ESQUIRE COMMUNICATIONS LTD, SC 13E4, 1997-05-13

ESQUIRE COMMUNICATIONS LTD
SC 13E4, 1997-05-13
MAILING, REPRODUCTION, COMMERCIAL ART & PHOTOGRAPHY

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13E-4

ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)

ESQUIRE COMMUNICATIONS LTD.
(Name of Issuer)

ESQUIRE COMMUNICATIONS LTD.
(Name of Person(s) Filing Statement)

Redeemable Common Stock Purchase Warrant
(Title of Class of Securities)

296658115
(CUSIP Number of Class of Securities)

Malcolm L. Elvey
Chairman of the Board
Esquire Communications Ltd.
216 East 45th Street
8th Floor
New York, New York 10017
(212) 687-8010

Copy to:

STROOCK & STROOCK & LAVAN LLP
180 Maiden Lane
New York, New York 10038-4982
Attention: Martin H. Neidell, Esq.
(212) 806-5400

(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)

May 13, 1997
(Date Tender Offer First Published,
Sent or Given to Security Holders)

Calculation of Filing Fee

Transaction Valuation(1) Amount of Filing Fee
------------------------ --------------------
$1,234,131 $246

(1) For purposes of calculating the filing fee only, this amount assumes the
exchange by holders of 1,702,251 Warrants for 340,450 shares of the
Issuer's Common Stock. The amount of the filing fee, calculated in
accordance with Rules 0-11(b)(2) and 0-11(a)(4) under the Securities
Exchange Act of 1934, as amended, equals 1/50th of one percent of the
value of such shares of Common Stock, based upon the average of the high
and low prices ($3 5/8) for the Issuer's Common Stock reported on the
Nasdaq Stock Market on May 9, 1997.

|X| Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

<TABLE>
<S> <C> <C> <C>
Amount previously paid: $252.00 Filing party: Esquire Communications Ltd.
Form or Registration no.: S-4 (File no. 333-19721) Date Filed: January 14, 1997

Exhibit Index Appears on Page 5
</TABLE>

This Schedule 13E-4 Issuer Tender Offer Statement (the
"Statement") relates to an Exchange Offer (the "Exchange Offer") whereby Esquire
Communications Ltd., a Delaware corporation (the "Company"), is offering to
exchange 340,450 shares of its Common Stock, par value $.01 per share (the
"Common Stock"), for 1,702,251 of its Redeemable Common Stock Purchase Warrants
to purchase Common Stock (the "Warrants"). This statement is being filed by the
Company.

A copy of the Company's prospectus dated May 9, 1997, prepared in
connection with the Exchange Offer (the "Prospectus"), is attached hereto as
Exhibit (a)(1). The information in the Prospectus is hereby expressly
incorporated herein by reference.

Item 1. Security and Issuer.

(a) The name of the issuer is Esquire Communications Ltd. and the address
of its principal executive office is 216 East 45th Street, 8th Floor, New York,
New York 10017.

(b) The exact title of the security being sought is "Redeemable Common
Stock Purchase Warrant." The exact number of Warrants outstanding on May 9, 1997
was 1,702,251. The exact number of Warrants being sought is 1,702,251. The
information set forth in the Prospectus under "PROSPECTUS SUMMARY," and "THE
EXCHANGE OFFER" is incorporated herein by reference.

(c) The information set forth in the Prospectus under "PRICE RANGE OF THE
COMPANY'S SECURITIES" is incorporated herein by reference.

(d) Not applicable.

Item 2. Source and Amount of Funds or Other Consideration.

(a) Up to a maximum of 340,450 shares of Common Stock will be exchanged
for the Warrants. These shares are newly issued shares of Common Stock. Any cash
required to be paid by the Company in lieu of fractional shares of Common Stock
will come from the Company's working capital.

(b) Not applicable.

Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
Affiliate.

The information set forth in the Prospectus under "PROSPECTUS SUMMARY" and
"THE EXCHANGE OFFER -- Purpose and Effects of the Exchange Offer" is
incorporated herein by reference.

(a) Upon the expiration of the Exchange Offer and the acceptance of the
Warrants, all tendered Warrants will be cancelled.

(b) - (d) Not applicable.

(e) The Company does not anticipate any material changes in its present
dividend rates or policies or indebtedness. If the maximum number of shares of
Common Stock are issued pursuant to the Exchange Offer, the Company will have an
additional 340,450 shares of Common Stock issued and outstanding. The
information set forth in the Prospectus under "CAPITALIZATION" and "DIVIDEND
POLICY" is incorporated herein by reference.

(f) - (g) Not applicable.

(h) If, after completion of the Exchange Offer, the Warrants are held of
record by fewer than 300 persons, the Company intends to cause the Warrants to
cease to be listed on the Nasdaq Stock Market and quoted on the Boston Stock
Exchange.

(i) - (j) Not applicable.

Item 4. Interest in Securities of the Issuer.

No such transaction has been effected during the past 40 business days.

-2-

Item 5. Contracts, Arrangements, Understandings or Relationships with Respect to
the Issuer's Securities.

No such contract, arrangement, understanding or relationship exists.

Item 6. Persons Retained, Employed or to be Compensated.

The Exchange Agent will receive a fee of one thousand five hundred dollars
($1,500) plus expenses for its services as Exchange Agent. The information set
forth in the Prospectus under "PROSPECTUS SUMMARY," "THE EXCHANGE OFFER --
Solicitation of Warrant Holder" and "THE EXCHANGE OFFER -- The Exchange Agent"
is incorporated herein by reference.

Item 7. Financial Information.

(a) The information set forth in the Prospectus under "CONSOLIDATED
FINANCIAL STATEMENTS" is incorporated herein by reference.

(b) Not applicable.

Item 8. Additional Information.

(a) - (d) Not applicable.

(e) The information set forth in the Prospectus is incorporated herein by
reference in its entirety.

Item 9. Material to be Filed as Exhibits.

(a)(1) Prospectus dated May 9, 1997.

(a)(2) Form of Letter of Transmittal.

(a)(3) Form of Notice of Guaranteed Delivery.

(a)(4) Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees.

(a)(5) Form of Letter from Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees to their Clients.

(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.

(a)(7) Form of Chairman's Letter to Holders of Warrants.

(b) - (d) Not applicable.

(e) Prospectus dated May 9, 1997.

(f) Not applicable.

-3-

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.

May 12, 1997 ESQUIRE COMMUNICATIONS LTD.

By: /s/ MALCOLM L. ELVEY
--------------------------------
Malcolm L. Elvey
Chairman of the Board

-4-

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
------- ----------- ------
<S> <C> <C>
(a)(1) Prospectus dated May 9, 1997.

(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.

(a)(4) Form of Letter to Securities Dealers, Commercial Banks, Trust
Companies and Other Nominees.

(a)(5) Form of Letter from Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees to their Clients.

(a)(6) Form of Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.

(a)(7) Form of Chairman's Letter to Holders of Warrants.

(e)* Prospectus dated May 9, 1997.
</TABLE>

- --------
* Filed at Exhibit (a)(1).

-5-

<PAGE>

PROSPECTUS

ESQUIRE COMMUNICATIONS LTD.

OFFER TO EXCHANGE COMMON STOCK
FOR
ANY AND ALL
OUTSTANDING REDEEMABLE COMMON STOCK PURCHASE WARRANTS

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JUNE 12, 1997, UNLESS EXTENDED.

This Prospectus of Esquire Communications Ltd., a Delaware corporation (the
'Company'), is being furnished to the holders of the Company's Redeemable Common
Stock Purchase Warrants (the 'Warrants'). The holders of the Warrants are hereby
being asked to participate in a Warrant exchange offer (the 'Exchange Offer').
The Company hereby offers to the holders of the Warrants (the 'Warrantholders'),
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal, to exchange one share of the Company's
common stock, par value $.01 ('Common Stock'), for each five Warrants (the
'Exchange Rate').

The expiration date of the Exchange Offer is 5:00 p.m., New York City time,
on June 12, 1997 (the 'Expiration Date'), unless the Expiration Date is
extended, in which case the Expiration Date will be the latest date and time to
which the Expiration Date is extended.

On May 8, 1997, the closing price of a share of Common Stock, as reported
on the Nasdaq Stock Market, was 3 5/8, and the closing price of a Warrant as so
reported was $19/32.

Tendering Warrantholders will not be obligated to pay transfer taxes or
exchange commissions in connection with the Exchange Offer. Tenders are
irrevocable, except that Warrants tendered pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date, and unless theretofore accepted for
exchange, may be withdrawn after 5:00 p.m., New York City time, on July 10,
1997.

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

IN EVALUATING THE EXCHANGE OFFER, THE WARRANTHOLDERS ARE STRONGLY URGED TO
READ AND CONSIDER CAREFULLY THE FACTORS DESCRIBED UNDER 'RISK FACTORS' ON PAGE 8
BELOW.

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

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

THE DATE OF THIS PROSPECTUS IS MAY 9, 1997.

NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED HEREIN, IN CONNECTION WITH THE
SOLICITATION AND THE OFFERING MADE BY THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES IN ANY
JURISDICTION IN WHICH SUCH SOLICITATION OR OFFERING MAY NOT LAWFULLY BE MADE.

NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'). In accordance with the
Exchange Act, the Company files proxy statements, reports and other information
with the Securities and Exchange Commission (the 'SEC'). This filed material can
be inspected and copied at the public reference facilities maintained by the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices in Chicago, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and in New York, 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material may also be obtained by mail from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The SEC maintains a Web Site address which contains reports,
proxy and information statements and other information regarding the registrants
that file electronically with the SEC. The address of such site is
http://www.sec.gov.

The Company has filed with the SEC a Registration Statement on Form S-4
(together with any amendments thereto, the 'Registration Statement') under the
Securities Act of 1933, as amended (the 'Securities Act') with respect to the
Warrants to be exchanged for Common Stock. Copies of the Registration Statement
are available from the SEC upon payment of prescribed rates. Statements
contained in this Prospectus relating to the contents of any contract or other
document referred to herein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Prospectus or such other document, each such statement being
qualified in all respects by such reference.

The shares of Common Stock are listed on the Nasdaq Stock Market and the
Boston Stock Exchange. Reports and other information concerning the Company may
be inspected at such places.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Available Information.................................................................................. 2
Prospectus Summary..................................................................................... 5
The Company....................................................................................... 5
The Exchange Offer................................................................................ 5
Use of Proceeds................................................................................... 7
Risk Factors...................................................................................... 7
Risk Factors........................................................................................... 8
Future Profitability; History of Losses; Accumulated Deficit; Stockholder's Deficit; Negative
Tangible Book Value.............................................................................. 8
Possible Fluctuations in Revenues................................................................. 8
Acquisitions...................................................................................... 8
Possible Need for Additional Financing............................................................ 8
Trends in Litigation; Alternatives to the Litigation Process...................................... 9
Changing Technology............................................................................... 9
Substantial Level of Indebtedness................................................................. 9
Reliance on Key Employee.......................................................................... 9
Competitive Industry.............................................................................. 9
Control by Insiders............................................................................... 9
Determination of Exchange Rate and Possible Volatility of Price of Common Stock................... 10
Authorization and Discretionary Issuance of Preferred Stock....................................... 10
No Dividends Contemplated on Common Stock......................................................... 10
Potential Adverse Effect of Redemption of Warrants Not Exchanged in the Exchange Offer............ 10
Nasdaq Listing; Trading Market for Warrants....................................................... 10
Use of Proceeds........................................................................................ 11
Price Range of the Company's Securities................................................................ 11
Capitalization......................................................................................... 12
Dividend Policy........................................................................................ 12
Selected Consolidated Financial Data................................................................... 12
Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 14
Introduction...................................................................................... 14
Results of Operations............................................................................. 14
Comparison of the Years ended December 31, 1996 and 1995..................................... 14
Comparison of the Years ended December 31, 1995 and 1994..................................... 15
Liquidity and Capital Resources................................................................... 15
Business............................................................................................... 16
General........................................................................................... 16
The Court Reporting Industry...................................................................... 16
Services and Technology........................................................................... 17
Acquisition Strategy.............................................................................. 18
Competitive Factors............................................................................... 19
Clients and Marketing............................................................................. 20
Human Resources................................................................................... 20
Properties........................................................................................ 20
Legal Proceedings................................................................................. 21
Recent Events..................................................................................... 21
Management............................................................................................. 23
Directors and Executive Officers.................................................................. 23
Compliance with Section 16(a) of the Securities Exchange Act of 1934.............................. 24
Executive Compensation............................................................................ 25
Summary Compensation Table........................................................................ 25
Employment and Related Agreements................................................................. 25
</TABLE>

<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Stock Option Plan................................................................................. 26
Certain Relationships and Related Transactions.................................................... 27
The Exchange Offer..................................................................................... 28
Purpose and Effects of the Exchange Offer......................................................... 28
Description of the Warrants....................................................................... 28
Effect of the Exchange Offer on the Warrantholders................................................ 29
Terms of the Exchange Offer....................................................................... 29
Expiration Date; Extensions; Amendments........................................................... 30
Procedure for Tendering Warrants.................................................................. 30
Guaranteed Delivery Procedures.................................................................... 31
Assistance........................................................................................ 32
Acceptance of Warrants for Exchange............................................................... 32
Withdrawal Rights................................................................................. 32
Conditions to the Exchange Offer.................................................................. 33
Fractional Shares................................................................................. 34
Solicitation of Warrant Holders................................................................... 34
Transfer Taxes.................................................................................... 35
Certain U.S. Federal Income Tax Considerations.................................................... 35
The Exchange Agent................................................................................ 35
Warrant Transfer Agent............................................................................ 36
Description of Securities.............................................................................. 36
Common Stock...................................................................................... 36
Preferred Stock................................................................................... 36
Legal Matters.......................................................................................... 36
Experts................................................................................................ 36
</TABLE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements, including notes thereto, appearing elsewhere in this Prospectus.
Each Warrantholder is urged to read this Prospectus in its entirety.

THE COMPANY

Esquire Communications Ltd. (the 'Company') is a court reporting firm using
state-of-the-art technology to provide printed and computerized transcripts and
video recordings of testimony from depositions to the legal profession primarily
in the New York City metropolitan, Southern California and Washington, D.C.
areas. The Company's strategy is to become a national court reporting firm by
acquiring court reporting companies in major business communities around the
country. The Company believes that by expanding through the acquisition of
established court reporting companies in major cities, the Company will achieve
a significant national presence in the court reporting industry. In evaluating a
prospective acquisition candidate, management of the Company considers the
following material factors: (i) financial condition and results of operations;
(ii) experience and skill of management and management's availability after the
acquisition; (iii) growth potential; (iv) costs associated with the consummation
of the acquisition; and (v) customer base and reputation. The size, nature and
geography of the early acquisitions will determine the pace of the Company's
achievement of national coverage. The Company believes that there are a number
of suitable acquisition candidates in the size range contemplated, and that
national status could be achieved by acquiring 10 to 12 firms in major
metropolitan areas.

The court reporting industry traditionally has consisted of many small
firms relying on personal relationships and quality service. With the advent of
sophisticated and rapidly changing technologies, aggressive marketing and
professional management, the Company believes that some of these small firms are
unlikely to be able to make the necessary capital investments required to
compete effectively against better capitalized competitors. This environment
creates the acquisition opportunities on which the Company intends to
capitalize.

On October 23, 1996, the Company sold an aggregate of 7,500 shares of
Series A Convertible Preferred Stock (the 'Series A Preferred Stock'), for an
aggregate purchase price of $7,500,000. The holders of Series A Preferred Stock
have the right within 21 months to acquire up to an additional 7,500 shares of
Series A Preferred Stock at a price of $1,000 per share. The Series A Preferred
Stock is convertible into Common Stock of the Company at a conversion price of
$3.00 per share (subject to anti-dilution adjustments) and bears cumulative
annual dividends at the rate of 6% per annum. In addition, on October 28, 1996,
the Company acquired the assets of M&M Reporting Referral Service, Inc., a
Southern California-based court reporting company, on November 15, 1996, the
Company acquired the assets of Sherry Roe & Associates, a Washington, D.C.-based
court reporting company and on January 3, 1997, the Company acquired the assets
of Nevill & Swinehart and Pelletier & Jones, two Southern California-based court
reporting companies. On December 24, 1996, the Company entered into a Credit
Agreement (the 'Credit Agreement') with Antares Leveraged Capital Corp. pursuant
to which the Company may borrow from time to time up to an aggregate principal
amount of $20 million. See 'Business -- Recent Events.'

THE EXCHANGE OFFER

<TABLE>
<S> <C>
Expiration................................... The Exchange Offer expires at 5:00 p.m., New York City time, on
June 12, 1997, unless extended (the 'Expiration Date').
Terms of Exchange............................ One share of Common Stock for each five Warrants tendered.
Fractional Shares............................ No fractional shares of Common Stock will be issued.
</TABLE>

<TABLE>
<S> <C>
Number of Warrants........................... The Company will accept all Warrants validly tendered and not
withdrawn prior to the Expiration Date.
Market for the Common Stock.................. The shares of Common Stock are quoted on the Nasdaq Stock Market
and the Boston Stock Exchange under the symbol 'ESQS.'
Tender Procedures............................ Any Warrantholder wishing to accept the Exchange Offer should
complete the accompanying Letter of Transmittal.
If a Warrantholder holds Warrants in book-entry form, such
Warrantholder may participate in the Exchange Offer by complying
with the procedures for book-entry transfer set forth under 'The
Exchange Offer -- Procedure for Tendering Warrants.' A
Warrantholder may also request his broker, dealer, commercial
bank, trust company or other nominee to effect the transaction
for him. A Warrantholder having shares registered in the name of
a broker, dealer, commercial bank, trust company or other
nominee must contact that broker, dealer, commercial bank, trust
company or other nominee if he tenders shares.
Warrantholders whose certificates are not immediately available or
who cannot deliver the Letter of Transmittal or other documents
required to be delivered to the Exchange Agent prior to the
expiration of the Exchange Offer may nevertheless tender
Warrants in accordance with the guaranteed delivery procedures
described herein. See 'The Exchange Offer -- Guaranteed Delivery
Procedures.'
Tax Consequences............................. Warrantholders are urged to consult their own tax advisors as to
the specific tax consequences to them of the Exchange Offer. See
'The Exchange Offer -- Certain U.S. Federal Income Tax
Considerations.'
Withdrawal Rights............................ Tenders may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date and unless theretofore
accepted for exchange by the Company, may also be withdrawn
after 5:00 p.m., New York City time, on July 10, 1997. To be
effective, a written, telegraphic or facsimile notice of
withdrawal must be received in a timely manner by the Exchange
Agent. See 'The Exchange Offer -- Withdrawal Rights.'
Exchange Agent............................... Continental Stock Transfer & Trust Company is the exchange agent
(the 'Exchange Agent') for the Exchange Offer.
Failure to Participate in Exchange Offer..... The reduced amount of outstanding Warrants as a result of the
Exchange Offer may limit the trading market for the Warrants,
may adversely effect their liquidity and market price and may
terminate their continued listing on The Boston Stock Exchange
and the Nasdaq Stock Market. Holders of the Warrants who do not
exchange their Warrants for shares of Common Stock in the
Exchange Offer will be entitled to receive shares of Common
Stock upon exercise of the Company's Warrants upon the same
terms and conditions as are contained in the Warrants. See 'The
Exchange Offer -- Effect of the Exchange Offer on the
Warrantholders.'
</TABLE>

NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
THAT WARRANTHOLDERS TENDER OR REFRAIN FROM TENDERING THEIR WARRANTS, AND NO ONE
HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION ON BEHALF OF THE COMPANY.
THIS IS A MATTER FOR EACH WARRANTHOLDER TO DETERMINE AFTER CONSULTATION WITH HIS
ADVISORS, INCLUDING TAX COUNSEL, ON THE BASIS OF HIS OWN FINANCIAL POSITION AND
REQUIREMENTS. SEE 'THE EXCHANGE OFFER -- CERTAIN U.S. FEDERAL INCOME TAX
CONSIDERATIONS.'

USE OF PROCEEDS

There will be no cash proceeds to the Company from the Exchange Offer.

RISK FACTORS

Investment in the securities of the Company involves a high degree of risk,
including, but not limited to, risks resulting from the Company's financial
condition, the current trend toward alternatives to the litigation process,
technological changes in the Company's industry, numerous competing firms in the
Company's industry, and the Company's acquisition and growth strategy. See 'Risk
Factors.'

RISK FACTORS

The following are certain risk factors or investment considerations that
should be carefully considered in evaluating the Exchange Offer, in addition to
the risks and other information described elsewhere in this Prospectus.

1. Future Profitability; History of Losses; Accumulated Deficit;
Stockholder's Deficit; Negative Tangible Book Value. Although the Company was
profitable in 1995, the Company incurred a net loss of $183,000 for its fiscal
year ended December 31, 1994 and a net loss of $541,000 for its fiscal year
ended December 31, 1996. There is no assurance that the Company will be
profitable in the future. As of December 31, 1996, the Company had an
accumulated deficit of $885,000, a total stockholders' equity of $12,769,000,
and a negative tangible book value (excess of liabilities over tangible assets)
of $6,912,000. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations.'

2. Possible Fluctuations in Revenues. The Company's revenues can fluctuate
widely from period to period as a result of the absence or presence of
significant non-recurring litigation matters. Large complex litigation cases can
result in bursts of revenues over a relatively short period. The Company's
revenues can also be adversely affected by a general economic recession that
reduces demand for court reporters. A decrease in revenues will adversely affect
the Company's results of operations and financial condition. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations.'

