................... (6,308) 6,217 (91)
---------- ------ --------
Income before provision for
income taxes .................... 12,190 6,217 18,407
Income tax expense (benefit) 5,689 2,487 8,176
---------- ------ --------
Net income (loss) ................ $ 6,501 $3,730 $ 10,231
========== ====== ========
Net income per share:
Basic ........................... $ 0.51 $ 0.61(29)
========== ===========
Diluted ......................... $ 0.49 $ 0.59(29)
========== ===========
Weighted average shares out-
standing:
Basic ........................... 12,732(26) 16,732(28)
Diluted ......................... 13,364(26) 17,364(28)

</TABLE>
F-5

The accompanying notes are an integral part of these pro
forma consolidated financial statements.
<PAGE>

Notes to Pro Forma Consolidated
Financial Statements
(Unaudited)

1. Includes the adjustments required to convert FCA's historical financial
statements to U.S. Generally Accepted Accounting Principles ("GAAP") and
gives effect to the conversion from Canadian dollars to U.S. dollars,
based upon the applicable exchange rate.

2. Gives effect to: (i) the acquisition of FCA for approximately $69.9 million
in cash, which was borrowed against the Company's credit facility, and the
recognition of certain acquisition related liabilities; and (ii) the
pending acquisition of MedSource for approximately $18.1 million in cash,
of which $5.1 million was assumed to be borrowed from the Company's credit
facility, and the recognition of certain acquisition related liabilities.
The Company expects to recognize goodwill of $58.4 million and $36.3
million for the FCA and MedSource acquisitions, respectively.

3. Gives effect to the issuance of 4.0 million shares of Common Stock at the
public offering price of $21.50 per share. The net proceeds of $81.1
million from the Offering, net of the underwriting discount and estimated
offering expenses payable by the Company, will be used to repay
acquisition related debt of $59.3 million and repay FCA's and MedSource's
acquired debt of $4.9 million and $16.9 million, respectively.

4. Represents the historical results of operations of TRC from January 1, 1998
to February 5, 1998, the period prior to the acquisition.

5. Includes the adjustments required to convert FCA's historical results of
operations for the three month period ended March 31, 1998 to U.S. GAAP
and gives effect to the conversion from Canadian dollars to U.S. dollars,
based on the applicable exchange rate.

6. Reflects the elimination of payroll and related expenses relating to
certain redundant collection and administrative personnel costs
immediately eliminated at the time of the TRC acquisition and expenses
identified during the due diligence process which will be eliminated upon
the closing of the FCA and MedSource acquisitions.

7. Reflects the elimination of certain rental expenses and related operating
costs attributable to facilities which were identified during the due
diligence process and will be closed upon the completion of the FCA and
MedSource acquisitions.

8. Gives effect to: (i) the increase in amortization expense assuming the TRC,
FCA and MedSource acquisitions had been acquired on January 1, 1998; and
(ii) the elimination of depreciation and amortization expense related to
assets revalued or not acquired.

F-6
<PAGE>

Notes to Pro Forma Consolidated

Financial Statements -- (Continued)

(Unaudited)

9. Reflects the elimination of interest income on funds assumed to be used for
the purchase of the TRC, FCA and MedSource acquisitions as if they
occurred on January 1, 1998.

10. Reflects interest expense on borrowings related to the FCA and MedSource
acquisitions as if they occurred on January 1, 1998.

11. Reflects the estimated income tax expense, after giving consideration to
non-deductible goodwill expense, as if the TRC, FCA and MedSource
acquisitions occurred on January 1, 1998.

12. Reflects the elimination of interest expense on debt assumed to be repaid
with a portion of the proceeds from the Offering as if it had occurred on
January 1, 1998.

13. Reflects the issuance of 4.0 million shares of Common Stock at the public
offering price of $21.50 per share, net of the underwriting discount and
estimated offering expenses payable by the Company, which would be
sufficient to repay acquisition related debt of $59.3 million, repay debt
of $4.9 million and $16.9 million assumed in connection with the FCA and
MedSource acquisitions, respectively.

