<PAGE>
 
                                                                    EXHIBIT 2.10

                   AGREEMENT OF PURCHASE AND SALE OF ASSETS
                   ----------------------------------------

    This Agreement of Purchase and Sale of Assets (this "Agreement") is entered
into and effective  as of August 29, 1997, by and AMONG LITIGATION RESOURCES OF
AMERICA-CALIFORNIA, INC., a California corporation (the "Buyer"), LITIGATION
RESOURCES OF AMERICA, INC., a Texas corporation (the "Parent"),  and LEGAL
ENTERPRISE, INC., a California corporation (the "Seller"), joined by TONY L.
MADDOCKS, an individual resident of California and a director, officer and
shareholder of the Seller ("Maddocks") and ALAN SIMON, an individual resident of
California and a director, officer and shareholder of the Seller ("Simon").
Buyer, Parent, Seller, Maddocks and Simon  are hereinafter sometimes referred to
collectively as the "Parties" or singularly as a "Party."

                                 W I T N E S S E T H :
                                 - - - - - - - - - -  

    WHEREAS, the Seller is the owner of various assets associated with the
Business (as hereinafter defined);

    WHEREAS, the Buyer desires to purchase all or substantially all of the
Assets (as hereinafter defined) owned by the Seller and used in the Business,
and the Seller desires to sell such Assets to the Buyer;

    WHEREAS, in connection with the purchase and sale of the Assets, the Parties
desire to  set forth in this Agreement the terms and conditions with respect to
the transfer of such Assets;

    NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:

                                   ARTICLE I
                              CERTAIN DEFINITIONS
                              -------------------

    As used herein, the following terms shall have the following meanings:

    ACCOUNTS PAYABLE REPORT.  The term "Accounts Payable Report" shall mean a
report prepared as of the time specified which shows accounts payable of the
Business by service provider and age of each account payable.

    ACCOUNTS RECEIVABLE.    The term "Accounts Receivable" shall mean all
accounts receivable of Seller generated in connection with the operations of the
Business prior to the Effective Date and reflected on the Financial Statements
as of the Effective Date in a manner consistent with Seller's past practices and
the manner in which such information has been provided to Buyer.
<PAGE>
 
    ACCOUNTS RECEIVABLE REPORT.  The term "Accounts Receivable Report"  shall
mean a report prepared as of the time specified which shows accounts receivable
of the Business by customer and age of each of the Accounts Receivable.

    ADDITIONAL PARENT SHARES VALUE.  The term "Additional Parent Shares Value"
means $8.50 per Parent Share; provided, that if the Parent or its Affiliates
have subsequently consummated an acquisition in which Parent Shares are issued,
then "Additional Parent Shares Value" means the value of each Parent Share as
specified in the most recent such acquisition; and further provided however,
that if the Parent has successfully consummated a public offering of its shares
of common stock; then "Additional Parent Shares Value" means the average public
trading price of each Parent Share over the five (5) most recent business days.

    AFFILIATE.  The term "Affiliate" of a person shall mean, with respect to
that person, a person who directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
or is acting as agent on behalf of, or as an officer or director of that person.
As used in the definition of Affiliate, the term "control" (including the terms
"controlling," "controlled by," or "under common control with") means the
possession, direct or indirect, of management and policies of a person whether
through the ownership of voting securities, by contract, through the holding of
a position as a director or officer of such person, or otherwise.  As used in
this definition, the term "person" means an individual, a corporation, a
partnership, an association, a joint stock company, a trust, an incorporated
organization, or a government or political subdivision thereof.

    ANCILLARY AGREEMENTS.  The term "Ancillary Agreements" shall have the
meaning set forth in Section 3.11.

    ASSETS.  The term "Assets" shall have the meaning set forth in Section 2.1.

    ASSUMED LIABILITIES.  The term "Assumed Liabilities" shall have the meaning
as contained in Section 2.6.

    BALANCE SHEET REPORT.  The term "Balance Sheet Report" means the balance
sheet of the Seller as of a given date showing the assets, liabilities and
equity of the Seller, prepared by the Seller in accordance with GAAP on a
consistent basis as with prior time periods and further adjusted to exclude
Excluded Assets and Retained Liabilities.

    BILL OF SALE.  The term "Bill of Sale" shall have the meaning set forth in
Section 6.2(g).

    BOOKS AND RECORDS.  The term "Books and Records" shall have the meaning set
forth in Section 2.1(c).

    BUSINESS.  The term "Business" shall mean the record retrieval and
litigation support business of the Seller as presently conducted.

                                      -2-
<PAGE>
 
    BUYER INDEMNIFIED PARTIES.  The term "Buyer Indemnified Parties" shall have
the meaning set forth in Section 7.1A.

    BUYER OBLIGATIONS.  The term "Buyer Obligations" shall have the meaning set
forth in Section 8.2.

    CLOSING.  The term "Closing" shall mean the consummation of the events and
transactions to take place on the Closing Date.

    CLOSING DATE.  The term "Closing Date" shall mean August 29, 1997.

    CLOSING DATE ACCOUNTS PAYABLE  REPORT.  The term "Closing Date Accounts
Payable  Report" shall mean an Accounts Payable Report prepared as of the
Closing Date.

    CLOSING DATE ACCOUNTS RECEIVABLE REPORT.  The term "Closing Date Accounts
Receivable Report" shall mean an Accounts Receivable Report prepared as of the
Closing Date.

    CLOSING DATE BALANCE SHEET REPORT.  The term "Closing Date Balance Sheet
Report" shall mean a Balance Sheet Report prepared as of the Closing Date.

    CLOSING DATE INCOME STATEMENT.  The term "Closing Date Income Statement"
shall mean an income statement of the Seller, prepared as of the Closing Date.

    CLOSING DATE REPORTS.  The term "Closing Date Reports" shall have the
meaning set forth in Section 2.4.

    CONTRACTS.  The term "Contract" shall have the meaning as contained in
Section 2.1(b).

    CUSTOMERS.  The term "Customers" shall have the meaning as contained in
Section 3.22.

    DAMAGES.  The term "Damages" shall have the meaning set forth in Section
7.1A.

    EFFECTIVE DATE.  The term "Effective Date" shall mean 12:01 a.m. on the
"Closing Date."

    EMPLOYEE.  The term "Employee" shall mean any employee of the Seller who, as
of the Effective Date, is employed or otherwise performs work or provides
services in connection with the operation of the Business, including those, if
any, on disability, sick leave, layoff or leave of absence, who, in accordance
with the Seller's applicable policies, are eligible to return to active status,
but shall not include any independent contractor providing record retrieval and
litigation support services to Seller from time to time.

    EMPLOYMENT AGREEMENT.  The term "Employment Agreement" shall have the
meaning as contained in Section 6.2(f).

                                      -3-
<PAGE>
 
    ERISA.  The term "ERISA" shall have the meaning as contained in Section
3.15.

    EQUIPMENT.  The term "Equipment" shall have the meaning as contained in
Section 2.1(a).

    EXCLUDED ASSETS.  The term "Excluded Assets" shall have the meaning as
contained in Section 2.2.

    FINAL NET WORTH.  The term "Final Net Worth" means total assets minus total
liabilities, as reflected on the Closing Date Balance Sheet Report.

    GAAP.  The term "GAAP" shall mean generally accepted accounting principles
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.

    GENERAL INTANGIBLES.  The term "General Intangibles" shall have the meaning
contained in Section 2.1(g).

    GUARANTEED NET WORTH.  The term "Guaranteed Net Worth" shall mean the amount
of Six Hundred Fifty-Four Thousand Two Hundred Eighty-Eight Dollars ($654,288).

    INITIAL CASH PURCHASE PRICE.  The term "Initial Cash Purchase Price" shall
have the meaning set forth in Section 2.3.

    INITIAL PURCHASE PRICE.  The term "Initial Purchase Price" shall mean the
consideration payable to the Seller for the Assets as set forth or contemplated
in Section 2.3.

    INTELLECTUAL PROPERTY.  The term "Intellectual Property" shall have the
meaning as contained in Section 2.1(e).

    LEI DIVISION.  The term "LEI Division" shall mean the separate operating
division of Buyer established to continue the operations of Seller acquired
under the terms of this Agreement.

    LEI DIVISION EBITDA.  The term "LEI Division EBITDA" shall mean adjusted
earnings of the LEI Division before interest, taxes, depreciation and
amortization BUT minus 50% of the initial base salary to be paid to Maddocks
pursuant to the Employment Agreement.

    NATIONAL RECORD RETRIEVAL EBITDA.  The term "National Record Retrieval
EBITDA" means adjusted earnings of the record retrieval business of Parent and
its subsidiaries before interest, taxes, depreciation and amortization,
excluding that of the LEI Division and any record retrieval business conducted
in Texas.

    NET WORTH.  The term "Net Worth" means the dollar amount of total assets
minus the total liabilities of the Seller as of a given time period as
determined by the Balance Sheet Reports as of such time period.

                                      -4-
<PAGE>
 
    NOTE 1.  The term "Note 1" shall have the meaning set forth in Section
2.3(a).

    NOTE 2.  The term "Note 2" shall have the meaning set forth in Section
2.3(a).

    NOTICE OF ACTION.  The term "Notice of Action" shall have the meaning set
forth in Section 7.1C.

    NOTICE OF ELECTION.  The term "Notice of Election" shall have the meaning
set forth in Section 7.1C.

    OFFSET.  The term "Offset" shall have the meaning set forth in Section 8.2.

    OFFSET CLAIM.  The term "Offset Claim" shall have the meaning set forth in
Section 8.2.

    OWNER.  The term "Owner" shall mean Seller, the owner of the Business.

    PARENT SHARES.  The term "Parent Shares" shall mean any of the shares of
common stock of the Parent.

    PECKS.  The term "Pecks" shall mean Pecks Management Partners Ltd., a New
York limited partnership.

    PUBLIC OFFERING.  The term "Public Offering" means the sale by the Parent of
any of its securities for cash in an underwritten public offering registered on
the appropriate form with the Securities and Exchange Commission.

    PUBLIC OFFERING PRICE.  The term "Public Offering Price" shall refer to the
initial share price of the common stock of Parent Shares at the time and on the
date of the initial Public Offering of the Parent Shares by Parent.

    REGISTRATION RIGHTS AGREEMENT.  The term "Registration Rights Agreement"
shall have the meaning as contained in Section 6.2(l).

    RETAINED LIABILITIES.  The term "Retained Liabilities" shall have the
meaning contained in Section 7.1B.

    SECONDARY CASH PURCHASE PRICE.  The term "Secondary Cash Purchase Price"
shall have the meaning set forth in Section 2.3.

    SECONDARY PURCHASE PRICE.  The term "Secondary Purchase Price" shall have
the meaning  set forth in Section 2.3.

                                      -5-
<PAGE>
 
    SECONDARY PURCHASE PRICE CALCULATION DATE.  The term "Secondary Purchase
Price Calculation Date" shall have the meaning  set forth in Section 2.3.

    SELLER INDEMNIFIED PARTIES.  The term "Seller Indemnified Parties" shall
have the meaning set forth in Section 7.1B.

    SELLER INDEMNITORS.  The term "Seller Indemnitors" shall have the meaning
set forth in Section 7.1A.

    SELLER'S FINANCIAL STATEMENTS.  The term "Seller's Financial Statements"
shall mean the internally compiled financial statements of  the Seller as more
fully defined in Section 3.15 herein.

    SELLER'S NAMES.  The term "Seller's Names" shall have the meaning set forth
in Section 2.1(j).

    SHAREHOLDERS' AGREEMENT.  The term "Shareholders' Agreement" shall have the
meaning set forth in Section 6.8.

    STOCK PLEDGE AGREEMENT.  The term "Stock Pledge Agreement" shall have the
meaning as contained in Section 6.2(n).

    SUBORDINATION AGREEMENTS.  The term "Subordination Agreements" shall mean
those certain Subordination Agreements of even date herewith entered into among
Seller and any of the Company, the Parent, Affiliates, and holders of Senior
Indebtedness (as such item is defined in Note 1 or Note 2).

    TOTAL VALUE OF SECONDARY SHARES.  The term "Total Value of Secondary Shares"
shall have the meaning set forth in Section 2.3.

    TRADE PAYABLES.  The term "Trade Payables" shall mean all of the accounts
payable of the Business incurred in the ordinary course of business existing as
of the Effective Date, as set forth on the Closing Date Balance Sheet Report.

                                  ARTICLE II
                     PURCHASE OF ASSETS AND PURCHASE PRICE
                     -------------------------------------

    2.1  SALE OF ASSETS.  Subject to the terms and conditions set forth in this
Agreement, the Seller agrees to sell, convey, transfer, assign and deliver to
the Buyer, and the Buyer agrees to purchase from the Seller on the Effective
Date, all assets owned by Seller and used in or derived from the Business (other
than those specifically excluded under Section 2.2 below) including the
following (such assets to be referred to herein as the "Assets"):

                                      -6-
<PAGE>
 
          (a) All office equipment, service equipment, supplies, computer
    hardware, computer software, data processing equipment, motor vehicles, and
    tools (the "Equipment"), including the Equipment described on Schedule
    2.1(a);

          (b) All contracts, leases, documents, franchises, licenses,
    instruments, agreements and other written or oral agreements relating to the
    Business of Seller to which Seller is a party or by which Seller or any of
    the Assets may be bound as well as all rights, privileges, claims and
    options relating to the foregoing (the "Contracts"), including the Contracts
    described on Schedule 2.1(b);

          (c) All customer and supplier files and databases, customer and
    supplier lists, accounting and financial records, invoices, and other books
    and records relating principally to the Business (the "Books and Records"),
    including the Books and Records described on Schedule 2.1(c);

          (d) Employee files for those employees actually hired by Buyer;

          (e) All right, title and interest of Seller, in, to and under all
    service marks, trademarks, trade and assumed names, principally related to
    the Business together with the right to recover for infringement thereon, if
    any (the "Intellectual Property"), and other marks and/or names described
    on Schedule 2.1(e);

          (f) All advertising materials and all other printed or written
    materials related to the conduct of the Business;

          (g) All of the Seller's general intangibles, claims, rights of set
    off, rights of recoupment, goodwill, patents, inventions, trade secrets and
    royalty rights and other proprietary intangibles, licenses and sublicenses
    granted and obtained with respect thereto, and rights thereunder, which are
    used in the Business, and remedies against infringements thereof, and rights
    to protection of interests therein under the laws of all jurisdictions (the
    "General Intangibles"), including the General Intangibles described on
    Schedule 2.1(g);

          (h) All goodwill and going concern value and all other intangible
    properties related to the Business;

          (i) All of Seller's receivables, including Accounts Receivable, notes
    receivable, trade receivables, and intercompany receivables relating to the
    Business; and

          (j)  The exclusive right to use the name "Legal Enterprise, Inc.", any
    similar   name or derivative thereof, and any past or present assumed names
    or trade names in   connection with Buyer's use of the Purchased Assets (the
    "Seller's Names").

                                      -7-
<PAGE>
 
    2.2  EXCLUDED ASSETS.  Seller is not selling and Buyer is not purchasing any
of the following excluded assets related to the Business ("Excluded Assets"):
(i) cash, and (ii) cash investments, cash deposits, including any and all
leasehold deposits, right to receive cash refunds, and other cash equivalents,
all as more specifically described on Schedule 2.2.

    2.3  PURCHASE PRICE.  Upon the terms and subject to the conditions contained
herein and as consideration for the sale of the Assets and the performance by
the Seller of various other matters as provided herein, the Buyer shall pay the
Seller the aggregate amount of the following :

          (a) At the Closing, the aggregate amount of the following (the
    "Initial Purchase Price"):

               (i) Subject to the provisions of Section 2.4, a cash sum in the
          amount of One Million Two Hundred Thousand and No/100 Dollars
          ($1,200,000.00) (the "Initial Cash Purchase Price"), paid by the wire
          transfer of immediately available funds; and

               (ii) Subject to the provisions of Section 2.4, a subordinated
          promissory note in substantially the form of EXHIBIT A-1 in the amount
          of Three Hundred Nineteen Thousand Three Hundred Forty and No/100
          Dollars ($319,340.00) which shall be subordinated as provided therein
          ( "Note 1");  Note 1 shall bear interest at an annual rate of Six and
          Three-Eighths  Percent (6.375%), and shall provide for equal monthly
          payments of accrued interest and a final payment of principal and all
          accrued and unpaid interest on the eighth anniversary of the Closing
          Date, subject to certain limitations imposed by the Subordination
          Agreements; and

               (iii)  Subject to the provisions of Section 2.4, a convertible
          subordinated promissory note in substantially the form of EXHIBIT A-2
          in the amount of Eight Hundred Twenty-One Thousand One Hundred Sixty
          and No/100 Dollars ($821,160.00) which shall be subordinated and
          convertible into shares of common stock of Parent as provided therein
          ( "Note 2");  Note 2 shall bear interest at an annual rate of Six and
          Three-Eighths Percent (6.375%), and shall provide for equal monthly
          payments of accrued interest and a final payment of principal and all
          accrued and unpaid interest on the eighth anniversary of the Closing
          Date, subject to certain limitations imposed by the Subordination
          Agreements.

