CCA PRISON REALTY TRUST, S-11/A, 1997-06-18

CCA PRISON REALTY TRUST
S-11/A, 1997-06-18
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1997

REGISTRATION NO. 333-25727
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 2

TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

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

CCA PRISON REALTY TRUST
(Exact name of Registrant as Specified in its Governing Instruments)

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

2200 ABBOTT MARTIN ROAD
SUITE 201
NASHVILLE, TENNESSEE 37215
(615) 460-7452
(Address of Principal Executive Offices)

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

J. MICHAEL QUINLAN
CHIEF EXECUTIVE OFFICER
CCA PRISON REALTY TRUST
2200 ABBOTT MARTIN ROAD
SUITE 201
NASHVILLE, TENNESSEE 37215
(615) 460-7452
(Name and Address of Agent for Service)

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

COPIES TO:

<TABLE>
<S> <C>
ELIZABETH E. MOORE F. MITCHELL WALKER, JR.
STOKES & BARTHOLOMEW, P.A. BASS, BERRY & SIMS PLC
SUNTRUST CENTER, NASHVILLE, TENNESSEE 37219 FIRST AMERICAN CENTER, NASHVILLE, TENNESSEE 37238
(615) 259-1450/FAX (615) 259-1470 (615) 742-6200/FAX (615) 742-6298
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JUNE 18, 1997

PROSPECTUS

17,000,000 COMMON SHARES

CORRECTIONS CORPORATION OF AMERICA (LOGO)

CCA Prison Realty Trust, a Maryland real estate investment trust (the
"Company"), was formed on April 23, 1997 to capitalize on the opportunities
created by the growing trend towards privatization in the corrections industry,
including the increased demand for private correctional and detention
facilities. The principal business strategy of the Company will be to acquire
correctional and detention facilities that meet the Company's investment
criteria, from both private prison managers and government entities, to expand
its existing facilities, and to lease all such facilities under long-term
leases. The Company initially will acquire nine correctional and detention
facilities (collectively, the "Initial Facilities") currently owned and operated
by Corrections Corporation of America, a Tennessee corporation ("CCA"), for an
aggregate purchase price of approximately $308.1 million. The Company will also
have an option for a period of three years following the closing of the purchase
of the Initial Facilities, to acquire up to five additional correctional and
detention facilities (collectively, the "Option Facilities") currently owned and
operated or under construction or development by CCA. See "The Formation
Transactions." The Company will lease all of the Initial Facilities and the
Option Facilities to CCA, and CCA will continue to manage the Initial Facilities
and the Option Facilities. The Company intends to pay regular quarterly
distributions, initially at a rate of $1.70 per share per annum, beginning with
a pro-rated dividend for the quarter ended September 30, 1997. See
"Distributions."

All of the common shares, $0.01 par value per share, of the Company (the
"Common Shares") offered hereby (the "Offering") are being sold by the Company.
Doctor R. Crants, Chairman of the Company and Chairman and Chief Executive
Officer of CCA, has agreed to acquire in the Offering approximately 500,000
Common Shares at a price per share equal to the initial public offering price.
Upon completion of the Offering, Doctor R. Crants and other members of the
management of the Company will collectively own, or will have options to
acquire, approximately 10.1% of the Common Shares.

Prior to the Offering, there has been no public market for the Common
Shares. It is currently anticipated that the initial public offering price per
Common Share will be between $19.00 and $21.00. See "Underwriting" for a
discussion of factors to be considered in determining the initial public
offering price. The Common Shares have been approved for listing on the New York
Stock Exchange (the "NYSE") under the symbol "PZN," subject to official notice
of issuance.

SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON SHARES OFFERED HEREBY, INCLUDING:

- The dependence on CCA as the lessee of the Facilities;

- Potential conflicts of interest of affiliates of the Company and CCA;

- Corrections and detention industry risks;

- The Company's lack of operating history and management's lack of
experience in operating a real estate investment trust;

- The taxation of the Company as a regular corporation if it fails to
qualify as a real estate investment trust; and

- Restrictions on ownership of outstanding Common Shares.
---------------------

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

<TABLE>
<CAPTION>
=================================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................................... $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
Total(3).................................................... $ $ $
==============================================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses estimated at $3,000,000 payable by the Company.

(3) The Company has granted to the Underwriters a 30-day over-allotment option
to purchase up to 2,550,000 additional Common Shares on the same terms and
conditions as set forth above. If all such shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discount will be $ and the total Proceeds to Company
will be $ . See "Underwriting."

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

The Common Shares are offered subject to receipt and acceptance by the
several Underwriters, to prior sale, and to the several Underwriters' right to
reject any order in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that certificates for the Common Shares will be
available for delivery on or about , 1997.
---------------------
JC BRADFORD & CO A.G. EDWARDS & SONS, INC. LEGG MASON WOOD WALKER INC. LEHMAN
BROS PAINEWEBBER INC. STEPHENS INC.
, 1997
<PAGE> 3

<TABLE>
<S> <C>
A growing demand for secure beds to house [A collection of photos representing views of
violent criminals has created an opportunity the interior and exterior of various facili-
for capital investment through the purchase ties to be acquired by the Company from CCA:
and leaseback of jails and prisons. [caption] (i) photo of open sleeping area; (ii) photo
of security personnel operating security
panel; (iii) photo of common area; (iv) photo
of security checkpoint; (v) photo of exterior
of Eloy Detention Center; (vi) photo of
multi-inmate cell; and (vii) photo of common
</TABLE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES,
INCLUDING STABILIZATION AND SHORT-COVERING TRANSACTIONS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."

[Fold-Out]
CCA Prison Realty Trust
Building on the growth of private sector corrections. [caption]

[Map of the United States showing location of
properties to be acquired or that may be acquired by the Company from CCA]

<TABLE>
<S> <C> <C> <C> <C>
[Picture of Exterior of
Eloy The Initial
Detention Center] Facilities
Eloy Detention Center Eloy, Arizona
Eloy, Arizona [caption] Florence, Arizona
Leavenworth, Kansas
Mason, Tennessee
Bridgeport, Texas
Houston, Texas
Laredo, Texas
[Picture of Exterior of Mineral Wells, Texas
Houston Taylor, Texas
Processing Center] The Option
Houston Processing Center Facilities
Houston, Texas [caption] Walsenburg, Colorado
Estancia, New Mexico
Youngstown, Ohio
Sayre, Oklahoma
Whiteville, Tennessee
[caption]
[Picture of Exterior of [Picture of Exterior of [Picture of Exterior of
West Tennessee [Picture of Exterior of Leavenworth Detention Central Arizona
Detention Facility] T. Don Hutto [Picture of Exterior of Center] Detention Center]
West Tennessee Detention Correctional Center] Laredo Leavenworth Detention Central Arizona
Facility T. Don Hutto Correctional Processing Center] Center Detention Center
Mason, Tennessee Center Laredo Processing Center Leavenworth, Kansas Florence, Arizona
[caption] Taylor, Texas [caption] Laredo, Texas [caption] [caption] [caption]
</TABLE>

Not pictured: Bridgeport Pre-Parole Transfer Facility, Bridgeport, Texas, and

Mineral Wells Pre-Parole Transfer Facility, Mineral Wells, Texas [caption]

<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUMMARY.................................. 1
The Company........................................ 1
Summary Risk Factors............................... 2
Selected Historical and Pro Forma Financial Data... 3
Business Objectives and Strategies................. 5
Business of the Company and its Properties......... 6
The Private Corrections Industry................... 9
Corrections Corporation of America................. 9
Relationship Between CCA and the Company after the
Formation Transactions........................... 9
Leases............................................. 11
The Formation Transactions......................... 11
Distributions...................................... 13
Tax Considerations and Tax Status of the Company... 14
The Offering....................................... 15
RISK FACTORS........................................ 16
The Dependence on CCA, as the Lessee of the
Facilities, for the Company's Initial Revenues
and Ability to Make Distributions................ 16
Conflicts of Interest.............................. 16
Relationships Which May Give Rise to Conflicts of
Interest....................................... 16
Situations in Which Conflicts of Interest Have
Arisen and May Continue to Arise............... 16
Corrections and Detention Industry Risks........... 17
Short-Term Nature of Government Contracts........ 17
Dependence on Government Appropriations.......... 17
Dependence on Government Agencies for Inmates.... 18
Dependence on Ability to Develop New Prisons..... 18
Legal Proceedings................................ 18
Adverse Impact on Distributions of Failure of
Company to Qualify as a REIT..................... 18
Initial Distribution Policy........................ 19
Real Estate Investment Considerations.............. 19
General.......................................... 19
Environmental Matters............................ 19
Uninsured Loss................................... 20
Dependence on Key Personnel........................ 20
Lack of Operating History.......................... 20
Lack of Control Over Day-to-Day Operations and Man-
agement of the Facilities........................ 20
Dilution........................................... 20
Ownership Limit.................................... 20
Limits on Changes in Control....................... 21
Changes in Investment and Financing Policies
Without Vote of Shareholders..................... 21
No Prior Market for Common Shares; Factors
Affecting Market Price........................... 21
Dependence on Financing For Growth and Adverse
Consequences of Debt Financing on Ability to Make
Distributions.................................... 22
ERISA Risks........................................ 22
THE COMPANY......................................... 23
General............................................ 23
Business Objectives and Strategies................. 24
Future Growth of the Company....................... 24
External Growth.................................. 24
Internal Growth.................................. 26
Lease Negotiation................................ 26
Due Diligence Process............................ 26
USE OF PROCEEDS..................................... 28
CAPITALIZATION...................................... 28
DISTRIBUTIONS....................................... 29
DILUTION............................................ 31
PRO FORMA FINANCIAL STATEMENTS...................... 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................ 35
General............................................ 35
Results of Operations.............................. 35
Pro Forma Results of Operations.................... 35
Liquidity and Capital Resources.................... 35
Funds from Operations.............................. 36
Inflation.......................................... 37
THE PRIVATE CORRECTIONS INDUSTRY.................... 37
CORRECTIONS CORPORATION OF AMERICA.................. 38
Facility Operations................................ 38
Certain Selected Financial Information............. 39
</TABLE>

<TABLE>
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PAGE
----
<S> <C>
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 41
BUSINESS OF THE COMPANY AND ITS PROPERTIES.......... 48
The Facilities..................................... 48
Description of the Facilities...................... 50
Legal Proceedings.................................. 52
Competition........................................ 53
Government Regulation.............................. 53
RELATIONSHIP BETWEEN CCA AND THE COMPANY AFTER THE
FORMATION TRANSACTIONS............................. 54
LEASES.............................................. 55
MANAGEMENT.......................................... 59
Trustees and Executive Officers.................... 59
Committees of the Board of Trustees................ 62
Compensation of Trustees........................... 62
Indemnification.................................... 62
Executive Compensation............................. 63
The Share Incentive Plan........................... 63
Non-Employee Trustees' Plan........................ 64
Dividend Reinvestment Plan......................... 65
Deferred Compensation Plan......................... 65
Employment Agreements.............................. 65
CERTAIN RELATIONSHIPS AND TRANSACTIONS.............. 66
Share Acquisitions by Management................... 66
Purchase of Initial Facilities..................... 66
Option Facilities.................................. 66
Right to Purchase.................................. 66
Employment Agreements.............................. 67
POLICIES AND OBJECTIVES WITH RESPECT TO CERTAIN
ACTIVITIES......................................... 67
Investment Objectives and Policies................. 67
Dispositions; CCA's Right of First Refusal......... 68
Financing.......................................... 68
Working Capital Reserves........................... 69
Conflict of Interest Policies...................... 69
Other Policies..................................... 69
CONFLICTS OF INTEREST............................... 70
General............................................ 70
Relationships Which May Give Rise to Conflicts of
Interest......................................... 70
Situations in Which Conflicts of Interests Have
Arisen and May Continue to Arise................. 70
Steps Taken by the Company to Address Potential
Conflicts of Interest............................ 71
THE FORMATION TRANSACTIONS.......................... 72
Advantages and Disadvantages to Unaffiliated
Shareholders..................................... 73
Benefits to the Company and its Officers and
Trustees......................................... 73
Benefits to CCA.................................... 73
PRINCIPAL SHAREHOLDERS OF THE COMPANY............... 74
DESCRIPTION OF CAPITAL SHARES....................... 74
General............................................ 74
Restrictions on Ownership.......................... 75
Certain Provisions of Maryland Law and of the Com-
pany's Declaration of Trust and Bylaws........... 76
Limitations on Changes in Control.................. 78
Limitation of Liability and Indemnification of
Trustees......................................... 79
Transfer Agent and Registrar....................... 79
SHARES AVAILABLE FOR FUTURE SALE.................... 80
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS.......... 80
Taxation of the Company............................ 80
Failure to Qualify................................. 86
Taxation of Taxable Domestic Shareholders.......... 86
Backup Withholding................................. 87
Taxation of Tax-Exempt Shareholders................ 87
Taxation of Foreign Shareholders................... 88
Other Tax Consequences............................. 89
ERISA CONSIDERATIONS................................ 90
UNDERWRITING........................................ 91
EXPERTS............................................. 92
LEGAL MATTERS....................................... 92
GLOSSARY............................................ 93
INDEX TO FINANCIAL STATEMENTS....................... F-1
</TABLE>

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<PAGE> 5

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-11 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Common Shares
offered hereby (the "Registration Statement"). This Prospectus, which is part of
the Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits and financial schedules thereto. For
further information with respect to the Company and the Common Shares, reference
is made to the Registration Statement and such exhibits and financial schedules
filed therewith. Any statements contained herein concerning the provisions of
any document are not necessarily complete, and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.

For further information with respect to the Company and the Common Shares,
reference is made to the Registration Statement and such exhibits and financial
schedules, copies of which may be examined without charge at, or copies obtained
upon payment of prescribed fees from, the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be
available for inspection and copying at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661-2511. The Commission also maintains a web site that contains reports,
proxy and information statements and other information regarding registrants
that file documents with the Commission, including the Company, and the address
is http://www.sec.gov. Moreover, the Common Shares have been approved for
listing on the New York Stock Exchange (the "NYSE"), subject to official notice
of issuance. Accordingly, upon official notice of issuance, periodic reports,
proxy material, and other information concerning the Company, when filed, may be
inspected at the offices of the NYSE, Operations, 20 Broad Street, New York, New
York 10005.

Following consummation of the Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and will, therefore, be required to file reports, proxy and
information statements and other information with the Commission pursuant to the
reporting requirements of Section 13(a) thereof, in addition to any other legal
or NYSE requirements. Such reports, statements and information can also be
inspected and copied at the Commission's offices and web site listed above.

CAUTIONARY STATEMENT

Information contained in this Prospectus contains "forward-looking
statements" relating to, without limitation, future economic performance, plans
and objectives of management for future operations and projections of revenue
and other financial items, which can be identified by the use of forward-looking
terminology such as "may," "will," "should," "expect," "anticipate," "estimate"
or "continue" or the negative thereof or other variations thereon or comparable
terminology. The cautionary statements set forth under the caption "Risk
Factors" and elsewhere in this Prospectus identify important factors with
respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to differ materially from those
in such forward-looking statements.

ii
<PAGE> 6

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial information and statements, and the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information contained in this Prospectus assumes(i) an initial public offering
price per Common Share of $20.00 (the midpoint of the range of estimated initial
public offering prices set forth on the front cover of this Prospectus); (ii)
the consummation of the Formation Transactions (as hereinafter defined); and
(iii) no exercise of the Underwriters' over-allotment option. See "Glossary" for
the definitions of certain terms used in the Prospectus.

THE COMPANY

CCA Prison Realty Trust, a Maryland real estate investment trust (the
"Company"), has been formed to capitalize on the opportunities created by the
growing trend towards privatization in the corrections industry, including the
increased demand for private correctional and detention facilities. The
principal business strategy of the Company will be to acquire correctional and
detention facilities that meet the Company's investment criteria, from both
private prison managers and government entities, to expand its existing
facilities, and to lease all such facilities under long-term leases. The Company
initially will acquire nine correctional and detention facilities (collectively,
the "Initial Facilities"), which have an aggregate design capacity of 6,687
beds, currently owned and operated by Corrections Corporation of America, a
Tennessee corporation ("CCA"). The Company will also have an option for a period
of three years following the closing of the purchase of the Initial Facilities,
to acquire up to five additional correctional and detention facilities
(collectively, the "Option Facilities"), which have an aggregate design capacity
of 5,638 beds, currently owned and operated or under construction or development
by CCA. (The Initial Facilities and the Option Facilities are sometimes referred
to collectively as the "Facilities"). In addition, the Company will have an
option to acquire any correctional or detention facility acquired or developed
and owned by CCA in the future for a period of three years following the date
CCA first receives inmates at such facility (the "Service Commencement Date").
As a result of these transactions, the Company and CCA will have several ongoing
relationships after the Formation Transactions, some of which could give rise to
possible conflicts of interest. See "Relationship Between CCA and the Company
after the Formation Transactions." Upon completion of the Offering and the
Formation Transactions, the Company will be the only publicly-traded,
self-administered and self-managed real estate investment trust ("REIT") focused
on acquiring and owning correctional and detention facilities.

The Company will lease all of the Facilities to CCA, and CCA will continue
to manage the Facilities. The Company believes that with respect to the Initial
Facilities and, if acquired, the Option Facilities, it will benefit
significantly from the continuity of management provided by CCA. CCA is the
largest manager of privatized correctional and detention facilities worldwide,
and has developed and operated the Facilities since they were acquired or
constructed by CCA at various times from 1984 through 1997. See "Business of the
Company and its Properties."

The Company will purchase the Initial Facilities for an aggregate cash
purchase price of approximately $308.1 million concurrent with the closing of
the Offering. The Initial Facilities will be leased to CCA pursuant to
long-term, non-cancelable "triple net" leases (the "Leases") which require CCA
to pay all operating expenses, taxes, insurance and other costs. All of the
Leases will provide for base rent with certain annual escalations and will have
primary terms ranging from 10 to 12 years which may be extended at fair market
rates for three additional five-year periods upon the mutual agreement of the
Company and CCA. The Initial Facilities are expected to generate aggregate
initial annual rent of approximately $33.9 million, which represents an 11%
lease rate based on the purchase price. The Company will have general recourse
to CCA under the Leases, but CCA's payment obligations under such Leases are not
secured by any assets of CCA. The obligations of CCA under the Leases are
cross-defaulted to each of the other Leases with respect to payment defaults and
certain other defaults. Each Lease (and any future lease with CCA) may be
terminated by the Company, at its option, at any time after the first five years
of the lease, upon 18 months written notice to CCA.

1
<PAGE> 7

The Company has obtained a commitment for a $150.0 million line of credit
(the "Bank Credit Facility") from a group of banks led by First Union National
Bank of Tennessee ("First Union"), which will be used for the acquisition of
additional correctional facilities, including the Option Facilities, and for
certain other purposes, including the expansion of existing facilities and
working capital, as necessary. The Company expects to close the Bank Credit
Facility immediately following the consummation of the Offering. Upon
consummation of the Offering, the Company will have no outstanding indebtedness.
The Company believes that its lack of debt, coupled with the available financing
through the Bank Credit Facility, will provide it with significant financial
resources in pursuing correctional facility acquisition and expansion
opportunities, including some or all of the Option Facilities. The Company
intends to maintain a capital structure which limits consolidated indebtedness
to no more than 50% of its total capitalization. See "Policies and Objectives
With Respect to Certain Activities -- Financing."

The Company intends to initially focus its investments on privately-managed
facilities that are owned and operated by CCA or its subsidiaries. However, the
Company will also pursue other opportunities, including acquisitions of, or
financings for, correctional facilities owned and operated by various government
entities. The Company believes it has significant access to development and
acquisition opportunities through its relationship with CCA and the experience
and industry contacts of its Board of Trustees and management, particularly its
Chief Executive Officer, J. Michael Quinlan, former Director of the Federal
Bureau of Prisons (the "BOP"). The Company intends to utilize Mr. Quinlan's
experience in developing and managing correctional and detention facilities to
opportunistically pursue development and acquisitions of correctional facilities
from both private prison owners and operators and government entities. See
"Management -- Trustees and Executive Officers."

The Company expects to qualify as a REIT for federal income tax purposes.
In order to qualify as a REIT, the Company's income must be derived from certain
sources, including rents from real property (and generally excluding income from
the operation of a correctional facility). See "Material Federal Income Tax
Considerations -- Taxation of the Company -- Income Tests." Accordingly, the
Company is precluded from operating correctional facilities and, consequently,
intends to lease such properties pursuant to long-term, non-cancelable triple
net leases.

The Company was formed as a Maryland real estate investment trust on April
23, 1997. The Company's principal executive offices are located at, and its
mailing address is, 2200 Abbott Martin Road, Suite 201, Nashville, Tennessee
37215. The Company's telephone and fax numbers are (615) 460-7452 and (615) 460-
1206, respectively.

SUMMARY RISK FACTORS

Investors should carefully consider the matters discussed under "Risk
Factors" in this Prospectus prior to making an investment decision regarding the
Common Shares offered hereby. Such risk factors include:

- The dependence on CCA, as the lessee of the Facilities, for the Company's
initial revenues and ability to make distributions to its shareholders;

- Potential conflicts of interest among affiliates of both CCA and the
Company, the lack of third party appraisals of the Facilities and the
lack of arm's-length negotiations in connection with certain aspects of
the Formation Transactions;

- Ownership of the Company's facilities is subject to operating risks
inherent in the corrections and detention industry;

- The taxation of the Company as a regular corporation if it fails to
qualify as a REIT;

- Actual Cash Available for Distribution (defined generally as net income
(loss) (computed in accordance with generally accepted accounting
principles) of the Company plus depreciation and amortization minus
capital expenditures and principal payments on indebtedness) may be
insufficient to allow the Company to maintain its proposed initial
distribution rate;

2
<PAGE> 8

- Certain real estate investment considerations, which may affect the value
of the Common Shares and the Company's ability to make expected
distributions to shareholders, including (i) the potential liability of
the Company for unknown or future environmental matters; and (ii) the
possibility that a facility could sustain an uninsured loss;

- The dependence on certain key personnel, particularly Messrs. Quinlan,
Crants, III and Devlin;

- The Company's lack of operating history and lack of experience in
operating in accordance with the requirements for maintaining its
qualification as a REIT;

- The Company's lack of control over the day-to-day operations and
management of the Facilities;

- Immediate dilution in the net tangible book value per share of the Common
Shares purchased in the Offering;

- The restrictions on the ownership of outstanding Common Shares to ensure
compliance with certain requirements related to qualification of the
Company as a REIT;

- Anti-takeover effect of limiting actual or constructive ownership of
Common Shares of the Company by a single person to 9.8% of the
outstanding capital shares, subject to certain specified exceptions, and
certain other provisions contained in the organizational documents of the
Company, any of which may have the effect of delaying or preventing a
transaction or change in control of the Company that might involve a
premium price for the Common Shares or otherwise be in the best interests
of the Company's shareholders;

- The ability of the Company to make changes in its investment and
financing policies without the approval of its shareholders, which could
result in decisions that do not fully reflect the interests of all
shareholders of the Company;

- The lack of a prior market for the Common Shares and the potential impact
of market interest rate increases and other factors on the trading price
of the Common Shares; and

- The possibility that the Company may not be able to obtain long-term
financing on favorable terms and that interest rates might increase on
amounts drawn under the Bank Credit Facility.

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth (i) selected historical financial
information for the Company and (ii) unaudited selected pro forma financial
information for the Company. The pro forma operating information is presented as
if the Formation Transactions had occurred as of the beginning of the period
indicated and therefore incorporates certain assumptions that are included in
the Notes to Pro Forma Statements of Operations. The pro forma balance sheet
information is presented as if the Formation Transactions had occurred on March
31, 1997. The pro forma information does not purport to represent what the
Company's financial position or results of operations actually would have been
had the Formation Transactions, in fact, occurred on such date or at the
beginning of the period indicated, or to project the Company's financial
position or results of operations at any future date or for any future period.
3
<PAGE> 9

CCA PRISON REALTY TRUST

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
----------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
OPERATING DATA:
Revenue:
Rent income(1)......................................... $33,891 $8,473
Costs and expenses:
Operating and administrative(2)........................ 1,950 487
Provision for depreciation and amortization(3)......... 8,588 2,147
------- ------
Total costs and expenses.......................... 10,538 2,634
------- ------
Net income................................................ $23,353 $5,839
============= ===========
Net income per share...................................... $ 1.35 $ 0.34
============= ===========
Weighted average number of shares outstanding(4).......... 17,301 17,301
OTHER DATA:
Funds from Operations(5).................................. $31,941 7,986
Cash Available for Distribution........................... 31,941 7,986
Distributions............................................. 29,412 7,353
Distributions per share................................... $ 1.70 $0.425
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
AS OF AS OF
MARCH 31, 1997 APRIL 23, 1997
----------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Real estate before accumulated depreciation............... $311,103 $ --
Total assets.............................................. 316,200 1
Shareholders' equity...................................... 316,200 1
</TABLE>

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

(1) Rent income from CCA recorded in accordance with the terms of the Leases as
if the Initial Facilities had been in operation at the leased design
capacity for the entire period. The Company will lease the Initial
Facilities to CCA under operating leases.
(2) Recurring administrative expenses of the Company, including franchise and
excise taxes, based upon management's estimates of operating and
administrative costs.
(3) Depreciation expense on fixed assets purchased from CCA based on the
estimated useful lives of the Initial Facilities.
(4) Weighted average shares outstanding include the founder's shares, shares
issued to management and Common Shares sold in the Offering as if such
shares were outstanding for the entire period.

(5) Management believes Funds from Operations (as hereinafter defined) is
helpful to investors as a measure of the performance of an equity REIT
because, along with cash flows from operating activities, financing
activities and investing activities, it provides investors with an
understanding of the ability of the Company to incur and service debt and
make capital expenditures. Funds from Operations is defined by the Board of
Governors of NAREIT (as hereinafter defined) as net income (loss) (computed
in accordance with GAAP), excluding significant non-recurring items, gains
(or losses) from debt restructuring and sales of property, plus depreciation
and amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures and, accordingly, may not be
comparable to other REITs' Funds from Operations calculated under a
differing methodology. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Funds from Operations."
Funds from Operations should be examined in conjunction with net income as
presented.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
------------------ ------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Calculations of Funds from Operations:
Pro Forma net income...................................... $23,353 $5,839
Plus: Pro forma real estate depreciation and
amortization............................................ 8,588 2,147
------- ------
Pro forma Funds from Operations........................... $31,941 $7,986
================= ===================
</TABLE>

Funds from Operations should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flows from operating activities
(determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it indicative of funds available to fund the Company's
cash needs, including its ability to make distributions.

4
<PAGE> 10

BUSINESS OBJECTIVES AND STRATEGIES

The Company's primary business objectives are to maximize current returns
to shareholders through increases in cash flow available for distribution and to
increase long-term total returns to shareholders through appreciation in the
value of the Common Shares. The Company will seek to achieve these objectives
through:

- The acquisition of the Initial Facilities and the potential acquisition
of the Option Facilities;

- The strategic expansion of its correctional and detention facilities
portfolio through the selective acquisition from both private prison
managers and government entities, of correctional and detention facilities
that demonstrate potential for significant revenue and cash flow;

- The expansion of its existing facilities;

- The construction and/or development of new correctional and detention
facilities;

- The improvement and enhancement of the Company's holdings through proper
maintenance and capital improvements;

- The structuring of fair market leases under which the lessees pay base
rent with certain annual escalations and pay certain expenses in
connection with the operation of the property such as real estate taxes,
insurance, utilities and services, maintenance and other operating
expenses;

- The provision of mortgages or other appropriate financing vehicles to
correctional facility owners and operators in circumstances where
ownership by the Company is not otherwise attractive;

- The monitoring of operating performance of the facilities in its
portfolio to ensure that the lessees comply with their lease obligations;
and

- The maintenance of a debt to total capitalization ratio (i.e., total debt
of the Company as a percentage of shareholders' equity plus total debt) of
50% or less. See "Policies and Objectives with Respect to Certain
Activities -- Financing."

FUTURE GROWTH OF THE COMPANY

External Growth

Acquisition Opportunities. In addition to the possible acquisition of the
Option Facilities, the Company intends to acquire from both private prison
managers and government entities additional correctional and detention
facilities that meet its investment criteria, as described herein. The primary
source of private correctional facilities to be initially acquired or financed
by the Company will be facilities owned and operated by CCA or its subsidiaries.
The Company believes it has a competitive advantage in the acquisition of new
correctional facilities due to its relationship with CCA and the Company's
significant capital resources. The Company also believes that attractive
opportunities exist to acquire or develop correctional facilities from or on
behalf of various government entities. In pursuing such opportunities, the
Company expects to utilize the industry knowledge, experience and relationships
of its Board of Trustees and management, particularly, J. Michael Quinlan, its
Chief Executive Officer and Doctor R. Crants, Chairman of the Board of Trustees.
Mr. Quinlan is the former director of the BOP and Mr. Crants is the Chairman and
Chief Executive Officer of CCA.

Financing Opportunities. High occupancy rates and prison overcrowding have
resulted in an increased demand for new federal, state and local correctional
facilities. While the Company intends to grow primarily through acquisitions and
expansions of correctional facilities, the Company believes that opportunities
exist for it to provide mortgage or other appropriate financing vehicles to
government entities and private prison owners and operators in circumstances
when ownership by the Company is not otherwise attractive.

Internal Growth

CCA will continue to attempt to achieve economies of scale through expansions of
existing facilities. Management of the Company intends to actively participate
in its tenants' expansion plans and intends to provide expansion space as
needed.

Rent Escalations. The rent schedule under the Leases provides for a
relatively stable source of cash flow and opportunities to participate in future
growth in revenues. The minimum rent for the first year for each Facility under
the Leases is initially set at a fixed amount. Thereafter, minimum rent will
escalate by a percentage of the rent applicable to a particular Facility in the
preceding year, such percentage being equal to the greater of (i) 4%, or (ii)
the percentage which is 25% of the percentage increase in the gross management
revenues realized by CCA from such Facility, exclusive of any increase
attributable to expansion in the size of or the number of beds in such facility
(the "Base Rent Escalation").

BUSINESS OF THE COMPANY AND ITS PROPERTIES

THE FACILITIES

The Company has negotiated a purchase agreement for the nine Initial
Facilities, and option agreements to purchase any or all of the five additional
Option Facilities that may be exercised at any time during the three-year period
following the closing of the purchase of the Initial Facilities. In addition,
the Company will have an option to acquire any correctional or detention
facility acquired or developed and owned by CCA in the future for a period of
three years following the Service Commencement Date with respect to such
facility. The Company will acquire a 100% interest in each of the facilities
purchased. Certain information with respect to the Initial Facilities and the
Option Facilities is set forth in the following tables and accompanying
descriptions. In general, the Facilities are all of the correctional and
detention facilities owned or currently under development by CCA which will not
be owned by the contracting government entity or are not the subject of below
market purchase options held by contracting government entities.

6
<PAGE> 12

THE INITIAL FACILITIES

<TABLE>
<CAPTION>
INITIAL
ANNUAL LEASE
DESIGN DATE RENT TERM
FACILITY AND LOCATION CAPACITY(1) OPENED TYPE OF FACILITY(2) CONTRACTING ENTITIES (IN MILLIONS)(3) (YEARS)
- --------------------- ----------- --------- ------------------- -------------------- ---------------- -------
<S> <C> <C> <C> <C> <C> <C>
Houston Processing
Center.............. 411 April Medium Security INS $ 1.5 12
Houston, Texas 1984 Processing Center
Laredo Processing
Center.............. 258 March Medium Security INS and BOP 1.2 12
Laredo, Texas 1985 Processing Center
Bridgeport Pre-Parole
Transfer Facility... 200 November Minimum Security State of Texas 0.4 12
Bridgeport, Texas 1987 Pre-Parole Transfer
Facility
Mineral Wells Pre-
Parole Transfer
Facility............ 1,119 July Minimum Security State of Texas 3.0 12
Mineral Wells, Texas 1989 Pre-Parole Transfer
Facility
West Tennessee
Detention
Facility............ 600 September Multi-Security INS, USMS(4), BOP and 3.7 10
Mason, Tennessee 1990 Detention Center State of North Carolina
Leavenworth Detention
Center.............. 327 June Maximum Security USMS 3.3 10
Leavenworth, Kansas 1992 Detention Center
Eloy Detention
Center.............. 1,500(5) July Medium Security INS and BOP 6.0 12
Eloy, Arizona 1994 Detention Center
Central Arizona
Detention Center.... 1,792 October Multi-Security USMS and States of Oregon, 12.3 10
Florence, Arizona 1994 Detention Center Alaska and New Mexico
T. Don Hutto
Correctional
Center.............. 480 January Medium Security Williamson County, Texas 2.5 12
Taylor, Texas 1997 Correctional and States of Colorado
Facility and Wyoming
</TABLE>

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

(1) Design capacity measures the number of beds, and accordingly the number of
inmates, each facility is designed to accommodate.

(2) Each facility is identified according to the level(s) of security maintained
and the types of inmates held. Minimum security facilities are facilities
having open-housing within an appropriate designated and patrolled
institutional perimeter; medium security facilities are facilities having
either cells, rooms or dormitories, a secure perimeter, and some form of
external patrol; maximum security facilities are facilities having single
occupancy cells, a secure perimeter and external patrol or detention
devices; and multi-security facilities are facilities with various areas
encompassing either minimum, medium, or maximum security. Processing centers
are used to house undocumented aliens for the U.S. Immigration and
Naturalization Service (the "INS"); pre-parole transfer facilities are used
to hold inmates that have been arrested for technical violations of their
parole agreements with the State Department of Criminal Justice, Board of
Pardons and Paroles; detention facilities are used to house inmates of all
levels, including pre-trial and pre-sentence prisoners for the U.S. Marshals
Service, inmates sentenced, but not yet housed in correctional facilities,
inmates awaiting trial, sentencing or hearing, and persons detained by the
INS; and correctional facilities are used to house inmates on a permanent
basis for the duration of their sentences.

(3) On an annualized basis.
(4) U.S. Marshals Service (the "USMS").
(5) Includes a 250-bed expansion which is expected to be completed in June 1997.

The Initial Facilities will be purchased from CCA for an aggregate purchase
price of approximately $308.1 million in cash. The Company will lease the
Initial Facilities to CCA pursuant to the Leases with terms ranging from 10 to
12 years with aggregate initial annual rents of approximately $33.9 million.
Throughout the terms of the initial Leases, annual rents will escalate by the
Base Rent Escalation. The Leases may be extended at fair market rates for three
additional periods of five years each upon the mutual agreement of the Company
and CCA.

7
<PAGE> 13

The initial public offering price and, accordingly, the aggregate
consideration to be paid by the Company in the Formation Transactions are based
on an evaluation of CCA's operation of the Initial Facilities as a whole and the
factors discussed under "Underwriting" herein, rather than the valuation of
individual properties. Independent valuations were not obtained to determine the
purchase price to be paid by the Company for, or the fair market value of, the
Initial Facilities, and the purchase price to be paid by the Company for the
Initial Facilities exceeds their historical costs. See "Risk
Factors -- Conflicts of Interest." The purchase price for the Initial Facilities
was determined primarily based on an evaluation of the current and anticipated
cash flows and operating results of such facilities. To determine the purchase
price for each of the Initial Facilities other than the T. Don Hutto
Correctional Center, the anticipated annual cash flow from the facility less
ongoing capital expenditures was divided by an agreed upon coverage ratio and
lease rate. Because the T. Don Hutto Correctional Center was not completed until
January 1997, the purchase price of that facility was calculated as CCA's
approximate cost of developing, constructing and equipping the facility, plus 5%
of such costs. It is possible that if the Company were to have obtained
third-party valuations, the sum of the values of the Initial Facilities might
have been lower than the valuation of the Company. There has not been, nor will
there be, any valuation of the Company other than the initial public offering
price of the Common Shares.

THE OPTION FACILITIES

<TABLE>
<CAPTION>
ANTICIPATED
DESIGN OPENING
FACILITY AND LOCATION CAPACITY DATE TYPE OF FACILITY CONTRACTING ENTITIES
- --------------------- -------- ----------- --------------------- ----------------------------
<S> <C> <C> <C> <C>
Northeast Ohio Correctional Center.......... 2,016 June Medium Security Pending(1)
Youngstown, Ohio 1997 Correctional Facility
Torrance County Detention Facility.......... 910 October Multi-Security USMS, BOP, State of New
Estancia, New Mexico 1997(2) Detention Facility Mexico and Torrance County,
New Mexico
Southern Colorado Correctional Facility..... 752 October Medium Security State of Colorado
Walsenburg, Colorado 1997 Correctional Facility
North Fork Correctional Facility............ 960 January Medium Security Under negotiation(3)
Sayre, Oklahoma 1998 Correctional Facility
Whiteville Correctional Center.............. 1,000 July Medium Security Under negotiation(4)
Whiteville, Tennessee 1998 Correctional Facility
</TABLE>

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

(1) CCA is reserving all 2,016 beds in this facility for use by the District of
Columbia on a permanent basis. CCA is currently housing 900 inmates in this
facility for the District of Columbia under a temporary contract.

(2) Anticipated opening date for a 624-bed expansion. The current 286-bed
facility was opened in December 1990.
(3) CCA is currently negotiating with the State of Colorado with respect to beds
in this facility.
(4) CCA is currently negotiating with various states with respect to beds in
this facility.

The Company will have options to purchase, for a period of three years from
the closing of the purchase of the Initial Facilities, any or all of the five
Option Facilities. See "Business of the Company and its Properties -- The Option
Facilities." The purchase price of each Option Facility will be equal to CCA's
approximate cost of developing, constructing and equipping such Option Facility,
plus 5% of such costs. The initial annual rental rate for each Option Facility
will be the greater of (i) the fair market rental rate of the Option Facility,
or (ii) 11% of the purchase price. Using the 11% lease rate calculation, the
Company and CCA believe that the purchase price and initial annual rent,
respectively, for each Option Facility, if purchased, will be: (a) Northeast
Ohio Correctional Center -- $58.0 million and $6.4 million; (b) Torrance County
Detention Facility -- $36.0 million and $4.0 million; (c) Southern Colorado
Correctional Facility -- $27.5 million and $3.0 million; (d) North Fork
Correctional Facility -- $29.5 million and $3.2 million; and (e) Whiteville
Correctional Center -- $42.0 million and $4.6 million. Total estimated purchase
price and first-year rent for the Option Facilities amount to approximately
$193.0 million and $21.2 million, respectively.

The Company will lease to CCA the Option Facilities, if acquired, pursuant
to long-term, non-cancelable triple net leases on substantially the same terms
and conditions as the Leases for the Initial Facilities, including the Base Rent
Escalation. The Company does not intend to acquire an Option Facility until it
is fully constructed, is the subject of an enforceable management contract
between CCA and a government entity,

8
<PAGE> 14

and has an occupancy rate acceptable to the Company. See "The
Company -- Business Objectives and Strategies."

Because the Option Facilities are currently under development, construction
or expansion by CCA, the cash consideration to be paid by the Company for each
of the five Option Facilities will be determined based on CCA's approximate
costs of developing, constructing and equipping such facilities plus 5% of such
costs. Independent valuations were not obtained to determine the purchase price
of the Option Facilities, and the purchase price to be paid by the Company for
the Option Facilities exceeds their historical costs. See "Risk
Factors -- Conflicts of Interest -- Situations in Which Conflicts of Interest
Have Arisen and May Continue to Arise -- Valuation of the Facilities."

THE PRIVATE CORRECTIONS INDUSTRY

The Company believes the United States private corrections industry is in a
period of significant growth. In the United States, there is a growing trend
toward privatization of government services and functions, including corrections
and detention services, as governments of all types face continuing pressure to
control costs and improve the quality of services. According to the Private
Adult Correctional 1996 Facility Census, prepared by Private Corrections Project
Center for Studies in Criminology and Law, University of Florida, dated March
15, 1997 (the "1996 Facility Census"), the design capacity of privately managed
adult correctional and detention facilities worldwide has increased dramatically
since the first privatized facility was opened by CCA in 1984. According to the
1996 Facility Census, the aggregate capacity of private facilities in operation
or under construction rose from 63,595 beds at December 31, 1995 to 85,201 beds
at December 31, 1996, an increase of 34%. Additionally, the 1996 Facility Census
reports that the number of private facilities for which contracts have been
awarded increased 27% from 104 in 1995 to 132 in 1996 and the prisoner
population housed in privately managed facilities expanded by 30% in 1996.

CORRECTIONS CORPORATION OF AMERICA

CCA is the largest developer and manager of privatized correctional and
detention facilities worldwide. At December 31, 1996, CCA had an estimated
United States market share of 52% and an estimated global market share of 48%.
CCA will be the lessee of the Initial Facilities and, if acquired, the Option
Facilities. CCA is expected to continue to sell additional correctional and
detention facilities to the Company in the future and to enter into long-term
non-cancelable leases with the Company with respect to those facilities. See
"Relationship Between CCA and the Company after the Formation Transactions."
CCA's facilities are located in 17 states in the United States, the District of
Columbia, Puerto Rico, Australia and the United Kingdom. As of June 10, 1997,
CCA had contracts to manage 60 correctional and detention facilities with an
aggregate design capacity of 43,748 beds, of which 51 facilities representing
32,441 beds were in operation.

RELATIONSHIP BETWEEN CCA AND THE COMPANY AFTER THE FORMATION TRANSACTIONS

For the purpose of governing certain of the ongoing relationships between
CCA and the Company after the Formation Transactions and to provide mechanisms
for an orderly transition, prior to the completion of the Formation
Transactions, CCA and the Company will have entered into the various agreements
and will adopt policies as described herein. The Company believes that the
agreements are fair to it and contain terms which generally are comparable to
those which would have been reached in arm's-length negotiations with
unaffiliated parties. In each case, the terms of these agreements have been
reviewed by the Board of Directors of CCA and by the Independent Committee (as
hereinafter defined) of the Board of Trustees of the Company (the "Board of
Trustees"). Such agreements include (a) the Purchase Agreement (as hereinafter
defined); (b) the Option Agreements (as hereinafter defined); (c) the Right to
Purchase Agreement (as hereinafter defined); and (d) the Trade Name Use
Agreement (as hereinafter defined).

Purchase Agreement. Prior to the consummation of the Offering, the Company
and CCA and certain of its subsidiaries will enter into an agreement of sale and
purchase which provides the terms of the sale of the
9
<PAGE> 15

nine Initial Facilities for aggregate cash consideration of approximately $308.1
million (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the
transfer of the Initial Facilities is subject to the completion of the Offering
as well as the normal and customary conditions to the closing of real estate
transactions. The Purchase Agreement will contain representations and warranties
by CCA concerning the Initial Facilities customarily found in agreements of such
types.

Option Agreements. Prior to the consummation of the Offering, the Company
and CCA and certain of its subsidiaries will enter into option agreements
(collectively, the "Option Agreements"), pursuant to which CCA and certain of
its subsidiaries will grant the Company exclusive options to acquire any or all
of the five Option Facilities for a period of three years following the closing
of the purchase of the Initial Facilities for a purchase price equal to CCA's
cost of developing, constructing and equipping such facilities plus 5% of such
costs, which aggregates approximately $193.0 million.

Right to Purchase. It is anticipated that CCA will acquire or develop
additional correctional or detention facilities in the future. The Company and
CCA will enter into a right to purchase agreement (the "Right to Purchase
Agreement") whereby the Company will have an option to acquire, at fair market
value, and lease back to CCA, any correctional or detention facility acquired or
developed and owned by CCA in the future, for a period of three years following
the Service Commencement Date with respect to such facility. For the first two
years of such option period, fair market value is deemed to be CCA's cost of
developing, constructing and equipping such facilities, plus 5% of such costs.
Thereafter, fair market value will be based on cash flows and operating results
of such facilities. For facilities acquired during the first five years of the
Right to Purchase Agreement, the initial annual rental rate on facilities leased
back to CCA will be the greater of (i) fair market rental rates, as determined
by CCA and the Company, or (ii) 11% of the purchase price of such facilities.
For facilities acquired thereafter, the initial annual rental rate on such
facilities will be the fair market rental rates, as determined by the Company
and CCA.

Trade Name Use Agreement. Pursuant to the terms of a trade name use
agreement (the "Trade Name Use Agreement"), the Company will be granted the
right to use the trade name "CCA" as part of its name, subject to specified
terms and conditions therein, including CCA's right to terminate the Trade Name
Use Agreement upon 10 days' written notice to the Company.

Policies and Procedures for Addressing Conflicts. After completion of the
Formation Transactions, CCA and the Company will have significant contractual
and other ongoing relationships, as described above and under "Leases" herein.
Such ongoing relationships may present certain conflict situations for certain
trustees and officers of the Company and certain directors and officers of CCA.
See "Risk Factors -- Conflicts of Interest." The Company and CCA will adopt
appropriate policies and procedures to be followed by the Board of Trustees of
the Company and the Board of Directors of CCA to attempt to address those
conflicts. Such procedures will include requiring Doctor R. Crants to abstain
from making management decisions in his capacity as an officer, trustee or
director of the Company and CCA, respectively, and to abstain from voting as a
director or trustee of either company, with respect to matters that present a
conflict of interest between the companies. Whether or not a conflict of
interest situation exists will be determined by the Independent Committee on a
case-by-case basis in accordance with the policies and procedures to be
developed by the Company's Board of Trustees. See "Risk Factors -- Conflicts of
Interest."

The Board of Trustees has established an Independent Committee consisting
of the seven trustees who will not be employees of the Company or affiliated
with CCA (the "Independent Committee"). The Independent Committee will evaluate
transactions involving the Company and CCA, such as the acquisition of
additional facilities from CCA and lease negotiation and enforcement. Certain
other significant actions of the Board of Trustees will require the approval of
a minimum of two-thirds of the trustees. In addition, Michael W. Devlin, the
Company's Chief Development Officer, and Vida H. Carroll, the Company's Chief
Financial Officer, neither of whom have had nor will have any affiliation with
CCA, will assist the Independent Committee with respect to potential conflicts
of interest between the Company and CCA, including the negotiation and
enforcement of all Leases. See "Management" and "Conflicts of Interest."

10
<PAGE> 16

LEASES

Concurrently with CCA's conveyance of the Initial Facilities to the
Company, the Company will lease each such facility to CCA. Each Facility will be
the subject of a separate Lease that will incorporate the provisions of a master
agreement to lease between the Company as landlord and CCA as tenant (the
"Master Lease"). The Leases will have primary terms ranging from 10 to 12 years
(the "Fixed Term"). The Lease for each Facility may be extended at fair market
rental rates for three additional five-year terms (the "Extended Term"), upon
the mutual agreement of the Company and CCA. Each Lease may be terminated by the
Company, at its option, at any time after the first five years of the Lease,
upon 18 months prior written notice to CCA. The Leases are triple net leases
which require CCA to pay substantially all expenses associated with the
operation of the Facilities, such as real estate taxes, insurance, utilities and
services, maintenance and other operating expenses. Each Lease requires that CCA
operate the leased property only as a correctional or detention facility.

The rent schedule under the Leases provides for a relatively stable source
of cash flow and opportunities to participate in future growth in revenues
experienced by CCA. The rent for the first year for each Facility under the
Leases is initially set at a fixed amount and will be increased each year by the
Base Rent Escalation.

The obligations of CCA under each Lease are cross-defaulted to each of the
other Leases with respect to payment defaults, certain bankruptcy and insolvency
related defaults and defaults relating to any CCA default on a material debt
obligation or any substantial adverse judgment not covered by insurance and not
promptly paid by CCA. The Company will have general recourse to CCA under the
Leases, but CCA's payment obligations under such Leases are not secured by any
assets of CCA.

Pursuant to the Master Lease, CCA will have a right of first refusal with
respect to the sale of any Initial Facility, any Option Facility or any interest
in a correctional or detention facility acquired or developed by the Company in
the future and operated by CCA. Neither the Master Lease nor any of the other
agreements entered into by CCA in connection with the Formation Transactions
prohibits or otherwise restricts CCA's ability to lease properties from parties
(domestic or foreign) other than the Company. See "Leases" for a more detailed
discussion of the terms and conditions of the Leases.

