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                                  RISK FACTORS

RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY

         PUBLIC RESISTANCE TO PRIVATIZATION OF CORRECTIONAL AND DETENTION
FACILITIES COULD RESULT IN OUR INABILITY TO OBTAIN NEW CONTRACTS OR THE LOSS
OF EXISTING CONTRACTS.

         Management of correctional and detention facilities by private
entities has not achieved complete acceptance by either the government or the
public. The movement toward privatization of correctional and detention
facilities has also encountered resistance from certain groups, such as labor
unions, local sheriff's departments, and groups believing that correctional
and detention facility operations should only be conducted by government
agencies. Changes in the dominant political party in any market in which
correctional facilities are located could have an adverse impact on
privatization. Further, some government agencies are not legally permitted to
delegate their traditional management responsibilities for correctional and
detention facilities to private companies.

         Any of these resistances may make it more difficult for us to renew
or maintain existing contracts, to obtain new contracts or sites on which to
operate new facilities or to develop or purchase facilities and lease them to
government or private entities, any or all of which could have a material
adverse effect on our business.

         WE ARE SUBJECT TO THE SHORT-TERM NATURE OF GOVERNMENT CONTRACTS.

         Many governmental agencies are legally limited in their ability to
enter into long-term contracts that would bind elected officials responsible
for future budgets. Therefore, many contracts with government agencies
typically either have a very short term or are subject to termination on
short notice without cause. In addition, our contracts with government
agencies may contain one or more renewal options that may be exercised only
by the contracting government agency. No assurance can be given that any
agency will exercise a renewal option in the future. The non-renewal or
termination of any of our significant contracts with governmental agencies
could materially adversely affect our financial condition, results of
operation and liquidity, including our ability to secure new facility
management contracts from others.

         WE ARE DEPENDENT ON GOVERNMENT APPROPRIATIONS. IF GOVERNMENT
APPROPRIATION. LEVELS ARE REDUCED, OUR BUSINESS MAY BE HARMED.

         Our cash flow is subject to the receipt of sufficient funding of and
timely payment by contracting governmental entities. If the appropriate
governmental agency does not receive sufficient appropriations to cover its
contractual obligations, a contract may be terminated or the amounts payable
to us may be deferred or reduced. Any delays in payment, or the termination
of a significant contract, could have an adverse effect on our cash flow and
financial condition. Moreover, as a result of the slowing economy and the
events of September 11, 2001, federal, state and local governments may
encounter unusual budgetary constraints and there is a risk that spending on
outsourced services provided by us may be curtailed.

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         OUR ABILITY TO WIN NEW CONTRACTS TO DEVELOP AND MANAGE CORRECTIONAL,
DETENTION AND TREATMENT FACILITIES DEPENDS ON MANY FACTORS OUTSIDE OUR
CONTROL.

         Our growth is generally dependent upon our ability to win new
contracts to develop and manage new correctional, detention and treatment
facilities. This depends on a number of factors we cannot control, including
crime rates and sentencing patterns in various jurisdictions. Accordingly,
the demand for our facilities could be adversely affected by the relaxation
of enforcement efforts, leniency in conviction and sentencing practices or
through the legal decriminalization of certain activities that are currently
proscribed by our criminal laws. For instance, any changes with respect to
drugs and controlled substances or illegal immigration could affect the
number of persons arrested, convicted and sentenced, thereby potentially
reducing demand for correctional facilities to house them. Similarly,
reductions in crime rates could lead to reductions in arrests, convictions
and sentences requiring correctional facilities. The Bureau of Justice
Statistics reports that the level of violent crime in the United States has
declined steadily since 1994 and the level of property crime is at the lowest
level since 1974. However, the number of detained offenders has grown
steadily during that period.