3. Acquisitions. The business strategy of the Company involves growth
through acquisitions and internal development. The Company is subject to various
risks associated with its growth strategy, including the risk that it will be
unable to identify and recruit suitable acquisition candidates in the future or
to integrate and manage the acquired court reporting businesses.

The Company has recently completed acquisitions and is still in the process
of integrating those acquired businesses. While the business plans of these
acquired companies are similar, their histories, geographical locations,
business models and cultures are different in many respects. The directors and
senior management of the Company face a significant challenge in their efforts
to integrate the acquired businesses. While management of the Company believes
that the diverse experience of the Company and the acquired companies will
strengthen the Company, there can be no assurance that management's efforts to
integrate the operations of the companies will be successful or that the
anticipated benefits of these business combinations will be fully realized. The
dedication of management resources to such efforts may detract attention from
the day-to-day business of the Company. There can be no assurance that there
will not be substantial costs associated with such activities or that there will
not be other material adverse effects of these integration efforts, which could
have a material adverse effect on the Company's operating results. The Company's
current and anticipated future expansion has placed, and will continue to place,
significant demands on the management, operational and financial resources of
the Company. The Company will need to continue to augment its management and
operational systems to support growth both within existing and into new
geographic markets. There can be no assurance that the Company will be able to
manage its expanded operations effectively.

Pursuant to Delaware general corporate law, stockholders of the Company
will have the opportunity to evaluate potential acquisition candidates only in
the event that the Company consummates an acquisition through a merger of the
Company. In the likely event that the Company consummates an acquisition through
the purchase of the assets or stock of a business or the merger of a subsidiary
with an acquisition target, the stockholders will not have the right to approve
such acquisition. Therefore, the Company will be able to make an acquisition
which may be perceived by a stockholder as not within the best interests of the
Company. If the Company is successful in consummating any acquisitions, there
can be no assurance that it will be able to successfully integrate such
acquisitions into its existing operations. Furthermore, there can be no
assurance that the Company will consummate a sufficient number of acquisitions
to achieve its ultimate goal of becoming a national court reporting firm.

4. Possible Need for Additional Financing. In connection with the Company's
acquisition strategy, the Company anticipates effecting acquisitions with cash
from bank or other debt financing, and/or the issuance of additional equity or
debt securities. The Company has recently entered into a new Credit

Agreement which provides the Company with up to $20 million of borrowings on a
secured basis. The Credit Agreement contains certain restrictive covenants with
respect to incurring additional debt, investments, distributions, acquisitions
and capital expenditures and also requires the maintenance of certain financial
ratios and covenants. In the event that the Company issues additional securities
with or without incurring bank or other debt financing, such issuance will have
the effect of diluting the interests of the stockholders of the Company. See
'Business -- Acquisition Strategy.'

5. Trends in Litigation; Alternatives to the Litigation Process. Due to the
large volume, complexity and resulting high cost of litigation in the United
States, corporate litigants, governmental agencies, and legal professional
associations are investigating potential changes to existing litigation
procedures and alternatives to the litigation process. Various proposals are
under consideration to limit the number and length of pretrial depositions, and
to substitute audio- and/or video-tape recording for stenographic transcription
of proceedings which may reduce or eliminate the use of court reporters. In
addition, certain alternatives to litigation, such as mediation and arbitration,
are increasingly being used to avoid the litigation process. These or other
trends that reduce litigation and related pretrial depositions could have a
material adverse impact on the Company's business. See 'Business -- Competitive
Factors.'

6. Changing Technology. The Company's business is subject to changes in
technology and new service introductions. Accordingly, the Company's ability to
compete will be dependent upon its ability to adapt to technological changes in
the industry and to develop services based on those changes to satisfy evolving
client requirements. Technological advances may create new products or services
that are competitive with, superior to, or render obsolete the services
currently provided by the Company. There can be no assurance that current
technologies, or technologies yet to emerge, will not in the future compete with
or replace the services provided by the Company. See 'Business -- Competitive
Factors.'

7. Substantial Level of Indebtedness. The Company has a substantial amount
of outstanding indebtedness. As of December 31, 1996, the Company had
approximately $14.3 million of debt. The Company's level of indebtedness could
have important consequences to the holders of the Common Stock, including the
following: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of the principal of and interest on its
indebtedness and will not be available for other purposes; (ii) the ability of
the Company to obtain financing in the future for working capital needs, capital
expenditures, acquisitions, investments, general corporate purposes or other
purposes may be materially limited or impaired; and (iii) the Company's level of
indebtedness may reduce the Company's flexibility to respond to changing
business and economic conditions. Subject to certain limitations contained in
its outstanding debt instruments, the Company may incur additional indebtedness
to finance working capital or capital expenditures, investments or acquisitions
or for other purposes. Substantially all of the Company's assets serve as
collateral security for the Company's indebtedness to its lenders.

8. Reliance on Key Employees. The Company's success depends largely upon
the abilities of Malcolm L. Elvey, Chairman of the Board of Directors, and Cary
A. Sarnoff, Vice Chairman of the Board. The loss of the services of these people
could have a negative impact on the Company. The Company has employment
agreements with each of these persons. In addition, the Company has purchased
and is the beneficiary of a $1,000,000 key-man insurance policy on the life of
Mr. Elvey. See 'Management.'

9. Competitive Industry. The Company competes with numerous other companies
offering many of the same services. Competition is based upon factors such as
the existence of personal relationships with clients and other reporting
agencies and price, service and reputation. Some of the Company's competitors
are larger, have greater resources and are more established than the Company.
The Company is not able at this time to accurately evaluate its competitive
position in the industry. There is no assurance that the Company will be able to
compete successfully in the future. See 'Business -- The Court Reporting
Industry' and 'Business -- Competitive Factors.'

10. Control by Insiders. In connection with the Series A Preferred Stock
Purchase Agreement, Golder, Thoma, Cressey, Rauner Fund IV, L.P. ('GTCR'),
Antares Leveraged Capital Corp., Malcolm L. Elvey, Chairman of the Board of the
Company, Cary A. Sarnoff, Vice Chairman of the Company, David J. Feldman,
President of the Company, CMNY Capital L.P. and Allied Investment Corporation,

Allied Investment Corporation II and Allied Capital Corporation II
(collectively, 'Allied'), entered into a Stockholder's Agreement, dated October
23, 1996 (the 'Stockholder's Agreement'), pursuant to which (a) the parties
agreed to vote their shares to elect as directors three representatives
designated by Messrs. Elvey, Sarnoff and Feldman (the 'Management
Stockholders'), two representatives designated by GTCR and two representatives
jointly designated by GTCR and the Management Stockholders; provided, however,
that if they are unable to agree on such joint designees within 90 days, then
GTCR may elect the joint designees; (b) the Management Stockholders granted to
the other stockholders rights of first refusal to acquire their shares if they
desire to sell the same, subject to exceptions for public sales and for
transfers to family members; and (c) if the Company's Board of Directors
approves a sale of the Company's assets or capital stock (whether by merger or
otherwise), each stockholder other than Allied and CMNY Capital L.P. agreed to
consent to such transaction. Since the parties to the Stockholder's Agreement
are able to elect a majority of the Company's directors, they are able to
control management of the Company. In addition, since the parties have agreed to
vote in favor of transactions approved by the Board of Directors and have a
majority of the voting power, such transactions may be approved regardless of
the votes of the other stockholders of the Company.

11. Determination of Exchange Rate and Possible Volatility of Price of
Common Stock. The Exchange Rate has been determined by the Company based upon
recent market prices for shares of Common Stock and recent market prices for the
Warrants. The Exchange Rate does not necessarily have any relationship to the
Company's assets, book value, results of operations or any other generally
accepted criteria of value or should it be regarded as indicative of the
intrinsic or market value of the Warrants. In addition, the trading prices of
the Common Stock issued in exchange for the Warrants could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcements or material business events by the Company or its competitors and
other events or factors.

12. Authorization and Discretionary Issuance of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of 'blank check'
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. The preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company, which could have the effect of discouraging bids for the
Company and, thereby, prevent stockholders from receiving the maximum value for
their shares. See 'Business -- Recent Events;' 'Description of Securities.'

13. No Dividends Contemplated on Common Stock. To date, the Company has not
paid any cash or other dividends on its Common Stock and does not anticipate
paying dividends in the foreseeable future. The Series A Preferred Stock and
Credit Agreement contain restrictions on the Company's ability to pay cash
dividends. See 'Dividend Policy.'

14. Potential Adverse Effect of Redemption of Warrants Not Exchanged in the
Exchange Offer. Any Warrants not exchanged hereby may be redeemed by the
Company, at a price of $.01 per Warrant, at any time they are exercisable,
subject to not less than 30 days prior written notice to the holders thereof,
provided that the last sale price of the Common Stock has been at least 150% of
the then-effective exercise price of the Warrants on each of the 20 consecutive
trading days ending on the third day prior to the day on which notice is given.
Notice of the redemption of the Warrants could force the holders thereof to
exercise the Warrants and pay the exercise price at a time when it may be
disadvantageous for them to do so, to sell the Warrants at the then-current
market price when they might otherwise wish to hold the Warrants, or to accept
the redemption price which is likely to be substantially less than the market
value of the Warrants at the time of redemption. See 'The Exchange
Offer -- Description of the Warrants.'

15. Nasdaq Listing; Trading Market for Warrants. Although the Company's
Common Stock is currently listed on the Nasdaq Stock Market and Boston Stock
Exchange, there is no assurance that the Company meets or will continue to meet
the listing requirements of the Nasdaq Stock Market. Accordingly, it is possible
that the Common Stock may be delisted from the Nasdaq Stock Market. The

Company does not meet Nasdaq's proposed new maintenance listing standards since
it does not have $4 million in net tangible assets, $50 million in market
capitalization, total assets or total revenues and a $5.00 minimum bid.

To the extent Warrantholders participate in the Exchange Offer, the trading
market for, and liquidity of, the Warrants which remain outstanding, if any,
could be reduced. In addition, the Company intends to delist the Warrants from
trading on the Boston Stock Exchange and the Nasdaq Stock Market and deregister
the Warrants under the Exchange Act if it determines that the Warrants are held
of record by fewer than 300 persons.

USE OF PROCEEDS

There will be no cash proceeds to the Company from the Exchange Offer.

PRICE RANGE OF THE COMPANY'S SECURITIES

Effective May 18, 1993, the Common Stock and Warrants of the Company were
listed on the Boston Stock Exchange and Nasdaq Stock Market under the symbols
'ESQS' and 'ESQSW,' respectively. The following table sets forth for the
calendar periods indicated the high and low bid prices on the Nasdaq Stock
Market for the Common Stock and Warrants for the period commencing January 1,
1995. The prices set forth below do not include retail mark-ups, mark-downs or
commissions and represent prices between dealers and are not necessarily actual
transactions.

<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
---------------- ------------------
HIGH LOW HIGH LOW
------ ------ ------- -------

<S> <C> <C> <C> <C>
1997
First Quarter............................................ $4.625 $2.375 $0.875 $0.3125
Second Quarter (through May 8)........................... 5.625 3.25 1.1875 0.5625
1996
First Quarter............................................ $3.50 $2.75 $0.9688 $0.625
Second Quarter........................................... 3.50 2.75 1.00 0.75
Third Quarter............................................ 3.25 2.00 0.9375 0.3125
Fourth Quarter........................................... 3.375 2.125 0.6895 0.375
1995
First Quarter............................................ $3.50 $2.875 $0.7813 $0.5625
Second Quarter........................................... 3.50 2.625 0.7813 0.4375
Third Quarter............................................ 3.375 2.375 0.7188 0.375
Fourth Quarter........................................... 3.063 2.625 0.75 0.625
</TABLE>

There were approximately 66 shareholders of record of Common Stock as of
March 18, 1997. This number does not include beneficial owners holding shares
through nominee or 'street' names. The Company believes that it has more than
2,000 beneficial holders of Common Stock.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1996.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)

<S> <C>
Long-term debt, including current portion........................................... $14,285
Stockholders' equity:
Preferred Stock $.01 par value, 1,000,000 shares authorized; 7,500 shares
issued and outstanding........................................................ --
Common Stock, $.01 par value, 25,000,000 shares authorized; 4,330,829 shares
issued and 3,897,329 shares outstanding....................................... 43
Additional paid-in capital.......................................................... 14,911
Treasury stock, at cost 433,500 shares.............................................. (1,300)
Accumulated deficit................................................................. (885)
-----------------
Total stockholders' equity.......................................................... 12,769
-----------------
Total capitalization........................................................... $27,054
-----------------
-----------------
</TABLE>

DIVIDEND POLICY

The Company has never declared or paid cash or other dividends on its
Common Stock. The payment of dividends, if any, in the future is within the
discretion of the Board of Directors and will depend upon the Company's
earnings, its capital requirements and financial condition, and other relevant
factors. Pursuant to the Series A Preferred Stock and the Credit Agreement, the
Company is currently prohibited from paying cash dividends. The Company
presently intends to retain all earnings for use in its business and does not
anticipate paying dividends on its Common Stock in the foreseeable future.

SELECTED CONSOLIDATED FINANCIAL DATA

The following statement of selected operating data for each of the three
years in the period ended December 31, 1996 and the balance sheet data as of
December 31, 1995 and 1996 are derived from the Company's financial statements,
which statements have been audited by Freed Maxick Sachs & Murphy, P.C.,
independent certified public accountants, as of December 31, 1995 and for each
of the years in the two-year period ended December 31, 1995, and by KPMG Peat
Marwick LLP, independent certified public accountants, as of and for the year
ended December 31, 1996.

The financial information set forth below should be read in conjunction
with, and is qualified in its entirety by, the detailed information in the
financial statements and notes referenced above.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
AND OTHER DATA)

<S> <C> <C> <C>
Revenues................................................................ $24,583 $20,692 $12,818
------- ------- -------
Costs and expenses:
Operating expenses................................................. 13,925 11,660 7,277
General and administrative expenses................................ 8,443 6,120 4,496
Depreciation and amortization...................................... 1,158 1,025 654
------- ------- -------
23,526 18,805 12,427
------- ------- -------
Income from operations.................................................. 1,057 1,887 391
------- ------- -------
Other income (expense).................................................. (1,154) (1,059) (515)
------- ------- -------
(Loss) income before provision for income taxes and extraordinary
item.................................................................. (97) 828 (124)
Provision for income taxes.............................................. 212 549 59
------- ------- -------
(Loss) income before extraordinary item................................. (309) 279 (183)
Extraordinary item-loss on early extinguishment of debt, net of tax
benefit............................................................... (157)
------- ------- -------
(466) 279 (183)
Dividends on preferred stock............................................ (75)
Net (loss) income applicable to common stockholders..................... $ (541) $ 279 $ (183)
------- ------- -------
------- ------- -------
Earnings per common share:
Income (loss) before extraordinary item............................ $ (0.09) $ 0.07 $ (0.05)
Extraordinary item................................................. (0.04)
------- ------- -------
Net (loss) income.................................................. $ (0.13) $ 0.07 $ (0.05)
------- ------- -------
------- ------- -------
Weighted average common shares outstanding.............................. 4,104,680 4,125,348 3,694,420
--------- --------- ---------
--------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------

<S> <C> <C>
Balance Sheet Data:
Total assets................................................................... $ 19,074 $ 30,335
Working capital................................................................ 1,600 3,415
Long-term debt including current portion....................................... 10,239 14,285
Total liabilities.............................................................. 11,674 17,566
Stockholders' equity........................................................... $ 7,400 $ 12,769
</TABLE>

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

INTRODUCTION

The revenues of the Company are primarily derived from service fees for
recording the sworn testimony at depositions. The Company's revenues can
fluctuate widely from period to period as a result of the absence or presence of
significant non-recurring litigation matters. Large complex litigation can
result in large amounts of revenues being recognized over a relatively short
period. The key variable in the Company's operating expenses are the fees paid
to reporters and transcribers engaged by the Company. The different types of
services provided by the Company represent varying profit margins, with
accelerated delivery transcripts, transcript copies and compressed transcripts
yielding the highest margins. In addition, profit margins vary in the different
geographic markets in which the Company operates.

The Company acquired the assets of Kitlas, Dickman & Associates ('KDA') in
July 1996, M&M Reporting Referral Services, Inc. ('M&M') in October 1996 and
Sherry Roe & Associates, Inc. ('SRA') in November 1996 (collectively referred to
as '1996 Acquisitions'). In January of 1995 the Company acquired the assets of
Coleman Haas Martin & Schwab ('CHMS') and in June of 1994 the Company acquired
Sarnoff Deposition Service, Inc. ('SDS') (see Note 2 to Consolidated Financial
Statements).

RESULTS OF OPERATIONS

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996 AND 1995

Revenues increased by $3.9 million or 18.8%. Excluding revenues from 1996
Acquisitions, the revenues increased by approximately 11.8% or $2.4 million. The
Company believes that the increase in revenues was due to its marketing efforts
and partly due to several large multi-party projects undertaken in 1996.

Operating expenses increased by $2.3 million, from $11.6 million in 1995 to
$13.9 million in 1996 in line with the revenue increase. As a percentage of
revenues, operating expenses were 56.6% in 1996 and 56.4% in 1995.

General and administrative expenses increased by $2.3 million to $8.4
million. The increase was in part due to expenses related to 1996 Acquisitions
consisting of payroll and occupancy expenses and increased sales compensation,
marketing and promotional expenses and admininstrative support expenses due to
increased revenue levels. Expenses incurred by the Company's Corporate Services
Division and additional expenses incurred for planned growth also contributed to
the increase. Corporate Services Division markets court reporting services on a
national basis to large insurance companies and corporations, and the revenues
from such efforts were not significant in 1996. The expenses incurred by
Corporate Services Division consisted of payroll, advertising and promotional
expenses. In addition, general and administrative expenses include approximately
$262,000 relating to the sublease loss (see Note 9 to Consolidated Financial
Statements). As a percentage of revenue, general and administrative expenses
increased from 29.6% to 34.3%. As the increase in general and administrative
expenses was greater than the contribution from increased revenues, overall
operating income declined.

Depreciation and amortization increased by $133,000 due to additional
amortization charges arising from the 1996 Acquisitions and due to additional
depreciation arising from the capital expenditures for the Company's new office
space for its New York operations. A significant component of the amortization
expense relates to the cost in excess of the net tangible assets of the acquired
businesses (goodwill) which is being amortized using the straight-line method
over 25 years. The Company continually reviews the recoverability of the
carrying value of goodwill. In determining whether there is an impairment of
goodwill, the Company compares the sum of the expected future cash flows
(undiscounted and without interest charges) to the carrying amount of the asset.
Management believes that at December 31, 1996, there has been no impairment in
the carrying amount of the assets.

Interest expense increased by $94,000 due to the incurrence of additional
debt to finance acquisitions and fund working capital.

The Company's operations resulted in a net loss of $309,000 before
extraordinary item compared to income of $279,000 in 1995. As the increases of
above-mentioned expenses negated the additional contribution from increased
revenues, operations for the year resulted in a loss compared to a profit in
1995.

COMPARISON OF THE YEARS ENDED DECEMBER 31, 1995 AND 1994

Revenues increased by $7.9 million or 61.4% to $20.7 million for the year
ended December 31, 1995 primarily as a result of the SDS and CHMS acquisitions.
On a pro forma basis, as though the acquisitions were made at January 1, 1994,
the revenues increased by 6.0% for the year ended December 31, 1995 due to
several large multiparty projects undertaken in 1995.

Operating expenses increased by $4.4 million, from $7.3 million in 1994 to
$11.7 million in 1995. As a percentage of revenue, operating expenses declined
from 56.8% to 56.4%.

General and administrative expenses increased by $1.6 million to $6.1
million. The increase was due to SDS's and CHMS's general and administrative
expenses consisting of payroll, occupancy, marketing and promotional expenses.
As a percentage of revenue, general and administrative expenses decreased from
35.1% to 29.6%. The decrease in general and administrative expenses as a
percentage of revenues was in part due to the integration of CHMS's operations
with SDS's and the integration of DFA's operations during the latter part of
1994.

Depreciation and amortization increased by $371,000, due to additional
depreciation and amortization charges arising from the SDS and CHMS
acquisitions. A significant component of the amortization expense relates to the
cost in excess of the net tangible assets of the acquired businesses (goodwill)
which is being amortized using the straight-line method over 25 years. The
Company continually reviews the recoverability of the carrying value of
goodwill. In determining whether there is an impairment of goodwill, the Company
compares the sum of the expected future cash flows (undiscounted and without
interest charges) to the carrying amount of the asset. Management believes that
at December 31, 1995, there has been no impairment in the carrying amount of the
asset.

Interest expense increased by $535,000 due to the incurrence of additional
debt to finance acquisitions and fund working capital.

The Company generated a net income of $279,000 compared to a net loss of
$183,000 in 1994 as the additional contributions from increased revenues was
greater than the increases of the above mentioned expenses.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996, the Company's working capital was approximately $3.4
million, which was approximately $1.8 million more than at December 31, 1995.
The increase was mainly due to the increase in the Company's accounts
receivable, net of accounts payable and accruals, and reduction in the current
maturities of long-term debt due to refinancing. The increase in the Company's
accounts receivable net of accruals was in part due to the 1996 Acquisitions and
increased revenue levels.