          (b) In addition to the Initial Purchase Price, the Buyer shall pay the
    Seller within forty-five (45) days following the end of the 30th month
    following the Closing Date (the "Secondary Purchase Price Calculation
    Date"), such amount, if any, by which the aggregate amount of six times the
    LEI Division EBITDA for the twelve-month period ending on the Secondary
    Purchase Price Calculation Date exceeds the Initial Purchase Price, as
    adjusted by Section 2.5, payable as follows (the "Secondary Purchase
    Price"):

                                      -8-
<PAGE>
 
               (i) a cash sum in the amount of (A) Sixty-Five Percent (65%) of
          the Secondary Purchase Price if the Public Offering has occurred, or
          (B) Fifty Percent (50%) of the Secondary Purchase Price if the Public
          Offering has not occurred (the "Secondary Cash Purchase Price"), paid
          by the wire transfer of immediately available funds; and

               (ii) (A) if the Public Offering has occurred, that certain number
          of Parent Shares which, when taken together ("Total Value of Secondary
          Shares"), collectively equals in value the difference between the
          Secondary Purchase Price minus the Secondary Cash Purchase Price
          (i.e., Total Value of Secondary Shares equals the Secondary Purchase
          Price minus the Secondary Cash Purchase Price) at a price per Parent
          Share equal to the Additional Parent Shares Value on the Secondary
          Purchase Price Calculation Date or (B) if the Public Offering has not
          occurred, then by increasing Note 1 and Note 2, pro rata in an
          aggregate amount equal to the Secondary Purchase Price minus the
          Secondary Cash Purchase Price.

    Notwithstanding anything to the contrary contained herein, in the event the
LEI Division EBITDA exceeds the National Record Retrieval EBITDA as of the
Secondary Purchase Price Calculation Date, then the Secondary Purchase Price
will be based on the average of the LEI Division EBITDA and the National Record
Retrieval EBITDA; provided, however, (A) upon the recommendation of Buyer's
Chief Executive Officer or (B) at the request of Maddocks, if the Board of
Directors of Buyer determines that the national record retrieval business did
not develop in the manner contemplated by the parties hereto despite the
reasonable best efforts of, and satisfactory performance by, Maddocks, then the
Board of Directors of Buyer , acting in good faith, may elect  to adjust the
formula used in connection with the calculation of the Secondary Purchase Price
to take into account a greater percentage of the LEI Division EBITDA.

          (c) Interim preliminary calculations of the Secondary Purchase Price
    shall be made and paid as follows:

               (i) Commencing thirty (30) days after the last day of the sixth
          full month following the Closing Date, and on the thirtieth (30th) day
          after the last day of every sixth month thereafter until such time as
          total interim payments of the Secondary Purchase Price equal $934,000,
          the Buyer shall calculate the Secondary Purchase Price as provided in
          Section 2.3(b) (except that if the Parent has consummated the Public
          Offering, the Additional Parent Shares Value shall be the average
          public trading price of each Parent Share over the first ten (10)
          business days after the end of each such six-month period) and shall
          pay the Seller such amount, if any, by which the amount of six times
          the LEI Division EBITDA for the preceding twelve-month period exceeds
          the Initial Purchase Price, as adjusted by Section 2.5 (for purposes
          of the first six-month period following the Closing Date, all numbers
          used to calculate the Secondary Purchase Price shall be those numbers
          derived from the preceding six-month period multiplied by two).

                                      -9-
<PAGE>
 
               (ii) The amount, if any, by which the interim calculation of the
          Secondary Purchase Price exceeds an amount equal to the Initial
          Purchase Price plus any prior interim payments made shall be paid as
          set forth in Section 2.3(b) above (except that if the Parent has
          consummated the Public Offering, the Additional Parent Shares Value
          shall be the average public trading price of each Parent Share over
          the first ten (10) business days after the end of each such six-month
          period).

               (iii)  At such time as total interim payments of the Secondary
          Purchase Price equal or first exceed $934,000, no additional payments
          of the Secondary Purchase Price shall be calculated or made until the
          Secondary Purchase Price Calculation Date.  On the Secondary Purchase
          Price Calculation Date, the total amount of any interim payments of
          cash, Parent Shares and aggregate increases in the amounts of Note 1
          and Note 2 made under this Section 2.3(c) shall be subtracted from the
          Secondary Purchase Price and the balance due Seller, if any, paid as
          provided in Section 2.3(b) above  (except that if the Parent has
          consummated the Public Offering, the Additional Parent Shares Value
          shall be the average public trading price of each Parent Share over
          the first ten (10) business days after the end of each such six-month
          period).  If according to such calculation Seller has been overpaid,
          then Seller shall promptly refund the amount of such overpayment to
          Seller by paying the amount of such overpayment in cash, provided
          however that at the option of Seller, up to 50% of such overpayment
          may be refunded by delivery to Buyer that number of Parent Shares
          obtained by dividing fifty percent (50%) of the amount of such
          overpayment by the Additional Parent Shares Value over the ten
          (10)business day period ending on the forty-fifth  (45th) day
          following the Secondary Purchase Price Calculation Date.

    2.4  DETERMINATION OF FINAL NET WORTH.    Each of the Closing Date Balance
Sheet Report, the Closing Date Accounts Receivable Report, the Closing Date
Accounts Payable Report, and the Closing Date Income Statement (collectively,
the "Closing Date Reports") of the Seller shall be prepared by the Seller, as
promptly as possible after the Closing.  Seller's accountants shall then review
and certify the Closing Date Reports, and deliver them to Buyer and Buyer's
accountants within 30 days after the Closing Date.  The Buyer's accountants
shall review the Closing Date Reports (including any corresponding work papers
of Seller's accountants) and report to the Seller's accountants in writing
within 30 days of receipt thereof of any discrepancy between the Seller's
accountants certification and the Buyer's accountants results of review.  If
Seller's accountants and Buyer's accountants cannot resolve such discrepancy
within 30 days after Seller's accountants receipt of such reported discrepancy,
then they shall so notify the Seller and the Buyer, and the Seller and the Buyer
shall attempt to resolve the discrepancy within 15 days of such notice.  If the
Seller and the Buyer cannot resolve the discrepancy to their mutual
satisfaction, another independent public accounting firm acceptable to the
Seller and the Buyer shall be retained to review the Closing Date Reports.  Such
firm's conclusions as to the carrying values to appear on the Closing Date
Reports for purposes of determining the Final Net Worth of the Seller shall be
conclusive.  The Seller and the Buyer shall share equally in the expenses of
retaining such accounting firm.  The Buyer shall pay

                                      -10-
<PAGE>
 
the expenses of the Buyer's accountants for their review of the Closing Date
Reports, and the Seller shall pay the expenses of Seller's accountants for their
review of the Closing Date Reports.

    2.5  ADJUSTMENT OF PURCHASE PRICE; PAYROLL ADJUSTMENT.  After the Closing
Date, the Initial Purchase Price set forth in Section 2.3 shall be adjusted as
follows:  If the Final Net Worth as finally determined pursuant to Section 2.4
shall be more than the Guaranteed Net Worth, then each element of the Initial
Purchase Price (cash, principal of Note 1 and principal of Note 2) shall be
increased in proportion to the percentage it represents of the total Initial
Purchase Price paid at Closing.   If the Final Net Worth of Seller as finally
determined pursuant to Section 2.4 shall be less than the Guaranteed Net Worth,
then each element of the Initial Purchase Price (cash, principal of Note 1 and
principal of Note 2) shall be decreased in proportion to the percentage it
represents of the total Initial Purchase Price paid at Closing, and Seller shall
promptly return such portion of cash overpayment to Buyer.  In addition, the
Parties acknowledge and agree that the Seller has paid or will pay the Seller's
Closing Date payroll (including taxes or other expenses) (collectively, the
"Payroll Amount") as of August 28, and that the Payroll Amount will be reflected
in the Closing Date Reports as an accrued liability.  Within five (5) business
days after the Effective Date, Buyer shall pay the Payroll Amount in cash to
Seller.  At the time of the adjustment of the Initial Purchase Price pursuant to
this Section 2.5, the Buyer shall pay in cash to Seller the aggregate amount of
the security deposits set forth in Item 2 of Schedule 2.2, entitled Excluded
Assets, subject to offset by any cash amounts owed by Seller to the Buyer as a
result of the adjustment to the Initial Purchase Price.

    2.6   Assumption of Liabilities.  Upon the terms and subject to the
conditions contained herein, the Buyer agrees that on the Closing Date, it will
not assume any liabilities of Seller except for those liabilities listed as
current liabilities on Seller's Balance Sheet dated May 31, 1997,  subject,
however, to adjustments for changes in liabilities occurring in the ordinary
course of Seller's business following May 31, 1997 through the Closing Date, as
determined under Section 2.4 and set forth on the Closing Date Reports ("Assumed
Liabilities").  Buyer specifically excludes and does not assume any liabilities
relating to or arising out of any of Seller's tax obligations, tax claims, tax
charges, tax fines or any related tax liabilities, regardless of the source,
cause or origin of such tax liabilities.

    2.7   ALLOCATION OF INITIAL PURCHASE PRICE.  For all federal, state and
local tax purposes, the Initial Purchase Price shall be allocated among the
various Assets in the manner indicated in Schedule 2.7 hereto subject to
adjustment pursuant to the Closing Date Reports.  None of the Parties shall file
any tax return or report or take any position with any taxing agency or
authority which is inconsistent with the foregoing allocation, except to the
extent mandated by a court of law or the appropriate taxing agency or authority
in a determination binding upon one Party provided that such Party has given
written notice and reasonable opportunity to the other Party to contest and
appeal such determination, at the other Party's expense, on behalf of both
Parties and such determination has nevertheless become final.  Within ninety
(90) days after the Closing Date, the Parties shall prepare for filing with the
Internal Revenue Service a Form 8594 in accordance with the foregoing
allocation.

                                      -11-
<PAGE>
 
    2.8  TAXES.  Seller shall be liable for the payment of all sales and use
taxes arising out of the sale and transfer or removal of the Assets, if any, and
the assumption of the Assumed Liabilities.  On or before the Effective Date, the
Seller agrees to furnish to the Buyer certificates from the state taxing
authorities, and any related certificates that the Buyer may reasonably request,
as evidence that all sales and use tax liabilities of the Seller accruing before
the Effective Date have been fully provided for or satisfied.  The Buyer shall
not be responsible for any business, occupation, withholding or similar tax, or
any taxes of any kind of the Seller, related to any period before the Effective
Date.

    2.9  TITLE TO ASSETS AND RISK OF LOSS.  Title to the Assets and risk of loss
or damage to the Assets by casualty (whether or not covered by insurance) will
pass to the Buyer immediately upon completion of the Closing.

                                  ARTICLE III
                   REPRESENTATIONS AND WARRANTIES OF SELLER
                   ----------------------------------------

          The Seller hereby represents and warrants, except as otherwise set
forth on the Schedules attached hereto, that:

    3.1  TITLE TO ASSETS.   Up until the Effective Date, the Seller has good,
marketable and indefeasible title to the Assets free and clear of restrictions
or conditions to transfer or assignment, mortgages, liens, pledges, charges,
encumbrances, equities, claims, easements, rights-of-way, covenants, conditions
or restrictions, except with respect to those Assets subject to lease and as
otherwise disclosed on Schedule 3.1.  The Seller is in possession of all
property leased to it from others.  Except for the Excluded Assets, the Assets
constitute all of the material property, whether real, personal, mixed, tangible
or intangible, that are used in the Business by the Seller.

    3.2  TAX RETURNS.  Within the times and in the manner prescribed by law,
including extensions permitted thereunder, the Seller has filed and will file
all federal, state and local tax returns required by law and has paid and will
pay all taxes, assessments and penalties, if any, due and payable in connection
with the Business through the Effective Date.  There are no pending, or to
Seller's knowledge, threatened disputes as to taxes of any nature payable by the
Seller.

    3.3  CONTRACTS, LEASES, AND AGREEMENTS.  Schedule 2.1(b) lists all of the
material contracts, leases, agreements, and other written or oral arrangements
relating to the Business to which the Seller is a party, or by which the Seller
or the Assets are bound.   As of the Effective Date, each of the Contracts is
valid and in full force and effect, and there has not been any default by the
Seller or, to the best of Seller's knowledge, by any other party to any of the
Contracts, or any event that with notice or lapse of time or both, would
constitute a default by the Seller or, to the best of Seller's knowledge, any
other party to any of the Contracts.  Except as shall be disclosed in Schedule
2.1(b), each Contract is assignable to the Buyer without the consent of any
other party.  The parties hereby acknowledge and agree that Seller will not
obtain any of the requisite consents relating to the items set forth on Schedule
2.1(b), other than the consent of Simon.  Seller has not received notice that
any party to any of the Contracts intends to cancel or terminate any of the
Contracts or exercise

                                      -12-
<PAGE>
 
or not exercise any options that they might have under any of the Contracts. In
the event any of the Contracts are, or are later determined to be, non-
assignable, and the other party to any such Contracts refuses to consent to the
assignment of same, then the Seller shall subcontract to the Buyer or its
designee, if the Buyer so desires, the remaining work on such Contracts, and the
Seller shall forward to the Buyer or its designee all proceeds of such Contracts
received by the Seller; provided, however, that Seller shall be reimbursed for
any reasonable out-of-pocket expenses incurred by it.

    3.4  EQUIPMENT.  All of the Equipment owned or leased by the Seller is
described on Schedule 2.1(a) attached hereto.  Except as disclosed on Schedule
2.1(a), none of the Equipment will be, at the Effective Date,  held under any
security agreement, conditional sales contract, or other title retention or
security arrangement or is located other than in the possession of the Seller
except for Equipment that is out of Seller's possession at certain job sites
and/or with certain Seller's agent(s).  To the best of Seller's knowledge, the
Equipment is in good operating condition and repair, ordinary wear and tear
excepted.

    3.5  INVENTORY.  Seller does not own any inventory nor does it utilize any
inventory in its Business.

    3.6  LICENSES.  Schedule 2.1(b) to this Agreement contains a schedule of all
licenses owned by Seller or in which it has any rights or licenses in connection
with the Business, together with a brief description of each.  To the best of
Seller's knowledge, Seller has not infringed, and is not now infringing, on any
license belonging to any other person, firm, or corporation.  Seller owns or
holds adequate licenses or other rights to use, all licenses necessary for the
Business as now conducted by it except where failure to own or hold such
licenses will not cause a material adverse effect on the Business, and to the
best of Seller's knowledge, that use does not conflict with, infringe on or
otherwise violate any rights of others.  Except as set forth on Schedule 2.1(b),
all of such licenses are fully assignable to Buyer.  Seller shall use its
reasonable best efforts to transfer title to all such licenses to Buyer.  In the
event any of the licenses are non-assignable and/or non-transferrable, Seller
shall sublicense or otherwise grant the use or make available the use of any
such license which Buyer requests until Buyer obtains an assignment or transfer
of such license or a new license in Buyer's own name.

    3.7  EMPLOYMENT CONTRACTS.    Except as set forth in Schedule 3.7, Seller
does not have any employment contracts and collective bargaining agreements to
which it is a party or by which it is bound relating to any Employee.  No
Employees are represented by any labor organization, and, as of the date hereof,
no labor organization or group of Employees has made a written demand to the
Seller for recognition, or filed a petition with the National Labor Relations
Board, or announced its intention to hold an election of a collective bargaining
representative.  There is no pending, or to the best knowledge and reasonable
belief of Seller, threatened, labor dispute, strike or work stoppage affecting
or potentially affecting the Business.

    3.8  COMPLIANCE WITH LAWS.  The Seller has complied with, and is not in
violation of, applicable federal, state or local statutes, laws, and regulations
(including, without limitation, any applicable building or other law, ordinance
or regulation) that affect, or are likely to affect, directly

                                      -13-
<PAGE>
 
or indirectly, any of the Assets or the Business, except where the failure to so
comply would not have a material adverse effect. The Seller has all permits,
licenses, and authorizations necessary to the conduct of the Business in the
manner and in the areas in which the Business is presently conducted, and all
such permits, licenses, or other authorizations are valid and in full force and
effect, except where the failure to possess such permits, licenses or other
authorizations would not have a material adverse effect on the Business. There
are not any uncured violations, known to Seller, of federal, state or municipal
laws, ordinances, orders, regulations or requirements affecting any portion of
the Assets or the Business.

    3.9  LITIGATION.  Except as disclosed in Schedule 3.9, there is no suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation pending or, to the best of Seller's knowledge,  threatened against
or affecting the Seller, the Assets, or the Business that could result in a
material adverse effect on the Business.

    3.10  NO BREACH OR VIOLATION.   As of the Effective Date and except as set
forth on Schedule 3.10, the consummation of the transactions contemplated by
this Agreement will not result in or constitute any of the following: (i) a
default or an event that, with notice or lapse of time or both, would be a
default, breach or violation, or give rise to a right of modification,
termination, cancellation or acceleration of any obligation or to a loss of a
benefit under, except for third party consents described in this Agreement or
any schedule prepared and delivered in connection herewith, of any lease,
license, promissory note, conditional sales contract, commitment, indenture,
mortgage, deed of trust, security agreement, concession, franchise, permit or
other agreement, instrument or arrangement by which the Assets, the Business or
the Seller may be affected, or to which the Assets, the Business or the Seller
may be bound, (ii) the creation or imposition of any lien, charge, or
encumbrance on any of the Assets or the Business, or (iii) a breach of any term
or provision of this Agreement, except for breaches and violations that could
not reasonably be expected to have a material adverse effect on the Business.