14. Represents the combined historical results of operations of the 1997
Acquisitions for the periods prior to their acquisition by NCO, as follows
(dollars in thousands):

<TABLE>
<CAPTION>
Income
(Loss) Net
Date of From Income
1997 Acquisitions Acquisition Revenue Operations (Loss)
- -------------------------- ------------- --------- -------------- --------------
<S> <C> <C> <C> <C>
Tele-Research ......... 1/30/97 $ 296 $ 97 $ 97
CMS A/R ............... 1/31/97 539 53 53
CRWCD ................. 2/2/97 2,006 (7) (8)
CAC ................... 10/1/97 1,570 (403) (391)
AFS ................... 10/1/97 4,210 (763) (772)
------ --------- ---------
$8,621 $(1,023) $(1,021)
====== ========= =========
</TABLE>

15. Represents the combined historical results of operations of AFECD and TRC
for the year ended December 31, 1997, as follows (dollars in thousands):

Income
Date of From Net
1998 Acquisitions Acquisition Revenue Operations Income
- ------------------- ------------- --------- ------------ ---------
AFECD .......... 1/1/98 $1,562 $ 272 $ 272
TRC ............ 2/2/98 7,993 1,274 1,274
------ ------ ------
$9,555 $1,546 $1,546
====== ====== ======

16. Includes the adjustments required to convert FCA's historical results of
operations for the twelve month period ended December 31, 1997 to U.S.
GAAP and gives effect to the conversion from Canadian dollars to U.S.
dollars, based on the applicable exchange rate.

17. Represents the historical results of operations of MedSource for the year
ended December 31, 1997.

F-7
<PAGE>

Notes to Pro Forma Consolidated

Financial Statements -- (Continued)

(Unaudited)

18. Represents the combined results of operations of the four acquisitions
completed by MedSource during 1997 (the "MedSource Acquisitions"), for the
periods prior to the acquisitions, as follows (dollars in thousands):

<TABLE>
<CAPTION>
Income (Loss)
1997 MedSource Date of From Net
Completed Acquisitions Acquisition Revenue Operations Income (Loss)
- -------------------------------------------- ------------- --------- -------------- --------------
<S> <C> <C> <C> <C>
Healthcare Business Management, Ltd.
and ECC of Pittsburgh, Inc. ............ 7/1/97 $ 975 $ (262) $ (180)
World Credit, Inc. ...................... 7/1/97 2,865 285 232
MAC/TCS, Inc. ........................... 8/30/97 4,790 852 483
AllStates Credit Services, Inc. ......... 10/1/97 1,623 578 327
------- ------ ------
$10,253 $1,453 $ 862
======= ====== ======
</TABLE>

19. Reflects amortization expense assuming the MedSource Acquisitions occurred
on January 1, 1997.

20. Reflects interest expense on acquisition related borrowings as if the
MedSource Acquisitions had occurred on January 1, 1997.

21. Reflects the elimination of payroll and related expenses relating to
certain redundant collection and administrative personnel costs
immediately eliminated at the time of the 1997 Acquisitions and the 1998
Acquisitions and expenses identified during the due diligence process
which will be eliminated upon the closing of the FCA and MedSource
acquisitions.

22. Reflects the elimination of certain rental expenses and related operating
costs attributable to facilities which were closed at the time of the 1997
Acquisitions and the 1998 Acquisitions and facilities identified during
the due diligence process which will be closed upon the completion of the
FCA and MedSource acquisitions.

23. Gives effect to: (i) the increase in amortization expense assuming the
Acquisitions had been acquired on January 1, 1997; and (ii) the
elimination of depreciation and amortization expense related to assets
revalued or not acquired.

24. Reflects interest expense on borrowings related to the Acquisitions as if
they occurred on January 1, 1997.

25. Reflects the estimated income tax expense, after giving consideration to
non-deductible goodwill expense, as if the Acquisitions occurred on
January 1, 1997.