         While we believe that governments will continue to privatize
correctional, detention and treatment facilities, we believe the rate of
growth experienced in the state private corrections industry during the late
1980's and early 1990's is moderating. Certain jurisdictions recently have
required successful bidders to make a significant capital investment in
connection with the financing of a particular project, a trend that could
require us to have sufficient capital resources to compete effectively. We
may not be able to obtain these capital resources when needed. Additionally,
our success in obtaining new awards and contracts may depend, in part, upon
our ability to locate land that can be leased or acquired under favorable
terms. Otherwise desirable locations may be in or near populated areas and,
therefore, may generate legal action or other forms of opposition from
residents in areas surrounding a proposed site.

         OUR PROFITABILITY MAY SUFFER IF THE NUMBER OF OFFENDERS OCCUPYING
OUR CORRECTIONAL, DETENTION AND TREATMENT FACILITIES DECREASES.

         Our correctional, detention and treatment facilities are dependent
upon government agencies supplying offenders. A substantial portion of our
revenues is generated under contracts that specify a net rate per day per
resident, or a per diem rate, sometimes with no minimum guaranteed occupancy
levels, even though most correctional facility cost structures are relatively
fixed. Under such a per diem rate structure, a decrease in occupancy levels
at a particular facility could have a material adverse effect on the
financial condition and results of operations at such facility.

         A FAILURE TO COMPLY WITH EXISTING REGULATIONS COULD RESULT IN
MATERIAL PENALTIES OR NON-RENEWAL OR TERMINATION OF OUR CONTRACTS TO MANAGE
CORRECTIONAL, DETENTION AND TREATMENT FACILITIES.

         Our industry is subject to a variety of federal, state and local
regulations, including education, health care and safety regulations, which
are administered by various regulatory authorities. We may not always
successfully comply with these regulations, and failure to

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comply could result in material penalties or non-renewal or termination of
facility management contracts. The contracts typically include extensive
reporting requirements and supervision and on-site monitoring by
representatives of contracting government agencies. Corrections officers are
customarily required to meet certain training standards, and in some
instances facility personnel are required to be licensed and subject to
background investigation. Certain jurisdictions also require the subcontracts
to be awarded on a competitive basis or to subcontract with businesses owned
by members of minority groups. Our facilities are also subject to operational
and financial audits by the governmental agencies with which we have
contracts. The failure to comply with any applicable laws, rules or
regulations and the loss of any required license could adversely affect the
financial condition and results of operations at our affected facilities.

         GOVERNMENT AGENCIES MAY INVESTIGATE AND AUDIT OUR CONTRACTS AND, IF
ANY IMPROPRIETIES ARE FOUND, WE MAY BE REQUIRED TO REFUND REVENUES WE HAVE
RECEIVED, TO FOREGO ANTICIPATED REVENUES AND MAY BE SUBJECT TO PENALTIES AND
SANCTIONS, INCLUDING PROHIBITIONS ON OUR BIDDING IN RESPONSE TO REQUESTS FOR
PROPOSALS, OR RFPS.

         Certain of the government agencies we contract with have the
authority to audit and investigate our contracts with them. As part of that
process, the government agency reviews our performance on the contract, our
pricing practices, our cost structure and our compliance with applicable
laws, regulations and standards. If the agency determines that we have
improperly allocated costs to a specific contract, we may not be reimbursed
for those costs and we could be required to refund the amount of any such
costs that have been reimbursed. If a government audit uncovers improper or
illegal activities by us or we otherwise determine that these activities have
occurred, we may be subject to civil and criminal penalties and
administrative sanctions, including termination of contracts, forfeitures of
profits, suspension of payments, fines and suspension or disqualification
from doing business with the government. Any adverse determination could
adversely impact our ability to bid in response to RFPs in one or more
jurisdictions.

         IF WE FAIL TO SATISFY OUR CONTRACTUAL OBLIGATIONS, OUR ABILITY TO
COMPETE FOR FUTURE CONTRACTS AND OUR FINANCIAL CONDITION MAY BE ADVERSELY
AFFECTED.