THE FORMATION TRANSACTIONS

Prior to or simultaneously with the completion of the Offering, the Company
and CCA will engage in a series of transactions (collectively, the "Formation
Transactions") which are designed to consolidate the ownership interests in the
Facilities in the Company, to facilitate the Offering and to enable the Company
to qualify as a REIT for federal income tax purposes commencing with its taxable
year ending December 31, 1997. None of such transactions is expected to occur
unless all such transactions occur. These transactions include the following:

- The Company, which was formed as a Maryland real estate investment trust
on April 23, 1997, will sell 17,000,000 Common Shares in the Offering for
net proceeds of approximately $313.2 million after deduction of the
underwriting discount and estimated offering expenses (assuming an initial
public offering price of $20.00 per share);

- Doctor R. Crants, Chairman of the Company and Chairman and Chief
Executive Officer of CCA, will acquire in the Offering approximately
500,000 Common Shares at a price per share equal to the initial public
offering price;

- The Company will use the net proceeds of the Offering to acquire the nine
Initial Facilities from CCA for an aggregate purchase price of
approximately $308.1 million payable in cash;

- The Company will lease the Initial Facilities to CCA pursuant to the
Leases for initial terms ranging from 10 to 12 years. Each Lease may be
extended at fair market rates for three additional five-year renewal terms
upon the mutual agreement of CCA and the Company. Pursuant to the Leases,
the Company will grant to CCA a right of first refusal to acquire the
Initial Facilities, the Option Facilities or any other correctional or
detention facilities subsequently acquired by the Company and operated by
CCA;

11
<PAGE> 17

- The Company will enter into the Option Agreements with CCA pursuant to
which the Company will be granted the option to acquire any or all of the
five Option Facilities from CCA for a period of three years following the
closing of the purchase of the Initial Facilities, for a purchase price
generally equal to CCA's costs of developing, constructing and equipping
such facilities plus 5% of such costs, which aggregate approximately
$193.0 million. If acquired, the Option Facilities will be leased to CCA
on terms substantially similar to those contained in the Leases;

- In addition to the Option Agreements, CCA will grant the Company a right
to acquire, at fair market value, and lease back to CCA at fair market
rental rates, any correctional or detention facility acquired or developed
and owned by CCA in the future for a period of three years following the
Service Commencement Date with respect to such facility. For facilities
acquired during the first five years of the Right to Purchase Agreement,
the initial annual rental rate for facilities leased back to CCA will be
the greater of (i) fair market rental rate as determined by the Company
and CCA, or (ii) 11% of the purchase price of such facilities. For
facilities acquired thereafter, the initial annual rental rate on such
facilities will be the fair market rental rate as determined by the
Company and CCA. Additionally, CCA will grant the Company a right of first
refusal to acquire any CCA-owned correctional or detention facility should
CCA receive an acceptable third party offer to acquire any such facility;

- The Company will enter into employment agreements with certain of the
Company's executive officers, including J. Michael Quinlan, Chief
Executive Officer, D. Robert Crants, III, President, and Michael W.
Devlin, Chief Development Officer; and

- Upon consummation of the Offering, D. Robert Crants, III and Michael W.
Devlin will each receive 150,000 Common Shares as a development fee and as
reimbursement for expenses incurred in connection with the promotion and
formation of the Company, the consummation of the Offering and the closing
of the purchase of the Initial Facilities, which would have a value for
each of them, based upon the initial public offering price, of $3.0
million. The reimbursed expenses include certain costs related to property
due diligence, employee compensation, travel and overhead. The development
fee compensates Messrs. Crants and Devlin for their services rendered on
behalf of the Company in connection with, among other things, the
preparation of the Company's initial business plan and capital and
operating budgets. A significant portion of this development work
commenced in the fall of 1995, and continued throughout 1996 and 1997.

ADVANTAGES AND DISADVANTAGES TO UNAFFILIATED SHAREHOLDERS

The potential advantages of the Formation Transactions to unaffiliated
shareholders of the Company include their ability to participate in the
substantial cash flow of the Initial Facilities, through their ownership in the
Company, and in all future acquisitions by the Company. See "The
Company -- Business Objectives and Strategies." The potential disadvantages of
such transactions to unaffiliated shareholders of the Company include the lack
of arm's-length valuations in determining the consideration in such transactions
and the fact that Doctor R. Crants, Chairman of the Board of both the Company
and CCA, will have substantial influence on the management and operations of the
Company and, as a substantial shareholder of both the Company and CCA, on the
outcome of any matters submitted to a vote of shareholders, and the risk that
such influence might be exercised in a manner inconsistent with the interests of
other shareholders. See the more complete discussion of such matters under "Risk
Factors."

BENEFITS TO THE COMPANY AND ITS OFFICERS AND TRUSTEES

The benefits of the foregoing transactions to the Company and its officers
and trustees include:

- The ability to access public capital markets;

- The creation of an entity which, through its distributions to
shareholders, is able to reduce or avoid the incurrence of federal income
tax, allowing its shareholders to participate in real estate investments
without the "double taxation" of income that generally results from an
investment in a regular corporation;

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<PAGE> 18

- The ability to expand the Company's acquisition and development
opportunities through its strong capital base;

- The Company will enter into employment agreements with J. Michael
Quinlan, D. Robert Crants, III and Michael W. Devlin providing for annual
salaries of $150,000, $100,000 and $100,000, respectively;

- J. Michael Quinlan, Chief Executive Officer, will be granted options to
acquire 350,000 Common Shares at the initial public offering price. Each
of Doctor R. Crants, Chairman of the Board of Trustees, D. Robert Crants,
III, President and Michael W. Devlin, Chief Development Officer, will be
granted options to acquire 200,000 Common Shares at the initial public
offering price. Vida H. Carroll, Chief Financial Officer, will be granted
options to acquire 50,000 Common Shares at the initial public offering
price. Such options will vest in 25% increments over a three year period
with the first increment vesting immediately upon the date of grant;

- Each non-employee trustee will receive options to acquire 5,000 Common
Shares at the initial public offering price. Such options will vest
immediately upon the date of grant.

BENEFITS TO CCA

The benefits of the foregoing structure to CCA include:

- CCA will receive approximately $308.1 million in cash in exchange for the
nine Initial Facilities it will sell to the Company. The historical cost
of the Initial Facilities at March 31, 1997 was approximately $175.2
million;

- In the event the Independent Committee determines to exercise the
Company's option to purchase any or all of five Option Facilities, CCA
could receive up to approximately $193.0 million in cash;

- CCA will use certain of the proceeds of the sale of the Initial
Facilities to repay certain indebtedness incurred in connection with
facility acquisitions; and

- CCA will expand its marketing opportunities through increased access to
capital.

DISTRIBUTIONS

The Company intends to pay regular quarterly distributions to its
shareholders. The Board of Trustees, in its sole discretion, will determine the
actual distribution rate based on the Company's actual results of operations,
economic conditions, tax considerations (including those related to REITs) and
other factors. The first distribution, for the period ending September 30, 1997,
is expected to equal a pro rata share of the anticipated initial quarterly
distribution of $0.425 per Common Share. On an annualized basis, the anticipated
distribution is $1.70 per share, or approximately 8% to 9% of the estimated
range of the initial public offering price. The Company does not expect to
change its estimated initial distribution per Common Share if the Underwriters'
over-allotment option is exercised. See "The Formation Transactions."

The Company has established the initial annual distribution rate based on
the Company's estimate of Cash Available for Distribution for the 12 months
following the Offering, which was derived from the

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<PAGE> 19

Company's Pro Forma Funds from Operations (as defined in Note 6 to Pro Forma
Statement of Operations) for the 12 months ended December 31, 1996. Funds from
Operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and should not be
considered an alternative to net income as an indication of the Company's
performance or to cash flows as a measure of liquidity or ability to make
distributions. The expected distribution for the 12 months following completion
of the Offering will equal approximately 92.1% of the estimated Cash Available
for Distribution for the 12 months ending June 30, 1998. The Company's estimate
of Cash Available for Distribution does not include any revenues or expenses
related to the purchase of the Option Facilities or additional facilities. The
Company intends to maintain its approximate initial distribution amount for at
least 12 months following the consummation of the Offering unless actual results
of operations, economic conditions or other factors differ from the assumptions
used in calculating the estimate. Based on the Company's estimated results of
operations for the 12 months ending June 30, 1998, the Company estimates that
approximately 10% to 20% of the anticipated initial annual distribution to
shareholders will represent a return of capital for federal income tax purposes
and that the Company would have been required to distribute $22.6 million or
$1.31 per share during such 12-month period in order to maintain its status as a
REIT. If future taxable income increases above or decreases below the estimated
taxable income for the 12 months following the Offering, the percentage of the
anticipated initial annual distribution representing a return of capital will
decrease or increase, respectively. See "Distributions" for the calculation of
estimated pro forma Cash Available for Distributions and related assumptions.

TAX CONSIDERATIONS AND TAX STATUS OF THE COMPANY

The Company will elect to be taxed as a REIT under sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with
its taxable year ending December 31, 1997. If the Company qualifies for taxation
as a REIT, with certain exceptions, the Company will not be subject to federal
income tax at the corporate level on its taxable income that is distributed to
its shareholders. A REIT is subject to a number of organizational and
operational requirements, including a requirement that it distribute at least
95% of its annual taxable income. Failure to qualify as a REIT will render the
Company subject to federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, and distributions
to the shareholders in any such year will not be deductible by the Company. Even
if the Company qualifies for taxation as a REIT, the Company may be subject to
certain state and local taxes on its income and property. In connection with the
Company's election to be taxed as a REIT, the Company's Amended and Restated
Declaration of Trust (the "Declaration of Trust") imposes restrictions on the
transfer of Common Shares. The Company has adopted the calendar year as its
taxable year. See "Risk Factors -- Adverse Impact on Distributions of Failure of
Company to Qualify as a REIT," "-- Limits on Changes in Control," "Material
Federal Income Tax Considerations" and "Description of Capital Shares --
Restrictions on Ownership."

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<PAGE> 20

THE OFFERING

Common Shares offered by the
Company............................... 17,000,000 shares

Common Shares to be outstanding after
the Offering........................ 17,301,000 shares(1)(2)

Use of proceeds....................... To pay the purchase price for the
Initial Facilities and for working
capital. See "Use of Proceeds,"
"Capitalization" and "The Formation
Transactions."

NYSE symbol........................... PZN

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

(1) Does not include an aggregate of 1,850,000 shares reserved for issuance
pursuant to the Company's Employee Share Incentive Plan and the Company's
Non-Employee Trustees' Plan (each as hereinafter defined) of which 1,075,000
shares will be subject to outstanding options at the closing of the
Offering. See "Management -- The Share Incentive Plan" and
"Management -- Non-Employee Trustees' Plan."

(2) Includes (i) 1,000 founder's shares, and (ii) 300,000 shares issued to D.
Robert Crants, III and Michael W. Devlin as a development fee and as
reimbursement for certain expenses incurred in connection with the promotion
and formation of the Company and the consummation of the Offering. See
"Dilution" and "The Formation Transactions."

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<PAGE> 21

RISK FACTORS

An investment in the Common Shares offered hereby involves various risks.
Prospective investors should carefully consider the following risk factors in
conjunction with the other information contained in this Prospectus before
purchasing Common Shares in the Offering.

THE DEPENDENCE ON CCA, AS THE LESSEE OF THE FACILITIES, FOR THE COMPANY'S
INITIAL REVENUES AND ABILITY TO MAKE DISTRIBUTIONS

CCA will be the lessee of all the Initial Facilities and, if acquired, the
Option Facilities. The Company's initial revenues, and its ability to make
distributions to its shareholders, will depend on rental payments by CCA under
the Leases. The Company believes that CCA has sufficient assets and income to
enable it to satisfy its obligations under the Leases at this time; however,
there can be no assurance that CCA will have such assets or income in the
future.

Failure by CCA to materially comply with the terms of a lease would give
the Company the right to terminate such lease and enforce the obligations
thereunder, but could also require the Company to find another lessee to lease
such facility or risk losing its ability to elect or maintain REIT status, as
applicable. Moreover, there can be no assurance that CCA will elect to renew a
lease upon expiration of its initial term, which would also force the Company to
find a suitable replacement lessee. In either circumstance, due to the nature of
the corrections and detention industry, the Company may be unable to locate a
suitable lessee or to attract such a lessee, and may, therefore, be required to
reduce the rent, which would have the effect of reducing the Company's Cash
Available for Distribution. See "Corrections Corporation of America," "Leases"
and "Conflicts of Interest."

CONFLICTS OF INTEREST

Several conflicts of interest exist on the part of the Company, its
trustees and officers and CCA, and its directors and officers. The following
description sets forth the principal conflicts of interest, including the
relationships through which they arise, and the policies and procedures
implemented by the Company to address those conflicts.

RELATIONSHIPS WHICH MAY GIVE RISE TO CONFLICTS OF INTEREST

Doctor R. Crants is the Chairman of the Board of Directors and Chief
Executive Officer of CCA and the Chairman of the Board of Trustees of the
Company. D. Robert Crants, III, President of the Company, is the son of Doctor
R. Crants. Doctor R. Crants and D. Robert Crants, III, as well as certain other
trustees or officers of the Company or directors or officers of CCA, may also
own, directly or indirectly, shares in both companies following the Offering. D.
Robert Crants, III and Michael W. Devlin, Chief Development Officer of the
Company, are principals of DC Investment Partners LLC, a limited liability
company which serves as the general partner of three private investment
partnerships. DC Investment Partners LLC is owned by D. Robert Crants, III,
Michael W. Devlin, Stephens Group, Inc., an affiliate of Stephens Inc., a
managing underwriter of this Offering, and one other individual. Doctor R.
Crants and three other directors of CCA are investors in one or more of the
private investment partnerships managed by DC Investment Partners LLC. Rusty L.
Moore, a trustee, is the spouse of a shareholder of Stokes & Bartholomew, P.A.,
tax and securities counsel to the Company. Stokes & Bartholomew, P.A. also
provides legal services to CCA, including representing CCA in certain of the
Formation Transactions. J. Michael Quinlan is a former employee of CCA. C. Ray
Bell, a trustee, is the principal of a construction company which, as a part of
its business, builds correctional and detention facilities, including facilities
for CCA. Because of Mr. Bell's experience in building correctional and detention
facilities, it is anticipated that Mr. Bell's company may build correctional and
detention facilities for or on behalf of the Company.

SITUATIONS IN WHICH CONFLICTS OF INTEREST HAVE ARISEN AND MAY CONTINUE TO
ARISE

Valuation of the Facilities. The valuation of the Initial Facilities and
the Option Facilities was determined by management of CCA and management of the
Company and was not negotiated on an arm's-length basis. The purchase price of
the Initial Facilities was determined based primarily on an evaluation of

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<PAGE> 22

the current and anticipated cash flows and operating results of such facilities.
To determine the purchase price for each of the Initial Facilities other than
the T. Don Hutto Correctional Center, the anticipated annual cash flow from the
facility less ongoing capital expenditures was divided by an agreed upon
coverage ratio and lease rate. Because the T. Don Hutto Correctional Center was
not completed until January 1997, the purchase price of that facility and of
each Option Facility was calculated as CCA's approximate cost of developing,
constructing and equipping such facilities, plus 5% of such costs. It is
possible that if such valuations had been determined on an arm's-length basis,
or had been the subject of independent valuations or appraisals, the sum of the
values of the Initial Facilities and, if acquired, the Option Facilities might
have been lower than the sum of the values determined by the management of CCA
and of the Company. The terms of the purchase of the Facilities were approved by
the Independent Committee of the Company's Board of Trustees.

Terms of Leases. The Lease payment obligations with respect to the Initial
Facilities were determined by management of CCA and management of the Company
and were not negotiated on an arm's-length basis. However, the lease payments
that CCA is obligated to make are based on an initial lease rate of
approximately 11%, which the Company believes reflects the fair market rental
value of the Initial Facilities to the Company. Moreover, the terms and
conditions of the Leases were the subject of independent negotiations between
the Company and CCA, and the amount of the Lease payment obligations and the
terms and conditions of the Leases were approved by the Independent Committee of
the Company's Board of Trustees.

Potential for Future Conflicts. After the Offering, CCA and the Company
may be in situations where they have differing interests resulting from the
ongoing relationship between the companies. Such situations include the fact
that after the Offering (i) CCA will lease the Initial Facilities which will be
owned by the Company; (ii) the Company will have an exclusive option to acquire
the Option Facilities and a right to purchase and a right of first refusal to
purchase any correctional or detention facility acquired or developed and owned
by CCA or its subsidiaries in the future and to provide mortgage financing for
any correctional or detention facilities financed in excess of 90% of their cost
by CCA or its subsidiaries in the future; and (iii) CCA will have a right of
first refusal to acquire the Facilities. Accordingly, the potential exists for
disagreements as to the compliance with the Leases or the values of the
facilities acquired or lease payments therefor in the future pursuant to the
Right to Purchase Agreement. Additionally, the possible need by the Company,
from time to time, to finance, refinance or effect a sale of any of the
properties managed by CCA may result in a need to modify the lease with CCA with
respect to such property. Any such modification will require the consent of CCA,
and the lack of consent from CCA could adversely affect the Company's ability to
consummate such financings or sale. Because of the relationships described
above, there exists the risk that the Company will not achieve the same results
in its dealings with CCA that it might achieve if such relationships did not
exist.

CORRECTIONS AND DETENTION INDUSTRY RISKS

The ability of lessees of the Company's facilities to make rental payments
and the value of the Company's facilities are subject to operating risks
generally inherent in the corrections and detention industry.

SHORT-TERM NATURE OF GOVERNMENT CONTRACTS. Private prison managers
typically enter into facility management contracts with government entities with
terms of up to five years, with 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. Moreover, the
contracting agency typically may terminate a facility contract without cause by
giving the private prison manager written notice. Therefore, there exists the
risk that a facility owned by the Company may not be the subject of a contract
with a government entity at some point during its ownership by the Company since
the Company's leases generally extend for periods substantially longer than the
underlying contracts with government entities.

DEPENDENCE ON GOVERNMENT APPROPRIATIONS. A private prison manager's cash
flow is subject to the receipt of sufficient funding and timely payment by
contracting government entities. If the appropriate government agency does not
receive sufficient appropriations to cover its contractual obligations, a
contract may be terminated, or the management fee may be deferred or reduced.
Any delays in payment could have an adverse effect on the private prison
manager's cash flow. Further, it is part of the Company's business strategy to
acquire facilities from government entities and to lease those facilities to the
government entity or to finance

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<PAGE> 23

the facility for the government entity. The ability of the government entity to
make payments under such leases or in connection with such financing may be
dependent upon annual appropriations.

DEPENDENCE ON GOVERNMENT AGENCIES FOR INMATES. Private prison managers are
dependent on government agencies supplying those facilities with a sufficient
number of inmates to meet the facility's design capacities. A failure to do so
may have a material adverse effect on a private prison manager's financial
condition and results of operations which could affect the private prison
manager's ability to make payments under a lease.

DEPENDENCE ON ABILITY TO DEVELOP NEW PRISONS. The success of a private
prison manager in obtaining new awards and contracts may depend, in part, upon
its 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. Moreover, the private corrections industry is
subject to public scrutiny. Negative publicity about an escape, riot or other
disturbance at a privately managed facility may result in publicity adverse to
the Company and the private corrections industry, thereby making it more
difficult for a private prison manager to renew existing contracts, or to obtain
new contracts or sites on which to operate new facilities.

LEGAL PROCEEDINGS. The Company's ownership and operation of correctional
and detention facilities could expose it to potential third party claims or
litigation by prisoners or other persons related to personal injury or other
damages resulting from contact with a facility, its managers, personnel, or
other prisoners, including damages arising from a prisoner's escape from, or a
disturbance or riot at, a Company owned facility. In addition, as an owner of
real property, the Company may be subject to certain proceedings relating to
personal injury of persons at such facilities. The Company may be held
responsible under state laws for claims based on personal injury or property
damage despite contractual provisions in its leases with CCA and other managers
providing for indemnity against such claims.

Each of the foregoing factors, among others, either individually or
collectively, could adversely affect a private prison manager's or government
entity's ability to generate revenues or make lease payments to the Company,
which may, therefore, affect the Company's ability to make expected
distributions to its shareholders.

ADVERSE IMPACT ON DISTRIBUTIONS OF FAILURE OF COMPANY TO QUALIFY AS A REIT

The Company intends to operate so as to qualify as a REIT under the Code.
Although the Company believes that it will be so organized and will operate in
such a manner, no assurance can be given that the Company will qualify or remain
qualified as a REIT. Qualification as a REIT involves the application of highly
technical and complex Code provisions for which there are only limited judicial
or administrative interpretations. The determination of various factual matters
and circumstances not entirely within the Company's control may affect its
ability to qualify as a REIT. In addition, no assurance can be given that
legislation, new regulations, administrative interpretations or court decisions
will not significantly change the tax laws with respect to qualification as a
REIT or the federal income tax consequences of such qualification. The Company
is relying on the opinions of Stokes & Bartholomew, P.A. and Sherrard & Roe, PLC
tax counsel to the Company, regarding various issues affecting the Company's
ability to qualify, and retain qualification, as a REIT. However, such opinions
are not binding on the Service or any court. See "Material Federal Income Tax
Considerations."

If the Company were to fail to qualify as a REIT in any taxable year, the
Company would not be allowed a deduction for distributions to shareholders in
computing taxable income and would be subject to federal income tax on its
taxable income at regular corporate rates. Unless entitled to relief under
certain statutory provisions, the Company would also be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification was lost. As a result, the funds available for distribution to the
Company's shareholders would be reduced for each of the years involved. Although
the Company currently intends to operate in a manner designed to qualify as a
REIT, it is possible that future economic, market, legal or tax considerations
may cause the Company to fail to qualify as a REIT or may cause the Board of
Trustees to revoke the REIT election if the Board and the holders of 66 2/3% of
all outstanding shares of beneficial

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<PAGE> 24

interest of the Company determine that such factors make it no longer beneficial
to qualify as a REIT. See "Policies and Objectives with Respect to Certain
Activities" and "Material Federal Income Tax Considerations."

INITIAL DISTRIBUTION POLICY

The Company initially plans to make annual distributions, payable in
quarterly installments of approximately 8.0% to 9.0% of the estimated range of
the initial public offering price per share. If actual Cash Available for
Distribution falls short of estimates, the Company may be unable to maintain its
proposed initial distribution rate. The Company's success in implementing its
distribution policy will depend significantly on the Company's ability to
acquire additional facilities at attractive prices. Internal growth through
increases in revenues from the Facilities is not expected to provide as much
growth in Cash Available for Distribution as will the acquisition, development
or expansion of additional facilities.

There can be no assurance that CCA or other entities engaged in the private
corrections and detention industry will develop or acquire additional facilities
to transfer to the Company. See "Risk Factors -- Corrections and Detention
Industry Risks." If the Company is unable to acquire additional facilities from
such entities at attractive prices, the Company's ability to increase revenues
and maintain or increase Cash Available for Distribution per share may be
adversely affected.

REAL ESTATE INVESTMENT CONSIDERATIONS

GENERAL. Investments in the Facilities and any additional properties in
which the Company may invest in the future are subject to risks typically
associated with investments in real estate. Such risks include the possibility
that the Facilities and any additional properties will generate total rental
rates lower than those anticipated or will yield returns lower than those
available through investment in comparable real estate or other investments.
Revenue from the Initial Facilities and, if acquired, the Option Facilities, and
yields from investments in such properties may be affected by many factors,
including changes in government regulation, general or local economic
conditions, the available local supply of prison beds and a decrease in the need
for prison beds.

Equity investments in real estate are relatively illiquid and, therefore,
the ability of the Company to vary its portfolio promptly in response to changed
conditions will be limited. There are no limitations on the percentage of the
Company's assets that may be invested in any one property or venture. The Board
of Trustees may establish limitations as it deems appropriate from time to time.
No limitations have been set on the number of properties in which the Company
will seek to invest or on the concentration of investments in any one geographic
region.

ENVIRONMENTAL MATTERS. Operating costs may be affected by the obligation
to pay for the cost of complying with existing environmental laws, ordinances
and regulations, as well as the cost of future legislation. Under various
federal, state and local environmental laws, ordinances and regulations, a
current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances on, under or in
such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of complying with environmental laws could materially
adversely affect Cash Available for Distribution. Phase I environmental
assessments have been obtained on all of the Facilities. The purpose of a Phase
I environmental assessment is to identify potential environmental contamination
that is made apparent from historical reviews of the Facilities, review of
certain public records, visual investigations of the sites and surrounding
properties, toxic substances and underground storage tanks. The Phase I
environmental assessment reports have not revealed any environmental
contamination that the Company believes would have a material adverse effect on
the Company's business, assets, results of operations or liquidity, nor is the
Company aware of any such liability. Nevertheless, it is possible that these
reports do not reveal all environmental liabilities or that there are material
environmental liabilities of which the Company is unaware. In addition,
environmental conditions on properties owned by the Company may affect the
operation or expansion of facilities located on the properties.

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<PAGE> 25

UNINSURED LOSS. The Leases require CCA to maintain insurance with respect
to each of the Facilities. CCA carries comprehensive liability, fire, flood (for
certain Facilities) and extended insurance coverage with respect to such
properties with policy specifications and insurance limits customarily carried
for similar properties. There are, however, certain types of losses (such as
from earthquakes) which may be either uninsurable or not economically insurable.
See "Leases." The Company will obtain new title insurance policies for each of
the Facilities in connection with the Offering. There is no assurance, however,
that the amount of title insurance coverage for any of the Facilities accurately
reflects the current value of such correctional facilities or that title losses
would be completely covered by such insurance. Subject to the terms of the
Leases, should an uninsured loss occur, the Company could lose both its capital
invested in, and anticipated profits from, one or more of the Facilities. In the
opinion of management of the Company, the Facilities are adequately insured in
accordance with industry standards.

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts of its executive officers, J.
Michael Quinlan, D. Robert Crants, III and Michael W. Devlin. In particular, the
Company expects to utilize the industry knowledge, experience and relationships
of Mr. Quinlan, its Chief Executive Officer. From July 1987 through December
1992, Mr. Quinlan served as the Director of the BOP. The loss of the services of
any one of these individuals could have a material adverse effect on the
Company. Specifically, if the Company were to lose the services of Mr. Quinlan,
it would lose the benefit of his extensive knowledge of, and experience in, the
corrections industry. The Company has entered into employment agreements with
each of the above named executive officers. See "Management -- Employment
Agreements."

LACK OF OPERATING HISTORY

The Company has been recently organized and has no operating history. There
can be no assurance that the Company will be able to generate sufficient revenue
from operations to make anticipated distributions. The Company also will be
subject to the risks generally associated with the formation of any new
business. The Company's management has no experience operating a public company
or a REIT.

LACK OF CONTROL OVER DAY-TO-DAY OPERATIONS AND MANAGEMENT OF THE FACILITIES

To qualify as a REIT for federal income tax purposes, the Company may not
operate, or participate in decisions affecting the operations of the Initial
Facilities and, if acquired, the Option Facilities. CCA will control the
operations of the Facilities under the Leases, each of which will have initial
terms ranging from 10 to 12 years and three renewal terms of five years each,
exercisable upon the mutual agreement of CCA and the Company. During the terms
of the Leases, the Company will not have the authority to require CCA to operate
the Facilities in a particular manner or to govern any particular aspect of
their operation except as set forth in the Leases. Thus, even if the Company
believes CCA is operating the Facilities inefficiently or in a manner adverse to
the Company's interests, the Company may not require CCA to change its method of
operation. The Company is limited to seeking redress only if CCA violates the
terms of a Lease, in which case the Company's primary remedy is to terminate the
Lease or, in certain circumstances, all of the Leases, and seek to recover
damages from CCA. If a Lease is terminated, the Company will be required to find
another suitable lessee or risk losing its ability to elect or maintain REIT
status, as applicable.

DILUTION

The purchasers of the Common Shares offered hereby will experience an
immediate dilution of $1.72 per share in the net tangible book value of the
Common Shares ($1.68 per share assuming full exercise of the Underwriters'
over-allotment option).

OWNERSHIP LIMIT

For the Company to maintain its qualification as a REIT, not more than 50%
in value of its outstanding shares may be owned, directly or constructively, by
five or fewer individuals (as defined in the Code). In addition, rent from
related party tenants is not qualifying income for purposes of the gross income
tests under the Code. See "Material Federal Income Tax
Considerations -- Taxation of the Company." Two sets of constructive ownership
rules (one to determine whether a REIT is closely held and one to determine
whether

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<PAGE> 26

rent is from a related party tenant) apply in determining whether these
requirements are met. For the purpose of preserving the Company's REIT
qualification, the Declaration of Trust prohibits direct or constructive
ownership by any person of more than 9.8% of the Common Shares or more than 9.8%
of any preferred shares, $0.01 par value per share, of the Company (the
"Preferred Shares") (such ownership limit being referred to as the "Ownership
Limit"). The constructive ownership rules are complex and may cause Common
Shares owned, directly or constructively, by a group of related individuals
and/or entities to be deemed to be constructively owned by one individual or
entity. As a result, the acquisition of less than 9.8% of the Common Shares (or
the acquisition of an interest in an entity which owns Common Shares) by an
individual or entity could cause that individual or entity (or another
individual or entity) to own constructively in excess of 9.8% of the Common
Shares, and thus subject such Common Shares to the Ownership Limit. Direct or
constructive ownership of Common Shares in excess of the Ownership Limit would
cause the violative transfer or ownership to be void, or cause such shares to be
held in trust as Shares-in-Trust (as hereinafter defined) for the benefit of one
or more charitable organizations. See "Description of Capital
Shares -- Restrictions on Ownership."

LIMITS ON CHANGES IN CONTROL

Certain provisions of the Company's Declaration of Trust and Bylaws,
including provisions imposing the Ownership Limit (which are described
specifically in the immediately preceding paragraph and which generally prohibit
any shareholder from owning more than 9.8% of the Common Shares), authorizing
the issuance of Preferred Shares and requiring staggered terms for the Board of
Trustees, and certain provisions of Maryland law regarding business combinations
and "control share acquisitions" could have the effect of delaying, deferring or
preventing a change in control of the Company or the removal of existing
management and, as a result, could prevent the shareholders of the Company from
being paid a premium for their Common Shares. The Declaration of Trust
authorizes the Board of Trustees to issue Preferred Shares in one or more
series, to establish the number of shares in each series and to fix the
designations, powers, preferences and rights of each series and the
qualifications, limitations or restrictions thereof, all without shareholder
approval. The authorization of Preferred Shares may have an anti-takeover effect
because it gives the Board of Trustees the power to issue Preferred Shares at
its sole discretion on such terms as it, in its sole discretion, deems proper,
which may have a dilutive effect on or otherwise deter any potential acquiror of
the Company. The Declaration of Trust provides for three classes of trustees, as
nearly equal in size as is practicable. Each class of trustees holds office
until the third annual meeting for selection of trustees following the election
of such class, except that the initial terms of the three classes expire in
1998, 1999 and 2000, respectively. The Declaration of Trust further provides
that the Board of Trustees or shareholders may, at any time, remove any trustee,
with or without cause, only by an affirmative vote of a majority of trustees or
a majority of holders of shares entitled to vote in the election of trustees.
These provisions may have an anti-takeover effect because a third party will be
unable to acquire immediate control of the Board of Trustees due to the
existence of the staggered board and will further be unable to remove trustees
without majority shareholder approval. See "Description of Capital
Shares -- Certain Provisions of Maryland Law and of the Company's Declaration of
Trust and Bylaws."

CHANGES IN INVESTMENT AND FINANCING POLICIES WITHOUT VOTE OF SHAREHOLDERS

The Board of Trustees determines the Company's investment and financing
policies with respect to certain activities, including its growth,
capitalization, distribution and operating policies. Although the Board of
Trustees has no present intention to amend or revise these policies, the Board
of Trustees may do so at any time without a vote of the Company's shareholders.
See "Policies and Objectives With Respect to Certain Activities -- Investment
Objectives and Policies."

NO PRIOR MARKET FOR COMMON SHARES; FACTORS AFFECTING MARKET PRICE

Prior to the Offering, there has been no public market for the Common
Shares. Although the Common Shares have been approved for listing on the NYSE,
subject to official notice of issuance, there can be no assurance that an active
trading market will develop or be sustained or that the Common Shares may be
resold at or above the initial public offering price. The initial public
offering price will be determined through

21
<PAGE> 27

negotiations between the Company and the Underwriters and may not be indicative
of the market price for the Common Shares after the Offering. See
"Underwriting."

The market price of the Common Shares could be subject to significant
fluctuations in response to variations in quarterly and yearly operating
results, the success of the Company's business strategy, general trends in the
corrections and detention industry, competition, changes in the laws affecting
the Company and other factors. In addition, the stock market in recent years has
experienced price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of affected companies. These
fluctuations may adversely affect the market price of the Common Shares.

Moreover, the price of the Company's shares in public markets may be
affected by the amount of the annual distributions paid by the Company relative
to the price paid for Common Shares. As a result, an increase in market interest
rates could adversely affect the market price of the Common Shares to the extent
that the yield on those shares compares less favorably to yields on fixed-income
securities and other investments.

DEPENDENCE ON FINANCING FOR GROWTH AND ADVERSE CONSEQUENCES OF DEBT FINANCING ON
ABILITY TO MAKE DISTRIBUTIONS

The Company intends to pursue a growth strategy which includes acquiring
correctional and detention facilities. There is a risk that the Company will not
have access to sufficient debt or equity capital it may need to pursue its
acquisition strategy. The Company may need access to debt or equity capital for
several reasons. First, the Company generally cannot retain cash generated by
operating activities. See "Material Federal Income Tax Considerations." Second,
the Company's current business strategy is to maintain a ratio of debt to total
capitalization of 50% or less. The Company believes that this debt policy
balances the Company's desire for growth with a prudent capital structure. The
Company's organizational documents, however, do not contain any limitation on
the amount or percentage of indebtedness the Company may incur, and the Board of
Trustees could alter or eliminate the Company's current borrowing policy. If the
policy were changed or eliminated, the Company could become more highly
leveraged, resulting in an increase in debt service, which could adversely
affect the Company's Funds from Operations and its ability to make expected
distributions to its shareholders, and result in an increased risk of default on
the Company's obligations. The Company intends to enter into the Bank Credit
Facility immediately following the Offering, although there can be no assurance
that the Company will enter into the Bank Credit Facility. Moreover, the Company
may, from time to time, incur additional indebtedness to acquire any or all of
the Option Facilities or any other facilities. Accordingly, since the Company
generally cannot retain earnings, and the amount of debt that it can incur is
limited by its internal policies, the Company's ability to continue making
acquisitions will depend primarily on its ability to obtain additional private
or public equity financing. There is no assurance that such financing will be
available.

Although the Company does not intend to incur indebtedness in connection
with the Offering, the Company is authorized to raise additional funds for its
future operations through debt financing. As a result of incurring debt, the
Company will be subject to the risks normally associated with debt financing,
including the risk that the Company's Funds from Operations will be insufficient
to meet required payments of principal and interest or that Cash Available for
Distribution may decrease. In addition, the Company will be subject to the risk
that interest rates may increase, which could adversely affect its ability to
make distributions. If a property is mortgaged to secure payment of
indebtedness, and the Company is unable to meet mortgage payments, the property
could be transferred to the mortgagee with a consequent loss of income and asset
value to the Company. See "Policies and Objectives With Respect to Certain
Activities -- Financing."

ERISA RISKS

Depending upon the particular circumstances of the plan, an investment in
the Common Shares may not be an appropriate investment for an ERISA (as
hereinafter defined) plan, a qualified plan or individual retirement accounts
and individual retirement annuities (collectively "IRAs"). In deciding whether
to purchase Common Shares, a fiduciary of an ERISA plan, in consultation with
its advisors, should carefully consider its fiduciary responsibilities under
ERISA, the prohibited transaction rules of ERISA and the Code, and the effect of
the "plan asset" regulations issued by the U.S. Department of Labor.

22
<PAGE> 28

THE COMPANY

GENERAL

The Company has been formed to capitalize on the opportunities created by
the growing trend towards privatization in the corrections industry, including
the increasing demand for private correctional and detention facilities. The
principal business strategy of the Company will be to acquire correctional and
detention facilities that meet the Company's investment criteria, from both
private prison managers and government entities, to expand its existing
facilities, and to lease all such facilities under long-term leases. The Company
initially will acquire the nine Initial Facilities from CCA. The Company will
also have options to acquire any or all of the five Option Facilities for a
period of three years following the closing of the purchase of the Initial
Facilities. In addition, the Company will have an option to acquire any
correctional or detention facility acquired or developed and owned by CCA in the
future, for a period of three years following the Service Commencement Date with
respect to such facility. As a result of these transactions, the Company and CCA
will have several ongoing relationships after the Formation Transactions, some
of which could give rise to possible conflicts of interest. See "Relationship
Between CCA and the Company after the Formation Transactions." Upon completion
of the Offering and the Formation Transactions, the Company will be the only
self-administered and self-managed publicly-traded REIT in the United States
focused on owning and acquiring correctional and detention facilities.

The Company will lease all of the Facilities to CCA, and CCA will continue
to manage the Facilities. The Company believes that with respect to the Initial
Facilities purchased and, if acquired, the Option Facilities, it will benefit
from the continuity of management provided by CCA. CCA is the largest developer
and manager of privatized correctional and detention facilities worldwide and
has developed and operated the Initial Facilities and the Option Facilities
since they were acquired or constructed by CCA at various times ranging from
1984 through 1997. See "Business of the Company and its Properties."

The Company will purchase the Initial Facilities for an aggregate purchase
price of approximately $308.1 million in cash concurrent with the closing of the
Offering. The Initial Facilities will be leased to CCA pursuant to triple net
Leases which require CCA to pay all operating expenses, taxes, insurance and
other costs. All of the Leases will provide for base rent with certain annual
escalation and will have primary terms of 10 to 12 years which may be extended
at fair market rental rates for three additional five-year periods upon the
mutual agreement of the Company and CCA. The Initial Facilities are expected to
generate aggregate initial annual rent of approximately $33.9 million, which
represents an 11% lease rate based on the purchase price. The Company will have
general recourse to CCA under the Leases, but such Leases are not secured by any
properties of CCA. The obligations of CCA under the Leases are cross-defaulted
to each of the other Leases with respect to payment defaults and certain other
defaults. Each Lease (and any future lease with CCA) may be terminated by the
Company, at its option, at any time after the first five years of the Lease,
upon 18 months written notice to CCA.

The Company has obtained a commitment for the $150.0 million Bank Credit
Facility which will be used for the acquisition of additional correctional
facilities, including the Option Facilities, and for certain other purposes,
including expanding existing facilities and working capital, as necessary. The
Company expects to close the Bank Credit Facility immediately following the
consummation of the Offering. Upon the consummation of the Offering, the Company
will have no outstanding indebtedness. The Company believes that its lack of
debt, coupled with its ability to obtain financing through the Bank Credit
Facility will provide the Company with significant financial resources in
pursuing correctional facility acquisition and expansion opportunities,
including some or all of the Option Facilities. The Company intends to maintain
a capital structure which limits consolidated indebtedness to no more than 50%
of its total capitalization. See "Policies and Objectives With Respect to
Certain Activities -- Financing."

The Company intends to initially focus its investments on privately-managed
facilities which are owned and operated by CCA or its subsidiaries. However, the
Company will also pursue other opportunities, including acquisitions or
financings of facilities owned and operated by government entities. The Company
believes it has significant access to potential development and acquisition
opportunities through its relationship with CCA and the experience and industry
contacts of its Board of Trustees and management, particularly its

23
<PAGE> 29

Chief Executive Officer, Mr. Quinlan, former Director of the BOP. The Company
intends to utilize Mr. Quinlan's experience in developing and managing
correctional and detention facilities to opportunistically pursue development
and acquisitions of correctional facilities from both private prison owners and
operators and government entities. See "Management -- Trustees and Executive
Officers."

The Company expects to qualify as a REIT for federal income tax purposes.
In order to qualify as a REIT, the Company's income must be derived from certain
sources, including rents from real property (and generally excluding income from
the operation of a correctional facility). See "Material Federal Income Tax
Considerations -- Taxation of the Company -- Income Tests." Accordingly, the
Company is precluded from operating correctional facilities and, as a
consequence, intends to lease such properties pursuant to long-term
non-cancelable leases.

BUSINESS OBJECTIVES AND STRATEGIES

- The acquisition of the Initial Facilities and the potential acquisition
of the Option Facilities;

- The strategic expansion of its correctional and detention facilities
portfolio through the selective acquisition of correctional facilities
that demonstrate potential for significant revenue and cash flow from both
private prison managers and government entities;

- The expansion of its existing facilities;

- The construction and/or development of new correctional and detention
facilities;

- The improvement and enhancement of the Company's holdings through proper
maintenance and capital improvements;

- The structuring of fair market leases under which the lessees pay base
rent with certain annual escalations and pays certain expenses in
connection with the operation of the property such as real estate taxes,
insurance, utilities and services, maintenance and other operating
expenses;

- The provision of mortgages or other appropriate financing vehicles to
correctional facility operators in circumstances where ownership by the
Company is not otherwise attractive;

- The monitoring of operating performance of the facilities in its
portfolio to ensure that the lessees comply with their lease obligations;
and

FUTURE GROWTH OF THE COMPANY

EXTERNAL GROWTH

Acquisition Opportunities. In addition to the possible acquisition of the
Option Facilities, the Company intends to acquire from both private prison
owners and operators and government entities additional correctional and
detention facilities that meet its investment criteria, as described herein. The
Company believes it has a competitive advantage in the acquisition of new
private correctional facilities due to its relationship with CCA and the
Company's significant capital resources. The primary source of private
correctional facilities to be initially acquired or financed by the Company will
be facilities owned and operated by CCA. Following any such acquisition from
CCA, the Company intends to lease such properties to CCA. The Company has an
option to acquire and lease back to CCA any correctional or detention facility
acquired

24
<PAGE> 30

or developed and owned by CCA in the future, for a period of three years
following the Service Commencement Date with respect to such facility. The
Company has a right of first refusal in the event CCA decides to sell an
interest in or use mortgage financing to finance more than 90% of the cost of
any correctional or detention facilities now owned or which are acquired or
developed by CCA or its affiliates in the future. See "Relationship Between CCA
and the Company after the Formation Transactions." In 1996, CCA invested
approximately $165.0 million in approximately 15 correctional facility projects
and increased its beds under contract from 28,607 to over 41,000. Moreover, as
of December 31, 1996, CCA was the largest private prison management company in
the United States with an estimated national market share of 52%. Of the 21,706
beds awarded to the private sector in 1996, CCA was awarded 12,872 beds, or 58%.
Notwithstanding CCA's market share and growth, less than 5% of all adult prison
beds in the United States are privately managed. Management believes that as CCA
and the private prison management industry continue to grow, many opportunities
will exist to acquire additional private correctional facilities from CCA on
attractive terms. See "Risk Factors -- Corrections and Detention Industry
Risks."

The Company also believes that attractive opportunities exist to acquire or
develop correctional facilities from various government entities. Historically,
government entities have used various methods of construction financing to
develop new correctional facilities, including but not limited to the following:
(i) one-time general revenue appropriations by the government agency for the
cost of the new facility; (ii) general obligation bonds that are secured by
either a limited or unlimited tax levied by the issuing government entity; or
(iii) lease revenue bonds secured by an annual lease payment that is subject to
annual or bi-annual legislative appropriation of funds. Many jurisdictions are
operating their correctional facilities at well above their rated capacities,
and as a result are under federal court order to alleviate prison overcrowding
within a certain time period. These jurisdictions are often not in a position to
appropriate funds or obtain financing to construct a correctional facility
because of other fiscal demands or requirements for public approval.
Accordingly, the Company believes that, in an attempt to address fiscal
pressures of matching revenue collections with projected expenses, many such
government entities have been and will be forced to consider private ownership
with respect to the development of new correctional facilities and
sale-leaseback transactions or other financing alternatives with respect to
existing correctional facilities. Management believes that such situations will
enable the Company to acquire and develop correctional facilities from and on
behalf of governments at all levels including those which might not be the
subject of a private management contract. In pursuing such opportunities, the
Company expects to utilize the industry knowledge, experience and relationships
of its Board of Trustees and management, particularly J. Michael Quinlan, its
Chief Executive Officer, and Doctor R. Crants, Chairman of the Board of
Trustees. From July 1987 through December 1992, Mr. Quinlan served as the
Director of the BOP. Mr. Crants currently serves as Chairman and Chief Executive
Officer of CCA.

In making its decision with respect to the Initial Facilities and in
evaluating the future acquisition of any or all of the Option Facilities and
other facilities, the Company has considered and will consider the following
criteria:

- The reputation and creditworthiness of the current owner, manager or
developer of the facility;

- The proposed terms for purchasing the facility;

- The proposed terms of leasing the facility, including rental payments and
lease term;

- The quality of construction of the facility;

- The quality of operations at an existing facility or the quality of other
operations of a prison manager for a new facility;

- The facility's status of accreditation by the American Correctional
Association (the "ACA"). The ACA is a multi-disciplinary organization of
professionals representing all levels and facets of the corrections and
criminal justice industry, including federal, state and military
correctional facilities in prisons, county jails and detention centers,
probation and parole agencies, and community corrections/half-way houses.
Comprised of 70 chapters and affiliated organizations, as well as
individual members numbering more than 20,000, the ACA serves as the
umbrella organization for all areas of corrections, and provides a broad
base of expertise in this industry; and

- The relationship between the prison manager and the contracting
correctional authority.

25
<PAGE> 31

Financing Opportunities. High occupancy rates and prison overcrowding have
resulted in an increased demand for new federal, state and local correctional
facilities. This demand has not been fully met because of budgetary constraints
and the reduced availability of construction financing. While the Company
intends to grow primarily from acquisitions and expansions of correctional
facilities, the Company believes that opportunities exist for it to provide
mortgage or other appropriate financing vehicles to government entities and
private prison managers in circumstances where ownership by the Company is not
otherwise attractive.

The Company's ability to acquire new facilities, expand its existing
facilities or provide mortgage financing will depend on its access to financing.
There can be no assurance that the Company will be able to acquire correctional
facilities that meet its investment criteria. Moreover, acquisitions and
expansions entail risks that acquired or expanded facilities will fail to
perform in accordance with expectations. See "Risk Factors -- Real Estate
Investment Considerations" and "Risk Factors -- Initial Distribution Policy."

INTERNAL GROWTH

Expansion Opportunities. The Company's growth objectives will also focus
on the selective expansion of its existing correctional facilities to increase
cash flows and property values. In 1996, CCA expanded four of its domestic
facilities by an aggregate of 992 beds and used the expansion space for its
existing contracting government entities as well as to house inmates from other
jurisdictions under new contracts. The Company believes that CCA (and other
tenants of the Company) will continue to attempt to achieve economies of scale
through expansions of existing facilities. Management of the Company intends to
actively participate in its tenants' expansion plans and intends to provide
expansion space as needed.

Rent Escalations. The rent schedule under the Leases provides for a
relatively stable source of cash flow and opportunities to participate in future
growth in revenues. The minimum rent for the first year for each Facility under
the Leases is initially set at a fixed amount. Thereafter minimum rent will
escalate by the Base Rent Escalation which is a percentage equal to the greater
of (i) 4%, or (ii) 25% of the percentage increase in the gross management
revenues realized by CCA from such Facility, exclusive of any increase
attributable to expansion in the size of or the number of beds in such facility.

LEASE NEGOTIATION

Concurrently with the performance of due diligence procedures related to
new acquisition opportunities and/or the negotiation of the terms and conditions
of new acquisitions, the Company will generally begin discussions regarding
proposed lease terms. Based on current market conditions, the Company will
generally seek lease terms which provide an initial annual base rent with an
appropriate escalation factor in an amount similar to the Base Rent Escalation,
and other terms similar to the terms of the Leases. The Company may, however,
negotiate lease terms different from the foregoing.

DUE DILIGENCE PROCESS

CCA has developed a comprehensive analytical approach to bidding on and
developing new correctional projects or facilities. This deliberation process
has allowed CCA to assemble a portfolio of privatized correctional and detention
facilities that has shown sustained growth in revenues and cash flows. The
Company expects that CCA will continue to follow these procedures in acquiring
privatized correctional facilities in the future. Such procedures include:

Competitive Market Analysis. CCA generally receives inquiries from or
on behalf of government agencies that are considering privatization of
certain facilities. When it receives such an inquiry, CCA thoroughly
examines the need for its services (including the economic and demographic
indicators such as the demand for prison beds and the number of available
beds in the area) and the legal and political climate in which the
inquiring party operates. Generally, government agencies responsible for
correctional and detention services procure goods and services through a
competitive process involving either a Request for Proposal ("RFP") or
Request for Qualification ("RFQ"). A majority of CCA's new business is
secured through responding to RFPs. As part of CCA's process of responding
to RFPs, CCA's management meets with appropriate personnel from the
government agency making the request to best

26
<PAGE> 32

determine the agency's distinct needs. If the project falls within CCA's
strategy, CCA will then submit a written response to the RFP. A typical RFP
requires bidders to provide detailed information, including, but not
limited to, the service to be provided by the bidder, its experience and
qualifications, and the price at which the bidder is willing to provide the
services (which services may include the renovation, improvement or
expansion of an existing facility or the planning, design and construction
of a new facility).