26. Gives effect to: (i) the issuance of 517,767 shares of Common Stock and
warrants exercisable for 375,000 shares of Common Stock in connection with
the acquisition of CRWCD; (ii) the issuance of 1,425,753 shares of Common
Stock in the July 1997 Offering at the public offering price of $19.67 per
share which, net of the underwriting discount and offering expenses paid
by the Company, would be sufficient to repay acquisition related debt of
$8.4 million and to fund the acquisitions of AFECD and TRC; and (iii) the
issuance of 46,442 shares of Common Stock issued in connection with the
acquisition of AFS.
<PAGE>
27. Reflects the elimination of interest expense on current and long-term debt
assumed to be repaid with a portion of the proceeds from the Offering as
if it had occurred on January 1, 1997.

28. Gives effect to the issuance of 4.0 million shares of Common Stock at
the public offering price of $21.50 per share as of January 1, 1997,
net of the underwriting discount and estimated offering expenses payable
by the Company, which would be sufficient to repay acquisition related
debt of $59.3 million, repay debt of $4.9 million and $16.9 million
recognized in connection with the FCA and MedSource acquisitions,
respectively.

29. Includes reorganization charges and other costs of $1.9 million and $90,000
for the year ended December 31, 1997 and the three months ended March 31,
1998 respectively. Net income per share - basic and net income per share -
diluted would have been $0.69 and $0.66, respectively, and $0.19 and
$0.19, respectively, on a pro forma basis assuming those charges had not
been incurred.

F-8
<PAGE>

[Map depicting Company's call centers and sales offices
in the United States, Canada and the United Kingdom.]

<PAGE>

================================================================================

No dealer, sales representative or any other person has been authorized
to give any information or to make any representations in connection with the
Offering other than those contained in this Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the shares of Common Stock to which it relates or an offer to, or a
solicitation of, any person in any jurisdiction where such offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company, or that information
contained herein is correct as of any time subsequent to the date hereof.

-----------------
TABLE OF CONTENTS
-----------------

Page
----
Prospectus Summary .......................... 3
Risk Factors ................................ 9
Pending and Recent Acquisitions ............. 15
Use of Proceeds ............................. 18
Dividend Policy ............................. 18
Price Range of Common Stock ................. 19
Capitalization .............................. 20
Selected Financial Data ..................... 21
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ................ 23
Business .................................... 31
Management .................................. 40
Principal and Selling Shareholders .......... 42
Underwriting ................................ 44
Legal Matters ............................... 45
Experts ..................................... 45
Additional Information ...................... 45
Incorporation of Certain Documents
by Reference ............................. 46
Index to Pro Forma Consolidated
Financial Statements ..................... F-1

================================================================================

4,329,110 Shares

[GRAPHIC OMITTED]

Common Stock

----------
PROSPECTUS
----------

NationsBanc Montgomery
Securities LLC

BT Alex. Brown

Janney Montgomery Scott Inc.

The Robinson-Humphrey Company

June 2, 1998

================================================================================

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The following table sets forth the expenses in connection with the
issuance and distribution of the securities being registered, all of which are
being borne by the Registrant.

Securities and Exchange Commission Registration Fee. ......... $ 57,546
National Association of Securities Dealers, Inc. Fee ......... 19,707
Nasdaq Listing Fee ........................................... 17,500
Printing and Engraving Expenses .............................. 100,000
Accounting Fees and Expenses ................................. 125,000
Legal Fees and Expenses ...................................... 100,000
Blue Sky Qualification Fees and Expenses ..................... 10,000
Transfer Agent and Registrar Fees and Expenses ............... 10,000
Miscellaneous ................................................ 160,247
--------
Total ..................................................... $600,000
========

The foregoing, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. fee, and
the Nasdaq Listing fee are estimates.

Item 15. Indemnification of Directors and Officers.

Sections 1741 through 1750 of Subchapter D, Chapter 17, of the
Pennsylvania Business Corporation Law of 1988, as amended (the "BCL"), contain
provisions for mandatory and discretionary indemnification of a corporation's
directors, officers and other personnel, and related matters.

Under Section 1741, subject to certain limitations, a corporation has the
power to indemnify directors and officers under certain prescribed
circumstances against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred in connection
with an action or proceeding, whether civil, criminal, administrative or
investigative, to which any of them is a party by reason of his being a
representative, director or officer of the corporation or serving at the
request of the corporation as a representative of another corporation,
partnership, joint venture, trust or other enterprise, if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. Under Section
1743, indemnification is mandatory to the extent that the officer or director
has been successful on the merits or otherwise in defense of any action or
proceeding if the appropriate standards of conduct are met.