    3.11  AUTHORITY.  The Seller has the full right, power, legal capacity and
authority to execute, deliver and perform its obligations under this Agreement
and all agreements ancillary to this Agreement which are part of the underlying
transaction made on the basis of this Agreement and executed in connection
herewith ("Ancillary Agreements"), and no approvals or consents of any other
person or entity, other than the Seller, are necessary in connection herewith.

    3.12  PERSONNEL.  Schedule 3.12 sets forth a complete and accurate list of
the names, addresses, hire dates, dates of birth and job descriptions of all
Employees employed by Seller in connection with the Business, current rates of
compensation  including, if determined, bonuses payable to each following
Closing.  At or after Closing, the Seller shall deliver such additional
information as the Buyer shall reasonably request with respect to such
Employees.

    3.13  VALID AND BINDING OBLIGATIONS.  Upon execution and delivery, each of
this Agreement, the Ancillary Agreements  and each document, instrument and
agreement to be executed by the Seller in connection herewith, will constitute
the  legal, valid, and binding obligation of the

                                      -14-
<PAGE>
 
Seller, enforceable in accordance with its terms, except as limited by
bankruptcy laws, insolvency laws, and other similar laws affecting the rights of
creditors generally.

    3.14  FINANCIAL STATEMENTS.   The financial statements of Seller consist of
unaudited financial statements that have been compiled by the independent
certified public accounting firm of Gray Proctor & McMannis for the fiscal years
ended December 31, 1994, 1995 and 1996 and for the five month period ended  May
31, 1997 (collectively, the "Seller's Financial Statements").  The Seller's
Financial Statements have been prepared in accordance with GAAP consistently
applied and fairly present in all material respects the financial condition and
results of operations of the Seller as at the dates and for the periods then
ended.

    3.15  EMPLOYEE BENEFITS.  Except as provided in Schedule 3.15,  Seller has
no pension, profit-sharing, bonus, deferred compensation, percentage
compensation, severance pay, retirement, insurance, or other employee benefit
plans, including "employee benefit plans" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").

    3.16  ABSENCE OF CERTAIN CHANGES OR EVENTS.  Except as disclosed in Schedule
3.16(a) with regard to the Business and the Assets, since May 31, 1997, there
has been no:

          (i) material adverse change in the condition, financial or otherwise,
    of the Seller, the Assets or the Business;

          (ii) waiver of any right of or claim held by the Seller;

          (iii)  material loss, destruction or damage to any property of the
    Seller, whether or not insured;

          (iv) material change in the personnel of the Seller or the terms or
    conditions of their compensation or employment;

          (v) acquisition or disposition of any assets (or any contract or
    arrangement therefor), nor any other transaction by the Seller otherwise
    than for value and in the ordinary course of business;

          (vi) transaction or disbursement of funds or assets by the Seller
    except in the ordinary course of business;

          (vii)  capital expenditure by the Seller exceeding $10,000 except in
    the ordinary course of business;

          (viii)  change in accounting methods or practices (including, without
    limitation, any change in depreciation or amortization policies or rates) by
    the Seller;

          (ix) re-valuation by the Seller of any of its Assets;

                                      -15-
<PAGE>
 
          (x) amendment, modification or termination of any Contract or license
    to which the Seller is a party, except in the ordinary course of business;

          (xi) mortgage, pledge or other encumbrance of any of the Assets;

          (xii)  any litigation or facts or circumstances that could result in
    litigation that, if adversely determined, might reasonably be expected to
    have a material adverse effect on Seller, Seller's financial condition,
    Seller's prospects, the Business or the Assets;

          (xiii)  increase in salary or other compensation payable or to become
    payable by the Seller to any of its officers, directors or employees, or the
    declaration, payment or commitment or obligation of any kind for the
    payment, by the Seller, of a bonus or other additional salary or
    compensation to any such person;

          (xiv)  loan by the Seller to any person or entity, or guaranty by the
    Seller of any loan;

          (xv) other event or condition of any character that has or might
    reasonably be expected to have a material adverse effect on the Business,
    Assets or financial condition of the Seller; or

          (xvi)  agreement by the Seller to do any of the things described in
    the preceding clauses (i) through (xv).

Except as disclosed in Schedule 3.16(b), there have been no contractual
commitments by Seller to spend more than $25,000 per contractual commitment over
a continuous 12-month period.

    3.17  CONSENTS AND APPROVALS.  Except as set forth on Schedule 3.17  no
consent, approval or authorization of, or filing or registration with, any
governmental or regulatory authority, or any other person or entity, is required
to be made or obtained by the Seller in connection with the execution, delivery
or performance of this Agreement by Seller or the consummation of the
transactions contemplated hereby by Seller.

    3.18  BROKERS.  Neither Seller nor any of Seller's Affiliates has employed
any broker, agent, or finder, or incurred any liability for any brokerage fees,
agent's fees, commission or finder's fees in connection with the transactions
contemplated herein.

    3.19  SALE OF ASSETS.  For purposes of determining whether a sales and use
tax charge is applicable, the sale of the Assets constitutes  (i) the sale of
the entire operating assets of a business or of a separate division, branch, or
identifiable segment of a business, and (ii) a sale outside the ordinary course
of Seller's business, and represents an isolated or occasional sale by a seller
who does not regularly engage in such business.  The income and expenses of the
Business can be

                                      -16-
<PAGE>
 
separately established from the Books and Records in the same manner as
previously provided to Buyer.

    3.20  ABSENCE OF CERTAIN BUSINESS PRACTICES.  Neither the Seller nor any
agent of  the Seller, nor to Seller's best knowledge, any other person acting on
Seller's behalf, has, directly or indirectly, within the past five years, given
or agreed to give any gift or similar benefit to any customer, supplier,
government employee of the United States or any state or foreign government, or
other person who is or may be in a position to help or hinder the Business which
(1) would subject the Seller to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (2) if not given in the past, would have
an adverse effect on the Business,  or (3) if not continued in the future, would
have a material adverse effect on the Business or the Assets, or which would
subject the Seller to suit or penalty in a private or governmental litigation or
proceeding.

    3.21  LIENS ON ASSETS.  Except as set forth on Schedule 3.21, all liens or
security interests of any third party as to any of the Assets have been removed
on or before the Effective Date, and the Seller has furnished evidence thereof
to Buyer.

    3.22  CUSTOMERS.    To the best of Seller's knowledge, Schedule 3.22
contains a true and correct list of all customers of the Business within the
last year (the "Customers").  The Seller has no information, nor is the Seller
aware of any facts, indicating that any of the material Customers intend to
cease doing business with the Seller.

    3.23  INSURANCE POLICIES.  Schedule 3.23 to this Agreement is a description
of all insurance policies held by the Seller concerning the Business and Assets.
The Seller maintains insurance protection on all its Assets and the Business of
such types and in such amounts as, to Seller's best knowledge, are customarily
insured by similar companies in the same industry, covering property damage and
loss by fire, theft, or other casualty.

    3.24  INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS.  Except as set forth
in Schedule 3.24, neither the Seller, nor any Affiliate, spouse or child of the
Seller, has any direct or indirect interest in any competitor, supplier or
customer of any of them, has any direct or indirect interest in any competitor,
supplier or customer of the Seller, or in any person from whom or to whom the
Seller leases any property, or in any other person with whom the Seller is doing
business.

    3.25  ADVERSE INFORMATION.  Seller does not have any actual knowledge of any
change contemplated in any applicable laws, ordinances or restrictions, or any
judicial or administrative action ( or any event, fact or circumstance) which
will or could be reasonably expected to, have a material adverse effect on the
Seller or its condition, financial or otherwise, the Assets, or the condition,
value or operation thereof.

     3.26  ORGANIZATION.  The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California, has all
necessary powers to own its properties and to operate its business as now owned
and operated by it, and is qualified to do business in the states specified on
Schedule 3.26.

                                      -17-
<PAGE>
 
    3.27  CONDITION.  All of the Assets are in good operating condition and
repair, ordinary wear and tear excepted, and, as applicable, good working order.
To the knowledge of Seller, the buildings, fixtures, and improvements leased by
the Seller, including but not limited to the  plumbing, electrical, air
conditioning, heating and ventilating systems, are in good condition, ordinary
wear and tear excepted, and, as applicable, good working order.

    3.28  INTELLECTUAL PROPERTY.  All of the Intellectual Property owned by the
Seller is described on Schedule 2.1(e) attached hereto.  The Seller is the sole
owner of all of the Intellectual Property, free and clear of any liens,
encumbrances, restrictions, or legal or equitable claims of others.  The Seller
has registered all trade names, trademarks, and service marks in all
jurisdictions necessary to evidence and protect its ownership thereof, and to
permit the Seller to conduct its business in the manner in which it is currently
conducted, or otherwise has all rights or licenses necessary to use the same.
The Seller has all patents or patent applications and copyrights registered in
all jurisdictions necessary to evidence and protect the ownership thereof and to
permit the Seller to conduct its business in the manner in which it is currently
conducted, or otherwise has all rights or licenses necessary to use same.
Except as disclosed in this Agreement, all of the patents of the Seller are
valid and in full force and effect and are not subject to any taxes, maintenance
fees, or actions which have not been currently paid.  None of the Intellectual
Property infringes upon any patents, trade or assumed names, trademarks, service
marks, or copyrights belonging to any other person or other entity.  The Seller
is not a party to any license, agreement, or arrangement, whether as licensor,
licensee, or otherwise, with respect to any of the Intellectual Property.  The
Seller does not have a license or a right to use any other patents, service
marks, trademarks, trade and assumed names, trade secrets and royalty rights and
other proprietary intangibles in connection with the Business, other than the
Intellectual Property.

    3.29  POWERS OF ATTORNEY.  No person or other entity holds a general or
special power of attorney from the Seller.

    3.30  NO SEVERANCE PAYMENTS.  Except as set forth in Schedule 3.30,  the
Seller will not owe a severance payment or similar obligation to any of its
Employees, officers, or directors, as a result of the transactions contemplated
by this Agreement, nor will any of such persons be entitled to an increase in
severance payments or other benefits as a result of the transactions
contemplated hereby, nor in the event of the subsequent termination of their
employment.

    3.31  EMPLOYEES.  Except as has occurred in the ordinary course of business,
the Seller has not, nor has it agreed to do in any unusual or extraordinary
amount or manner, any of the following acts with respect to its Employees in the
Business: (i) grant any increase in salaries payable or to become payable by it,
(ii) increase benefits, (iii) modify any collective bargaining agreement to
which it is a party or by which it may be bound, or (iv) declare any bonuses for
any of its Employees.

    3.32  TAXES.  Seller has paid, and shall pay when due, or contest in good
faith, and shall be responsible for paying for, all federal, state, and local
taxes and charges of any kind whatsoever related thereto, which relate to or
arise from the period on or prior to the Closing

                                      -18-
<PAGE>
 
Date, whether such taxes and charges shall be due and payable before or after
the Closing Date. All federal, state and local taxes and charges of any kind
whatsoever relating to the ownership of the Assets shall be prorated as of the
Closing Date.

    3.33  HIRING OF EMPLOYEES.  As of the Closing Date, Seller shall permit
Buyer to offer employment to all of the Employees.  At or prior to Closing,
Seller shall have paid or accrued in the Closing Date Balance Sheet Report all
compensation and benefits to which such Employees are entitled by reason of
their previous employment with the Seller on such date.  Seller shall use
Seller's best efforts to assist Buyer in any reasonable manner in the hiring by
Buyer of the Employees that Buyer desires to hire.  Buyer shall have the right,
but not the obligation, to offer employment to such Employees that it desires to
hire in its sole discretion.  Seller shall be solely responsible and liable for
all severance pay, if any, to the extent that any of the Employees are not
offered employment with Buyer or do not accept an offer of employment.  Under no
circumstances shall the Seller or any of Seller's Affiliates be permitted to
employ or offer employment to any of the Employees after the Closing Date,
without the prior written consent of Buyer.

    3.34  OPERATIONS OF THE SELLER.  Except as disclosed in Schedule 3.34, since
May 31, 1997:

    (i) the Seller has used its best efforts to preserve the business
organization of the Seller intact, to keep available to the Business the
Employees, and to preserve its present relationships with suppliers, customers
and others having business relationships with it;

    (ii) the Seller has maintained its existing insurance as to the Business and
the Assets, and otherwise maintained and operated the Business in a good and
businesslike manner in accordance with good and prudent business practices;

    (iii)  the Seller has not entered into any agreement or instrument which
would bind Buyer, the Seller or the Assets after Closing, other than in the
ordinary course of business, or which would be outside the normal scope of
maintaining and operating the Business and the Assets in the ordinary course of
business;

    (iv) the Seller has performed all of the Seller's material obligations under
all contracts and commitments applicable to the Seller, the Business, or the
Assets, and has maintained the Seller's books of account and records relating to
the Business in the usual, regular and customary manner;

    (v) to the best of Seller's knowledge, the Seller has complied with all
statutes, laws, ordinances and regulations applicable to the Seller, the Assets,
and the conduct of the Business;

    (vi) except in the ordinary course of business, neither the Seller nor any
of the shareholders of Seller has removed or disposed of, nor permitted the
removal or disposal of, any assets of the Seller unless such assets were
replaced with an item of at least equal value that is properly suited for its
intended purpose;

                                      -19-
<PAGE>
 
    (vii)  the Seller has paid all bills and other payments due with respect to
the ownership, use, insurance, operation and maintenance of the Business or the
Assets in the usual, regular and customary manner consistent with its prior
practices, and has taken all action necessary or prudent to prevent liens or
other claims for the same from being filed or asserted against any part of the
Assets; and

    (viii)  all revenues received by the Seller relating to the Business have
been deposited in the Seller's account relating to the Business.

    3.35  FULL DISCLOSURE.  This Agreement, the Schedules and Exhibits hereto,
and all other documents and written information furnished by the Seller to the
Buyer pursuant hereto or in connection herewith, are true, complete and correct,
and do not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made herein and therein not
misleading.  To the best of Seller's knowledge, there are no facts or
circumstances relating to the Assets or the Business which adversely affect or
might reasonably be expected to adversely affect the Assets, the Business or the
ability of the Seller to perform this Agreement or any of Seller's obligations
hereunder.

                                  ARTICLE IV
              REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
              --------------------------------------------------

    Each of Buyer and Parent represents and warrants, except as otherwise set
forth on the Schedules attached hereto, that:

    4.1  ORGANIZATION.  The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
all the necessary corporate powers to own its properties and to carry on its
business as now owned and operated by it. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all the necessary corporate powers to own its properties and to
carry on its business as now owned and operated by it.

    4.2  AUTHORITY.  Each of Buyer and Parent, as applicable, has the right,
power, legal capacity, and authority to execute, deliver and perform this
Agreement and the Ancillary Agreements to which it is a party.  The execution,
delivery and performance of this Agreement and any Ancillary Agreements to which
it is a party by Buyer and Parent, as applicable, have been duly authorized by
all necessary corporate action.

    4.3  VALID AND BINDING OBLIGATIONS.  Upon execution and delivery, each of
this Agreement and the Ancillary Agreements to which it is a party will
constitute the legal, valid, and binding obligation of Buyer or Parent, as
applicable, enforceable in accordance with its terms, except as limited by
bankruptcy laws, insolvency laws, and other similar laws affecting the rights of
creditors generally.

                                      -20-
<PAGE>
 
    4.4  BROKERS.  Neither Buyer nor any of its respective Affiliates, officers,
directors, or employees, has employed any broker, agent, or finder, or incurred
any liability for any brokerage fees, agent's fees, commissions or finder's fees
in connection with the transactions contemplated herein, except for the fee
payable to The Gulfstar Group, Inc., which fee shall be paid solely by Buyer or
its Affiliates in connection with this transaction.

    4.5  CONSENTS AND APPROVALS.  Except as set forth on Schedule 4.5,

          (a)  No consent, approval or authorization of, or filing or
    registration with, any governmental or regulatory authority, or any other
    person or entity, is required to be made or obtained by Buyer or Parent in
    connection with the execution, delivery and performance of this Agreement
    and the Ancillary Agreements to which it is a party and the consummation of
    the transactions contemplated hereby.

          (b)  Neither the execution and delivery of this Agreement or the
    Ancillary Agreements to which it is a party nor the consummation of the
    transactions contemplated hereby or thereby will (i) violate any provision
    of the Articles of Incorporation or Bylaws of either Buyer or Parent or (ii)
    conflict with, or result (immediately or upon the giving of notice or the
    passage of time or both) in any violation of or any default under, or give
    rise to a right of modification, termination, cancellation or acceleration
    of any obligation or to a loss of a benefit under, any mortgage, indenture,
    lease, instrument, permit, concession, franchise, license or other agreement
    which either the Buyer or Parent or its properties or assets is a party to,
    beneficiary of, or bound by, or violate any judgment, order, decree,
    statute, law, ordinance, rule or regulation applicable to either the Buyer
    or Parent or its properties or assets, other than such conflicts,
    violations, or defaults or possible modifications, terminations,
    cancellations or accelerations which individually or in the aggregate do not
    and will not have a material adverse effect on the Buyer or the Parent.