Pro Forma Operating Budget. CCA works closely with the government
agency to develop a comprehensive pro forma budget on the property,
utilizing available financial information in addition to other information
collected from a variety of sources. The expected term of the management
contract is examined as well as the cost of construction of a new facility
or the expansion or renovation of an existing facility. Finally, in the
event of the construction of a new facility, the potential for overall
capital appreciation of the facility is reviewed.

Environmental and Legal Review. In conjunction with each prospective
acquisition, CCA conducts comprehensive real estate and legal due diligence
on the property. This due diligence includes Phase I environmental
assessments to the extent such assessments are not already existing. In
addition, CCA conducts customary real estate due diligence, including a
survey of the property, a review of all title documents, operating leases
and contracts, zoning, and government permits and licenses, and a
determination of whether the property is in compliance with all applicable
laws.

Accordingly, the Company believes it will be able to acquire or finance
future correctional and detention facility properties from CCA with physical and
market characteristics similar to the Facilities. The Company will use a similar
approach in evaluating the acquisition or financing of correctional and
detention facilities, including those from government entities.

27
<PAGE> 33

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Shares offered
hereby are estimated to be approximately $313.2 million ($360.6 million if the
Underwriters' over-allotment option is exercised in full) after deduction of the
underwriting discount and estimated Offering expenses. Approximately $308.1
million of the net proceeds of the Offering will be used by the Company to
purchase the nine Initial Facilities from CCA. The purchase of the Initial
Facilities will close contemporaneously with the closing of the Offering. See
"The Formation Transactions." The remaining net proceeds from the Offering of
approximately $5.1 million, any net proceeds from the exercise of the
Underwriters' over-allotment option, and funds available from the $150.0 million
Bank Credit Facility, will be used by the Company for general purposes,
including the possible future acquisition of additional properties consistent
with the Company's investment policies, including the Option Facilities. While
the Company may engage from time to time in discussions regarding potential
acquisitions, other than with respect to the Option Facilities and the Right to
Purchase Agreement, it has not entered into any agreement as of the date of this
Prospectus to make any such acquisition. Pending the described uses, the
remaining net proceeds will be invested in short-term investment grade
instruments, interest bearing bank account, certificates of deposit, money
market securities, U.S. government securities or mortgage-backed securities
guaranteed by Federal agencies.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
April 23, 1997, the date of its formation, (i) after giving effect to the
Formation Transactions, and (ii) as adjusted to reflect the sale by the Company
of the 17,000,000 Common Shares offered hereby and the application of the
estimated net proceeds therefrom as described under "Use of Proceeds." The
information set forth in the following table should be read in conjunction with
the financial statements and notes thereto, the pro forma financial information
and notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

<TABLE>
<CAPTION>
APRIL 23, 1997
------------------------
ACTUAL AS ADJUSTED(2)
------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Shareholders' Equity:
Preferred Shares, $0.01 par value, 10,000,000 shares
authorized, no shares issued and outstanding........... $-- $ --
Common Shares, $0.01 par value, 90,000,000 shares
authorized, 1,000 shares issued and outstanding;
17,301,000 shares, as adjusted, issued and
outstanding(1)......................................... -- 173
Additional paid-in capital................................ 1 316,027
--- --------
Total shareholders' equity........................ 1 316,200
--- --------
Total capitalization............................ $ 1 $316,200
=== ========
</TABLE>

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

(1) Does not include 1,850,000 Common Shares reserved for issuance pursuant to
the Company's Share Incentive Plan or the Company's Non-Employee Trustees'
Plan of which 1,075,000 shares will be outstanding upon consummation of the
Offering. See "Management -- The Share Incentive Plan" and " -- Non-Employee
Trustees' Plan."

28
<PAGE> 34

DISTRIBUTIONS

The Company intends to pay regular quarterly distributions to its
shareholders. The Board of Trustees, in its sole discretion, will determine the
actual distribution rate based on the Company's actual results of operations,
economic conditions, tax considerations (including those related to REITs) and
other factors. The first distribution, for the period ending September 30, 1997,
is expected to equal a pro rata share of the anticipated initial quarterly
distribution of $0.425 per Common Share, which on an annualized basis, will
represent a distribution of $1.70 per share, or approximately 8% to 9% of the
estimated range of the initial public offering price. The Company does not
expect to change its estimated initial distribution per Common Share if the
Underwriters' over-allotment option is exercised. See "The Formation
Transactions."

The distribution described above is expected to represent approximately
92.1% of the Company's pro forma Cash Available for Distribution for the twelve
months ending December 31, 1996. The Company's estimate of the pro forma Cash
Available for Distribution is based upon pro forma Funds from Operations, with
certain adjustments based on the items described below. The estimate of Cash
Available for Distribution is being made solely for the purpose of setting the
initial distribution and is not intended to be a projection or forecast of the
Company's results of operations or its liquidity, nor is the methodology upon
which such adjustments were made necessarily intended to be a basis for
determining future distributions.

The following table describes the calculation of pro forma Funds from
Operations for the 12 months ended December 31, 1996 and the three months ended
March 31, 1997 and the adjustments made to pro forma Funds from Operations in
order to calculate initial estimated distributions.

<TABLE>
<CAPTION>
PRO FORMA
----------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
Pro forma net income........................................ $23,353 $5,839
Plus: Pro forma real estate depreciation and amortization... 8,588 2,147
------- ------
Pro forma Funds from Operations(1)........................ 31,941 7,986
======= ======
Estimated Cash Available for Distribution(2)................ 31,941 7,986
Expected initial distribution(3)............................ 29,412 7,353
Expected initial distribution per common share.............. $ 1.70 $0.425
Expected initial payout ratio based on estimated cash
available for distribution(4)............................. 92.1% 92.1%
</TABLE>

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

(1) Funds from Operations does not represent cash generated from operating
activities (determined in accordance with GAAP) and should not be considered
as an alternative to net income (determined in accordance with GAAP) as an
indication of the Company's performance or to cash flows from operating
activities (determined in accordance with GAAP) as a measure of liquidity or
ability to make distributions. The Company generally considers Funds from
Operations an appropriate measure of liquidity of an equity REIT because
industry analysts have accepted it as a performance measure of equity REITs.
"Funds from Operations" as defined by NAREIT means net income (loss)
(computed in accordance with GAAP) excluding significant non-recurring
items, gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization on real estate assets, and after adjustments
for unconsolidated partnerships and joint ventures. The Company's Funds from
Operations are not comparable to Funds from Operations reported by other
REITs that do not define the term using the current NAREIT definition or
that interpret the current NAREIT definition differently than does the
Company. The Company believes that in order to facilitate a clear
understanding of the operating results of the Company, Funds from Operations
should be examined in conjunction with net income as presented in the
combined financial statements and information included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Calculation of Funds from Operations:
Pro forma net income...................................... $23,353 $5,839
Plus: Pro forma real estate depreciation and
amortization............................................ 8,588 2,147
-------- -------
Pro forma Funds from Operations........................... $31,941 $7,986
======== =======
</TABLE>

29
<PAGE> 35

(2) To estimate Cash Available for Distribution, pro forma Funds from Operations
were adjusted (a) without giving effect to any changes in working capital
resulting from changes in current assets and current liabilities (which
changes are not anticipated to be material) or the amount of cash estimated
to be used for (i) development, acquisition and other activities and (ii)
financing activities (b) for certain known events and/or contractual
commitments that may have occurred during the period but would not have been
in effect for the full year and (c) for certain non-GAAP adjustments
consisting of an estimate of amounts anticipated for recurring tenant
improvements and capital expenditures. The estimate of Cash Available for
Distribution is being made solely for the purpose of setting the initial
distribution and is not intended to be a projection or forecast of the
Company's results of operations or its liquidity, nor is the methodology
upon which such adjustments were made necessarily intended to be a basis for
determining future distributions.
(3) Represents expected initial distribution per Common Share multiplied by the
17,301,000 Common Shares to be outstanding upon completion of the Formation
Transactions.
(4) Represents the anticipated initial aggregate distribution divided by Cash
Available for Distribution.

The Company believes that its estimated Cash Available for Distribution
constitutes a reasonable basis for setting the initial distribution rate on the
Common Shares and intends to maintain its initial distribution rate for the 12
months following the Offering unless actual results from operations, economic
conditions or other factors differ from the assumptions used in its estimate.
The actual return that the Company will realize and the amount available for
distributions to shareholders will be affected by a number of factors, including
the revenues received from the Initial Facilities, the operating expenses of the
Company, the interest expense incurred on its borrowings and unanticipated
capital expenditures. No assurance can be given that the Company's estimate will
prove accurate. In addition, pro forma results of operations do not purport to
represent the actual results that can be expected for future periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

The Company anticipates that Funds from Operations will exceed earnings and
profits due to non-cash expenses, primarily depreciation and amortization,
expected to be incurred by the Company. Distributions by the Company to the
extent of its current or accumulated earnings and profits for federal income tax
purposes will be taxable to shareholders as ordinary dividend income.
Distributions in excess of earnings and profits generally will be treated as a
non-taxable reduction of the shareholder's basis in the Common Shares to the
extent thereof, and thereafter as capital gain. Distributions treated as a
non-taxable reduction in basis will have the effect of deferring taxation until
the sale of a shareholder's Common Shares. The Company does not intend to reduce
the expected initial distribution per share if the Underwriters' over-allotment
option is exercised. Based on the Company's estimated results of operations for
the 12 months ending June 30, 1998, the Company estimates that approximately 10%
to 20% of the anticipated initial annual distribution to shareholders will
represent a return of capital for federal income tax purposes and that the
Company would have been required to distribute $22.6 million or $1.31 per share
during such 12-month period in order to maintain its status as a REIT. If actual
Funds from Operations or taxable income vary from these amounts, the percentage
of distributions may vary substantially in future years. For a discussion of the
tax treatment of distributions to holders of Common Shares, see "Material
Federal Income Tax Considerations -- Taxation of Taxable Domestic Shareholders"
and "-- Taxation of Foreign Shareholders." In order to qualify to be taxed as a
REIT, the Company must make annual distributions to shareholders of at least 95%
of its REIT taxable income (determined by excluding any net capital gain), which
the Company anticipates will be less than its share of adjusted Funds from
Operations. Under certain circumstances, the Company may be required to make
distributions in excess of Cash Available for Distribution in order to meet such
distribution requirements. In such a case, the Company may find it necessary to
arrange for short-term (or possible long-term) borrowings or to raise funds
through the issuance of Preferred Shares or additional Common Shares.

Future distributions by the Company will be at the discretion of the Board
of Trustees and will depend on the actual Funds from Operations of the Company,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code (see "Material Federal Income
Tax Considerations -- Taxation of the Company -- Requirements for
Qualification"), and such other factors as the Board of Trustees deems relevant.
See "Risk Factors -- Changes in Investment and Financing Policies Without Vote
of Shareholders."

30
<PAGE> 36

DILUTION

As of April 23, 1997, the founding shareholder owned 1,000 Common Shares.
The net tangible book value of the Common Shares immediately subsequent to this
Offering (based on an initial public offering price of $20.00 per share, after
deduction of the estimated underwriting discount and Offering expenses) will be
$18.28 per share, an increase of $18.27 from the $0.01 net tangible book value
per share prior to the Offering (or a net tangible book value per share of
$18.32 and a per share increase of $18.31, respectively, assuming full exercise
of the Underwriters' over-allotment option). A $1.72 per share dilution will be
experienced by the purchasers of shares in this Offering (or $1.68 per share
dilution assuming full exercise of the Underwriters' over-allotment option).

The following table illustrates this dilution on a per share basis based on
the initial public offering price and assuming no exercise of the Underwriters'
over-allotment option:

<TABLE>
<S> <C> <C>
Initial public offering price per Common Share.............. $20.00
Historical net tangible book value per Common Share before
the Offering(1)........................................ $ 0.01
Increase in net tangible book value per Common Share
attributable to new investors.......................... 18.27
Pro forma net tangible book value per Common Share after
the Offering(2)........................................ 18.28
------
Dilution per Common Share to new investors.................. $ 1.72
======
</TABLE>

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

(1) Based on the Company's historical April 23, 1997 Balance Sheet contained
elsewhere in this Prospectus.

(2) Based on the pro forma shareholders' equity of $316.2 million divided by
17,301,000 Common Shares outstanding after the Offering and the Formation
Transactions. Does not give effect to the 1,850,000 Common Shares issuable
under the Company's Share Incentive Plan or the Company's Non-Employee
Trustees' Plan. See "Management -- The Share Incentive Plan" and
" -- Non-Employee Trustees' Plan."

The following table summarizes, as of April 23, 1997, after giving effect
to the sale of the Common Shares offered hereby and the Formation Transactions,
(i) the number and percentage of Common Shares purchased from the Company, (ii)
the total consideration for the Common Shares and (iii) the average price per
Common Share paid by the public investors and the current shareholders.

<TABLE>
<CAPTION>
SHARES OWNED TOTAL CONSIDERATION
--------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- -------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Common Shares issued or to be
issued in the Formation
Transactions.................... 301,000(1) 1.7% $ 6,001,000(2) 1.7% $19.94
Common Shares to be sold in the
Offering........................ 17,000,000 98.3 340,000,000 98.3 20.00
</TABLE>

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

(1) Includes (i) 1,000 founder's shares, and (ii) 300,000 shares issued to D.
Robert Crants, III and Michael W. Devlin as a development fee and as
reimbursement for certain expenses incurred in connection with the promotion
and formation of the Company and the consummation of the Offering which are
valued based upon the initial public offering price. See "Dilution" and "The
Formation Transactions."

(2) Founder's shares were capitalized by $1,000; no cash proceeds were received
by the Company for the shares issued to D. Robert Crants, III and Michael W.
Devlin. The valuation of the shares is based on the initial public offering
price. See "The Formation Transactions."

Upon closing of the Offering, the Company will grant options to purchase
1,075,000 Common Shares at an exercise price equal to the initial public
offering price per share. The foregoing table assumes no exercise of outstanding
share options. See "Management -- The Share Incentive Plan" and
" -- Non-Employee Trustees' Plan."

31
<PAGE> 37

PRO FORMA FINANCIAL STATEMENTS

The following financial statements represent the unaudited pro forma
financial results for the Company as of March 31, 1997 and the three months and
year ended March 31, 1997 and December 31, 1996, respectively. The pro forma
Statements of Operations are presented as if the Formation Transactions had
occurred as of the beginning of the period indicated and therefore incorporate
certain assumptions that are included in the Notes to Pro Forma Statement of
Operations. The pro forma Balance Sheet is presented as if the Formation
Transactions had occurred on March 31, 1997. The Company is accounting for the
Facility acquisitions under the purchase method of accounting. The pro forma
information does not purport to represent what the Company's financial position
or results of operations actually would have been had the Formation
Transactions, in fact, occurred on such date or at the beginning of the period
indicated, or to project the Company's financial position or results of
operations at any future date or for any future period.

The Company's audited historical balance sheet as of April 23, 1997, and
notes thereto are included elsewhere in this Prospectus along with the Report of
the Independent Public Accountants. Total assets and shareholders' equity
totaled $1,000 each at April 23, 1997.

32
<PAGE> 38

CCA PRISON REALTY TRUST

PRO FORMA STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 THREE MONTHS ENDED MARCH 31, 1997
--------------------------------- ---------------------------------
ACTUAL ADJUSTMENTS PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- --------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rent income................... $-- $33,891(1) $33,891 $-- $8,473(1) $ 8,473
Cost and expenses:
Operating and
administrative.............. -- 1,854(2) 1,950 -- 463(2) 487
96(3) 24(3)
Provision for depreciation and
amortization................ -- 8,588(4) 8,588 -- 2,147(4) 2,147
--- ------- ------- --- ------ -------
Total costs and
expenses............... -- 10,538 10,538 -- 2,634 2,634
--- ------- ------- --- ------ -------
Net income....................... $-- $23,353 $23,353 $-- $5,839 $ 5,839
===== ========= ======== ===== ========= ========
Net income per share............. $ 1.35 $ 0.34
======== ========
Weighted average number of shares
outstanding(5)................ 17,301 17,301
OTHER DATA:
Funds from Operations(6)......... $31,941 $ 7,986
Cash Available for
Distribution.................. 31,941 7,986
Distributions.................... 29,412 7,353
Number of facilities............. 9 9
</TABLE>

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

(1) To record rent income from CCA in accordance with the terms of the Leases as
if the Initial Facilities had been in operation at the leased design
capacity for the entire period. The Company will lease the Initial
Facilities to CCA under operating leases.
(2) To record recurring administrative expenses of the Company based upon
management's estimates of operating and administrative costs.
(3) To record state franchise taxes based upon the corporate structure of the
Company.
(4) To record depreciation expense on fixed assets purchased from CCA based on
the estimated useful lives of the Initial Facilities.
(5) Weighted average shares outstanding include the founder's shares, shares
issued to management and shares sold in the Offering as if such shares were
outstanding for the entire period.

(6) Management believes Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows
from operating activities, financing activities and investing activities, it
provides investors with an understanding of the ability of the Company to
incur and service debt and make capital expenditures. Funds from Operations
is calculated by management as net income (loss) (computed in accordance
with GAAP), excluding significant non-recurring items, gains (or losses)
from debt restructuring and sales of property, plus real estate related
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures and, accordingly, may not be comparable to
other REITs' Funds from Operations calculated under differing methodology.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Funds from Operations." Funds from Operations should be
examined in conjunction with net income as presented.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------
<S> <C> <C>
Calculation of Funds from Operations:
Pro forma net income...................................... $23,353 $5,839
Plus: Pro forma real estate depreciation and
amortization............................................ 8,588 2,147
------- ------
Pro forma Funds from Operations............................. $31,941 $7,986
=============== ================
</TABLE>

Funds from Operations should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indication of the Company's
financial performance or to cash flows from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make distributions.

33
<PAGE> 39

CCA PRISON REALTY TRUST

PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C>
ASSETS
Land and buildings, net..................................... $ -- $311,103(1) $311,103
Cash........................................................ -- 313,200(2) 5,097
(308,103)(1)
---- -------- --------
$ -- $316,200 $316,200
==== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity:
Preferred Shares, $0.01 par value; 10,000,000 shares
authorized; none outstanding........................... $ -- $ -- $ --
Common Shares, $0.01 par value; 90,000,000 shares
authorized, 17,301,000 issued and outstanding, as
adjusted............................................... -- 173(2) 173
Additional paid-in capital................................ -- 313,027(2) 316,027
3,000(1)
---- -------- --------
$ -- $316,200 $316,200
==== ======== ========
</TABLE>

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

(1) To record the purchase of the nine Initial Facilities from CCA using the
purchase method of accounting. The capitalized cost of the land and
buildings includes a $3.0 million development fee paid to management of the
Company representing one-half of the value of the 300,000 shares (valued at
the assumed initial public offering price) issued to management at the
closing of the Offering. The remaining fair market value of the shares
issued to management is considered to be a non-recurring expense and such
expense has been excluded from the pro forma financial statements.

(2) Reflects the initial capitalization (1,000 shares) of the Company, 300,000
shares issued to management, and issuance of 17,000,000 Common Shares, $0.01
par value, in connection with the Offering at an assumed initial public
offering price of $20.00 per share. The estimated costs of the Offering,
including the underwriting discount, estimated Offering expenses and the
development fee, totaling $29.8 million have been reflected as an offset to
additional paid-in capital. The resulting net cash proceeds of the Offering
total $313.2 million.

34
<PAGE> 40

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

GENERAL

The Company was organized as a Maryland real estate investment trust on
April 23, 1997, and intends to make an election to qualify under the Code as a
REIT commencing with its taxable year ending December 31, 1997. Substantially
all of the Company's initial revenues are expected to be derived from: (i) rents
received under triple net leases of correctional and detention facilities; and
(ii) interest earned from the temporary investment of funds in short-term
instruments. With respect to Leases for the Initial Facilities, base rent is the
annual rental payment set forth in such Leases. All such Leases also provide for
annual increases equal to the Base Rent Escalation.

The Company will incur operating and administrative expenses including,
principally, compensation expense for its executive officers and other
employees, office rental and related occupancy costs and various expenses
incurred in the process of acquiring additional properties. The Company will be
self-administered and managed by its executive officers and staff, and will not
engage a separate advisor or pay an advisory fee for administrative or
investment services, although the Company will engage legal, accounting, tax and
financial advisors from time to time.

The primary non-cash expense of the Company will be the depreciation of its
correctional and detention facilities. The Company expects to depreciate
buildings and improvements over a 40-year period and certain equipment
transferred with the Facilities over a seven-year period for both tax and
financial reporting purposes.

The Company also expects to leverage its portfolio of real estate equity
investments and will incur long and short-term indebtedness, and related
interest expense, from time to time. See "Risk Factors -- Dependence on Debt
Financing for Growth and Adverse Consequences of Debt Financing on Ability to
Make Distributions."

The Company intends to make distributions to its shareholders in amounts
not less than the amounts required to maintain REIT status under the Code and,
in general, in amounts exceeding taxable income. The Company's ability to make
distributions will depend upon its Cash Available for Distribution.

RESULTS OF OPERATIONS

The Company has had no operations prior to April 23, 1997 (the date of
organization), or through the date of this Prospectus. The Company's future
results of operations will depend upon the acquisition of the Initial Facilities
and other properties, including the Option Facilities, and the terms of any
subsequent investments the Company may make.

PRO FORMA RESULTS OF OPERATIONS

The Company estimates that after giving effect to the Offering and the
acquisition of the Initial Facilities, revenues would have been $33.9 million
for the year ended December 31, 1996 and $8.5 million for the three months ended
March 31, 1997. Net income would have been $23.4 million or $1.35 per share for
the year ended December 31, 1996, and $5.8 million or $0.34 per share for the
three months ended March 31, 1997. Depreciation, amortization and other non-cash
expenses would have been $8.6 million for the year ended December 31, 1996 and
$2.1 million for the three months ended March 31, 1997, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company anticipates that its initial working capital and cash from
operations, together with the Bank Credit Facility anticipated to be available
to the Company, will provide adequate liquidity to conduct its operations, fund
administrative and operating costs, interest payments, and acquisitions and
allow distributions to the Company's shareholders in accordance with the Code's
requirements for qualification as a REIT and to avoid any corporate level
federal income or excise tax.

35
<PAGE> 41

In order to qualify as a REIT for federal income tax purposes, the Company
will be required to make substantial distributions to its shareholders. The
following factors, among others, will affect funds from operations and will
influence the decisions of the Board of Trustees regarding distributions: (i)
scheduled increases in base rent under the Leases with respect to the
Facilities; and (ii) returns from short-term investments pending application of
the net proceeds of the Offering. Although the Company will receive most of its
rental payments on a monthly basis, it intends to make distributions quarterly.
Amounts accumulated for distribution will be invested by the Company in
short-term money market instruments.

Under the terms of the Leases, CCA is responsible for all operating
expenses and taxes, including property and casualty insurance. See "Business of
the Company and its Properties -- The Facilities" and "Leases." As a result of
these arrangements, the Company does not believe it will be responsible for any
major expenses in connection with the Initial Facilities during the terms of the
respective Leases. The Company anticipates entering into similar leases with
respect to additional properties, including the Option Facilities. After the
terms of the respective leases expire, or in the event a lessee is unable to
meet its obligations, the Company anticipates that any expenditures it might
become responsible for in maintaining the facilities will be funded by cash from
operations and, in the case of major expenditures, possibly by borrowings. To
the extent that unanticipated expenditures or significant borrowings are
required, the Company's Cash Available for Distribution and liquidity may be
adversely affected.

The Company has obtained a commitment for the $150.0 million Bank Credit
Facility which will be used to finance the acquisition of additional properties,
including the Option Facilities, and for other general operating purposes,
including the expansion of the Company's existing facilities. There can be no
assurance that the Bank Credit Facility will be made available to the Company.

Other than the $308.1 million purchase of the Initial Facilities using the
offering proceeds, the Company has no commitments with respect to other capital
expenditures. However, the Company has options at any time during the three-year
period following the acquisition of the Initial Facilities to purchase any or
all of the five Option Facilities for CCA's costs of developing, constructing
and equipping the Option Facilities, plus 5% of such costs, aggregating
approximately $193.0 million. In addition, the Company has an option to acquire,
at fair market value, and lease back to CCA, any correctional or detention
facility acquired or developed and owned by CCA in the future for a period of
three years following the Service Commencement Date with respect to such
facility.

The Company may raise additional long-term capital by issuing, in public or
private transactions, equity or debt securities, but the availability and terms
of any such issuance will depend upon the market and other conditions. The
Company anticipates that as a result of its initially low debt to total
capitalization and its intention to maintain a debt to total capitalization of
50% or less, it will be able to obtain financing for its long-term capital
needs. However, there can be no assurance that such additional financing or
capital will be available on terms acceptable to the Company. The Company may,
under certain circumstances, borrow additional amounts in connection with the
renovation or expansion of the Initial Facilities, the acquisition of additional
properties, including the Option Facilities or, as necessary, to meet certain
distribution requirements imposed on REITs under the Code. See "Policies and
Objectives with Respect to Certain Activities -- Investment Objectives and
Policies."

Acquisitions will be made subject to the investment objectives and policies
to maximize both current income and long-term growth in income described
elsewhere in this Prospectus. The Company's liquidity requirements with respect
to future acquisitions may be reduced to the extent the Company uses Common
Shares as consideration for such purchases.

FUNDS FROM OPERATIONS

Management believes Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flows from
operating activities, financing activities and investing activities, it provides
investors with an understanding of the ability of the Company to incur and
service debt and make capital expenditures. Funds from Operations is calculated
as net income (loss) (computed in accordance with GAAP), excluding significant
non-recurring items, gains (or losses) from debt restructuring

36
<PAGE> 42

and sales of property, plus real estate related depreciation and amortization
and after adjustments for unconsolidated partnerships and joint ventures. The
Company computes Funds from Operations in accordance with standards established
by the White Paper on Funds from Operations approved by the NAREIT Board of
Governors in March 1995, which may differ from the methodology for calculating
Funds from Operations utilized by other equity REITs, and, accordingly, may not
be comparable to such other REITs. Further, Funds from Operations does not
represent amounts available for management's discretionary use because of needed
capital replacement or expansion, debt service obligations, or other commitments
and uncertainties. The Company believes that in order to facilitate a clear
understanding of the pro forma operating results of the Facilities and the
Company, Funds from Operations should be examined in conjunction with the income
(loss) as presented in the pro forma financial statements and information
included elsewhere in this Prospectus. Funds from Operations should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make distributions.

INFLATION

Management believes that inflation should not have a material adverse
effect on the operating expenses of the Company because such expenses are
relatively insignificant as a percentage of revenues. Because the Bank Credit
Facility provides for a variable interest rate, inflation could have a material
adverse effect on the Company's interest expense if interest rates increase
substantially during any year. Accordingly, when appropriate, based on the then
current interest rates, management may seek to replace the Bank Credit Facility
with a credit facility that provides for a fixed interest rate.

THE PRIVATE CORRECTIONS INDUSTRY

The Company believes the United States private corrections industry is in a
period of significant growth. In the United States, there is a growing trend
toward privatization of government services and functions, including corrections
and detention services, as governments of all types face continuing pressure to
control costs and improve the quality of services. According to the 1996
Facility Census (which was authored by Dr. Charles W. Thomas, an Independent
Trustee of the Company), see "Management -- Trustees and Executive Officers,"
the design capacity of privately managed adult correctional and detention
facilities worldwide has increased dramatically since the first privatized
facility was opened by CCA in 1984. The majority of this growth has occurred
since 1989 as the number of privately managed adult correctional and detention
facilities in operation or under construction worldwide increased from 26
facilities with a design capacity of 10,973 beds in 1989 to 132 facilities with
a design capacity of 85,201 beds in 1996. The majority of all private prison
management contracts are in the United States. At December 31, 1996, 118 of the
132 contracts were for United States facilities with the remaining 14 equally
divided between Australia and the United Kingdom. According to the 1996 Facility
Census, the aggregate capacity of private facilities in operation or under
construction rose from 65,595 beds at December 31, 1995 to 85,201 beds at
December 31, 1996, an increase of 34%. Additionally, the 1996 Facility Census
reports that the number of private facilities for which contracts have been
awarded increased 27% from 104 in 1995 to 132 in 1996 and that the prisoner
population housed in privately managed facilities expanded by 30% in 1996.

The 1996 Facility Census reports that at December 31, 1996 there were 25
state jurisdictions, the District of Columbia and Puerto Rico, within which
there were private facilities in operation or under construction. Four of these
were state jurisdictions within which facilities were located but where the
facilities are not intended to house the local or state level prisoners of those
state jurisdictions. An additional six state jurisdictions were contracting for
the housing of state-level or local-level prisoners in private facilities
located beyond their geographical boundaries. Further, all three federal
agencies with prisoner custody responsibilities (i.e., the BOP, INS and USMS)
continued to contract with private management firms.

Management believes that the increase in the demand for privatized
correctional and detention facilities is also a result, in large part, of the
general shortage of beds available in United States correctional and

37
<PAGE> 43

detention facilities. According to reports issued by the United States
Department of Justice, Bureau of Justice Statistics (the "BJS"), the number of
inmates housed in United States federal and state prison facilities and in local
jails increased from 744,208 at December 31, 1985 to 1,630,940 at June 30, 1996,
a compound annual growth rate of 7.8%.

Industry reports also indicate that inmates convicted of violent crimes
generally serve only one-third of their sentence, with the majority of them
being repeat offenders. Accordingly, there is a perceived public demand for,
among other things, longer prison sentences, as well as prison terms for
juvenile offenders, resulting in even more overcrowding in United States
correctional and detention facilities. Finally, numerous courts and other
government entities in the United States have mandated that additional services
offered to inmates be expanded and living conditions be improved. Many
governments do not have the readily-available resources to make the changes
necessary to meet such mandates.

The demand for privately-managed correctional and detention centers is also
increasing internationally. Management believes that many countries are faced
with the same fiscal pressures as the United States and, as a result, are
seeking more cost-effective means of providing prison management services. At
December 31, 1996, there were a total of 14 privatized facilities in the United
Kingdom and Australia, with an aggregate design capacity of 7,617 beds.

At December 31, 1996, 40 of the 118 privately managed facilities in
operation or under construction in the United States were privately rather than
publicly owned. To date, all private ownership of correctional facilities has
been in connection with private prison management. However, management believes
that the number of privately owned facilities will grow, independent of the
growth in the private prison management industry. In an attempt to address the
fiscal pressures of matching revenue collections with projected expenses, many
government entities have been and will continue to be forced to consider private
ownership in connection with the development of new correctional facilities and
sale leaseback and other financing arrangements with respect to existing
facilities.

CORRECTIONS CORPORATION OF AMERICA

FACILITY OPERATIONS

CCA is the largest developer and manager of privatized correctional and
detention facilities worldwide. The Company initially will acquire the nine
Initial Facilities from CCA. The Company will also have an option to acquire any
or all of the five Option Facilities from CCA for a period of three years
following the closing of the purchase of the Initial Facilities. In addition,
the Company will have an option to acquire any correctional or detention
facility acquired or developed and owned by CCA in the future for a period of
three years following the Service Commencement Date with respect to such
facility. The Company will also have a right of first refusal to acquire and
provide mortgage financing for any correctional or detention facilities owned
and operated by CCA in the future. CCA's facilities are located in 17 states of
the United States, the District of Columbia, Puerto Rico, Australia and the
United Kingdom. As of June 10, 1997, CCA had contracts to manage 60 correctional
and detention facilities with an aggregate design capacity of 43,748 beds of
which 51 facilities representing 32,441 beds were in operation.

The services provided by CCA to government agencies include the integrated
design, construction and management of new correctional and detention facilities
and the redesign, renovation and management of older facilities. In addition to
providing the fundamental residential services relating to adult and juvenile
inmates, CCA's facilities offer a large variety of rehabilitation and education
programs including basic education, life skills and employment training and
substance abuse treatment. CCA also provides health care (including medical,
dental and psychiatric services), institutional food services, transportation
services, and work and recreational programs. CCA's management believes that its
proven ability to deliver a full range of high quality correctional and
detention facility management services on a cost-effective basis to government
agencies provides such agencies with sufficient incentives to choose CCA when
awarding new contracts or renewing existing contracts. In addition to the
opening of new facilities, over the last few years, CCA has expanded its service
capabilities and broadened its geographic presence in the United States market
through a

38
<PAGE> 44

series of strategic acquisitions of prison management companies and individual
facilities as well as the acquisition of an inmate transportation company.

In addition to its domestic operations, CCA has obtained and is pursuing
construction and management contracts for correctional and detention facilities
outside the United States. CCA presently has contracts to operate one facility
in the United Kingdom, two facilities in Australia, and also has contracts to
provide inmate transportation services in Australia. In June 1994, CCA entered
into an international strategic alliance with Sodexho S.A. ("Sodexho"), a French
conglomerate, for the purpose of pursuing prison management business outside the
United States. In connection with the alliance, Sodexho purchased a significant
ownership in CCA and entered into certain agreements with CCA relating to future
financings by CCA and corporate governance and control matters.

The Initial Facilities and the Option Facilities have been owned and
operated by CCA since the facilities were acquired or developed by CCA at
various times ranging from 1984 to 1997. CCA will operate the Initial Facilities
and, if acquired, the Option Facilities under the Leases with the Company. See
"Business of the Company and its Properties" and "Leases."

CCA is a Tennessee corporation and is the successor to a corporation of the
same name originally incorporated in January 1983. CCA's principal executive
offices are located at 102 Woodmont Boulevard, Nashville, Tennessee 37205, and
its telephone and fax numbers are (615) 292-3100 and (615) 269-8635,
respectively. CCA's common stock and warrants are listed on the NYSE under the
symbols "CXC" and "CXC/WS," respectively. CCA is not offering any of the
securities offered hereby.

CERTAIN SELECTED FINANCIAL INFORMATION

The following table sets forth (i) certain selected historical financial
information concerning CCA for the three months ended March 31, 1997 and 1996
and for each of the five years ended December 31, 1996, and (ii) unaudited
selected consolidated pro forma financial information concerning CCA. The pro
forma operating information is presented as if the Formation Transactions had
occurred as of the beginning of the period indicated and therefore incorporates
certain assumptions that are included in the Notes to Pro Forma Statement of
Operations included elsewhere in this Prospectus. The pro forma balance sheet
information is presented as if the Formation Transactions had occurred on March
31, 1997. The pro forma information does not purport to represent what the
Company's financial position or results of operations actually would have been
had the Formation Transactions, in fact, occurred on such date or at the
beginning of the period indicated, or to project the Company's financial
position or results of operations at any future date or any future period. The
selected historical financial information for the three months ended March 31,
1997 and 1996 is derived from CCA's unaudited condensed consolidated financial
statements. The selected historical financial information for each of the five
years ended December 31, 1996 is derived from CCA's audited consolidated
financial statements. The selected historical financial information for CCA has
been included in this Prospectus due to the Company's initial dependence on CCA
as the sole lessee of the Facilities. All information contained in the following
table should be read in conjunction with the consolidated financial statements
and related notes of CCA included elsewhere in this Prospectus. Investors should
review the financial statements and other data set forth herein with respect to
CCA, as well as the financial statements and other data set forth herein with
respect to the Company and the Facilities.

39
<PAGE> 45

CORRECTIONS CORPORATION OF AMERICA

SELECTED PRO FORMA AND HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)

HISTORICAL
HISTORICAL PRO FORMA ---------------------
--------------------------------------------------------- ------------ QUARTER ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED ---------------------
--------------------------------------------------------- DECEMBER 31, MARCH 31, MARCH 31,
1992 1993 1994 1995 1996 1996(1) 1996 1997
--------- --------- --------- --------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues............... $ 95,518 $ 132,534 $ 152,375 $ 207,241 $ 292,513 $ 292,513 $ 63,277 $ 91,838
Expenses:
Operating............ 74,796 108,026 123,540 158,814 213,173 227,475 47,184 63,919
General and
administrative..... 8,408 7,885 9,413 14,288 13,428 13,342 2,925 3,595
Depreciation and
amortization....... 5,468 5,759 5,753 6,524 11,339 9,008 2,277 3,923
--------- --------- --------- --------- --------- --------- --------- ---------
88,672 121,670 138,706 179,626 237,940 249,825 52,386 71,437
--------- --------- --------- --------- --------- --------- --------- ---------
Operating income....... 6,846 10,864 13,669 27,615 54,573 42,688 10,891 20,401
Interest expense
(income), net...... 4,264 4,424 3,439 3,952 4,224 452 1,350 498
--------- --------- --------- --------- --------- --------- --------- ---------
Income before income
taxes................ 2,582 6,440 10,230 23,663 50,349 42,236 9,541 19,903
Provision for income
taxes.............. 50 832 2,312 9,330 19,469 13,549 3,835 7,908
--------- --------- --------- --------- --------- --------- --------- ---------
Net income............. 2,532 5,608 7,918 14,333 30,880 28,687 5,706 11,995
--------- --------- --------- --------- --------- --------- --------- ---------
Preferred stock
dividends.......... 71 425 204 -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Net income allocable to
common stockholders.. $ 2,461 $ 5,183 $ 7,714 $ 14,333 $ 30,880 $ 28,687 $ 5,706 $ 11,995
========= ========= ========= ========= ========= ========= ========= =========
Net income per share:
Primary.............. $ 0.06 $ 0.10 $ 0.13 $ 0.19 $ 0.38 $ 0.35 $ 0.07 $ 0.14
Fully diluted........ $ 0.05 $ 0.10 $ 0.13 $ 0.18 $ 0.36 $ 0.34 $ 0.07 $ 0.14
Weighted average common
shares
outstanding.......... 41,544 51,762 61,908 75,110 81,664 81,664 80,502 83,942
OTHER DATA:
Beds in operation
(period end)......... 7,844 10,368 13,404 20,252 24,310 24,310 21,098 28,062
Beds under contract
(period end)......... 8,737 12,254 19,735 28,607 41,135 41,135 31,357 43,049
Compensated
mandays(2)........... 2,210,682 3,338,411 3,768,095 4,799,562 7,113,794 7,113,794 1,552,509 2,127,531
Available mandays(3)... 2,463,496 3,628,114 4,012,881 5,133,221 7,557,988 7,557,988 1,739,844 2,260,470
Average occupancy(4)... 89.7% 92.1% 93.5% 93.9% 94.1% 94.1% 89.2% 94.1%
BALANCE SHEET DATA (END
OF PERIOD):
Total assets........... $ 103,295 $ 109,285 $ 141,792 $ 213,478 $ 468,888 $ 231,137 $ 566,917
Total long-term debt... 56,277 50,558 47,984 74,865 117,535 81,848 194,745
Total liabilities
excluding deferred
gain................. 75,367 75,103 80,035 116,774 187,136 119,490 269,971
Stockholders' equity... 27,928 34,182 61,757 96,704 281,752 111,647 296,946

PRO FORMA
-------------
QUARTER ENDED
MARCH 31,
1997(1)
-------------
<S> <C>
STATEMENT OF OPERATIONS:
Revenues............... $ 91,838
Expenses:
Operating............ 68,332
General and
administrative..... 3,573
Depreciation and
amortization....... 2,852
---------
74,757
---------
Operating income....... 17,081
Interest expense
(income), net...... (684)
---------
Income before income
taxes................ 17,765
Provision for income
taxes.............. 6,160
---------
Net income............. 11,605
---------
Preferred stock
dividends.......... --
---------
Net income allocable to
common stockholders.. $ 11,605
=========
Net income per share:
Primary.............. $ 0.14
Fully diluted........ $ 0.14
Weighted average common
shares
outstanding.......... 83,942
OTHER DATA:
Beds in operation
(period end)......... 28,062
Beds under contract
(period end)......... 43,049
Compensated
mandays(2)........... 2,127,531
Available mandays(3)... 2,260,470
Average occupancy(4)... 94.1%
BALANCE SHEET DATA (END
OF PERIOD):
Total assets........... $ 576,193
Total long-term debt... 64,500
Total liabilities
excluding deferred
gain................. 141,759
Stockholders' equity... 296,946
</TABLE>

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

(1) See Corrections Corporation of America Pro Forma Consolidated Financial
Statements and related notes thereto appearing elsewhere in this Prospectus.
(2) Compensated mandays is equal to the number of beds for which CCA is paid
multiplied by the number of days the beds are occupied.
(3) Available mandays is the total number of beds in operation multiplied by the
number of days in operation.
(4) Average occupancy is the quotient of dividing compensated mandays by
available mandays.

40
<PAGE> 46

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

The following financial analysis should be read in conjunction with the
above financial information concerning CCA.

General

As of June 10, 1997, CCA had contracts to manage 60 correctional and
detention facilities with an aggregate design capacity of 43,748 beds. Of these
60 facilities, 51 are currently in operation and nine are under development by
CCA, two of which are Option Facilities and seven of which will be financed and
owned by a contracting government entity. CCA, through its United Kingdom joint
venture, UK Detention Services ("UKDS"), manages one facility in the United
Kingdom and, through its Australian joint venture, CC Australia, manages two
facilities in Australia. CCA's ownership interest in CC Australia is accounted
for under the equity method. Of the nine facilities under development by CCA,
four are scheduled to commence operations during the third quarter of 1997 and
five are scheduled to commence operations during 1998. In addition, at June 10,
1997, CCA had outstanding written responses to RFPs and other solicitations for
13 projects with an aggregate design capacity of 7,709 beds.

The following table sets forth the number of facilities under contract or
award at the end of the periods shown:

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
--------------------------------- ---------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Contracts(1)...................... 39 47 59 48 60
Facilities in operation........... 31 38 42 37 49
Design capacity of contracts...... 19,735 28,607 41,135 31,357 43,049
Design capacity of facilities in
operation....................... 13,404 20,252 24,310 21,098 28,062
Compensated mandays(2)............ 3,768,095 4,799,562 7,113,794 1,552,509 2,127,531
</TABLE>

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

(1) Consists of facilities in operation and facilities under development for
which contracts have been finalized.
(2) Compensated mandays for a period ended are calculated, for per diem rate
facilities, as the number of beds occupied by residents on a daily basis
during the period ended and, for fixed rate facilities, as the design
capacity of the facility multiplied by the number of days the facility was
in operation during the period.

CCA derives substantially all of its revenues from the management of
correctional and detention facilities for national, federal, state and local
government agencies in the United States and abroad.

41
<PAGE> 47

Geographic Market Concentration

CCA currently manages facilities in 15 states, the District of Columbia and
Puerto Rico. Management revenues by state, as a percentage of CCA's total
revenues for years ended December 31, 1995 and 1996, respectively, and for the
periods ended March 31, 1996 and 1997, respectively, are as follows:

<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996 MARCH 31, 1996
--------------------------- --------------------------- ---------------------------
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
STATE FACILITIES TOTAL REVENUES FACILITIES TOTAL REVENUES FACILITIES TOTAL REVENUES
- ----- ---------- -------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Arizona.............. 2 16.5% 2 14.7% 2 14.6%
Colorado............. -- -- 1 0.3 -- --
Florida.............. 5 7.8 4 10.3 4 11.3
Indiana.............. 1 1.4 1 0.4 -- 0.0
Kansas............... 2 4.6 1 3.0 1 3.2
Louisiana............ 1 6.1 1 4.7 1 5.4
Minnesota............ -- -- 1 0.7 -- --
Mississippi.......... -- -- 1 1.1 -- --
New Jersey........... -- -- -- -- -- --
New Mexico........... 3 8.4 3 6.7 3 7.7
Oklahoma............. 1 1.9 2 3.0 1 1.4
Puerto Rico.......... 1 0.1 1 4.7 1 4.5
South Carolina....... -- -- 1 2.1 -- --
Tennessee............ 8 25.2 8 19.2 7 21.0
Texas................ 12 22.7 12 23.6 11 24.6
Washington, D.C...... -- -- -- -- -- --

<CAPTION>
MARCH 31, 1997
---------------------------
NUMBER OF PERCENTAGE OF
STATE FACILITIES TOTAL REVENUES
- ----- ---------- --------------
<S> <C> <C>
Arizona.............. 2 14.4%
Colorado............. 1 1.2
Florida.............. 5 9.3
Indiana.............. 1 0.1
Kansas............... 1 2.4
Louisiana............ 1 3.8
Minnesota............ 1 2.3
Mississippi.......... 1 2.5
New Jersey........... 1 2.7
New Mexico........... 3 4.8
Oklahoma............. 2 3.6
Puerto Rico.......... 3 5.3
South Carolina....... 1 2.9
Tennessee............ 7 15.8
Texas................ 12 21.9
Washington, D.C...... 1 1.0
</TABLE>

To the extent favorable or unfavorable changes in regulations or market
conditions occur in these markets, such changes would likely have a
corresponding impact on CCA's results of operations.

Revenues for operation of correctional and detention facilities are
recognized as the services are provided, based on a net rate per day per inmate
or on a fixed monthly rate. Of CCA's 48 domestic facilities in operation, 44 are
compensated on a per diem basis and four are compensated at fixed monthly rates.
The per diem rates or fixed monthly rates vary according to the type of facility
and the extent of services provided at the facility. Transportation revenues are
based on a per mile charge or a fixed fee per trip.

CCA incurs all facility operating expenses, except for certain debt service
and lease payments with respect to certain facilities that CCA does not own or
lease. CCA owns 14 of the domestic facilities it currently manages. CCA
currently manages 34 domestic facilities that are owned or leased by a
government agency, construction of which has been financed by the agency through
one or more of a variety of methods.

Facility payroll and related taxes constitute the majority of facility
operating expenses for CCA. Substantially all other operating expenses consist
of food, clothing, medical services, utilities, supplies, maintenance, insurance
and other general operating expenses. As inmate populations increase following
the start-up of a facility, operating expenses generally decrease as a
percentage of related revenues. Each facility is fully staffed at the time it is
opened or taken over by CCA, although it may be operating at a relatively low
occupancy rate at such time.

CCA's general and administrative costs consist of salaries of officers and
other corporate headquarters personnel, legal, accounting and other professional
fees (including pooling expenses related to certain acquisitions), travel
expenses, executive office rental, and promotional and marketing expenses. The
most significant component of these costs relates to the hiring and training of
experienced corrections and administrative personnel necessary for the
implementation and maintenance of the facility management and transportation
contracts.

Operating income for each facility depends upon the relationship between
operating costs, the rate at which CCA is compensated per manday, and the
occupancy rate. The rates of compensation are fixed by contract and
approximately two-thirds of all operating costs are fixed costs. Therefore,
operating income will vary from period to period as occupancy rates fluctuate.
Operating income will be affected adversely as CCA increases the number of
newly-constructed or expanded facilities under management and experiences
initial

42
<PAGE> 48

low occupancy rates. After a management contract has been awarded, CCA incurs
facility start-up costs that consist principally of initial employee training,
travel and other direct expenses incurred in connection with the contract. These
costs are capitalized and amortized on a straight-line basis over the shorter of
the term of the contract plus renewals, or five years. Depending on the
contract, start-up costs are either fully recoverable as pass-through costs or
are billable to the contracting agency over the original term of the contract
plus renewals. CCA has historically financed start-up costs through available
cash, the issuance of various securities, cash from operations and borrowings
under CCA's revolving credit facility.

Newly opened facilities are staffed according to contract requirements when
CCA begins receiving inmates. Inmates are typically assigned to a newly opened
facility on a regulated, structured basis over a one-to-three month period.
Until expected occupancy levels are reached, operating losses may be incurred.