         Our failure to comply with contract requirements or to meet our
client's performance expectations when performing a contract could materially
and adversely affect our financial performance and our reputation, which, in
turn, would impact our ability to compete for new contracts. Our failure to
meet contractual obligations could also result in substantial actual and
consequential damages. In addition, our contracts often require us to
indemnify clients for our failure to meet performance standards. Some of our
contracts contain liquidated damages provisions and financial penalties
related to performance failures. Although we have liability insurance, the
policy limits may not be adequate to provide protection against all potential
liabilities.

         NEW COMPETITORS IN OUR INDUSTRY MAY ADVERSELY AFFECT THE
PROFITABILITY OF OUR BUSINESS.

         We must compete on the basis of cost, quality and range of services
offered, experience

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in managing facilities, reputation of personnel and ability to design,
finance and construct new facilities on a cost effective competitive basis.
While there are barriers for companies seeking to enter into the management
and operation of correctional, detention and treatment facilities, there can
be no assurance that these barriers will be sufficient to limit additional
competition.

         A DISTURBANCE IN ONE OF OUR FACILITIES COULD RESULT IN CLOSURE OF A
FACILITY OR HARM TO OUR BUSINESS.

         An escape, riot or other disturbance at one of our facilities could
adversely effect the financial condition, results of operations and liquidity
of our operations. Among other things, the adverse publicity generated as a
result of an event could adversely affect our ability to retain an existing
contract or obtain future ones. In addition, if such an event were to occur,
there is a possibility that the facility where the event occurred may be shut
down by the relevant governmental agency. A closure of certain of our
facilities could adversely affect the financial condition, results of
operations and liquidity of our operations.

         TERRORIST ATTACKS, SUCH AS THE ATTACKS THAT OCCURRED IN NEW YORK AND
WASHINGTON, D.C. ON SEPTEMBER 11, 2001, AND OTHER ACTS OF VIOLENCE OR WAR MAY
AFFECT THE MARKETS IN WHICH OUR COMMON STOCK TRADES, THE MARKETS IN WHICH WE
OPERATE AND OUR PROFITABILITY.

         Terrorist attacks may negatively affect our operations and your
investment. There can be no assurance that there will not be further
terrorist attacks against the United States or United States businesses. As a
result of terrorism, the United States may enter into a protracted armed
conflict, which could have a further impact on our business. In addition,
terrorists attacks in the United States may increase demand for trained
security personnel, which could increase our operating costs. Political and
economic instability in some regions of the world may also result and could
negatively impact our business. In addition, any of these events may affect
the markets in which our common stock trades. The consequences of any of
these armed conflicts are unpredictable and we may not be able to foresee
events that could have an adverse effect on our business or your investment.

         INACCURATE, MISLEADING OR NEGATIVE MEDIA COVERAGE COULD ADVERSELY
AFFECT OUR REPUTATION AND OUR ABILITY TO BID FOR GOVERNMENT CONTRACTS.

         The media frequently focuses its attention on private operators'
contracts with government agencies. If the media coverage is negative, it
could influence government officials to slow the pace of outsourcing
government services, which could reduce the number of RFPs. The media may
also focus its attention on the activities of political consultants engaged
by us, even when their activities are unrelated to our business, and we may
be tainted by adverse media coverage about their activities. Moreover,
inaccurate, misleading or negative media coverage about us could harm our
reputation and, accordingly, our ability to bid for and win government
contracts.

         WE MAY INCUR SIGNIFICANT COSTS BEFORE RECEIVING RELATED REVENUES,
WHICH COULD RESULT IN CASH SHORTFALLS.

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         When we are awarded a contract to manage a government program, we
may incur significant expenses before we receive contract payments. These
expenses include leasing office space, purchasing office equipment and hiring
and training personnel. As a result, in certain large contracts where the
government does not fund program pre-opening and start-up costs, we may be
required to invest significant sums of money before receiving related
contract payments. In addition, payments due to us from government agencies
may be delayed due to billing cycles or as a result of failures to approve
governmental budgets and finalize contracts in a timely manner.