    4.6   FINANCIAL STATEMENTS.  Buyer has delivered to Seller the unaudited
consolidated balance sheet, unaudited consolidated income statement, and
unaudited consolidated cash flow statement of Parent for the periods commencing
on January 17, 1997, and ending May 31, 1997, and June 30, 1997, respectively
(the "Parent Financial Statements").  Each of the Parent Financial Statements
(i) fairly represents the financial position of Parent and its consolidated
subsidiaries as of each respective Parent Financial Statement date, and the
results of their operations for the respective periods indicated, and (ii) were
true and correct in all material respects as of the respective dates thereof,
subject to finalization of purchase accounting adjustments in accordance with
GAAP.

    4.7  ASSUMED LIABILITIES.  Buyer shall assume the Assumed Liabilities as
defined in Section 2.6 herein.

                                      -21-
<PAGE>
 
    4.8  ABSENCE OF CERTAIN CHANGES.  Since May 31, 1997,  there have been no
(a) material adverse changes in the business, financial condition, assets,
operations or prospects of Parent, (b) amendments, modifications or terminations
of any material contract applicable to Parent, (c) any changes in the accounting
methods or practices of Parent, (d) any litigation or facts or circumstances
that could result in litigation that, if adversely determined, might reasonably
be expected to have a material adverse effect on Parent or on its business,
financial condition or prospects, or (e) other event or condition of any
character that has or might reasonably be expected to have a material adverse
effect of the business, financial condition, assets, operations or prospects of
Parent.

    4.9  FULL DISCLOSURE.  No representation or warranty of the Buyer or Parent
in this Article IV or in any other Article of this Agreement or in the Ancillary
Agreements to which it is a party or any schedule, exhibit, certificate or other
document furnished or to be furnished by the Buyer or Parent to the Seller
pursuant to this Agreement or any Ancillary Agreements to which it is a party,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements made herein
or therein not misleading.  To the best of Buyer and Parent's knowledge, there
are no facts or circumstances relating to the business, financial condition,
assets, operations or prospects of Buyer or Parent which adversely affect or
might reasonably be expected to adversely affect the business, financial
condition, assets or operations of Buyer or Parent, or the ability of Buyer or
Parent to perform this Agreement or the Ancillary Agreements to which it is a
party or any of Buyer or Parent's obligations thereunder.

                                   ARTICLE V
                           COVENANTS OF THE PARTIES
                           ------------------------

    Buyer and Seller covenant and agree as follows:

    5.1  CONDUCT OF THE BUSINESS.  Except as otherwise permitted by this
Agreement or consented to by Buyer in writing, Seller shall conduct the Business
in the ordinary course in substantially the same manner as heretofore, using its
best efforts to preserve intact its present business organization, to keep
available the services of its Employees, and to preserve its relationships with
customers, suppliers and others having business dealings with it.

    5.2  CERTAIN CHANGES.  Except as otherwise permitted by this Agreement or
consented to by Buyer in writing, Seller shall not:  (a) subject any of the
Assets to any lien or encumbrance; (b) dispose of any of the Assets;  (c) grant
any increase in compensation or benefits to any Employee, except for periodic
bonuses in the ordinary course consistent with past practices; (d) materially
modify any of the Assumed Liabilities, or (e) with respect to the Business,
perform any act outside the ordinary course of the Business except as otherwise
contemplated by this Agreement.

    5.3  NOTICE.  Seller will notify Buyer immediately in writing if (i) any of
Seller's representations or warranties set forth in this Agreement are or become
untrue prior to the Closing Date, (ii) Seller fails to fully perform all of the
covenants of Seller set forth in this Agreement, or (iii) there occurs any
material adverse development in the Business or Seller's market position,

                                      -22-
<PAGE>
 
sales, profit trends, labor regulations, litigation or insurance claims or
otherwise of which Seller has knowledge or reasonable belief prior to Closing.

    5.4  RECORD RETENTION.  From and after the Closing, Buyer shall permit
Seller the right, during normal business hours, to inspect any documents, books,
records or other information pertaining to the Assets for any reason whatsoever.
For a period of three (3) years following the Closing Date, Buyer agrees not to
destroy any files or records which are subject to this Section 5.4 without
giving reasonable notice to the Seller, and within fifteen (15) business days of
receipt of such notice, the Buyer may cause to be delivered to Seller the
records intended to be destroyed, at the Seller's expense.

    5.5  BULK SALES.  It may not be practicable to comply or attempt to comply
with the procedures of Division 6 of the California Commercial Code (the
"California Bulk Sales Act").  Accordingly, to induce Buyer to waive any
requirements for compliance with any or all of such laws, Seller hereby agrees
that except for the Assumed Liabilities, the indemnity provisions of Article VII
hereof shall apply to any damages of Buyer arising out of or resulting from the
failure of Buyer or Seller to comply with the California Bulk Sales Laws.

    5.6  NON-COMPETITION AGREEMENT.   The Seller agrees that, for the period
beginning on the Closing Date and continuing for three (3) years following the
Closing Date, neither Maddocks, individually,  Simon, individually, nor any of
their Affiliates, shall, either directly or indirectly, individually or
separately, for themselves or as a shareholder of a privately-held company, a
greater than 5% shareholder of a publicly traded company, owner, partner, joint
venturer, promoter, consultant, manager, independent contractor, agent, or in
some similar capacity for any reason whatsoever:

    A.    Enter into, engage in, or be connected with any business or business
          operation or activity which consists in whole or in part of the
          Business within the following counties in the state of California:
          Ventura, Los Angeles, San Diego, Orange and any other counties
          included within a fifty mile radius of the federal courthouses in San
          Francisco and Sacramento.

    B.    Call upon any customer whose account is or was serviced in whole or in
          part by the Seller in relation to the Business within twelve (12)
          months prior to the date hereof, or the Buyer, with the intent of
          selling or attempting to sell to any such customer any services
          similar to the services provided by the Buyer; and

    C.    Intentionally divert, solicit or take away any customer, supplier or
          employee of the Buyer, or the patronage of any customer or supplier of
          the Buyer, or otherwise interfere with or disturb the relationship
          existing between the Buyer and any of its customers, suppliers, or
          employees, directly or indirectly.

                                      -23-
<PAGE>
 
    In the event the Buyer ceases operation of the Business other than in a
merger, consolidation, or similar transaction, or upon the filing of a
bankruptcy or receivership proceeding against the Buyer, or upon the appointment
of a liquidator for the Buyer, the provisions of this Section 5.6 will not be
applicable to the conduct of Seller subsequent thereto.

    Notwithstanding anything to the contrary contained herein, it is understood
and agreed that the foregoing provisions contained in this Section 5.6 shall not
apply to: (i) an individual named in Section 5.6 if that particular individual
executes an Employment Agreement as of the Closing Date with the Buyer or (ii)
any relationship or affiliation now existing or hereafter created between Simon
and FYI or Simon and Florida Medical Records Service and the business conducted
or services rendered thereby.  It is mutually understood and agreed that if any
of the provisions relating to the scope, time or territory in this Section 5.6
are more extensive than is enforceable under applicable law or are broader than
necessary to protect the goodwill and legitimate business interests of the
Buyer, then the Parties agree that they will reduce the degree and extent of
such provisions by whatever minimal amount is necessary to bring such provisions
within the ambit of enforceability under applicable law.

    The Parties acknowledge that the remedies at law for breach of Seller's
covenants contained in this Section 5.6 are inadequate, and they agree that the
Buyer shall be entitled, at its election, to injunctive relief (without the
necessity of posting bond against such breach or attempted breach), and to
specific performance of such covenants in addition to any other remedies at law
or equity that may be available to the Buyer.

    5.7  TERMINATION OF EMPLOYMENT OF SELLER'S EMPLOYEES.  Buyer anticipates
extending an offer of employment to substantially all of the employees of the
Seller on substantially the same terms and conditions as the Employees currently
are employed by Seller.  Notwithstanding the foregoing, nothing herein shall
imply or guarantee employment of any Employee of Seller by Buyer.  If Seller's
Employees desire employment with Buyer, they will be interviewed in conjunction
with the applicants from other sources and given strong consideration for
available positions with Buyer, at the wages, hours, and conditions of
employment established by Buyer prior to hiring any employees.  Seller agrees to
use its best efforts to make available the Employees to the Buyer that Buyer
desire to hire for the purpose of operating the Business.  Notwithstanding
anything to the contrary contained herein, Buyer agrees that it will offer to
employ substantially all of Seller's employees.  Nothing shall prohibit Buyer
from terminating any of Seller's Employees subsequent to their employment by
Buyer.

    5.8  ADDITIONAL FINANCIAL STATEMENTS.  Seller shall promptly furnish to
Buyer a copy of all unaudited financial statements for each additional month end
period beyond May 31, 1997 as soon as same is regularly prepared by Seller in
the ordinary course of its business. All such additional financial statements
shall be subject to the same representations and warranties as contained in
Section 3.14 of this Agreement. The Parties acknowledge and agree that Buyer
shall be permitted to conduct at its sole cost and expense an audit of Seller
for the fiscal years ended 1994, 1995 and 1996 in connection with any Public
Offering.

                                      -24-
<PAGE>
 
    5.9    NAME CHANGE AND REQUALIFICATION DOCUMENTS.  At or prior to the
Closing, the Seller will execute, deliver and file, or cause to be executed,
delivered and filed, all necessary or reasonably requested amendments to
Seller's articles of incorporation, and such other documents as may be required
to change Seller's name to a name reasonably acceptable to Seller, Buyer and
Parent.  In addition, Seller hereby consents to an Affiliate of Buyer
incorporating or changing its corporate name to "Legal Enterprises, Inc." or any
name substantially similar thereto, or filing such assumed name certificates as
Buyer deems reasonable, necessary or appropriate. In addition, at or prior to
Closing, Seller and its Affiliates shall execute and deliver such assignments,
terminations and cancellations of assumed and trade names as Buyer may request.
Seller shall cooperate with Buyer in connection with all filings relating to the
use of Seller's name or names and with any filings that Buyer may desire to make
in order to effect such name change or otherwise protect such name.

    5.10  CONSENTS TO ASSIGNMENTS.  Pursuant to Section 3.3, Seller has
represented and warranted that except as disclosed in Schedule 2.1(b), each
Contract is assignable to the Buyer without the consent of any other party.  The
parties hereby acknowledge and agree that the Seller has not obtained, and is
not required to obtain, consents to assignment of any of the Contracts (other
than the consent of Simon), provided that Seller, Maddocks and Simon hereby
agree that they will cooperate with Buyer after the Closing in obtaining the
required consents, and will, at Buyer's cost and expense, take such action as
Buyer may reasonably request in order to obtain, or to assist Buyer in
obtaining, such consents.

                                  ARTICLE VI
                                  THE CLOSING
                                  -----------

    6.1   CLOSING.  Payment of the Purchase Price required to be made by the
Buyer to the Seller and the transfer of the Assets by the Seller and the other
transactions contemplated hereby shall take place on the Closing Date at the
offices of Boyer, Ewing & Harris Incorporated, 9 Greenway Plaza, Suite 3100,
Houston, Texas 77046 or by fax  unless the time or location is changed by mutual
agreement of the Parties.  At the Closing, (a) the Seller will deliver to the
Buyer the various certificates, instruments, and documents referred to in
Section 6.2 below, (b) the Buyer will deliver to the Seller the various
certificates, instruments, and documents referred to in Section 6.3 below, and
(c) the Buyer will deliver to the Seller the Purchase Price specified in Section
2.3 above.

    6.2   CONDITIONS TO OBLIGATIONS OF THE BUYER.  The obligation of the Buyer
to proceed with the Closing and consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:

          (a) the representations and warranties of Seller hereunder shall be
    true and correct in all material respects at and as of the Closing Date;

          (b) the Seller shall have performed and complied with all of its
    covenants hereunder in all material respects through the Closing;

                                      -25-
<PAGE>
 
          (c) no action, suit, or proceeding shall be pending before any court
    or quasi-judicial or administrative agency of any federal, state, local, or
    foreign jurisdiction or before any arbitrator wherein an unfavorable
    injunction, judgment, order, decree, ruling, or charge would (i) prevent
    consummation of any of the transactions contemplated by this Agreement, (ii)
    cause any of the transactions contemplated by this Agreement to be rescinded
    following consummation, or (iii) affect adversely in any material respect
    the rights in and to the Assets (and no such injunction, judgment, order,
    decree, ruling, or charge shall be in effect);

          (d) the Seller shall have delivered to the Buyer a certificate to the
    effect that each of the conditions specified above in Section 6.2(a) -(c) is
    satisfied in all respects;

          (e) the Buyer shall have received from counsel to the Seller an
    opinion in form and substance acceptable to Buyer, addressed to the Buyer,
    and dated as of the Closing Date containing such assumptions and
    qualifications as may be reasonably acceptable to Buyer's legal counsel;

          (f) Maddocks, individually, shall have entered into a separate
    Employment Agreement with Buyer in the form attached hereto as EXHIBIT B
    (the "Employment Agreement");

          (g) The Seller shall have delivered to Buyer instruments of assignment
    and transfer or bills of sale signed by Seller as the Buyer shall reasonably
    request, including the Bill of Sale in substantially the form attached
    hereto as EXHIBIT C (the "Bill of Sale");

          (h) Seller shall have delivered to Buyer affidavits or other reliable
    evidence reasonably satisfactory to Buyer and its counsel of Seller's
    authority to sell the Assets;

          (i) Buyer shall have completed its due diligence review of Seller and
    the Business and been satisfied with the results;

          (j) The Board of Directors and shareholders of Seller shall have
    approved the terms of this transaction and Seller shall have delivered a
    certificate therefore to Buyer;

          (k) The Board of Directors of Buyer shall have approved the terms of
    this transaction;

          (l) Seller shall have entered into with Parent a Registration Rights
    Agreement in a form similar to those previously entered into by similarly
    situated shareholders of Parent and reasonably acceptable to Buyer and its
    counsel (the "Registration Rights Agreement");

          (n) Seller shall have delivered to Buyer a Contingent Stock Pledge
    Agreement in substantially the form of EXHIBIT D attached hereto (the "Stock
    Pledge Agreement");
 

                                      -26-
<PAGE>
 
          (o) Buyer shall have received approval from its senior lender to fund
    the Initial Cash Purchase Price under its acquisition line of credit;

          (p) Seller shall have delivered to Buyer all other items required or
    requested to be delivered hereunder, including the Subordination Agreements,
    such requested items to be reasonably necessary or reasonably appropriate to
    facilitate consummation of the transactions contemplated hereby; and

          (q) All actions to be taken by the Seller in connection with
    consummation of the transactions contemplated hereby and all certificates,
    opinions, instruments, and other documents required to effect the
    transactions contemplated hereby will be reasonably satisfactory in form and
    substance to the Buyer.

The Buyer may waive any condition specified in Section 6.2 if it executes a
writing so stating at or prior to the Closing Date.

    6.3   CONDITIONS TO OBLIGATIONS OF THE SELLER.  The obligation of the Seller
to proceed with Closing and consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:

          (a) the representations and warranties of Buyer and Parent hereunder
    shall be true and correct in all material respects at and as of the Closing
    Date;

          (b) the Buyer shall have performed and complied with all of its
    covenants hereunder in all material respects through the Closing;

          (c) no action, suit, or proceeding shall be pending before any court
    or quasi-judicial or administrative agency of any federal, state, local, or
    foreign jurisdiction or before any arbitrator wherein an unfavorable
    injunction, judgment, order, decree, ruling, or charge would (A) prevent
    consummation of any of the transactions contemplated by this Agreement, or
    (B) cause any of the transactions contemplated by this Agreement to be
    rescinded following consummation (and no such injunction, judgment, order,
    decree, ruling, or charge shall be in effect);

          (d) each of Buyer and Parent shall have delivered to the Seller a
    certificate to the effect that each of the conditions applicable to it which
    are specified above in Section 6.3(a)-(c) is satisfied in all respects;

          (e) the Seller shall have received from counsel to the Buyer  an
    opinion in form and substance acceptable to Seller, addressed to the Seller,
    and dated as of the Closing Date containing such assumptions and
    qualifications as may be reasonably acceptable to Seller's legal counsel;

                                      -27-
<PAGE>
 
          (f) the Buyer shall have paid the Initial Purchase Price required by
    Section 2.3, including delivery of Note 1 and Note 2;

          (g) the Buyer shall have entered into the Employment Agreement;

          (h) Seller shall have completed its due diligence review of Buyer and
    Parent and been satisfied with the results;

          (i) The Buyer shall have caused Parent to enter into the Registration
    Rights Agreement with Seller in a form similar to those previously entered
    into by similarly situated shareholders of Parent;

          (j) The Board of Directors and shareholders of Seller shall have
    approved the terms of this transaction;

          (k) The Board of Directors of Buyer shall have approved the terms of
    this transaction and Buyer shall have delivered a certificate therefore to
    Seller;

          (l) The Buyer shall have entered into the Stock Pledge Agreement; and

          (m) all actions to be taken by the Buyer in connection with
    consummation of the transactions contemplated hereby, and all certificates,
    opinions, instruments, and other documents required to effect the
    transactions contemplated hereby will be reasonably satisfactory in form and
    substance to the Seller.

The  Seller may waive any condition specified in this Section 6.3 if Seller
executes a writing so stating at or prior to the Closing.

    6.4  INSURANCE AND AD VALOREM TAXES.  The Buyer shall be obligated to make
all premium payments necessary to continue the existing insurance on the
Business commencing as of the Effective Date, and Seller shall cooperate with
Buyer in assigning such insurance to Buyer, in pursuing any claims thereunder
and in assigning and delivery to Buyer any proceeds payable thereunder.  Buyer
shall refund to Seller any insurance premium payments that have been prepaid.
With regard to ad valorem taxes on the Assets for the 1997 tax year, the Seller
and the Buyer agree that the taxes to be paid shall be prorated as of the
Effective Date.