Results of Operations

The following table sets forth, for the periods indicated, the percentage
of revenues of certain items in CCA's statement of operations and the percentage
change from period to period in such items:

<TABLE>
<CAPTION>
PERIOD-TO-PERIOD
PERCENTAGE CHANGES
---------------------------------
DECEMBER 31, MARCH 31, 1995 1996 MARCH 1997
--------------------- ------------- COMPARED COMPARED COMPARED TO
1994 1995 1996 1996 1997 TO 1994 TO 1995 MARCH 1996
----- ----- ----- ----- ----- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... 100.0% 100.0% 100.0% 100.0% 100.0% 36.0% 41.1% 45.1%
Expenses:
Operating................... 81.1 76.6 72.9 74.6 69.6 28.6 34.2 35.5
General and
administrative............ 6.1 6.9 4.6 4.6 3.9 51.8 (6.0) 22.9
Depreciation and
amortization.............. 3.8 3.2 3.9 3.6 4.3 13.4 73.8 72.3
----- ----- ----- ----- -----
Operating income.............. 9.0 13.3 18.6 17.2 22.2 102.0 97.6 87.3
----- ----- ----- ----- -----
Interest expense, net......... 2.3 1.9 1.4 2.1 .5 14.9 6.9 (63.1)
----- ----- ----- ----- -----
Income before income taxes.... 6.7 11.4 17.2 15.1 21.7 131.3 112.8 108.6
Provision for income taxes.... 1.5 4.5 6.6 6.1 8.6 303.5 108.7 106.2
----- ----- ----- ----- -----
Net income.................... 5.2 6.9 10.6 9.0 13.1 81.0 115.4 110.2
Preferred stock dividends..... 0.1 -- -- -- -- (100.0) -- --
----- ----- ----- ----- -----
Net income allocable to common
stockholders................ 5.1% 6.9% 10.6% 9.0% 13.1% 85.8% 115.4% 110.2%
===== ===== ===== ===== =====
</TABLE>

Three Months Ended March 31, 1997 Compared with Three Months Ended March 31,
1996

Revenues. CCA's total revenues for the first quarter of 1997 increased 45%
over the comparable period of 1996. CCA's management revenues increased $28.3
million or 47%, and transportation revenues increased $259,000 or 10%, in the
first three months of 1997 as compared to the same period in 1996. The increase
in management revenues was due to a 37% increase in compensated mandays. During
the first quarter of 1997, CCA opened six new facilities totaling 3,496 beds and
expanded one existing facility representing 256 beds. CCA also realized the full
period effect in the first quarter of 1997 of 3,835 beds brought on line over
the course of 1996. Transportation revenues increased due to an expanded
customer base and compensated mileage realized through the opening of two new
transportation hubs. In the first quarter of 1997, CCA recognized development
fee income of $1.3 million (after tax) related to a contract to design,
construct and equip a managed facility.

Facility Operating Expenses. CCA's operating expenses for the first
quarter of 1997 increased 35% over the comparable quarter in 1996. This increase
was due to the increased compensated mandays and compensated mileage that CCA
realized in 1997. As a percentage of revenues, however, operating expenses
declined to 70% in 1997 from 75% in 1996 as CCA continues to benefit from
economies of scale and cost containment.

General and Administrative. CCA's general and administrative expenses
increased 23% for the first quarter of 1997 as compared to the comparable
quarter of 1996. The increase was due to the expanded activity

43
<PAGE> 49

and staffing necessary to administer the increased beds under management.
General and administrative expenses decreased as a percentage of revenues to
3.9% in 1997 from 4.6% in 1996 during the comparable period.

Depreciation and Amortization. CCA's depreciation and amortization for the
first quarter of 1997 increased 72% as compared to the comparable quarter of
1996. This increase was due to the growth in total beds in facilities owned by
CCA.

Interest Expenses, Net. CCA's interest expense, net, decreased 63% for the
first quarter of 1997 as compared to the first quarter of 1996, primarily due to
the fact that additional facilities were under construction during 1997 and the
associated interest expense was capitalized.

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

Revenues. CCA's total revenues increased 41% from 1995 to 1996 with
increases in both management and transportation services. CCA's management
revenues increased 43% in 1996, or $84.2 million. This increase is due to the
opening of new facilities and the expansion of existing facilities by CCA in
1995 and 1996. In 1996, CCA opened four new facilities with an aggregate design
capacity of 2,501 beds, assumed management of two facilities with an aggregate
design capacity of 899 beds and expanded five existing facilities to increase
their design capacity by an aggregate of 1,058 beds. Accordingly, 4,458 new beds
were brought on line in 1996. Due to the growth in beds, compensated mandays
increased 48% in 1996 from 4,799,562 to 7,113,794. Average occupancy remained
stable at 94.1% for 1996 as compared to 93.9% for 1995.

CCA's transportation revenues increased $1.1 million or 12% in 1996 as
compared to 1995. The 1996 growth was due to a continued marketing effort that
expanded the customer base and resulted in increased compensated mileage.

During the second and fourth quarters of 1996, CCA purchased the remaining
two-thirds of UKDS from its original joint venture partners. After consideration
of several strategic alternatives related to UKDS, CCA sold 20% of the entity to
Sodexho, and recognized an after-tax gain of $515,000. In conjunction with this
transaction, Sodexho was also provided the option to purchase an additional 30%
of UKDS, which option expires in 1997.

Facility Operating Expenses. CCA's facility operating expenses increased
34.2% to $213.2 million in 1996 compared to $158.8 million in 1995. This
increase was due to the additional beds on line that increased compensated
mandays and the growth in the transportation services. The average management
operating cost per manday was $28.82 for 1996 as compared to $31.59 for 1995.
The decrease in average cost per manday was due to CCA's ability to realize more
economies of scale as additional beds were brought on line. As a percentage of
revenues, facility operating expenses decreased to 73% from 77%. This decrease
is primarily attributable to the expansion of various facilities that added
lower incremental operating expenses and improved economies of scale. Salary and
related employee benefits constituted approximately 63% and 58% of facility
operating expenses for 1996 and 1995, respectively.

General and Administrative. CCA's general and administrative costs
decreased 6% in 1996 to $13.4 million as compared to $14.3 million in 1995. This
decrease is due to the non-recurring pooling expenses associated with
acquisitions during fiscal 1995 as well as CCA's ability to reduce duplication
in the general and administrative areas by integrating the acquired companies
into its systems. Management believes that as CCA continues to grow, general and
administrative expenses should increase in volume but continue to decrease as a
percentage of revenues.

Depreciation and Amortization. CCA's depreciation and amortization
increased 74% to $11.4 million in 1996 as compared to $6.5 million in 1995. The
1996 increase is due to the growth in total beds in CCA-owned facilities as well
as the one-time, non-recurring reserve of $850,000 established for the
termination of CCA's contract with South Carolina.

Interest Expenses, Net. CCA's interest expense, net, increased 7% in 1996,
consisting of a 48% or $2.7 million, increase in interest expense, and a 151%,
or $2.4 million, increase in interest income. Interest

44
<PAGE> 50

expense increased due primarily to the addition of $50.0 million in convertible
subordinated notes issued in February and April 1996, bearing interest at 7.5%.
Interest income increased as a result of CCA investing the net proceeds from an
equity offering, which closed in June 1996.

Year Ended December 31, 1995 Compared with Year Ended December 31, 1994

In 1994 and 1995, CCA expanded its service capabilities and broadened its
geographic presence in the United States through a series of strategic
acquisitions that complemented CCA's development activities (collectively, the
"Acquisitions"). In December 1994, CCA acquired TransCor America, Inc.
("TransCor"), a nationwide provider of inmate transportation services. In April
1995, CCA acquired Concept Incorporated ("Concept"), a prison management company
with eight facilities and 4,400 beds under contract at the time of acquisition.
In August 1995, CCA acquired Corrections Partners, Inc. ("CPI"), a prison
management company with seven facilities and 2,900 beds under contract at the
time of acquisition. CCA's operating results for 1995 were significantly
affected by the Acquisitions. All of these business combinations were accounted
for as a pooling-of-interests and, accordingly, the operations of TransCor,
Concept and CPI have been combined in the accompanying consolidated financial
statements. The discussion herein is based upon the combined operations of CCA,
TransCor, Concept and CPI for all periods presented in the accompanying
consolidated financial statements.

Revenues. CCA's total revenues increased 36% from 1994 to 1995 with
increases in both management and transportation services. Management revenues
increased 37% in 1995, or $53.2 million. This increase was due to the opening of
new facilities and the expansions of existing facilities in 1994 and 1995 by CCA
and the related Acquisitions. In 1995, CCA opened five new facilities with an
aggregate design capacity of 3,390 beds and assumed management of three
facilities with an aggregate design capacity of 1,688 beds. CCA also realized
the full-year effect of three facilities added in 1994 with an aggregate design
capacity of 1,560 beds. The third contributing factor to growth was the
expansion of 13 existing facilities to increase their design capacity by 1,887
beds. Due to the growth in the number of beds, compensated mandays increased 27%
in 1995 from 3,768,095 to 4,799,562. Average occupancy remained stable at 93.9%
for 1995 as compared to 93.5% for 1994.

CCA's transportation revenues increased $1.7 million or 21% in 1995 as
compared to 1994. The 1995 growth was due to a continued marketing effort that
expanded the customer base and resulted in increased compensated mileage.

During the first quarter of 1995, CCA purchased the remaining 50% of CC
Australia from its original joint venture partner. After consideration of
several strategic alternatives related to CC Australia, CCA then sold 50% of the
entity to Sodexho during the second quarter of 1995. CCA accounted for the 100%
ownership period on the equity basis of accounting and recognized an after-tax
gain of $783,000 on the sale.

Facility Operating Expenses. CCA's facility operating expenses increased
29% to $158.8 million in 1995 compared to $123.5 million in 1994. This increase
was due to the additional beds on line that increased compensated mandays and
the growth in the transportation services. The average management operating cost
per manday was $31.59 for 1995 as compared to $31.16 for 1994. The increase in
average cost per manday was due to the significant number of new beds brought on
line in 1995. As the five new facilities were opened, the full complement of
fixed costs was being incurred prior to full occupancy. As a percentage of
revenues, however, facility operating expenses decreased to 77% from 81%. This
decrease was primarily attributable to the expansion of various facilities that
added lower incremental operating expenses and improved economies of scale.
Salary and related employee benefits constituted approximately 58% and 55% of
facility operating expenses for 1995 and 1994, respectively.

General and Administrative. CCA's general and administrative costs
increased 52% in 1995 to $14.3 million as compared to $9.4 million in 1994.
Included in 1995 were approximately $950,000 of non-recurring pooling expenses
related to the Acquisitions. CCA has also expanded its management staff to
manage its significant growth. Additional staff was added to bring new business
on line, resulting in cost being incurred prior to revenue being realized. Also,
as all transition issues are finalized from the acquired operations and the

45
<PAGE> 51

duplicate services are consolidated, general and administrative costs should
decrease as a percentage of revenues.

Depreciation and Amortization. CCA's depreciation and amortization
increased $771,000, to $6.5 million in 1995 as compared to $5.8 million in 1994.
The 1995 increase was due to the growth in total beds in CCA-owned facilities.

Interest Expenses, Net. CCA's interest expense, net, increased 15% in 1995
due to the assumption of debt related to the Eloy Detention Center in Eloy,
Arizona. In July 1995, CCA acquired the remaining 50% of the investment in a
partnership and assumed the assets and debts.

Income Taxes. In 1995, CCA's effective income tax rate increased to 39% as
compared to 23% in 1994. This increase in taxes was due to CCA's complete
utilization of net operating loss carry forwards, therefore becoming subject to
full statutory tax rates.

Liquidity and Capital Resources

CCA's business is capital intensive in relation to the development of a
correctional facility. CCA's efforts to obtain contracts, construct additional
facilities and maintain its day-to-day operations have required the continued
acquisition of funds through borrowings and equity offerings. Historically, CCA
has financed these activities with cash generated from operating and bank
borrowings, the issuance and sale of capital stock, subordinated convertible
notes and senior secured debt, taxable and tax-exempt bonds, and by assisting
governmental agencies in their issuance of municipal bonds.

CCA's current ratio increased to 1.79 in 1996 as compared to 1.31 in 1995.
The increase was due to the increase in accounts receivable that resulted from
additional beds on line, as well as an increase in construction receivables for
facilities being constructed by CCA. Management receivables increased 56%, from
$32.5 million to $50.6 million and construction related receivables increased
from $4.5 million to $44.5 million. The primary reason for the significant
increase in construction receivables was the sale of a facility to a not-for-
profit organization for which the proceeds were not received until subsequent to
year end. CCA's current ratio decreased to 1.11 as of March 31, 1997, due
primarily to the aforementioned collection of the construction receivables. The
ratio of long-term debt to total capitalization was 39% at March 31, 1997
compared to 29% at December 31, 1996 and 44% at December 31, 1995. In October
1995, CCA declared a two-for-one stock split paid in the form of a one-share
dividend for every share of its common stock held on the record date. In June
1996, CCA declared a second two-for-one stock split paid in the form of a
one-share dividend for every share of its common stock held on the record date.
All references to number of shares have been adjusted for both stock splits.

CCA's cash flow from operations for 1996 was approximately $24.4 million as
compared to $17.8 million in 1995 and $11.6 million in 1994. CCA's cash flow
from operations in the first quarter of 1997 was $59.2 million, which included
approximately $38.0 million from the reduction of the construction receivables,
as compared to $4.0 million in the comparable period in 1996. CCA has
strengthened its cash flow through its expanded business, additional focus on
larger, more profitable facilities, its expansion of existing facilities where
economies of scale could be realized, and its continuing effort of cost
containment.

In 1994, CCA entered into an international strategic alliance with Sodexho
for the purpose of pursuing prison management business outside the United
States. In connection with this alliance, Sodexho purchased a significant
ownership interest in CCA and entered into certain agreements with CCA relating
to future financings by CCA and certain corporate governance and control issues.
These issues included the grant by CCA to Sodexho of a preemptive right to
purchase additional shares of CCA's common stock in securities convertible into
or exchangeable for common stock in any amount necessary to enable Sodexho to
maintain a percentage ownership in CCA equal to 20% of the common stock on a
fully diluted basis.

In February 1996, CCA issued $30.0 million of its convertible subordinated
notes to an investor. The proceeds were used to repay the outstanding principal
under CCA's working capital credit facility and construction loan. The notes
bear interest at 7.5%, payable quarterly, and require CCA to maintain specific
ratio requirements relating to net worth, cash flow and debt coverage. The notes
are convertible into shares of

46
<PAGE> 52

CCA's common stock at a conversion price, as adjusted, of $25.91 per share. In
April 1996, due to the triggering of its preemptive right in connection with the
issuance of the convertible subordinated notes, Sodexho purchased $20.0 million
of convertible subordinated notes under the same terms and conditions.

In June 1996, CCA completed a public offering of 3,750,000 shares of its
common stock at a price to the public of $37.50 per share. The proceeds of the
offering, after deducting all associated costs, were $131.8 million.

In August 1996, CCA issued $24.7 million of revenue bonds to finance the
construction of a 480-bed medium security detention facility located in Taylor,
Texas. These bonds are taxable and bear interest at a variable rate. The bonds
are secured by an irrevocable direct pay letter of credit issued by a group of
banks.

In September 1996, CCA entered into a new revolving credit facility with a
group of banks. The new revolving credit facility replaced the $25.0 million
revolving line of credit which was scheduled to mature in May 1997. The new
revolving credit facility provides for general corporate borrowings up to $170.0
million, which includes the issuance of a maximum of $136.0 million in letters
of credit and matures in September 1999. The credit facility is secured by the
pledge of stock of CCA's first tier domestic subsidiaries and bears interest, at
the election of CCA, at either the agent bank's prime rate or a rate which is
0.5%, 0.75% or 1.0% above the applicable 30-, 60- or 90-day LIBOR rate,
depending on CCA's leverage ratio. Interest is payable quarterly with respect to
prime rate loans and at the expiration of the applicable period with respect to
LIBOR rate-based loans. There are no prepayment penalties associated with the
credit facility. The credit facility requires CCA, among other things, to
maintain specific ratio requirements relating to net worth, leverage and debt
service coverage. The facility also limits certain payments and distributions.
As of December 31, 1996, there were $4.0 million in borrowings under the
facility. As of March 31, 1997, there was $78.0 million borrowed under this
facility. Letters of credit totaling $63.5 million had been issued, leaving the
unused commitment at $28.5 million as of March 31, 1997.

In September 1996, CCA also closed a $2.5 million credit facility with a
bank that provides for the issuance of letters of credit and matures in
September 1999. As of March 31, 1997, there were $1.6 million in letters of
credit issued, leaving the unused commitment at $932,000.

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<PAGE> 53

BUSINESS OF THE COMPANY AND ITS PROPERTIES

THE FACILITIES

The Company has negotiated a purchase agreement for the nine Initial
Facilities with an aggregate design capacity of 6,687 beds, and option
agreements to purchase any or all of the five additional Option Facilities with
an aggregate design capacity of 5,638 beds at any time during the three year
period from the closing of the purchase of the Initial Facilities. In addition,
the Company will have an option to acquire any future correctional or detention
facilities acquired or developed and owned by CCA in the future for a period of
three years following the Service Commencement Date with respect to such
facility. The Company will acquire a 100% interest in each of the facilities
purchased. Certain information for the Initial Facilities and the Option
Facilities is set forth in the following tables and accompanying descriptions.

The Initial Facilities

<TABLE>
<CAPTION>
INITIAL ANNUAL LEASE
DESIGN DATE RENT TERM
FACILITY AND LOCATION CAPACITY OPENED TYPE OF FACILITY CONTRACTING ENTITIES (IN MILLIONS)(1) (YEARS)
- --------------------- -------- ------ ---------------- -------------------- ---------------- -------
<S> <C> <C> <C> <C> <C> <C>
Houston Processing
Center.................. 411 April Medium Security INS $1.5 12
Houston, Texas 1984 Processing Center

Laredo Processing
Center.................. 258 March Medium Security INS and BOP 1.2 12
Laredo, Texas 1985 Processing Center

Bridgeport Pre-Parole
Transfer Facility....... 200 November Minimum Security State of Texas 0.4 12
Bridgeport, Texas 1987 Pre-Parole Transfer
Facility

Mineral Wells Pre-Parole
Transfer Facility....... 1,119 July Minimum Security State of Texas 3.0 12
Mineral Wells, 1989 Pre-Parole Transfer
Texas Facility

West Tennessee
Detention Facility(2)... 600 September Multi-Security INS, USMS, BOP and 3.7 10
Mason, Tennessee 1990 Detention Center State of North Carolina

Leavenworth Detention
Center.................. 327 June Maximum Security USMS 3.3 10
Leavenworth, 1992 Detention Center
Kansas

Eloy Detention
Center(2)............... 1,500(3) July Medium Security INS and BOP 6.0 12
Eloy, Arizona 1994 Detention Center

Central Arizona Detention
Center(2)............... 1,792 October Multi-Security USMS and States of Oregon, 12.3 10
Florence, Arizona 1994 Detention Center Alaska and New Mexico

T. Don Hutto
Correctional Center..... 480 January Medium Security Williamson County, Texas 2.5 12
Taylor, Texas 1997 Correctional Facility and States of Colorado
and Wyoming

</TABLE>

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

(1) On an annualized basis.

(2) Annual rentals for this facility will exceed 10% of aggregate annual pro
forma rentals of $33.9 million.

(3) Includes a 250-bed expansion which is expected to be completed in June 1997.

The Initial Facilities will be purchased from CCA for an aggregate purchase
price of approximately $308.1 million in cash. The Company will lease the
Initial Facilities to CCA pursuant to the Leases with terms ranging from 10 to
12 years and with aggregate initial annual rents of approximately $33.9 million.
Throughout the terms of the initial Leases, annual rents will escalate by the
Base Rent Escalation. The Leases may be extended at fair market rates for three
additional periods of five years each upon the mutual agreement of the Company
and CCA.

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<PAGE> 54

The initial public offering price and, accordingly, the aggregate
consideration to be paid by the Company in the Formation Transactions are based
on an evaluation of CCA's operation of the Initial Facilities as a whole and the
factors discussed under "Underwriting" herein, rather than the valuation of
individual properties. Independent valuations were not obtained to determine the
purchase price to be paid by the Company for, or the fair market value of, the
Initial Facilities and the purchase price to paid by the Company for the Initial
Facilities exceeds their historical costs. See "Risk Factors -- Conflicts of
Interest." The purchase price for the Initial Facilities was determined
primarily based on an evaluation of the current and anticipated cash flows and
operating results of such facilities. To determine the purchase price for each
of the Initial Facilities other than the T. Don Hutto Correctional Center, the
anticipated annual cash flow from the facility less capital expenditures was
divided by an agreed upon coverage ratio and lease rate. Because the T. Don
Hutto Correctional Center was not completed until January 1997, the purchase
price of that facility was calculated as CCA's approximate cost of developing,
constructing and equipping the facility, plus 5% of such costs. It is possible
that if the Company were to have obtained any such third-party valuations, the
sum of the values of the Initial Facilities might have been lower than the
valuation of the Company. There has not been, nor will there be, any valuation
of the Company other than the initial public offering price of the Common
Shares.

The Option Facilities

<TABLE>
<CAPTION>
DESIGN ANTICIPATED
FACILITY AND LOCATION CAPACITY OPENING DATE TYPE OF FACILITY CONTRACTING ENTITIES
- --------------------- -------- ------------ ---------------- --------------------
<S> <C> <C> <C> <C>
Northeast Ohio Correctional Center... 2,016 June Medium Security Pending(1)
Youngstown, Ohio 1997 Correctional Facility
Torrance County Detention Facility... 910 October Multi-Security USMS, BOP, State of New
Estancia, New Mexico 1997(2) Detention Facility Mexico and Torrance County,
New Mexico
Southern Colorado Correctional
Facility........................... 752 October Medium Security State of Colorado
Walsenburg, Colorado 1997 Correctional Facility
North Fork Correctional Facility..... 960 January Medium Security Under negotiation(3)
Sayre, Oklahoma 1998 Correctional Facility
Whiteville Correctional Center....... 1,000 July Medium Security Under negotiation(4)
Whiteville, Tennessee 1998 Correctional Facility
</TABLE>

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

The Company will have options to purchase, for a period of three years from
the closing of the purchase of the Initial Facilities, any or all of the five
Option Facilities. The purchase price of each Option Facility will be equal to
CCA's approximate cost of developing, constructing and equipping such Option
Facility, plus 5% of such costs. The initial annual rental rate for each Option
Facility will be the greater of (i) the fair market rental rate of the Option
Facility or (ii) 11% of the purchase price. Using the 11% lease rate
calculation, the Company and CCA believe that the purchase price and initial
annual rent, respectively, for each Option Facility, if purchased, will be: (a)
Northeast Ohio Correctional Center -- $58.0 million and $6.4 million; (b)
Torrance County Detention Facility -- $36.0 million and $4.0 million; (c)
Southern Colorado Correctional Facility -- $27.5 million and $3.0 million; (d)
North Fork Correctional Facility -- $29.5 million and $3.2 million and (e)
Whiteville Correctional Center -- $42.0 million and $4.6 million. Estimated
aggregate purchase price and first-year rent amount to approximately $193.0
million and $21.2 million, respectively.

The Company will lease the Option Facilities, if acquired, pursuant to
long-term, non-cancelable triple net leases on substantially the same terms and
conditions as the Leases for the Initial Facilities, including the Base Rent
Escalation. The Company does not intend to acquire an Option Facility until it
is fully constructed, is the subject of an enforceable management contract
between CCA and a government entity and has an occupancy rate acceptable to the
Company. See "The Company -- Business Objectives and Strategies."

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<PAGE> 55

DESCRIPTION OF THE FACILITIES

The Initial Facilities

Set forth below are brief descriptions of each of the Initial Facilities.
Unless otherwise noted, the Company will own fee title to the Facilities, free
and clear of any material liens. In general, the Facilities are operated under
management contracts with various government entities with terms shorter than
the terms of the Leases. The contracts, generally, have current terms that
require renewals every two to five years. CCA expects to renew these contracts
for periods consistent with the remaining renewal options allowed by the
contract or other reasonable extensions. It has been CCA's experience generally
that renewals proposed by it have been accepted by the corresponding contracting
government entity. See "Risk Factors -- Correctional and Detention Industry
Risks."

Pre-Parole Transfer Facilities. Pre-parole transfer facilities are used to
hold inmates who have been arrested for technical violations of their parole
agreements with a State Department of Criminal Justice, Board of Pardons and
Paroles. Pre-parole transfer facilities are classified as minimum security
facilities. The pre-parole transfer facilities to be acquired by the Company are
the Bridgeport Pre-Parole Transfer Facility and the Mineral Wells Pre-Parole
Transfer Facility.

The Bridgeport Pre-Parole Transfer Facility is located on approximately
three acres in Bridgeport, Texas and has a design capacity of 200 beds. The
31,000 square foot facility houses females who have been arrested for technical
violations of their parole agreements with the Texas Department of Criminal
Justice, Board of Pardons and Paroles. The facility was opened in 1987 and was
managed by Concept prior to CCA's acquisition of Concept in 1995. The facility
has been operated pursuant to a contract with the State of Texas since its
opening. CCA's current management contract with the State of Texas expires in
August 1997 with a two-year renewal option available to CCA.

The Mineral Wells Pre-Parole Transfer Facility is located on a 23 acre
tract in Mineral Wells, Texas and has a design capacity of 1,119 beds. The
196,000 square foot facility houses male inmates who have been arrested for
technical violations of their parole agreements with the Texas Department of
Criminal Justice, Board of Pardons and Paroles. The facility has been in
operation since July 1989 and was previously managed by Concept. CCA's current
management contract with the State of Texas expires in August 1997 with a two-
year renewal option available to CCA.

Processing Centers. Processing centers are used to house undocumented
aliens for the INS and are classified as minimum to medium security facilities.
The processing centers to be acquired by the Company include the Houston
Processing Center and the Laredo Processing Center.

The Houston Processing Center is located on approximately six acres in
Houston, Texas and has a design capacity of 411 beds. The 68,000 square foot
medium security facility, completed in April 1984, represents CCA's first
design, construction and management contract. CCA has contracted with the INS to
detain juveniles and adults at the center. The facility was accredited by the
ACA in April 1986 and is the first privately managed adult detention facility to
be awarded this status. CCA's management contract with the INS expires in
September 1997 with a one-year renewal option available. CCA has managed this
facility since 1984 under similar contract renewals.

The Laredo Processing Center is located on approximately four acres in
Laredo, Texas and has a design capacity of 258 beds. Constructed originally as a
48,000 square foot facility, the medium security facility underwent a 50-bed,
6,400 square foot expansion in March 1990, bringing the rated capacity to its
current

50
<PAGE> 56

level. Though the facility was designed and constructed under a contract with
the INS, CCA has also contracted with the BOP to detain juveniles and adults at
the center. The USMS has entered into an intergovernmental contract with the BOP
to detain inmates at the facility as well. CCA's current management contracts
with the INS and BOP expire in December 1997. CCA is currently under
negotiations with the INS, BOP and USMS regarding an additional series of
contracts totaling a five-year term. CCA has managed this facility under similar
contract renewals since 1985.

Detention Facilities. Detention facilities are multi-security level
facilities used to house inmates of all levels, including pre-trial and
pre-sentence prisoners for the USMS, inmates sentenced but not yet housed in
correctional facilities, inmates awaiting trial, sentencing or hearing and
persons detained by the INS. The detention facilities to be acquired by the
Company include the Central Arizona Detention Center, the Leavenworth Detention
Center and the West Tennessee Detention Facility.

The Central Arizona Detention Center is located on two tracts totaling 68
acres in Florence, Arizona and has a design capacity of 1,792 beds. The 275,000
square foot, minimum to medium security facility houses male prisoners for the
USMS and the States of Alaska, Oregon and New Mexico. The facility was
constructed in three phases with the original construction completed in October
1994 and the final expansion completed in February 1997. CCA anticipates the
facility will seek ACA accreditation. CCA's current contracts with the USMS and
the States of Alaska, Oregon and New Mexico expire at various times through June
1999.

The Eloy Detention Center is located on a 146 acre tract in Eloy, Arizona
and has a design capacity of 1,500 beds. The 299,500 square foot medium security
center, originally designed, built and managed by Concept, represents a joint
arrangement between INS and the BOP, each of which uses these beds to house
either illegal aliens awaiting deportation or illegal aliens serving a short
prison term prior to deportation. Originally constructed as a 1,000-bed
facility, the facility was expanded by 250 beds in October 1996 and is currently
undergoing a second 250-bed expansion. The facility is seeking ACA
accreditation. CCA's management contract with INS commenced in July 1994 with a
three-year base period that expired in February 1997 and with two one-year
option periods. The current extension will expire in February 1998 and the
remaining extension will expire in February 1999.

The Leavenworth Detention Center is located on a 20 acre tract in
Leavenworth, Kansas and has a design capacity of 327 beds. The 75,000 square
foot, maximum security facility primarily houses federal prisoners awaiting
trial, sentencing or hearing and persons detained by the USMS. Opened in June
1992, the center received ACA accreditation in August 1993. CCA's current
management contract with the USMS originally extended through June 1997. CCA has
received a six-month extension of its current contract which will now expire in
December 1997, and will be entering into negotiations with the USMS regarding a
new contract.

The West Tennessee Detention Facility is located on a 45 acre tract in
Mason, Tennessee and has a design capacity of 600 beds. The 121,000 square foot,
multi-level security facility houses adult male and male juveniles certified as
adults for the USMS, the INS, the BOP and the North Carolina Department of
Corrections (the "NCDC"). The facility received its ACA accreditation in August
1992. CCA's current management contract with the State of North Carolina expires
in September 1997. CCA's current management contract with the USMS, INS and BOP
is set to expire in August 2001.

Correctional Facilities. Correctional facilities are used to house inmates
on a permanent basis for the duration of their sentences. The correctional
facility to be acquired by the Company is the T. Don Hutto Correctional Center.

The T. Don Hutto Correctional Center is located on approximately 64 acres
in Taylor, Texas and has a design capacity of 480 beds. Opened in January 1997,
the 136,000 square foot, secure facility was developed, designed and constructed
by CCA and is CCA's newest facility. CCA anticipates the facility will seek ACA
accreditation in the next two to three years. The facility currently houses
inmates for Williamson County, Texas and the States of Wyoming and Colorado
under contracts which expire at various times from the end of 1997 through
January 2000.

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<PAGE> 57

Historical Occupancy Rates of the Initial Facilities. The following chart
summarizes the historical occupancy rates of the Initial Facilities for the five
year period ended December 31, 1996.

HISTORICAL OCCUPANCY OF INITIAL FACILITIES

<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Bridgeport............................................. 48.4% 67.3% 94.2% 83.2% 98.4%
Mineral Wells.......................................... 121.4 99.6 93.9 83.0 96.9
Houston................................................ 101.0 105.3 111.6 75.5 59.8
Laredo................................................. 82.0 87.7 109.3 94.0 90.0
Central Arizona........................................ NA NA 33.7 92.7 104.9
Eloy................................................... NA NA 47.8 92.2 93.2
Leavenworth............................................ 91.2 90.6 82.9 94.2 88.4
West Tennessee......................................... 100.7 87.2 86.4 95.8 97.1
T. Don Hutto........................................... NA NA NA NA NA
</TABLE>

The Option Facilities

Of the five Option Facilities, four are medium security correctional
facilities, and one is a multi-level security detention center.

The Northeast Ohio Correctional Center is located on approximately 72 acres
in Youngstown, Ohio. The 365,000 square foot, medium security facility was
completed in March 1997 with a design capacity of 1,504 beds. A 512 bed, 60,000
square foot expansion is scheduled for completion in July 1997, bringing the
design capacity to 2,016 beds. CCA is reserving all 2,016 beds in this facility
for use by the District of Columbia, on a permanent basis. CCA is currently
housing 900 inmates in the facility for the District of Columbia under a
temporary contract. The facility will seek ACA accreditation.

The Southern Colorado Correctional Facility is located on two tracts
totaling 82 acres in Walsenburg, Colorado. The 207,000 square foot, medium
security facility has a design capacity of 752 beds and is scheduled to open in
October 1997. The facility will seek ACA accreditation and will house inmates
for the State of Colorado under a contract that consists of a one-year initial
agreement with a series of automatic renewals.

The North Fork Correctional Facility is located on a 75 acre tract in
Sayre, Oklahoma. Scheduled for completion by the first quarter of 1998, the
207,000 square foot, medium security facility will have a design capacity of 960
beds. The facility will seek ACA accreditation. CCA is currently under
negotiation with the State of Colorado with regard to beds in this facility.

The Torrance County Detention Facility is located on a 2,840 acre tract in
Estancia, New Mexico and has a design capacity of 910 beds. The 60,000 square
foot, multi-security level facility houses pre-trial and pre-sentence prisoners
for the USMS and BOP and sentenced inmates for the New Mexico Department of
Corrections and Torrance County. The facility was originally constructed in
December 1990 with a design capacity of 286 beds and is currently being expanded
by 624 beds. The facility is seeking ACA accreditation. CCA's contract with
Torrance County, New Mexico extends through May 1998. CCA's contracts with USMS
and the State of New Mexico do not have specific expiration dates.

The Whiteville Correctional Center will be located in Whiteville, Tennessee
and will have a design capacity of 1,000 beds. The medium security facility is
scheduled to open in July 1998, and the facility will seek ACA accreditation.
CCA is currently negotiating with various states regarding the housing of
inmates in the facility.

LEGAL PROCEEDINGS

Owners and operators of privatized correctional and detention facilities
are subject to a variety of legal proceedings arising in the ordinary course of
operating such facilities, including proceedings relating to personal injury and
property damage. Such proceedings are generally brought against the operator of
a correctional facility, but may also be brought against the owner. Although the
Company is not currently a

52
<PAGE> 58

party to any legal proceeding, it is possible that in the future the Company
could become a party to such proceedings. CCA is a party to certain litigation
relating to the Facilities arising in the ordinary course of operations. The
Company does not believe that such litigation, if resolved against CCA, would
have a material adverse effect upon its business or financial position. The
Leases provide that CCA is responsible for claims based on personal injury and
property damage at the Facilities and require CCA to maintain insurance for such
purposes.

COMPETITION

The Facilities are, and any additional correctional and detention
facilities acquired by the Company will be, subject to competition for inmates
from private prison managers. The number of inmates in a particular area could
have a material effect on the revenues of the Facilities. In addition, revenues
of the Facilities will be affected by a number of factors including the demand
for inmate beds and general economic conditions. The Company will also be
subject to competition for the acquisition of correction and detention
facilities with other purchasers of correctional and detention facilities.

GOVERNMENT REGULATION

Environmental Matters. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous substances
released on or in its property. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
release of such hazardous substances. The presence of such substances, or the
failure to remediate such substances properly when released, may adversely
affect the owner's ability to sell such real estate or to borrow funds if the
borrower is using such real estate as collateral. Neither the Company, CCA nor
any of their affiliates has been notified by any government authority of any
material non-compliance, liability or other claim in connection with any of the
Facilities and neither the Company, CCA nor any of their affiliates is aware of
any other environmental condition with respect to any of the Facilities that is
likely to be material to the Company. All of the Facilities have been subjected
to a preliminary environmental investigation. No assurance can be given that
such investigation would reveal all potential environmental liabilities, that no
prior or adjacent owner created any material environmental condition not known
to the Company or that future uses or conditions (including, without limitation,
changes in applicable environmental laws and regulations) will not result in
imposition of environmental liability or limitation on use of properties. The
Company does not intend to conduct any further environmental investigation in
connection with the Offering. The Leases provide that CCA will indemnify the
Company for certain potential environmental liabilities at the Facilities. See
"Leases."

Americans with Disabilities Act. The Facilities are subject to the
Americans with Disabilities Act of 1990, as amended (the "ADA"). The ADA has
separate compliance requirements for "public accommodations" and "commercial
facilities" but generally requires that public facilities such as correctional
facilities be made accessible to people with disabilities. These requirements
became effective in 1992. Compliance with the ADA requirements could require
removal of access barriers and other capital improvements at the Facilities.
Noncompliance could result in imposition of fines or an award of damages to
private litigants. Under the Leases, CCA is required to make any necessary
modifications or improvements to comply with the ADA. The Company does not
believe that such costs will be material because it believes that relatively few
modifications are necessary to comply with the ADA. CCA has undertaken, where
necessary, a capital improvement program to cause the Facilities to comply with
the ADA.

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<PAGE> 59

RELATIONSHIP BETWEEN CCA AND THE COMPANY AFTER THE
FORMATION TRANSACTIONS

For the purpose of governing certain of the ongoing relationships between
CCA and the Company after the Formation Transactions and to provide mechanisms
for an orderly transition, prior to the completion of the Formation
Transactions, CCA and the Company will have entered into the various agreements,
and will adopt policies as described herein. The Company believes that the
agreements are fair to it and contain terms which generally are comparable to
those which would have been reached in arm's-length negotiations with
unaffiliated parties. In each case, the terms of these agreements have been
reviewed by the Board of Directors of CCA and by the Independent Committee of
the Board of Trustees of the Company. Such agreements include (a) the Purchase
Agreement, (b) the Option Agreements, (c) the Right to Purchase Agreement, and
(d) the Trade Name Use Agreement.

Purchase Agreement. Prior to the consummation of the Offering, the Company
and CCA and certain of its subsidiaries will enter into the Purchase Agreement
which provides the terms of the sale of the nine Initial Facilities for
aggregate cash consideration of approximately $308.1 million. Pursuant to the
Purchase Agreement, the transfer of the Initial Facilities is subject to the
completion of the Offering as well as the normal and customary conditions to the
closing of real estate transactions. The Purchase Agreement will contain
representations and warranties by CCA concerning the Initial Facilities
customarily found in agreements of such types.

Option Agreements. Prior to the consummation of the Offering, the Company
and CCA and certain of its subsidiaries will enter into the Option Agreements,
pursuant to which CCA and certain of its subsidiaries will grant the Company
exclusive options to acquire any or all of the five Option Facilities for a
period of three years following the purchase of the Initial Facilities for a
purchase price equal to CCA's costs of developing, constructing and equipping
such facilities, plus 5% of such costs, which aggregate approximately $193.0
million.

Right to Purchase. It is anticipated that CCA will acquire or develop
additional correctional or detention facilities in the future. The Company and
CCA will enter into the Right to Purchase Agreement whereby the Company will
have an option to acquire, at fair market value, and lease back to CCA, any
correctional or detention facility acquired or developed and owned by CCA in the
future, for a period of three years following the Service Commencement Date with
respect to such facility. For the first two years of such option period, fair
market value is deemed to be CCA's cost of developing, constructing and
equipping such facilities, plus 5% of such costs. Thereafter, fair market value
will be based on cash flows and operating results of such facilities. For
facilities acquired during the first five years of the Right to Purchase
Agreement, the initial annual rental rate on facilities leased back to CCA will
be the greater of (i) fair market rental rates, as determined by CCA and the
Company, or (ii) 11% of the purchase price of such facilities. For facilities
acquired, thereafter, the initial annual rental rate on such facilities will be
the fair market rental rates, as determined by the Company and CCA.
Additionally, the Company will have a right of first refusal in the event CCA
obtains an acceptable third party offer to acquire or provide mortgage secured
financing to finance more than 90% of the cost of any correctional or detention
facility now owned or which is acquired or developed by it or its subsidiaries
in the future. Pursuant to such right, prior to selling any such facility, or
mortgaging more than 90% of the cost of such facility, CCA must first offer to
sell such facility to the Company or have the Company finance such facility, as
applicable, on the same terms and conditions contained in such third party
offer. With respect to a sale of any such facility, if the Company declines to
purchase such facility at a price or on terms set forth in such third party
offer, CCA will be free to sell such facility for a specified period of time at
a price at least equal to the price offered to the Company, and on terms and
conditions substantially consistent with those offered to the Company. With
respect to a first mortgage financing of 90% of the cost of any such facility,
if the Company declines to provide such financing on the terms set forth in such
third party offer, CCA will be free to obtain first mortgage financing from a
third-party on terms and conditions no more favorable to CCA than those
contained in the third party offer.

Trade Name Use Agreement. Pursuant to the terms of the Trade Name Use
Agreement, the Company will be granted the right to use the trade name "CCA" as
part of its name, in conformance with standards

54
<PAGE> 60

reasonably set by CCA for the period commencing on the date of execution and
terminating on the date the Company ceases to own any correctional or detention
facility managed by CCA. The agreement may also be terminated upon 10 days
written notice from CCA to the Company; the occurrence of a change in control of
the Company; the liquidation or bankruptcy of the Company; or in the event of an
unauthorized transfer of the right to use the trade name by the Company. In
addition, the Company acknowledges that CCA owns all rights, title and interest
in and to the trade name and agrees that it will do nothing inconsistent with
such ownership.

Policies and Procedures for Addressing Conflicts. After completion of the
Formation Transactions, CCA and the Company will have significant contractual
and other ongoing relationships, as described above and under "Leases" herein.
Such ongoing relationships may present certain conflict situations for certain
trustees and officers of the Company and certain directors and officers of CCA.
See "Conflicts of Interest." CCA and the Company will adopt appropriate policies
and procedures to be followed by the Board of Trustees of the Company and the
Board of Directors of CCA to attempt to address those conflicts. Such procedures
will include requiring Doctor R. Crants to abstain from making management
decisions in his capacity as an officer, trustee or director of the Company and
CCA, respectively, and to abstain from voting as a director or trustee of either
company, with respect to matters that present a conflict of interest between the
companies. Whether or not a conflict of interest situation exists will be
determined by the Independent Committee on a case-by-case basis in accordance
with the policies and procedures to be developed by the Board of Trustees.

The Board of Trustees has established the Independent Committee to evaluate
transactions involving the Company and CCA, such as the acquisition of
additional facilities from CCA and lease negotiation and enforcement. Certain
other significant actions of the Board of Trustees will require the approval of
a minimum of two-thirds of the trustees. In addition, Michael W. Devlin, the
Company's Chief Development Officer, and Vida H. Carroll, the Company's Chief
Financial Officer, neither of whom have had nor will have any affiliation with
CCA, will assist the Independent Committee with respect to certain potential
conflicts of interest between the Company and CCA, including the negotiation and
enforcement of all Leases. See "Management" and "Conflicts of Interest."

LEASES

The following summary of the Leases between the Company and CCA is
qualified in its entirety by reference to the Leases, a form of which is filed
as an exhibit to the Registration Statement, of which this Prospectus is a part.
The following description of the Leases does not purport to be complete but
contains a summary of all material provisions thereof. Capitalized terms used
below but not otherwise defined have the meanings set forth in the "Glossary."

Concurrently with CCA's conveyance of the Facilities to the Company, the
Company will lease each of the Facilities to CCA. Each such Facility will be the
subject of a separate Lease that will incorporate the provisions of the Master
Lease between the Company and CCA. The Lease of each Facility will include the
land, the buildings and structures and other improvements thereon, easements,
rights and similar appurtenances to such land and improvements, and permanently
affixed equipment, machinery, and other fixtures relating to the operation of
the Facility and all personal property necessary to operate the facility for its
intended purpose, other than a limited amount of CCA's proprietary property (the
"Leased Property"). Each Facility will be leased to CCA under the Master Lease
which will have a primary term of 10 to 12 years (the "Fixed Term"). The Lease
for each Facility may be extended at fair market rates for three additional
five-year terms beyond the Fixed Term (the "Extended Terms"), but only upon the
mutual agreement of the Company and CCA. Fair market rates for Extended Terms
will be determined mutually by the Company and CCA based on their respective
analyses of the market for the relevant Facility. Such analyses may include a
review of the historical and projected economic performance of the Facility and
will take into account the interest rate environment at the time of the
extension and the creditworthiness of the tenant. The Fixed Term and Extended
Terms under each Lease shall be subject to earlier termination upon the
occurrence of certain contingencies described in the Lease. Additionally, each
Lease may be terminated by the Company, at its option, at any time after the
first five years of the Lease, upon 18 months written notice to CCA. Any

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additional properties acquired (other than the Facilities) will be leased
pursuant to similar terms and conditions as may be agreed upon between CCA and
the Company at the time of such acquisitions, and such terms and conditions may
vary from the terms and conditions described herein with respect to the
Facilities.

Use of the Facilities. Each Lease permits CCA to operate the Leased
Property solely as a correctional or detention facility. CCA has the
responsibility in each Lease to obtain and maintain all licenses, certificates
and permits in order to use and operate each Facility.

Amounts Payable Under the Leases; Net Provisions. During the Fixed Term
and the Extended Terms, CCA will pay annual base rent ("Annual Base Rent"),
which will be payable in monthly installments. Annual Base Rent for each Leased
Property will be increased each year by the Base Rent Escalation. Annual Base
Rent and Base Rent Escalation are collectively referred to in the Master Lease
as "Rent." The Company believes that the Rent CCA will pay to the Company under
the Leases represents the fair market rate for each Leased Property. The fair
market rates for the Leased Properties are based on the Company's analysis of
the market for the Leased Properties, including the Company's review of the
historical and projected economic performance of the Leased Properties, the
current interest rate environment, and the creditworthiness of CCA.

Each Lease of a Leased Property is what is commonly known as a triple net
lease or absolute net lease, under which CCA is to pay Annual Base Rent and all
additional charges. All additional charges include every fine, penalty, interest
expense and cost which may be added for nonpayment or late payment thereof, all
taxes, assessments and levies, excises, fees, and all other government charges
with respect to each Leased Property, and all charges for utilities and
services, including, without limitation, electricity, telephone, trash disposal,
gas, oil, water, sewer, communication and all other utilities used in each
Leased Property.

CCA's Right of First Refusal. Pursuant to the Master Lease, CCA will have
a right of first refusal in the event the Company obtains an acceptable third
party offer to acquire any interest in any Facility or in any correctional or
detention facility acquired or developed by the Company in the future and
operated by CCA (each a "Future Facility"). Pursuant to such right, prior to
selling any interest in any Facility or Future Facility, the Company must first
offer to sell each Facility or Future Facility to CCA on the same terms and
conditions contained in such third party offer. If CCA declines to purchase such
facility on such terms and conditions, the Company will be free to sell each
Facility or Future Facility for a specified period of time at a price at least
equal to the price offered to CCA and on terms and conditions substantially
consistent with those offered to CCA.

Maintenance, Modification and Capital Additions. Under each Lease, CCA
will, at its sole cost and expense, maintain each Leased Property in good order,
repair and appearance and will make structural and non-structural, interior and
exterior, foreseen and unforeseen, and ordinary and extraordinary repairs which
may be necessary and appropriate to keep such Leased Property in good order,
repair and appearance (excluding ordinary wear and tear). The Company will not
be required to build or rebuild any improvements to any Leased Property, or to
make any repairs, replacements, alterations, restorations or renewals to any
Leased Property.

CCA, at its sole cost and expense, may make alterations, additions, changes
and/or improvements to each Leased Property without the consent of the Company,
provided that the value and primary intended use of such Leased Property
(determined in the Company's reasonable judgment) is not impaired. All
machinery, equipment, furniture, furnishings, and other personal property
installed at the expense of CCA on any Leased Property, will remain the property
of CCA until the expiration or earlier termination of the Lease.

Each Lease provides that, at the request of CCA, the Company may construct
one or more new buildings or other improvements to a particular Leased Property
which are not normal or recurring to the maintenance of a Leased Property (a
"Capital Addition"). A Capital Addition to a Leased Property may necessitate an
amendment to an existing Lease or new lease agreement setting forth any changes
in the premises, rent, or other similar terms of the Lease as a result of the
Capital Addition. In certain situations, a Capital Addition to a Leased Property
may be made directly by CCA and financed by third parties. In the case of a
Capital Addition not undertaken or financed by the Company, the Company will
have an option to acquire and lease back to CCA such Capital Addition for a
period of three years following the Service Commencement Date

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with respect to such Capital Addition, at a fair market price and at an annual
rental rate equal to (i) for Capital Additions acquired during the first five
years, the greater of (a) fair market rental rate or (b) 11% of the purchase
price and (ii) for Capital Additions acquired thereafter, at fair market rental
rates. For the first two years of such option, the fair market price of any such
Capital Addition is deemed to be CCA's actual cost and expense to acquire,
develop, design, construct and equip such Capital Addition ("CCA's Cost") plus
5% of CCA's Cost.

Insurance. Each Lease provides that CCA will maintain insurance on each
Leased Property under CCA's insurance policies providing for the following
coverages: (i) fire, vandalism and malicious mischief, extended coverage perils,
and all physical loss perils; (ii) comprehensive general public liability
(including personal injury and property damage); and (iii) worker's
compensation. Under the Lease, the Company will have the right to periodically
review CCA's insurance coverage and provide input with respect thereto.