         WE MAY BE UNABLE TO ATTRACT AND RETAIN SUFFICIENT QUALIFIED
PERSONNEL NECESSARY TO SUSTAIN OUR BUSINESS.

         Our delivery of services is labor-intensive. When we are awarded a
government contract, we must hire operating management, security, case
management and other personnel. The success of our business requires that we
attract, develop, motivate and retain these personnel. Our inability to hire
sufficient personnel on a timely basis or the loss of significant numbers of
personnel could adversely affect our business.

         IF WE ARE UNABLE TO MANAGE OUR GROWTH, OUR PROFITABILITY WILL BE
ADVERSELY AFFECTED.

         Sustaining our growth has placed significant demands on our
management as well as on our administrative, operational and financial
resources. For us to continue to manage our growth, we must continue to
improve our operational, financial and management information systems and
expand, motivate and manage our workforce. If our growth comes at the expense
of providing quality service and generating reasonable profits, our ability
to successfully bid for contracts and our profitability will be adversely
affected.

         UNSUCCESSFUL FINANCING OR ACQUISITION PROJECTS MAY RESULT IN CHARGES
TO EXPENSE FOR DEFERRED COSTS.

         If we determine that one or more financing or acquisition projects
is unlikely to be successfully concluded, we could incur significant charges
to expense for deferred costs associated with such projects.

         IF WE DO NOT SUCCESSFULLY INTEGRATE THE BUSINESSES THAT WE ACQUIRE,
OUR RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.

         We may be unable to manage businesses that we may acquire profitably
or integrate them successfully without incurring substantial expenses, delays
or other problems that could negatively impact our results of operations.

         Moreover, business combinations involve additional risks, including:

         o        diversion of management's attention;

         o        loss of key personnel;

         o        assumption of unanticipated legal or financial liabilities;

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         o        our becoming significantly leveraged as a result of the
                  incurrence of debt to finance an acquisition;

         o        unanticipated operating, accounting or management difficulties
                  in connection with the acquired entities;

         o        amortization or charges of acquired intangible assets,
                  including goodwill; and

         o        dilution to our earnings per share.

         Also, client dissatisfaction or performance problems with an
acquired business could materially and adversely affect our reputation as a
whole. Further, the acquired businesses may not achieve the revenues and
earnings we anticipated.

         BECAUSE FEDERAL ENVIRONMENTAL LAWS IMPOSE STRICT AS WELL AS JOINT
AND SEVERAL LIABILITY FOR CLEAN UP COSTS, UNFORESEEN ENVIRONMENTAL RISKS
COULD PROVE TO BE COSTLY.

         Our facilities may be subject to unforeseen environmental risks. The
federal Comprehensive Environmental Response, Compensation, and Liability
Act, as amended, or CERCLA, imposes strict, as well as joint and several,
liability for certain environmental cleanup costs on several classes of
potentially responsible parties, including current owners and operators of
the property and, in some cases, lenders who did not cause or contribute to
the contamination. Furthermore, liability under CERCLA is not limited to the
original or unamortized principal balance of a loan or to the value of the
property securing a loan. Other federal and state laws in certain
circumstances may impose liability for environmental remediation, which costs
may be substantial. Moreover, certain federal statutes and certain states by
statute impose a lien for any cleanup costs incurred by such state on the
property that is the subject of such cleanup costs. All subsequent liens on
such property generally are subordinated to such an environmental lien and,
in some states, even prior recorded liens are subordinated to environmental
liens.

         WE MIGHT BECOME INVOLVED IN LITIGATION, INCLUDING THIRD-PARTY AND
PERSONAL INJURY CLAIMS, WHICH COULD BE COSTLY AND TIME CONSUMING.