Section 1742 provides for indemnification in derivative actions except in
respect of any claim, issue or matter as to which the person has been adjudged
to be liable to the corporation unless and only to the extent that the proper
court determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.

Section 1744 provides that, unless ordered by a court, any indemnification
under Section 1741 or 1742 shall be made by the corporation only as authorized
in the specific case upon a determination that the representative met the
applicable standard of conduct, and such determination will be made by the
board of directors (i) by a majority vote of a quorum of directors not parties
to the action or proceeding; (ii) if a quorum is not obtainable, or if
obtainable and a majority of disinterested directors so directs, by independent
legal counsel; or (iii) by the shareholders.

Section 1745 provides that expenses (including attorney's fees) incurred
by an officer, director, employee or agent in defending a civil or criminal
action or proceeding may be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or
on behalf of such person to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the corporation.

II-1
<PAGE>

Section 1746 provides generally that, except in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter 17D of the
BCL shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding that office.

Section 1747 grants to a corporation the power to purchase and maintain
insurance on behalf of any director or officer against any liability incurred
by him or her in his or her capacity as officer or director, whether or not the
corporation would have the power to Subchapter 17D of the BCL.

Section 1748 and 1749 extend the indemnification and advancement of
expenses provisions contained in Subchapter 17D of the BCL to successor
corporations in fundamental changes and to representatives serving as
fiduciaries of employee benefit plans.

Section 1750 provides that the indemnification and advancement of expenses
provided by, or granted pursuant to, Subchapter 17D of the BCL, shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs and personal representative of such person.

For information regarding provisions under which a director or officer of
the Company may be insured or indemnified in any manner against any liability
which he or she may incur in his or her capacity as such, reference is made to
the Company's Articles of Incorporation and Bylaws, copies of which are filed
as Exhibits 3.1 and 3.2, respectively, which provide in general that the
Company shall indemnify its officers and directors to the fullest extent
authorized by law.

Reference is also made to Section 11 of the Underwriting Agreement filed
as Exhibit 1.1 to this Registration Statement.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
No. Description
-- -----------
<S> <C>
*1.1 Form of Underwriting Agreement
*2.11 Agreement dated March 24, 1998 among the Company, FCA and Fairfax
concerning the FCA Tender Offer
*2.2 Stock Purchase Agreement dated May 4, 1998 among the Company, MedSource, Whit-
ney Subordinated Debt Fund, L.P., Whitney Equity Partners, L.P., C.B. Hellman, Jr.,
Mark Gorman, John O'Hara and HealthCare Business Management, Ltd.
4.1(2) Specimen of Common Stock Certificate
5.1 Opinion of Blank Rome Comisky & McCauley LLP
*23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Arthur Andersen & Co.
23.3 Consent of Blank Rome Comisky & McCauley LLP (included in the opinion
filed as Exhibit 5.1 hereto)
*23.4(3) Consent of Arthur Andersen LLP.
*24.1 Power of Attorney of directors and officers.
*27.1 Financial Data Schedules
</TABLE>

- ------------
* Previously filed.

(1) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 4, 1998.
(2) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 333-11745), as amended, filed with the Securities and
Exchange Commission on September 11, 1996.

(3) Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 12, 1998.

II-2
<PAGE>

(b) Financial Statement Schedules

None required.

Item 17. Undertakings.

(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

(b) The undersigned hereby undertakes:

(1) For purposes of determining any liability under the Securities Act
each filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(2) that for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective; and

(3) that for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Fort Washington, Pennsylvania, on June 1, 1998.

NCO GROUP, INC.