Environmental Matters. Each Lease provides that CCA makes various
representations and warranties relating to environmental matters with respect to
each Leased Property. Each Lease also requires CCA to indemnify and hold
harmless the Company and any Company Mortgagee (as herein defined) from and
against all liabilities, costs and expenses imposed upon or asserted against the
Company or the Leased Property on account of, among other things, any federal,
state or local law, ordinance, regulation, order or decree relating to the
protection of human health or the environment in respect of the Leased Property.
The Leases also provide, however, that CCA will not be liable with respect to
matters or events that arise after the commencement date of the applicable Lease
as a result of the negligence or misconduct of the Company.

Assignment and Subletting. The Leases provide that CCA may not, without
the prior written consent of the Company, assign, sublease, mortgage, pledge,
hypothecate, encumber or otherwise transfer (except to a subsidiary of CCA,
performance of whose obligations will be guaranteed by CCA) any Lease or any
interest therein, all or any part of the Leased Property. The Leases further
state that such consent may be granted or withheld by the Company in its sole
discretion. An assignment of a Lease will be deemed to include any Change of
Control of CCA (as defined herein), as if such Change of Control were an
assignment of the Lease. A "Change of Control" of CCA means, for purposes of the
Leases, the sale by CCA of a controlling interest in CCA, or the sale or other
transfer of all or substantially all of the assets of CCA. A Change of Control
also means any transaction pursuant to which CCA is merged with or consolidated
into another entity, and CCA is not the surviving entity. The Leases further
provide that no assignment will in any way impair the continuing primary
liability of CCA under the Leases.

Damage to, or Condemnation of, a Leased Property. In the event of any
damage or destruction to any Facility, CCA has the obligation fully to repair or
restore the same at CCA's expense, with the Annual Base Rent, real estate taxes
and other impositions on the particular Facility being proportionately abated
during the time of restoration, but only to the extent of any rental
interruption insurance proceeds actually received by the Company. If any
Facility is damaged to such an extent that 50% of the Facility is rendered
unsuitable for use as a correctional or detention facility, and if CCA has fully
complied with the insurance obligations with respect to such Facility (including
maintaining insurance against loss of rents), CCA may terminate the Lease of
that facility, upon turning over all insurance proceeds to the Company with
respect to such Facility, together with an amount equal to the difference, if
any, between the amount of such insurance proceeds and the net book value of the
damaged facility, as reflected on the Company's financial statements on the date
of damage.

In the event of a condemnation or taking of any Leased Property, so long as
such condemnation was not due to CCA's failure to maintain the particular Leased
Property, the Lease will terminate as to the portion of the Leased Property
taken, and in the event of a partial taking, CCA is obligated to repair the
portion not taken, if the same does not render the Leased Property unsuitable
for CCA's then use and occupancy, but only to the extent of the condemnation
award. The total condemnation award shall be payable to the Company, except that
CCA may recover the value of its improvements and the value of its leasehold
interest so long as the amount of the award paid to the Company is equal to the
net book value of the facility, as reflected on the Company's financial
statements on the date of the condemnation.

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Indemnification Generally. Under each Lease, CCA indemnifies, and is
obligated to save harmless, the Company from and against all liabilities, costs
and expenses (including reasonable attorneys' fees and expenses) imposed upon or
asserted against the Company as owner of the applicable Leased Property on
account of, among other things, (i) any accident, injury to or death of a person
or loss of or damage to property on or about the Leased Property; (ii) any use,
misuse, non-use, condition, maintenance or repair by CCA of the Leased Property;
(iii) any impositions (which are the obligations of CCA to pay pursuant to the
applicable provisions of such Lease); (iv) any claim of any person incarcerated
in the Leased Property, including claims alleging breach or violation of such
person's civil or legal rights; (v) any failure on the part of CCA to perform or
comply with any of the terms of the Lease or any sublease; (vi) any claims by a
prisoner arising from or relating to such individual's incarceration or
detention in any Leased Property; and (vii) any liability the Company may incur
or suffer as a result of any permitted contest by CCA under any Lease. Under
each Lease, the Company indemnifies, and is obligated to save harmless, CCA from
and against all liabilities, costs and expenses (including reasonable attorneys'
fees) imposed upon or asserted against CCA as a result of the Company's active
negligence or willful misconduct.

Events of Default. An "Event of Default" will be deemed to have occurred
under the Master Lease and any individual Lease if CCA fails to perform any
covenant and does not diligently undertake to cure the same after 30 days'
notice from the Company; if the interest of CCA in any Leased Property is levied
upon or attached and is not discharged in a specified period of time; or if any
representation or warranty of CCA is incorrect. An "Event of Default" will be
deemed to have occurred under the Master Lease and all of the Leases, if CCA
fails to pay any rent within 15 days after notice of non-payment from Company,
if any bankruptcy proceedings are instituted by or against CCA and, if against
CCA, they are not dismissed within 90 days; if any material part of the property
of CCA is levied upon or attached in any proceeding; if CCA defaults in any
payment of any obligations for borrowed money having a principal balance of
$25.0 million or more in the aggregate are not discharged within 90 days; or if
CCA is the subject of a non-appeallable final judgment in an amount greater than
$10.0 million, which is not covered by insurance or discharged by CCA within a
specified period of time.

In the event of any Event of Default referable to a specific Leased
Property, the Company may evict CCA from such Leased Property and either
terminate the Lease or re-let the Leased Property. In either event, CCA shall
remain responsible for the rental value of such Leased Property for the
remainder period of the term in excess of rents received by the Company from any
successor occupant. In addition, the Company may exercise any other rights that
it may have under law. In the event the Company evicts CCA from a Leased
Property, the Master Lease will remain in full force and effect for all other
Leased Properties. With respect to certain Events of Default under the Master
Lease which are not referable to a specific Leased Property (including CCA's
failure to timely pay Rent), the Company shall have all of the foregoing rights
and remedies with respect to all of the Leased Properties.

The Leases will be governed by and construed in accordance with Tennessee
law (but not including Tennessee's conflict of laws rules) except for certain
procedural laws which must be governed by the laws of the location of each
Leased Property. Because the Facilities are located in various states, the
Leases may be subject to restrictions imposed by applicable local law. Neither
the Master Lease nor any of the other agreements entered into by CCA in
connection with the Formation Transactions prohibits or otherwise restricts the
Company's ability to lease properties to parties (domestic or foreign) other
than CCA.

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MANAGEMENT

TRUSTEES AND EXECUTIVE OFFICERS

The Board of Trustees consists of 13 members divided into three classes
serving staggered three-year terms. Four of the trustees include Doctor R.
Crants, the Chairman of the Board of Trustees and Chairman and Chief Executive
Officer of CCA, J. Michael Quinlan, Chief Executive Officer of the Company, D.
Robert Crants, III, President of the Company, and Michael W. Devlin, Chief
Development Officer of the Company. Of the remaining nine trustees, seven are
Independent Trustees who are not employees of the Company or affiliated with
CCA. See "Conflicts of Interest." The first annual meeting of shareholders of
the Company after the Offering at which trustees will be elected will be held in
1998. Subject to rights pursuant to any employment agreements, executive
officers of the Company serve at the discretion of the Board of Trustees.

Set forth below is information with respect to the current trustees and
executive officers of the Company, each of whom has served in such capacity
since the formation of the Company, except for Messrs. Cardin, Carell, Eakin and
Feldman who were elected to the Board of Trustees on June 6, 1997.

<TABLE>
<CAPTION>
YEAR TERM
AS TRUSTEE
NAME AGE POSITION EXPIRES
- ---- --- -------- ----------
<S> <C> <C> <C>
Doctor R. Crants......................... 52 Chairman of the Board of Trustees 2000
J. Michael Quinlan....................... 55 Chief Executive Officer; Trustee 2000
D. Robert Crants, III.................... 28 President; Trustee 1999
Michael W. Devlin........................ 37 Chief Development Officer; Trustee 1998
C. Ray Bell.............................. 56 Trustee 1998
Richard W. Cardin........................ 62 Independent Trustee 2000
Monroe J. Carell, Jr..................... 65 Independent Trustee 1998
John W. Eakin, Jr........................ 43 Independent Trustee 1999
Ted Feldman.............................. 44 Independent Trustee 1999
Jackson W. Moore......................... 48 Independent Trustee 1999
Rusty L. Moore........................... 37 Trustee 1999
Joseph V. Russell........................ 56 Independent Trustee 2000
Charles W. Thomas, Ph.D. ................ 54 Independent Trustee 1998
Vida H. Carroll.......................... 37 Chief Financial Officer;
Secretary/Treasurer
M. Susan Smith........................... 33 Vice President, Finance
</TABLE>

DOCTOR R. CRANTS is the Chairman of the Board of Trustees. Since June 1994,
Mr. Crants has served as the Chief Executive Officer and Chairman of the Board
of CCA, which he co-founded in 1983. From June 1983 to June 1994, he served in
various capacities with CCA, including President, Chief Executive Officer, and
Vice Chairman of the Board of Directors. Mr. Crants was graduated from the
United States Military Academy at West Point in 1966, and received a joint
MBA/J.D. degree from the Harvard Business School and the Harvard Law School,
respectively, in 1974. Mr. Crants is the father of D. Robert Crants, III.

J. MICHAEL QUINLAN is a trustee and the Chief Executive Officer of the
Company. Mr. Quinlan has been employed in the corrections and detention industry
for over 25 years. Prior to joining the Company, Mr. Quinlan served as the
Director of Strategic Planning for CCA for over three years. From July 1987 to
December 1992, Mr. Quinlan served as the Director of the Federal Bureau of
Prisons. In such capacity, Mr. Quinlan was responsible for the total operations
and administration of a federal agency with an annual budget of more than $2
billion, more than 26,000 employees and 75 facilities. In 1988, Mr. Quinlan
received the Presidential Distinguished Rank Award, which is the highest award
given by the United States government to civil servants for service to the
United States. In 1992, he received the National Public Service Award of the
National Academy of Public Administration and the American Society of Public
Administration, awarded annually to the top three public administrators in the
United States. Mr. Quinlan is a 1963 graduate of Fairfield University with a BSS
in History and received a J.D. from Fordham University Law School in 1966. He
also received an LLM from the George Washington University School of Law in
1970.

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D. ROBERT CRANTS, III is a trustee and the President of the Company. Mr.
Crants also serves as a principal of DC Investment Partners LLC and will
continue to serve in such capacity after the Offering. DC Investment Partners
LLC is a Tennessee limited liability company which serves as general partner to
three investment limited partnerships and is responsible for managing the
partnerships' investment activities. Notwithstanding Mr. Crants' obligation to
DC Investment Partners LLC, Mr. Crants expects to devote the majority of his
time to the management of the Company. From 1990 through 1996, Mr. Crants was
associated with Goldman, Sachs & Company ("Goldman Sachs"), most recently
serving as an associate in the Goldman Sachs Special Investments Group. During
his tenure with Goldman Sachs, Mr. Crants was involved in structuring over $3
billion in real estate transactions, including over $1 billion in REIT public
offerings. During this time, he also negotiated triple net leases for shopping
centers, free standing stores and other properties on behalf of several clients.
Mr. Crants was graduated from Princeton University in 1990 with an A.B., summa
cum laude, in Economics. Mr. Crants is the son of Doctor R. Crants.

MICHAEL W. DEVLIN is a trustee and the Chief Development Officer of the
Company. Mr. Devlin also serves as a principal of DC Investment Partners LLC and
will continue in such capacity after the Offering. Notwithstanding Mr. Devlin's
obligation to DC Investment Partners LLC, Mr. Devlin expects to devote the
majority of his time to management of the Company. From 1993 through 1995, Mr.
Devlin was a Vice President in the Business Development Group of Goldman Sachs.
Immediately prior to joining Goldman Sachs, Mr. Devlin practiced law for four
years at the law firm of Davis Polk & Wardwell in New York working on various
corporate transactions, including leveraged leasing. During that time, he
negotiated approximately $1 billion in leases, including triple net leases. Mr.
Devlin is a graduate of Yale University and the Duke University School of Law.

C. RAY BELL is a trustee of the Company. Mr. Bell is the President and
owner of Ray Bell Construction Company, Inc. ("Ray Bell Construction"). Ray Bell
Construction specializes in the construction of a wide range of commercial
buildings, including the construction on behalf of various government entities
and private companies, including CCA, of approximately 40 correctional and
detention facilities, consisting of over 15,000 beds in seven states. Mr. Bell
is a founding member of the Middle Tennessee Chapter of Associated Builders and
Contractors. Mr. Bell is a graduate of the University of the South. Mr. Bell is
a member of the Compensation Committee of the Board of Trustees.

RICHARD W. CARDIN is an Independent Trustee of the Company. Mr. Cardin is
currently a consultant and private investor. Prior to his retirement in 1995,
Mr. Cardin was affiliated with, and a partner in, Arthur Andersen LLP, an
international firm of independent public accountants and consultants, for 37
years. From 1980 through 1994, Mr. Cardin served as the managing partner of
Arthur Andersen's Nashville office. Mr. Cardin is a member of the Board of
Directors of United Cities Gas Company ("United Cities"), a publicly traded
company, and will serve on the Board of Directors of Atmos Energy Corporation, a
publicly traded company into which United Cities expects to merge in July 1997.
Mr. Cardin is a certified public accountant. Mr. Cardin is a member of the Audit
Committee of the Board of Trustees and is the Chairman of the Compensation
Committee of the Board of Trustees.

MONROE J. CARELL, JR. is an Independent Trustee of the Company. For the
past 18 years, Mr. Carell has served as Chief Executive Officer and Chairman of
the Board of Directors of Central Parking Corporation, a NYSE company which
provides parking services ("Central Parking"). Since 1991, Mr. Carell has served
as a trustee of Vanderbilt University in Nashville and he is currently a member
of the Board of Trust of the Urban Land Institute. Mr. Carell is also a member
of the Board of Directors of Vanderbilt University Medical Center.

JOHN W. EAKIN, JR. is an Independent Trustee of the Company. Mr. Eakin
founded Eakin & Smith, Inc., a real estate development and management company
("Eakin & Smith") in 1987, and served as its President from that time until
1996, when Eakin & Smith was merged with Highwoods Properties, Inc.
("Highwoods"), a publicly traded, self-administered and self-managed, office and
industrial REIT, based in Raleigh, North Carolina. Mr. Eakin is a Senior Vice
President and Director of Highwoods. Mr. Eakin is also a member of the Board of
Directors of Central Parking and a member of the advisory board of First
American National Bank of Nashville. Mr. Eakin is a member of the Compensation
Committee of the Board of Trustees.

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TED FELDMAN is an Independent Trustee of the Company. Mr. Feldman is
currently the Chief Operating Officer of StaffMark, Inc., a provider of
diversified staffing services to business, medical, professional and service
organizations and governmental agencies, a position he has held since October
1996. Prior to joining StaffMark, Mr. Feldman founded HRA, Inc., a Nashville
provider of staffing services, in 1991, and served as its President and Chief
Executive Officer from that time until it merged with StaffMark in March 1996.
Mr. Feldman is a member of the Compensation Committee of the Board of Trustees.

JACKSON W. MOORE is an Independent Trustee of the Company. Mr. Moore is
presently a Director and the President and Chief Operating Officer of Union
Planters Corporation, a multi-state bank and savings and loan holding company
headquartered in Memphis, Tennessee, positions he has held since 1986, 1989 and
1994, respectively. He is also Chairman of PSB Bancshares, Inc. and a Vice
President and Director of its subsidiary, The Peoples Savings Bank in Clanton,
Alabama. Prior to joining Union Planters, Mr. Moore practiced law for 16 years.
Mr. Moore is a graduate of the University of Alabama and Vanderbilt University
School of Law. Mr. Moore is not related to Rusty Moore. Mr. Moore is the
Chairman of the Independent Committee and is a member of the Audit Committee of
the Board of Trustees.

RUSTY L. MOORE is a trustee of the Company. Since 1996, Mr. Moore has been
a principal of the Nashville law firm of Moore & Waechter, PLC and the President
of its affiliate, Bankers Title & Escrow Corporation. He is also a principal and
an executive officer of a privately-held real estate investment and property
management company that owns multi-family residential properties throughout the
Southeast. Mr. Moore has over 12 years of experience in negotiating and
structuring real estate transactions including the development, acquisition,
leasing and financing of various types of property. Prior to forming Moore &
Waechter, Mr. Moore was a partner at Stokes & Bartholomew, P.A., where his
practice focused on all aspects of real estate law. Mr. Moore was graduated from
the University of Tennessee, where he received a B.S. in Public Administration
in 1981 and a J.D. in 1985. Mr. Moore is not related to Jackson Moore. Mr. Moore
is a member of the Audit Committee of the Board of Trustees.

JOSEPH V. RUSSELL is an Independent Trustee of the Company. Mr. Russell is
the President and Chief Financial Officer of Elan-Polo, Inc., a Nashville based,
privately-held, worldwide producer and distributor of footwear. Mr. Russell is
also the Vice President of and a Partner in RCR Building Corporation, a
Nashville based, privately-held builder and developer of commercial and
industrial properties. He also serves on the Board of Directors of Capital Bank
and Trust Company, the Footwear Distributors of America Association and US Auto
Insurance Company. Mr. Russell was graduated from the University of Tennessee in
1963 with a B.S. in Finance. Mr. Russell is the Chairman of the Audit Committee
of the Board of Trustees.

CHARLES W. THOMAS, PH.D. is an Independent Trustee of the Company. Dr.
Thomas is a university professor who has taught and written on the criminal
justice and private corrections fields for over 27 years. Currently, he is a
Professor of Criminology and the Director of the Private Corrections Project
Center for Studies in Criminology and Law (the "Center") at the University of
Florida, Gainesville, positions he has held since 1980 and 1989, respectively.
While serving as Director of the Center, Dr. Thomas authored the 1996 Facility
Census (as well as prior editions). Dr. Thomas was graduated from McMurry
University in 1966 with a B.S. in Secondary Education and from the University of
Kentucky with a M.A. in Sociology in 1969 and a Ph.D. in Sociology in 1971. Mr.
Thomas is a member of the Compensation Committee of the Board of Trustees.

VIDA H. CARROLL is Chief Financial Officer and Secretary/Treasurer. From
1991 to 1996, Ms. Carroll, as a sole proprietor, worked as a financial
consultant, specializing in accounting conversions and systems design. Prior to
this time, she worked in public accounting, including working as an audit
manager with KPMG Peat Marwick. Ms. Carroll holds a Bachelor of Science degree
from Tennessee Technological University and is a certified public accountant.

M. SUSAN SMITH is Vice President, Finance of the Company. Ms. Smith also
serves as Controller of DC Investment Partners LLC and will continue in such
capacity after the Offering. Ms. Smith was an audit manager with Arthur Andersen
LLP in Nashville from 1992 to 1996. While at Arthur Andersen LLP, Ms. Smith
worked primarily with a private investment company and a large financial
institution. Prior to this

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time, she worked in the banking industry. Ms. Smith holds a Bachelor of Science
degree from the University of Tennessee and is a certified public accountant.

COMMITTEES OF THE BOARD OF TRUSTEES

Independent Committee. The Board of Trustees has established the
Independent Committee consisting of the seven Independent Trustees to oversee
the acquisition of the Initial Facilities and, if acquired, the Option
Facilities, the selection of facilities acquired in the future and to evaluate
transactions between the Company and CCA, including the acquisition of
correctional and detention facilities and lease negotiation and enforcement.
Jackson W. Moore is the Chairman of the Independent Committee.

Audit Committee. The Board of Trustees has established an audit committee
consisting of Messrs. Cardin, Jackson W. Moore, Rusty L. Moore and Russell
(Chairman) (the "Audit Committee"). The Audit Committee will make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the plans and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls.

Compensation Committee. The Board of Trustees has established a
compensation committee consisting of Messrs. Bell, Cardin (Chairman), Eakin,
Feldman and Thomas (the "Compensation Committee"). The Compensation Committee
will determine compensation, including awards under the Company's 1997 Employee
Share Incentive Plan for the Company's executive officers (the "Share Incentive
Plan") and the Non-Employee Trustees' Share Option Plan, as amended (the
"Non-Employee Trustees' Plan") (the Share Incentive Plan and the Non-Employee
Trustees' Plan are herein collectively referred to as the "Plans"). The
Compensation Committee will also administer the Plans.

The Company may from time to time form other committees as circumstances
warrant. Such committees will have authority and responsibility as delegated by
the Board of Trustees.

COMPENSATION OF TRUSTEES

The Company intends to pay its non-employee trustees annual compensation of
$12,000 for their services. In addition, non-employee trustees will receive a
fee of $1,000 for each Board of Trustees meeting attended. Non-employee trustees
attending any committee meetings will receive an additional fee of $500 for each
committee meeting attended, unless the committee meeting is held on the day of a
meeting of the Board of Trustees. Non-employee trustees will also be reimbursed
for reasonable expenses incurred to attend trustee and committee meetings.
Officers of the Company who are trustees will not be paid any trustees' fees.
Non-employee trustees, other than Doctor R. Crants, will also participate in the
Non-Employee Trustees' Share Option Plan. See "Management -- Non-Employee
Trustees' Plan."

INDEMNIFICATION

The Declaration of Trust provides for the indemnification of the Company's
officers and trustees against certain liabilities to the fullest extent
permitted under Maryland law. The Declaration of Trust also provides that the
trustees and officers of the Company be exculpated from monetary damages to the
fullest extent permitted under Maryland law. The trustees and officers of the
Company have entered into separate indemnification agreements with the Company
pursuant to which the Company has agreed to indemnify such trustees and officers
against certain liabilities. In addition, the officers, trustees and controlling
persons of the Company will be indemnified against certain liabilities by the
Underwriters.

The Company has obtained trustees' and officers' liability insurance.

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EXECUTIVE COMPENSATION

Prior to the Offering, the Company will not pay any compensation to its
officers. The following table sets forth the annual base salary rates and other
compensation expected to be paid by the Company in 1997 to the most highly
compensated executive officers of the Company (i.e., those whose cash
compensation from the Company in 1997 on an annualized basis is expected to
exceed $100,000) (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------
COMPENSATION SECURITIES
------------------------- UNDERLYING
BASE OPTIONS(#)(2) SHARE BONUS
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(1) BONUS OPTION AWARD(#)(3)
- --------------------------- ---- ------------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
J. Michael Quinlan............... 1997 150,000 -- 350,000 --
Chief Executive Officer
D. Robert Crants, III............ 1997 100,000 -- 200,000 150,000
President and Chief Operating
Officer
Michael W. Devlin................ 1997 100,000 -- 200,000 150,000
Chief Development Officer
</TABLE>

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

(1) Amounts given are annualized salaries effective for the year ended December
31, 1997.

(2) All options will vest in 25% increments over a three-year period with the
first increment vesting immediately upon the date of grant, and will be
exercisable at a price per share equal to the initial public offering price
per Common Share offered hereby.

(3) Represents Common Shares issued as a development fee and as reimbursement
for actual costs incurred in connection with the promotion and formation of
the Company, the consummation of the Offering, and the closing of the
purchase of the Initial Facilities.

THE SHARE INCENTIVE PLAN

The Company has established the Share Incentive Plan to enable executive
officers and other key employees of the Company to participate in the ownership
of the Company. The Share Incentive Plan is designed to attract and retain
executive officers and other key employees of the Company and to provide
incentives to such persons to maximize the Company's cash flow available for
distribution. The Share Incentive Plan provides for the award to executive
officers and other key employees of the Company (subject to the Ownership Limit)
of a broad variety of share-based compensation alternatives such as nonqualified
share options, incentive share options, restricted shares, deferred shares and
other share-based awards.

The Share Incentive Plan will be administered by the Compensation
Committee, which is authorized to select from among the eligible employees of
the Company individuals to whom options, restricted shares, deferred shares and
other share-based awards are to be granted and to determine the number of shares
to be subject thereto and the terms and conditions thereof. The Compensation
Committee is also authorized to adopt, amend and rescind rules relating to the
administration of the Share Incentive Plan. No member of the Compensation
Committee will be eligible to participate in the Share Incentive Plan.

Awards Available for Issuance under the Share Incentive Plan

Nonqualified options, if granted, will provide for the right to purchase
Common Shares at a specific price which may be less than fair market value on
the date of grant and usually will become exercisable in installments after the
grant date. Nonqualified options may be granted for any reasonable term and may
be transferable in certain limited circumstances.

Incentive options, if granted, will be designed to comply with the
"incentive stock option" provisions of the Code and will be subject to
restrictions contained therein, including that the exercise price must generally

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equal at least 100% of fair market value of Common Shares on the grant date and
that the term generally must not exceed ten years. Incentive options may be
modified after the grant date to disqualify them from treatment as an "incentive
stock option."

Restricted shares, if issued, may be sold to participants at various prices
(or issued without monetary consideration) and may be made subject to such
restrictions as may be determined by the Compensation Committee. Restricted
shares typically may be repurchased by the Company at the original purchase
price if the conditions or restrictions are not met. In general, restricted
shares may not be sold, or otherwise transferred or hypothecated, until
restrictions are removed or expired. Purchasers of restricted shares, unlike
recipients of options, will have voting rights and will receive dividends or
distributions prior to the time when the restrictions lapse.

Deferred shares, if issued, will obligate the Company to issue Common
Shares upon the occurrence or nonoccurrence of conditions specified in the
deferred share award. Under a typical deferred share award, the Company may
agree to issue Common Shares to an employee if he or she achieves certain
performance goals or remains employed by the Company for a specified period of
time. Recipients of deferred shares will not have voting rights or receive
dividends or distributions until the shares are actually issued.

Other share-based awards, if granted, may be granted by the Compensation
Committee on an individual or group basis. Generally, these awards will be based
upon specific agreements and may be paid in cash or in Common Shares or in a
combination of cash and Common Shares. Other share-based awards may include
share appreciation rights and "phantom" share awards that provide for payments
based upon increases in the price of the Company's Common Shares over a
predetermined period. They may also include bonuses which may be granted by the
Compensation Committee on an individual or group basis and which may be payable
in cash or in Common Shares or in a combination of cash and Common Shares.

Shares subject to the Share Incentive Plan. A maximum of 1,700,000 shares
(including shares subject to the options listed below) will be reserved for
issuance under the Share Incentive Plan. There is no limit on the number of
awards that may be granted to any one individual so long as the grant does not
violate the Ownership Limit or cause the Company to fail to qualify as a REIT
for federal income tax purposes. See "Description of Capital
Shares -- Restrictions on Ownership."

The Compensation Committee will approve, prior to the completion of the
Offering, the grant of options to executive officers and certain key employees
of the Company, to purchase, in each case subject to the Ownership Limit, an
aggregate of 1,030,000 Common Shares. The term of each of such options will be
ten years from the date of grant. Each such option will vest in 25% increments
over a three year period with the first increment vesting immediately upon the
date of grant, and will be exercisable, at a price per share equal to the
initial public offering price. The table below sets forth the expected
allocation of the options to such persons:

<TABLE>
<CAPTION>
NAME OPTIONS
- ---- -------
<S> <C>
J. Michael Quinlan.......................................... 350,000
Doctor R. Crants............................................ 200,000
D. Robert Crants, III....................................... 200,000
Michael W. Devlin........................................... 200,000
Vida H. Carroll............................................. 50,000
Other key employees......................................... 30,000
</TABLE>

NON-EMPLOYEE TRUSTEES' PLAN

The Company has established the Non-Employee Trustees' Plan to maintain the
Company's ability to attract and retain the services of experienced and highly
qualified non-employee trustees and to increase their proprietary interest in
the Company's continued success.

Shares Subject to Non-Employee Trustees' Plan. A maximum of 150,000 Common
Shares have been authorized and reserved for issuance under the Non-Employee
Trustees' Plan. The shares so reserved for issuance and the terms of outstanding
awards shall be adjusted as the Compensation Committee deems

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appropriate in the event of a share dividend, share split, combination,
reclassification, recapitalization or other similar event.

Transferability. The Non-Employee Trustees' Plan provides that the options
may be transferred by a non-employee trustee in certain limited circumstances to
certain family members and affiliates. The options under the Non-Employee
Trustees' Plan are nonqualified options intended not to qualify as incentive
stock options under Section 422 of the Code.

Eligibility. The Non-Employee Trustees' Plan provides for the grant of
options to purchase Common Shares to each eligible trustee of the Company. No
director who is an employee of the Company or CCA is eligible to participate in
the Non-Employee Trustees' Plan.

Options. The Non-Employee Trustees' Plan provides that each non-employee
trustee who is a member of the Board of Trustees as of the date of this
Prospectus, other than Doctor R. Crants, will be awarded nonqualified options to
purchase 5,000 Common Shares on that date (each such trustee, a "Founding
Trustee"). Each non-employee trustee who is not a Founding Trustee (a
"Non-Founding Trustee") will receive nonqualified options to purchase 5,000
Common Shares on the date the Non-Founding Trustee is first elected or appointed
to the Board of Trustees. In addition, on each of the first nine anniversary
dates of the adoption of the Non-Employee Trustees' Plan, each non-employee
trustee, other than Doctor R. Crants, will receive an option to purchase 5,000
Common Shares. The options granted to Founding Trustees will have an exercise
price equal to the initial public offering price and will vest on the date of
grant. The exercise price of options under future grants will be 100% of the
fair market value of the Common Shares on the date of grant and will vest one
year from the date of grant. The exercise price may be paid in cash, cash
equivalents, Common Shares or a combination thereof, as acceptable to the
Compensation Committee. The term of options granted under the Non-Employee
Trustees' Plan generally will be ten years from the date of grant.

DIVIDEND REINVESTMENT PLAN

The Company may implement a dividend reinvestment plan in the future under
which holders of Common Shares may elect to reinvest automatically their
dividends in additional Common Shares. In the event the Company does implement
such a plan, the Company may, from time to time, repurchase Common Shares in the
open market or issue additional Common Shares for the purpose of fulfilling its
obligations under this reinvestment plan.

DEFERRED COMPENSATION PLAN

The Company may establish a deferred compensation plan under which
executive officers of the Company may elect to defer receiving a portion of
their cash compensation otherwise payable in one tax year until a later tax year
and thereby postpone payment of tax on the deferred amount. If the plan is
established prior to the beginning of any taxable year, such executive officer
may elect to defer such amount of cash compensation until a future date or until
an event selected by such persons pursuant to the terms of the plan. Deferred
compensation may be invested in a separate trust account.

EMPLOYMENT AGREEMENTS

The Company will have seven employees. J. Michael Quinlan, D. Robert
Crants, III and Michael W. Devlin have entered into employment agreements with
the Company for terms of four years (the "Employment Agreements"). The
agreements provide for annual compensation in the amounts set forth under
"Executive Compensation" and incentive compensation determined by the
Compensation Committee on the terms set forth therein. Each agreement includes
provisions restricting the officers from competing, directly or indirectly, with
the Company during employment and, except in certain circumstances, for three
years after termination of employment. Under applicable Tennessee law, which
governs the interpretation and enforceability of the Employment Agreements,
specific performance is not available as a remedy for violation of the
agreements; however the Company may generally enforce the provisions of the
agreement against the employee if the provisions contained therein are deemed
reasonable. In particular, Tennessee courts will

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enforce noncompetition provisions such as the ones contained in the Employment
Agreements provided the restrictions contain a reasonable geographic scope and
duration, will impose no undue hardship on the employee, and would cause serious
damage and injury to the Company if violated. Also, the courts will enjoin
violations of the covenants not to compete if the scope of employment is deemed
to require special skills and competence of the employees that could not be
attained by another employee of average competence.

The Company generally may terminate each employee's employment with 30
days' prior written notice upon the happening of any one of the following
events: (a) any act of the employee which constitutes fraud, gross misconduct,
gross negligence or a material breach of the employment agreement, (b) frequent
and repeated failure to perform services which have been reasonably requested by
the Board of Trustees and which are consistent with the terms of the employment
agreement, (c) the death of the employee, (d) the disability of the employee or
(e) a decision by the Company to terminate its business and liquidate; provided
that the Company generally may not terminate an employee's employment under
clause (a) or (b) unless it provides the employee with 15 days' notice of the
conduct giving rise to the Company's right of termination and gives the employee
a reasonable period of time to cure. Each employee may terminate his employment
upon 30 days' written notice to the Company.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

SHARE ACQUISITIONS BY MANAGEMENT

Doctor R. Crants, Chairman of the Board of the Company, has agreed to
purchase in the Offering approximately 500,000 of the Company's Common Shares
for a purchase price per share equal to the initial public offering price per
share sold to the public in the Offering.

Prior to the formation of the Company on April 23, 1997, D. Robert Crants,
III and Michael W. Devlin served as promoters of the Company. Upon consummation
of the Offering, Mr. Crants and Mr. Devlin, who currently serve as President and
Chief Development Officer, respectively, of the Company, will each receive
150,000 Common Shares as a development fee and as reimbursement of actual costs
incurred in connection with the promotion and formation of the Company, the
consummation of the Offering and the closing of the purchase of Initial
Facilities, which would have a value for each of them, based upon the initial
public offering price, of $3.0 million. The reimbursed costs include certain
costs related to property due diligence, employee compensation, travel and
overhead.

PURCHASE OF INITIAL FACILITIES

CCA and the Company will enter into the Purchase Agreement pursuant to
which the Company will acquire the nine Initial Facilities, for an aggregate
cash consideration of approximately $308.1 million. The Purchase Agreement will
contain representations and warranties by CCA customarily found in agreements of
such types.

OPTION FACILITIES

CCA and the Company will enter into the Option Agreements pursuant to which
CCA will grant the Company options, each for a period of three years from the
closing of the purchase of the Initial Facilities, to acquire any of the five
Option Facilities for CCA's costs of developing, constructing and equipping such
facilities, plus 5% of such costs, aggregating approximately $193.0 million.

RIGHT TO PURCHASE

The Company and CCA will enter into the Right to Purchase Agreement whereby
the Company will have an option to acquire, at fair market value, and lease back
to CCA, any correctional or detention facility acquired or developed and owned
by CCA in the future, for a period of three years following the Service
Commencement Date with respect to such facilities. The fair market value of such
facilities will be determined by the Company and CCA based on their respective
analyses of the market for such facility. Such

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analyses may include a review of the historical and projected economic
performance of the facility and an estimate of the value of the facility on a
replacement cost or comparative sales basis. For the first two years of such
option period, fair market value is deemed to be equal to CCA's costs of
developing, constructing and equipping such facilities, plus 5% of such costs.
Thereafter, fair market value will be based on cash flows and operating results
of such facilities. For facilities acquired in the first five years of the Right
to Purchase Agreement, the initial annual rental rate on facilities leased back
to CCA will be the greater of (i) fair market rental rates, as determined by the
Company and CCA or (ii) 11% of the purchase price for the facilities. For
facilities acquired thereafter, the initial annual rental rates will be the fair
market rental rates, as determined by the Company and CCA. The fair market
rental rates for such facilities will be determined by the Company and CCA based
on the fair market value of such facilities, taking into account the interest
rate environment at the time of the purchase and the creditworthiness of the
tenant.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with J. Michael Quinlan,
D. Robert Crants, III and Michael W. Devlin, pursuant to which Mr. Quinlan will
serve as Chief Executive Officer, Mr. Crants will serve as President, and Mr.
Devlin will serve as Chief Development Officer of the Company for a period of
four years at an initial annual compensation of $150,000, $100,000, and
$100,000, respectively, subject to any increases in base compensation approved
by the Compensation Committee. See "Management -- Employment Agreements."

POLICIES AND OBJECTIVES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of the Company's investment objectives and
policies, financing policies and policies with respect to certain other
activities. These policies are determined by the Board of Trustees and may be
amended or revised from time to time at the discretion of the Board of Trustees
without a vote of the Company's shareholders.

INVESTMENT OBJECTIVES AND POLICIES

The Company's investment objectives are to maximize current returns to
shareholders through increases in cash flow available for distribution and to
increase long-term total returns to shareholders through appreciation in the
value of the Common Shares. The Company will seek to accomplish its objectives
through (i) its ownership interests in the Initial Facilities and, if acquired,
the Option Facilities; (ii) selective acquisitions of additional correctional
and detention facilities from both private prison managers and government
entities; (iii) expansion of its existing facilities; and (iv) construction or
development of new correctional facilities. Although the Company intends to
focus its investments on the acquisition or development of facilities directly
from, or on behalf of, CCA or its affiliates or government entities in the
United States, it may pursue other opportunities as well. In addition, the
Company may invest in other facilities or excess land to the extent necessary to
acquire a facility.

The Company will consider a variety of factors in evaluating potential
investments in correctional or detention facilities, including (i) the
reputation and creditworthiness of the current owner, manager or developer of
the facility; (ii) the proposed terms for purchasing the facility; (iii) the
proposed terms for leasing the facility, including rental payments and lease
term; (iv) the quality of construction of the facility; (v) the quality of
operations at an existing facility or the quality of other operations of a
prison manager for a new facility; (vi) the status of existing facilities as
facilities accredited by the ACA; and (vii) the relationship between the prison
manager and the contracting correctional authority.

The Company may purchase or lease properties for long-term investment,
expand and improve the facilities presently owned or sell such properties, in
whole or in part, when circumstances warrant. The Company may also participate
with other entities in property ownership, through joint ventures or other types
of co-ownership. Equity investments may be subject to existing mortgage
financing and other indebtedness which have priority over the equity interest of
the Company.

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While the Company emphasizes equity real estate investments, it may, in its
discretion, invest in mortgages, equity or debt securities of other REITs,
partnerships and other real estate interests. Such mortgage investments may
include participating in convertible mortgages. The Company does not currently
intend to purchase securities of, or interests in, other entities engaged in
real estate activities.

There are no limitations on the percentage of the Company's assets that may
be invested in any one property, venture or type of security. The Board of
Trustees may establish limitations as it deems appropriate from time to time. No
limitations have been set on the number of properties in which the Company will
seek to invest or on the concentration of investments in any one geographic
region.

DISPOSITIONS; CCA'S RIGHT OF FIRST REFUSAL

The Company has no current intention to cause the disposition of any of the
Facilities, although it reserves the right to do so if the Board of Trustees
determines that such action would be in the best interests of the Company.
Pursuant to the Leases, CCA shall have a right of first refusal with respect to
any sale of the Facilities or any interest in a correctional or detention
facility acquired or developed and owned by the Company in the future and
operated by CCA. See "Leases" for a more detailed discussion of the terms and
conditions of the Leases.

FINANCING

The Company presently intends to maintain a ratio of debt to total
capitalization of 50% or less. Following the completion of the Offering and the
use of net proceeds therefrom, the Company will have no indebtedness. The Board
of Trustees may, however, from time to time reevaluate this policy and decrease
or increase such ratio accordingly. The Company will determine its financing
policies in light of then current economic conditions, relative costs of debt
and equity capital, market values of properties, growth and acquisition
opportunities and other factors. The Company has obtained a commitment for the
$150.0 million Bank Credit Facility which will be used in acquiring additional
correctional and detention facilities, and for certain other purposes, including
expanding existing facilities and working capital, as necessary. The Company
expects to close the Bank Credit Facility immediately following the consummation
of the Offering. If the Board of Trustees determines that additional funding is
desirable, the Company may raise such funds through additional equity offerings,
debt financing or retention of cash flow (subject to provisions in the Code
concerning taxability of undistributed REIT income and REIT qualification), or a
combination of these methods.

Indebtedness incurred by the Company may be in the form of publicly or
privately placed debt instruments or financings from banks, institutional
investors or other lenders, any of which indebtedness may be unsecured or may be
secured by mortgages or other interests in the property owned by the Company.
There are no limits on the number or amounts of mortgages or other interests
which may be placed on any one property. In addition, such indebtedness may be
with or without recourse to all or any part of the property of the Company or
may be limited to the particular property to which the indebtedness relates. The
proceeds from any borrowings may be used for the payment of distributions, and
working capital or to refinance indebtedness or to finance acquisitions,
expansions or developments of new properties.

In the event that the Board of Trustees determines to raise additional
equity capital, the Board of Trustees has the authority, without shareholder
approval, to issue additional Common Shares or other equity interests (including
Preferred Shares and other securities senior to the Common Shares) of the
Company in any manner (and on such terms and for such consideration) it deems
appropriate, including in exchange for property. The Company's Bylaws require
the approval of at least two-thirds of the members of the Board of Trustees for
the Company to issue equity securities other than Common Shares issued (a) for
at least the fair market value thereof at the time of issuance as determined in
good faith by a majority of the Board of Trustees, (b) pursuant to any share
incentive or option plans of the Company, or (c) in a bona fide underwritten
public offering managed by one or more nationally recognized investment banking
firms. Existing shareholders would have no preemptive right to purchase shares
issued in any offering, and any such offering might cause a dilution of a
shareholder's investment in the Company.

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WORKING CAPITAL RESERVES

The Company will maintain working capital reserves (and when not
sufficient, access to borrowings) in amounts that the Board of Trustees
determines to be adequate to meet normal contingencies in connection with the
operation of the Company's business and investments.

CONFLICT OF INTEREST POLICIES

The Company will adopt certain policies and enter into certain agreements
designed to minimize potential conflicts of interest. However, there can be no
assurance that these policies always will be successful in eliminating the
influence of such conflicts, and if they are not successful, decisions could be
made that might fail to reflect fully the interests of all shareholders. See
"Conflicts of Interest."

Declaration of Trust and Bylaw Provisions

The Company's Declaration of Trust requires that at least three members of
the Company's Board of Trustees be comprised of Independent Trustees, defined
therein as persons who are not officers or employees of the Company and are not
affiliated with CCA, any lessee or management company operating any property of
the Company, any subsidiary of the Company or any partnership that is an
affiliate of the Company. The Declaration of Trust provides that such provisions
relating to Independent Trustees may not be amended, altered or repealed without
the affirmative vote of holders of two-thirds of the shares of the Company
entitled to vote in the election of trustees. In addition, the Company's Bylaws
provide that the selection of operators for the Company's properties and all
transactions between the Company and CCA and its affiliates, including, but not
limited to, the negotiation and enforcement of the terms of any lease of any of
the Company's properties be approved by the Independent Trustees.

Pursuant to the Declaration of Trust, each trustee is required to discharge
his or her duties in good faith, with the care an ordinarily prudent person in a
like position would exercise under similar circumstances and in a manner he
reasonably believes to be in the best interest of the Company.

OTHER POLICIES

The Company intends to operate in a manner that will not subject it to
regulation under the Investment Company Act of 1940. The Company does not intend
(i) to invest in the securities of other issuers for the purpose of exercising
control over such issuer; (ii) to underwrite securities of other issuers; or
(iii) to trade actively in loans or other investments.

The Company may make investments other than as previously described
(including bonds, preferred stocks, and common stocks), although it does not
currently intend to do so. The Company may repurchase or otherwise reacquire
Common Shares or any other securities it may issue and may engage in such
activities in the future. The Board of Trustees has no present intention of
causing the Company to repurchase any of the Common Shares, and any such action
would be taken only in conformity with applicable federal and state laws and the
requirements for qualifying as a REIT under the Code and the Treasury
Regulations (as hereinafter defined). Although it may do so in the future,
except in connection with the Formation Transactions, the Company has not issued
Common Shares or any other securities in exchange for property, nor has it
reacquired any of its Common Shares or any other securities. See "The Formation
Transactions." The Company may make loans to third parties, including, without
limitation, to its officers and to joint ventures in which it decides to
participate. Such loans will generally require the approval of the Board of
Trustees, and loans to CCA and its affiliates or to a joint venture in which CCA
participates will require the approval of the Independent Committee.

At all times, the Company intends to make investments in such a manner as
to be consistent with the requirements of the Code to qualify as a REIT unless,
because of changes in future economic, market or legal conditions, or changes in
the Code or in the Treasury Regulations, the Board of Trustees determines to
revoke the Company's REIT election if the Board determines that such factors
make it no longer beneficial to qualify as a REIT.

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CONFLICTS OF INTEREST

GENERAL

RELATIONSHIPS WHICH MAY GIVE RISE TO CONFLICTS OF INTEREST

Doctor R. Crants is the Chairman and Chief Executive Officer of CCA and the
Chairman of the Board of Trustees of the Company. D. Robert Crants, III,
President of the Company, is the son of Doctor R. Crants. Doctor R. Crants and
D. Robert Crants, III, as well as certain other trustees or officers of the
Company or directors or officers of CCA, may also own, directly or indirectly,
shares in both companies following the Offering. D. Robert Crants, III and
Michael W. Devlin, Chief Development Officer of the Company, are principals of
DC Investment Partners LLC, a limited liability company which serves as the
general partner of three private investment partnerships. DC Investment Partners
LLC is owned by D. Robert Crants, III, Michael W. Devlin, and Stephens Group,
Inc., an affiliate of Stephens Inc., a managing underwriter of this Offering,
and one other individual. Doctor R. Crants and three other directors of CCA are
investors in one or more of the private investment partnerships managed by DC
Investment Partners LLC. Rusty L. Moore, a trustee, is the spouse of a
shareholder of Stokes & Bartholomew, P.A., tax and securities counsel to the
Company. Stokes & Bartholomew, P.A. also provides legal services to CCA,
including representing CCA in certain of the Formation Transactions. J. Michael
Quinlan is a former employee of CCA. C. Ray Bell, a trustee, is the principal of
a construction company which, as a part of its business, builds correctional and
detention facilities, including facilities for CCA. Because of Mr. Bell's
experience in building correctional and detention facilities, it is anticipated
that his company may build correctional or detention facilities for or on behalf
of the Company.

SITUATIONS IN WHICH CONFLICTS OF INTERESTS HAVE ARISEN AND MAY CONTINUE TO ARISE

Valuation of the Facilities. The valuation of the Initial Facilities and
the Option Facilities was determined by management of both CCA and the Company
and was not negotiated on an arm's-length basis. The purchase price of the
Initial Facilities was determined based primarily on an evaluation of the
current and anticipated cash flows and operating results of such facilities. To
determine the purchase price for each of the Initial Facilities other than the
T. Don Hutto Correctional Center, the anticipated annual cash flow from the
facility less ongoing capital expenditures was divided by an agreed upon
coverage ratio and lease rate. Because the T. Don Hutto Correctional Center was
completed in January 1997, the purchase price of the T. Don Hutto Correctional
Center and of each Option Facility was calculated as CCA's approximate cost of
developing, constructing and equipping such facilities, plus 5% of such costs.
It is possible that if such valuations had been determined on an arm's-length
basis, or had been the subject of independent valuations or appraisals, the sum
of the values of the Initial Facilities and, if acquired, the Option Facilities,
might have been lower than the sum of the values determined by the management of
CCA and of the Company. The terms of the purchase of the Facilities were
approved by the Independent Committee of the Company's Board of Trustees.

Terms of Leases. The Lease payment obligations with respect to the Initial
Facilities were determined by management of CCA and management of the Company
and were not negotiated on an arm's-length basis. However, the lease payments
that CCA is obligated to make are based on an initial lease rate of
approximately 11%, which the Company believes reflects the fair rental value of
the Initial Facilities to the Company. Moreover, the terms and conditions of the
Leases were the subject of independent negotiations between the Company and CCA,
and the amount of the Lease payment obligations and the terms and conditions of
the Leases were approved by the Independent Committee of the Company's Board of
Trustees.

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Company; (ii) the Company will have an exclusive option to acquire the Option
Facilities and a right to purchase and a right of first refusal to purchase any
correctional or detention facilities acquired or developed and owned, by CCA or
its subsidiaries in the future, and a right of first refusal to purchase any and
all correctional facilities owned by CCA or its subsidiaries in the future and
to provide mortgage financing for any correctional facilities financed in excess
of 90% of their cost by CCA or its subsidiaries in the future; and (iii) CCA
will have a right of first refusal to acquire the Facilities. Accordingly, the
potential exists for disagreements as to the compliance with the Leases or the
values of the facilities acquired in the future pursuant to the Right to
Purchase Agreement. Additionally, the possible need by the Company, from time to
time, to finance, refinance or effect a sale of any of the properties managed by
CCA may result in a need to modify the lease with CCA with respect to such
property. Any such modification will require the consent of CCA, and the lack of
consent from CCA could adversely affect the Company's ability to consummate such
financings or sale. Because of the relationships described above, there exists
the risk that the Company will not achieve the same results in its dealings with
CCA that it might achieve if such relationships did not exist.