    6.5  FURTHER ASSURANCES.  At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby.  The Seller, at any time at or after the Closing, will
execute, acknowledge and deliver any further bills of sale, assignments and
other assurances, documents and instruments of transfer, reasonably requested by
the Buyer, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by

                                      -28-
<PAGE>
 
the Buyer, for the purpose of assigning and confirming to the Buyer, all of the
Assets. The Buyer shall notify the Seller promptly, and in no event more than
ten (10) business days after the Buyer's receipt, of any tax inquiries or
notifications thereof which relate to any period prior to the Effective Date,
and the Seller shall prepare and deliver responses to such inquiries as the
Seller deems necessary or appropriate. In addition, the Seller shall make
available the books and records of the Business during reasonable business hours
and take such other actions as are reasonably requested by the Buyer to assist
the Buyer in the operation of the Business.

    6.6   CONFIDENTIAL INFORMATION.  After the Closing and except as otherwise
specifically permitted in this Agreement, each party to this Agreement agrees,
on behalf of itself and its Affiliates, to use reasonable efforts not to
divulge, communicate, use to the detriment of any other party to this Agreement
or its Affiliates or for the benefit of any other person or persons, any
confidential information or trade secrets of such other party with respect to
the Assets or the Business, including personnel information, secret processes,
know-how, customer lists, formulae, or other technical data; provided, if any
party to this Agreement or any of its Affiliates is compelled to disclose such
information to any tribunal, regulatory or governmental authority or agency or
else stand liable for contempt or suffer other censure and penalty, such party
may so disclose such information without any liability hereunder.

    6.7   ASSIGNMENT OF CONTRACTS.  On or before the Effective Date, Seller
shall have delivered to Buyer all of the Contracts presently in force and shall
have effected a valid assignment of all of Seller's rights and obligations
thereunder.

    6.8  SHAREHOLDERS' AGREEMENT; INVESTMENT REPRESENTATIONS.  No Parent Shares
can or will be issued upon conversion of  Note 2 until Seller becomes a party to
a Shareholders' Agreement in the form required by the Parent ("Shareholders'
Agreement") and gives appropriate investment representations concerning
knowledge about the investment and acknowledgments of any applicable
restrictions on transferability.

                                  ARTICLE VII
                                INDEMNIFICATION
                                ---------------

    7.1  INDEMNIFICATION.

          A.  BY THE SELLER AND SELLER'S SHAREHOLDERS.  Subject to Section
7.1(E) hereof, the Seller and Maddocks,  jointly and severally, and Simon,
severally but not jointly, (collectively herein "Seller Indemnitors") shall
indemnify, save, defend and hold harmless the Buyer and Buyer's shareholders and
the directors, officers, partners, agents and employees of each (collectively,
the "Buyer Indemnified Parties") from and against any and all costs, lawsuits,
losses, liabilities, deficiencies, claims and expenses, including interest,
penalties, attorneys' fees and all amounts paid in investigation, defense or
settlement of any of the foregoing (collectively referred to herein as
"Damages"), (i) incurred in connection with or arising out of or resulting from
or incident to any breach of any covenant, breach of warranty as of the
Effective Date, or the inaccuracy of any representation as of the Effective
Date, made by the Seller in or pursuant to this Agreement or any

                                      -29-
<PAGE>
 
other agreement contemplated hereby or in any schedule, certificate, exhibit, or
other instrument furnished or to be furnished by the Seller or its Affiliates
under this Agreement, or (ii) based upon, arising out of, or otherwise in
respect of any liability or obligation of the Business or relating to the Assets
relating to any period prior to the Effective Date, other than those Damages
based upon or arising out of the Assumed Liabilities; provided, however, that
the Seller shall not be liable for any such Damages to the extent, if any, such
Damages result from or arise out of a breach or violation of this Agreement by
any Buyer Indemnified Parties.

          B.  BY THE BUYER AND THE PARENT.  Subject to Section 7.1(E) hereof,
the Buyer and Parent shall indemnify, save, defend and hold harmless the Seller,
Seller's successors in interest or heirs, Maddocks and Simon (collectively, the
"Seller Indemnified Parties") from and against any and all Damages (i) incurred
in connection with or arising out of or resulting from or incident to any breach
of any covenant , breach of warranty as of the Effective Date, or the inaccuracy
of any representation as of the Effective Date, made by the Buyer and/or Parent
in or pursuant to this Agreement or any other agreement contemplated hereby or
in any schedule, certificate, exhibit, or other instrument furnished or to be
furnished by the Buyer and/or Parent under this Agreement, or (ii) based upon,
arising out of or otherwise in respect of any liability or obligation of the
Business or relating to the Assets (a) relating to any period on and after the
Effective Date, other than those Damages based upon or arising out of the
liabilities other than Assumed Liabilities (the "Retained Liabilities"), or (b)
arising out of facts or circumstances existing on and after the Effective Date,
other than those Damages based upon or arising out of the Retained Liabilities;
provided, however, that neither Buyer nor Parent shall be liable for any such
Damages if such Damages result from or arise out of a breach or violation of
this Agreement by any Seller Indemnified Parties.

          C.  DEFENSE OF CLAIMS.  If any lawsuit or enforcement action is filed
against any Party entitled to the benefit of indemnity hereunder, written notice
thereof describing such lawsuit or enforcement action in reasonable detail and
indicating the amount (estimated, if necessary) or good faith estimate of the
reasonably foreseeable estimated amount of Damages (which estimate shall in no
way limit the amount of indemnification the indemnified Party is entitled to
receive hereunder), shall be given to the indemnifying Party as promptly as
practicable (and in any event within ten (10) days, after the service of the
citation or summons) ("Notice of Action"); provided that the failure of any
indemnified Party to give timely notice shall not affect its rights to
indemnification hereunder to the extent that the indemnified Party demonstrates
that the amount the indemnified Party is entitled to recover exceeds the actual
damages to the indemnifying Party caused by such failure to so notify within ten
(10) days and so long as the indemnifying Party is not materially prejudiced by
the failure to receive such notice.  The indemnifying Party may elect to
compromise or defend any such asserted liability and to assume all obligations
contained in this Section 7.1 to indemnify the indemnified Party by a delivery
of notice of such election ("Notice of Election") within ten (10) days after
delivery of the Notice of Action.  Upon delivery of the Notice of Election, the
indemnifying Party shall be entitled to take control of the defense and
investigation of such lawsuit or action and to employ and engage attorneys of
its own choice to handle and defend the same, at the indemnifying Party's sole
cost, risk and expense,  and such indemnified Party shall cooperate in all
reasonable respects, at the indemnifying Party's sole cost, risk and expense,
except with respect to the fees and expenses of the indemnified Party's
attorney, which shall be borne by

                                      -30-
<PAGE>
 
the indemnified Party, with the indemnifying Party and such attorneys in the
investigation, trial, and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified Party may, at its own
cost, risk and expense, participate in such investigation, trial and defense of
such lawsuit or action and any appeal arising therefrom. If the Notice of
Election is delivered to the indemnified Party, the indemnified Party shall not
pay, settle or compromise such claim without the indemnifying Party's consent,
which consent shall not be unreasonably withheld. If the indemnifying Party
elects not to defend the claim of the indemnified Party or does not deliver to
the indemnified Party a Notice of Election within ten (10) days after delivery
of the Notice of Action, the indemnified Party may, but shall not be obligated
to defend, provided that in no circumstance shall the indemnified Party
compromise or settle the claim or other matter on behalf or for the account of
the indemnifying Party without the consent of the indemnifying Party, which
shall not be unreasonably withheld.

          D.  THIRD PARTY CLAIMS.  The provisions of this Section 7.1 are not
limited to matters asserted by the Parties, but cover Damages incurred in
connection with third party claims.  The indemnity hereunder is in addition to
any and all rights and remedies of the Parties in connection herewith.

          E.  LIMITATION ON INDEMNIFICATION.  Notwithstanding the other
provisions of this Section 7.1, Seller Indemnitors shall not be liable to Buyer
Indemnified Parties, and Buyer shall not be liable to Seller Indemnified
Parties, for the first $25,000 in aggregate Damages suffered by such indemnified
Parties; provided, however, that once any such indemnified Parties have suffered
Damages aggregating in excess of $25,000,  the indemnifying Party shall
reimburse the indemnified Parties for the full amount of such Damages, including
the $25,000 in Damages initially excluded.  In no event shall the aggregate
Damages payable by an indemnifying Party to indemnified Parties exceed one-half
(1/2) of the Purchase Price.

    7.2  SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  All of the
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing hereunder and continue in full force and
effect for two (2) years thereafter, except that the representations and
warranties contained in Sections 3.1, 3.2 and 3.33 shall survive for a period of
three (3) years after Closing.

                                 ARTICLE VIII
                                   REMEDIES
                                   --------

    8.1  SPECIFIC PERFORMANCE; REMEDIES.  Each of the Parties hereby agrees that
the transactions contemplated by this Agreement are unique, and that each Party
shall have, in addition to any other legal or equitable remedy available to it,
the right to enforce this Agreement by decree of specific performance.  If any
legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing Party or Parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other remedies to which it, he or they may be entitled at law
or equity.  The rights

                                      -31-
<PAGE>
 
and remedies granted herein are cumulative and not exclusive of any other right
or remedy granted herein or provided by law.

    8.2  OFFSET; REMEDIES.  To the extent not otherwise prohibited by applicable
law, (i) all amounts due and owing by the Buyer to the Seller under this
Agreement, Note 1, Note 2, or any document, instrument, or agreement executed in
connection herewith, and (ii) the Parent Shares, if issued,  shall be subject to
offset by the Buyer to the extent of any Damages incurred by Buyer that have
triggered an indemnification obligation of Seller under Section 7.1.A.  In the
event Buyer elects to offset any such Damages, Buyer shall furnish Seller notice
containing detailed information with respect to such Damages, the specific
obligation of Seller that triggered such Damages and such other information as
may be reasonably appropriate in respect of Seller's consideration of such claim
(an "Offset Claim").  Seller shall have twenty (20) days after receipt of such
information to dispute any such Offset Claim, and shall so notify Buyer of the
basis for such dispute.  If the Parties are unable to resolve such dispute
within fifteen (15) days, the Offset Claim shall be submitted to arbitration, as
further described in Section 9.14.  If Seller agrees to pay such Offset Claim or
fails to contact Buyer within such twenty (20) day period, and pending final
resolution of any Offset Claim which has been submitted to arbitration, the
offset shall be applied as follows (the act of offsetting by Buyer shall be
referred to as an "Offset"):  (a)  First against Note 1 until the full amount of
Note 1, both principal and interest, has been repaid, (b) next against Note 2
until the full amount of Note 2, both principal and interest, has been repaid,
and (c) finally, against the Parent Shares.  In order to secure the Buyer's
offset rights against the Parent Shares, Buyer and Seller shall execute the
Stock Pledge Agreement.  Upon issuance, the Parent Shares shall have a
restrictive legend typed on the back thereof specifying that the Parent Shares
are subject to a right of offset as specified in this Agreement.  The Seller
acknowledges and agrees that but for the right of Offset contained in this
Agreement, the Buyer would not have entered into this Agreement or any of the
transactions contemplated herein.  Notwithstanding anything contained herein to
the contrary, the offset rights of Buyer hereunder shall terminate in the manner
set forth in Section 7.2.

                                  ARTICLE IX
                                 MISCELLANEOUS
                                 -------------

    9.1  FEES.  Except as expressly set forth herein to the contrary, each Party
shall be responsible for all costs, fees and expenses (including attorney and
accountant fees and expenses) paid or incurred by such Party in connection with
the preparation, negotiation, execution, delivery and performance of this
Agreement, or otherwise in connection with the transaction contemplated hereby.

    9.2  MODIFICATION OF AGREEMENT.  This Agreement may be amended or modified
only in writing signed by all of the Parties.

    9.3  NOTICES.  All notices, consents, demands or other communications
required or permitted to be given pursuant to this Agreement shall be deemed
sufficiently given when delivered personally or telefaxed with receipt of
transmission confirmed during regular business hours during a business day to
the appropriate location described below, or three (3) business days after
posting

                                      -32-
<PAGE>
 
thereof by United States first-class, registered or certified mail, return
receipt requested, with postage and fees prepaid and addressed as follows:

          IF TO SELLER:   Legal Enterprise, Inc.
                          Attn: Mr. Tony L. Maddocks, President
                          4232-1 Las Virgenes Road
                          Calabasas, California 91302
                          Phone:  818/878-9227
                          Fax:  818/878-9851

          Copy to:        Timothy F. Sylvester
                          Riordan & McKinzie
                          300 S. Grand Ave. 29th Floor
                          Los Angeles, California 90071
                          Phone:  213/229-8421
                          Fax:  213/229-8550

          IF TO MADDOCKS: Mr. Tony L. Maddocks
                          178 Magellan Street
                          Thousand Oaks, California 91360
                          Phone: 805/492-2702

          IF TO SIMON:    Mr. Alan Simon
                          30227 Walford Court
                          Agoura Hills, California 91301-4627
                          Phone: 818/597-8331

          IF TO BUYER:    Litigation Resources of America-California, Inc.
                          650 First City Tower, 1001 Fannin
                          Houston, Texas 77002
                          Phone:  713/653-7100
                          Fax:   713/653-7172

          IF TO PARENT:   Litigation Resources of America, Inc.
                          650 First City Tower, 1001 Fannin
                          Houston, Texas 77002
                          Phone:  713/653-7100
                          Fax:   713/653-7172

          Copy to:        J. Randolph Ewing
                          Boyer, Ewing & Harris Incorporated
                          Nine Greenway Plaza, Suite 3100

                                      -33-
<PAGE>
 
                          Houston, Texas  77046
                          Phone: 713/871-2025  
                          Fax: (713) 871-2024

Any addressee at any time by furnishing notice to the other addressees in the
manner described above may designate additional or different addresses for
subsequent notices or communications.

    9.4  SEVERABILITY.  The invalidity or unenforceability of any provision of
this Agreement shall not invalidate or affect the enforceability of any other
provision of this Agreement.

    9.5  ENTIRE AGREEMENT; BINDING EFFECT.  This Agreement and any Ancillary
Agreements set forth the entire agreement among the Parties with respect to the
subject matter hereof.  This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and assigns.

    9.6  WAIVER.  No delay in the exercise of any right under this Agreement
shall waive such rights. Any waiver, to be enforceable, must be in writing.

    9.7  GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

    9.8  ASSIGNMENT.  The Seller shall not assign this Agreement or any interest
herein .

    9.9  HEADINGS.  Headings in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.

    9.10  SCHEDULES AND EXHIBITS.  All Schedules and Exhibits attached to this
Agreement or to be delivered by the Seller, upon review and approval by the
Buyer, are and shall be hereby incorporated in and made a part of this
Agreement.  All Schedules to this Agreement must be delivered no later than four
(4) days prior to Closing, in order to provide the Buyer ample time to review
and evaluate the items described therein and disclosed thereby. Although the
Schedules remain subject to the review and approval of the Buyer, no such review
or approval shall constitute a waiver by the Buyer of any breach or default
caused by the inaccuracy or incompleteness of any Schedule, the accuracy and
completeness of the Schedules being the sole responsibility of the Seller.

    9.11  RIGHTS AND LIABILITIES OF PARTIES.  Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the Parties and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
Party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over against any Party to this Agreement.

    9.12  SURVIVAL.  Subject to Section 7.2, this Agreement, including but not
limited to all covenants, warranties, representations and indemnities contained
herein, shall survive the Closing,

                                      -34-
<PAGE>
 
and the Bill of Sale and all other documents, instruments or agreements relating
to the Assets and the transactions contemplated herein shall not be deemed
merged therein.

    9.13  COUNTERPARTS.  This Agreement may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute one and the same agreement.

    9.14  ARBITRATION.  If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if such dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this Section 9.14.  Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Agreement or the transactions contemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter into this Agreement, shall be settled by binding arbitration.  There shall
be one arbitrator to be mutually agreed upon by the Parties involved in the
controversy and to be selected from the National Panel of Commercial Arbitrators
(or successor panel, if any).  If within 45 days after service of the demand for
arbitration the Parties are unable to agree upon such an arbitrator who is
willing to serve, then an arbitrator shall be appointed by the American
Arbitration Association in accordance with its rules.  Except as specifically
provided in this Section 9.14, the arbitration shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The arbitrator shall not render an award of punitive damages.  Any arbitration
hereunder shall be held in Los Angeles, California.  Expenses related to the
arbitration, including counsel fees, shall be borne by the Party incurring such
expenses except to the extent otherwise provided in Section 9.15 herein.  The
fees of the arbitrator and of the American Arbitration Association, if any,
shall be divided equally among the Parties involved in the controversy.
Judgment upon the award rendered by the arbitrator (which may, if deemed
appropriate by the arbitrator, include equitable or mandatory relief with
respect to performance of obligations hereunder) may be entered in any court of
competent jurisdiction.

    9.15  ATTORNEYS' FEES.  If any litigation is instituted to enforce or
interpret the provisions of this Agreement or the transactions described herein,
the prevailing Party in such action shall be entitled to recover its reasonable
attorneys' fees from the other Party hereto.