By: /s/ Michael J. Barrist
-------------------------------------
Michael J. Barrist,
Chairman of the Board, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
Signature Title(s) Date
- ---------------------------- ------------------------------------------------ -------------
<S> <C> <C>
/s/ Michael J. Barrist Chairman of the Board, President and Chief June 1, 1998
- ---------------------------- Executive Officer (principal executive officer)
Michael J. Barrist

* Executive Vice President and Director June 1, 1998
- ----------------------------
Charles C. Piola

* Executive Vice President, Finance, Chief June 1, 1998
- ---------------------------- Financial Officer and Treasurer (principal
Steven L. Winokur financial and accounting officer)

* Executive Vice President, Development and June 1, 1998
- ----------------------------
Bernard R. Miller Director

* Director June 1, 1998
- ----------------------------
Eric S. Siegel

* Director June 1, 1998
- ----------------------------
Allen F. Wise
</TABLE>

*By: /s/ Michael J. Barrist
- -------------------------------------
Michael J. Barrist,
Power-of-Attorney

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No. Description
-- -----------
<S> <C>
*1.1 Form of Underwriting Agreement
*2.1(1) Agreement dated March 24, 1998 among the Company, FCA and Fairfax
concerning the FCA Tender Offer
*2.2 Stock Purchase Agreement dated May 4, 1998 among the Company MedSource, Whit-
ney Subordinated Debt Fund, L.P., Whitney Equity Partners, L.P., C.B. Hellman, Jr.,
Mark Gorman, John O'Hara and HealthCare Business Management, Ltd.
4.1(2) Specimen of Common Stock Certificate
5.1 Opinion of Blank Rome Comisky & McCauley LLP
*23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Arthur Andersen & Co.
23.3 Consent of Blank Rome Comisky & McCauley LLP (included in the opinion
filed as Exhibit 5.1 hereto)
*23.4(3) Consent of Arthur Anderson LLP.
*24.1 Power of Attorney of directors and officers.
*27.1 Financial Data Schedules
</TABLE>

- ------------
* Previously filed

<PAGE>
Blank Rome Comisky & McCauley LLP
Counselors at Law
One Logan Square
Philadelphia, Pennsylvania 19103
215-569-5500
Fax 215-569-5555

June 1, 1998

NCO Group, Inc.
515 Pennsylvania Avenue
Fort Washington, PA 19034

Re: NCO Group, Inc.
Registration Statement
on Form S-3

Gentlemen:

We have acted as counsel to NCO Group, Inc. (the "Company") in
connection with the Registration Statement on Form S-3, as amended (the
"Registration Statement"), being filed by the Company with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, relating
to: (i) the offer and sale by the Company of 4,000,000 shares of Common Stock,
no par value (the "Common Stock"); (ii) the offer and sale by the Selling
Shareholders named in the Registration Statement ("Selling Shareholders") of
329,110 shares of Common Stock; and (iii) the offer and sale by the Company and
certain Selling Shareholders of up to 469,366 shares and 180,000 shares of
Common Stock, respectively, to be purchased at the option of the Underwriters to
cover over-allotments, if any. This opinion is furnished pursuant to the
requirements of Item 601(b)(5) of Regulation S-K and replaces our opinion dated
May 7, 1998.

In rendering this opinion, we have examined only the following
documents: (i) the Company's Amended and Restated Articles of Incorporation and
Bylaws; (ii) resolutions adopted by the Board of Directors; (iii) the Company's
minute book and stock records books since the date of incorporation of NCO
Group, Inc.; and (iv) the

<PAGE>

NCO Group, Inc.
June 1, 1998
Page 2

Registration Statement. We have not performed any independent investigation
other than the document examination described. We have assumed and relied, as to
questions of fact and mixed questions of law and fact, on the truth,
completeness, authenticity and due authorization of all certificates, documents
and records examined and the genuineness of all signatures. This opinion is
limited to the laws of the Commonwealth of Pennsylvania.

Based upon and subject to the foregoing, we are of the opinion that:
(i) 4,469,366 shares of Common Stock which are being offered by the Company
pursuant to the Registration Statement, when sold in the manner and for the
consideration contemplated by the Registration Statement, will be legally
issued, fully paid and non-assessable; and (ii) 509,110 shares of Common Stock
which are being offered by the Selling Shareholders pursuant to the Registration
Statement are legally issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus, which is part of the Registration Statement.

Sincerely,

/s/ Blank Rome Comisky & McCauley LLP
--------------------------------------
BLANK ROME COMISKY & McCAULEY LLP