STEPS TAKEN BY THE COMPANY TO ADDRESS POTENTIAL CONFLICTS OF INTEREST

Use of Independent Committee. Upon completion of the Offering, the
Company's Board of Trustees will consist of 13 trustees. Four of the trustees
are Doctor R. Crants, the Chairman of the Board of Trustees and Chairman and
Chief Executive Officer of CCA, J. Michael Quinlan, Chief Executive Officer of
the Company, D. Robert Crants, III, President of the Company, and Michael W.
Devlin, Chief Development Officer of the Company. Of the remaining nine
trustees, seven will be Independent Trustees who are not employees of the
Company or otherwise affiliated with CCA. The Independent Trustees will
constitute the Independent Committee of the Board of Trustees. Transactions
involving the Company and CCA such as the acquisition of additional facilities
from CCA and lease negotiation, enforcement and renegotiation, will require the
approval of the Independent Committee. Certain other significant actions of the
Board of Trustees will require the approval of a minimum of two-thirds of the
Board of Trustees. In addition, Michael W. Devlin, the Company's Chief
Development Officer, and Vida H. Carroll, the Company's Chief Financial Officer,
neither of whom have had nor will have any affiliation with CCA will assist the
Independent Committee with respect to potential conflicts of interest between
the Company and CCA, including the negotiation and enforcement of all Leases.
See "Management."

Agreements Between CCA and the Company. Prior to the Offering, the Company
and CCA will enter into certain agreements, the terms of which are more
completely described herein, designed to address in advance certain situations
in which conflicts might arise. For example, CCA will grant the Company an
option to acquire and lease back to CCA certain future facilities and a right of
first refusal pursuant to which, prior to selling any facility, or mortgaging
more than 90% of the cost of a facility, the Company will have the right to
purchase such facility, or provide first mortgage financing for 90% of the
acquisition costs of any such facility, as applicable, on terms equal to those
offered to a third party. Pursuant to the Leases, CCA will also have a right of
first refusal with respect to any sale of the Facilities or any interest in a
correctional or detention facility acquired or developed and owned by the
Company in the future. See "Certain Relationships and Transactions" and
"Conflicts of Interest."

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THE FORMATION TRANSACTIONS

Prior to or simultaneously with the consummation of the Offering, the
Company and CCA will engage in the Formation Transactions which are designed to
consolidate the ownership interests in the Facilities in the Company, to
facilitate the Offering and to enable the Company to qualify as a REIT for
federal income tax purposes commencing with its taxable year ending December 31,
1997. None of such transactions is expected to occur unless all such
transactions occur. These transactions include the following:

- The Company, which was formed as a Maryland real estate investment trust
on April 23 1997, will sell 17,000,000 Common Shares in the Offering for
net proceeds of approximately $313.2 million after deduction of the
underwriting discount and estimated offering expenses (assuming an initial
public offering price of $20.00 per share);

- Doctor R. Crants, Chairman of the Company and Chairman and Chief
Executive Officer of CCA will acquire in the Offering approximately
500,000 Common Shares at a price per share equal to the initial public
offering price;

- The Company will use the net proceeds of the Offering to acquire the nine
Initial Facilities from CCA for an aggregate purchase price of
approximately $308.1 million payable in cash;

- The Company will lease the Initial Facilities to CCA, pursuant to the
Leases, for initial terms ranging from 10 to 12 years. Each Lease may be
extended at fair market rates for three additional five-year renewal terms
upon the mutual agreement of CCA and the Company. Pursuant to the Leases,
the Company will grant to CCA a right of first refusal to acquire the
Initial Facilities, the Option Facilities or any other correctional or
detention facilities subsequently acquired by the Company and operated by
CCA;

- In addition to the Option Agreements, CCA will grant the Company a right
to acquire, at fair market value and lease back to CCA at fair market
rental rates, any correctional or detention facility acquired or developed
and owned by CCA in the future for a period of three years following the
Service Commencement Date with respect to such facility. The initial
annual rental rate for facilities acquired in the first five years of the
Right to Purchase Agreement, will be equal to the greater of (i) fair
market rental rate as determined by the Company and CCA, or (ii) 11% of
the purchase price. For facilities acquired thereafter, the initial annual
rental rate on such facilities will be the fair market rental rate as
determined by the Company and CCA. Additionally, CCA will grant the
Company a right of first refusal to acquire any CCA-owned correctional or
detention facility should CCA receive an acceptable third party offer to
acquire any such facility;

- The Company will enter into employment agreements with certain of the
Company's executive officers, including J. Michael Quinlan, Chief
Executive Officer, D. Robert Crants, III, President and Michael W. Devlin,
Chief Development Officer; and

- Upon consummation of the Offering, D. Robert Crants, III and Michael W.
Devlin will each receive 150,000 Common Shares as a development fee and as
reimbursement of actual costs incurred in connection with the promotion
and formation of the Company, the consummation of the Offering and the
closing of the purchase of the Initial Facilities which would have a value
for each of them, based on the initial public offering price, of $3.0
million. The reimbursed expenses include certain costs related to property
due diligence, employee compensation, travel and overhead. The development
fee compensates Messrs. Crants and Devlin for their services rendered on
behalf of the Company in connection with, among other things, the
preparation of the Company's initial business plan and capital and
operating budgets. A significant portion of this development work
commenced in the fall of 1995, and continued throughout 1996 and 1997.

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ADVANTAGES AND DISADVANTAGES TO UNAFFILIATED SHAREHOLDERS

The potential advantages of the Formation Transactions to unaffiliated
shareholders of the Company include their ability to participate in the
substantial cash flow of the Initial Facilities through their ownership in the
Company, and in all future acquisitions by the Company. See "The
Company -- Business Objectives and Operating Strategies." The potential
disadvantages of such transactions to unaffiliated shareholders of the Company
include the lack of arm's-length valuations in determining the consideration in
such transactions and the fact that Doctor R. Crants, Chairman of the Board of
both the Company and CCA, will have substantial influence on the management and
operations of the Company and, as a substantial shareholder of both the Company
and CCA, on the outcome of any matters submitted to a vote of shareholders, and
that the risk such influence might be exercised in a manner inconsistent with
the interests of other shareholders. See the more complete discussion of such
matters under "Risk Factors."

BENEFITS TO THE COMPANY AND ITS OFFICERS AND TRUSTEES

The benefits of the foregoing transactions to the Company and its officers
and trustees include:

- The ability to access public capital markets;

- The creation of an entity which, through its distribution to
shareholders, is able to reduce or avoid the incurrence of federal income
tax, allowing its shareholders to participate in real estate investments
without the "double taxation" of income that generally results from an
investment in a regular corporation;

- The ability to expand the Company's acquisition and development
opportunities through its strong capital base;

- The Company will enter into employment agreements with J. Michael
Quinlan, D. Robert Crants, III, and Michael W. Devlin providing for annual
salaries of $150,000, $100,000 and $100,000, respectively;

- J. Michael Quinlan, Chief Executive Officer, will be granted options to
acquire 350,000 Common Shares at the initial public offering price. Each
of Doctor R. Crants, Chairman of the Board of Trustees, D. Robert Crants,
III, President and Michael W. Devlin, Chief Development Officer will be
granted options to acquire 200,000 Common Shares at the initial public
offering price. Vida H. Carroll, Chief Financial Officer, will be granted
options to acquire 50,000 Common Shares at the initial public offering
price. Such options will vest in 25% increments over a three year period
with the first increment vesting immediately upon the date of grant;

- Upon consummation of the Offering, D. Robert Crants, III and Michael W.
Devlin will each receive 150,000 Common Shares as a development fee and as
reimbursement of expenses incurred in connection with the promotion and
formation of the Company, the consummation of the Offering and the closing
of the purchase of the Initial Facilities, which would have a value for
each of them, based on the initial public offering price, of $3.0 million.
The reimbursed expenses include certain costs related to property due
diligence, employee compensation, travel and overhead. The development fee
compensates Messrs. Crants and Devlin for their services rendered on
behalf of the Company in connection with, among other things, the
preparation of the Company's initial business plan and capital and
operating budgets. A significant portion of this development work
commenced in the fall of 1995, and continued throughout 1996 and 1997. See
"The Formation Transactions -- Benefits to the Company and its Officers
and Trustees;" and

- Each non-employee trustee will receive options to acquire 5,000 Common
Shares at the initial public offering price. Such options will vest
immediately upon the date of grant.

BENEFITS TO CCA

The benefits of the foregoing transactions to CCA include:

- CCA will receive approximately $308.1 million in cash in exchange for the
nine Initial Facilities it will sell to the Company. The historical cost
of such Initial Facilities at March 31, 1997 was approximately $175.2
million;

- In the event the Independent Committee determines to exercise the
Company's option to purchase all of the five Option Facilities, CCA could
receive approximately $193.0 million in cash;

- CCA will use certain of the proceeds of the sale of the Initial
Facilities to discharge certain indebtedness incurred in connection with
facility acquisitions; and

- CCA will expand its marketing opportunities through increased access to
capital.

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PRINCIPAL SHAREHOLDERS OF THE COMPANY

The following table sets forth certain information regarding the beneficial
ownership of Common Shares by each trustee of the Company, by each Named
Executive Officer, by all trustees and officers of the Company as a group and by
each person who is expected to be the beneficial owner of 5% or more of the
outstanding Common Shares immediately following completion of the Offering. The
table assumes (i) the consummation of the Formation Transactions, and (ii) that
the Underwriters' over-allotment option will not be exercised. Each person named
in the table has sole voting and investment power with respect to all the Common
Shares shown as beneficially owned by such person except as otherwise set forth
in the notes to the table.

<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON SHARES
OUTSTANDING
NUMBER OF FOLLOWING THE
NAME OF BENEFICIAL OWNERS COMMON SHARES(1) OFFERING
- ------------------------- ---------------- ------------------
<S> <C> <C>
Doctor R. Crants............................................ 550,000 3.2%
J. Michael Quinlan.......................................... 87,500 *
D. Robert Crants, III....................................... 200,000 1.2
Michael W. Devlin........................................... 200,000 1.2
C. Ray Bell................................................. 5,000 *
Richard W. Cardin........................................... 5,000 *
Monroe J. Carell, Jr........................................ 5,000 *
John W. Eakin, Jr........................................... 5,000 *
Ted Feldman................................................. 5,000 *
Jackson W. Moore............................................ 5,000 *
Rusty L. Moore.............................................. 5,000 *
Joseph V. Russell........................................... 5,000 *
Charles W. Thomas, Ph.D..................................... 5,000 *
All executive officers and trustees as a group (15
persons).................................................. 1,098,750 6.2%
</TABLE>

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

* Less than 1%.
(1) Includes 282,500 shares subject to options that are exercisable within 60
days after completion of the Offering.

DESCRIPTION OF CAPITAL SHARES
GENERAL

Under the Declaration of Trust, the total number of shares of all classes
that the Company has authority to issue is 100,000,000 consisting of 90,000,000
Common Shares and 10,000,000 Preferred Shares. As of the date of this
Prospectus, 1,000 Common Shares were outstanding, held by one record holder. No
Preferred Shares are currently outstanding or will be outstanding immediately
after consummation of the Offering. Under Maryland law, shareholders generally
are not personally liable for the Company's obligations solely as a result of
their status as shareholders.

The holders of Common Shares are entitled to one vote per share on all
matters voted on by holders, including elections of trustees, and, except as
otherwise required by law or provided in any resolution adopted by the Board of
Trustees with respect to any series of Preferred Shares establishing the powers,
designations, preferences and relative, participating, option or other special
rights of such series, the holders of such Common Shares exclusively possess all
voting power. The Declaration of Trust does not provide for cumulative voting in
the election of trustees. Subject to any preferential rights of any outstanding
series of Preferred Shares, the holders of Common Shares are entitled to such
distributions as may be declared from time to time by the Board of Trustees from
funds available therefor, and upon liquidation are entitled to receive pro rata
all assets of the Company available for distribution to such holders. All Common
Shares issued in the Offering will be fully paid and nonassessable and the
holders thereof will not have preemptive rights.

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The Board of Trustees is authorized to provide for the issuance of shares
of Preferred Shares in one or more series, to establish the number of shares in
each series and to fix the designations, powers, preferences and rights of each
such series and the qualifications, limitations or restrictions thereof.

RESTRICTIONS ON OWNERSHIP

For the Company to qualify as a REIT under the Code, it must meet certain
requirements concerning the ownership of its outstanding shares. Specifically,
not more than 50% in value of the Company's outstanding shares may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of a taxable year, and the
Company must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months or during a proportionate part of a shorter
taxable year. See "Material Federal Income Tax Considerations -- Taxation of the
Company -- Requirements for Qualification." In addition, the Company must meet
certain requirements regarding the nature of its gross income in order to
qualify as a REIT. One such requirement is that at least 75% of the Company's
gross income for each year must consist of rents from real property and income
from certain other real property investments. The rents received by the Company
from the lessee will not qualify as rents from real property, which likely would
result in loss of REIT status for the Company, if the Company owns, directly or
constructively, 10% or more of the ownership interests in the lessee within the
meaning of Section 856(d)(2)(B) of the Code. See "Material Federal Income Tax
Considerations -- Taxation of the Company -- Income Tests."

Because the Board of Trustees believes it is essential for the Company to
continue to qualify as a REIT, the Declaration of Trust, subject to certain
exceptions described below, provides that no person may own, or be deemed to own
by virtue of the attribution provisions of the Code, more than 9.8% of (i) the
number of outstanding Common Shares or (ii) the number of outstanding shares of
any series of Preferred Shares (the "Ownership Limit Provision"). Any transfer
of Common Shares or Preferred Shares that would (i) result in any person owning,
directly or indirectly, Common Shares or Preferred Shares in excess of the
Ownership Limit, (ii) result in the Common Shares and Preferred Shares being
owned by fewer than 100 persons (determined without reference to any rules of
attribution), (iii) result in the Company being "closely held" within the
meaning of Section 856(h) of the Code, or (iv) cause the Company to own,
directly or constructively, 10% or more of the ownership interests in a tenant
of the Company's real property, within the meaning of Section 856(d)(2)(B) of
the Code, shall be null and void, and the intended transferee will acquire no
rights in such Common Shares or Preferred Shares.

Subject to certain exceptions described below, any purported transfer of
Common Shares or Preferred Shares that would (i) result in any person owning,
directly or indirectly, Common Shares or Preferred Shares in excess of the
Ownership Limit, (ii) result in the Common Shares and Preferred Shares being
owned by fewer than 100 persons (determined without reference to any rules of
attribution), (iii) result in the Company being "closely held" within the
meaning of Section 856(h) of the Code, or (iv) cause the Company to own,
directly or constructively, 10% or more of the ownership interests in a tenant
of the Company's real property, within the meaning of Section 856(d)(2)(B) of
the Code, will be designated as "Shares-in-Trust" and transferred automatically
to a trust (the "Share Trust") effective on the day before the purported
transfer of such Common Shares or Preferred Shares. The record holder of the
Common Shares or Preferred Shares that are designated as Shares-in-Trust (the
"Prohibited Owner") will be required to submit such number of Common Shares or
Preferred Shares to the Company for registration in the name of the trustee of
the Share Trust (the "Share Trustee"). The Share Trustee will be designated by
the Company, but will not be affiliated with the Company. The beneficiary of the
Share Trust (the "Beneficiary") will be one or more charitable organizations
that are named by the Company.

Shares-in-Trust will remain issued and outstanding Common Shares or
Preferred Shares and will be entitled to the same rights and privileges as all
other shares of the same class or series. The Share Trustee will receive all
dividends and distributions on the Shares-in-Trust and will hold such dividends
and distributions in trust for the benefit of the Beneficiary. The Share Trustee
will vote all Shares-in-Trust and will designate a permitted transferee of the
Shares-in-Trust, provided that the permitted transferee (i) purchases such
Shares-

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in-Trust for valuable consideration and (ii) acquires such Shares-in-Trust
without such acquisition resulting in a transfer to another Share Trust.

The Prohibited Owner with respect to Shares-in-Trust will be required to
repay the Share Trustee the amount of any dividends or distributions received by
the Prohibited Owner (i) that are attributable to any Shares-in-Trust, and (ii)
the record date of which was on or after the date that such shares became
Shares-in-Trust. The Prohibited Owner generally will receive from the Share
Trustee the lesser of (i) the price per share such Prohibited Owner paid for the
Common Shares or Preferred Shares that were designated as Shares-in-Trust (or,
in the case of a gift or bequest, the Market Price (as hereinafter defined) per
share on the date of such transfer), or (ii) the price per share received by the
Share Trustee from the sale of such Shares-in-Trust. Any amounts received by the
Share Trustee in excess of the amounts to be paid to the Prohibited Owner will
be distributed to the Beneficiary.

The Shares-in-Trust will be deemed to have been offered for sale to the
Company, or its designee, at a price per share equal to the lesser of (i) the
price per share in the transaction that created such Shares-in-Trust (or, in the
case of a gift or bequest, the Market Price per share on the date of such
transfer), or (ii) the Market Price per share on the date that the Company, or
its designee, accepts such offer. The Company will have the right to accept such
offer for a period of 90 days after the later of (i) the date of the purported
transfer which resulted in such Shares-in-Trust, or (ii) the date the Company
determines in good faith that a transfer resulting in such Shares-in-Trust
occurred.

"Market Price" means the last reported sales price of the Common Shares or
Preferred Shares reported on the NYSE on the trading day immediately preceding
the relevant date, or if such shares are not then traded on the NYSE, the last
reported sales price of such shares on the trading day immediately preceding the
relevant date as reported on any exchange or quotation system over which such
shares may be traded, or if such shares are not then traded over any exchange or
quotation system, then the market price of such shares on the relevant date as
determined in good faith by the Board of Trustees.

Any person who acquires or attempts to acquire Common Shares or Preferred
Shares in violation of the foregoing restrictions, or any person who owned
Common Shares or Preferred Shares that were transferred to a Share Trust, will
be required (i) to give immediately written notice to the Company of such event,
and (ii) to provide to the Company such other information as the Company may
request in order to determine the effect, if any, of such transfer on the
Company's status as a REIT.

All persons who own, directly or indirectly, more than 5% (or such lower
percentages as required pursuant to regulations under the Code) of the
outstanding Common Shares and Preferred Shares must, within 30 days after
January 1 of each year, provide to the Company a written statement or affidavit
stating the name and address of such direct or indirect owner, the number of
Common Shares and Preferred Shares owned directly or indirectly by such owner,
and a description of how such shares are held. In addition, each direct or
indirect shareholder shall provide to the Company such additional information as
the Company may request in order to determine the effect, if any, of such
ownership on the Company's status as a REIT and to ensure compliance with the
Ownership Limit Provision.

The Ownership Limit generally will not apply to the acquisition of Common
Shares or Preferred Shares by an underwriter that participates in a public
offering of such shares. In addition, the Board of Trustees, upon such
conditions as the Board of Trustees may direct, may exempt a person from the
Ownership Limit under certain circumstances.

All certificates representing Common Shares or Preferred Shares will bear a
legend referring to the restrictions described above.

CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S DECLARATION OF TRUST AND
BYLAWS

The Company was formed on April 23, 1997. Pursuant to Maryland law, the
Company's existence is perpetual subject to voluntary dissolution and complete
distribution of its assets.

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The summary of certain provisions of Maryland law and of the Declaration of
Trust and Bylaws of the Company set forth below and elsewhere in this Prospectus
does not purport to be complete and is subject to and qualified in its entirety
by reference to Maryland law and the Declaration of Trust and Bylaws of the
Company. Copies of the Declaration of Trust and Bylaws may be obtained as
described under "Available Information."

Staggered Board of Trustees. The Declaration of Trust provides for a
staggered Board of Trustees consisting of three classes as nearly equal in size
as practicable. Each class holds office until the third annual meeting for
selection of trustees following the election of such class, except that the
initial terms of the three classes expire in 1998, 1999 and 2000, respectively.
The provision relating to the staggered Board may be amended only upon the vote
of the holders of at least two-thirds of the outstanding Common Shares of the
Company entitled to vote for the election of trustees. Such a vote could be
undertaken at an annual or special meeting of shareholders called in accordance
with the provisions of the Company's Bylaws. The Bylaws prohibit shareholders
from calling special meetings.

Meetings of Shareholders. Pursuant to the Company's Bylaws, an annual
meeting of the Company's shareholders for the election of Trustees and the
transaction of other business shall be held during the month of May of each
year. A special meeting of the shareholders of the Company may be called by (i)
the Chairman of the Board of Trustees, (ii) a majority of the members of the
Board of Trustees; or (iii) a committee of the Board of Trustees which has been
duly designated by the Board of Trustees and whose powers and authority include
the power to call such meetings.

Business Combinations Law. Under Maryland law, certain "business
combinations" (including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland real estate investment trust and any person who
beneficially owns 10% or more of the voting power of the real estate investment
trust's shares or an affiliate of the real estate investment trust who at any
time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting shares of the real estate investment trust (an "Interested Shareholder")
or an affiliate thereof are prohibited for five years after the most recent date
on which the Interested Shareholder became an Interested Shareholder.
Thereafter, any such business combination must be recommended by the board of
trustees of such real estate investment trust and approved by the affirmative
vote of at least (a) 80% of the votes entitled to be cast by holders of
outstanding voting shares of the real estate investment trust and (b) two-thirds
of the votes entitled to be cast by holders of outstanding voting shares of the
real estate investment trust other than shares held by the Interested
Shareholder with whom the business combination is to be effected, unless among
other things, the real estate investment trust's shareholders receive a minimum
price (as defined in the MGCL) for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Shareholder for its shares. The trustees of the real estate investment trust
may, by resolution, exempt business combinations specifically, generally, or
generally by types from the prohibitions of the business combinations law, but
such exemption with respect to a potential acquiror must be in place before the
acquiror becomes an Interested Shareholder.

Control Share Acquisitions. Maryland law provides that "control shares" of
a Maryland real estate investment trust acquired in a "control share
acquisition" have no voting rights except to the extent authorized by a vote of
two-thirds of the votes entitled to be cast on the matter, excluding shares
owned by the acquiror or by officers or directors who are employees of the
corporation. "Control Shares" are voting shares which, if aggregated with all
other such shares previously acquired by the acquiror, or in respect of which
the acquiror is able to exercise or direct the exercise of voting power, would
entitle the acquiror to exercise voting power in electing directors within one
of the following ranges of voting power (i) one-fifth or more but less than one-
third, (ii) one-third or more but less than a majority, or (iii) a majority of
all voting power. Control shares do not include shares the acquiring person is
then entitled to vote as a result of having previously obtained shareholder
approval. A "control share acquisition" means the acquisition of control shares,
subject to certain exceptions.

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A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of trustees to call a special meeting of shareholders to be
held within 50 days of demand to consider the voting rights of the shares. If no
request for a meeting is made, the real estate investment trust may itself
present the question as any shareholders meeting.

If voting rights are authorized at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the real estate investment trust
may redeem any or all of the control shares (except those for which voting
rights have previously been authorized) for fair value determined without regard
to the absence of voting rights for the control shares, as of the date of the
last control share acquisition or of any meeting of shareholders at which the
voting rights of such shares are considered and not authorized. If voting rights
for control shares are authorized at a shareholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
shareholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such approval rights may not be less than the highest
price per share paid by the acquiror in the control share acquisition.

The control share acquisition statue does not apply to shares acquired in a
merger, consolidation or share exchange if the real estate investment trust is a
party to the transaction, or to an acquisition authorized or exempted by the
declaration of trust or bylaws of the real estate investment trust.

The Company's Bylaws contain a provision exempting from the control share
acquisition statute any and all acquisitions by any person of the Company's
Common Shares. There can be no assurance that such provision will not be amended
or eliminated at any point in the future. If the foregoing exemption in the
Bylaws is rescinded, the control share acquisition statute could have the effect
of discouraging offers to acquire the Company and of increasing the difficulty
of consummating any such offer.

Interested Trustee Transactions. The Company's Bylaws contain a provision
requiring approval by the Independent Trustees of the Company of actions by the
Board of Trustees concerning the selection of operators of the Company's
Facilities and all transactions between the Company and CCA and its affiliates.

Removal of Trustees. The Declaration of Trust provides the Board of
Trustees or shareholders may, at any time, remove any trustee, with or without
cause, by an affirmative vote of a majority of trustees or a majority of holders
of shares entitled to vote in the election of trustees.

Amendments to the Declaration of Trust and Bylaws. The Declaration of
Trust provides generally that its provisions may be amended in accordance with
Maryland law except that (a) the trustees by a majority vote may amend the
Declaration of Trust to increase or decrease the aggregate number of shares of
any class that the Company has authority to issue, and (b) the trustees by a
two-thirds vote may amend the Declaration of Trust to qualify, or continue to
qualify, as a real estate investment trust under the Code or Maryland law.
Maryland law requires amendments to the Declaration of Trust to be authorized by
shareholders, by the affirmative vote of two-thirds of all the votes entitled to
be cast on the matter,

The Bylaws provide that the Board of Trustees has the exclusive power to
adopt, alter or repeal any provision of the Bylaws and to make new Bylaws, in
accordance with the provisions as set forth in the Bylaws.

Restrictions on Investment. Maryland law requires that a Maryland real
estate investment trust hold at least 75% of the value of its assets in real
estate assets, governmental securities, cash and cash items, including
receivables.

LIMITATIONS ON CHANGES IN CONTROL

The provisions of the Declaration of Trust and the Bylaws providing for
ownership limitations, a staggered Board of Trustees, eliminating the ability of
the shareholders to call special meetings of shareholders, and authorizing the
Board of Trustees to issue Preferred Shares without shareholder approval could
have the effect of delaying, deferring or preventing a change in control of the
Company or the removal of existing management, and as a result could prevent the
shareholders of the Company from being paid a premium for

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their Common Shares. In addition, Maryland's business combinations law makes it
difficult to acquire control of the Company by means of a tender offer, open
market purchase, a proxy fight or otherwise, if the acquisition is not
authorized in advance by the Board of Trustees. The Company has, however,
elected not to be governed by the provisions of Maryland law concerning control
share acquisitions.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF TRUSTEES

Maryland law provides that shareholders and trustees of a Maryland real
estate investment trust are not personally liable for the obligations of the
real estate investment trust; provided, however, that a trustee is not relieved
from any liability to a trust or its security holders for any act that
constitutes (a) bad faith, (b) willful misfeasance, (c) gross negligence or (d)
reckless disregard of the trustee's duties. According to the Declaration of
Trust, a trustee of the Company shall perform his duties (i) in good faith, (ii)
in a manner he reasonably believes to be in the best interest of the Company and
(iii) with the care that an ordinarily prudent person in a like position would
use under similar circumstances.

Maryland law permits a Maryland real estate investment trust to include in
its Declaration of Trust provisions limiting the liability of its trustees and
officers to the trust and its shareholders for money damages except for, in
general, liability resulting from (a) actual receipt of an improper benefit or
profit in money, property or services, or (b) active and deliberate dishonesty
established by a final judgment as being material to the matter giving rise to
the cause of action. The Declaration of Trust of the Company contains a
provision which eliminates a trustee's liability to the Company and its
shareholders for money damages to the maximum extent permitted by Maryland law.

The Declaration of Trust and the Bylaws of the Company require the Company,
to the maximum extent permitted by Maryland law, to indemnify and advance
expenses to a trustee or officer of the Company in connection with a proceeding
and to indemnify a trustee or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he is made a party by
reason of his or her service in that capacity.

Maryland law permits a Maryland real estate investment trust to indemnify
and advance expenses to its trustees, officers, employees and agents to the same
extent as permitted by the Maryland General Corporation Law (the "MGCL") for
directors, officers, employees and agents of Maryland corporations. The MGCL
permits a Maryland corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. Maryland
law requires a Maryland corporation to indemnify a director or officer who has
been successful on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. In
accordance with the MGCL, the Bylaws of the Company require it, as a condition
to advancing expenses, to obtain (a) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Company as authorized by the Bylaws and (b)
a written undertaking by or on his behalf to repay the amount paid or reimbursed
by the Company if it shall ultimately be determined that the standard of conduct
was not met. The Bylaws permit the Company to indemnify and advance expenses to
any person who served a predecessor of the Company as a trustee, director,
officer, or partner and to any employee or agent of the Company or a predecessor
of the Company.

TRANSFER AGENT AND REGISTRAR

The Company has appointed BankBoston, N.A. as its transfer agent and
registrar.

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SHARES AVAILABLE FOR FUTURE SALE

Upon the completion of the Offering, the Company will have outstanding
17,301,000 Common Shares. The Common Shares issued in the Offering will be
freely tradeable by persons other than "affiliates" of the Company without
restriction under the Securities Act, subject to the limitations on ownership
set forth in the Declaration of Trust. See "Description of Capital
Shares -- Restrictions on Ownership." The Common Shares owned by the officers
and trustees of the Company, other than those Common Shares purchased in the
Offering, or shares acquired upon the exercise of options registered on a
registration statement on Form S-8, will be "restricted" securities within the
meaning of Rule 144 promulgated under the Securities Act ("Rule 144") and may
not be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including exemptions contained in Rule
144.

Prior to the date of this Prospectus, there has been no public market for
the Common Shares. The Common Shares have been approved for listing on the NYSE,
subject to official notice of issuance. No prediction can be made as to the
effect, if any, that future sales of shares, or the availability of shares for
future sale, will have on the market price prevailing from time to time. Sales
of substantial amounts of Common Shares or the perception that such sales could
occur, could adversely affect prevailing market prices of the Common Shares. See
"Risk Factors -- No Prior Market for Common Shares."

For a description of certain restrictions on transfers of Common Shares
held by certain shareholders of the Company, see "Underwriting" and "Description
of Capital Shares -- Restrictions on Ownership."

MATERIAL FEDERAL INCOME TAX CONSIDERATIONS

The following summary of material federal income tax considerations
regarding the Offering is based on current law, is for general information only
and is not tax advice. The discussion does not purport to deal with all aspects
of taxation that may be relevant to particular shareholders in light of their
personal investment or tax circumstances, or to certain types of shareholders
(including insurance companies, tax-exempt organizations, financial institutions
or broker-dealers, foreign corporations, and persons who are not citizens or
residents of the United States) subject to special treatment under the federal
income tax laws.

The statements in this discussion are based on current provisions of the
Code, existing, temporary, and currently proposed Treasury regulations
promulgated under the Code ("Treasury Regulations"), the legislative history of
the Code, existing administrative rulings and practices of the Service, and
judicial decisions. No assurance can be given that future legislative, judicial,
or administrative actions or decisions, which may be retroactive in effect, will
not affect the accuracy of any statements in this Prospectus with respect to the
transactions entered into or contemplated prior to the effective date of such
changes.

EACH PROSPECTIVE PURCHASER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF THE COMMON
SHARES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES
THEREOF AND THE POSSIBILITY THAT APPLICABLE TAX LAWS MAY CHANGE.

TAXATION OF THE COMPANY

General. The Company plans to make an election to be taxed as a REIT under
Sections 856 through 860 of the Code, commencing with its taxable year ending
December 31, 1997. The Company believes that, commencing with such taxable year,
it will be organized and will operate in such a manner as to qualify for
taxation as a REIT under the Code. Because these sections of the Code are highly
technical and complex, no assurance can be given that the Company will qualify
or remain qualified as a REIT.

The following sets forth the material aspects of the sections that govern
the federal income tax treatment of a REIT and its shareholders. This summary is
qualified in its entirety by the applicable Code provisions, rules and Treasury
Regulations promulgated thereunder, and administrative and judicial
interpretations thereof.

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In the opinion of each of Stokes & Bartholomew, P.A. and Sherrard & Roe,
PLC, commencing with its taxable year ending December 31, 1997, the Company will
be organized in conformity with the requirements for qualification as a REIT,
and its proposed method of operation will enable it to meet the requirements for
qualification and taxation as a REIT under the Code. These opinions are based
upon, and subject to, certain assumptions and various factual representations of
the Company, which are incorporated into such opinions and are addressed in this
discussion of "Material Federal Income Tax Considerations." Opinions of counsel
are not binding on the Service or a court. Accordingly, there can be no
assurance that the Service will not successfully assert a position contrary to
the opinions of Stokes & Bartholomew, P.A. and Sherrard & Roe, PLC, and
therefore prevent the Company from qualifying as a REIT. Qualification and
taxation as a REIT also depends upon the Company's ability to meet, through
actual annual operating results, distribution requirements, diversity of stock
ownership and the various other qualification tests imposed under the Code, the
results of which will not be reviewed either by Stokes & Bartholomew, P.A. or by
Sherrard & Roe, PLC. Thus, there can be no assurance that the actual results of
the Company's operation for any particular taxable year will satisfy such
requirements. For a discussion of the tax consequences of failure to qualify as
a REIT, see "Material Federal Income Tax Considerations -- Failure to Qualify."

If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently
distributed to shareholders. This treatment substantially eliminates the "double
taxation" (at the corporate and shareholder levels) of income that generally
results from investment in a regular corporation. However, the Company will be
subject to federal income tax as follows: First, the Company will be taxed at
regular corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business; or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the Company has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property), such income will be subject to a 100% tax.
Fifth, if the Company fails to satisfy the 75% gross income test or the 95%
gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which the Company fails the 75% or
95% test, multiplied by (b) a fraction intended to reflect the Company's
profitability. Sixth, if the Company fails to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year; (ii)
95% of its REIT capital gain net income for such year; and (iii) any
undistributed taxable income from prior periods, it will be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed. Seventh, with respect to any asset (a "Built-in Gain Asset")
acquired by the Company from a corporation which is or has been a C corporation
(i.e., generally a corporation subject to full corporate-level tax) in certain
transactions in which the basis of the Built-in Gain Asset in the hands of the
Company is determined by reference to the basis of the asset in the hands of the
C corporation, if the Company recognizes gain on the disposition of such asset
during the 10-year period (the "Recognition Period") beginning on the date on
which such asset was acquired by the Company, then, to the extent of the
Built-in Gain (i.e., the excess of (a) the fair market value of such asset over
(b) the Company's adjusted basis in such asset, determined as of the beginning
of the Recognition Period), such gain will be subject to tax at the highest
regular corporate rate. The results described above with respect to the
recognition of Built-in Gain assume that the Company will make an election
pursuant to IRS Notice 88-19.

Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (i) which is managed by one or more trustees; (ii) the
beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (iii) which would be taxable
as a domestic corporation, but for Sections 856 through 859 of the Code; (iv)
which is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (v) the beneficial ownership of which is held by
100 or more persons; (vi) during the last half of each taxable year not more
than 50% in value of the outstanding stock of which is owned, directly or
constructively, by five or fewer individuals (as defined

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in the Code to include certain entities); and (vii) which meets certain other
tests, described below, regarding the nature of its income and assets. The Code
provides that conditions (i) to (iv), inclusive, must be met during the entire
taxable year and that condition (v) must be met during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a taxable year of
less than 12 months. Conditions (v) and (vi) will not apply until after the
first taxable year for which an election is made to be taxed as a REIT.

The Company believes that it will have issued sufficient shares pursuant to
the Offering to allow it to satisfy conditions (v) and (vi). In addition, the
Company's Declaration of Trust provides for restrictions regarding the transfer
and ownership of shares, which restrictions are intended to assist the Company
in continuing to satisfy the share ownership requirements described in (v) and
(vi) above. Such transfer and ownership restrictions are described in
"Description of Capital Shares -- Restrictions on Ownership."

Income Tests. To maintain qualification as a REIT, the Company annually
must satisfy three gross income requirements. First, at least 75% of the
Company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property," gain from the sale of real property and, in certain
circumstances, interest) or from certain types of temporary investments. Second,
at least 95% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such real
property investments, dividends, interest and gain from the sale or disposition
of stock or securities (or from any combination of the foregoing). Third,
short-term gain from the sale or other disposition of stock or securities, gain
from prohibited transactions and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must represent less than 30% of the Company's
gross income including gross income from prohibited transactions for each
taxable year.

Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, rents received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if the REIT, or
an owner of 10% or more of the REIT, directly or constructively owns 10% or more
of such tenant (a "Related Party Tenant"). Third, if rent attributable to
personal property, leased in connection with a lease of real property, is
greater than 15% of the total rent received under the lease, then the portion of
rent attributable to such personal property will not qualify as "rents from real
property." Finally, for rents received to qualify as "rents from real property,"
the REIT generally must not operate or manage the property or furnish or render
services to the tenants of such property, other than through an independent
contractor from whom the REIT derives no revenue, except that the REIT may
directly perform certain services that are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property.

Pursuant to the Leases, CCA will lease from the Company the land, buildings
and improvements comprising the Facilities and certain personal property located
at the Facilities for initial terms ranging from 10 to 12 years. Upon mutual
agreement of the parties, each Lease may be extended for up to three additional
five-year terms. The Leases will be "triple net" leases which will require CCA
to pay substantially all expenses associated with the operation of the
Facilities, such as real estate taxes, insurance, utilities and services,
maintenance and other operating expenses. The minimum rent for the first year of
each Lease will be a fixed amount. Thereafter, minimum rent will be increased
each year by the Base Rent Escalation.

On an ongoing basis, the Company will use its best efforts; (i) not to
charge rent for any property that is based in whole or in part on the income or
profits of any person (except by reason of being based on a percentage of
receipts or sales, as described above); (ii) not to rent any property to a
Related Party Tenant (taking into account the constructive ownership rules),
unless the Company determines in its discretion that the rent received from such
Related Party Tenant is not material and will not jeopardize the Company's
status as a REIT; (iii) not to derive rental income attributable to personal
property (other than personal property

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leased in connection with the lease of real property, the amount of which is
less than 15% of the total rent received under the lease); or (iv) not to
perform services considered to be rendered to the occupant of the property,
other than through an independent contractor from whom the Company derives no
revenue. Because the Code provisions applicable to REITs are complex, however,
the Company may fail to meet one or more of the foregoing objectives, which
failure may jeopardize the Company's status as a REIT. For a discussion of the
consequences of any failure by the Company to qualify as a REIT, see "Failure to
Qualify."

Rents under the Leases will constitute "rents from real property" only if
the Leases are treated as true leases for federal income tax purposes and are
not treated as service contracts, joint ventures, financing arrangements or some
other type of arrangement. The determination of whether the Leases are true
leases depends on an analysis of all surrounding facts and circumstances. In
making such a determination, courts have considered a variety of factors,
including the following: (i) the intent of the parties; (ii) the form of the
agreement; (iii) the degree of control over the property that is retained by the
property owner (e.g., whether the lessee has substantial control over the
operation of the property or whether the lessee was required simply to use its
best efforts to perform its obligations under the agreement); (iv) the extent to
which the property owner retains the risk of loss with respect to the operation
of the property (e.g., whether the lessee bears the risk of increases in
operating expenses or the risk of damage to the property); and (v) the extent to
which the property owner retains the burdens and benefits of ownership of the
property.

Code Section 7701(e) provides that a contract that purports to be a service
contract (or a partnership agreement) will be treated instead as a lease of
property if the contract is properly treated as such, taking into account all
relevant factors, including whether or not: (i) the service recipient is in
physical possession of the property; (ii) the service recipient controls the
property; (iii) the service recipient has a significant economic or possessory
interest in the property (e.g., the property's use is likely to be dedicated to
the service recipient for a substantial portion of the useful life of the
property, the recipient shares the risk that the property will decline in value,
the recipient shares in any appreciation in the value of the property, the
recipient shares in savings in the property's operating costs, or the recipient
bears the risk of damage to or loss of the property); (iv) the service provider
does not bear any risk of substantially diminished receipts or substantially
increased expenditures if there is nonperformance under the contract; (v) the
service provider does not use the property concurrently to provide significant
services to entities unrelated to the service recipient; and (vi) the total
contract price does not substantially exceed the rental value of the property
for the contract period. Since the determination whether a service contract
should be treated as a lease is inherently factual, the presence or absence of
any single factor may not be dispositive in every case.

The Leases should be treated as true leases for federal income tax
purposes, based, in part, on the following facts: (i) the Company and CCA intend
for their relationship to be that of a lessor and lessee and such relationship
will be documented by lease agreements; (ii) CCA will have the right to
exclusive possession and use and quiet enjoyment of the Initial Facilities
during the term of the Leases; (iii) CCA will bear the cost of, and be
responsible for, day-to-day maintenance and repair of the Facilities, and will
dictate how the Facilities are operated, maintained, and improved; (iv) CCA will
bear all of the costs and expenses of operating the Facilities during the terms
of the Leases; (v) CCA will benefit from any savings in the costs of operating
the Facilities during the terms of the Leases; (vi) CCA will indemnify the
Company against all liabilities imposed on the Company during the term of the
Leases by reason of (a) injury to persons or damage to property occurring at the
Facilities, or (b) CCA's use, management, maintenance or repair of the
Facilities; (vii) CCA is obligated to pay substantial fixed rent for the period
of use of the Facilities; (viii) CCA stands to incur substantial losses (or reap
substantial gains) depending on how successfully it operates the Facilities;
(ix) the useful lives of the Facilities are significantly longer than the terms
of the Leases; and (x) the Company will receive the benefit of any increase in
value, and will bear the risk of any decrease in value, of the Facilities during
the terms of the Leases.

Investors should be aware that there are no controlling Treasury
Regulations, published rulings, or judicial decisions involving leases with
terms substantially similar to those contained in the Leases that address
whether such leases constitute true leases for federal income tax purposes. If
the Leases are recharacterized as service contracts or partnership agreements,
rather than true leases, part or all of the payments that the Company receives
from CCA may not be considered rent or may not otherwise satisfy the various

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requirements for qualification as "rents from real property." In that case, the
Company likely would not be able to satisfy either the 75% or 95% gross income
tests and, as a result, would lose its REIT status.

For the rents to constitute "rents from real property," the other
requirements enumerated above also must be satisfied. One requirement is that
the Rent attributable to personal property leased in connection with the lease
of a Facility must not be greater than 15% of the total Rent received under the
Leases. The Rent attributable to the personal property in a Facility is the
amount that bears the same ratio to total rent for the taxable year as the
average of the adjusted bases of the personal property in the Facility at the
beginning and at the end of the taxable year bears to the average of the
aggregate adjusted bases of both the real and personal property comprising the
Facility at the beginning and at the end of such taxable year (the "Adjusted
Basis Ratio"). The Company will lease certain personal property to CCA pursuant
to the Leases. The Adjusted Basis Ratio with respect to each Lease is
anticipated to be less than 15%. Accordingly, Rent received by the Company
should satisfy this requirement.

A second requirement for qualification of the rents as "rents from real
property" is that the Rent must not be based in whole or in part on the income
or profits of any person. The Rent paid by CCA for the Facilities will be a
fixed amount (as adjusted based in part on the gross revenues of each Facility)
and will not be based in whole or in part on the net income of the Facilities.
Thus, the Rent should also satisfy this requirement.

A third requirement for qualification of the rents as "rents from real
property" is that the Company must not own, directly or constructively, 10% or
more of CCA or any other tenant of the Facilities. The constructive ownership
rules generally provide that if 10% or more in value of the shares of the
Company are owned, directly or indirectly, by or for any person, the Company is
considered as owning the shares owned, directly or indirectly, by or for such
person. The Declaration of Trust provides that no person may own, directly or
constructively, more than 9.8% of the Company. See "Description of Capital
Shares -- Restrictions on Ownership." Assuming the Declaration of Trust is
complied with, neither CCA nor any other person should ever own, directly or
constructively, 10% or more of the Company, and thus the constructive ownership
rules should not be triggered. Furthermore, the Company has represented that it
will not rent any property to a Related Party Tenant. The constructive ownership
rules, however, are highly complex and difficult to apply, and the Company may
inadvertently enter into leases with tenants who, through application of such
rules, will constitute Related Party Tenants. In such event, Rent paid by the
Related Party Tenant will not qualify as "rents from real property," which may
jeopardize the Company's status as a REIT.

A fourth requirement for qualification of the rents as "rents from real
property" is that the Company cannot furnish or render noncustomary services to
the tenants of the Facilities, or manage or operate the Facilities, other than
through an independent contractor who is adequately compensated and from whom
the Company itself does not derive or receive any income. Provided that the
Leases are respected as true leases, the Company should satisfy this requirement
because it is not performing for CCA any services other than customary services.
Furthermore, the Company has represented that, with respect to other properties
that it acquires in the future, it will not perform noncustomary services with
respect to the tenant of the property. As described above, however, if the
Leases are recharacterized as service contracts or partnership agreements, the
rents likely would be disqualified as "rents from real property" because the
Company would be considered to furnish or render services to the occupants of
the Facilities and to manage or operate the Facilities other than through an
independent contractor who is adequately compensated and from whom the Company
derives or receives no income.

Based on the foregoing, the Rent should qualify as "rents from real
property" for purposes of the 75% and 95% gross income tests. As described
above, however, there can be no complete assurance that the Service will not
assert successfully a contrary position and, therefore, prevent the Company from
qualifying as a REIT.

If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedules was not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of

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these relief provisions. As discussed above in "-- General," even if these
relief provisions apply, a tax would be imposed with respect to the excess net
income.

Other Issues. Because the Facilities will be acquired from and leased back
to CCA, the Service could assert that the Company realized prepaid rental income
in the year of purchase to the extent that the value of the facilities exceeds
the purchase price paid by the Company. In litigated cases involving
sale-leasebacks which have considered this issue, courts generally have
concluded that buyers have realized prepaid rent where both parties acknowledged
that the purported purchase price for the property was substantially less than
fair market value, and the proposed rents were substantially less than the fair
market rentals. Because of the lack of clear precedent and the inherently
factual nature of the inquiry, no assurance can be given that the Service could
not successfully assert the existence of prepaid rental income in such
circumstances. The value of property and the fair market rent for properties
involved in sale-leasebacks are inherently factual matters and always subject to
challenge.

Additionally, Section 467 of the Code (concerning leases with increasing
rents) may apply to these Leases because they provide for rents that increase
from one period to the next. Section 467 provides that in the case of a
so-called "disqualified leaseback agreement," rental income must be accrued at a
constant rate. If such constant rate accrual is required, the Company would
recognize rental income in excess of cash rents and, as a result, may fail to
meet the 95% dividend distribution requirement. "Disqualified leaseback
agreements" include leaseback transactions where a principal purpose of
providing increasing rent under the agreement is the avoidance of federal income
tax. The Company and CCA have represented that the principal purpose of rent
increases under the Leases is not the avoidance of federal income taxes.
Furthermore, under proposed Treasury Regulations, tax avoidance is not
considered a principal purpose where the lessee is required to pay third party
costs, such as insurance, maintenance and taxes, or where rent is adjusted based
on reasonable price indices. Accordingly, the Company believes that the Leases
will not be subject to rent leveling under Code Section 467. It should be noted,
however, that leases involved in sale-leaseback transactions are subject to
special scrutiny under this Section.

Asset Tests. The Company, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets. First,
at least 75% of the value of the Company's total assets must be represented by
real estate assets (including (i) its allocable share of real estate assets held
by partnerships in which the Company owns an interest; and (ii) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of the Company),
cash, cash items and government securities. Second, not more than 25% of the
Company's total assets may be represented by securities other than those in the
75% asset class. Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by the Company may not exceed 5% of
the value of the Company's total assets, and the Company may not own more than
10% of any one issuer's outstanding voting securities.

The Company has represented that, as of the date of the offering, (i) at
least 75% of the value of its total assets will be represented by real estate
assets, cash and cash items (including receivables), and government securities;
and (ii) it will not own any securities that do not satisfy the 75% asset
requirement (except for the stock of subsidiaries with respect to which it has
held 100% of the stock at all times during the subsidiary's existence). In
addition, the Company has represented that it will not acquire or dispose of
assets in the future in a way that would cause it to violate either asset
requirement. Based on the foregoing, the Company should satisfy both asset
requirements for REIT status.

If the Company should fail inadvertently to satisfy the asset requirements
at the end of a calendar quarter, such a failure would not cause it to lose its
REIT status if (i) it satisfied all of the asset tests at the close of the
preceding calendar quarter; and (ii) the discrepancy between the value of the
Company's assets and the standards imposed by the asset requirements either did
not exist immediately after the acquisition of any particular asset or was not
wholly or partly caused by such an acquisition (i.e., the discrepancy arose from
changes in the market values of its assets). If the condition described in
clause (ii) of the preceding sentence were not satisfied, the Company still
could avoid disqualification by eliminating any discrepancy within 30 days after
the close of the calendar quarter in which it arose.