In October 1996, the Company raised approximately $6.7 million through a
private sale of Convertible Preferred Stock (See Note 5 to Consolidated
Financial Statements). The funds were used to finance the 1996 Acquisitions and
repay approximately $500,000 of the Company's debt. In addition approximately
$1.3 million of the proceeds were used to repurchase 433,500 shares of the
Company's common stock at $3.00 per share. The purchase of the shares of Common
Stock was from an original investor in the predecessor of the Company and was
designed to permit such investor to liquidate its holdings without affecting the
trading in the Company's Common Stock. The repurchase caused a decrease of $1.3
million of cash and stockholders' equity.

In December 1996, the Company entered into a three-year revolving loan
agreement ('Loan Agreement') with a financial institution which provides for
borrowing up to $20.0 million based on operating cash flows as defined therein.
Borrowings under the Loan Agreement bear interest at either

prime rate or London Interbank Offered Rate (LIBOR), at the Company's election,
plus the applicable margin rate. The applicable margin varies on the basis of
operating cash flows and the overall leverage ratio as defined in the Loan
Agreement. The effective rate at December 31, 1996 was 9%. The Loan Agreement,
which is secured by substantially all the assets of the Company, restricts
future indebtedness, investments, distributions, acquisitions or sale of assets
and capital expenditures and also requires maintenance of certain financial
ratios and covenants. The initial borrowings of $8.2 million under the Loan
Agreement were used to repay all amounts outstanding under the Company's credit
agreement with a bank and approximately $4.5 million of its subordinated
debentures. The aggregate borrowings at December 31, 1996 were $8.2 million with
additional availability of approximately $6.4 million.

The Company's strategy is to continue to finance future acquisitions
principally and/or with the issuance of the Company's securities and borrowings.
The availability of these capital resources is dependent upon prevailing market
conditions, interest rates and the financial condition of the Company.

The capital expenditures for 1997 are expected to range between $575,000
and $625,000. The Company believes that the cash flows from its operations
supplemented, if needed, by additional borrowing capacity from the Loan
Agreement will be sufficient to support the working capital and capital
expenditure requirements through at least the end of 1997.

BUSINESS

GENERAL

The Company is a court reporting firm using state-of-the-art technology to
provide printed and computerized transcripts and video recordings of testimony
from depositions to the legal profession primarily in the New York City
metropolitan, Southern California and Washington, D.C. areas. The Company's
strategy is to become a national court reporting firm by acquiring court
reporting companies in major business communities around the country. The
Company believes that by expanding through the acquisition of established court
reporting companies in major cities, the Company will achieve a significant
national presence in the court reporting industry. In evaluating a prospective
acquisition candidate, management of the Company considers the following
material factors: (i) financial condition and results of operations; (ii)
experience and skill of management and management's availability after the
acquisition; (iii) growth potential; (iv) costs associated with the consummation
of the acquisition; and (v) customer base and reputation. The size, nature and
geography of the early acquisitions will determine the pace of the Company's
achievement of national coverage. The Company believes that there are a number
of suitable acquisition candidates in the size range contemplated, and that
national status could be achieved by acquiring 10 to 12 firms in major
metropolitan areas.

THE COURT REPORTING INDUSTRY

Court reporting is the verbatim transcription of the spoken word into the
written word, generally from sworn legal testimony. The industry is divided into
two distinct sectors -- the recording of proceedings in court, or 'official'
court reporting, and all other court reporting. Official court reporting is
performed by civil servant court reporters employed by municipal, state, or
federal courts. All other court reporting is performed outside the courtroom by
free-lance court reporters, who may be either self-employed, or employees or
independent contractors affiliated with a court reporting agency. The Company is
a court reporting agency which primarily uses the services of independent
contractors to handle the recording of legal proceedings (typically civil ones)
outside the courtroom and, to a lesser extent, the recording of other events
such as hearings, arbitrations, board meetings, stockholders' meetings,
conferences, conventions and media events.

Court reporting firms range in size from sole practitioners to firms with
more than 100 free-lance court reporters. Although there are no independently
verified statistics with respect to the number of court reporters or the total
revenues of the court reporting industry, there are approximately 22,000 members
of the National Court Reporting Association ('NCRA'), the only national
professional association in the industry, and an additional 12,000 student
members. The Company estimates that

there are approximately 50,000 court reporters in the United States. The Company
believes that, based on its size and reputation, it is one of the leading court
reporting companies in the United States.

The industry's long-time local focus is shifting toward a more national
approach to accommodate law firms and corporations whose cases, in many
instances, extend beyond a single city. Attorneys commonly request such
out-of-town referrals from their local court reporting firm. Professional
associations such as the NCRA and various national networks facilitate both the
development of personal relationships between agency owners and the referral of
business between agencies. Through such networks, a member court reporting firm
is able to schedule depositions in other cities for clients so requesting. One
drawback of the networks to date has been the inability of the referring court
reporting firm to guarantee the quality of service that the client ultimately
receives. The Company believes that by expanding nationally, it will be able to
more effectively serve clients across the country, rather than depending on the
loosely-aligned networks or other strategic relationships.

SERVICES AND TECHNOLOGY

The Company's basic business is the verbatim transcription of EBTs
(examinations before trial) or depositions. Court reporting requires a trained
professional capable of transcribing speech, which generally approximates 200
words per minute, using shorthand symbols. Most of the Company's court reporters
use a computer-aided transcription, or CAT, system for transcribing depositions.
Much like traditional stenotype machines, CAT systems enable a court reporter to
represent what is spoken as phonetic symbols. CAT systems, however, have an
added feature: the phonetic symbols are simultaneously recorded on the
traditional paper tape and on disk. Whether taken on a CAT system or a
traditional stenotype machine, the shorthand notes are translated from the paper
or magnetic medium, then edited to produce a final transcript. CAT systems
enable the computer to interpret the shorthand symbols and translate them into
English, a process that otherwise must be done manually. CAT systems have
speeded the production of the final transcript; in fact, a court reporter can
connect a computer to his stenotype machine, which can perform the translation
during the proceedings and allow him to provide a transcript directly following
the proceeding. As a by-product of CAT technology, specialized software has been
developed enabling court reporters to provide clients with a floppy disk
containing the translation of the shorthand symbols in a computer-readable
format. This software allows the client to search, store, index, annotate, and
manage transcripts. Documents can be searched easily for relevant portions of
testimony, and can be integrated into larger databases containing all of the
other information pertaining to a particular proceeding.

The Company's state-of-the art technologies include:

Realtime Transcription. The reporter writes on the stenotype machine and
the written translation of what is said instantaneously appears on
monitors located in the conference rooms where the deposition is taking
place and/or at a remote location.

Interactive Realtime Transcription. Specialized software enables the user
to mark, annotate, search, cut and paste the text instantly on a computer
linked to that of the court reporter.

Full-Text Search and Retrieval Programs. These programs allow the computer
to be used to search, store, index and manage transcripts and other
documents. This enables the user to locate a particular word or portion of
text quickly and easily.

Compressed Transcripts. This format eliminates excess white space on the
page and organizes the text in columns, substantially reducing transcript
bulk. The compressed transcripts contain an index listing all of the words
in the transcript, as well as where and how often the words appear,
simplifying the summarizing of transcripts.

Multimedia Technology Systems. This format allows text and video images to
be shown concurrently on a single screen. The proceedings are taped on
video while the court reporter records the proceedings on a stenotype
machine connected to a computer equipped with the appropriate software. A
videotape or CD ROM can later be accessed via video cassette recorder or
computer, as appropriate.

While the Company believes that the services it provides through these
technologies are high quality, none of these services are unique in the industry
or represent any significant investments that would act as a barrier to entry by
competitors. Rather, the Company believes that its experience and expertise in
the use of such technologies give it a competitive advantage over those court
reporting firms that have not successfully integrated these technologies into
the services they provide on a regular basis.

ACQUISITION STRATEGY

The Company intends to continue expanding geographically by making initial
acquisitions in new geographic markets of one or more court reporting companies
that can operate effectively on a decentralized basis resulting in the creation
of a new 'hub.' Subsequent to the establishment of a hub, the Company intends to
acquire additional court reporting agencies in that market. The Company believes
that these 'tuck-in' acquisitions can be absorbed without significant increases
in administrative costs. The Company's strategy is to become a national court
reporting company by acquiring court reporting companies in both its present
geographic markets and in other major metropolitan areas in the United States.
The Company believes a national court reporting firm will be able to more
effectively serve its clients. The highly fragmented nature of the court
reporting industry provides substantial acquisition opportunities for the
Company. With the advent of sophisticated and rapidly changing technologies,
aggressive marketing and professional management, the Company believes that some
small firms are unlikely to be able to make the necessary capital investments
required to compete effectively against better-capitalized competitors. Through
its utilization of the newest technologies and its ability to provide
professional management, the Company will benefit from certain economies of
scale in its operations and marketing by expanding in its present market places.
Additionally, the Company believes that the efficiencies it has achieved in its
present locations can be duplicated in other locations which may be acquired in
the future. For example, the Company has developed a customized computer system
to handle the scheduling of depositions and billing and accounting matters. This
software will be used in managing the firms acquired by the Company without any
corresponding material increases in operating costs. Additionally, the Company's
training program for managers will enable the Company to efficiently streamline
the operations of acquired businesses by reducing or eliminating administrative
offices and certain staff positions of such acquired businesses.

Pursuant to an Agreement of Merger dated as of September 30, 1993 (the
'Merger Agreement'), by and among the Company, Esquire Communications
Acquisition Corp., a wholly-owned subsidiary of the Company ('Acquisition Sub'),
and David Feldman & Associates (U.S.A.), Ltd. ('DFA'), on September 30, 1993 DFA
was merged into Acquisition Sub. As a result of the merger, DFA became a
wholly-owned subsidiary of the Company. DFA serves the metropolitan New York
City area. The purchase price paid by the Company pursuant to the Merger
Agreement consisted of 549,900 unregistered shares of Common Stock of the
Company, $1,500,000 in cash and a promissory note in the principal amount of
$600,000. The promissory note is payable in 16 equal quarterly installments,
commencing December 30, 1993, together with interest at the rate of 10% per
annum.

On June 22, 1994, the Company acquired all the outstanding stock of Sarnoff
Deposition Service, Inc., a Southern California based court reporting company.
The purchase price paid by the Company for SDS consisted of approximately
$4,331,000 in cash, a promissory note in the principal amount of $1,500,000 and
750,000 unregistered shares of Common Stock of the Company. The promissory note
is payable in 28 equal quarterly installments commencing September 1994,
together with interest at the rate of 10% per annum.

On January 27, 1995, the Company acquired substantially all the assets of
Coleman, Haas, Martin & Schwab, Inc., a California based court reporting
company. The purchase price paid by the Company for CHMS consisted of $400,000
in cash, promissory notes in the aggregate principal amount of $800,000 and
76,923 unregistered shares of Common Stock of the Company. Upon CHMS attaining
specified revenues in 1995, the Company paid an additional $150,000 in cash. The
principal amount of one of the promissory notes is subject to adjustment based
on revenue levels attained by CHMS in 1995 and 1996. As the result, the
principal balance increased by approximately $35,000 for the 1995 fiscal year
and $143,000 for the 1996 fiscal year. The promissory notes are payable in equal
monthly installments over a period of seven years, together with interest at the
rate of 9% per annum.

On July 26, 1996, the Company acquired the assets and liabilities of
Kitlas, Dickman & Associates, a court reporting agency based in San Diego,
California, which has an immaterial effect on the operating results of the
Company.

On October 28, 1996, the Company acquired the assets and liabilities of M&M
Reporting Referral Service, Inc., a Southern California-based court reporting
company. The purchase price consisted of $2,600,000 in cash, subordinated
promissory notes in the aggregate principal amount of $2,712,700 and 132,258
unregistered shares of Common Stock. The principal amount of one of the notes
and the cash portion of the purchase price are subject to revision based on the
revenue derived from M&M's business for the twelve month period commencing
November 1, 1996. The promissory notes are payable in equal quarterly
installments over a period of five years, together with interest at the rate of
9% per annum.

On November 15, 1996, the Company acquired the assets of Sherry Roe &
Associates, Inc., a Washington, D.C. based court reporting company. On January
3, 1997, the Company acquired the assets of Nevill & Swinehart and Pelletier &
Jones, both Southern-California based court reporting companies. The inclusion
of the historical financial statements would not have had a material effect on
the operating results of the Company. The purchase price in such acquisitions
consisted of $2,160,000 in cash, subordinated promissory notes in the aggregate
principal amount of $1,265,000 and 171,748 unregistered shares of Common Stock.
The principal amount of some of the notes and the cash portion of the purchase
price are subject to revision based on the revenue derived from the acquired
businesses subsequent to the closing. The promissory notes are payable over a
period of six years, together with interest at the rate of 8% or 9% per annum.

The Company has entered into letters of intent to acquire Krauss, Katz &
Ackerman and Wolfe, Rosenberg & Associates, court reporting companies in
Philadelphia and Chicago, respectively. Consummation of these acquisitions is
subject to negotiation and execution of definitive agreements and to the
satisfaction of any conditions to be contained in such agreements. There is no
assurance that either of such acquisitions will be consummated.

COMPETITIVE FACTORS

Court reporting is an increasingly competitive industry, where firms must
adapt to changing technology. The industry is characterized by low barriers to
entry, resulting in a large number of small firms competing for available
business. Most court reporting firms offer substantially the same type of
services which the Company offers. However, larger firms can compete more
effectively due to the economies of scale which can be achieved as a result of
spreading the high cost of computer and video equipment and marketing efforts
over a larger base. Additionally, large court reporting firms can use their
sophisticated facilities and equipment for ancillary services requested by their
clients. Although no statistics are available, the Company believes that there
are only one or two court reporting firms that are truly national in scope;
perhaps a dozen other firms are regional in scope. These firms may represent
more competition for the Company than smaller, presumably less comprehensive
firms. Competition in the court reporting industry is based on factors such as
the existence of personal relationships with clients and other reporting
agencies, price, service and reputation.

Various proposals are under consideration by the Federal Advisory Committee
on Civil Rules, the Judicial Conference of the U.S. and the U.S. Supreme Court,
among others, which may reduce or eliminate the use of court reporters. Such
proposals include limitations on the number and length of pretrial depositions,
requirements to use alternative dispute resolution methods and the substitution
of audio- and/or video-tape recordings for stenographic transcription of
proceedings. In addition, on an unofficial basis, certain industries have
adopted alternative dispute resolution methods as standard industry practices.
These or other trends could have a material adverse impact on the court
reporting industry.

Future technological innovations in the court reporting industry may create
new services or products that are competitive with, superior to or render
obsolete the services currently provided by the Company and other court
reporting companies. There can be no assurance that the Company would not be
adversely affected in the event of such technological innovation. In an attempt
to keep abreast of the

changing technology, the Company has aggressively sought to become a 'beta' site
for the manufacturers of all types of industry hardware and software; the
Company uses and evaluates new products for the manufacturers before the
products are available to the general public. This policy has proven to be
effective to date and will be aggressively continued. In addition,
representatives of the Company attend trade shows and serve on various industry
group committees.

CLIENTS AND MARKETING

The Company's professional sales team helps create and implement its
marketing efforts. Representatives of the Company attend and perform
demonstrations at industry trade shows. The Company highlights its technological
resources through advertisements in trade magazines and legal periodicals, and
engages in direct mail advertising to lawyers. The Company attracts business
through telemarketing, cold calling, recommendations and referrals, and
participates in competitive bidding.

The Company also attracts new business through contacts made as a result of
its membership in the National Network Reporting Company ('NNRC'), a national
network of approximately 53 large, reputable court reporting agencies set up to
facilitate the exchange of ideas among agency owners. Membership in NNRC is
limited to one court reporting firm in each major metropolitan area in the
United States, Canada and the United Kingdom. The Company is the NNRC
representative for each of New York City, New York, Long Island, New York, Los
Angeles, California and San Diego, California. The Company also has contractual
relationships with deposition-setting services that refer work to the Company.

The Company recently formed Esq. Com CSD, Inc., as a wholly owned
subsidiary, to market court reporting services to large insurance companies and
corporations. Revenues generated from these operations have not been
significant.

The Company's client base is composed primarily of law firms. Since the
Company provides verbatim transcriptions of sworn legal testimony, it is
unlikely that customers which are not law firms or others involved in legal
proceedings would be interested in the Company's services. Thus, the Company's
future is dependent upon the continued use of legal proceedings and the need for
transcriptions thereof by interested parties.

HUMAN RESOURCES

The Company currently has 142 full-time employees and approximately 387
free-lance court reporters. The Company's court reporters are primarily
independent contractors, each of whom owns a stenotype machine and many of whom
own personal computers. The Company's ability to utilize the services of
independent contractors has significant favorable consequences to the Company.
As a result, the Company is able to minimize its fixed operating costs, while
avoiding certain capital expenditures. Although the Company does not have the
same amount of control over an independent contractor as it does over an
employee of the Company, the Company does not believe that this has had a
negative impact on its business since the Company has been able to attract
highly qualified professionals. The Company provides comprehensive training to
its managers and has an internship program for its court reporters. The
Company's employees and independent contractors are not represented by any
union. The Company considers its relations with its employees and free-lance
court reporters to be good.

PROPERTIES

The Company has leased offices in New York, New York, Santa Ana,
California, Los Angeles, California, San Diego, California and Washington, D.C.
The aggregate area under the leases approximates 50,000 square feet. The leases
generally run for a term of five years and expire at various dates from time to
time. In addition, the Company owns an office condominium of approximately 1,100
square feet of office space at 230 Hilton Avenue, Hempstead, New York.

LEGAL PROCEEDINGS

The Company is not a party to any material pending legal proceedings.

RECENT EVENTS

On October 23, 1996, the Company entered into a Purchase Agreement (the
'Purchase Agreement') pursuant to which the Company sold to Golder, Thoma,
Cressey, Rauner Fund IV, L.P. ('GTCR') and Antares Leveraged Capital Corp.
(collectively with GTCR, the 'Investors') 7,312.50 and 187.50 shares of Series A
Preferred Stock, respectively, for an aggregate purchase price of $7,500,000. In
addition, the Investors have the right from time to time within 21 months to
acquire up to an additional 7,500 shares of Series A Preferred Stock at a price
of $1,000 per share.

The Series A Preferred Stock is convertible into Common Stock of the
Company at a conversion price of $3.00 per share (subject to anti-dilution
adjustments) and bears cumulative annual dividends at the rate of 6% ($60.00)
per annum. The holders of Series A Preferred Stock have a liquidation preference
of $1,000 per share, plus accrued dividends. Holders of Series A Preferred Stock
have the right to vote together with the holders of Common Stock and are
entitled to one vote for each whole share of Common Stock into which the Series
A Preferred Stock is convertible (presently 333 1/3 votes per share). GTCR was
granted various rights to ask for registration under the Securities Act of 1933
of any shares of Common Stock acquired by it upon conversion of the Series A
Preferred Stock. Without the consent of the holders of a majority of the Series
A Preferred Stock, the Company may not take various actions, including paying
dividends on capital stock if there are any accrued but unpaid dividends on the
Series A Preferred Stock, issuing any equity securities which are senior to or
on a parity with the Series A Preferred Stock, merging with another entity,
selling or otherwise disposing of all or substantially all its assets, or
acquiring other entities. In addition, the Company may not issue in a private
offering any equity securities without first offering the holders of Series A
Preferred Stock the right to acquire their pro rata share.

In connection with the Purchase Agreement, the Investors and Malcolm L.
Elvey, Chairman of the Board of the Company, Cary A. Sarnoff, Vice Chairman of
the Company, David J. Feldman, President of the Company, CMNY Capital L.P. and
Allied Investment Corporation, Allied Investment Corporation II and Allied
Capital Corporation II (collectively, 'Allied') entered into a Stockholder's
Agreement dated October 23, 1996 (the 'Stockholder's Agreement') pursuant to
which (a) the parties agreed to vote their shares to elect as directors three
representatives designated by Messrs. Elvey, Sarnoff and Feldman (the
'Management Stockholders'), two representatives designated by GTCR and two
representatives jointly designated by GTCR and the Management Stockholders;
provided, however, that if they are unable to agree on such joint designees
within 90 days, then GTCR may elect the joint designees; (b) the Management
Stockholders granted to the other stockholders rights of first refusal to
acquire their shares if they desire to sell the same, subject to exceptions for
public sales and for transfers to family members; and (c) if the Company's Board
of Directors approves a sale of the Company's assets or capital stock (whether
by merger or otherwise), each stockholder other than Allied and CMNY Capital
L.P. agreed to consent to such transaction. The Stockholder's Agreement dated
June 22, 1994 among the Company and the Management Stockholders was terminated.
In addition, GKN Securities Corp. and Allied terminated their rights to
designate directors of the Company.

Effective October 23, 1996, Messrs. Howard Davidoff and Robert Wunder
resigned as directors of the Company and Messrs. Bruce V. Rauner and Joseph P.
Nolan, representatives of GTCR, were elected as directors of the Company.
Messrs. Andrew Garvin and Mortimer Feinberg, directors of the Company, agreed to
resign as directors at any time upon the request of GTCR.