    9.16  DRAFTING.  All Parties hereto acknowledge that each Party was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against any Party hereto because one is
deemed to be the author thereof.

          IN WITNESS WHEREOF, the undersigned have  executed and delivered this
Agreement in multiple counterparts effective as of the date first written above.

                         BUYER:
                         ------

                                      -35-
<PAGE>
 
                         LITIGATION RESOURCES OF AMERICA-CALIFORNIA, INC., a
                         California corporation

                         By:                 Richard O. Looney
                             ---------------------------------------------------
                             Richard O. Looney, Chairman and
                             Chief Executive Officer

                         SELLER:
                         -------

                         LEGAL ENTERPRISE, INC.,
                         a California corporation

                         By:                 Tony L. Maddocks
                             ---------------------------------------------------
                             Name:           Tony L. Maddocks
                                    --------------------------------------------
                             Title:           President, CFO
                                    --------------------------------------------

                         PARENT:

                         LITIGATION RESOURCES OF AMERICA, INC.,
                         a Texas corporation

                         By:                  Richard O. Looney
                             ---------------------------------------------------
                             Richard O. Looney,
                             President & Chief Executive Officer

                         MADDOCKS:
                         ---------

                                             Tony L. Maddocks
                         -------------------------------------------------------
                         TONY L. MADDOCKS, Individually

                         SIMON:
                         ------

                                               Alan Simon
                         -------------------------------------------------------
                         ALAN SIMON, Individually


Schedules:
----------

2.1(a)    Equipment
2.1(b)    Contracts
2.1(c)    Books and Records
2.1(e)    Intellectual Property
2.1(g)    General Intangibles
2.2       Excluded Assets
2.7       Allocation of Purchase Price

                                      -36-
<PAGE>
 
3.1       Encumbrances on Assets
3.7       Employment Contracts
3.9       Litigation
3.10      Breaches or Violations
3.12      Personnel
3.15      Employee Benefits
3.16(a)   Certain Changes or Events
3.16(b)   Certain Commitments
3.17      Consents and Approvals
3.21      Liens
3.22      Customers
3.23      Insurance Policies
3.24      Interest in Customers, Suppliers and Competitors
3.26      Organization
3.30      Severance Payments
3.34      Operations of Seller
4.5       Consents



Exhibits:
---------

A-1       Note 1
A-2       Note 2
B         Maddocks Employment Agreement
C         Bill of Sale
D         Contingent Stock Pledge Agreement

Other Agreements:
-----------------

Registration Rights Agreement
Pecks Subordination Agreement(s)
Texas Commerce Bank Subordination Agreement(s)

                                      -37-
<PAGE>
 
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, NOR THE SECURITIES LAWS OF ANY STATE.  THIS NOTE MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON
(1) SUCH REGISTRATION, OR (2) DELIVERY TO THE ISSUER OF THIS NOTE OF AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED FOR SUCH TRANSFER, OR (3) THE SUBMISSION TO THE ISSUER OF THIS NOTE OF
OTHER EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT ANY SUCH
SALE, PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE IN VIOLATION OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, OR OTHER APPLICABLE SECURITIES LAWS
OF ANY STATE, OR ANY RULES OR REGULATIONS PROMULGATED THEREUNDER.

THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE SENIOR DEBT
(AS DEFINED IN THE SUBORDINATION AGREEMENT BELOW REFERRED TO) PURSUANT TO, AND
TO THE EXTENT PROVIDED IN, THE SUBORDINATION AGREEMENT EFFECTIVE AS OF AUGUST
29, 1997, BY THE MAKER HEREOF AND PAYEE NAMED HEREIN IN FAVOR OF TEXAS COMMERCE
BANK NATIONAL ASSOCIATION.


                LITIGATION RESOURCES OF AMERICA-CALIFORNIA, INC.
                          D/B/A LEGAL ENTERPRISE, INC.
                          Subordinated Promissory Note
                                    (Note 1)


$319,340.00               Houston, Texas                 August 29, 1997


     Litigation Resources of America-California, Inc. d/b/a Legal Enterprise,
Inc., a California corporation (hereinafter called the "Company," which term
includes any directly or indirectly controlled subsidiaries or successor
entities), for value received, hereby promises to pay to Legal Enterprise, Inc.,
a California corporation (being hereinafter called the "Holder"),  the principal
sum of THREE HUNDRED NINETEEN THOUSAND THREE HUNDRED FORTY AND NO/100 DOLLARS
($319,340.00) together with accrued interest on the amount of such principal
sum, payable in accordance with the terms set forth below.

     THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBORDINATED TO
ALL SENIOR INDEBTEDNESS, AS HEREINAFTER DEFINED, NOW OWING OR HEREAFTER EXISTING
OR ARISING TO THE EXTENT SET FORTH IN THE SUBORDINATION AGREEMENT DESCRIBED
ABOVE.
<PAGE>
 
                                   ARTICLE I
                                  Definitions

     For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular, (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles of the Accounting Principles Board of the American
Institute of Certified Public Accountants and the Financial Accounting Standards
Board that are applicable from time to time, and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision.

     1.1  "Board of Directors" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.

     1.2  "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.

     1.3  "Change in Control" shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a change in control
shall be deemed to have occurred if (W) any "person" (as such term is used in
Section 13(d) and 14(d) of the Exchange Act), other than the Parent or Holder,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
40% or more of the combined voting power of the Company's then outstanding
securities other than as a result of the sale by the Parent of securities in a
private transaction, and the Pecks Group of Investors no longer has the right to
elect a majority of the Board of Directors of the Parent, or (X) during any
period of two consecutive years during the term of this Note, individuals who at
the beginning of such period constitute the Board of Directors cease for any
reason to constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period is as a result
of the stockholder permitted to designate such director to fill a position
making a change in such designee or if additional directors are added to the
board as a result of an expansion of the board of directors for purposes of the
Company conducting a Public Offering or for any other business reason, or (Y)
the Parent consummates a Public Offering, or (Z) all or substantially all of the
assets of the Parent or the Company are sold.

     1.4  "Default"  means any event which is, or after notice or passage of
time would be, an Event of Default.

     1.5  "Event of Default" has the meaning specified in Section 3.1.

     1.6  "GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.



                                      -2-
<PAGE>
 
     1.7   "Indebtedness" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or purchase money
indebtedness, or indebtedness secured by property ("Purchase Money
Indebtedness") at the time of the acquisition of such property by such Person,
for the payment of which the Person is directly or contingently liable, (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay over funds, (iii) for
all trade debt of the Person, and (iv) for all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.

     1.8   "Lien" means any mortgage, deed of trust, lien, security interest,
pledge, claim, charge, liability, obligation or other encumbrance.

     1.9   "Maturity Date", when used with respect to this Note means August 31,
2005 (or such other date upon which this Note becomes due and payable).

     1.10  "Maximum Nonusurious Rate" means the indicated rate ceiling from time
to time in effect as defined by Article 5069-1.04, Vernon's Annotated Civil
Statutes, as amended.

     1.11  "Note" means this Subordinated Promissory Note.

     1.12  "Other Subordinated Indebtedness" means any other Indebtedness now or
hereinafter due and owing by the Company or to any person who is the seller of a
court reporting and/or litigation service business and who finances all or part
of the purchase price thereof.

     1.13  "Parent" means Litigation Resources of America, Inc., a Texas
corporation.

     1.14 "Parent Stock"  means shares of common stock, $.01 par value, of
Parent and any securities for which such stock may be exchanged or into which it
may be converted.

     1.15   "Pecks Group of Investors" means those persons defined as
"Investors" who are parties to the Securities Purchase Agreement dated effective
January 17, 1997 among the Investors, the Parent and certain subsidiaries of the
Parent, and the permitted assigns of the Investors.

     1.16 "Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

     1.17 "Public Offering" means the sale by the Parent of securities for cash
in an underwritten public offering registered on the appropriate form with the
SEC.


                                      -3-
<PAGE>
 
     1.18 "Purchase Agreement" means that certain Agreement of  Purchase and
Sale of Assets dated as of August 29, 1997 executed by and among the Company,
Anthony Maddocks, individually, Alan Simon, individually, and the Holder.

     1.19 "SEC"  means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act of 1933 or
any successor act thereto.

     1.20 "Senior Indebtedness" means any and all indebtedness, liabilities and
obligations of the Company to any Person including Other Subordinated
Indebtedness that is incurred by the Company or its affiliates in financing the
purchase by it or its affiliates of a court reporting and/or litigation service
business, whether direct or indirect, absolute or contingent, now owing or
hereafter existing or arising, or due or to become due, including without
limitation, future indebtedness (principal, interest, fees and expenses,
collection costs or otherwise) and future advances of funds, and all
modifications, renewals, extensions or rearrangements of any of the foregoing.

     1.21 "Subordination Agreements" means those certain Subordination
Agreements executed as of even date herewith by and among the Company, the
Holder, and the holders of the Senior Indebtedness.

     1.22 "Subsidiary" means a corporation or other entity in which more than
50% of the outstanding voting stock or equity interests is owned or controlled,
directly or indirectly, by the Company or any combination of the Company and one
or more other Subsidiaries.  For the purposes of this definition, "voting stock"
means stock or other interests which ordinarily has voting power for the
election of directors, and equity interests means the right to receive the
profits of the entity, when disbursed, or the assets of the entity upon
liquidation or dissolution.

                                   ARTICLE II
                                    Payments

     2.1  Interest.  From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate of six and three-eighths percent (6.375%) per annum, calculated
on the basis of a 365-day year or 366-day year as the case may be.

     2.2  Payment of Principal and Interest.  Beginning September 15, 1997, the
Company shall make monthly payments of interest on the fifteenth day of each
month during the term of this Note (and if the fifteenth day is not a Business
Day, the first Business Day thereafter) with the entire principal amount of this
Note and accrued interest thereon being due and payable on August 31, 2005.
Prepayments of this Note are not permitted without the consent of the Holder in
Holder's sole discretion.

                                  ARTICLE III
                                    Remedies

     3.1  Events of Default.  An "Event of Default" occurs if:


                                      -4-
<PAGE>
 
     3.1.1   the Company fails to make when due any payment of interest due
under this Note, and such default remains uncured for a period of 10 days after
notice from the Holder;

     3.1.2   the Company fails to make when due the principal payment due
under this Note, and such default remains uncured for a period of 180 days after
notice from the Holder; or

     3.1.3   the Company defaults in the performance of any other covenant
made by the Company in this Note, and such default remains uncured for a period
of 180 days after notice from the Holder.

     3.2     Acceleration of Maturity. Regardless of the occurrence of an Event
of Default (and the expiration of any applicable cure or grace period), the
Holder shall have no right to accelerate the maturity of this Note other than as
set forth in this Section 3.2. Notwithstanding the provisions of the foregoing
sentence, this Note and all accrued interest shall at the option of the Holder
become immediately due and payable on the first Business Day following the date
on which Texas Commerce Bank National Association, or its successors or assigns,
accelerates the maturity of any Senior Indebtedness as the result of the
consummation of a transaction resulting in a Change in Control. The provisions
of this Section 3.2 shall govern notwithstanding any other agreement or document
of the Company or the Parent (with the exception of the Subordination
Agreements).

                                   ARTICLE IV
                                   Covenants

     The Company covenants and agrees that, so long as this Note is outstanding:

     4.1  Payment of Principal and Accrued Interest.  The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof, except to the extent of any limitations
contained in the Purchase Agreement or the Subordination Agreements.


                                   ARTICLE V
                                 Miscellaneous

     5.1  No Collection Fees.  If this Note is placed in the hands of an
attorney for collection, and if it is collected through any legal proceedings at
law or in equity or in bankruptcy, receivership or other court proceedings, the
Company will not pay any costs or expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Holder.

     5.2  Consent to Amendments.  This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the prior written
consent to such amendment, action or omission to act from the Holder.


                                      -5-
<PAGE>
 
     5.3  Benefits of Note.  Nothing in this Note, express or implied, shall
give to any Person, other than the Company, Holder, and their successors any
benefit or any legal or equitable right, remedy or claim under or in respect of
this Note.

     5.4  Successors and Assigns.  All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.

     5.5  Restrictions on Transfer.  This Note shall not be transferable or
assignable in any manner whatsoever; provided that this Note may, upon ten (10)
days prior written notice to Company, be assigned by Holder to either or both of
the individuals who were shareholders of Holder immediately prior to the Closing
Date.

     5.6  Waiver; Remedies Exclusive.  No failure to exercise and no delay on
the part of Holder in exercising any power or right in connection herewith shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power.  No course of dealing between the Company
and Holder shall operate as a waiver of any right of Holder under this Note.  No
modification or waiver of any provision of this Note or any other instrument
evidencing, securing, or guaranteeing this Note nor any consent to any departure
therefrom shall in any event be effective unless the same shall be in writing
and signed by the person against whom enforcement thereof is to be sought, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. All rights and remedies of Holder existing
hereunder are exclusive and not cumulative of any rights or remedies otherwise
available thereto.

     5.7  Notice; Address of Parties. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, or by telefax with confirmed receipt, to the
following addresses: if to the Company, 650 First City Tower, 1001 Fannin,
Houston, Texas 77002, Fax 713/653-7172 or at any other address designated by the
Company in writing to Holder; if to Holder, 4232-1 Las Virgenes Road, Calabasas,
California 91302, Fax: 818/878-9851 or at any other address designated by Holder
to the Company in writing.

     5.8  Separability Clause.  In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.

     5.9  Governing Law.  This Note shall be construed and enforced in
accordance with and governed by the laws of the State of Texas.

     5.10 Usury.  It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Texas and the United States of America,
and judicial or administrative interpretations or determinations thereof
regarding the contracting for, charging and receiving of 


                                      -6-
<PAGE>
 
interest for the use, forbearance, and detention of money (referred to as
"Applicable Law"). The Holder shall have no right to claim, to charge or to
receive any interest in excess of the maximum rate of interest, if any,
permitted to be charged on that portion of the amount representing principal
which is outstanding and unpaid from time to time by Applicable Law.
Determination of the rate of interest for the purpose of determining whether
this Note is usurious under Applicable Law shall be made by amortizing,
prorating, allocating and spreading in equal parts during the period of the
actual time of this Note, all interest or other sums deemed to be interest
(referred to in this Section as "Interest") at any time contracted for, charged
or received from the Company in connection with this Note. Any Interest
contracted for, charged or received in excess of the maximum rate allowed by
Applicable Law shall be deemed a result of a mathematical error and a mistake.
If this Note is paid in part prior to the end of the full stated term of this
Note and the Interest received for the actual period of existence of this Note
exceeds the maximum rate allowed by Applicable Law, Holder shall credit the
amount of the excess against any amount owing under this Note or, if this Note
has been paid in full, or in the event that it has been accelerated prior to
maturity, Holder shall refund to the Company the amount of such excess, and
shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.

     5.11 Arbitration.  The arbitration provisions contained in Section 9.14 of
the Purchase Agreement shall govern this Note.

     THIS NOTE, ANY AND ALL ADDITIONAL PROMISSORY NOTES, IF ANY, ISSUED BY THE
COMPANY TO HOLDER AND ALL DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION
HEREWITH OR THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE COMPANY AND
HOLDER WITH RESPECT TO THE OBLIGATIONS OWED THEREBY TO HOLDER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE COMPANY AND HOLDER.  PAYMENT OF THIS NOTE IS SUBJECT TO
THE PURCHASE AGREEMENT AND THE SUBORDINATION AGREEMENTS.

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.

                         LITIGATION RESOURCES OF
                         AMERICA-CALIFORNIA, INC.,
                         A CALIFORNIA CORPORATION
 
                         By:_____________________________________________
                         Name:___________________________________________
                         Title:__________________________________________
 

                                      -7-
<PAGE>
 
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, NOR THE
SECURITIES LAWS OF ANY STATE. NEITHER THIS NOTE NOR SUCH SHARES MAY BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON (1) SUCH
REGISTRATION, OR (2) DELIVERY TO THE ISSUER OF THIS NOTE OR SUCH SHARES OF AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED FOR SUCH TRANSFER, OR (3) THE SUBMISSION TO THE ISSUER OF THIS NOTE OR
SUCH SHARES OF OTHER EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER, TO THE
EFFECT THAT ANY SUCH SALE, PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE IN
VIOLATION OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE, OR ANY RULES OR REGULATIONS PROMULGATED
THEREUNDER.

THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE SENIOR DEBT
(AS DEFINED IN THE SUBORDINATION AGREEMENT BELOW REFERRED TO) PURSUANT TO, AND
TO THE EXTENT PROVIDED IN, THE SUBORDINATION AGREEMENT EFFECTIVE AS OF AUGUST
29, 1997, BY THE MAKER HEREOF AND PAYEE NAMED HEREIN IN FAVOR OF TEXAS COMMERCE
BANK NATIONAL ASSOCIATION.

                LITIGATION RESOURCES OF AMERICA-CALIFORNIA, INC.
                          D/B/A LEGAL ENTERPRISE, INC.
                    Convertible Subordinated Promissory Note
                                    (Note 2)

$821,160.00               Houston, Texas                  August 29, 1997

     Litigation Resources of America-California, Inc. d/b/a Legal Enterprise,
Inc., a California corporation (hereinafter called the "Company," which term
includes any directly or indirectly controlled subsidiaries or successor
entities), for value received, hereby promises to pay to Legal Enterprise, Inc.,
a California corporation (being hereinafter called the "Holder"),  the principal
sum of EIGHT HUNDRED TWENTY-ONE THOUSAND ONE HUNDRED SIXTY AND NO/100 DOLLARS
($821,160.00) together with accrued interest on the amount of such principal
sum, payable in accordance with the terms set forth below.

     THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBORDINATED TO
ALL SENIOR INDEBTEDNESS, AS HEREINAFTER DEFINED, NOW OWING OR HEREAFTER EXISTING
OR ARISING TO THE EXTENT SET FORTH IN THE SUBORDINATION AGREEMENT DESCRIBED
ABOVE.

                                   ARTICLE I
                                  Definitions

     For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular, (ii) all accounting terms not otherwise defined 
<PAGE>
 
herein have the meanings assigned to them in accordance with generally accepted
accounting principles of the Accounting Principles Board of the American
Institute of Certified Public Accountants and the Financial Accounting Standards
Board that are applicable from time to time, and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision.

     1.1  "Board of Directors" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.

     1.2  "Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.

     1.3  "Change in Control" shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a change in control
shall be deemed to have occurred if (W) any "person" (as such term is used in
Section 13(d) and 14(d) of the Exchange Act), other than the Parent or Holder,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
40% or more of the combined voting power of the Company's then outstanding
securities other than as a result of the sale by the Parent of securities in a
private transaction, and the Pecks Group of Investors no longer has the right to
elect a majority of the Board of Directors of the Parent, or (X) during any
period of two consecutive years during the term of this Note, individuals who at
the beginning of such period constitute the Board of Directors cease for any
reason to constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period is as a result
of the stockholder permitted to designate such director to fill a position
making a change in such designee or if additional directors are added to the
board as a result of an expansion of the board of directors for purposes of the
Company conducting a Public Offering or for any other business reason, or (Y)
the Parent consummates a Public Offering, or (Z) all or substantially all of the
assets of the Parent or the Company are sold.

     1.4  "Default"  means any event which is, or after notice or passage of
time would be, an Event of Default.

     1.5  "Event of Default" has the meaning specified in Section 3.1.

     1.6  "GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.

     1.7  "Indebtedness" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease


                                      -2-
<PAGE>
 
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or purchase money
indebtedness, or indebtedness secured by property ("Purchase Money
Indebtedness") at the time of the acquisition of such property by such Person,
for the payment of which the Person is directly or contingently liable, (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay over funds, (iii) for
all trade debt of the Person, and (iv) for all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.

     1.8  "Lien" means any mortgage, deed of trust, lien, security interest,
pledge, claim, charge, liability, obligation or other encumbrance.

     1.9  "Maturity Date", when used with respect to this Note means August 31,
2005 (or such other date upon which this Note becomes due and payable).

     1.10 "Maximum Nonusurious Rate" means the indicated rate ceiling from time
to time in effect as defined by Article 5069-1.04, Vernon's Annotated Civil
Statutes, as amended.

     1.11 "Note" means this Convertible Subordinated Promissory Note.

     1.12 "Other Subordinated Indebtedness" means any other Indebtedness now or
hereinafter due and owing by the Company or to any person who is the seller of a
court reporting and/or litigation service business and who finances all or part
of the purchase price thereof.

     1.13 "Parent" means Litigation Resources of America, Inc., a Texas
corporation.

     1.14 "Parent Stock"  means shares of common stock, $.01 par value, of
Parent and any securities for which such stock may be exchanged or into which it
may be converted.
 
     1.15 "Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

     1.16   "Pecks Group of Investors" means those persons defined as
"Investors" who are parties to the Securities Purchase Agreement dated effective
January 17, 1997 among the Investors, the Parent and certain subsidiaries of the
Parent, and the permitted assigns of the Investors.

     1.17 "Public Offering" means the sale by the Parent of securities for cash
in an underwritten public offering registered on the appropriate form with the
SEC.

     1.18 "Purchase Agreement" means that certain Agreement of  Purchase and
Sale of Assets dated as of August 29, 1997 executed by and among the Company,
Anthony Maddocks, individually, Alan Simon, individually, and the Holder.



                                      -3-
<PAGE>
 
     1.19 "SEC"  means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act of 1933 or
any successor act thereto.

     1.20 "Senior Indebtedness" means any and all indebtedness, liabilities and
obligations of the Company to any Person including Other Subordinated
Indebtedness that is incurred by the Company or its affiliates in financing the
purchase by it or its affiliates of a court reporting and/or litigation service
business, whether direct or indirect, absolute or contingent, now owing or
hereafter existing or arising, or due or to become due, including without
limitation, future indebtedness (principal, interest, fees and expenses,
collection costs or otherwise) and future advances of funds, and all
modifications, renewals, extensions or rearrangements of any of the foregoing.

     1.21 "Subordination Agreements" means those certain Subordination
Agreements executed as of even date herewith by and among the Company, the
Holder, and the holders of the Senior Indebtedness.

     1.22 "Subsidiary" means a corporation or other entity in which more than
50% of the outstanding voting stock or equity interests is owned or controlled,
directly or indirectly, by the Company or any combination of the Company and one
or more other Subsidiaries.  For the purposes of this definition, "voting stock"
means stock or other interests which ordinarily has voting power for the
election of directors, and equity interests means the right to receive the
profits of the entity, when disbursed, or the assets of the entity upon
liquidation or dissolution.

                                  ARTICLE II
                                   Payments

     2.1  Interest.  From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note at a rate of six and three-eighths percent (6.375%) per annum, calculated
on the basis of a 365-day year or 366-day year as the case may be.

     2.2  Payment of Principal and Interest.  Beginning September 15, 1997, the
Company shall make monthly payments of interest on the fifteenth day of each
month during the term of this Note (and if the fifteenth day is not a Business
Day, the first Business Day thereafter) with the entire principal amount of this
Note and accrued interest thereon being due and payable on August 31, 2005.
Prepayments of this Note are not permitted without the consent of the Holder in
Holder's sole discretion.

                                  ARTICLE III
                                   Remedies

     3.1   Events of Default.  An "Event of Default" occurs if:

     3.1.1 the Company fails to make when due any payment of interest due
under this Note, and such default remains uncured for a period of 10 days after
notice from the Holder;


                                      -4-
<PAGE>
 
     3.1.2 the Company fails to make when due the principal payment due
under this Note, and such default remains uncured for a period of 180 days after
notice from the Holder; or

     3.1.3 the Company defaults in the performance of any other covenant
made by the Company in this Note, and such default remains uncured for a period
of 180 days after notice from the Holder.

     3.2   No Acceleration of Maturity.  Regardless of  the occurrence of an
Event of  Default (and the expiration of any applicable cure or grace period),
the Holder shall have no right to accelerate the maturity of this Note.

                                   ARTICLE IV
                                   Covenants

     The Company covenants and agrees that, so long as this Note is outstanding:

     4.1  Payment of Principal and Accrued Interest.  The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof, except to the extent of any limitations
contained in the Purchase Agreement or the Subordination Agreements.

                                   ARTICLE V
                                   Conversion

     5.1  Conversion Events. On the date of and simultaneously with the closing
(the "Event Date") of  the first event which causes a Change in Control, all of
the outstanding principal amount of this Note shall be automatically converted
into shares of Parent Stock at a price equal to $8.50 per share ("Conversion
Price"), and otherwise on and subject to the terms and conditions set forth in
this Article V.  The outstanding principal amount of this Note shall be deemed
converted  into shares of Parent Stock on the Event Date but shall not be
complete until (i) the Company has given written notice to the Holder, which
notice shall be given at least twenty days prior to the Event Date, that the
outstanding principal amount of this Note has been converted, which notice shall
disclose the Conversion Price, the Event Date and the number of shares of Parent
Stock to be received by the Holder, (ii) the Holder has delivered written
instructions to the Company which states the denominations in which the Holder
wishes the certificate or certificates for Parent Stock to be issued, and (iii)
the Holder has surrendered this Note to the Company.

     5.2  Accrued Interest; Fractional Shares; Conversion Date. In the event of
any conversion, the Company will, as soon as practicable after surrender of this
Note and compliance by the Holder with the other conditions herein contained,
cause to be issued and delivered to the surrendering Holder certificates for the
number of full shares of Parent Stock to which the Holder shall be entitled as
aforesaid, together with any unpaid interest on the principal amount converted
accrued through the Event Date.  The Holder shall not  be entitled to receive
fractional shares of Parent Stock upon conversion or script in lieu thereof, but
the number of shares of Parent Stock to be received by the Holder upon
conversion shall be rounded down to the next whole number and the 



                                      -5-
<PAGE>
 
Holder shall be entitled to payment for the fractional share in cash at the
Conversion Price. So that the persons entitled to receive the shares of Parent
Stock upon conversion of the principal amount hereof shall be treated for all
purposes as having been the record holder or holders of such shares of Parent
Stock at such time, conversion shall be deemed to have been made as of the close
of business on the Event Date.

     5.3  No Shareholder Rights; Representations and Agreements Upon Issuance.
This Note shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Parent, or to any other rights whatsoever except the rights
herein expressed and such as are set forth, and no dividends shall be payable or
accrue in respect of this Note or the interest represented hereby or the Parent
Stock purchasable hereunder until or unless, and except to the extent that, the
outstanding principal amount hereof shall be converted.  No shares of Parent
Stock can or will be issued upon conversion until the Holder becomes a party to
a Shareholders' Agreement in the form required by the Parent and gives
appropriate investment representations concerning knowledge about the investment
and acknowledgments of any applicable restrictions on transferability.

                                  ARTICLE VI
                                 Miscellaneous

     6.1  No Collection Fees.  If this Note is placed in the hands of an
attorney for collection, and if it is collected through any legal proceedings at
law or in equity or in bankruptcy, receivership or other court proceedings, the
Company will not pay any costs or expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Holder.

     6.2  Consent to Amendments.  This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the prior written
consent to such amendment, action or omission to act from the Holder.

     6.3  Benefits of Note.  Nothing in this Note, express or implied, shall
give to any Person, other than the Company, Holder, and their successors any
benefit or any legal or equitable right, remedy or claim under or in respect of
this Note.

     6.4  Successors and Assigns.  All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.

     6.5  Restrictions on Transfer.  This Note shall not be transferable or
assignable in any manner whatsoever; provided that this Note may, upon ten (10)
days prior written notice to Company, be assigned by Holder to either of the
individuals who were shareholders of Holder immediately prior to the Closing
Date.

     6.6  Waiver; Remedies Exclusive.  No failure to exercise and no delay on
the part of Holder in exercising any power or right in connection herewith shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance 



                                      -6-
<PAGE>
 
of steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. No course of
dealing between the Company and Holder shall operate as a waiver of any right of
Holder under this Note. No modification or waiver of any provision of this Note
or any other instrument evidencing, securing, or guaranteeing this Note nor any
consent to any departure therefrom shall in any event be effective unless the
same shall be in writing and signed by the person against whom enforcement
thereof is to be sought, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. All rights and
remedies of Holder existing hereunder are exclusive and not cumulative of any
rights or remedies otherwise available thereto.

     6.7  Notice; Address of Parties.  Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, or by telefax with confirmed receipt, to the
following addresses: if to the Company, 650 First City Tower, 1001 Fannin,
Houston, Texas 77002, Fax 713/653-7172 or at any other address designated by the
Company in writing to Holder; if to Holder, 4232-1 Las Virgenes Road, Calabasas,
California 91302, Fax: 818/878-9851 or at any other address designated by Holder
to the Company in writing.

     6.8  Separability Clause.  In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.

     6.9  Governing Law.  This Note shall be construed and enforced in
accordance with and governed by the laws of the State of Texas.

     6.10 Usury.  It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Texas and the United States of America,
and judicial or administrative interpretations or determinations thereof
regarding the contracting for, charging and receiving of interest for the use,
forbearance, and detention of money (referred to as "Applicable Law").  The
Holder shall have no right to claim, to charge or to receive any interest in
excess of the maximum rate of interest, if any, permitted to be charged on that
portion of the amount representing principal which is outstanding and unpaid
from time to time by Applicable Law.  Determination of the rate of interest for
the purpose of determining whether this Note is usurious under Applicable Law
shall be made by amortizing, prorating, allocating and spreading in equal parts
during the period of the actual time of this Note, all interest or other sums
deemed to be interest (referred to in this Section as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note.  Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake.  If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by 


                                      -7-
<PAGE>
 
Applicable Law for contracting for, charging or receiving Interest in excess of
the maximum rate allowed by Applicable Law. Any such excess which is unpaid
shall be canceled.

     6.11 Arbitration.  The arbitration provisions contained in Section 9.14 of
the Purchase Agreement shall govern this Note.

     6.12 Antidilution Protection.  The Company shall, and shall induce Parent
to, grant to Holder any antidilution protection granted to any other holder of
shares of Parent Stock or of securities, options, warrants or other rights to
acquire, or any other securities convertible into,  shares of Parent Stock,
except for antidilution protection previously granted or granted in the future
to institutional investors.

     THIS NOTE, ANY AND ALL ADDITIONAL PROMISSORY NOTES, IF ANY, ISSUED BY THE
COMPANY TO HOLDER AND ALL DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION
HEREWITH OR THEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE COMPANY AND
HOLDER WITH RESPECT TO THE OBLIGATIONS OWED THEREBY TO HOLDER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE COMPANY AND HOLDER.  PAYMENT OF THIS NOTE IS SUBJECT TO
THE PURCHASE AGREEMENT AND THE SUBORDINATION AGREEMENTS.

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.

                         LITIGATION RESOURCES OF AMERICA-CALIFORNIA, INC., A
                         CALIFORNIA CORPORATION
 

                            By:___________________________________________
                            Name:_________________________________________
                            Title:________________________________________


                                      -8-
<PAGE>
 
     The Parent has executed this Note solely to evidence its agreement to the
potential obligations of the Parent with respect to conversion of the Note into
Parent Common Stock, as set forth in Section 5 of this Agreement.

                         LITIGATION RESOURCES OF AMERICA, INC.,
                         A TEXAS CORPORATION
 

                            By:___________________________________________
                            Name:_________________________________________
                            Title:________________________________________


                                      -9-


 
<PAGE>
 
                                 BILL OF SALE,
                      ASSIGNMENT AND ASSUMPTION AGREEMENT
                      -----------------------------------

     THIS BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Bill of
Sale") is entered into effective as of August 29, 1997, among LEGAL ENTERPRISE,
INC., a California corporation (the "Seller"), and LITIGATION RESOURCES OF
AMERICA-CALIFORNIA, INC., a California corporation ("Purchaser").  Purchaser and
Seller may be hereinafter sometimes referred to collectively as the "Parties" or
individually as a "Party."  All defined terms not otherwise defined herein shall
have the meanings ascribed to them in that certain Agreement of Purchase and
Sale of Assets of even date herewith (the "Purchase Agreement"), executed among
Seller, Purchaser, Tony L. Maddocks, an individual, Alan Simon, an individual,
and Litigation Resources of America, Inc., a Texas corporation.

                              W I T N E S S E T H:
                              - - - - - - - - - - 

     WHEREAS, Purchaser has agreed to purchase from Seller, and Seller has
agreed to grant, bargain, sell, convey, transfer, assign and deliver to
Purchaser, the Assets; and

     WHEREAS, as partial consideration for the sale and assignment of the
Assets, Purchaser has agreed to assume the Assumed Liabilities, on and subject
to the terms and conditions set forth in the Purchase Agreement;

     NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including the delivery to Seller of the Initial Purchase
Price, and the covenants of Seller set forth in the Purchase Agreement with
respect to the Secondary Purchase Price the receipt and sufficiency of which are
hereby acknowledged, Purchaser and Seller hereby agree as follows:

     1.    SALE AND ASSIGNMENT.  Seller has granted, bargained, sold, conveyed,
transferred, assigned and delivered, and by these presents does grant, bargain,
sell, convey, transfer, assign and deliver unto Purchaser, its successors and
assigns, the Assets, other than the Excluded Assets, on the terms and conditions
set forth in the Purchase Agreement.  Seller warrants that Seller is the lawful
owner in every respect of all of the Assets and that the Assets are free and
clear of any and all liens, security agreements, encumbrances, claims, demands,
and charges of every kind and character whatsoever other than as previously
disclosed in writing to Purchaser.  Seller hereby binds Seller and Seller's
successors and assigns to warrant and defend the title to all of the Assets unto
Purchaser and Purchaser's successors and assigns forever against every person
whomsoever lawfully claiming or to claim the Assets or any part thereof.
Purchaser hereby accepts the conveyance, transfer, assignment and delivery of
the Assets.  The representations and warranties of Seller set forth in the
Purchase Agreement are hereby incorporated herein by reference.

     2.    ASSUMPTION.  Subject to the exceptions and exclusions of Section 2.6
of the Purchase Agreement, and otherwise on and subject to the terms and
conditions of the Purchase Agreement, Purchaser hereby assumes and agrees to pay
and perform the Assumed Liabilities.
<PAGE>
 
     3.    FURTHER ACTIONS.  Seller hereby consents and agrees to any lawful
action taken by Purchaser in connection with the enforcement of, or the legal
protection of, the Assets, and confers upon Purchaser full right of substitution
in any and all such actions.  Seller further covenants and agrees to execute
such further documents and take such additional actions as may reasonably be
requested by Purchaser to vest in Purchaser title to any and all of the Assets
and otherwise to effectuate the intent of this Bill of Sale.  Each of the
Parties shall perform such actions and deliver or cause to be delivered any and
all such documents, instruments and agreements as the other Party may reasonably
request for the purpose of fully and effectively carrying out this Bill of Sale
and the transactions contemplated hereby.