         The operation of our facilities exposes us to potential third-party
claims or litigation by offenders or other persons for personal injury or
other damages including damages arising from an offender's escape or from a
disturbance or riot at a facility. In addition, our management contracts
generally require us to indemnify the government agency against any damages
to which the government agency may be subject in connection with such claims
or litigation. We are generally obligated to maintain an insurance program
that provides coverage for certain liability risks, including personal
injury, bodily injury, death or property damage to a third party where we are
found to be negligent. There can be no assurance, however, that such
insurance will be adequate to cover potential third-party claims.

RISKS RELATED TO THIS OFFERING

         OUR STOCK PRICE IS VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR
SHARES AT OR ABOVE THE PRICE YOU PAID FOR THEM.

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         The market price of our common stock has fluctuated in the past and
could continue to fluctuate substantially due to a variety of factors,
including:

         o        quarterly fluctuations in results of operations;

         o        the termination by a government client of a material contract;

         o        political and legislative developments adverse to the
                  privatization of government services;

         o        changes in or failure to meet earnings estimates by securities
                  analysts;

         o        sales of our common stock by existing shareholders or the
                  perception that these sales may occur;

         o        adverse judgments or settlements obligating us to pay damages;

         o        negative publicity;

         o        loss of key personnel; and

         o        the failure to be awarded a significant contract on which we
                  have bid.

         In addition, overall volatility has often significantly affected the
market prices of securities for reasons unrelated to a company's operating
performance. In the past, securities class action litigation has often been
commenced against companies that have experienced periods of volatility in
the price of their stock. Securities litigation initiated against us could
cause us to incur substantial costs and could lead to the diversion of
management's attention and resources.

         OUR RIGHTS PLAN AND DELAWARE LAW MAY DISCOURAGE ACQUISITION BIDS.

         Our board of directors has adopted a stockholders' rights plan.
Under this plan, we have issued preferred stock purchase rights as a dividend
on our outstanding common stock and on any other common stock issued after
adoption of the plan. The rights become exercisable if someone acquires or
offers to acquire specific amounts of common stock.

         Moreover, a provision of Delaware law that is applicable to us could
delay or make difficult a merger, tender offer or proxy contest involving us.
This provision becomes applicable if someone acquires or offers to acquire a
specified amount of our common stock.

         The rights and the provisions of Delaware law have certain
anti-takeover effects. The rights will cause substantial dilution to a person
or group that attempts to acquire us without the approval of our board of
directors. The rights and the provisions of Delaware law may deter a
potential unfriendly offer or other effort to gain control of our company
that is not approved by our board of directors. This may deprive our
stockholders of opportunities to sell shares of our common stock at prices
higher than those prevailing in the market. Neither the rights nor this

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provision of Delaware law should, however, interfere with any merger or other
business combination that is approved by our board of directors.

         OUR CERTIFICATE OF INCORPORATION AND BYLAWS INCLUDE PROVISIONS THAT
MAY HAVE ANTI-TAKEOVER EFFECTS.

         Our certificate of incorporation and bylaws include provisions that
may delay, deter or prevent a takeover attempt that stockholders might
consider desirable. For example, our certificate of incorporation provides
that our stockholders may not take any action in writing without a meeting,
except by unanimous written consent. This prohibition could impede or
discourage an attempt to obtain control of us by requiring that any actions
required to be taken by stockholders be taken at properly called stockholder
meetings or by unanimous written consent.

         THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK AFTER
THIS OFFERING COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECLINE.

         Upon completion of this offering, we will have 12,430,790 shares of
common stock outstanding and 1,738,306 shares of common stock issuable
pursuant to the exercise of outstanding options and warrants and reserved for
issuance under our stock option plans. Sales of substantial amounts of our
common stock by our existing stockholders in the public market following the
offering, or the perception that such sales will occur, could cause the
market price of our common stock to drop.