Effective October 23, 1996, the Company engaged KPMG Peat Marwick, LLP as
its independent accountants to audit its financial statements in place of Freed
Maxick Sachs & Murphy, P.C. (the 'Former Accountant'). The decision to change
accountants was approved by the Board of Directors and the Audit Committee of
the Company and was the result of the Company's belief that due to its
increasing size and nationwide scope of operations, it needed a 'Big 6'
accounting firm with nationwide operations to audit its financial statements.
The Former Accountant's report on the financial statements of the Company for
each of the past two years did not contain an adverse opinion or a disclaimer of

opinion, and was not qualified or modified as to uncertainty, audit scope or
accounting principles. There were no disagreements of the type described in
paragraph (a)(1)(iv) of Item 304 of Regulation S-K promulgated under the
Securities Act ('Item 304 of Regulation S-K'), or any reportable event as
described in paragraph (a)(1)(v), paragraph (a)(2) or paragraph (b) of Item 304
of Regulation S-K.

On December 24, 1996, the Company entered into a Credit Agreement with
Antares Leveraged Capital Corp. pursuant to which the Company may borrow from
time to time under a revolving credit facility up to an aggregate amount of $20
million. The Credit Agreement, which is secured by substantially all the assets
of the Company, restricts future indebtedness, investments, distributions,
acquisitions or sale of assets and capital expenditures and also requires the
maintenance of certain financial ratios and covenants. The initial borrowings
under the Credit Agreement were used to repay all amounts outstanding under the
Company's credit agreement with The Chase Manhattan Bank and $4.5 million of
subordinated debentures due June 2001 and held by Allied.

On April 3, 1997, David White was appointed Chief Executive Officer of the
Company. Mr. White and Fir Geenen have been elected as directors of the Company.
Messrs. White and Geenen have agreed to resign as directors at any time upon the
request of GTCR.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
DIRECTOR OR
NAME AGE POSITION WITH COMPANY OFFICER SINCE
- ------------------------ --- -------------------------------------------------------------- -------------

<S> <C> <C> <C>
Malcolm L. Elvey 55 Chairman of the Board, and Director 1993
Cary A. Sarnoff 49 Vice Chairman and Director 1994
David A. White 44 Chief Executive Officer and Director 1997
David J. Feldman 57 President, Chief Operating Officer, and Director 1993
David Higson 49 Senior Vice President and Chief Financial Officer 1997
Debra Neiderfer 39 Vice President 1993
Paul Strohfus 44 Vice President 1995
Vasan Thatham 38 Chief Financial Officer and Secretary 1994
Sandra Waite 37 Vice President 1994
Mortimer R. Feinberg(1) 73 Director 1993
Andrew P. Garvin(1)(2) 50 Director 1993
Fir Geenen 42 Director 1997
Joseph P. Nolan(1)(2) 32 Director 1996
Bruce V. Rauner 40 Director 1996
</TABLE>

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

(1) Member of the Compensation Committee

(2) Member of the Audit Committee

------------------------
Malcolm L. Elvey has served as Chairman of the Board of Directors of the
Company, Pepper and ERC since their respective incorporations. Mr. Elvey is a
Chartered Accountant and has a Master of Business Administration from the
University of Cape Town. From 1985 through 1987, Mr. Elvey served as President
and Chief Executive Officer of Pritchard Services, Ltd. where he was responsible
for the home health care, hospital and building maintenance, security and food
services subsidiaries, and served as a director of ADT Ltd. (formerly, the
Hawley Group Ltd.), an international service company.

Cary A. Sarnoff has served as Vice Chairman of the Company since November
1994. Mr. Sarnoff was President of Sarnoff Deposition Service, Inc. for more
than five years prior thereto. Mr. Sarnoff formed in 1982 and owns CAT-Links, a
litigation support software development company. Mr. Sarnoff has more than 25
years experience in the court reporting industry. He was a founding member of
the NNRC and served as a member of the Board of Directors of the California
Court Reporters Association.

David J. Feldman has served as President, Chief Operating Officer and a
director of the Company since September 1993. Mr. Feldman was President of David
Feldman & Associates (U.S.A.) Ltd. for more than five years prior thereto. Mr.
Feldman has more than thirty years experience in the court reporting industry,
including serving as a court reporter for the Knapp Commission Hearings and the
Nelson Rockefeller Commission on Critical Choices for America.

Debra Neiderfer has served as Vice President of the Company since September
1993. From 1989 to September 1993, Ms. Neiderfer was employed as account
executive and then vice president at David Feldman & Associates (U.S.A.) Ltd.
From 1980 through 1987, Ms. Neiderfer served as marketing manager for Prentice
Hall Law & Business.

Paul Strohfus has served as Vice President of the Company since November
1995. From 1987 to 1995, Mr. Strohfus was employed by Firemans Fund Insurance
Company in various capacities, with his last position having been assistant vice
president of claims.

Vasan Thatham has served as Chief Financial Officer and Secretary of the
Company since 1994. In 1993, Mr. Thatham was controller of the IPC Franchising
Corp. and from 1987 through 1992 was controller (and ultimately Chief Financial
Officer) of Strings, Ltd., a specialty retail chain. From 1978 to

1987, Mr. Thatham held various positions with Ernst & Whinney in Kuwait and KPMG
Peat Marwick in India. Mr. Thatham is a chartered accountant.

Sandra Waite has served as Vice President of the Company since June 1994.
She served as office manager of Sarnoff Deposition Service, Inc. from 1980
through 1989, as general manager from 1990 to 1994 and as vice president since
June 1994.

Mortimer R. Feinberg, Ph.D., has served as a director of the Company since
its incorporation. He is the co-founder of BFS Psychological Associates, Inc., a
human resources consulting firm, and has served as Chairman of its Board of
Directors since 1960. Dr. Feinberg is Professor Emeritus, Baruch College, City
University of New York and is a frequent contributor to the Wall Street Journal
on human resources and other business topics.

Andrew P. Garvin has served as a director of the Company since its
incorporation. Mr. Garvin is the co-founder of FIND/SVP, a consulting, research
and information gathering company, and has served as its Chief Executive Officer
since 1969.

Joseph P. Nolan has served as director of the Company since October 1996.
Mr. Nolan is a principal and has been with Golder, Thoma, Cressey, Rauner, Inc.,
an affiliate of GTCR, since February 1994. From May 1990 to January 1994, Mr.
Nolan was Vice President Corporate Finance at Dean Witter Reynolds Inc. Mr.
Nolan is also a director of Lason Inc., Principal Hospital, Inc., UllO
International and Excaliber Tubular Corporation.

Bruce V. Rauner has served as director of the Company since October 1996.
Mr. Rauner is a principal and has been with Golder, Thoma, Cressey, Rauner, Inc.
since 1981. Mr. Rauner is also a director of ERO, Inc., COREStaff, Inc.,
Coinmach Laundry Corporation, Lason Inc., Polymer Group, Inc., Cherrydale Farms,
Inc., International Computer Graphics, Principal Hospital, Inc. and U.S.
Aggregates.

Fir Geenen has been an officer of Harlingwood Corp., an affiliate of
Harlingwood & Company LLC ('Harlingwood') since 1988. Harlingwood provides
advisory services to growing companies. From 1993 to September 1996, Mr. Geenen
served as Executive Vice President of Medical Transport, Inc., a division of
Laidlaw Inc. ('MedTrans').

David White has been an officer of Harlingwood since 1997. From 1992 to
December 1996, Mr. White was employed by MedTrans as President. From 1991 to
1992, Mr. White was Vice President, Financial Operations for a division of
Laidlaw, Inc.

David Higson was appointed Senior Vice President and Chief Financial
Officer of the Company in May 1997. From June 1993 to April 1997, he was Senior
Vice President -- Administration and Financial Operations of MedTrans. For more
than five years prior thereto he was regional director for financial operations
of Laidlaw Inc.

Messrs. Andrew Garvin, Mortimer Feinberg, David White and Fir Geenen have
agreed to resign as directors at any time upon the request of GTCR. All other
directors will hold office until the next annual meeting of stockholders and
until the election and qualification of their successors, or until death,
resignation or removal. Compensation for directors who are not officers of the
Company is $1,250 per meeting. Officers serve at the discretion of the Board of
Directors and under the terms of any employment agreement which may exist.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Exchange Act requires the Company's executive officers
and directors, and persons who own more than ten percent of the Company's common
stock to file reports of ownership and changes in ownership with the SEC.
Executive officers, directors and holders of more than ten percent are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that during the year ended December 31, 1996,
its executive officers, directors and holders of more than ten percent complied
with all applicable Section 16(a) filing requirements.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
paid by the Company or accrued for services rendered in all capacities during
the fiscal year ended December 31, 1996, to the Company's Chief Executive
Officer and to each of the other most highly compensated executive officers of
the Company whose aggregate cash compensation exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ---------- PAYOUTS
-------------------------------------- RESTRICTED --------------------
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS SARS PAYMENTS COMPENSATION
POSITION YEAR $ $ ($) ($) (#) (#) ($)
- ------------------------ ---- -------- -------- ------------ ---------- ------- -------- ------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Malcolm L. Elvey ....... 1996 $194,595 $115,000 50,000
Chairman & 1995 166,431
Chief Executive 1994 185,175
Officer
David J. Feldman ....... 1996 188,927 358,665 50,000
President 1995 161,335 238,543 75,000
1994 180,000 188,575
Cary A. Sarnoff, ....... 1996 190,436 50,000
Vice Chairman 1995 160,629
1994(1) 90,000
Debra Neiderfer ........ 1996 115,967 48,666 5,000
Vice President 1995 82,660 18,650 25,000
1994 80,000 7,448
Paul Strohfus .......... 1996 155,764 50,000
Vice President 1995(2) 42,577
</TABLE>

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

(1) Represents compensation for the partial year from June 22, 1994.

(2) Represents compensation for the partial year.

EMPLOYMENT AND RELATED AGREEMENTS

Malcolm L. Elvey is employed under an employment agreement which expires
May 1998 and is automatically renewable on a year-by-year basis unless
terminated by either party upon at least 60 days notice prior to the renewal
date. Mr. Elvey receives an annual salary of $194,595, which is subject to cost
of living increases. Mr. Elvey is also entitled to an annual bonus ranging from
3% based on pre-tax earnings of the Company in excess of $750,000 to 15% based
on pre-tax earnings of the Company in excess of $2,500,000; provided, however,
that the bonus will not exceed 100% of Mr. Elvey's annual salary. In the event
the Company consummates any acquisitions, these pre-tax earnings levels are
increased by 70% of the net income before taxes of the acquired business,
excluding any extraordinary items of gain or loss (which amount is prorated for
the portion of any year in which the acquired business operations are
consolidated with the Company's). The employment agreement terminates upon the
death or permanent disability of Mr. Elvey or for cause. Cause is defined as a
material breach of the employment agreement by Mr. Elvey, his gross negligence
or wilful misconduct in the performance of his duties, his dishonesty to the
Company, conviction of a felony or excessive absenteeism unrelated to a
disability. In addition, Mr. Elvey has agreed not to compete with the Company
for a period of two years following the termination of his employment with the
Company. The Company maintains and is the beneficiary of key-man life insurance
in the amount of $1,000,000 on the life of Mr. Elvey.

In connection with the acquisition of SDS, on June 22, 1994, the Company
entered into an employment agreement with Cary A. Sarnoff pursuant to which Mr.
Sarnoff is employed as Vice Chairman of the Company. The agreement expires four
years from the date thereof and is automatically renewed on a year-by-year basis
unless terminated by either party upon at least 60 days prior notice. Mr.
Sarnoff receives an annual salary at the rate of $186,455, which is subject to
cost of living increases. Mr.

Sarnoff's employment agreement contains termination provisions which are
substantially the same as those of Mr. Elvey's employment agreement. Mr. Sarnoff
has agreed not to compete with the Company for a period of two years following
the termination of his employment with the Company.

In connection with the acquisition of DFA, on September 30, 1993, the
Company entered into an employment agreement with David Feldman pursuant to
which Mr. Feldman is employed as President and Chief Operating Officer of the
Company. The agreement expires four years from the date thereof and is
automatically renewed on a year-by-year basis unless terminated by either party
upon at least 60 days notice prior to the renewal date. Mr. Feldman receives an
annual salary at the rate of $188,927, which is subject to cost of living
increases. Mr. Feldman is also entitled to an annual bonus of 4.25% of total
annual revenues of the Company in excess of $4,200,000 and 5% of total annual
revenues of the Company in excess of $9,000,000. During the first two years, Mr.
Feldman is entitled to a minimum bonus of $175,000 per year and during the third
and fourth years is entitled to a minimum bonus of $225,000 per year. The
revenue hurdle levels will be increased in the event the Company consummates any
acquisitions. Mr. Feldman's employment agreement contains termination provisions
which are substantially the same as those of Messrs. Elvey's and Sarnoff's
employment agreements, and in addition, Mr. Feldman may terminate the employment
agreement for a material reduction in his responsibilities or authority, failure
of the Company to pay Mr. Feldman compensation or amounts due him under a
certain promissory note, relocation of his office or a termination not permitted
under the employment agreement. Upon the termination of Mr. Feldman's employment
(except if such termination results from his death, disability or for cause),
the Company will continue to pay Mr. Feldman his annual salary for the balance
of the term of the agreement and for a period of six months thereafter. Mr.
Feldman has agreed not to compete with the Company for a period of one year
following the termination of his employment with the Company.

STOCK OPTION PLAN

In February, 1993, the Board of Directors of the Company adopted the 1993
Stock Option Plan (the 'Plan'), which was approved by all stockholders of the
Company. The Plan was amended to increase the number of options which may be
granted thereunder to 1,400,000 shares of Common Stock, subject to stockholder
approval. Incentive stock options, intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended, and nonqualified stock options may be
granted under the Plan.

The Plan is administered by the compensation committee of the Board of
Directors, which may grant options to key employees, directors, consultants and
independent contractors to the Company. The term of each option may not exceed
ten years from the date of grant. The exercise price of an option may not be
less than 100% of the fair market value of a share of Common Stock. The options
vest over a three-year period, commencing one year following their issuance.

The table below sets forth information regarding the grant of stock options
made to the executive officers named in the Summary Compensation Table during
the fiscal year ended December 31, 1996.

<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE
- ----------------------------------------------------------- ------------ ------------ ----------- ----------

<S> <C> <C> <C> <C>
Malcolm L. Elvey........................................... 50,000 29.41% $ 3.00 12/2006
David Feldman.............................................. 50,000 29.41% $ 3.00 12/2006
Cary Sarnoff............................................... 50,000 29.41% $ 3.00 12/2006
Debra Neiderfer............................................ 5,000 2.94% $ 2.875 2/2006
Paul Strohfus.............................................. 0 -- -- --
</TABLE>

The table below sets forth information for the executive officers named in
the Summary Compensation Table concerning option exercises during 1996 and
outstanding options at December 31, 1996.

AGGREGATED OPTION/SAR EXERCISES IN 1996 AND DECEMBER 31, 1996 OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996
ACQUIRED ---------------------------- ----------------------------
NAME ON EXERCISE(a) VALUE REALIZED(a) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- -------------- ----------------- ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Elvey...... 0 -- 125,000 50,000 0 0
David Feldman......... 0 -- 37,500 87,500 0 0
Cary Sarnoff.......... 0 -- 0 50,000 0 0
Debra Neiderfer....... 0 -- 41,667 13,333 0 0
Paul Strohfus......... 0 -- 16,667 33,333 0 0
</TABLE>

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

(a) There were no exercises of options by the Company's executives during 1996.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases its Santa Ana, California office from an affiliate of
Cary A. Sarnoff. The lease expires in June 1999 and grants to the Company an
option to renew for five years. The Company believes the terms of the lease are
comparable to market terms.

For as long as The Sarnoff Trust owns 20% or more of the Common Stock
issued in connection with the acquisition of SDS, the Company has agreed to
nominate, recommend and use its best efforts to have Mr. Sarnoff elected as a
director of the Company. As long as Messrs. Elvey, Feldman and Sarnoff continue
as directors of the Company, the Company has agreed that they shall be the sole
members of the Executive Committee and that all decisions to be made by the
Executive Committee shall require unanimous approval.

Agreement') pursuant to which (a) the parties agreed to vote their shares to
elect as directors three representatives designated by Messrs. Elvey, Sarnoff
and Feldman (the 'Management Stockholders'), two representatives designated by
GTCR and two representatives jointly designated by GTCR and the Management
Stockholders; provided, however, that if they are unable to agree on such joint
designees within 90 days, then GTCR may elect the joint designees; (b) the
Management Stockholders granted to the other stockholders rights of first
refusal to acquire their shares if they desire to sell the same, subject to
exceptions for public sales and for transfers to family members; and (c) if the
Company's Board of Directors approves a sale of the Company's assets or capital
stock (whether by merger or otherwise), each stockholder other than Allied and
CMNY Capital L.P. agreed to consent to such transaction. The Stockholder's
Agreement dated June 22, 1994 among the Company and the Management Stockholders
was terminated. In addition, GKN Securities Corp. and Allied terminated their
rights to designate directors of the Company.

Effective October 23, 1996, Messrs. Howard Davidoff and Robert Wunder
resigned as directors of the Company and Messrs. Bruce V. Rauner and Joseph P.
Nolan, representatives of GTCR, were elected as directors of the Company.
Messrs. Andrew Garvin, Mortimer Feinberg, David White and Fir Geenen, directors
of the Company, agreed to resign as directors at any time upon the request of
GTCR.

SDS was a party to an agreement with Edward Sarnoff, the father of Cary
Sarnoff, pursuant to which SDS agreed to pay to Edward Sarnoff, in the event of
the sale of SDS, the amount of $1,000,000 payable in equal monthly installments
over a period of five years. In connection with the Company's acquisition of
SDS, the Company assumed the obligations of SDS under this agreement.

THE EXCHANGE OFFER

PURPOSE AND EFFECTS OF THE EXCHANGE OFFER

The Exchange Offer is intended to extinguish the Warrants through the
issuance of Common Stock to reduce the future potential dilutive impact on the
Company's earnings per share of Common Stock that would be caused by exercise of
the Warrants. In the absence of the Exchange Offer, 1,702,251 shares of Common
Stock could be issued if all of the currently outstanding Warrants held by the
Warrantholders were exercised. Assuming 100% participation in the Exchange
Offer, 340,450 shares of Common Stock will be issued upon consummation of the
Exchange Offer.

DESCRIPTION OF THE WARRANTS

The Warrants were issued in registered form pursuant to an agreement, dated
May 18, 1993 (the 'Warrant Agreement'), between the Company and Continental
Stock Transfer & Trust Company (the 'Warrant Agent'). The following discussion
of certain terms and provisions of the Warrants is qualified in its entirety by
reference to the detailed provisions of the Warrant Agreement, the form of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.

One Warrant represents the right of the registered Warrantholder to
purchase one share of Common Stock at an exercise price of $4.50 per share,
subject to adjustment (the 'Exercise Price'), from May 18, 1994 until May 18,
1998 (the 'Warrant Expiration Date'). The Exercise Price and the number of
shares of Common Stock issuable upon the exercise of the Warrants are subject to
adjustment in certain circumstances, including a stock dividend, stock split,
reclassification, reorganization, consolidation or merger.

At any time commencing on May 18, 1994 and prior to the close of business
on the Warrant Expiration Date (on which date the Warrants become wholly void
and of no value), the Warrants, unless previously redeemed, or exchanged
pursuant to the Exchange Offer, may be exercised at the office of the Warrant
Agent. No holder of Warrants shall be entitled to vote or receive dividends or
be deemed the holder of shares of Common Stock for any purpose whatsoever until
such Warrants have been duly exercised and the Exercise Price has been paid in
full or exchanged pursuant to the Exchange Offer.

Under the provisions of the Warrant Agreement, the Company has the right at
any time after May 18, 1994, to redeem the Warrants in whole or in part at a
price of $.01 each, by written notice mailed not less than 30 days prior to the
redemption date to each Warrantholder at his address as it appears on the books
of the Warrant Agent. Such notice shall be given only within three days
following any period of

20 consecutive trading days during which the last sale price for the shares of
Common Stock exceeds 150% of the then-effective exercise price of the Warrants
to be redeemed. If the Warrants are called for redemption, they must be
exercised prior to the close of business on the date of any such redemption or
the right to purchase the applicable shares of Common Stock is forfeited.

EFFECT OF THE EXCHANGE OFFER ON THE WARRANTHOLDERS

Upon acceptance of the tendered Warrants by the Company, the Warrantholders
will receive one share of Common Stock for each five Warrants tendered.
Warrantholders who do not participate in the Exchange Offer will retain the
right to purchase one share of Common Stock at an exercise price of $4.50 per
Warrant, which price will remain subject to the adjustment provisions of the
Warrant Agreement. The Warrants are subject to redemption by the Company under
certain circumstances. See ' -- Description of the Warrants.' To the extent
Warrantholders participate in the Exchange Offer, the trading market for, and
liquidity of, the Warrants which remain outstanding, if any, could be reduced.
In addition, the Company intends to delist the Warrants from trading on the
Boston Stock Exchange and the Nasdaq Stock Market and deregister the Warrants
under the Exchange Act if it determines that the Warrants are held of record by
fewer than 300 persons.

TERMS OF THE EXCHANGE OFFER

The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (the
'Letter of Transmittal'), to exchange one share of Common Stock for each five
Warrants tendered.

The Company will accept any Warrants validly tendered and not withdrawn
prior to 5:00 p.m., New York City time, on the Expiration Date. Warrants which
are not accepted for exchange will be returned as promptly as practicable after
the Expiration Date. Warrantholders may tender all or a portion of their
Warrants pursuant to the Exchange Offer.