     4.    GOVERNING LAW.  This Bill of Sale shall be construed and enforced in
accordance with and governed by the laws of the State of Texas, without regard
to conflicts of law principles, and the laws of the United States applicable in
Texas.

     5.   ARBITRATION.  If a dispute arises out of or relates to this Bill of
Sale, or the breach thereof, and if such dispute cannot be settled through
negotiation, the Parties agree first to try in good faith to settle the dispute
by mediation under the Commercial Mediation Rules of the American Arbitration
Association, before resorting to arbitration, litigation, or some other dispute
resolution procedure as required by this Section 5.  Failing an adequate
resolution by mediation, any controversy or claim arising out of or relating to
this Bill of Sale or the transactions contemplated hereby, including any
controversy or claim arising out of or relating to the Parties' decision to
enter into this Bill of Sale, shall be settled by binding arbitration.  There
shall be one arbitrator to be mutually agreed upon by the Parties involved in
the controversy and to be selected from the National Panel of Commercial
Arbitrators (or successor panel, if any).  If within 45 days after service of
the demand for arbitration the Parties are unable to agree upon such an
arbitrator who is willing to serve, then an arbitrator shall be appointed by the
American Arbitration Association in accordance with its rules.  Except as
specifically provided in this Section 5, the arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association.  The arbitrator shall not render an award of punitive damages.  Any
arbitration hereunder shall be held in Los Angeles, California.  Expenses
related to the arbitration, including counsel fees, shall be borne by the Party
incurring such expenses except to the extent otherwise provided in Section 9.15
of the Purchase Agreement.  The fees of the arbitrator and of the American
Arbitration Association, if any, shall be divided equally among the Parties
involved in the controversy.  Judgment upon the award rendered by the arbitrator
(which may, if deemed appropriate by the arbitrator, include equitable or
mandatory relief with respect to performance of obligations hereunder) may be
entered in any court of competent jurisdiction.

     6.    MODIFICATION OF AGREEMENT.  This Bill of Sale may be amended or
modified only by written instrument signed by all of the Parties.

     7.    ENTIRE AGREEMENT; BINDING EFFECT.  This Bill of Sale, the Purchase
Agreement and the documents, instruments and agreements executed in connection
herewith and

                                       2
<PAGE>
 
therewith, set forth the entire agreement and understanding between the Parties
with respect to the subject matter hereof and thereof.  This Bill of Sale shall
be binding upon and shall inure to the benefit of the Parties and their
respective successors and assigns.

     8.    COUNTERPARTS.  This Bill of Sale may be executed in multiple
counterparts, each of which shall have the force and effect of an original, and
all of which together shall constitute one and the same agreement.

     EXECUTED AND DELIVERED EFFECTIVE as of the date first written above.

                         PURCHASER:

                         LITIGATION RESOURCES OF AMERICA-
                         CALIFORNIA, INC., a California corporation

                         By:____________________________________________________
                              Richard O. Looney,
                              Chairman and Chief Executive Officer
 
                         SELLER:

                         LEGAL ENTERPRISE, INC., a California corporation
 
                         By:__________________________________________
                         Name: _______________________________________
                         Title: ________________________________________
 

                                       3
<PAGE>
 
                       CONTINGENT STOCK PLEDGE AGREEMENT

          THIS CONTINGENT STOCK PLEDGE AGREEMENT (this "Pledge Agreement") is
made effective as of August 29, 1997, by LEGAL ENTERPRISE, INC., a California
corporation ("Pledgor") and LITIGATION RESOURCES OF AMERICA--CALIFORNIA, INC., a
California corporation ("Secured Party").

                              W I T N E S S E T H:
                              - - - - - - - - - - 

     WHEREAS, Pledgor, Secured Party and certain other parties have entered into
an Agreement of Purchase and Sale of Assets of even date herewith (the "Purchase
Agreement"), pursuant to which Pledgor has sold to Secured Party substantially
all of the assets of Pledgor (the "Business"); and

     WHEREAS, Pledgor has certain obligations under the Purchase Agreement,
including, but not limited to, the obligation of Pledgor to indemnify Secured
Party for any breaches of representations and warranties of Pledgor contained in
the Purchase Agreement; and

     WHEREAS, pursuant to the terms of the Purchase Agreement and Note 2 (as
defined in the Purchase Agreement) and as consideration for the purchase of the
Business,  the Pledgor has the right to convert at a certain time sums due under
Note 2 into shares of the common stock, $.01 par value (the "Parent Stock"), of
Parent (as defined in the Purchase Agreement), on the terms and conditions
contained in Note 2; and

     WHEREAS, pursuant to the terms of the Purchase Agreement, the Pledgor may
be issued additional shares of  Parent Stock and additional notes convertible
into shares of Parent Stock subsequent to the Closing (as defined in the
Purchase Agreement); and

     WHEREAS, the terms of the Purchase Agreement provide for the Pledgor to
pledge all shares of Parent Stock owned by Pledgor, whenever acquired
(hereinafter referred to as "Stock"), to the Secured Party to partially secure
the obligations of Pledgor under the Purchase Agreement;

     NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties agree as follows (all capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the
Purchase Agreement):

     1.   Pledge of Stock.  Pledgor hereby pledges and grants to Secured Party a
security interest in the Stock, which shall attach immediately upon each
issuance of Stock to all shares of Stock issued to Pledgor in accordance with
the purchase of the Business or under the terms of the Notes (as defined in the
Purchase Agreement).  Immediately upon receipt of any shares of Stock, Pledgor
shall be required to deliver to Secured Party the certificate or certificates
representing the Stock in order that Secured Party might perfect its security
interest therein.  The Pledgor and the Secured Party hereby acknowledge and
agree that the value of the Stock shall be deemed to be $8.50 
<PAGE>
 
per share of Stock; provided, however, that if the Parent has successfully
consummated a public offering of its shares of Stock, then it shall mean the
average public trading price of each share of Stock over the five (5) most
recent business days falling prior to the date of delivery by the Secured Party
to the Pledgor of the notice of an event requiring an Offset, as such term is
defined in the Purchase Agreement (the "Agreed Value"). Pledgor shall possess
all voting rights pertaining to the Stock, so long as an Event of Offset, as
hereinafter defined, has not occurred, or if an Event of Offset has allegedly
occurred but is being disputed by the parties hereto prior to submission to
arbitration in accordance with Section 9.14 of the Purchase Agreement, and
Secured Party shall have no voting rights that may be presently or hereafter
attributable to the Stock. In addition, so long as an Event of Offset has not
occurred, or if an Event of Offset has allegedly occurred but is being disputed
by the parties hereto prior to submission to arbitration in accordance with
Section 9.14 of the Purchase Agreement, then Pledgor shall have the right to
receive all dividends, if any, on the Stock, and Pledgor shall be entitled to
receive all proceeds upon liquidation of the Stock, if any, as well as all other
rights with respect to the Stock except for the right to transfer title thereto.
Notwithstanding the foregoing, if an Event of Offset has occurred and (i) has
been resolved, either by failure to timely dispute it as required by Section
9.14 of the Purchase Agreement, by agreement or by arbitration decided in favor
of Secured Party (a "Resolved Event of Offset") or (ii) has been submitted to
arbitration in accordance with Section 9.14 of the Purchase Agreement which
arbitration is still pending or in process (a "Continuing Event of Offset"),
then Secured Party shall have the right to designate a representative or trustee
to vote those shares of Stock covered by or subject to the Resolved Event of
Offset or Continuing Event of Offset (the "Offset Shares"), to receive all
dividends and liquidation proceeds with respect to the Offset Shares, and to
receive all other rights with respect to the Offset Shares.

     2.   Representations and Warranties.  Pledgor hereby represents, warrants
and covenants to and with Secured Party that:

          (a) Pledgor will not, without the written consent of Secured Party,
     sell, contract to sell, encumber, or dispose of the Stock or any interest
     therein until this Pledge Agreement and all obligations under the Purchase
     Agreement have been fully satisfied.

          (b) No consent of any party is necessary for Pledgor to perform its
     obligations hereunder, or if any such consent is required, such consent has
     been received prior to the execution of this Pledge Agreement.

     3.   Event of Offset.  Each delivery by Secured Party to the Pledgor of a
notice of a claim of Offset shall constitute an Event of Offset ("Event of
Offset") under this Pledge Agreement.

     4.   Remedies.

          (a) Upon the occurrence of a Resolved Event of Offset, Secured Party
     may, at its option, exercise with reference to the Stock any and all of the
     rights and remedies of a secured party under the Uniform Commercial Code as
     adopted in the State of Texas and as 


                                      -2-
<PAGE>
 
     otherwise granted therein or under any other applicable law or under any
     other agreement executed by Pledgor, including, without limitation, the
     right and power to sell, at public or private sale(s), or otherwise dispose
     of or keep the Stock and any part or parts thereof, or interest or
     interests therein owned by Pledgor, in any manner authorized or permitted
     under this Pledge Agreement or under the Uniform Commercial Code, and to
     apply the proceeds thereof toward payment of any costs and expenses and
     attorneys' fees and legal expenses thereby incurred by Secured Party, and
     toward payment of the obligations under the Purchase Agreement in such
     order or manner as Secured Party may elect. Notwithstanding anything to the
     contrary contained herein, the Secured Party shall only foreclose on that
     portion of the Stock that is reasonably necessary in the reasonable good
     faith judgment of the Secured Party in order to satisfy the amount of the
     claim constituting the Resolved Event of Offset. For purposes hereof, the
     Agreed Value of the Stock shall be deemed to be the value that the Secured
     Party is receiving on the foreclosure of the Stock and Secured Party shall
     not be entitled to foreclose on more Stock than is necessary to recover all
     of its damages resulting from the Resolved Event of Offset.

          (b) Secured Party is hereby granted the right, at its option, after a
     Continuing Event of Offset, to transfer at any time to itself or its
     nominee the securities or other property hereby pledged, or any part
     thereof, and to thereafter exercise all voting rights with respect to such
     Stock so transferred and to receive the proceeds, payments, monies, income
     or benefits attributable or accruing thereto and to hold the same as
     security for the obligations hereby secured, or at Secured Party's
     election, to apply such amounts to the obligations, only if due, and in
     such order as Secured Party may elect or Secured Party may, at its option,
     without transferring such securities or property to its nominee, exercise
     all voting rights with respect to the securities pledged hereunder and vote
     all or any part of such securities at any regular or special meeting of
     shareholders.

          (c) Pledgor hereby agrees to cooperate fully with Secured Party in
     order to permit Secured Party to sell, at foreclosure or other private
     sale, Pledgor's interest in the Stock pledged hereunder as provided in this
     Pledge Agreement.  Specifically, Pledgor agrees to deliver to Secured Party
     the certificate or certificates representing the Stock if Pledgor has
     possession at that time, to fully comply with the securities laws of the
     United States and of the State of Texas and to take such other action as
     may be necessary to permit Secured Party to sell or otherwise transfer the
     securities pledged hereunder in compliance with such laws.

     5.   Termination.  This Pledge Agreement shall continue as security for the
payment or satisfaction of the obligations under the Purchase Agreement until
the earliest to occur of (i) termination of the Purchase Agreement, (ii)
termination of this Pledge Agreement by written notice of the Secured Party to
the Pledgor, or (iii) three (3) years after the date of this Pledge Agreement ,
provided that no Continuing Event of Offset exists.  If such a Continuing Event
of Offset exists, the pledge shall continue only to the extent of the amount of
Stock (based on the Agreed Value) equal to the amount of Damages claimed in the
Offset or the amount of damages reasonably expected to be caused by the Event of
Offset, as applicable.   Notwithstanding anything to the 


                                      -3-
<PAGE>
 
contrary contained herein, so long as there is not a Continuing Event of Offset
pending against Pledgor under the Purchase Agreement, (A) 40% of the shares of
Stock then subject to this Pledge Agreement shall be released from this Pledge
Agreement and returned to the Pledgor on the date of consummation of the initial
public offering of Stock by the Parent (the "IPO"), (B) 20% of the shares of
Stock then subject to this Pledge Agreement shall be released from this Pledge
Agreement and returned to the Pledgor on the date which is six months following
the date of consummation of the IPO, (C) 20% of the shares of Stock then subject
to this Pledge Agreement shall be released from this Pledge Agreement and
returned to the Pledgor two (2) years after the effective date of this Pledge
Agreement and (D) the remaining shares of Stock then subject to this Pledge
Agreement shall be released from this Pledge Agreement and returned to the
Pledgor three (3) years after the effective date of this Pledge Agreement. If a
Continuing Event of Offset is pending against Pledgor under the Purchase
Agreement, the action described in the immediately preceding sentence shall be
taken immediately at the time that such Continuing Event of Offset is resolved,
except that the computation of the number of shares of Stock then subject to the
Pledge Agreement shall be made as of the time of such resolution.

     6.   Release from Pledge.  Upon the termination of this Pledge Agreement,
Secured Party shall immediately release its security interest in the Stock.  In
addition, Secured Party shall deliver the certificate or certificates
representing the Stock to Pledgor if Secured Party has possession of such
certificates at that time.  Upon such occurrence, the security interest of
Secured Party shall automatically terminate and Secured Party shall thereafter
have no interest whatsoever in the Stock.

     7.   Notices.  All notices,  requests, demands, claims, and other
communications hereunder will be in writing.  Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested,  postage  prepaid, and addressed to the intended recipient as
set forth below or by confirmed telefax:

     If to Pledgor:      T & A, Inc.
                    f/k/a Legal Enterprise, Inc.
                    Attn:  Tony L. Maddocks, President
                    4232-1 Las Virgenes Road
                    Calabasas, California 91302
                    Phone:  818/878-9227
                    Fax:  818/878-9851

     Copy to:       Timothy F. Sylvester
                    Riordan & McKinzie
                    300 S. Grand Ave. 29/th/ Floor
                    Los Angeles, California 90071
                    Phone:  213/229-8421
                    Fax:  213/229-8550


                                      -4-
<PAGE>
 
     If to the
     Secured Party: Litigation Resources of America-California, Inc.
                    650 First City Tower, 1001 Fannin
                    Houston, Texas 77002
                    Attn: President
                    Phone:  713/653-7100
                    Fax:   713/653-7172

     Copy to:       Boyer Ewing & Harris Incorporated
                    Nine Greenway Plaza, Suite 3100
                    Houston, Texas  77046
                    Attn:  J. Randolph Ewing
                    Phone:  713/871-2025
                    Fax:  713/871-2024
 
     8.   Successors.  This Pledge Agreement shall be binding upon, and inure to
the benefit of the parties hereto and their successors and assigns.  Any
assignee whatsoever will be bound by the obligations of the assigning party
under this Pledge Agreement, and any assignment shall not diminish the liability
or obligation of the assignor under the terms of this Pledge Agreement unless
otherwise agreed.

     9.   Severability.  In the event that any one or more of the provisions
contained in this Pledge Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Pledge Agreement or any such other
instrument.

     10.  Paragraph Headings.  The paragraph headings used herein are
descriptive only and shall have no legal force or effect whatsoever.

     11.  Gender.  Whenever the context so requires, the masculine shall include
the feminine and neuter, and the singular shall include the plural and
conversely.

     12.  Survival of Warranties.  All representations, warranties, and
agreements made by the parties in this Pledge Agreement or in any certificates
delivered pursuant hereto will survive the execution date hereof.

     13.  Applicable Law.  This Pledge Agreement shall be construed and
interpreted in accordance with the laws of the United States of America and the
State of Texas, and is intended to be performed in accordance with and as
permitted by such laws.

     14.  Definitions.  All terms and definitions used herein shall have the
same meaning as in the Purchase Agreement unless otherwise indicated.


                                      -5-
<PAGE>
 
     15.  Drafting.  The parties hereto acknowledge that each party was actively
involved in the negotiation and drafting of this Pledge Agreement and that no
law or rule of construction shall be raised or used in which the provisions of
this Pledge Agreement shall be construed in favor or against either party hereto
because one is deemed to be the author thereof.

     16.  Attorneys' Fees.  If any litigation is instituted to enforce or
interpret the provisions of this Pledge Agreement or the transactions described
herein, the prevailing party in such action shall be entitled to recover its
reasonable attorneys' fees from the other party hereto.

     17.  Arbitration.  The arbitration provisions contained in Section 9.14 of
the Purchase Agreement shall govern this Pledge Agreement.

     18.  Multiple Counterparts.  This Pledge Agreement may be executed in
multiple counterparts each of which shall be deemed an original and all of which
shall constitute one instrument.

     IN WITNESS WHEREOF, this Pledge Agreement has been executed effective as of
the date first above written.

                         PLEDGOR:
                         --------

                         LEGAL ENTERPRISE, INC., A CALIFORNIA CORPORATION

                         By:  __________________________________________
                              TONY L. MADDOCKS, PRESIDENT
 
                         SECURED PARTY:
                         --------------

                         LITIGATION RESOURCES OF AMERICA --
                         CALIFORNIA,  INC., A CALIFORNIA CORPORATION

                         By:________________________________________________
                         Name:______________________________________________
                         Title:_____________________________________________




                                      -6-