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Annual Distribution Requirements. The Company, to qualify as a REIT, is
required to distribute dividends (other than capital gain dividends) to its
shareholders in an amount at least equal to (i) the sum of (a) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends paid
deduction and the Company's net capital gain) and (b) 95% of the net income
(after tax), if any, from foreclosure property, minus (ii) the sum of certain
items of noncash income. In addition, if the Company disposes of any Built-in
Gain Asset during its Recognition Period, the Company will be required to
distribute at least 95% of the Built-in Gain (after tax), if any, recognized on
the disposition of such asset. Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if declared before
the Company timely files its tax return for such year and if paid on or before
the first regular dividend payment after such declaration. To the extent that
the Company does not distribute all of its net capital gain or distributes at
least 95%, but less than 100% of its "REIT taxable income", as adjusted, it will
be subject to tax thereon at regular ordinary and capital gain corporate tax
rates. Furthermore, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year; (ii) 95% of its REIT capital gain income for such year; and (iii) any
undistributed taxable income from prior periods, the Company will be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. The Company intends to make timely distributions
sufficient to satisfy this annual distribution requirement.

It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses; and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company. In the event that
such timing differences occur, in order to meet the 95% distribution
requirement, the Company may find it necessary to arrange for short-term, or
possibly long-term, borrowings to pay dividends in the form of taxable stock
dividends.

Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency dividends"
to shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the Company will be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.

FAILURE TO QUALIFY

If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distribution to shareholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. In such event, to the extent of current and accumulated
earnings and profits, all distributions to shareholders will be taxable as
ordinary income, and, subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, the Company will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances the Company would be entitled to such statutory relief.

TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS

As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic shareholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income and will not be eligible for the dividends
received deduction for corporations. Distributions that are designated as
capital gain dividends generally will be taxed as long-term capital gain (to the
extent they do not exceed the Company's actual net capital gain for the taxable
year) without regard to the period for which the shareholder has held its stock.
Distributions in excess of current and accumulated earnings and profits will not
be taxable to a shareholder to the extent that they do not exceed the adjusted
basis of the shareholder's shares, but rather will reduce the adjusted basis of
such shares. To the extent that such distributions exceed the adjusted basis of
a shareholder's shares, they will be

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included in income as long-term capital gain (or short-term capital gain if the
shares have been held for one year or less) assuming the shares are a capital
asset in the hands of the shareholder. For a discussion of how the Company
anticipates that initial distributions will be characterized, see
"Distributions." In addition, any distribution to a shareholder of record on a
specified date in any such month shall be treated as both paid by the Company
and received by the shareholder on December 31 of such year provided that the
dividend is actually paid by the Company during January of the following
calendar year. Shareholders may not include in their individual income tax
returns any net operating losses or capital losses of the Company.

In general, any loss upon a sale or exchange of shares by a shareholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such shareholder as
long-term capital gain.

BACKUP WITHHOLDING

The Company will report to its domestic shareholders and the Service the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 31% with respect to dividends paid
unless such holder (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A shareholder that does not provide the Company with his
correct taxpayer identification number may also be subject to penalties imposed
by the Service. Any amount paid as backup withholding will be creditable against
the shareholder's income tax liability. In addition, the Company may be required
to withhold a portion of capital gain distributions made to any shareholders who
fail to certify their non-foreign status to the Company. See "-- Taxation of
Foreign Shareholders."

TAXATION OF TAX-EXEMPT SHAREHOLDERS

Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the Service has issued a published
ruling that dividend distributions by a REIT to an exempt employee pension trust
do not constitute UBTI, provided that the shares of the REIT are not otherwise
used in an unrelated trade or business of the exempt employee pension trust.
Based on that ruling, amounts distributed by the Company to Exempt Organizations
generally should not constitute UBTI. However, if an Exempt Organization
finances its acquisition of the Common Shares with debt, a portion of its income
from the Company will constitute UBTI pursuant to the "debt-financed property"
rules. Furthermore, social clubs, voluntary employee benefit associations,
supplemental unemployment benefit trusts, and qualified group legal services
plans that are exempt from taxation under paragraphs (7), (9), (17), and (20),
respectively, of Code Section 501(c) are subject to different UBTI rules, which
generally will require them to characterize distributions from the Company as
UBTI.

Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" shall be treated as UBTI as to any trust which (i) is
described at Section 401(a) of the Code, (ii) is tax exempt under Section 501(a)
of the Code and (iii) holds more than 10% (by value) of the interests in the
REIT. Tax exempt pension funds that are described in Section 401(a) of the Code
are referred to below as "qualified trusts."

A REIT is a "pension held REIT" if (i) it would not have qualified as a
REIT but for the fact that Section 856(h)(3) of the Code provides that stock
owned by qualified trusts shall be treated, for purposes of the "not closely
held" requirement, as owned by the beneficiaries of the trust rather than by the
trust itself and (ii) either (a) at least one such qualified trust holds more
than 25% (by value) of the interest in the REIT, or (b) one or more of such
qualified trusts, each of which owns more than 10% (by value) of the interests
in the REIT, hold in the aggregate more than 50% (by value) of the interests in
the REIT. The percentage of any REIT dividend treated as UBTI is equal to the
ratio of (i) the UBTI earned by the REIT (treating the REIT

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as if it were a qualified trust and therefore subject to tax on UBTI) to (ii)
the total gross income of the REIT. A de minimis exception applies where the
percentage is less than 5% for any year. The provisions requiring qualified
trusts to treat a portion of REIT distributions as UBTI will not apply if the
REIT is able to satisfy the "not closely held" requirement without relying upon
the look through exception with respect to qualified trusts. As a result of
certain limitations on transfer and ownership of Common Shares contained in the
Declaration of Trust, the Company does not expect to be classified as a "pension
held REIT."

While an investment in the Company by an Exempt Organization generally is
not expected to result in UBTI except in the circumstances described herein, any
gross UBTI that does arise from such an investment will be combined with all
other gross UBTI of the Exempt Organization for a taxable year and reduced by
all deductions attributable to the UBTI plus $1,000. Any amount then remaining
will constitute UBTI on which the Exempt Organization will be subject to tax. If
the gross income taken into account in computing UBTI exceeds $1,000, the Exempt
Organization is obligated to file a tax return for such year on IRS Form 990-T.
Neither the Company, the Board of Trustees, nor any of their Affiliates expects
to undertake the preparation for filing of IRS Form 990-T for any Exempt
Organization in connection with an investment by such Exempt Organization in the
Common Shares. Generally, IRS Form 990-T must be filed with the Service by April
15 of the year following the year to which it relates.

TAXATION OF FOREIGN SHAREHOLDERS

The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "Non-U.S. Shareholders") are complex and no attempt
will be made herein to provide more than a summary of such rules. Prospective
Non-U.S. Shareholders should consult with their own tax advisors to determine
the impact of federal, state and local income tax laws with regard to an
investment in shares, including any reporting requirements.

Distributions by the Company that are neither attributable to gain from
sales or exchanges by the Company of United States real property interests nor
designated by the Company as capital gains dividends will be treated as
dividends of ordinary income to the extent that they are made out of current or
accumulated earnings and profits of the Company. Such distributions, ordinarily,
will be subject to a withholding tax equal to 30% of the gross amount of the
distribution unless an applicable tax treaty reduces or eliminates that tax.
However, if income from the investment in the shares is treated as effectively
connected with the conduct by the Non-U.S. Shareholder of a United States trade
or business, the Non-U.S. Shareholder generally will be subject to a tax at
graduated rates, in the same manner as U.S. Shareholders are taxed with respect
to such dividends (and may also be subject to the 30% branch profits tax in the
case of a shareholder that is a foreign corporation). The Company expects to
withhold United States income tax at the rate of 30% on the gross amount of any
such dividends made to a Non-U.S. Shareholder unless (i) a lower treaty rate
applies; or (ii) the Non-U.S. Shareholder files the Service's Form 4224 with the
Company certifying that the investment to which the distribution relates is
effectively connected to a United States trade or business of such Non-U.S.
Shareholder. Lower treaty rates applicable to dividend income may not
necessarily apply to dividends from a REIT such as the Company, however.
Distributions in excess of current and accumulated earnings and profits of the
Company will not be taxable to a shareholder to the extent that they do not
exceed the adjusted basis of the shareholder's shares, but rather will reduce
the adjusted basis of such shares. To the extent that such distributions exceed
the adjusted basis of a Non-U.S. Shareholder's shares, they will give rise to
gain from the sale or exchange of his shares, the tax treatment of which is
described below. If it cannot be determined at the time a distribution is made
whether or not such distribution will be in excess of current and accumulated
earnings and profits, the distributions will be subject to withholding at the
same rate applicable to dividends. However, amounts thus withheld are refundable
if it is subsequently determined that such distribution was, in fact, in excess
of current and generally accumulated earnings and profits of the Company. For a
discussion of how the Company anticipates that initial distributions will be
characterized, see "Distributions."

Distributions that are designated by the Company at the time of
distribution as capital gains dividends (other than those arising from the
disposition of a United States real property interest) generally will not be
subject to taxation, unless (i) investment in the shares is effectively
connected with the Non-U.S. Shareholder's United States trade or business, in
which case the Non-U.S. Shareholder will be subject to the

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same treatment as U.S. shareholders with respect to such gain (except that a
shareholder that is a foreign corporation may also be subject to the 30% branch
profits tax); or (ii) the Non-U.S. Shareholder is a nonresident alien individual
who was present in the United States for 183 days or more during the taxable
year and has a "tax home" in the United States, in which case the nonresident
alien individual will be subject to a 30% tax on the individual's capital gains.

Distributions that are attributable to gain from sales or exchanges by the
Company of United States real property interests will cause a Non-U.S.
Shareholder to be treated as if such gain were effectively connected with a
United States trade or business. Non-U.S. Shareholders would thus be entitled to
offset its gross income by allowable deductions and would pay tax on the
resulting income at the same rates applicable to U.S. shareholders (subject to a
special alternative minimum tax in the case of nonresident alien individuals).
Also, such gain may be subject to a 30% branch profits tax in the hands of a
foreign corporate shareholder not entitled to treaty exemption. The Company is
required to withhold 35% of any such distribution. This amount is creditable
against the Non-U.S. Shareholder's United States federal income tax liability.

Gain recognized by a Non-U.S. Shareholder upon a sale or other disposition
of shares generally will not be subject to United States federal income tax if
the Company is a "domestically controlled REIT," defined generally as a REIT in
which at all times during a specified testing period less than 50% in value of
the stock was held directly or indirectly by foreign persons. It is currently
anticipated that the Company will be a "domestically controlled REIT," and
therefore the sale of shares will not be subject to taxation under the Foreign
Investment in Real Property Tax Act of 1980, as amended ("FIRPTA"). However,
gain not subject to FIRPTA will be taxable to a Non-U.S. Shareholder if (i)
investment in the shares is effectively connected with the Non-U.S.
Shareholder's United States trade or business, in which case the Non-U.S.
Shareholder will be subject to the same treatment as U.S. shareholders with
respect to such gain (except that a shareholder that is a foreign corporation
may also be subject to the 30% branch profits tax); or (ii) the Non-U.S.
Shareholder is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has a "tax home" in the
United States, in which case the nonresident alien individual will be subject to
a 30% tax on the individual's capital gains. If the Company is not a
"domestically controlled REIT," the Non-U.S. Shareholder will be subject to the
same treatment as U.S. shareholders with respect to such gain (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals and, in the case of foreign corporations,
subject to the possible applications of the 30% branch profits tax).

The United States Treasury has recently issued proposed Treasury
Regulations regarding withholding and information reporting rules discussed
above. In general, the proposed Treasury Regulations do not alter the
substantive withholding and information reporting requirements but unify current
certification procedures and forms and clarify and modify reliance standards. If
finalized in their current form, the proposed Treasury Regulations would
generally be effective for payments made after December 31, 1997, subject to
certain transition rules.

OTHER TAX CONSEQUENCES

The Company and its shareholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its shareholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective shareholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in the Company.

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ERISA CONSIDERATIONS

The following is intended to be a summary only and is not a substitute for
careful planning with a professional. Employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and other
sections of the Code considering purchasing the Common Shares should consult
with their own tax or other appropriate counsel regarding the application of
ERISA and the Code to their purchase of the Common Shares. Plans should also
consider the entire discussion under the heading of "Material Federal Income Tax
Considerations," as material contained therein is relevant to any decision by a
Plan to purchase the Common Shares.

Certain employee benefit plans and IRAs (collectively, "Plans"), are
subject to various provisions of ERISA, and the Code. Before investing in the
Common Shares of the Company, a Plan fiduciary should ensure that such
investment is in accordance with ERISA's general fiduciary standards. In making
such a determination, a Plan fiduciary should ensure that the investment is in
accordance with the governing instruments and the overall policy of the Plan,
and that the investment will comply with the diversification and composition
requirements of ERISA. In addition, provisions of ERISA and the Code prohibit
certain transactions in Plan assets that involve persons who have specified
relationships with a Plan ("Disqualified Persons"). The consequences of such
prohibited transactions include the imposition of excise taxes,
disqualifications of IRAs and other liabilities. A Plan fiduciary should ensure
that any investment in the Common Shares will not constitute such a prohibited
transaction.

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UNDERWRITING

Pursuant to the Underwriting Agreement, and subject to the terms and
conditions thereof, the Underwriters named below, acting through J.C. Bradford &
Co., A.G. Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated, Lehman
Brothers Inc., PaineWebber Incorporated and Stephens Inc., as representatives of
the several Underwriters (the "Representatives"), have agreed, severally, to
purchase from the Company the number of Common Shares set forth below opposite
their respective names:

<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
- ------------------- ----------
<S> <C>
J.C. Bradford & Co..........................................
A.G. Edwards & Sons, Inc....................................
Legg Mason Wood Walker, Incorporated........................
Lehman Brothers Inc.........................................
PaineWebber Incorporated....................................
Stephens Inc................................................
----------
Total............................................. 17,000,000
==========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions therein set forth, to purchase all Common Shares offered
hereby if any of such shares are purchased.

The Company has been advised by the Representatives that the Underwriters
propose initially to offer the Common Shares to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers, who may include the Underwriters, at such public offering price less a
selling concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain other brokers or dealers. After the Offering, the public
offering price and the concession to certain dealers and the reallowances may be
changed by the Representatives. The Representatives have informed the Company
that the Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.

The offering of the Common Shares is made for delivery when, as, and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation, or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the shares.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of the effectiveness of the Offering, to
purchase up to 2,550,000 Common Shares to cover over-allotments, if any. To the
extent the Underwriters exercise this option, each of the Underwriters will have
a firm commitment to purchase approximately the same percentage thereof that the
number of Common Shares to be purchased by it shown in the table above bears to
the total number of shares in such table, and the Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the Common Shares offered hereby. If purchased, the
Underwriters will sell these additional shares on the same terms as those on
which the shares are being offered.

The Company will pay an advisory fee equal to 0.50% of the gross proceeds
of the Offering (including any exercise of the Underwriters' over-allotment
option) to J.C. Bradford & Co. for advisory services in connection with the
evaluation, analysis and structuring of the Company's formation and the
Offering.

Subject to applicable limitations, the Underwriters, in connection with the
Offering, may place bids for or make purchases of the Common Shares in the open
market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain, or otherwise affect the price of the Common
Shares, which might be higher than the price that otherwise might prevail in the
open market. There can be no assurance that the price of the Common Shares will
be stabilized, or that stabilizing, if commenced, will not be discontinued at
any time. Subject to applicable limitations, the Underwriters may also place
bids or make purchases on behalf of the underwriting syndicate to reduce a short
position created in connection with the Offering.

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<PAGE> 97

The Underwriting Agreement provides that the Company will indemnify the
Underwriters and their controlling persons, if any, against certain liabilities,
including liabilities under the Securities Act, or will contribute to payments
that the Underwriters or any such controlling persons may be required to make in
respect thereto.

The Company has agreed with the Representatives for a period of 180 days
after the consummation of the Offering, subject to certain exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, or grant any
rights with respect to any Common Shares, any options or warrants to purchase
any Common Shares, or any securities convertible into or exchangeable for Common
Shares other than the Company's sales of shares in the Offering and the
Company's issuance of options and shares under the Share Incentive Plan, without
the prior written consent of J.C. Bradford & Co. In addition, certain affiliates
of the Company have agreed that, for a period of 24 months following the
completion of the Offering, they and their affiliates will not, without prior
written consent of J.C. Bradford & Co., subject to certain exceptions, issue,
sell, contract to sell, or otherwise dispose of, any Common Shares, any options
or warrants to purchase any Common Shares or any securities convertible into,
exercisable for or exchangeable for Common Shares. J.C. Bradford & Co. may, in
its sole discretion and at any time without notice, release all or any portion
of the securities subject to lock-up agreements.

The Common Shares have been approved for listing on the NYSE, subject to
official notice of issuance. Prior to the Offering, however, there has been no
public market for the Common Shares. The initial public offering price will be
determined through negotiations among the Company and the Representatives. Among
the factors to be considered in such negotiations will be the prevailing market
conditions, the expected results of operations of the Company, evaluation of the
Initial Facilities and the Option Facilities, estimates of the business
potential and earnings prospects of the Company, the current state of the
Company's industry and the economy as a whole. The evaluation of the Initial
Facilities and the Option Facilities will be based on an evaluation of CCA's
operation of the Facilities as a whole rather than the valuation of individual
properties. The initial public offering price to be set forth on the cover page
of this Prospectus should not, however, be considered an indication of the
actual value of the Common Shares. Such price is subject to change as a result
of market conditions and other factors.

EXPERTS

The audited financial statements of CCA for each of the three years in the
period ended December 31, 1996 and the audited balance sheet of the Company as
of April 23, 1997, which are included in this Prospectus, have been included in
reliance on the reports of Arthur Andersen LLP, independent public accountants,
given on the authority of that firm as experts in accounting and auditing.

LEGAL MATTERS

The validity of the Common Shares offered hereby will be passed upon for
the Company by Stokes & Bartholomew, P.A., Nashville, Tennessee, and certain
legal matters will be passed upon for the Underwriters by Bass, Berry & Sims
PLC, Nashville, Tennessee. Stokes & Bartholomew, P.A. and Bass, Berry & Sims PLC
will rely as to all matters of Maryland law on the opinion of Miles &
Stockbridge, a Professional Corporation, Baltimore, Maryland. Certain matters
relating to the purchase and leasing of the Facilities will be passed upon for
the Company by Sherrard & Roe, PLC, Nashville, Tennessee. In addition, the
description of federal income tax consequences contained in this Prospectus
entitled "Material Federal Income Tax Considerations" is based upon the opinions
of Stokes & Bartholomew, P.A., and Sherrard & Roe, PLC. In addition to providing
services to the Company, Stokes & Bartholomew, P.A. also provides legal services
to CCA, including in connection with certain of the Formation Transactions.
Samuel W. Bartholomew, Jr., a shareholder of Stokes & Bartholomew, P.A., is a
director of CCA.

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GLOSSARY

Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this Prospectus:

"ADA" means the Americans with Disabilities Act of 1990, as amended.

"Audit Committee" means the committee established by the Board of
Trustees to make recommendations concerning the engagement of independent
public accountants, review with the independent public accountants the
plans and results of the audit engagement, approve professional services
provided by the independent public accountants, review the independence of
the independent public accountants, consider the range of audit and
non-audit fees and review the adequacy of the Company's internal accounting
controls.

"Bank Credit Facility" means the $150.0 million line of credit for
which the Company has obtained a commitment which will be utilized
primarily to fund the acquisition or expansion of additional correctional
facilities.

"Base Rent" means the fixed base rent payable under the Leases.

"Base Rent Escalation" means, for any year, the increase in minimum
rent equal to a percentage of the rent applicable to a particular property
for the preceding year which percentage is the greater of (i) 4% or (ii)
the percentage which is 25% of the percentage increase in the gross
management revenues realized by CCA from such leased property exclusive of
any increase attributable to expansion in the size of or number of beds in
such property.

"Beneficiary" means one or more charitable organizations that are
designated by the Company as the beneficiary of a Share Trust.

"Board of Trustees" means the Board of Trustees of the Company.

"BOP" means the Federal Bureau of Prisons.

"Built-in Gain" means the difference between the fair market value and
the adjusted basis of a Built-In Gain Asset.

"Built-in Gain Asset" means an asset acquired by the Company in
certain transactions from a corporation which is or has been a C
Corporation.

"Business Combinations" means any business combination as defined in
the Declaration of Trust.

"Bylaws" means the bylaws of the Company, as amended.

"CCA" means Corrections Corporation of America, a Tennessee
corporation.

"Cash Available for Distribution" means net income (loss) computed in
accordance with generally accepted accounting principles of the Company
plus depreciation and amortization minus capital expenditures and principal
payments on indebtedness.

"Capital Addition" means construction or other capital improvements to
a particular property which is leased between the Company as landlord and
CCA as tenant.

"Change of Control" with respect to the Company means the acquisition
of 20% or more of the combined voting power of the Company by a person or
group.

"Change of Control" with respect to CCA means, for purposes of the
Leases, any of the following transactions (individually, a "Transaction"):
(i) the sale by CCA of a controlling interest in CCA; (ii) the sale of all
or substantially all of the assets of CCA; or (iii) any transaction
pursuant to which CCA is merged with or consolidated into another entity,
and CCA is not the surviving entity.

"Code" means Internal Revenue Code of 1986, as amended.

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"Compensation Committee" means the committee established by the Board
of Trustees to determine compensation, including awards under the Share
Incentive Plan and the Non-Employee Trustees' Plan, and to administer the
Plans.

"Commission" means the Securities and Exchange Commission.

"Common Shares" means the Common Shares, par value $0.01 per share, of
the Company.

"Company" means CCA Prison Realty Trust, a Maryland real estate
investment trust.

"Company Mortgagee" means any holder of a mortgage, deed of trust or
other security agreement on a Leased Property.

"Coverage Ratio" means the ratio of CCA's net operating income to
CCA's lease payment.

"Declaration of Trust" means the Amended and Restated Declaration of
Trust of the Company.

"Disqualified Persons" means those persons who have specified
relationships with Plans.

"Environmental Law" means any federal, state or local law, ordinance,
regulation, order or decree relating to the protection of human health or
the environment.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"Event of Default" means an event which constitutes a default under
the Leases between the Company as landlord and CCA as tenant.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Extended Terms" means the options to extend the term of each Lease at
fair market rates for three five-year periods upon the mutual agreement of
the parties.

"Facility" or "Facilities" means the Initial Facilities and the Option
Facilities, including the land, buildings and other improvements, that are
the subject of leases between the Company as landlord and CCA as tenant.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of
1980, as amended.

"Fixed Term" means the primary term of each Lease which shall be for a
term ranging from 10 to 12 years.

"Formation Transactions" means the series of transactions described
under the heading "The Formation Transactions" contained in this
Prospectus.

"Funds from Operations" means, in accordance with the resolution
adopted by the Board of Governors of NAREIT, net income (loss) (computed in
accordance with GAAP), excluding significant non-recurring items, gains (or
losses) from debt restructuring and sales of property, plus depreciation
and amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures.

"Future Facility" means any correctional or detention facility
acquired or developed by the Company in the future.

"Independent Committee" means the independent committee of the Board
of Trustees, consisting of the seven Independent Trustees.

"Independent Trustees" means the trustees who are not employed by the
Company and who are unaffiliated with CCA.

"Initial Facilities" means the nine correctional and detention
facilities which the Company will purchase from CCA pursuant to the
Purchase Agreement.

"IRAs" means individual retirement accounts and individual retirement
annuities.

94
<PAGE> 100

"Leases" or "Lease" means the leases between the Company as landlord
and CCA as tenant with respect to the Initial Facilities.

"Leased Property" means the Company's rights and interest in and to
each Facility, including land, buildings and improvements, related
easements and rights, and fixtures and certain personal property located at
each Facility.

"Look through rule" means the ERISA rule providing that in certain
circumstances where a Plan holds an interest in an entity, the assets of
the entity are deemed to be the Plan's assets.

"Market Price" means the last reported sales price of the Common
Shares or Preferred Shares reported on the New York Stock Exchange on the
trading day immediately preceding the relevant date, or if such stock is
not then traded on the New York Stock Exchange, the last reported sales
price of such stock on the trading day immediately preceding the relevant
date as reported on any exchange or quotation system over which such stock
may be traded, or if such stock is not then traded over any exchange or
quotation system, then the market price of such stock on the relevant date
as determined in good faith by the Board of Trustees.

"Master Lease" means the lease agreement between the Company as
landlord and CCA as tenant.

"MGCL" means the Maryland General Corporation Law.

"1996 Facility Census" means the Private Adult Correctional 1996
Facility Census, prepared by the Private Corrections Project Center for
Studies in Criminology and Law, University of Florida, dated March 15,
1997.

"NAREIT" means the National Association of Real Estate Investment
Trusts.

"Non-Employee Trustees' Plan" means the Company's Non-Employee
Trustees' Share Option Plan, as amended.

"Non-U.S. Shareholders" means nonresident alien individuals, foreign
corporations, foreign partnerships and other foreign shareholders.

"NYSE" means the New York Stock Exchange.

"Offering" means the offering of Common Shares of the Company,
pursuant to this Prospectus.

"Offering Price" means the initial public offering price of the Common
Shares.

"Option Agreements" means the agreements between CCA and the Company
pursuant to which the Company will have an option (for a period of three
years from the closing of the purchase of the Initial Facilities) to
purchase any or all of the five Option Facilities.

"Option Facilities" means the five correctional and detention
facilities which the Company has the option to purchase pursuant to the
Option Agreements.

"Ownership Limit" means the direct or constructive ownership by any
shareholder or group of affiliated shareholders of more than 9.8% of the
outstanding Common Shares or more than 9.8% of the outstanding Preferred
Shares.

"Ownership Limit Provision" means the provision of the Declaration of
Trust that prohibits the direct or constructive ownership by any
shareholder or group of affiliated shareholders of more than 9.8% of the
outstanding Common Shares or more than 9.8% of the Preferred Shares.

"Preferred Shares" means preferred shares, par value $0.01 per share,
of the Company.

"Prohibited Owner" means one who would be record owner of Common
Shares or Preferred Shares but for the ownership limitations set forth in
the Declaration of Trust.

"Purchase Agreement" means the agreement between CCA and the Company
pursuant to which CCA will sell the nine Initial Facilities to the Company.

95
<PAGE> 101

"Recognition Period" means the recognition period pertaining to
Built-in Gain as defined pursuant to Treasury Regulations to be issued
under Section 337(d) of the Code.

"REIT" means real estate investment trust as defined in Section 856 of
the Code.

"Related Party Tenant" means a tenant of a REIT in which the REIT, or
an owner of 10% or more of the REIT, directly or constructively owns a 10%
or greater ownership interest.

"Rent" means rents paid by CCA pursuant to the Leases.

"Right to Purchase Agreement" means the agreement between CCA and the
Company whereby the Company has an option to acquire certain future
facilities of CCA and whereby the Company will have a right of first
refusal in the event CCA obtains an acceptable offer to acquire or provide
first mortgage financing for any correctional or detention facility.

"Rule 144" means Rule 144 promulgated under the Securities Act.

"Securities Act" means the Securities Act of 1933, as amended.

"Service" means the Internal Revenue Service.

"Service Commencement Date" means the date CCA first receives inmates
at a facility.

"Share Incentive Plan" means the Company's 1997 Employee Share
Incentive Plan.

"Share Trust" means any separate trust created pursuant to the
Declaration of Trust to hold Shares-in-Trust for the benefit of the
Beneficiary.

"Share Trustee" means any person or entity unaffiliated with both the
Company and any Prohibited Owner which is designated by the Company to
serve as trustee of the Share Trust.

"Shares-in-Trust" means Common Shares or Preferred Shares designated
as Shares-in-Trust pursuant to the Declaration of Trust, which is held in
trust by the Share Trustee for the benefit of the Beneficiary.

"Trade Name Use Agreement" means the agreement between CCA and the
Company whereby the Company will be granted the right to use the trade name
"CCA" as part of its name.

"Treasury Regulations" means existing, temporary and currently
proposed Treasury regulations that have been promulgated under the Code.

"UBTI" means "unrelated business taxable income" as defined in Section
512(a) of the Code.

"White Paper" means the White Paper on Funds from Operations approved
by the Board of Governors of NAREIT in March 1995.

96
<PAGE> 102

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CCA PRISON REALTY TRUST
FINANCIAL STATEMENTS
Report of Independent Public Accountants............... F-2
Balance Sheet as of April 23, 1997..................... F-3
Notes to Balance Sheet................................. F-4
CCA PRISON REALTY TRUST
PRO FORMA FINANCIAL STATEMENTS
Pro Forma Statements of Operations for the year ended
December 31, 1996 and the three months ended March 31,
1997.................................................. 33
Pro Forma Balance Sheet as of March 31, 1997........... 34
CORRECTIONS CORPORATION OF AMERICA
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Consolidated Balance Sheet as of March 31,
1997.................................................. F-6
Notes to Pro Forma Consolidated Balance Sheet.......... F-7
Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1996.......................... F-8
Pro Forma Consolidated Statement of Operations for the
three months ended March 31, 1997..................... F-9
CORRECTIONS CORPORATION OF AMERICA
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants............... F-10
Consolidated Balance Sheets as of December 31, 1996 and
1995.................................................. F-11
Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994................ F-12
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994................ F-13
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994.......... F-15
Notes to the Consolidated Financial Statements......... F-16
CORRECTIONS CORPORATION OF AMERICA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheet as of March 31,
1997 and December 31, 1996............................ F-30
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1996............ F-31
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1996............ F-32
Notes to Condensed Consolidated Financial Statements... F-34
</TABLE>

F-1
<PAGE> 103

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To CCA Prison Realty Trust:

We have audited the accompanying balance sheet of CCA Prison Realty Trust
(a Maryland real estate investment trust) as of April 23, 1997. This financial
statement is the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statement based on our audit.

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 balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of CCA Prison Realty Trust as of April
23, 1997, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Nashville, Tennessee
April 23, 1997

F-2
<PAGE> 104

CCA PRISON REALTY TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)

BALANCE SHEET
APRIL 23, 1997

<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $1,000
======
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity:
Preferred shares, $.01 par value; 10,000,000 shares
authorized;
none outstanding....................................... $ --
Common shares, $.01 par value; 90,000,000 shares
authorized;
1,000 shares issued and outstanding.................... 1,000
------
$1,000
======
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-3
<PAGE> 105

CCA PRISON REALTY TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)

NOTES TO BALANCE SHEET
APRIL 23, 1997

1. ORGANIZATION

CCA Prison Realty Trust (the "Company") was formed April 23, 1997 as a
Maryland real estate investment trust. The Company has had no operations to date
but has issued 1,000 Common Shares to a founding shareholder.

2. FEDERAL INCOME TAXES

At the earliest possible date, the Company plans to qualify as a real
estate investment trust ("REIT") under the Internal Revenue Code and,
accordingly, will not be subject to federal income taxes on amounts distributed
to shareholders provided that it distributes at least 95% of its real estate
investment trust taxable income and meets certain other requirements.

3. PREFERRED SHARES

No Preferred Shares are outstanding. Preferred Shares may be issued from
time to time without shareholder approval with terms and conditions established
by the Board of Trustees of the Company.

4. INTENTIONS OF THE COMPANY (UNAUDITED)

The Company has announced its intention to sell 17,000,000 Common Shares in
an initial public offering. Immediately after the closing of the Offering, the
Company intends to consummate the following transactions with Corrections
Corporation of America ("CCA"): (a) purchase of nine correctional and detention
facilities for $308.1 million and enter into triple net leases with CCA for
original fixed terms of 10 to 12 years with renewal terms upon the mutual
agreement of both parties for three additional five-year terms, (b) option
agreements to purchase an additional five correctional and detention facilities
at a total estimated purchase price of $193.0 million with similar leaseback
terms, (c) trade name and noncompetition agreements between the Company and CCA,
and (d) an agreement that provides the Company a right to purchase other
facilities from CCA.

The Company will be dependent on CCA for its initial revenues. Also, due to
the nature of the business and the contractual relationships with CCA, including
the operating leases, the Company's ability to be successful is dependent on a
number of factors, including key personnel, continuing qualification as a REIT
and continued availability of financial resources.

F-4
<PAGE> 106

CORRECTIONS CORPORATION OF AMERICA

PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following pro forma consolidated financial statements represent the
unaudited pro forma financial results for CCA as of March 31, 1997 and for the
three months ended March 31, 1997 and the year ended December 31, 1996. The Pro
Forma Consolidated Statements of Operations are presented as if the Formation
Transactions had occurred as of the beginning of the period indicated and
incorporate certain assumptions that are included in the Notes to Pro Forma
Consolidated Statements of Operations. The Pro Forma Consolidated Balance Sheet
is presented as if the Formation Transactions had occurred on March 31, 1997.
The pro forma information does not purport to represent what CCA's financial
position or results of operations actually would have been had the Formation
Transactions, in fact, occurred on such date or at the beginning of the period
indicated, or to project CCA's financial position or results of operations at
any future date or any future period.

F-5
<PAGE> 107

CORRECTIONS CORPORATION OF AMERICA

PRO FORMA CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
-------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash, cash equivalents and restricted cash............. $ 7,101 $ 298,953(a) $174,701
(131,940)(b)
587(c)
Accounts receivable, net of allowances................. 69,743 69,743
Other.................................................. 6,604 6,604
-------- --------
Total current assets......................... 83,448 251,048
-------- --------
Property and equipment................................. 382,492 (173,557)(a) 208,935
Accumulated depreciation............................... (25,767) 12,742(a) (13,025)
-------- --------
Property and equipment, net.................. 356,725 195,910
-------- --------
Restricted investments................................. 587 (587)(c) --
Notes receivable....................................... 22,748 22,748
Other assets........................................... 34,787 3,728(d)(b) 37,865
(650)(a)
Investment in direct financing leases.................. 68,622 68,622
-------- --------- --------
Total assets................................. $566,917 $ 9,276 $576,193
======== =========== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt...................... $ 7,249 $ (7,249)(b) $ --
Accounts payable....................................... 42,214 42,214
Other accrued expenses................................. 25,763 8,540(c) 34,303
-------- --------
Total current liabilities.................... 75,226 76,517
-------- --------
Long-term debt:
Revolving line of credit............................. 79,568 (79,568)(b) --
Notes payable, less current portion.................. 45,123 (45,123)(b) --
Convertible subordinated notes....................... 64,500 64,500
-------- --------
Total long-term debt......................... 189,191 64,500
-------- --------
Deferred tax liabilities............................... 4,812 (4,812)(d) --
Deferred gain on sale of Facilities.................... -- 137,488(a) 137,488
Other noncurrent liabilities........................... 742 742
Total stockholders' equity............................. 296,946 296,946
-------- --------- --------
Total liabilities and stockholders' equity... $566,917 $ 9,276 $576,193
======== =========== ========
</TABLE>

F-6
<PAGE> 108

CORRECTIONS CORPORATION OF AMERICA

NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET

CCA's anticipated transactions, reflected on a pro forma basis, as if the
transactions had occurred on March 31, 1997, are as follows:

(a) To record the sale of the nine Initial Facilities to the Company
for $308.1 million. The Facilities' net book value of $162.5 million and
other costs of the sale result in a total deferred gain of $137.5 million
which will be amortized over the lives of the leases entered into
coincident with the sale. Prepayment obligations, the reduction in
unamortized loan costs incurred as a result of the retirement of certain
debt obligations and certain other costs of the sale reduced the deferred
gain on the sale.

(b) To record the retirement of debt and reduction of unamortized debt
costs as a result of the sale of the nine Initial Facilities.

(d) To record current liabilities and deferred tax assets for the
future recognition of the gain and related taxes over the lives of the
Initial Facility leases. An effective tax rate of 39% is assumed on the
deferred gain.

(e) CCA plans to account for the Leases of the nine Initial Facilities
as operating leases.

F-7
<PAGE> 109

CORRECTIONS CORPORATION OF AMERICA

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
------------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:.................................................. $292,513 $ -- $292,513
Costs and expenses:
Operating................................................ 213,173 14,302(a) 227,475
General and administrative............................... 13,428 (86)(b) 13,342
Depreciation and amortization............................ 11,339 (2,331)(c) 9,008
-------- ------- --------
237,940 11,885 249,825
-------- ------- --------
Operating income........................................... 54,573 (11,885) 42,688
Interest expense, net.................................... 4,224 (3,772)(d) 452
-------- ------- --------
Income before income taxes................................. 50,349 (8,113) 42,236
Provision for income taxes............................... 19,469 (5,920)(e) 13,549
-------- ------- --------
Net income................................................. 30,880 (2,193) 28,687
Preferred stock dividends................................ -- -- --
-------- ------- --------
Net income allocable to common stockholders................ $ 30,880 $(2,193) $ 28,687
======== ========= ========
Net income per common share:
Primary.................................................. $ 0.38 $ (0.03) $ 0.35
Fully-diluted............................................ $ 0.36 $ (0.02) $ 0.34
Weighted average common shares outstanding................. 81,664 81,664 81,664
</TABLE>

CCA's anticipated transactions, reflected on a pro forma basis, as if the
transactions had occurred on January 1, 1996, are as follows:

(a) To record rent expense, net of the amortized gain on the sale of
the Initial Facilities. Actual results of operations as reported do not
include a full year of earnings for certain Initial Facilities with
increased capacity becoming operational during 1996 and one facility
opening during 1997; accordingly, the lease payments and deferred gain
amortization have been reduced by $11.0 million and $4.3 million,
respectively. The additional expenses also reflect an amount expected to be
expended by CCA each year to maintain the facilities according to the lease
requirements.

(b) To record a reduction in state franchise taxes based upon the sale
of the facilities.

(d) To reduce interest expense on debt no longer outstanding as a
result of the sale of facilities.

(e) To adjust income tax expense to the expected effective tax rate.

(f) The pro forma income statement has not provided for interest
income on the cash balances expected as a result of the sale of the
facilities. Assuming a return on investment of 5%, average cash balances on
hand after the sale, payment of related taxes, payment of monthly lease
payments, and debt retirement would yield interest income of $7,166 for the
year ended December 31, 1996.
(g) CCA plans to account for the Leases of the nine Initial Facilities
as operating leases.

F-8
<PAGE> 110

CORRECTIONS CORPORATION OF AMERICA

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
-----------------------------------
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:................................................... $91,838 $ -- $91,838
Costs and expenses:
Operating................................................. 63,919 4,413(a) 68,332
General and administrative................................ 3,595 (22)(b) 3,573
Depreciation and amortization............................. 3,923 (1,071)(c) 2,852
------- ------- -------
71,437 3,320 74,757
------- ------- -------
Operating income............................................ 20,401 (3,320) 17,081
Interest expense (income), net............................ 498 (1,182)(d) (684)
------- ------- -------
Income before income taxes.................................. 19,903 (2,138) 17,765
Income tax provision...................................... 7,908 (1,748)(e) 6,160
------- ------- -------
Net income.................................................. 11,995 (390) 11,605
Preferred stock dividends................................. -- -- --
------- ------- -------
Net income allocable to common stockholders................. $11,995 $ (390) $11,605
======= ========= ========
Net income per common share:
Primary................................................... $ 0.14 $ -- $ 0.14
Fully-diluted............................................. $ 0.14 $ -- $ 0.14
Weighted average common shares outstanding.................. 83,942 83,942 83,942
</TABLE>

CCA's anticipated transactions, reflected on a pro forma basis, as if the
transactions had occurred on January 1, 1996, are as follows:

(a) To record rent expense, net of the amortized gain on the sale of
the Initial Facilities. Actual results of operations as reported do not
include a full quarter of earnings for certain Initial Facilities with
increased capacity becoming operational during first quarter 1997;
accordingly, the lease payments and deferred gain amortization have been
reduced by $1.3 million and $0.4 million, respectively. The additional
expenses also reflect an amount expected to be expended by CCA each year to
maintain the facilities according to the lease requirements.

(b) To record a reduction in state franchise taxes based upon the sale
of the facilities.

(d) To reduce interest expense on debt no longer outstanding as a
result of the sale of facilities.

(e) To adjust income tax expense to the expected effective tax rate.

(f) The pro forma income statement has not provided for interest
income on the cash balances expected as a result of the sale of the
facilities. Assuming a return on investment of 5%, average cash balances on
hand after the sale, payment of related taxes, payment of monthly lease
payments, and debt retirement would yield interest income of $1,257 for the
three months ended March 31, 1997.
(g) CCA plans to account for the Leases of the nine Initial Facilities
as operating leases.

F-9
<PAGE> 111

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Corrections Corporation of America and Subsidiaries:

We have audited the accompanying consolidated balance sheets of CORRECTIONS
CORPORATION OF AMERICA AND SUBSIDIARIES as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. 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 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Corrections Corporation of
America and Subsidiaries as of December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Nashville, Tennessee
February 18, 1997

F-10
<PAGE> 112

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted cash................ $ 8,282 $ 2,714
Accounts receivable, net of allowances.................... 100,551 39,661
Prepaid expenses.......................................... 2,940 1,569
Deferred tax assets....................................... 1,026 1,646
Other..................................................... 1,643 1,020
-------- --------
Total current assets.............................. 114,442 46,610
-------- --------
RESTRICTED INVESTMENTS...................................... 587 443
OTHER ASSETS................................................ 29,405 18,752
PROPERTY AND EQUIPMENT, NET................................. 288,697 137,019
NOTES RECEIVABLE............................................ 22,859 890
INVESTMENT IN DIRECT FINANCING LEASES....................... 12,898 9,764
-------- --------
$468,888 $213,478
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 39,224 $ 10,757
Accrued salaries and wages................................ 5,487 3,480
Accrued property taxes.................................... 1,675 1,623
Other accrued expenses.................................... 9,227 8,637
Current portion of long-term debt......................... 8,281 11,020
-------- --------
Total current liabilities......................... 63,894 35,517
-------- --------
LONG-TERM DEBT, NET OF CURRENT PORTION...................... 117,535 74,865
DEFERRED TAX LIABILITIES.................................... 4,717 4,164
OTHER NONCURRENT LIABILITIES................................ 990 2,228
-------- --------
Total liabilities................................. 187,136 116,774
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock -- $1 (one dollar) par value; 150,000 shares
authorized............................................. 75,029 64,540
Additional paid-in capital................................ 165,317 16,560
Retained earnings......................................... 42,132 15,641
Treasury stock, at cost................................... (726) (37)
-------- --------
Total stockholders' equity........................ 281,752 96,704
-------- --------
$468,888 $213,478
======== ========
</TABLE>

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

F-11
<PAGE> 113

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES................................................... $292,513 $207,241 $152,375
EXPENSES:
Operating................................................ 213,173 158,814 123,540
General and administrative............................... 13,428 14,288 9,413
Depreciation and amortization............................ 11,339 6,524 5,753
-------- -------- --------
OPERATING INCOME........................................... 54,573 27,615 13,669
INTEREST EXPENSE, NET...................................... 4,224 3,952 3,439
-------- -------- --------
INCOME BEFORE INCOME TAXES................................. 50,349 23,663 10,230
PROVISION FOR INCOME TAXES................................. 19,469 9,330 2,312
-------- -------- --------
NET INCOME................................................. 30,880 14,333 7,918
PREFERRED STOCK DIVIDENDS.................................. -- -- 204
-------- -------- --------
NET INCOME ALLOCABLE TO COMMON STOCKHOLDERS................ $ 30,880 $ 14,333 $ 7,714
======== ======== ========
NET INCOME PER COMMON SHARE:
Primary.................................................. $ .38 $ .19 $ .12
======== ======== ========
Fully diluted............................................ $ .36 $ .18 $ .12
======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................. 81,664 75,110 61,908
======== ======== ========
</TABLE>

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

F-12
<PAGE> 114

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 30,880 $ 14,333 $ 7,918
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................ 11,339 6,524 5,753
Deferred and other noncash income taxes.............. 13,117 6,162 878
Other noncash items....................................... 524 -- --
(Gain) loss on disposal of assets......................... (3,501) (1,284) 11
Equity in earnings of unconsolidated entities........ (1,098) (619) (422)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable.................................. (55,993) (12,750) (7,901)
Prepaid expenses..................................... (1,371) (18) (70)
Other current assets................................. (623) (87) (259)
Accounts payable..................................... 28,467 1,991 4,537
Accrued expenses..................................... 2,649 3,514 1,192
--------- -------- --------
Net cash provided by operating activities......... 24,390 17,766 11,637
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment....................... (165,703) (25,926) (24,891)
Acquisition of UCLP....................................... -- (5,250) --
Increase in restricted cash and investments............ (3,025) (619) (7)
Increase in other assets............................... (11,163) (8,500) (1,836)
Investment in affiliates, net.......................... (3,138) (3,717) (426)
Proceeds from disposals of assets......................... 6,747 3,763 25
Purchase of notes receivable.............................. (22,500) -- (900)
Increase in direct financing leases.................... (3,693) -- --
Payments received on direct financing leases and notes
receivable........................................... 553 328 286
--------- -------- --------
Net cash used in investing activities............. (201,922) (39,921) (27,749)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................. 74,700 7,111 15,974
Payments on long-term debt................................ (24,443) (8,648) (14,159)
Payments on notes payable to stockholders.............. -- -- (403)
(Payments on) proceeds from line of credit, net........ (10,500) 13,715 270
Payment of debt issuance costs............................ (433) (260) --
Payments of dividends.................................. -- -- (291)
Proceeds from issuance of common stock.................... 131,006 7,859 10,571
Proceeds from exercise of stock options and warrants...... 9,889 868 1,137
Purchase of treasury stock and warrants................ -- (630) --
--------- -------- --------
Net cash provided by financing activities.............. 180,219 20,015 13,099
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 2,687 (2,140) (3,013)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 2,145 4,285 7,298
--------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 4,832 $ 2,145 $ 4,285
========= ======== ========
</TABLE>

F-13
<PAGE> 115

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amounts capitalized)................ $ 8,979 $ 5,145 $ 4,854
========= ======== ========
Income taxes......................................... $ 6,630 $ 3,060 $ 1,572
========= ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
The company entered into an international alliance and
equity participation which included the deferral of the
payment of certain issuance costs:
Other assets........................................... $ -- $ -- $ (3,488)
Other accrued expenses................................. -- -- 990
--------- -------- --------
Other noncurrent liabilities........................... -- -- 2,970
--------- -------- --------
Additional paid-in capital............................. -- -- (472)
--------- -------- --------
$ -- $ -- $ --
========= ======== ========
Long-term debt was converted into common stock through the
exercise of stock warrants:
Other assets........................................... $ -- $ 27 $ 9
Long-term debt......................................... -- (1,428) (357)
Common stock........................................... -- 400 100
Additional paid-in capital............................. -- 1,001 248
--------- -------- --------
$ -- $ -- $ --
========= ======== ========
Redeemable convertible preferred stock was converted into
common stock:
Other assets........................................... $ -- $ -- $ 290
Preferred stock........................................ -- -- (5,000)
Common stock........................................... -- -- 1,400
Additional paid-in capital............................. -- -- 3,310
--------- -------- --------
$ -- $ -- $ --
========= ======== ========
Long-term debt was converted into common stock:
Other assets........................................... $ -- $ 53 $ 26
Long-term debt......................................... -- (6,700) (3,000)
Common stock........................................... -- 887 419
Additional paid-in capital............................. -- 5,760 2,555
--------- -------- --------
$ -- $ -- $ --
========= ======== ========
The company acquired property and equipment by assuming
long-term debt:
Property and equipment................................. $ -- $(27,392) $ --
Long-term debt......................................... -- 27,392 --
--------- -------- --------
$ -- $ -- $ --
========= ======== ========
</TABLE>

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

F-14
<PAGE> 116

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------
ISSUED TREASURY
---------------- ----------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993.................................. 48,600 $48,600 (148) $ (340)
------ ------- ------ -------
Issuance of common stock.................................... 3,712 3,712 -- --
Stock options exercised and warrants converted to stock..... 3,432 3,432 70 33
Income tax benefits of incentive stock option exercises..... -- -- -- --
Conversion of long-term debt and preferred stock............ 3,636 3,636 -- --
Preferred stock dividends................................... -- -- -- --
Net income.................................................. -- -- -- --
------ ------- ------ -------
BALANCE, DECEMBER 31, 1994.................................. 59,380 59,380 (78) (307)
------ ------- ------ -------
Issuance of common stock.................................... 1,158 1,158 -- --
Stock options exercised and warrants repurchased or
converted to stock........................................ 2,228 2,228 74 270
Income tax benefits of incentive stock option exercises..... -- -- -- --
Conversion of long-term debt................................ 1,774 1,774 -- --
Net income.................................................. -- -- -- --
------ ------- ------ -------
BALANCE, DECEMBER 31, 1995.................................. 64,540 64,540 (4) (37)
------ ------- ------ -------
Issuance of common stock.................................... 3,700 3,700 -- --
Stock options exercised and warrants converted to stock..... 6,789 6,789 (19) (689)
Income tax benefits of incentive stock option exercises..... -- -- -- --
Compensation expense related to deferred stock awards....... -- -- -- --
Net income.................................................. -- -- -- --
------ ------- ------ -------
BALANCE, DECEMBER 31, 1996.................................. 75,029 $75,029 (23) $ (726)
====== ======= ====== =======
</TABLE>

<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
PAID-IN EARNINGS STOCKHOLDERS'
CAPITAL (DEFICIT) EQUITY
---------- --------- -------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993.................................. $(10,780) $(3,298) $ 34,182
-------- ------- --------
Issuance of common stock.................................... 6,387 -- 10,099
Stock options exercised and warrants converted to stock..... (1,430) (550) 1,485
Income tax benefits of incentive stock option exercises..... 593 -- 593
Conversion of long-term debt and preferred stock............ 4,048 -- 7,684
Preferred stock dividends................................... -- (204) (204)
Net income.................................................. -- 7,918 7,918
-------- ------- --------
BALANCE, DECEMBER 31, 1994.................................. (1,182) 3,866 61,757
-------- ------- --------
Issuance of common stock.................................... 7,184 -- 8,342
Stock options exercised and warrants repurchased or
converted to stock........................................ 1,699 (2,558) 1,639
Income tax benefits of incentive stock option exercises..... 3,987 -- 3,987
Conversion of long-term debt................................ 4,872 -- 6,646
Net income.................................................. -- 14,333 14,333
-------- ------- --------
BALANCE, DECEMBER 31, 1995.................................. 16,560 15,641 96,704
-------- ------- --------
Issuance of common stock.................................... 128,112 -- 131,812
Stock options exercised and warrants converted to stock..... 8,177 (4,389) 9,888
Income tax benefits of incentive stock option exercises..... 11,944 -- 11,944
Compensation expense related to deferred stock awards....... 524 -- 524
Net income.................................................. -- 30,880 30,880
-------- ------- --------
BALANCE, DECEMBER 31, 1996.................................. $165,317 $42,132 $281,752
======== ======= ========
</TABLE>

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

F-15
<PAGE> 117

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Corrections Corporation of America (together with its subsidiaries,
referred to as the "company"), a Delaware corporation, operates and manages
prisons and other correctional facilities and provides prisoner transportation
services for governmental agencies. The company provides a full range of related
services to governmental agencies, including managing, financing, designing and
constructing new facilities and redesigning and renovating older facilities. The
consolidated financial statements include the accounts of the company and its
wholly-owned subsidiaries, TransCor America, Inc. ("TransCor"), Concept
Incorporated ("Concept"), Corrections Management Affiliates, Inc. ("CMA"),
Correctional Services Group, Inc. ("CSG") and CCA International, Inc. CCA
International, Inc. has two wholly-owned subsidiaries, CCA France, Inc. and CCA
(UK) Limited. CCA (UK) Limited has a majority owned subsidiary, UK Detention
Services Limited ("UKDS"). Concept has two wholly-owned subsidiaries, Mineral
Wells R.E. Holding Corp. ("Mineral Wells") and United-Concept Inc.
("United-Concept"). Concept, together with Mineral Wells, wholly owns
United-Concept Limited Partnership ("UCLP"). CMA, together with CSG, wholly owns
Corrections Partners, Inc. ("CPI"). The accompanying consolidated financial
statements and note information reflect the accounting for the acquisitions in
1994 and 1995 of TransCor, Concept, CMA and CSG in transactions accounted for
under the pooling-of-interests method of accounting and the acquisitions in 1995
and 1996 of United-Concept, UCLP and UKDS accounted for under the purchase
method of accounting. All material intercompany transactions and balances have
been eliminated.