If the Company should increase or decrease the number of shares of Common
Stock offered in exchange for the Warrants in the Exchange Offer, such changed
consideration would be paid with regard to all Warrants accepted in the Exchange
Offer. If the consideration is so changed, the Exchange Offer will remain open
at least ten business days from the date the Company first gives notice, by
public announcement or otherwise, of such increase or decrease.

As of January 2, 1997, 1,702,251 Warrants were outstanding and there were
approximately 43 registered Warrantholders. Only holders or owners of Warrants
(or such Warrantholder's legal representative or attorney-in-fact) may
participate in the Exchange Offer. There will be no fixed record date for
determining Warrantholders entitled to participate in the Exchange Offer. The
Company believes that, as of the date of this Prospectus, none of such holders
is an affiliate (as defined in Rule 405 under the Securities Act) of the
Company, except that Cary A. Sarnoff owns 7,600 Warrants. Mr. Sarnoff has
indicated that he will exchange his Warrants pursuant to the Exchange Offer.

Warrantholders do not have any appraisal or dissenters' rights under the
General Corporation Law of the State of Delaware or the Warrant Agreement in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the SEC thereunder.

The Company shall be deemed to have accepted validly tendered Warrants
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for tendering
Warrantholders for the purposes of receiving the Common Stock from the Company.

If any tendered Warrants are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Warrants will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.

Tendering Warrantholders will not be required to pay brokerage commissions
or fees with respect to the exchange of Warrants for Common Stock pursuant to
the Exchange Offer. The Company will pay all charges and expenses in connection
with the Exchange Offer. The Company will also pay all transfer taxes, if any,
applicable to the transfer and exchange of Warrants to it or its order pursuant
to the

Exchange Offer. If, however, Warrants not exchanged are to be delivered to, or
are to be issued in the name of, any person other than the registered
Warantholder, or if tendered Warrants are recorded in the name of any person
other than the person signing the Letter of Transmittal, then the amount of such
transfer taxes (whether imposed on the registered Warrantholder or any other
person) will be payable by the tendering Warrantholder. See ' -- Transfer
Taxes.'

Although the Company has no plan or intention to do so, it reserves the
right in its sole discretion to purchase or make offers for any Warrants that
remain outstanding after the consummation of the Exchange Offer. The terms of
any such purchases or offers could differ from the terms of the Exchange Offer.

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term 'Expiration Date' shall mean 5:00 p.m., New York City time, on
June 12, 1997, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term 'Expiration Date' shall mean the latest date and
time to which the Exchange Offer is extended.

In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.

The Company reserves the rights in its sole discretion, (i) to delay
accepting any Warrants, (ii) to extend the Exchange Offer, (iii) if any of the
conditions set forth below under 'Conditions of the Exchange Offer' shall not
have been satisfied, to terminate the Exchange Offer, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or (iv) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, termination or amendment will be followed as promptly as practicable
by a public announcement thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendments by means of a prospectus supplement that will
be distributed to the registered Warrantholders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
Warrantholders, if the Exchange Offer would otherwise expire during such five to
ten business day period. If the Company amends the terms of the Exchange Offer
to improve the consideration for the Warrants, the Company will give such
improved consideration to all tendering Warrrantholders, including
Warrantholders who have previously tendered Warrants.

Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall not have an obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely public disclosure.

PROCEDURE FOR TENDERING WARRANTS

The tender by a Warrantholder as set forth below and the acceptance thereof
by the Company will constitute a binding agreement between the tendering
Warrantholder and the Company upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal. Except
as set forth below, a Warrantholder who wishes to tender Warrants for exchange
pursuant to the Exchange Offer must transmit such Warrants, together with a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to the Exchange Agent at the
address set forth herein on or prior to 5:00 p.m., New York City time, on the
Expiration Date.

THE METHOD OF DELIVERY OF WARRANTS, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE WARRANTHOLDER. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED BE USED. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.

A signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, need not be guaranteed if the Warrants surrendered for exchange
pursuant thereto (i) are tendered by a registered Warrantholder of the Warrants
who has not completed either the box entitled 'Special Exchange Instructions' or
the box entitled 'Special Delivery Instructions' on the Letter of Transmittal or
(ii) are tendered by an Eligible Institution (as defined below). In the event
that a signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, is required to be guaranteed, such guarantee must be by a firm
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or is otherwise
an 'eligible guarantor institution' within the meaning of Rule l7Ad-l5 under the
Exchange Act (collectively, 'Eligible Institutions'). If Warrants are registered
in the name of a person other than a signer of the Letter of Transmittal, the
Warrants surrendered for exchange must either (i) be endorsed by the registered
holder, with the signature thereon guaranteed by an Eligible Institution or (ii)
be accompanied by a stock power, in satisfactory form as determined by the
Company in its sole discretion, duly executed by the registered Warrantholder,
with the signature thereon guaranteed by an Eligible Institution. The term
'registered Warrantholders' as used herein with respect to the Warrants means
any person in whose name the Warrants are registered on the books of the
registrar for the Warrants.

All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Warrants tendered for exchange will be
determined by the Company in its sole, reasonable discretion, which
determination shall be final and binding. The Company reserves the absolute
right to reject any and all tenders of any particular Warrants not properly
tendered or to reject any particular Warrants which acceptance might, in the
judgment of the Company or its counsel, be unlawful. The Company also reserves
the absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Warrants either before or after the
Expiration Date. The interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Warrants for exchange must be cured
within such reasonable period of time as the Company shall determine. The
Company will use reasonable efforts to give notification of defects or
irregularities with respect to tenders of Warrants for exchange but shall not
incur any liability for failure to give such notification. Tenders of the
Warrants will not be deemed to have been made until such irregularities have
been cured or waived.

If any Letter of Transmittal, endorsement, stock power, power of attorney
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of such person's authority to so act
must be submitted.

Any beneficial owner whose Warrants are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
Warrants in the Exchange Offer should contact such registered Warrantholder
promptly and instruct such registered Warrantholder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender directly, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and tendering Warrants, make appropriate arrangements to register
ownership of the Warrants in such beneficial owner's name. Beneficial owners
should be aware that the transfer of registered ownership may take considerable
time.

GUARANTEED DELIVERY PROCEDURES

Warrantholders who wish to tender their Warrants but whose Warrants are not
immediately available or who cannot deliver their Warrants and Letter of
Transmittal or any other documents required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date must tender their Warrants according
to the guaranteed delivery procedures set forth in the Letter of Transmittal.
Pursuant to such procedures: (i) such tender must be made by or through an
Eligible Institution and a Notice of Guaranteed Delivery (as defined in the
Letter of Transmittal) must be signed by such Warrantholder, (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Warrantholder
and the Eligible Institution a properly completed and duly executed Letter of

Transmittal and a Notice of Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the Warrantholder, the
certificate number or numbers of the tendered Warrants, stating that the tender
is being made thereby and guaranteeing that, within three business days after
the date of delivery of the Notice of Guaranteed Delivery, the tendered Warrants
and any other required documents will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) such properly completed and executed
documents required by the Letter of Transmittal and the tendered Warrants in
proper form for transfer must be received by the Exchange Agent within three
business days after the Expiration Date. Any Warrantholder who wishes to tender
Warrants pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery and
Letter of Transmittal relating to such Warrants prior to 5:00 p.m., New York
City time, on the Expiration Date. Failure to complete the guaranteed delivery
outlined above will not, of itself, affect the validity or effect a revocation
of any Letter of Transmittal properly completed if executed by a holder who
attempted to use the guaranteed delivery process.

ASSISTANCE

All tendered Warrants, executed Letters of Transmittal and other related
documents should be directed to the Exchange Agent. Questions and requests for
assistance and requests for additional copies of this Prospectus, the Letter of
Transmittal and other related documents should be addressed to the Exchange
Agent as follows:

By Registered or Certified Mail:
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
2 Broadway
New York, New York 10004
Attention: Reorganization Dept.

By Facsimile:
(212) 509-5150
Confirmed by Telephone
(212) 509-4000, ext. 535
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight courier, or registered or certified mail.)

ACCEPTANCE OF WARRANTS FOR EXCHANGE

Upon satisfaction or waiver of all conditions to the Exchange Offer and
following the Expiration Date, the Company will promptly accept all Warrants
properly tendered, and will immediately thereafter issue the appropriate number
of corresponding shares of Common Stock to eligible Warrantholders. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted Warrants
that are tendered for exchange when, and if, the Company has given oral or
written notice thereof to the Exchange Agent.

In all cases, issuances of Common Stock for Warrants that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Warrants, a properly completed and duly executed
Letter of Transmittal, and all other required documents; provided, however, that
the Company reserves the absolute right to waive any defects or irregularities
in the tender or conditions of the Exchange Offer. If any tendered Warrants are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Warrant certificates are submitted for a greater number
than the holder desires to exchange, such unaccepted or nonexchanged Warrants or
substitute Warrants evidencing the unaccepted portion, as appropriate, will be
returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.

WITHDRAWAL RIGHTS

Tenders of the Warrants may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date and unless theretofore accepted for
exchange by the Company, may also be withdrawn after 5:00 p.m., New York City
time, on July 10, 1997.

For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth herein. Any such notice
of withdrawal must (i) specify the name of the

person having deposited the Warrants to be withdrawn ('Depositor'), (ii)
identify the Warrants to be withdrawn (including the Warrant certificate number
or numbers and number of Warrants), and (iii) be signed in the same manner
required for the Letter of Transmittal by which such Warrants were tendered. All
questions as to the validity, form, and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. The Warrants so withdrawn, if any, will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Warrants which have been tendered for exchange but which are
withdrawn will be returned to the Warrantholder without cost to such
Warrantholder as soon as practicable after withdrawal. Warrants properly
withdrawn may be re-tendered by following the procedures described under
' -- Procedure for Tendering Warrants' at any time on or prior to the Expiration
Date.

CONDITIONS TO THE EXCHANGE OFFER

Notwithstanding any other provisions of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue the Common Stock in
exchange for, any Warrants and may terminate or amend the Exchange Offer if, any
time before the Expiration Date, any of the following events shall occur, which
occurrence, in the sole judgment of the Company and regardless of the
circumstances (including any action by the Company) giving rise to any such
events, makes it inadvisable to proceed with the Exchange Offer:

(i) there shall be threatened, instituted, or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission (a) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (b) resulting in a material delay in the
ability of the Company to accept for exchange some or all of the Warrants
pursuant to the Exchange Offer, or any statute, rule, regulation, order or
injunction shall be sought, proposed, introduced, enacted, promulgated or
deemed applicable to the Exchange Offer or any of the transactions
contemplated by the Exchange Offer by any domestic or foreign government or
governmental authority that, in the reasonable judgment of the Company,
might directly or indirectly result in any of the consequences referred to
in clauses (a) or (b) above, or would otherwise in the reasonable judgment
of the Company make it inadvisable to proceed with the Exchange Offer;
provided, however, that the Company will use reasonable efforts to modify
or amend the Exchange Offer or to take such other reasonable steps as to
make the provisions of this section inapplicable;

(ii) there shall have occurred (a) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or any limitation by any governmental agency or authority which
adversely affects the extension of credit or (b) a commencement of war,
armed hostilities or other similar international calamity directly or
indirectly involving the United States, or, in the case of any of the
foregoing existing at the time of the commencement of the Exchange Offer, a
material acceleration or worsening thereof;

(iii) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operation or
prospects of the Company that, in the reasonable judgment of the Company,
is or may be adverse to the Company, or the Company shall have become aware
of facts that, in the sole judgment of the Company, have or may have
adverse significance with respect to the value of the Warrants or the
Common Stock; or

(iv) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.

If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Warrants and return
all tendered Warrants to the tendering holders, (ii) extend the Exchange Offer
and retain all Warrants tendered prior to the Expiration Date, subject, however,
to the rights of holders to withdraw such Warrants (see ' -- Withdrawal
Rights'), or

(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all validly tendered Warrants which have not been withdrawn. If such
waiver constitutes a material change to the Exchange Offer, the Company will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Warrantholders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
Warrantholders, if the Exchange Offer would otherwise expire during such five to
ten business day period.

The Company expects that the foregoing conditions will be satisfied. The
foregoing conditions are for the sole benefit of the Company and may be asserted
by the Company regardless of the circumstances giving rise to any such condition
or may be waived by the Company in whole or in part at any time and from time to
time in its reasonable discretion. The failure by the Company at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time. Any determination by the Company concerning
the events described above will be final and binding upon all parties.

FRACTIONAL SHARES

No fractional shares of Common Stock will be issued as a result of the
Exchange Offer. Each holder of a fractional interest in shares of the Company's
Common Stock will be entitled to receive a cash payment in lieu of such
fractional amount based on the current market price of a share of Common Stock.
The current market price will be determined as follows: (i) if the shares of the
Company's Common Stock are listed on a national securities exchange or admitted
to unlisted trading privileges on such exchange or listed for trading on the
Nasdaq Stock Market or Boston Stock Exchange, the current market price shall be
the last reported sale price of the shares of the Company's Common Stock on the
last business day prior to the date of exchange or, if no such sale is made on
such day, the average of the closing bid and asked prices for such day; or (ii)
if not so listed or admitted for trading, the current market price, if the
shares of Common Stock are not so listed or admitted to trading and bid and
asked prices are not so reported, the current value shall be an amount
determined in a reasonable manner by the Board of Directors of the Company.

As soon as practicable after the determination of the amount of cash, if
any, to be paid to the holder of shares of Common Stock with respect to any
fractional share interests, the Exchange Agent shall distribute in cash the
amount payable to such fractional holder.

SOLICITATION OF WARRANT HOLDERS

The Company and GKN Securities Corp. ('GKN') and Royce Investment Group,
Inc. ('Royce' and, together with GKN, the 'Agents') have entered into an
agreement pursuant to which the Agents shall solicit Warrantholders in
connection with the Exchange Offer and shall receive from the Company a fee of
$.05 for each Warrant tendered and accepted by the Company in the Exchange
Offer. The entire compensation to the Agents will be paid by the Company to GKN.
GKN shall then pay Royce an amount equal to $0.05 for each Warrant exchanged by
a Royce client and $0.025 for each Warrant exchanged by a holder who is not a
client of either GKN or Royce, with GKN retaining $0.05 for each Warrant
exchanged by its own clients. The Agents shall also be reimbursed by the Company
for all of their reasonable out-of-pocket expenses in connection with such
solicitation. The Company has paid to the Agents the amount of $25,000 as a
credit against such expenses.

Other than the fee to be paid to the Agents, the Company will not make any
payments to brokers, dealers or others soliciting acceptances of the Exchange
Offer. The Company, however, will pay the Exchange Agent reasonable and
customary fees for its services and will reimburse the Exchange Agent for its
reasonable out-of-pocket expenses in connection therewith. The Company will also
pay brokers, dealers and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus and related documents to the beneficial owners of the Warrants, and
in handling or forwarding tenders for their customers.

The cash expenses to be incurred by the Company in connection with the
Exchange Offer are estimated to be approximately $200,000, which include
registration fees, listing fees, solicitation fees to the Agents, accounting,
legal and printing fees, and associated expenses.

TRANSFER TAXES

The Company will pay all transfer taxes, if any, applicable to the exchange
of Warrants pursuant to the Exchange Offer. If, however, tendered Warrants are
registered in the name of any person other than the person signing the Letter of
Transmittal or if a transfer tax is imposed for any reason other than the
exchange of Warrants pursuant to the Exchange Offer, the amount of any such
transfer tax (whether imposed on the registered Warrantholder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of such transfer tax or exemption therefrom is not submitted, the amount
of such transfer tax will be billed directly to such tendering holder.

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

THE FOLLOWING DISCUSSION IS INTENDED ONLY AS A GENERAL SUMMARY OF CERTAIN
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER AND DOES NOT
CONSIDER ALL POTENTIAL TAX EFFECTS OF THE EXCHANGE OFFER OR THE TAX CONSEQUENCES
TO A PARTICULAR WARRANTHOLDER IN LIGHT OF SUCH WARRANTHOLDER'S PERSONAL
CIRCUMSTANCES. THIS DISCUSSION ALSO DOES NOT ADDRESS THE U.S. FEDERAL INCOME TAX
CONSEQUENCES TO WARRANTHOLDERS (AND UNDERLYING COMMON STOCK) NOT HELD AS CAPITAL
ASSETS OR TO WARRANTHOLDERS SUBJECT TO SPECIAL TREATMENT, SUCH AS NON-U.S.
PERSONS, DEALERS IN SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT
ORGANIZATIONS, WARRANTHOLDERS OWNING AT LEAST 10% OF THE VOTING POWER OF THE
COMPANY AND WARRANTHOLDERS WHO ACQUIRED THEIR INTERESTS PURSUANT TO THE EXERCISE
OF OPTIONS OR SIMILAR DERIVATIVE SECURITIES OR OTHERWISE AS COMPENSATION, NOR
PROVIDE AN ANALYSIS OF ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCALITY, OR FOREIGN JURISDICTION. THIS DISCUSSION IS BASED ON CURRENT
PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE 'CODE'),
CURRENT AND PROPOSED TREASURY REGULATIONS PROMULGATED THEREUNDER, AND
ADMINISTRATIVE AND JUDICIAL DECISIONS AS OF THE DATE HEREOF, ALL OF WHICH ARE
SUBJECT TO CHANGE, POSSIBLY ON A RETROACTIVE BASIS. ACCORDINGLY, WARRANTHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE,
LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE EXCHANGE OFFER TO
THEM.

The exchange of Warrants for shares of Common Stock will result in the
following federal income tax consequences to participating Warrantholders:

1. A participating Warrantholder will recognize gain or loss equal to
the excess of (a) the sum of the fair market value of the shares of Common
Stock received in the Exchange Offer and any cash received in lieu of a
fractional share of Common Stock over (b) the participating Warrantholder's
tax basis in the Warrants exchanged therefor;

2. Such gain or loss will be capital gain or loss if the Warrants were
capital assets in the hands of a participating Warrantholder;

3. The tax basis of the shares of Common Stock received in the
Exchange Offer will be equal to the fair market value of such shares of
Common Stock received in the Exchange Offer; and

4. The holding period for the shares of Common Stock received in the
Exchange Offer will commence on the day following the consummation of the
Exchange Offer if the shares of Common Stock are capital assets in the
hands of a participating Warrantholder.

THE EXCHANGE AGENT

Continental Stock Transfer & Trust Company has been appointed as Exchange
Agent for the Exchange Offer. All correspondence in connection with the Exchange
Offer and the Letters of Transmittal should be addressed to the Exchange Agent,
as follows:

Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Reorganization Department

WARRANT TRANSFER AGENT

The Warrants are issued in registered form under a Warrant Agreement
between the Company and Continental Stock Transfer & Trust Company, as Warrant
Agent.

DESCRIPTION OF SECURITIES

The total authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, par value $.01 per share, and 1,000,000 shares of
Preferred Stock, par value $.01 per share (the 'Preferred Stock'). The following
descriptions of the capital stock are qualified in all respects by reference to
the Certificate of Incorporation and By-laws of the Company.

COMMON STOCK

The holders of Common stock elect all directors and are entitled to one
vote for each share held of record. All holders of shares of Common Stock will
participate equally in dividends, when, as and if declared by the Board of
Directors, and in net assets on liquidation. All shares of Common Stock
presently outstanding are, and the shares of Common Stock issuable upon exchange
of the Warrants will be, duly authorized, validly issued, fully paid and
non-assessable. The shares of Common Stock have no preference, conversion,
exchange, preemptive or cumulative voting rights.

PREFERRED STOCK

The Company is authorized to issue shares of Preferred Stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue shares of Preferred Stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the shares of Preferred Stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. On October 23, 1996, the Company issued 7,500
shares of Series A Preferred Stock. See 'Business -- Recent Events.'

LEGAL MATTERS

Certain legal matters, including the legality of the issuance of the shares
of Common Stock in exchange for the Warrants, are being passed upon for the
Company by Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038.

EXPERTS

The consolidated financial statements of the Company as of December 31,
1996 and for the year then ended, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The
consolidated financial statements of the Company as of December 31, 1995 and for
each of the years in the two-year period ended December 31, 1995, have been
included herein and in the registration statement in reliance upon the report of
Freed Maxick Sachs & Murphy, P.C., independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(WITH INDEPENDENT AUDITORS' REPORTS THEREON)

A-1

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
Independent Auditors' Reports.............................................................................. A-3
Consolidated Financial Statements:
Balance Sheets -- December 31, 1996 and 1995.......................................................... A-5
Statements of Operations -- Years ended December 31, 1996, 1995 and 1994.............................. A-6
Statements of Stockholders' Equity -- Years ended December 31, 1996, 1995 and 1994.................... A-7
Statements of Cash Flows -- Years ended December 31, 1996, 1995 and 1994.............................. A-8
Notes to Consolidated Financial Statements................................................................. A-9
</TABLE>

A-2

INDEPENDENT AUDITORS' REPORT

The Board of Directors
ESQUIRE COMMUNICATIONS LTD.:

We have audited the accompanying consolidated balance sheet of Esquire
Communications Ltd. and subsidiaries as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The accompanying consolidated financial
statements of Esquire Communications Ltd. and subsidiaries as of December 31,
1995 and for the years ended December 31, 1995 and 1994 were audited by other
auditors whose report, dated January 27, 1996, on those statements expressed an
unqualified opinion.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 1996 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Esquire Communications Ltd. and subsidiaries as of December 31,
1996, and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

February 12, 1997
Short Hills, New Jersey

A-3

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of
ESQUIRE COMMUNICATIONS LTD.

