1030965--3/30/2007--EVERCOM

related topics

{debt, indebtedness, cash}

{system, service, information}

{regulation, government, change}

{investment, property, distribution}

{product, market, service}

{customer, product, revenue}

{personnel, key, retain}

{control, financial, internal}

{property, intellectual, protect}

{capital, credit, financial}

{financial, litigation, operation}

{stock, price, operating}

Risks Related to our Senior Notes We have a substantial amount of debt outstanding and have significant interest payments. We may be able to incur more debt, including secured debt, and some or all of this debt may effectively rank Senior to the notes and the guarantees. There may not be sufficient collateral to pay all or any of the notes. The indenture and our working capital facility contain covenants that limit the discretion of our management in operating our business and could prevent us from capitalizing on business opportunities and taking other corporate actions. We are a holding company and we may not have access to sufficient cash to make payments on the notes. In addition, the notes are effectively subordinated to the liabilities of our subsidiaries. U.S. bankruptcy or fraudulent conveyance law may interfere with the payment of the notes and the guarantees and the enforcement of the security interests. We may be unable to repurchase the notes upon a change of control as required by the indenture. Rights of holders of notes in the collateral may be adversely affected by bankruptcy proceedings. Rights of holders of notes in the collateral may be adversely affected by the failure to perfect security interests in certain collateral acquired in the future. The notes may be deemed to be contingent payment debt instruments. Risk Relating to Our Business Our financial results are dependent on the success of our billing and bad debt management systems. We are dependent on third party vendors for our information and billing systems. A number of our customers individually account for a large percentage of our revenues, and therefore the loss of one or more of these customers could harm our business. Our success depends on our ability to protect our proprietary technology and ensure that our systems are not infringing on the proprietary technology of other companies. We may not be able to adapt successfully to new technologies, to respond effectively to customer requirements or to provide new products and services. Our business could be adversely affected if our products and services fail to perform or be performed properly. System failures could cause delays or interruptions of service and security breaches, which could cause us to lose customers. We are dependent on the telecommunications industry, which subjects our business to risks affecting the telecommunications industry generally. Some of our customers are governmental entities that require us to adhere to certain policies that may limit our ability to attract and retain customers. Our equity investors interests may differ from our noteholders interests. Our success depends on our ability to attract and retain qualified management and other personnel. Our management information, internal controls and financial reporting systems may need further enhancements and development to comply with the requirements of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002 and the costs of compliance may strain our resources. The FCC is currently reviewing challenges and alternatives to the exclusive-provider system that, if implemented, could have an adverse effect on our business. We operate in a highly regulated industry, and are subject to restrictions in the manner in which we conduct our business and a variety of claims relating to such regulation.

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1030965--3/30/2007--EVERCOM_INC