We have audited the accompanying consolidated balance sheets of Esquire
Communications Ltd. as of December 31, 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Esquire
Communications Ltd. as of December 31, 1995, and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.

FREED MAXICK SACHS & MURPHY, P.C.

Buffalo, New York
January 27, 1996

A-4

<PAGE>
<PAGE>
ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1996 1995
------------------- ------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash............................... $ 165 $ 95
Accounts receivable, less allowance
for doubtful accounts of $380 in
1996 and $245 in 1995............ 6,764 4,263
Prepaid expenses................... 792 247
Deferred tax asset................. 102 --
---------- ----------
Total current assets.......... 7,823 4,605
Property and equipment, net............. 1,946 1,026
Cost in excess of fair value of net
identifiable assets of acquired
businesses, less accumulated
amortization of $1,516 in 1996 and
$962 in 1995.......................... 19,681 12,752
Deferred tax asset...................... 38 21
Other assets, net....................... 847 670
---------- ----------
$30,335 $19,074
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 1,708 $ 577
Accrued expenses................... 1,306 413
Income taxes payable............... -- 361
Deferred tax liability............. -- 49
Current portion of long-term debt,
including related parties........ 1,394 1,605
---------- ----------
Total current liabilities..... 4,408 3,005
Long-term debt, including related
parties............................... 12,891 8,634
Other liabilities....................... 267 35
Stockholders' equity:
Preferred stock, $.01 par value,
1,000,000 shares authorized in
series: Series A convertible
preferred stock, authorized
15,000 shares, 7,500 shares
issued and outstanding in 1996
(none in 1995) aggregate
liquidation preference
$7,500,000....................... -- --
Common stock, $.01 par value,
25,000,000 shares authorized,
4,330,829 and 4,126,823 shares
issued in 1996 and 1995,
respectively, 3,897,329 and
4,126,823 shares outstanding in
1996 and 1995, respectively...... 43 41
Additional paid-in capital......... 14,911 7,703
Treasury stock, at cost -- 433,500
shares in 1996 (none in 1995).... (1,300) --
Accumulated deficit................ (885) (344)
---------- ----------
Total stockholders' equity.... 12,769 7,400
Commitments and contingencies...........
---------- ----------
$30,335 $19,074
---------- ----------
---------- ----------
</TABLE>

See accompanying notes to consolidated financial statements.

A-5

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)

<S> <C> <C> <C>
Revenues......................................................................... $24,583 $20,692 $12,818
------- ------- -------
Costs and expenses:
Operating expenses.......................................................... 13,925 11,660 7,277
General and administrative expenses......................................... 8,443 6,120 4,496
Depreciation and amortization............................................... 1,158 1,025 654
------- ------- -------
23,526 18,805 12,427
------- ------- -------
Income from operations........................................................... 1,057 1,887 391
------- ------- -------
Other income (expense):
Interest expense............................................................ (1,163) (1,069) (534)
Interest income............................................................. 6 9 9
Other....................................................................... 3 1 10
------- ------- -------
(1,154) (1,059) (515)
------- ------- -------
(Loss) income before provision for income taxes and extraordinary item........... (97) 828 (124)
Provision for income taxes....................................................... 212 549 59
------- ------- -------
(Loss) income before extraordinary item.......................................... (309) 279 (183)
Extraordinary item -- loss on early extinguishment of debt, net of tax benefit of
$104........................................................................... (157) -- --
------- ------- -------
Net (loss) income................................................................ (466) 279 (183)
Dividends on preferred stock..................................................... (75) -- --
------- ------- -------
Net (loss) income applicable to common stockholders.............................. $ (541) $ 279 $ (183)
------- ------- -------
------- ------- -------
(Loss) earnings per common share:
(Loss) income before extraordinary item..................................... $(.09) $ .07 $(.05)
Extraordinary item.......................................................... (.04) -- --
----- ----- -----
Net (loss) income........................................................... $(.13) $.07 $(.05)
----- ----- -----
----- ----- -----
Weighted average common shares outstanding....................................... 4,104,680 4,125,348 3,694,420
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

A-6

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
SERIES A ------------------- PAID-IN ACCUMULATED TREASURY STOCKHOLDERS'
PREFERRED STOCK SHARES AMOUNT CAPITAL DEFICIT STOCK EQUITY
--------------- --------- ------ ---------- ----------- -------- -------------
(DOLLARS IN THOUSANDS)

<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993..... $ -- 3,299,900 $ 33 5,242 (440) -- 4,835

Issuance of common stock and
stock purchase warrants in
connection with financing and
acquisition of subsidiary.... -- 750,000 7 2,249 -- -- 2,256

Net loss....................... -- -- -- -- (183) -- (183)
------ --------- ------ ---------- ----------- -------- -------------

Balance, December 31, 1994..... -- 4,049,900 40 7,491 (623) -- 6,908

Issuance of common stock in
connection with acquisition
of business.................. -- 76,923 1 212 -- -- 213

Net income..................... -- -- -- -- 279 -- 279
------ --------- ------ ---------- ----------- -------- -------------

Balance, December 31, 1995..... -- 4,126,823 41 7,703 (344) -- 7,400

Issuance of common stock in
connection with acquisition
of businesses................ -- 204,006 2 508 -- -- 510

Purchase of treasury stock..... -- (433,500) -- -- -- (1,300) (1,300)

Dividends on preferred stock... -- -- -- -- (75) -- (75)

Issuance of 7,500 shares of
Series A convertible
preferred stock, net of
issuance costs of $800....... -- -- -- 6,700 -- -- 6,700

Net loss....................... -- -- -- -- (466) -- (466)
------ --------- ------ ---------- ----------- -------- -------------

Balance, December 31, 1996..... $ -- 3,897,329 $ 43 $ 14,911 $ (885) (1,300) $12,769
------ --------- ------ ---------- ----------- -------- -------------
------ --------- ------ ---------- ----------- -------- -------------
</TABLE>

See accompanying notes to consolidated financial statements.

A-7

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------ ------
(DOLLARS IN THOUSANDS)

<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income..................................................... $ (466) $ 279 $ (183)
Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities:
Depreciation and amortization.................................... 1,158 1,025 655
Deferred income taxes............................................ (168) 23 (141)
Extraordinary item............................................... 157 -- --
(Increase) decrease in assets:
Accounts receivable......................................... (1,284) (501) (178)
Prepaid expenses............................................ (427) 7 (13)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses.......................... 873 (156) (145)
Deferred rent obligation and other long-term liabilities....... 37 (6) (2)
------- ------ ------
Net cash (used in) provided by operating activities....... (120) 671 (7)
------- ------ ------
Cash flows from investing activities:
Acquisitions of businesses............................................ (3,958) (642) (4,331)
Certificate of deposit redemption..................................... -- -- 110
Increase in other assets.............................................. (314) (104) (50)
Purchases of property and equipment................................... (952) (161) (159)
------- ------ ------
Net cash used in investing activities..................... (5,224) (907) (4,430)
------- ------ ------
Cash flows from financing activities:
Proceeds from long-term debt.......................................... 8,218 -- 4,994
Principal payments on long-term debt.................................. (6,317) (783) (633)
Repayment under bank line of credit, net.............................. (1,600) 1,100 160
Deferred financing costs.............................................. (287) -- (365)
Proceeds from issuance of common stock warrants....................... -- -- 6
Purchase of treasury stock............................................ (1,300) -- --
Proceeds from issuance of Series A preferred stock, net............... 6,700 -- --
------- ------ ------
Net cash provided by financing activities................. 5,414 317 4,162
------- ------ ------
Net increase (decrease) in cash........................... 70 81 (275)
Cash -- beginning of year.................................................. 95 14 289
------- ------ ------
Cash -- end of year........................................................ $ 165 $ 95 $ 14
------- ------ ------
------- ------ ------
</TABLE>

See accompanying notes to consolidated financial statements.

A-8

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND DESCRIPTION OF BUSINESS

The accompanying consolidated financial statements include the financial
statements of Esquire Communications Ltd. and its subsidiaries, all of which are
wholly owned (collectively, the Company) All significant intercompany accounts
and transactions have been eliminated.

The Company is a court reporting firm providing printed and computerized
transcripts, and video recordings of testimony from depositions to the legal
profession, primarily in the New York City Metropolitan, Washington, D.C. and
Southern California areas.

ESTIMATES

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

REVENUE RECOGNITION

Revenues and the related direct costs of court reporters and transcribers
are recognized when services rendered are billable, which generally occurs at
the time the final documents are transcribed and completed.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed using
both accelerated and straight-line methods over the estimated useful lives of
the assets. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the assets or lease terms. Maintenance and repairs are
charged to expenses as incurred while improvements are capitalized.

GOODWILL AND OTHER INTANGIBLE ASSETS

The cost in excess of the fair values of net identifiable tangible and
intangible assets of acquired businesses (goodwill) is amortized using the
straight-line method over 25 years. The Company assesses the recoverability of
this intangible asset by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.

Other intangible assets consisting of customer lists, covenants not to
compete, and deferred financing costs, are amortized using the straight-line
method over the assets' respective estimated lives or terms, typically no more
than ten years.

Amortization expense for fiscal years 1996, 1995 and 1994 related to
intangible assets was $824, $699 and $476, respectively.

INCOME TAXES

The Company utilizes the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their

A-9

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

EARNINGS (LOSS) PER COMMON SHARE

Earnings (loss) per common share are computed on the basis of weighted
average number of common shares outstanding. No effect has been given to
outstanding warrants and options or convertible preferred stock since their
assumed exercise would be antidilutive or not have a material effect on
dilution.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting For Stock-Based Compensation

Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, 'Accounting for Stock Issued to Employees', and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 123, 'Accounting for Stock-Based Compensation', which permits
entities to recognize as expense, over the vesting period, the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for employee
stock option grants made in 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123. See note 6.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The Company adopted the provisions of SFAS No. 121, 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,' on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or change in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future cash flows (undiscounted
and without interest charges) expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less selling costs. Adoption of this statement
did not have a material impact on the Company's financial position or results of
operations.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash, accounts receivable, the current maturities of
long-term debt, and accounts payable approximate their fair value because of the
short-term maturity of these instruments. The carrying value of debt
approximates its fair value as such amounts bear rates of interest which
approximate the Company's current borrowing rate for instruments with similar
terms.

A-10

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(2) BUSINESS COMBINATIONS

Effective June 22, 1994, the Company acquired 100% of the outstanding stock
of Sarnoff Deposition Service, Inc. (SDS), a Southern California-based court
reporting company. The purchase price, inclusive of associated costs, consisted
of approximately $4,331 in cash, a $1,500 promissory note payable over seven
years with interest at 10%, and 750,000 unregistered shares of the Company's
common stock valued at $2,250. The acquisition, accounted for under the purchase
method of accounting, resulted in the inclusion of the results of operations of
SDS from the date of acquisition. The excess of the cost of the Company's
investment over the fair values of the assets acquired and liabilities assumed
at the date of acquisition amounted to approximately $8,031.

Effective January 27, 1995, the Company acquired the assets and liabilities
of Coleman, Haas, Martin & Schwab (CHMS), Inc., a California-based court
reporting company, and entered into consulting and noncompetition agreements for
the total consideration of $1,413 consisting of cash in the amount of $400,
promissory notes in the aggregate of $800 with interest at 9% payable monthly
over seven years, and 76,923 unregistered shares of the Company's common stock
valued at $213. In addition, the purchase agreement provided for an additional
$150 payment based upon the attainment of certain revenues in 1995. The
principal amount payable under one of the promissory notes is subject to
adjustment based upon revenue levels attained in 1995 and 1996. As a result, the
principal balance increased by approximately $143 in 1996 and $35 in 1995. The
acquisition, accounted for under the purchase method of accounting, has resulted
in the inclusion of the results of operations of CHMS from the date of
acquisition. The excess of the cost of the Company's investment over the fair
values of the assets acquired and liabilities assumed amounted to approximately
$1,900.

On July 26, 1996, the Company acquired the assets and liabilities of
Kitlas, Dickman & Associates (KDA), a court reporting agency based in San Diego,
California. The acquisition, accounted for under the purchase method of
accounting, has resulted in the inclusion of the results of operations of KDA
from the date of acquisition which has had an immaterial effect on the operating
results of the Company. The total purchase price, inclusive of associated costs,
consisted of $305 in cash, $315 estimated earn out and assumption of net
liabilities of $221. The excess of the cost of the Company's investment over the
fair values of the assets acquired and liabilities assumed, including the
estimated earn out, approximated $841.

On October 28, 1996, the Company acquired the assets and liabilities of M&M
Reporting Referral Services, Inc. (M&M), a Southern California-based court
reporting company. The purchase price, inclusive of associated costs, consisted
of approximately $2,991 of cash, subordinated promissory notes in the aggregate
amount of $2,713, and 132,258 unregistered shares of the Company's common stock
valued at $309. The principal amount of one of the notes and cash portion of the
purchase price are subject to revision based on the revenue derived from M&M's
business for 12 months commencing November 1, 1996. The Company will account for
any such revisions as an adjustment to goodwill, when such contingencies are
resolved. The subordinated promissory notes are payable in equal quarterly
installments over a period of five years, together with interest at the rate of
9% per annum. The excess of the cost of the Company's investment over the fair
values of the assets acquired and liabilities assumed approximated $5,418.

On November 15, 1996, the Company acquired the assets and liabilities of
Sherry Roe & Associates, Inc. (SRA), a Washington, D.C.-based court reporting
company. The purchase price, inclusive of associated costs, consisted of
approximately $656 of cash, subordinated promissory notes in the aggregate
amount of $530, and 71,748 unregistered shares of the Company's common stock
valued at $200. The principal amount of one of the notes and cash portion of the
purchase price are subject to revision based on the revenue derived from SRA's
business for 24 months commencing December 1, 1996. The Company will account for
any such revisions, as an adjustment to goodwill, when such contingencies are
resolved. The subordinated promissory notes are payable in equal quarterly

A-11

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

installments over a period of six years, together with interest at the rate of
8% per annum. The excess of the cost of the Company's investment over the fair
values of the assets acquired and liabilities assumed approximated $1,155.

The following unaudited pro forma information assumes the M&M and SRA
acquisitions, the private placement of Series A convertible preferred stock, the
Company's repurchase of its common stock and the revolving loan credit agreement
and related repayment of certain existing debt occurred on January 1, 1995.
These results are not necessarily indicative of future operations nor of results
that would have occurred had the acquisitions and other transactions been
consummated as of the beginning of the periods presented.

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revenues................................................................ $30,275 $27,683
Net (loss) income applicable to common stockholders..................... (211) 97
------- -------
------- -------
(Loss) earning per common share......................................... $(.05) $.03
------- -------
------- -------
</TABLE>

On January 3, 1997, the Company acquired the assets and liabilities of
Nevill & Swinehart and Pelletier & Jones, both Southern California-based court
reporting companies, and entered into consulting and noncompetition agreements
for an aggregate consideration of $2,560 consisting of cash in the amount of
$1,550, subordinated promissory notes and installment payments in the aggregate
amount of $735 payable in equal quarterly installments over a period of six
years and 100,000 unregistered shares of the Company's common stock valued at
$275. The business combinations are to be accounted for under the purchase
method, the excess of cost over the fair value of assets acquired and
liabilities assumed is expected to be approximately $1,950, and other intangible
assets of approximately $425 are expected to be recognized. The Company borrowed
approximately $1,500 under its revolving credit agreement to finance the
acquisition.

(3) PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of December 31, 1996
and 1995:

<TABLE>
<CAPTION>
DEPRECIABLE
1996 1995 LIVES
------ ------ --------------
<S> <C> <C> <C>
Office condominium....................................... $ 203 $ 203 31 years
Equipment................................................ 2,365 1,590 5 to 7 years
Leasehold improvements................................... 820 283 5 to 10 years
------ ------ --------------
--------------
3,388 2,076
Less accumulated depreciation............................ 1,442 1,050
------ ------
$1,946 $1,026
------ ------
------ ------
</TABLE>

Depreciation expense amounted to $392, $327, $178 for the years ended
December 31, 1996, 1995 and 1994, respectively.

A-12

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(4) LONG-TERM DEBT

Long-term debt consists of the following as of December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revolving loan agreement(A)............................................. $ 8,218 $ --
Subordinated debentures(D).............................................. -- 5,440
Promissory notes(B)..................................................... 5,181 2,367
Revolving credit note(E)................................................ -- 1,600
Contract obligation(C).................................................. 496 609
Other notes and obligations(F).......................................... 390 223
------- -------
14,285 10,239
Less current portions................................................... 1,394 1,605
------- -------
$12,891 $ 8,634
------- -------
------- -------
</TABLE>

(A) In December 1996, the Company entered into a three-year revolving loan
agreement (Loan Agreement) with a financial institution which provides for
borrowings up to $20,000 based on operating cash flows as defined therein.
Borrowings under the Loan Agreement bear interest at either prime rate or
London Interbank Offered Rate (LIBOR), at the Company's election, plus
applicable margin rate. The applicable margin varies on the basis of
operating cash flows and overall leverage ratio as defined in the Loan
Agreement. The effective rate at December 31, 1996 was 9%. The Loan
Agreement, which is secured by substantially all the assets of the Company,
restricts future indebtedness, investments, distributions, acquisitions or
sale of assets and capital expenditures and also requires the maintenance
of certain financial ratios and covenants. In addition, substantially all
other lenders to the Company have entered into a subordination agreement
with this financial institution. The initial borrowings under the Loan
Agreement were used to repay all amounts outstanding under the Company's
credit agreement with a bank and approximately $4.5 million of its
subordinated debentures due June 2001.

(B) Promissory notes with former stockholders of acquired businesses are
generally payable in quarterly installments plus interest at rates ranging
from 8% to 10% through November 2002.

(C) Contract obligation -- an agreement with a former employee of an acquired
company, who is related to an officer/director of the Company, provides for
monthly payments of $9 through June 2002. The obligation is carried net of
imputed interest, at 8%, of $47 and $91 at December 31, 1996 and 1995,
respectively.

(D) Debentures -- in June 1994, the Company completed a private placement of
subordinated debentures (the Debentures) in the aggregate principal amount
of $5,000 to fund the cash portion of the purchase price of the SDS
acquisition and entered into an agreement with the debentureholders (the
Investment Agreement). The Debentures provided for quarterly principal
payments commencing in January 1996 in the amount of $125 through June
2001. The Debentures were repaid in 1996.

(E) Revolving credit note -- in September 1994, the Company entered into a
three-year revolving credit agreement (the Credit Agreement) with a bank
which provided for borrowings up to $3,000 based on eligible accounts
receivables as defined therein. The borrowings under the Credit Agreement
bore interest at prime plus 1% and interest payments were required monthly.
The Company repaid the outstanding balance under the Credit Agreement from
borrowings under the Loan Agreement. In conjunction with the repayment and
termination of the Credit Agreement and Investment Agreement, the Company
recognized an extraordinary loss of $157, net of a $104 tax benefit,
relating to unamortized deferred financing costs.

(footnotes continued on next page)

A-13

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(footnotes continued from previous page)

(F) Other notes and obligations -- outstanding amounts relate to various
equipment capital leases and are payable in aggregate monthly installments
with interest at 9% to 19% maturing through 1999.

Scheduled annual principal payments of long-term debt subsequent to
December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997..................................................................... $ 1,394
1998..................................................................... 1,183
1999..................................................................... 9,413
2000..................................................................... 1,135
2001..................................................................... 1,005
Thereafter............................................................... 155
-------
$14,285
-------
-------
</TABLE>

(5) STOCKHOLDERS' EQUITY

In May 1993, the Company completed an initial public offering of its
securities comprised of 1,250,000 shares of common stock at a price of $4.00 per
share and 1,250,000 warrants to purchase common stock at $.10 per warrant.

The warrants are exercisable until May 18, 1998 at an exercise price of
$4.50 per share. The exercise price and the number of shares of common stock
issuable upon the exercise of the warrants are subject to adjustment in certain
circumstances, as defined. The Company may call the warrants for redemption at a
price of $.01 per warrant, provided the sales price of the common stock has been
at least 150% of the then effective exercise price of the warrants over a
specified period of time. If the warrants are called for redemption, they must
be exercised prior to such redemption or the right to purchase the applicable
shares of common stock is forfeited. As part of the Initial Public Offering, the
underwriters exercised an 'overallotment' and acquired an additional 187,500 of
warrants at $.09 per warrant, net of discount. In addition, they received a
purchase option (subject to certain antidilutive provisions) to acquire, until
May 18, 1998, 264,751 shares and warrants at a price of $2.64 and $.06,
respectively. The warrants are exercisable at an exercise price of $4.50 per
share.

In connection with the private placement of Debentures in 1994, the Company
issued warrants to the holders to acquire an aggregate of 625,000 shares of
common stock. The exercise price of the warrants is $2.90, subject to revision
under specified circumstances. The warrants expire upon the earlier of (a) six
years from the date of the final payment on the Debentures, or (b) the tenth
anniversary of the date of issuance.

In connection with the acquisition of SDS in June 1994, the Company issued
750,000 shares of common stock at a recorded share price of $3.00. The Company
granted warrants to acquire 100,000 shares of its common stock at $4.50 per
share to its investment bankers in connection with the SDS acquisition in
addition to cash compensation. The warrants are exercisable at any time prior to
June 1999.

In connection with the acquisition of CHMS in January 1995, the Company
issued 76,923 shares of common stock at a recorded share price of $2.76.

On October 23, 1996, the Company completed a private placement of 7,500
shares of Series A convertible preferred stock (the Preferred Stock) for an
aggregate purchase price of $7,500 and entered into an agreement (the Agreement)
with the Preferred Stockholders. Under the Agreement, the Preferred Stockholders
have the right within 21 months to acquire up to an additional 7,500 shares of
Preferred Stock at a price of $1,000 per share. The Preferred Stock is
convertible into common stock of the Company at a conversion price of $3.00 per
share (subject to antidilution adjustments) and bears

A-14

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

cumulative annual dividends at the rate of 6% per annum. The holders of
Preferred Stock have a liquidation preference of $1,000 per share, plus accrued
dividends. The Preferred Stockholders have the right to vote with the holders of
common stock and are entitled to one vote for each whole share of common stock
into which the Preferred Stock is convertible (presently 333-1/3 votes per
share). The Agreement restricts future dividend payments on common stock,
issuance of certain equity securities, mergers, acquisitions and sale of assets.
In connection with the private placement, the Company granted the placement
agent warrants to acquire 187,500 of common stock of the Company at an exercise
price of $3.00 per share in addition to cash compensation. The warrants are
exercisable at any time prior to October 2001.

In connection with the acquisitions of M&M on October 28, 1996 and SRA on
November 15, 1996, the Company issued 204,006 shares of common stock valued at
approximately $509.

In November 1996, the Company purchased 433,500 shares of its outstanding
common stock at $3.00 per share.

(6) STOCK OPTION PLAN

In 1993, the Company adopted a stock option plan (the Plan) pursuant to
which the Company's Board of Directors may grant stock options to officers,
employees, directors, consultants and independent contractors to the Company.
The Plan authorizes grants of options to purchase up to 1,400,000 shares of
authorized but unissued common stock subject to stockholder approval. Stock
options are granted with an exercise price equal to the stock's fair market
value at the date of grant. All stock options have ten-year terms and generally
vest and become fully exercisable over a three-year period, commencing one year
from date of grant.

The per share weighted-average fair value of stock options granted during
1996 and 1995 was $1.03 and $1.35 on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions:
1996 -- expected volatility 25%, expected dividend yield 0%, risk-free interest
rate of 6%, and an expected life of five years; 1995 -- expected volatility 20%,
expected dividend yield 0%, risk-free interest rate of 7%, and an expected life
of five years. The Company applies APB Opinion No. 25 in accounting for its Plan
and, accordingly, no compensation cost has been recognized for its stock options
in the consolidated financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income would have been reduced to
the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996 1995
----- ----
<S> <C> <C>
Net (loss) income applicable to common stockholders:
As reported.............................................................. $(541) $279
Pro forma................................................................ (587) 265
Net (loss) income per common share:
As reported.............................................................. (.13) .07
Pro forma................................................................ $(.14) $.06
----- ----
----- ----
</TABLE>

Pro forma net (loss) income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net (loss) income amounts
presented above because compensation cost is reflected over the options' vesting
period of three years and compensation cost for options granted prior to January
1, 1995 is not considered.

A-15

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- ---------

<S> <C> <C>
Balance at December 31, 1993........................................... 227,100 $4.00
Granted................................................................ 320,650 4.00
Exercised.............................................................. -- --
Forfeited.............................................................. (32,933) 4.00
Expired................................................................ -- --
---------
Balance at December 31, 1994........................................... 514,817 4.00
Granted................................................................ 105,000 4.00
Exercised.............................................................. -- --
Forfeited.............................................................. (41,217) 4.00
Expired................................................................ -- --
---------
Balance at December 31, 1995........................................... 578,600 4.00
Granted................................................................ 170,000 2.99
Exercised.............................................................. -- --
Forfeited.............................................................. (20,100) 4.00
Expired................................................................ -- --
---------
Balance at December 31, 1996........................................... 728,500 $3.76
--------- ---------
--------- ---------
</TABLE>

At December 31, 1996, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $2.77 -- $4.00 and 8.5
years, respectively.

At December 31, 1996 and 1995, the number of options exercisable was
395,569 and 216,877, respectively, and the weighted-average exercise price of
those options was $4.00 in each year.

(7) PROFIT SHARING PLAN

In September 1995, the Company adopted a 401(k) savings plan covering all
eligible employees. The plan allows employees to voluntarily contribute up to
15% of compensation. The Company may make matching contributions as may be
determined prior to the end of each plan year. The current matching percentage
is 10%. The Company may also make discretionary additional contributions to the
plan. The Company's total contributions to the plan for 1996 and 1995 amounted
to $12 and $8, respectively.

A-16

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

(8) INCOME TAXES

The income tax provision (benefit) for the years ended December 31, 1996,
1995 and 1994, excluding the income tax benefit of $104 attributed to the
extraordinary loss in 1996, is as follows:

<TABLE>
<CAPTION>
1996 1995 1994
----- ---- -----
<S> <C> <C> <C>
Current tax expense:
Federal......................................................... $ 284 $363 $ 130
State and city.................................................. 96 163 70
----- ---- -----
Total current.............................................. 380 526 200
----- ---- -----
Deferred tax (benefit) expense:
Federal......................................................... (135) 16 (92)
State and city.................................................. (33) 7 (49)
----- ---- -----
Total deferred............................................. (168) 23 (141)
----- ---- -----
$ 212 $549 $ 59
----- ---- -----
----- ---- -----
</TABLE>

The income tax provision differs from the amount of income tax determined
by applying the U.S. federal income tax rate to income before income taxes for
the years ended December 31, 1996, 1995 and 1994 due to nondeductible expenses,
primarily goodwill amortization, amounting to approximately $230, $227 and $128,
respectively.

Significant components of the Company's net deferred tax assets and
liabilities as of December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Contract obligation...................................................... $199 $269
Allowances and accrued expenses.......................................... 317 115
Net operating loss carryforwards......................................... -- 2
Tax credits.............................................................. 21 21
---- ----
Total deferred tax assets........................................... 537 407
---- ----
Deferred tax liabilities:
Depreciation and amortization............................................ 282 149
Cash versus accrual accounting differences, net.......................... 115 286
---- ----
Total deferred tax liabilities...................................... 397 435
---- ----
Net deferred tax asset (liability).................................. $140 $(28)
---- ----
---- ----
</TABLE>

The Company has state minimum tax credit carryforwards of approximately $22
which may be carried forward to reduce future year tax liabilities through the
year 2004.

Based upon recoverable taxes paid, historical taxable income and
projections of future taxable income over the periods which the deferred tax
assets are deductible, management believes that it is more likely than not that
the Company will realize the benefits of deductible temporary differences.

(9) COMMITMENTS

(a) EMPLOYMENT AGREEMENTS

The chairman of the board entered into an employment agreement with a
five-year term through May 1998 which is renewable on a year to year basis
thereafter. The agreement provides for a base salary of $180 plus cost of living
increases, and an annual bonus based on a percentage of the pretax

A-17

ESQUIRE COMMUNICATIONS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

earnings of the Company in excess of specified levels. No bonus was earned under
the agreement in each of the years ended December 31, 1996, 1995 and 1994.

In connection with the acquisition of David Feldman & Associates (USA) Ltd.
(DFA) in September 1993 and SDS in 1994, the Company entered into employment and
noncompetition agreements with the former stockholders of each of the companies,
which expire in September 1997 and June 1998, respectively. The agreements
provide for an annual base salary of $180 plus cost of living increases for each
individual. The DFA agreement also provides for an annual bonus based on
percentages of consolidated revenues in excess of specified levels. Total bonus
amounts earned under the DFA employment agreement amounted to $359 and $239 for
the respective years ended December 31, 1996 and 1995.

(b) LEASE COMMITMENTS

The Company is obligated under operating leases for office facilities which
expire through December 2005. The leases provide, among other things, that the
Company is responsible for its share of increases in certain utilities,
maintenance and property taxes over a base amount. In addition, the Company is
also obligated under various equipment and vehicle leases which expire through
September 1999. Total lease expense for 1996, 1995 and 1994 under the above
leases amounted to approximately $720, $375 and $337, respectively.

During 1996, the Company relocated its headquarters and recognized a $262
expense related to the net present value of future rental payments, net of
sublease income, pertaining to the vacated premises.

The Company leases its Santa Ana, California office from an affiliate of an
officer/director which expires in June 1999 with an option to renew for five
years. Management believes that the terms of the lease agreement are comparable
to market rates. Total lease expense for 1996 and 1995 amounted to $265 in each
year.

The anticipated future annual lease payments under operating leases at
December 31, 1996, inclusive of the base utility, maintenance and property tax
charges for the office facilities, are as follows:

<TABLE>
<S> <C>
1997........................................................................ $868
1998........................................................................ 773
1999........................................................................ 546
2000........................................................................ 291
2001........................................................................ 251
Thereafter.................................................................. $815
----
----
</TABLE>

Future annual rental income under remaining noncancelable subleases is as
follows: 1997 -- $63, 1998 -- $79, 1999 -- $79 and 2000 -- $13.

(10) SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for the years ended December 31, 1996, 1995 and 1994 have
included:

<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ----
<S> <C> <C> <C>
Interest........................................................... $1,140 $1,074 $528
------ ------ ----
------ ------ ----
Income taxes....................................................... $1,007 $ 200 $ 12
------ ------ ----
------ ------ ----
</TABLE>

During 1996, $75 in preferred stock dividends were accrued and unpaid.

In connection with the acquisitions of M&M and SRA, during 1996, the
Company issued 204,006 shares of common stock valued at $509.

A-18

<PAGE>

LETTER OF TRANSMITTAL
TO ACCOMPANY
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
OF
ESQUIRE COMMUNICATIONS LTD.
TENDERED PURSUANT TO THE PROSPECTUS

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

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JUNE 12, 1997, UNLESS EXTENDED. THE TIME THE EXCHANGE OFFER
EXPIRES IS REFERRED TO AS THE 'EXPIRATION DATE.' TENDERS MAY BE
WITHDRAWN PRIOR TO THE EXPIRATION DATE. MOREOVER, THE EXCHANGE AGENT SHALL
DELIVER THE COMMON STOCK OFFERED OR RETURN THE WARRANTS DEPOSITED BY THE
WARRANTHOLDERS PROMPTLY AFTER THE EXPIRATION DATE OR AS SOON AS PRACTICABLE
AFTER WITHDRAWAL OF THE TENDERED WARRANTS.

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

EXCHANGE AGENT:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY

<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
2 Broadway 2 Broadway 2 Broadway
New York, New York 10004 New York, New York 10004 19th Floor
Attention: Reorganization Attention: Reorganization New York, New York 10004
Department Department Attention: Reorganization
(registered or certified Department
mail recommended)
</TABLE>

By Facsimile:
212-509-5150
(For Eligible Institutions Only)
Confirm by telephone:
212-509-4000, extension 535

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF WARRANTS TENDERED
- -----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN IF BLANK) WARRANTS TENDERED
- -----------------------------------------------------------------------------------------------------------------------
TOTAL
NUMBER
TOTAL OF
SERIAL NUMBER WARRANTS
NUMBER(S)* OF WARRANTS* TENDERED**
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
*Need not be completed by Warrantholders tendering Warrants by book entry transfer.
**Unless otherwise indicated, it will be assumed that the total number of Warrants represented by
the certificates bearing the serial numbers listed are being tendered.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

This Letter of Transmittal is to be completed by holders of the Redeemable
Common Stock Purchase Warrants (the 'Warrants') of Esq.Com pursuant to the
procedures set forth in the Prospectus under the caption 'THE EXCHANGE
OFFER -- Procedure for Tendering Warrants.'

Public Warrantholders (the 'Warrantholders') whose Warrants are not
immediately available or who cannot deliver their Warrants or confirmation (a
'Book-Entry Confirmation') of a book-entry tender of their Warrants into the
account of The Depository Trust Company, the Midwest Securities Trust Company or
the Philadelphia Depository Trust Company (each, a 'Book Entry Transfer
Facility') and all other documents required by this Letter of Transmittal to the
Exchange Agent on or prior to the Expiration Date must tender their Warrants in
accordance with the procedures described in the Notice of Guaranteed Delivery
enclosed herewith and in the Prospectus under the caption 'THE EXCHANGE
OFFER -- Procedure for Tendering Warrants.' See Instruction 2 of this Letter of
Transmittal. Delivery of documents to the Book Entry Transfer Facility does not
constitute delivery to the Exchange Agent.

[ ]CHECK HERE IF TENDERED WARRANTS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT A BOOK ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:

Name of Tendering Institution _______________

Check Box of applicable Book-Entry Transfer
Facility:

[ ] DTC [ ] MSTC [ ] PDTC

Account Number ______________________________

Transaction Code Number _____________________

NOTE: SIGNATURE MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

LADIES AND GENTLEMEN:

The undersigned hereby tenders to Esquire Communications Ltd., a Delaware
corporation ('Esq.Com'), the Warrants listed above pursuant to the offer by
Esq.Com to exchange one share of its Common Stock, par value $.01 per share (the
'Common Stock'), for each five of its Warrants, upon the terms and subject to
the conditions set forth in the Prospectus, the receipt of which is hereby
acknowledged, and in this Letter of Transmittal (the 'Exchange Offer'). No
fractional shares of Common Stock will be issued. A cash payment based upon the
current market price of a share of Common Stock will be made in lieu of
fractional shares.

Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of,
Esq.Com all right, title and interest in and to all the Warrants that are being
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned
(with full knowledge that the Exchange Agent also acts as the agent of Esq.Com)
with respect to such Warrants, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver such Warrants, or transfer ownership of such Warrants to or upon the
order of Esq.Com and (ii) receive all benefits and otherwise exercise all rights
of beneficial ownership of such Warrants, all in accordance with the terms of
the Exchange Offer.

The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Warrants
tendered hereby and that Esq.Com will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
that such Warrants will not be subject to any adverse claim when the same are
accepted for exchange by Esq.Com. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Exchange Agent or Esq.Com to
be necessary or desirable to complete the sale, assignment and transfer of the
Warrants tendered hereby.

All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Any tender pursuant to this Letter of
Transmittal may only be revoked in accordance with the procedures set forth
under 'Instructions' below.

The undersigned understands that tenders of any of the Warrants pursuant to
any of the procedures described in the Prospectus under the caption 'THE
EXCHANGE OFFER -- Procedure for Tendering Warrants' and in the instructions
hereto will constitute a binding agreement between the undersigned and Esq.Com
upon the terms and subject to the conditions set forth in the Prospectus.

Unless otherwise indicated herein under 'Special Exchange Instructions,'
please issue the Common Stock and/or return any Warrants not accepted for
exchange in the name of the registered holder(s) appearing above under
'Description of Warrants Tendered.' Similarly, unless otherwise indicated under
'Special Delivery Instructions' below, please mail the certificates representing
issued Common Stock and/or return any Warrants not accepted for exchange (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) above appearing under 'Description of Warrants Tendered.' If both the
'Special Exchange Instructions' and the 'Special Delivery Instructions' are
completed, please issue the Common Stock and/or return any Warrants not accepted
for exchange in the name of, and deliver the certificate(s) for such Common
Stock and/or return any Warrants not accepted for exchange to, the person or
persons so indicated. The undersigned recognizes that Esq.Com has no obligation,
pursuant to the 'Special Exchange Instructions,' to transfer any Warrants from
the name of the registered holder thereof if Esq.Com does not accept for
exchange any of the Warrants so tendered.

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

SPECIAL EXCHANGE INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5, AND 6)
To be completed ONLY if the shares of the Common Stock are to be issued in
the name of someone other than the undersigned.

Issue and Mail Shares of the Common
Stock to:

Name .....................................................................
(PLEASE PRINT)

Address ..................................................................

.........................................................................
(INCLUDE ZIP CODE)

.........................................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)

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

SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5, AND 6)
To be completed ONLY if the shares of the issued Common Stock are to be
mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown above.

Mail Shares of the Common Stock to:

Name ....................................................................
(PLEASE PRINT)

Address ..................................................................

.........................................................................
(INCLUDE ZIP CODE)

.........................................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)

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

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

WARRANTHOLDER SIGN HERE

............................................................................

............................................................................
SIGNATURE(S) OF OWNER(S)

Dated: .................... , 1997

(See instruction 4 of this Letter of Transmittal. This Letter of Transmittal
must be signed by registered holder(s) exactly as name(s) appear(s) on the
tendered Warrants or on a security position listing or by person(s)
authorized to become registered holder(s) by endorsements and other documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting
in a fiduciary or representative capacity, please provide the following
information.)

Name(s) ....................................................................

............................................................................
(PLEASE PRINT)

Capacity ...................................................................

Address ....................................................................

............................................................................
(INCLUDE ZIP CODE)

Area Code and Telephone No. ................................................

Tax Identification or Social Security No. ..................................

SIGNATURE GUARANTEE(S)
(SEE INSTRUCTIONS 1 AND 4)

Authorized Signature .......................................................

Name .......................................................................
(PLEASE PRINT)

Name of Firm ...............................................................

Address ....................................................................

............................................................................

Area Code and Telephone No. ................................................

Dated: .................... , 1997

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

INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER.

1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required if (i) this Letter of Transmittal if signed by the
registered holder(s) of the Warrants being tendered herewith (the term
'registered holder' for purposes of this document, shall include any participant
in the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of such Warrants) unless such holder(s) have completed
either the box entitled 'Special Delivery Instructions' or the box entitled
'Special Exchange Instructions' on this Letter of Transmittal or (ii) such
Warrants are tendered for the account of a bank, broker, dealer, credit union,
savings association or other entity that is a member in good standing of a
recognized Medallion Program approved by The Securities Transfer Association
Inc. (an 'Eligible Institution'). In all other cases, all signatures on this
Letter of Transmittal must be guaranteed by an Eligible Institution. If the
Warrant is registered in the name of a person other than the signer of this
Letter of Transmittal, the tendered Warrant must be endorsed or accompanied by
an appropriate instrument of transfer, signed exactly as the name or names of
the registered owner or owners appear on the Warrant, with the signatures on the
Warrant or instrument of transfer guaranteed as aforesaid. See Instruction 4.

2. Delivery of Letter of Transmittal and Warrants; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be used to exchange Warrants for
shares of Common Stock either if Warrants are to be forwarded herewith or if
tenders of Warrants are to be made pursuant to the procedures for delivery by
book-entry transfer set forth under 'The Exchange Offer -- Procedure for
Tendering Warrants' in the Prospectus. All physically tendered Warrants or
Book-Entry Confirmation, as the case may be, as well as a properly completed and
duly executed Letter of Transmittal (or a facsimile hereof), and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth above on or prior to the Expiration
Date. Warrantholders whose Warrants are not immediately available or who cannot
deliver Warrants and all other required documents to the Exchange Agent on or
prior to the Expiration Date, or who cannot complete the procedure for
book-entry transfer on a timely basis, may tender their Warrants by having the
Notice of Guaranteed Delivery enclosed herewith properly completed and duly
executed by an Eligible Institution. To be effective, such Notice of Guaranteed
Delivery must be (i) made by or through an Eligible Institution, (ii) received
substantially in the form provided herewith by the Exchange Agent on or prior to
the Expiration Date, and (iii) followed, within three business days after
delivery of the Notice of Guaranteed Delivery, by the tendered Warrants, in
proper form for transfer, or Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and any other documents required by this Letter of
Transmittal.

THE METHOD OF DELIVERY OF WARRANTS AND ALL OTHER REQUIRED DOCUMENTS IS AT
THE ELECTION AND RISK OF THE TENDERING WARRANTHOLDER. IF WARRANTS ARE SENT BY
MAIL, REGISTERED OR CERTIFIED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY TO THE EXCHANGE AGENT.

No alternative, conditional or contingent tenders will be accepted. All
tendering Warrantholders, by execution of this Letter of Transmittal (or
facsimile hereof), waive any right to receive any notice of the acceptance of
their Warrants for exchange.

3. Inadequate Space. If the space provided herein is inadequate, list and
attach hereto on a separate schedule the Warrant serial numbers, the number of
Warrants represented thereby and the number of Warrants being tendered.

4. Signatures on Letter of Transmittal; Instruments of Transfer and
Endorsements. If this Letter of Transmittal is signed by the registered holder
of the Warrants tendered hereby, the signature must correspond with the name as
written on the face of the Warrant without alteration, enlargement or any change
whatsoever.

If any of the Warrants tendered are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.

If any of the Warrants tendered are registered in different names, it will
be necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of Warrants. To obtain
additional copies of this Letter of Transmittal, contact the Exchange Agent at
its address provided in Instruction 8.

When this Letter of Transmittal is signed by the registered holder(s) of
Warrant(s) tendered hereby, no endorsements of Warrants or separate instruments
of transfer are required. If, however, shares of the Common Stock are to be
issued to a person other than the registered holder, then endorsement of
Warrants transmitted hereby or separate instruments of transfer are required.
Signatures on such Warrant endorsements or instruments of transfer must be
guaranteed by an Eligible Institution.

If this Letter of Transmittal or any Warrants or instruments of transfer
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
Esq.Com, proper evidence satisfactory to Esq.Com of their authority so to act
must be submitted.

If this Letter of Transmittal is signed by a person other than the
registered holder of the Warrant(s) listed, the Warrants must be endorsed or
accompanied by appropriate instruments of transfer and, in either case, must be
signed exactly as the name or names of the registered holder(s) appears on the
Warrants. Signatures on such Warrants or instruments of transfer must be
guaranteed by an Eligible Institution.

5. Transfer Taxes. Esq.Com will pay any transfer taxes with respect to the
transfer and sale of any of the Warrants to it or its order pursuant to the
Exchange Offer. If delivery of the Common Stock is to be made to any person
other than the registered holder, however, or if tendered Warrants are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, or if for any other reason (other than the transfer of
Warrants to Esq.Com or its order pursuant to the Exchange Offer) a transfer tax
is imposed, the amount of the transfer tax (whether imposed on the registered
holder or any other person) will be payable by the tendering Warrantholder. If
satisfactory evidence of the payment of such transfer tax or an exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering Warrantholder.

EXCEPT AS PROVIDED IN THIS INSTRUCTION 5, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE WARRANTS LISTED IN THIS LETTER OF
TRANSMITTAL.

6. Special Exchange and Delivery Instructions. If shares of the Common
Stock are to be issued in the name of a person other than the signer of this
Letter of Transmittal or if shares of the Common Stock are to be sent or
returned to someone other than the signer of this Letter of Transmittal or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed.

7. Irregularities and Waiver of Conditions. All questions as to the
validity, form, eligibility (including time of receipt) and acceptance for
exchange of any tender of Warrants will be determined by Esq.Com, in its sole
discretion, which determination shall be final and binding. Esq.Com reserves the
absolute right to reject any or all tenders of Warrants determined by it not to
be in proper form, or the acceptance or exchange of which may, in the opinion of
Esq.Com's counsel, be unlawful. Esq.Com also reserves the absolute right to
waive any defect or irregularity in any tender with respect to any particular
Warrants or any particular Warrantholder, and Esq.Com's interpretations of the
terms and conditions of the Exchange Offer (including these instructions) shall
be final and binding. Unless waived, any defects or irregularities in connection
with tenders must be cured within such time as Esq.Com shall determine. Neither
Esq.Com, the Exchange Agent nor any other person will be under any duty or
obligation to give notice of any defects or irregularities in tenders, nor shall
any of them incur any liability for failure to give such notice. Any Warrants
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned to
the appropriate tendering Warrantholder as soon as practicable.

8. Requests for Assistance or Additional Copies. Requests for information
or additional copies of the Prospectus or this Letter of Transmittal should be
directed to the Exchange Agent at (212) 509-4000, extension 535, or by mail to 2
Broadway New York, New York 10004, Attention: Reorganization Department.

9. Taxpayer Information and Substitute W-9.

All Warrantholders

All Warrantholders must complete Part 1 of the 'Substitute Form W-9' set
forth below by providing the Warrantholder's name, street address, city, and
either (i) state and zip code, or (ii) country of residence. United States
Warrantholders must also complete Part 2 of the 'Substitute Form W-9' and all
foreign Warrantholders must also complete Part 3 of the 'Substitute Form W-9.'

United States Warrantholders

United States federal income tax law requires that a United States holder
who surrenders Warrants provide the Exchange Agent (as payor) with his or her
correct taxpayer identification number ('TIN'), which, if the surrendering
holder is an individual, is his or her social security number. If the Exchange
Agent is not provided with the correct TIN, the surrendering holder may be
subject to a penalty imposed by the Internal Revenue Service and payments that
are made by Esq.Com to the tendering holder may be subject to a 31% backup
withholding. If withholding results in an overpayment of taxes, a refund may be
obtained. Exempt persons (including, among others, all corporations) are not
subject to these backup withholding and reporting requirements.

To prevent the 31% backup withholding tax, each surrendering United States
holder must provide his or her correct TIN by completing Part 2 of the
'Substitute Form W-9' set forth below, certifying that the TIN provided is
correct (or that the surrendering holder is awaiting a TIN) and that (a) the
surrendering holder has not been notified by the Internal Revenue Service that
he or she is subject to backup withholding as a result of failure to report all
interest or dividends, or (b) the Internal Revenue Service has notified the
surrendering holder that he or she is no longer subject to backup withholding or
certify in accordance with the enclosed Guidelines that such surrendering holder
is exempt from backup withholding. If shares of the Common Stock are to be
issued in more than one name or in a name other than that of the actual owner,
consult the enclosed Guidelines for information on which TIN to report.

Foreign Warrantholders

United States federal income tax law requires a foreign holder who
surrenders Warrants to provide the Exchange Agent (as payor) with a
certification of such holder's foreign status. If the Exchange Agent is not
provided with the certification of foreign status, payments that are made by
Esq.Com to the surrendering holder (including but not limited to dividends on
the Common Stock) may be subject to the 31% backup withholding tax.

To prevent the 31% backup withholding tax, each surrendering foreign holder
must certify, by completing Part A of Part 3 of the 'Substitute Form W-9' set
forth below, that such holder is not a United States citizen or United States
resident (or that such holder is a foreign corporation, partnership, trust or
estate). If shares of the Common Stock are to be issued in the name of a
securities clearing organization, a bank or other financial institution, then an
authorized representative of such institution must complete Part B of Part 3 of
the 'Substitute Form W-9' set forth below.

If the shares of the Common Stock are to be owned jointly by more than one
foreign holder, each such joint owner must complete a separate Part 3 of the
'Substitute Form W-9.'

10. Mutilated, Lost, Stolen or Destroyed Warrants. Any exchanging
Warrantholder whose Warrants have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent in writing at its address set forth in
Instruction 8.

PAYOR'S NAME: ESQUIRE COMMUNICATIONS LTD.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ALL WARRANTHOLDERS MUST COMPLETE PART 1 AND EITHER PART 2 OR PART 3 (SEE INSTRUCTION 9).
-----------------------------------------------------------------------------------------------
PART 1: TO BE COMPLETED BY ALL WARRANTHOLDERS

-----------------------------------------------------------------------------------------------
SUBSTITUTE Name
FORM W-9
-----------------------------------------------------------------------------------------------
Address

-----------------------------------------------------------------------------------------------
City, State, and ZIP code (or Country)
-----------------------------------------------------------------------------------------------
PART 2: TAXPAYER IDENTIFICATION NUMBER
(CHECK IF AWAITING TIN [ ])

Enter your taxpayer Social security number
identification number - -
in the appropriate box: ----- --- -----
Employer identification number
-
---- ---------
Certification. -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I
am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified by the
Internal Revenue Service (IRS) that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or the IRS has notified me that I am
no longer subject to backup withholding.

Signature Date
------------------------------------------------------------ ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PART 3: CERTIFICATE OF FOREIGN STATUS -- COMPLETE EITHER PART A
OR PART B.

Part A: Certification of Under penalties of perjury, I certify that, to the best of my knowledge and belief, I am not a
Registered Holder United States citizen or resident (or I am a foreign corporation, partnership, trust or
estate).

Signature Date
------------------------------------------------------------ ------------------

Part B: Certification of Under penalties of perjury, I certify that I am an authorized representative of the financial
Financial Institution institution named below and that we have received from the beneficial owner a Form W-8 or
substitute form in accordance with the provisions of Treasury Regulations Section 1.6049-
5(b)(2)(iv).

---------------------------------------------------------------------------------------------
Name of Financial Institution

PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

<PAGE>

NOTICE OF GUARANTEED DELIVERY FOR
ESQUIRE COMMUNICATIONS LTD.

This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Esquire Communications Ltd. (the 'Company') made pursuant to
the Prospectus dated May 9, 1997 (the 'Prospectus') and the accompanying Letter
of Transmittal, if certificates for the Warrants are not immediately available
or time will not permit all required documents to reach the Exchange Agent prior
to the Expiration Date of the Exchange Offer or if the procedures for book-entry
transfer cannot be completed on a timely basis. Such form may be delivered by
hand or transmitted by telegram, facsimile transmission or mail to the Exchange
Agent.

TO: CONTINENTAL STOCK TRANSFER & TRUST COMPANY

<TABLE>
<S> <C> <C>
By Mail: By: Overnight Courier: By Hand:
2 Broadway 2 Broadway 2 Broadway
New York, New York 10004 New York, New York 10004 19th Floor
Attention: Reorganization Department Attention: Reorganization Department New York, New York 10004
(registered or certified mail Attention: Reorganization Department
recommended)
</TABLE>

By Facsimile:
212-509-5150
(For Eligible Institutions Only)
Confirm by telephone
212-509-4000, extension 535

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A
FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

Ladies and Gentlemen:

The undersigned hereby tenders to the Company upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal, receipt of which is
hereby acknowledged, the Warrants set forth below, pursuant to the guaranteed
delivery procedure described in the Prospectus.

Signature(s) ..................................................................

................................................................................

Name(s) .......................................................................

................................................................................
PLEASE TYPE OR PRINT

Warrant Nos. (if available) ...................................................

Number of Warrants ............................................................

Address .......................................................................

................................................................................

Area Code and Tel. No.(s) .....................................................

If Warrants will be delivered by book-entry
transfer, check one box and provide account number.
[ ] The Depository Trust Company
[ ] Midwest Securities Trust Company
[ ] Philadelphia Depository Trust Company

Account Number: ...............................................................

GUARANTEE

The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of a recognized Medallion
Program approved by the Securities Transfer Association Inc. (an 'Eligible
Institution'), hereby guarantees that either the certificates representing the
Warrants tendered hereby, in proper form for transfer, or timely confirmation of
the book-entry transfer of such Warrants into the Exchange Agent's account at
the Depository Trust Company, the Midwest Securities Trust Company or the
Philadelphia Depository Trust Company, in each case together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees and any other required documents, will be
received by the Exchange Agent at one of its addresses set forth above, no later
than three business days after the delivery of this Notice.

<TABLE>
<CAPTION>
<S> <C>
....................................................... ........................................................
AUTHORIZED SIGNATURE NAME OF FIRM

....................................................... ........................................................
ADDRESS TITLE

....................................................... ........................................................
ZIP CODE PLEASE TYPE OR PRINT

....................................................... Dated .................................................
AREA CODE AND TEL. NO.
</TABLE>

<PAGE>

ESQUIRE COMMUNICATIONS LTD.
OFFER TO EXCHANGE
SHARES OF COMMON STOCK FOR ANY AND ALL OF
ITS REDEEMABLE COMMON STOCK PURCHASE WARRANTS

May 12, 1997

To Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees:

Esquire Communications Ltd. (the 'Company') is enclosing to you copies of a
Prospectus, dated May 9, 1997 (the 'Prospectus'), and related materials listed
below for you to distribute to your clients, in connection with the Company's
offer to exchange one share of its Common Stock, par value $.01 per share, for
each five of its Redeemable Common Stock Purchase Warrants (the 'Warrants').

Enclosed is a collated supply of the following documents:

1. A form of letter, dated today, which you may send, as a cover
letter to accompany the Prospectus and related materials, to your clients
for whose accounts you hold Warrants registered in your name or the name of
your nominee.

2. A Letter to Holders from the Chairman of the Board of the Company
dated today.

3. The Prospectus.

4. The Letter of Transmittal for your use and for the information of
your clients.

5. Form of Notice of Guaranteed Delivery.

6. The guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.

7. A return envelope addressed to Continental Stock Transfer & Trust
Company, the Exchange Agent.

WE ARE ASKING YOU TO FORWARD THE ENCLOSED MATERIALS TO YOUR CLIENTS FOR
WHOM YOU HOLD WARRANTS REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE OR
WHO HOLD WARRANTS REGISTERED IN THEIR OWN NAMES AND TO WHOM YOU HAVE PREVIOUSLY
FORWARDED COPIES OF THE PROSPECTUS AND RELATED MATERIALS.

Other than a fee to be paid to GKN Securities Corp. and Royce Investment
Group, Inc. as solicitation agents for the Company, the Company will not pay any
fees or commissions to any broker or dealer or other person for soliciting
tenders of Warrants pursuant to the Exchange Offer. You will be reimbursed for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients.

Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on June 12, 1997, unless the Exchange Offer is
extended by the Company. The time at which the Exchange Offer expires is
referred to as the 'Expiration Date.' Tendered Warrants may be withdrawn at any
time prior to the Expiration Date and unless theretofore accepted for exchange
by the Company, may also be withdrawn after 5:00 p.m., New York City time, on
July 10, 1997. Moreover, the Exchange Agent shall deliver the Common Stock or
return the tendered and withdrawn Warrants promptly after the Expiration Date or
withdrawal of the tendered Warrants.

To participate in the Exchange Offer, certificates for Warrants, or a
timely confirmation of a book-entry transfer of such Warrants into the Exchange
Agent's account at the Depository Trust Company, the Midwest Securities Trust
Company or the Philadelphia Depository Trust Company, in each case together with
a duly executed and properly completed Letter of Transmittal or facsimile
thereof, with any required signature guarantees, and any other required
documents, must be received by the Exchange Agent by the Expiration Date as
indicated in the Letter of Transmittal and the Prospectus.

If holders of the Warrants wish to tender, but it is impracticable for them
to forward their Warrants prior to the Expiration Date or to comply with the
book-entry transfer procedures on a timely basis, a

tender may be effected by following the guaranteed delivery procedures described
in the Prospectus under 'The Exchange Offer -- Procedure for Tendering Warrants'
and the Letter of Transmittal.

Additional copies of the enclosed material may be obtained from the
Exchange Agent, Continental Stock Transfer & Trust Company, by calling (212)
509-4000, extension 535.

Very truly yours,

ESQUIRE COMMUNICATIONS LTD.

NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO
THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL.

<PAGE>

ESQUIRE COMMUNICATIONS LTD.
OFFER TO EXCHANGE
SHARES OF ITS COMMON STOCK FOR ANY AND ALL OF
ITS REDEEMABLE COMMON STOCK PURCHASE WARRANTS

May 12, 1997

To Our Clients:

Enclosed for your consideration is a Prospectus, dated May 9, 1997 (the
'Prospectus') and a form of Letter of Transmittal (the 'Letter of Transmittal')
relating to the offer (the 'Exchange Offer') of Esquire Communications Ltd. (the
'Company'), to exchange one share of the Company's Common Stock, par value $.01
per share (the 'Common Stock'), for each five of its Redeemable Common Stock
Purchase Warrants (the 'Warrants'). Each holder of a fractional interest in
shares of the Company's Common Stock will be entitled to receive a cash payment
in lieu of such fractional amount based on the current market price of a share
of Common Stock. The Company will accept for exchange any and all Warrants
properly tendered and not withdrawn according to the terms of the Prospectus and
the Letter of Transmittal. Consummation of the Exchange Offer is subject to
certain conditions described in the Prospectus.

This material is being forwarded to you as the beneficial owner of Warrants
carried by us in your account but not registered in your name. A tender of such
Warrants may only be made by us as the holder of record and pursuant to your
instructions.

Accordingly, we request instructions as to whether you wish us to tender
any or all such Warrants held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
However, we urge you to read the Prospectus carefully before instructing us as
to whether or not to tender your Warrants.

Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Warrants on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City Time, on June 12, 1997, unless the Exchange Offer is extended by
the Company. The time the Exchange Offer expires is referred to as the
'Expiration Date.' Tenders of Warrants may be withdrawn at any time prior to the
Expiration Date and unless theretofore accepted for exchange by the Company, may
be withdrawn after 5:00 p.m., New York City time on July 10, 1997. Moreover, the
Exchange Agent shall deliver the Common Stock or return the tendered and
withdrawn Warrants promptly after the Expiration Date or withdrawal of the
tendered Warrants.

If you wish to have us tender any or all of your Warrants, please so
instruct us by completing, executing and returning to us the instruction form on
the reverse hereof. The accompanying Letter of Transmittal is furnished to you
for your information only and may not be used by you to tender Warrants.

If we do not receive written instructions in accordance with the procedures
presented in the Prospectus and the Letter of Transmittal, we will not tender
any of the Warrants in your account.

INSTRUCTIONS

The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer to exchange Common
Stock for the Warrants of the Company.

This will instruct you to tender the number of Warrants indicated below
held by you for the account of the undersigned, pursuant to the terms and
conditions set forth in the Prospectus and the related Letter of Transmittal.

Please Tender .......................
Warrants held by you for my account in
exchange for one share of Common Stock
for each five Warrants.

Date: ...............................

.....................................

.....................................
SIGNATURE(S)

.....................................

.....................................
PLEASE PRINT NAME(S) HERE

Unless a specific contrary instruction is given in the spaces provided,
your signature(s) hereon shall constitute an instruction to us to tender all
your Warrants in exchange for one share of Common Stock for each five Warrants
pursuant to the terms and conditions set forth in the Prospectus and the related
Letter of Transmittal.

<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.

<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF --
- -----------------------------------------------------------
<S> <C>
1. An individual's account The individual
2.Two or more individuals (joint The actual owner of the
account) account or, if combined
funds, any one of the
individuals(1)
3.Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4.Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5.Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6.Account in the name of guardian The ward, minor or
or committee for a designated incompetent person(3)
ward, minor, or incompetent
person
7. A.The usual revocable savings The grantor- trustee(1)
trust account (grantor is
also trustee)
B.So-called trust account that The actual owner(1)
is not a legal or valid
trust under State law
8.Sole proprietorship account The owner(4)
- -----------------------------------------------------------

<CAPTION>
- -----------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- -----------------------------------------------------------
<S> <C>
9. A valid trust, estate or Legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title)(5)
10. Corporate account The corporation
11.Religious, charitable, or The organization
educational organization
account
12.Partnership acccount held in The partnership
the name of the business
13.Association, club or other The organization
tax-exempt organization
14.A broker or registered nominee The broker or nominee
15.Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district or prison) that
receives agricultural program
payments
- -----------------------------------------------------------
</TABLE>

(1) List first and circle the name of the person whose number you furnish.

(2) Circle the minor's name and furnish the minor's social security number.

(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.

(4) Show the name of the owner.

(5) List first and circle the name of the legal trust, estate or pension trust.

NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.

<PAGE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.

PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:

A corporation.

A financial institution.

An organization exempt from tax under section 501(a), or an individual
retirement plan.

The United States or any agency or instrumentality thereof.

A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.

A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.

An international organization or any agency, or instrumentality thereof.

A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.

A real estate investment trust.

A common trust fund operated by a bank under section 584(a).

An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).

An entity registered at all times under the Investment Company Act of 1940.

A foreign central bank of issue.

Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:

Payments to nonresident aliens subject to withholding under section 1441.

Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.

Payments of patronage dividends where the amount received is not paid in
money.

Payments made by certain foreign organizations.

Payments made to a nominee.

Payments of interest not generally subject to backup withholding include the
following:

Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.

Payments of tax-exempt interest (including exempt-interest dividends under
section 852).

Payments described in section 6049(b)(5) to non-resident aliens.

Payments on tax-free covenant bonds under section 1451.

Payments made by certain foreign organizations.

Payments made to a nominee.

Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE 'EXEMPT' ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER, ALSO SIGN AND DATE THE FORM.

Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.

PRIVACY ACT NOTICE. -- Section 6019 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.

PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.

(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.

(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.

<PAGE>

ESQUIRE COMMUNICATIONS LTD.
216 EAST 45TH STREET
NEW YORK, NEW YORK 10017

May 12, 1997

To the Holders of Warrants of
ESQUIRE COMMUNICATIONS LTD.

Ladies and Gentlemen:

We are proposing in the documents enclosed herewith to allow holders (the
'Holders') of Redeemable Common Stock Purchase Warrants (the 'Warrants') of
Esquire Communications Ltd. (the 'Company') to exchange (the 'Exchange') each
five Warrants for one share of newly issued Common Stock, par value $.01
('Common Stock'), of the Company. Fractional shares of Common Stock will not be
issued. Cash will be paid in lieu of fractional shares of Common Stock being
issued. The Exchange is intended to extinguish the outstanding Warrants and
thereby reduce the potential dilutive impact of the Warrants on the Company's
future earnings and voting power.

Upon consummation of the Exchange, exchanging Holders will be able to: (i)
vote on all matters that may come before the holders of Common Stock; (ii)
receive dividends, if any, when declared by the Company; and (iii) receive
proceeds, if any, payable to holders of Common Stock in the event of a
liquidation of the Company. Exchanging Holders, however, will lose the right to
exercise the Warrants and purchase a share of the Company's Common Stock for the
exercise price of $4.50 per Warrant. Holders of outstanding Warrants who elect
not to participate in the Exchange Offer will retain the right to purchase
shares of the Company's Common Stock for $4.50 per Warrant. To the extent
Holders participate in the Exchange, the trading market for, and liquidity of,
the Warrants remaining outstanding, if any, could be reduced. In addition, such
Warrants may no longer be traded on the Boston Stock Exchange or the Nasdaq
Stock Market and may no longer be registered securities pursuant to the
Securities Exchange Act of 1934, as amended. The Warrants are subject to
redemption by the Company under certain circumstances.

We are confident that as an owner of Warrants you will agree that the
proposed Exchange is beneficial to all concerned. The deadline for the Exchange
is 5:00 p.m. New York City time on June 12, 1997. After you have carefully read
the enclosed Prospectus, if you desire further information about the Exchange,
please feel free to contact the Reorganization Department of the Exchange Agent,
Continental Stock Transfer & Trust Company by calling (212) 509-4000, extension
535.

Very truly yours,

MALCOLM L. ELVEY
Chairman of the Board