At December 31, 1996, the company has a 50% interest in Corrections
Corporation of Australia Pty. Ltd. ("CC Australia"). CC Australia provides
services similar to the company in Australia and surrounding countries. The
company accounts for this investment under the equity method. Assets and
liabilities are converted from their functional currency into the U.S. dollar
utilizing the conversion rate in effect at the balance sheet date. Revenue and
expense items are converted using the weighted average rate during the period.
The excess of the company's investment in this unconsolidated subsidiary over
the underlying equity is being amortized over twenty-five years.

Deferred project development costs consist of costs that can be directly
associated with a specific anticipated contract and, if recovery from that
contract is probable, are deferred until the anticipated contract has been
awarded. At the time the contract is awarded to the company, the deferred
project development costs are either capitalized as part of property and
equipment or are transferred to project development costs. Costs of unsuccessful
or abandoned contracts are charged to depreciation and amortization expense when
their recovery is not considered probable. Internal costs incurred in securing
new clients including costs of responding to requests for proposals are expensed
as incurred. Facility start-up costs, principally costs of initial employee
training, travel and other direct expenses incurred in connection with opening
of new facilities, to the extent recoverable under each negotiated contract, are
deferred and recorded as other assets. Project development costs and start-up
costs are amortized on a straight-line basis over the lesser of the initial term
of the contract plus renewals or five years.

Debt issuance costs are amortized on a straight-line basis over the life of
the related debt. This amortization is charged to depreciation and amortization
expense.

Property and equipment is carried at cost. Betterments, renewals and
extraordinary repairs that extend the life of the asset are capitalized; other
repairs and maintenance are expensed. Interest is capitalized to the asset to
which it relates in connection with the construction of major facilities. The
cost and accumulated depreciation applicable to assets retired are removed from
the accounts and the gain or loss on disposition is recognized in income.
Depreciation is computed by the straight-line method for financial reporting
purposes and accelerated methods for tax reporting purposes based upon the
estimated useful lives of the related assets.

F-16
<PAGE> 118

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

Investment in direct financing leases represents the portion of the
company's management contract with a governmental agency that represents
payments on building and equipment leases. The leases are accounted for using
the financing method and, accordingly, the minimum lease payments to be received
over the term of the leases less unearned income are capitalized as the
company's investment in the leases. Unearned income is recognized as income over
the term of the leases using the interest method.

Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
This statement generally requires the company to record deferred income taxes
for the differences between book and tax bases of its assets and liabilities.

The company maintains contracts with various governmental entities to
manage their facilities for fixed per diem rates or monthly fixed rates. The
company also maintains contracts with various federal, state and local
governmental entities for the housing of inmates in company owned facilities at
fixed per diem rates. These contracts usually contain expiration dates with
renewal options ranging from annual to multi-year renewals. Most of these
contracts have current terms that require renewal every two to five years. The
company expects to renew these contracts for periods consistent with the
remaining renewal options allowed by the contracts or other reasonable
extensions. Fixed monthly rate revenue is recorded in the month earned and fixed
per diem revenue is recorded based on the per diem rate multiplied by the number
of inmates housed during the respective period. The company recognizes
development revenue on the percentage-of-completion method.

To meet the reporting requirements of SFAS 107, "Disclosures About Fair
Value of Financial Instruments," the company calculates the fair value of
financial instruments using quoted market prices. At December 31, 1996, there
were no material differences in the book values of the company's financial
instruments and their related fair values, except for the company's convertible
subordinated notes (see Note 8) and the forward contract for convertible
subordinated notes (see Note 13), which based on the conversion rate on the
underlying equity securities, have an estimated fair market value of
approximately $339,000.

For purposes of the statements of cash flows, the company excludes
restricted cash from cash and cash equivalents. The company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.

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.

In March, 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of." This statement imposes stricter criteria for
long-term assets by requiring that such assets be probable of future recovery at
each balance sheet date. The company adopted SFAS 121 effective January 1, 1996.
The company did not experience a material impact on its results of operations,
financial condition or cash flows as a result of adoption.

SFAS No. 128, "Earnings per Share" has been issued effective for fiscal
years ending after December 15, 1997. SFAS No. 128 establishes standards for
computing and presenting earnings per share. The company is required to adopt
the provisions of SFAS No. 128 in the fourth quarter of 1997 and does not expect
adoption thereof to have a material effect on the company's results of
operations.

F-17
<PAGE> 119

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

Certain reclassifications of 1995 and 1994 amounts have been made to
conform with the 1996 presentation.

2. MERGERS AND ACQUISITIONS

On August 18, 1995, the company issued 2,800 shares of its common stock for
all the outstanding shares of CMA and CSG. CMA and CSG operate and manage
prisons and other correctional facilities for governmental agencies.

On April 25, 1995, the company issued 5,450 shares of its common stock for
all the outstanding shares of Concept. Concept operates and manages prisons and
other correctional facilities for governmental agencies. Of the shares issued,
273 are held in escrow for the resolution of precombination contingencies.

On December 30, 1994, the company issued 5,200 shares of its common stock
for all the outstanding shares of TransCor, a prisoner transportation company.
Of the shares issued, 520 are held in escrow for the resolution of certain
precombination contingencies.

The transactions above were accounted for under the pooling-of-interests
method of accounting, and the company has previously filed restated financial
statements. In the preparation of the consolidated financial statements, the
company made certain immaterial adjustments and reclassifications to the
historical financial statements of TransCor, Concept, CMA and CSG to be
consistent with the accounting policies of the company.

During the second and fourth quarters of 1996, the company purchased the
remaining two-thirds of UKDS from its original joint venture partners. After
consideration of several strategic alternatives related to UKDS, the company
sold 20% of the entity to Sodexho, S.A. ("Sodexho"), a French conglomerate, and
recognized an after-tax gain of $515. In conjunction with this transaction,
Sodexho was also provided the option to purchase an additional 30% of UKDS. This
option expires June 30, 1997.

As discussed in Note 7, the company exercised its option to acquire the
remaining 50% of its investment in UCLP during 1995. The acquisition was
accounted for under the purchase method of accounting. The purchase price was
allocated to assets acquired and liabilities assumed based on the estimated fair
market value at the date of the acquisition. The operations of UCLP on a
consolidated basis prior to the acquisition are not material to the company's
results of operations.

During the first quarter of 1995, the company purchased the remaining 50%
of CC Australia from its original joint venture partner. After consideration of
several strategic alternatives related to CC Australia, the company sold 50% of
the entity to Sodexho during the second quarter of 1995. The company accounted
for the 100% ownership period on the equity basis of accounting and recognized
an after-tax gain of $783 on the sale.

F-18
<PAGE> 120

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

3. OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
------- -------
<S> <C> <C>
Deferred project development costs.......................... $ 284 $ 1,230
Project development costs, less accumulated amortization of
$499 and $487, respectively............................... 3,989 2,275
Facility start-up costs, less accumulated amortization of
$4,296 and $2,728, respectively........................... 11,404 6,705
Debt issuance costs, less accumulated amortization of $1,698
and $1,289, respectively.................................. 2,555 1,669
Deferred placement fees..................................... 2,404 2,404
Investments in affiliates................................... 7,893 3,756
Other assets................................................ 876 713
------- -------
$29,405 $18,752
======= =======
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Land........................................................ $ 14,276 $ 3,953
Buildings and improvements.................................. 140,470 114,863
Equipment................................................... 19,376 13,486
Office furniture and fixtures............................... 2,937 2,262
Construction in progress.................................... 137,405 23,083
-------- --------
314,464 157,647
Less accumulated depreciation............................... (25,767) (20,628)
-------- --------
$288,697 $137,019
======== ========
</TABLE>

Depreciation expense was $7,147, $4,428 and $3,469 for 1996, 1995 and 1994,
respectively.

5. NOTES RECEIVABLE

Notes receivable consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- ------
<S> <C> <C>
Note receivable, principal and interest payments of $206
monthly through September 2016, interest at 9.25%, secured
by a first mortgage on a facility......................... $22,401 $ --
Notes receivable, $700 is secured by a third mortgage on a
facility and is due in January 1999, remaining balance is
due in monthly principal and interest payments through
April 1999, weighted average interest rate at 11.14%...... 876 890
------- ------
23,277 890
Less current portion in accounts receivable................. (418) --
------- ------
$22,859 $ 890
======= ======
</TABLE>

F-19
<PAGE> 121

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

6. INVESTMENT IN DIRECT FINANCING LEASES

At December 31, 1996, the company's investment in direct financing leases
represents building and equipment leases between the company and the State of
New Mexico for the New Mexico Women's Correctional Facility. The agreements
contain provisions that allow the state to purchase the buildings and equipment
for predetermined prices at specific intervals during the contract period.

A schedule of minimum future rentals to be received under the direct
financing leases at December 31, 1996, is as follows:

<TABLE>
<CAPTION>
DIRECT
FINANCING
LEASES RENTAL
RECEIVABLE
-------------
<S> <C>
1997...................................................... $ 1,807
1998...................................................... 1,807
1999...................................................... 1,807
2000...................................................... 1,807
2001...................................................... 1,807
Thereafter................................................ 17,465
--------
Total minimum obligation.................................... 26,500
Less unearned income........................................ (13,129)
--------
Present value of direct financing leases.................... 13,371
Less current portion in accounts receivable................. (473)
--------
Long-term portion at December 31, 1996...................... $ 12,898
========
</TABLE>

7. INVESTMENT IN UCLP

At December 31, 1994, Concept and its affiliates owned 49.9% of UCLP and
Concept owned 50% of the common stock of United-Concept, which owned .2% of UCLP
and was the managing general partner of UCLP. In addition, Concept had an option
to purchase from its partner in UCLP the other 50% partnership interests in UCLP
and the other 50% of the common stock of United-Concept. On July 17, 1995,
Concept exercised its option and acquired the remaining interests of UCLP for
$5,250.

United-Concept has issued and outstanding one thousand shares of common
stock (which Concept owns) and one share of voting preferred stock, which is
owned by The First National Bank of Chicago under an indenture agreement related
to the financing of the Eloy Facility. Each share of stock, common and
preferred, has one vote. The preferred stock does not participate in income
distribution by United-Concept and has a ten dollar liquidation value. The
by-laws of United-Concept require 100% shareholder approval of significant
corporate actions, and also require an independent director. Concept is entitled
to 100% of the income of UCLP, but the independent director effectively has veto
power over certain actions of United-Concept.

The company's investment in UCLP was accounted for under the equity method
from inception through July 17, 1995. Since July 17, 1995, the company is
entitled to 100% of the income and has responsibility for all the debt and for
satisfying the contractual obligation of UCLP. As a result, the company has
included UCLP in the consolidated financial statements.

F-20
<PAGE> 122

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

8. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Senior Secured Notes, principal payments of $1,773 annually
through 1997, increasing to $2,660 in 1998 with the unpaid
balance due in 2000, interest payable semi-annually at
11.08%, collateralized by property and equipment with a
carrying value of $8,424 at December 31, 1996, and by
revenues from certain contracts........................... $ 10,328 $ 12,215
Secured Notes Payable, principal payments due annually in
various amounts through 1997, interest payable monthly at
9.6%, collateralized by property and equipment with a
carrying value of $10,935 at December 31, 1996, and by
revenues from a contract.................................. 1,210 2,981
Detention Center Revenue Bonds, interest payable monthly at
variable rates (5.85% at December 31, 1996), principal due
at maturity in 2015, collateralized by a letter of credit
issued by a group of banks................................ 24,700 --
Industrial Development Revenue Bonds, principal paid in full
in November 1996.......................................... -- 2,385
Notes payable to a bank, principal and interest at 10%,
payable monthly until maturity in March 2000,
collateralized by property and equipment with a carrying
value of $30,709 at December 31, 1996, and by revenues
from a contract........................................... 20,911 25,608
Revolving Credit Facility payable to a group of banks,
principal due September 1999, interest payable quarterly
at the bank's prime rate (8.25% at December 31, 1996) or
LIBOR plus .5% (6.0% at December 31, 1996), collateralized
by the pledge of stock of the company's first tier
domestic subsidiaries..................................... 4,000 --
Bank Loan, principal paid in full in February 1996.......... -- 12,580
Line of credit payable to a bank, principal paid in full in
February 1996............................................. -- 14,500
Convertible Subordinated Notes, principal due at maturity in
2002 with call provisions beginning in March 2000,
interest payable quarterly at 7.5%........................ 50,000 --
Convertible Subordinated Notes, principal due at maturity in
1999 with call provisions beginning in June 1999, interest
payable semi-annually at 8.5%............................. 7,000 7,000
Convertible Subordinated Notes, principal due at maturity in
1998 with call provisions beginning in June 1997, interest
payable quarterly at 8.5%................................. 7,500 7,500
Other....................................................... 167 1,116
-------- --------
125,816 85,885
Less current portion........................................ (8,281) (11,020)
-------- --------
$117,535 $ 74,865
======== ========
</TABLE>

At December 31, 1996, the company's revolving credit facility provides for
borrowings up to $170,000. The facility bears interest at the bank's prime rate
or LIBOR plus .50%, .75% or 1.0%, depending on the company's leverage ratio. The
facility consists of a working capital line, which includes letters of credit.

F-21
<PAGE> 123

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

Letters of credit totaling $65,011 have been issued to support an industrial
development bond, a taxable bond and to secure performance bonds. The unused
commitment at December 31, 1996, was $100,989. The facility is subject to
renewal on September 6, 1999.

At December 31, 1996, the company has a $2,500 letter of credit facility.
Letters of credit totaling $1,393 have been issued to secure the company's
worker's compensation insurance policy, performance bonds and utility deposits.
The unused commitment at December 31, 1996, was $1,107. The facility is subject
to renewal on September 6, 1999.

Restricted cash of $3,450 and $569 at December 31, 1996 and 1995,
respectively, represents cash held in sinking funds established for the funding
of current year principal and interest on certain bonds and current construction
obligations.

The company does not maintain any significant formal or informal
compensating balance arrangements with financial institutions.

The Convertible Subordinated Notes are convertible into the company's
common stock at prices ranging from $1.69 to $25.91 per share. The company may
require conversion under certain conditions after the stock has a market value
of 150% of the conversion price for a specified period. In 1995, Convertible
Subordinated Notes with a face value of $6,700 were converted into 1,774 shares
of common stock.

The provisions of the credit facilities, bonds, and notes contain
restrictive covenants, the most restrictive of which are limits on the payment
of dividends, incurrence of additional indebtedness, investments and mergers.
The agreements also require that the company maintain specific ratio
requirements relating to cash flow, tangible net worth, interest coverage and
earnings. The company was in compliance with the covenants at December 31, 1996.

The company capitalized interest of $502, $717 and $377 in 1996, 1995 and
1994, respectively. Interest expense, net is comprised of the following for each
year:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Interest expense.......................................... $ 8,200 $ 5,534 $ 4,954
Interest income........................................... (3,976) (1,582) (1,515)
------- ------- -------
$ 4,224 $ 3,952 $ 3,439
======= ======= =======
</TABLE>

Maturities of long-term debt for the next five years and thereafter are:
1997 -- $8,281; 1998 -- $16,357; 1999 -- $21,007; 2000 -- $5,471; 2001 -- $0 and
thereafter -- $74,700.

F-22
<PAGE> 124

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

9. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The provision for income
taxes is comprised of the following components:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
CURRENT PROVISION
Federal................................................... $ 5,567 $2,853 $1,319
State..................................................... 785 315 115
------- ------ ------
6,352 3,168 1,434
------- ------ ------
INCOME TAXES CHARGED TO EQUITY
Federal................................................... 10,719 3,567 531
State..................................................... 1,225 420 62
------- ------ ------
11,944 3,987 593
------- ------ ------
DEFERRED PROVISION
Federal................................................... 1,052 1,946 99
State..................................................... 121 229 186
------- ------ ------
1,173 2,175 285
------- ------ ------
Provision for income taxes........................ $19,469 $9,330 $2,312
======= ====== ======
</TABLE>

Significant components of the company's deferred tax assets and liabilities
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------ ------
<S> <C> <C>
CURRENT DEFERRED TAX ASSETS
Asset reserves and liabilities not yet deductible for tax... $2,067 $1,473
Alternative minimum tax carryforward........................ -- 173
------ ------
Total current deferred tax assets................. 2,067 1,646
------ ------
CURRENT DEFERRED TAX LIABILITY
Income item not yet taxable................................. 1,041 --
------ ------
Total current deferred tax liability.............. 1,041 --
------ ------
Net current deferred tax assets................... $1,026 $1,646
====== ======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
------ ------
<S> <C> <C>
NONCURRENT DEFERRED TAX ASSETS
Other..................................................... $ 788 $ 35
------ ------
Total noncurrent deferred tax assets.............. 788 35
------ ------
NONCURRENT DEFERRED TAX LIABILITIES
Tax in excess of book depreciation and amortization....... 3,876 3,565
Income items not yet taxable and other.................... 1,629 634
------ ------
Total noncurrent deferred tax liabilities......... 5,505 4,199
------ ------
Net noncurrent deferred tax liabilities........... $4,717 $4,164
====== ======
</TABLE>

F-23
<PAGE> 125

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

A reconciliation of the statutory federal income tax rate and the effective
tax rate as a percentage of pretax income for the years ended December 31, is as
follows:

<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory federal rate...................................... 35.0% 34.0% 34.0%
State taxes, net of federal tax benefit..................... 4.0 4.0 4.0
Utilization of net operating loss carryforward.............. -- -- (15.4)
Other items, net............................................ (.3) 1.4 --
---- ---- ----
38.7% 39.4% 22.6%
==== ==== ====
</TABLE>

10. EARNINGS PER SHARE

Primary net income per common share is computed using the weighted average
number of shares of common stock and common stock equivalents outstanding. Stock
warrants and stock options are considered common stock equivalents. The
convertible subordinated notes are not common stock equivalents. In computing
fully diluted net income per common share, the 8.5% convertible subordinated
notes are considered dilutive using the if-converted method. In 1994, the 8.5%
convertible subordinated notes were antidilutive. The following table presents
information necessary to calculate fully diluted earnings per share for the
years ended December 31:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net income allocable to common stockholders............... $30,880 $14,333 $ 7,714
Interest expense applicable to convertible subordinated
notes, net of tax....................................... 752 740 --
------- ------- -------
Adjusted net income....................................... $31,632 $15,073 $ 7,714
======= ======= =======
Fully diluted weighted average common shares
outstanding............................................. 81,740 77,355 62,440
Conversion of convertible subordinated notes.............. 6,249 6,249 --
------- ------- -------
Adjusted fully diluted common shares outstanding.......... 87,989 83,604 62,440
======= ======= =======
Fully diluted earnings per share.......................... $ .36 $ .18 $ .12
======= ======= =======
</TABLE>

11. STOCKHOLDERS' EQUITY

Preferred Stock

The company has authorized 1,000 shares of $1 par value preferred stock.

In December 1991, the company sold 50 shares of Series A preferred stock
for $5,000. The preferred stock earned dividends at 8.5% and were paid quarterly
from January 31, 1993 through June 23, 1994. Each share of the Series A
preferred stock was convertible into 56 shares of common stock. In June 1994,
the Series A preferred stock was converted at par value into 2,800 shares of
common stock. At December 31, 1996, no preferred stock was issued or
outstanding.

Stock Offering

On June 5, 1996, the company completed a secondary public offering of 3,700
new shares of its common stock. The net proceeds of $131,812 were used to
develop, acquire and expand correctional and detention facilities.

F-24
<PAGE> 126

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

Stock Split

On June 5, 1996, the Board of Directors declared a two-for-one stock split
of the company's common stock to be effective on July 2, 1996. An amount equal
to the par value of the common shares outstanding as of July 2, 1996, was
transferred from additional paid-in capital to the common stock account. On
October 4, 1995, the Board of Directors declared a two-for-one stock split of
the company's common stock to be effective on October 31, 1995. An amount equal
to the par value of the common shares outstanding as of October 31, 1995, was
transferred from additional paid-in capital to the common stock account. All
references to number of shares and to per share data in the consolidated
financial statements have been adjusted for these stock splits.

Stock Warrants

The company has issued stock warrants to certain affiliated and
unaffiliated parties for providing certain financing, consulting and brokerage
services to the company and to stockholders as a dividend. Stock warrants
outstanding at December 31, 1996, are as follows:

<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
DATE OF ISSUANCE WARRANTS PRICE DATE
---------------- --------- ------------ ------------------
<S> <C> <C> <C>
September 4, 1992................... 839 $ 8.50/share September 14, 1997
June 23, 1994....................... 1,100 $15.80/share December 31, 1999
</TABLE>

Each warrant entitles the warrant holder to four common shares upon
exercise. The warrants are exercisable from the date of issuance except for the
warrants issued September 4, 1992, which were exercisable beginning April 30,
1993. In 1996, the company extended the expiration date of the warrants issued
June 23, 1994, from December 31, 1998, to December 31, 1999.

In 1996, 1,313 warrants were exercised at $8.50 per share. In 1995, 268
warrants were exercised at prices ranging from $7.14 to $8.50 per share. In
1995, the company purchased 60 warrants at the market price of $18 per share
from a warrant holder.

Stock Option Plans

The company has incentive and nonqualified stock option plans under which
options may be granted to "key employees" as designated by the Board of
Directors. The options are granted with exercise prices that equal market value
on the date of grant. The options are exercisable after the later of two years
from the date of employment or one year after the date of grant until ten years
after the date of the grant.

The company's Board of Directors authorized a stock repurchase program for
up to an aggregate of 400 shares of the company's stock for the purpose of
funding the employee stock options, stock ownership and stock award plans.

F-25
<PAGE> 127

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

Stock option transactions relating to the company's incentive and
nonqualified stock option plans are summarized below:

<TABLE>
<CAPTION>
1996
-----------------------------
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at beginning of period........................ 3,916 $ 3.73
Granted................................................. 903 27.06
Exercised............................................... (1,297) 2.92
Canceled................................................ (19) 22.97
------ -------
Outstanding at end of period............................ 3,503 $ 9.96
====== =======
Available for future grant.............................. 2,950 --
====== =======
Exercisable............................................. 2,601 $ 4.06
====== =======
</TABLE>

<TABLE>
<CAPTION>
1995
-----------------------------
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at beginning of period........................ 3,470 $ 2.31
Granted................................................... 1,248 7.61
Exercised................................................. (754) 3.49
Canceled.................................................. (48) 5.82
------ -------
Outstanding at end of period.............................. 3,916 $ 3.73
====== =======
Available for future grant................................ 3,818 --
====== =======
Exercisable............................................... 2,680 $ 1.93
====== =======
</TABLE>

<TABLE>
<CAPTION>
1994
---------
NUMBER OF
SHARES
---------
<S> <C> <C>
Outstanding at beginning of period........................ 6,382
Granted................................................... 178
Exercised................................................. (3,060)
Canceled.................................................. (30)
------
Outstanding at end of period.............................. 3,470
======
Available for future grant................................ 1,020
======
Exercisable............................................... 3,386
======
</TABLE>

The weighted average fair value of options granted during 1996 and 1995 was
$12.28 and $3.21 per option, respectively. The options outstanding at December
31, 1996, have exercise prices between $.96 and $33.13 and a weighted average
remaining contractual life of 7 years.

In addition to the plans mentioned above, the company has a nonqualified
stock option plan to encourage stock ownership by selected employees of the
company. Pursuant to the plan, stock options may be granted to key employees
upon authorization by the Board of Directors. The aggregate number of options
that may be granted under the plan is 1,440. As of December 31, 1996, 240
options were outstanding at an option price of $1.35 per share.

F-26
<PAGE> 128

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

During 1995, the company authorized the issuance of 337 shares of common
stock to certain key employees as a deferred stock award. The award becomes
fully vested ten years from the date of grant based on continuous employment
with the company. The company is expensing the $3,670 of awards over the vesting
period.

In October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based
Compensation." SFAS 123 establishes new financial accounting and reporting
standards for stock-based compensation plans. The company has adopted the
disclosure-only provisions of SFAS 123. As a result, no compensation cost has
been recognized for the company's stock option plans. Had compensation cost for
the stock option plans been determined based on the fair value at the grant date
for awards in 1996 and 1995 consistent with the provisions of SFAS 123, the
company's net income and net income per share would have been reduced to the pro
forma amounts indicated below for the years ended December 31:

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Net income -- as reported................................... $30,880 $14,333
Net income -- pro forma..................................... 25,995 13,550
Net income per share -- Primary -- as reported.............. $ .38 $ .19
Net income per share -- Primary -- pro forma................ .32 .17
Net income per share -- Fully Diluted -- as reported........ $ .36 $ .18
Net income per share -- Fully Diluted -- pro forma.......... .30 .16
</TABLE>

Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the pro forma compensation cost may not be
representative of that to be expected in future years.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Expected dividend yield..................................... 0.0% 0.0%
Expected stock price volatility............................. 49.5% 50.3%
Risk-free interest rate..................................... 5.9% 6.8%
Expected life of options.................................... 4 years 4 years
</TABLE>

Employee Stock Ownership Plan

The company has an Employee Stock Ownership Plan whereby each employee of
the company who is at least 18 years of age is eligible for membership in the
plan as of January 1 of their first anniversary year in which they have
completed at least one thousand hours of service.

Benefits, which become 40% vested after four years of service and 100%
vested after five years of service, are paid on death, retirement or
termination. The Board of Directors has discretion in establishing the amount of
the company contributions. The company's contributions to the plan may be in the
form of common stock, cash or other property. Contributions to the plan amounted
to $2,086, $1,366 and $1,059 for the years ended December 31, 1996, 1995 and
1994, respectively.

12. REVENUES AND EXPENSES

Approximately 99% of the company's revenues for the years ended December
31, 1996, 1995 and 1994, relate to amounts earned from federal, state and local
governmental management and transportation contracts.

The company had revenues of 21%, 23% and 17% from the federal government
and 54%, 49% and 54% from state governments for the years ended December 31,
1996, 1995 and 1994, respectively. One state

F-27
<PAGE> 129

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

government accounted for revenues of 16%, 18% and 24% for the years ended
December 31, 1996, 1995 and 1994, respectively. In addition, another state
government accounted for revenues of 11% for the year ended December 31, 1994.

Accounts receivable include $55,924 and $37,057 due from federal, state and
local governments at December 31, 1996 and 1995, respectively. Accounts
receivable and accounts payable at December 31, 1996, consist of the following:

<TABLE>
<CAPTION>
ACCOUNTS ACCOUNTS
RECEIVABLE PAYABLE
---------- --------
<S> <C> <C>
Trade....................................................... $ 50,618 $10,766
Construction................................................ 44,469 28,458
Other....................................................... 5,464 --
-------- -------
$100,551 $39,224
======== =======
</TABLE>

Salaries and related benefits represented 63%, 58% and 54% of operating
expenses for the years ended December 31, 1996, 1995 and 1994, respectively.

For the year ended December 31, 1996, the company recognized development
fee income of $1,629 (after tax) related to a contract to design, construct and
equip a managed detention facility.

13. INTERNATIONAL ALLIANCE

The company has entered into an International Alliance (the "Alliance")
with Sodexho to pursue prison management business outside the United States. In
conjunction with the Alliance, Sodexho purchased an equity position in the
company by acquiring several instruments. In 1994, the company sold Sodexho
2,800 shares of common stock at $3.75 per share and a $7,000 convertible
subordinated note bearing interest at 8.5%. Sodexho also received 1,100 warrants
at $15.80 per warrant that expire December 1999. Each warrant entitles Sodexho
to four common shares upon exercise. In consideration of the placement of the
aforementioned securities, the company agreed to pay Sodexho $3,960 over a
four-year period ending in 1998. These fees include debt issuance costs and
private placement equity fees. These fees have been allocated to the various
instruments and are charged to debt issuance costs or equity as the respective
financings are completed. Sodexho is subject to a standstill agreement that
limits their ownership to 25% in the company and has certain preemptive rights
to retain its percentage ownership.

In 1995, Sodexho purchased 1,090 shares of common stock for $7.63 per share
pursuant to their contractual preemptive right. Also during 1995, the company
and Sodexho entered into a forward contract whereby Sodexho would purchase up to
$20,000 of convertible subordinated notes at any time prior to December 1997.
The notes will bear interest at LIBOR plus 1.35% and will be convertible into
common shares at a conversion price of $6.83 per share.

In 1996, the company sold $20,000 of convertible notes to Sodexho pursuant
to their contractual preemptive right. The notes bear interest at 7.5% and are
convertible into common shares at a conversion price of $25.91 per share.

14. RELATED PARTY TRANSACTIONS

The company pays legal fees to a law firm of which one of the partners is a
stockholder and a member of the Board of Directors of the company. Legal fees,
including fees related to the company's mergers and acquisitions, paid to the
law firm amounted to $683, $675 and $140 in 1996, 1995 and 1994, respectively.

F-28
<PAGE> 130

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

15. COMMITMENTS AND CONTINGENCIES

The company leases certain facilities, office space and equipment under
long-term operating leases expiring through 2001. Rental expense was
approximately $2,786, $5,904 and $3,490 for the years ended December 31, 1996,
1995 and 1994, respectively. Minimum rental commitments for noncancelable leases
are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ------
<S> <C>
1997........................................................ $4,147
1998........................................................ 3,520
1999........................................................ 1,741
2000........................................................ 322
2001........................................................ 37
</TABLE>

The nature of the company's business results in claims and litigation
alleging that the company is liable for damages arising from the conduct of its
employees or others. In the opinion of management, there are no pending legal
proceedings that would have a material effect on the consolidated financial
position or results of operations of the company.

The company has an employment agreement with its chief executive officer
through September 30, 1997. The agreement includes a non-compete agreement
covering the same period and requires payments during the period if employment
is terminated.

Each of the company's management contracts and the statutes of certain
states require the maintenance of insurance. The company maintains various
insurance policies including employee health, workers compensation, automobile
liability and general liability insurance. These policies are fixed premium
policies with various deductible amounts that are self-funded by the company.
Reserves are provided for estimated incurred claims within the deductible
amounts.

The company guarantees $113 of a bank facility for CC Australia. The
company has provided a $1,000 performance bond in connection with UKDS's
management contract with the United Kingdom.

The company provides a limited guarantee related to a bond issue on the
Eden Detention Center in Eden, Texas. The maximum obligation as of December 31,
1996 was $22,875. In the event the company is required to fund amounts pursuant
to this limited guarantee, the company will obtain ownership rights to the
facility.

16. EVENT SUBSEQUENT TO DECEMBER 31, 1996 (UNAUDITED)

On January 30, 1997, the company purchased the fixed and movable assets of
a correctional treatment facility in Washington, D.C. for $52,000. The company
has entered into additional agreements to manage this facility and to lease the
facility to Washington, D.C. over a period of twenty years. At the end of the
lease, the facility reverts to the District of Columbia authorities. The Company
intends to account for the purchase and lease as a financing transaction.

F-29
<PAGE> 131

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and restricted cash................ $ 7,101 $ 8,282
Accounts receivable, net of allowances.................... 69,743 100,551
Prepaid expenses.......................................... 4,144 2,940
Deferred tax assets....................................... 22 1,026
Other..................................................... 2,438 1,643
-------- --------
Total current assets.............................. 83,448 114,442
Restricted investments...................................... 587 587
Other assets................................................ 34,787 29,405
Property and equipment, net................................. 356,725 288,697
Notes receivable............................................ 22,748 22,859
Investment in direct financing leases....................... 68,622 12,898
-------- --------
$566,917 $468,888
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 42,214 $ 39,224
Accrued salaries and wages................................ 6,410 5,487
Accrued property taxes.................................... 605 1,675
Other accrued expenses.................................... 18,748 9,227
Current portion of long-term debt......................... 7,249 8,281
-------- --------
Total current liabilities......................... 75,226 63,894
Long-term debt, net of current portion...................... 189,191 117,535
Deferred tax liabilities.................................... 4,812 4,717
Other noncurrent liabilities................................ 742 990
-------- --------
Total liabilities................................. 269,971 187,136
-------- --------
Stockholders' equity:
Common stock.............................................. 75,945 75,029
Additional paid-in capital................................ 167,082 165,317
Retained earnings......................................... 54,127 42,132
Treasury stock, at cost................................... (208) (726)
-------- --------
Total stockholders' equity........................ 296,946 281,752
-------- --------
$566,917 $468,888
======== ========
</TABLE>

F-30
<PAGE> 132

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
----------------------
1997 1996
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues.................................................... $91,838 $63,277
Expenses:
Operating................................................. 63,919 47,184
General and administrative................................ 3,595 2,925
Depreciation and amortization............................. 3,923 2,277
------- -------
71,437 52,386
------- -------
Operating income............................................ 20,401 10,891
Interest expense, net....................................... 498 1,350
------- -------
Income before income taxes.................................. 19,903 9,541
Provision for income taxes.................................. 7,908 3,835
------- -------
Net income.................................................. $11,995 $ 5,706
======= =======
Net income per common share:
Primary................................................... $ 0.14 $ 0.07
======= =======
Fully diluted............................................. $ 0.14 $ 0.07
======= =======
Weighted average common shares outstanding:
Primary................................................... 83,942 80,502
======= =======
Fully diluted............................................. 89,659 87,168
======= =======
</TABLE>

F-31
<PAGE> 133

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash Flows from Operating Activities:
Net income................................................ $ 11,995 $ 5,706
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 3,923 2,277
Deferred and other noncash income taxes................ 2,329 6,077
Other noncash items.................................... 92 --
Loss (gain) on disposal of assets...................... (20) 11
Equity in earnings of unconsolidated entities.......... (252) (150)
Changes in assets and liabilities:
Accounts receivable.................................. 30,830 (8,034)
Prepaid expenses..................................... (1,204) 62
Other current assets................................. (795) (309)
Accounts payable..................................... 2,990 2,250
Accrued expenses..................................... 9,374 (3,823)
--------- --------
Net cash provided by operating activities......... 59,262 4,067
--------- --------
Cash Flows from Investing Activities:
Decrease (increase) in restricted and escrow cash......... 1,365 (402)
Increase in other assets.................................. (6,165) (2,771)
Additions of property and equipment....................... (70,919) (9,602)
Proceeds from disposals of assets......................... 8 6
Increase in direct financing leases....................... (55,850) --
Payments received on direct financing leases and notes
receivable............................................. 215 91
--------- --------
Net cash used in investing activities............. (131,346) (12,678)
--------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt.................. -- 30,000
Payments on long-term debt................................ (2,476) (15,444)
Proceeds from (payments on) line of credit, net........... 74,000 (9,723)
Payment of debt issuance cost............................. (248) (496)
Proceeds from exercise of stock options and warrants...... 992 3,044
--------- --------
Net cash provided by financing activities......... 72,268 7,381
--------- --------
Net increase (decrease) in cash............................. 184 (1,230)
CASH AND CASH EQUIVALENTS, beginning of period............ 4,832 2,145
--------- --------
CASH AND CASH EQUIVALENTS, end of period.................. $ 5,016 $ 915
========= ========
</TABLE>

F-32
<PAGE> 134

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
----------------
1997 1996
----- -------
(IN THOUSANDS)
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest............................................... $ 840 $ 1,986
===== =======
Income taxes........................................... $ 609 $ 1,565
===== =======
Supplemental Schedule of Noncash Investing and Financing
Activities:
The Company acquired treasury stock and issued common
stock through the exercise of stock options:
Common stock........................................... $ 134 $ 911
Additional paid-in capital............................. 411 2,885
Retained earnings...................................... -- (2,847)
Treasury stock, at cost................................ (545) (949)
----- -------
$ -- $ --
===== =======
Long term debt was converted into common stock:
Other assets.............................................. $ 15 $ --
Long-term debt............................................ (900) --
Common Stock.............................................. 531 --
Additional paid-in capital................................ 354 --
----- -------
$ -- $ --
===== =======
</TABLE>

F-33
<PAGE> 135

CORRECTIONS CORPORATION OF AMERICA AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheet as of March 31, 1997, and the consolidated
statements of operations and cash flows for the three month periods ended March
31, 1997 and 1996, have been prepared by the Company in accordance with the
accounting policies described in its Annual Report to Stockholders for the year
ended December 31, 1996 and should be read in conjunction with the notes
thereto.

In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial positions,
results of operations and changes in cash flows at March 31, 1997 and for all
periods presented have been made. The results of operations for the period ended
March 31, 1997, are not necessarily indicative of the operating results for the
full year.

2. INVESTMENT IN DIRECT FINANCING LEASES

In January 1997, the Company purchased the fixed and movable assets of a
correctional treatment facility in Washington, D.C. for $52,000,000, and agreed
to make certain renovations totaling $3,850,000. The Company has entered into
additional agreements to manage this facility and to lease the facility back to
Washington, D.C. over a period of twenty years. At the end of the lease, the
facility reverts to the District of Columbia authorities. The Company is
accounting for the purchase and lease as a financing transaction.

3. EARNINGS PER SHARE

Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"), has been issued effective for fiscal periods ending after December
15, 1997. SFAS 128 establishes standards for computing and presenting earnings
per share. The Company is required to adopt the provisions of SFAS 128 in the
fourth quarter of 1997. Under the standards established by SFAS 128, earnings
per share is measured at two levels: basic earnings per share and diluted
earnings per share. Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding during the year.
Diluted earnings per share is computed by dividing net income by the weighted
average number of common shares after considering the additional dilution
related to preferred stock, convertible debt, options and warrants.

The following pro forma amounts represent the basic earnings per share and
diluted earnings per share as if the Company had adopted SFAS 128 for the
quarters presented:

<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
-----------
1997 1996
---- ----
<S> <C> <C>
Basic earnings per share.................................... $.16 $.09
==== ====
Diluted earnings per share.................................. $.14 $.07
==== ====
</TABLE>

F-34
<PAGE> 136

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

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE COMMON SHARES OFFERED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION OR OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE SECURITIES OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................... ii
Prospectus Summary....................... 1
Risk Factors............................. 16
The Company.............................. 23
Use of Proceeds.......................... 28
Capitalization........................... 28
Distributions............................ 29
Dilution................................. 31
Pro Forma Financial Statements........... 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 35
The Private Corrections Industry......... 37
Corrections Corporation of America....... 38
Business of the Company and its
Properties............................. 48
Relationship Between CCA and the Company
After the Formation Transactions....... 54
Leases................................... 55
Management............................... 59
Certain Relationships and Transactions... 66
Policies and Objectives with Respect to
Certain Activities..................... 67
Conflicts of Interest.................... 70
The Formation Transactions............... 72
Principal Shareholders of the Company.... 74
Description of Capital Shares............ 74
Shares Available for Future Sale......... 80
Material Federal Income Tax
Considerations......................... 80
ERISA Considerations..................... 90
Underwriting............................. 91
Experts.................................. 92
Legal Matters............................ 92
</TABLE>

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

17,000,000 SHARES

(LOGO) CORRECTIONS CORPORATION OF AMERICA

COMMON SHARES
-------------------------

PROSPECTUS

-------------------------
JC BRADFORD & CO A.G. EDWARDS & SONS, INC. LEGG MASON WOOD WALKER INC. LEHMAN
BROS PAINEWEBBER INCORPORATED STEPHENS INC.
, 1997

======================================================
<PAGE> 137

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below are certain registration, filing and listing fees and an
estimate of the other fees and expenses to be incurred in connection with the
issuance and distribution of the Common Shares offered hereby.

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 124,410
NASD Filing Fee............................................. 30,500
New York Stock Exchange Original Listing Fee................ 152,730
Blue Sky Fees and Expenses (including attorneys' fees)...... 2,500
Accounting Fees and Expenses................................ 400,000
Attorneys' Fees and Expenses................................ *
Printing and Engraving Expenses............................. 500,000
Transfer Agent's Fees....................................... 12,000
Trustees' and Officers' Insurance........................... 175,000
Miscellaneous Expenses...................................... *
----------
Total............................................. $ *
==========
</TABLE>

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

* To be filed by amendment.

ITEM 31. SALES TO SPECIAL PARTIES.

The Company was formed as a Maryland real estate investment trust in April
1997, with Jim Phillips being issued 1,000 Common Shares in consideration of
$1,000.

Upon consummation of the Offering, D. Robert Crants, III and Michael W.
Devlin will each receive 150,000 Common Shares as a development fee and for
services rendered and as reimbursement of actual costs incurred in connection
with the formation of the Company, the consummation of the Offering and the
closing of the Initial Facilities. The reimbursed costs include certain costs
related to property due diligence, employee compensation, travel and overhead.

ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.

All of the Common Shares issued by the Company discussed in Item 31 above
were issued pursuant to an exemption from the registration requirements of the
Securities Act contained in Section 4(2) of the Securities Act.

ITEM 33. INDEMNIFICATION OF TRUSTEES AND OFFICERS.

The Declaration of Trust of the Company provides for indemnification of
trustees and officers to the full extent permitted by the laws of the State of
Maryland.

Section 8-301 of the Corporation and Associations Article of the Annotated
Code of Maryland permits a Maryland real estate investment trust to indemnify
trustees, officers, employees and agents of the real estate investment trust to
the same extent as is permitted for directors, officers, employees and agents of
a Maryland corporation under Section 2-418 of the MGCL.

Section 2-418 of the MGCL generally permits indemnification of any trustee
made a party to any proceedings by reason of service as a trustee unless it is
established that (i) the act or omission of such person was material to the
matter giving rise to the proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty; or (ii) such person actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, such person had reasonable cause to

II-1
<PAGE> 138

believe that the act or omission was unlawful. The indemnity may include
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by the trustee in connection with the proceeding; but, if the
proceeding is one by, or in the right of, the corporation, indemnification is
not permitted with respect to any proceeding in which the trustee has been
adjudged to be liable to the corporation, or if the proceeding is one charging
improper personal benefit to the trustee, whether or not involving action in the
trustee's official capacity, indemnification of the trustee is not permitted if
the trustee was adjudged to be liable on the basis that personal benefit was
improperly received. The termination of any proceeding by conviction or upon a
plea of nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the trustee did not
meet the requisite standard of conduct required for permitted indemnification.
The termination of any proceeding by judgment, order or settlement, however,
does not create a presumption that the trustee failed to meet the requisite
standard of conduct for permitted indemnification.

Indemnification under the provisions of the MGCL is not deemed exclusive of
any other rights, by indemnification or otherwise, to which a trustee may be
entitled under the Declaration of Trust, Bylaws, any resolution of shareholders
or trustees, any agreement or otherwise.

The statute permits a Maryland real estate investment trust to indemnify
its officers, employees and agents to the same extent as its trustees. The
Company's Declaration of Trust provides for indemnification of the Company's
officers, employees or agents to the fullest extent permitted by law.

The Company will enter into indemnification agreements (the
"Indemnification Agreements") with its trustees and certain of its executive
officers. The Indemnification Agreements are intended to provide indemnification
to the maximum extent allowable by or not in violation of any law of the State
of Maryland. Each Indemnification Agreement provides that the Company shall
indemnify a trustee or officer who is a party to the agreement (the
"Indemnitee") if he or she was or is a party to or otherwise involved in any
proceeding (other than a derivative proceeding) by reason of the fact that he or
she was or is a trustee or officer of the Company, against losses incurred in
connection with the defense or settlement of such proceeding. The
indemnification provided under each Indemnification Agreement is limited to
instances where the act or omission giving rise to the claim for which
indemnification is sought was not otherwise indemnified by the Company or
insurance maintained by the Company, was not established to have been committed
in bad faith or the result of active and deliberate dishonesty, did not involve
receipt of improper personal benefit, did not result in a judgment of liability
to the Company in a proceeding by or in the right of the Company, did not
involve an accounting of profits pursuant to Section 16(b) of the Securities
Exchange Act of 1934, as amended, and, with respect to any criminal proceeding,
the Indemnitee had no reasonable cause to believe his or her conduct was
unlawful.

The Company will obtain trustees and officers liability insurance.

ITEM 34. TREATMENT OF PROCEEDS FROM SECURITIES BEING REGISTERED.

Not applicable.

II-2
<PAGE> 139

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements Included in this Registration Statement, including
the Prospectus:

(B) EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- --------
<C> <C> <S>
*1 -- Form of Underwriting Agreement
*2 -- Form of Agreement of Sale and Purchase Between CCA Prison
Realty Trust and Corrections Corporation of America
</TABLE>

*3.1 -- Amended and Restated Declaration of Trust of CCA Prison
Realty Trust
*3.2 -- Amended and Restated Bylaws of CCA Prison Realty Trust
*3.3 -- Specimen of certificate representing the Common Shares

II-3
<PAGE> 140

<TABLE>
<C> <C> <S>
*4 -- Provisions defining the rights of shareholders are found Sections 8-10 and 15 and Article II in the
Amended and Restated Declaration of Trust and Amended and Restated Bylaws, respectively, of CCA
Prison Realty Trust (included as Exhibits 3.1 and 3.2 to the Registration Statement)
***5.1 -- Opinion of Stokes & Bartholomew, P.A., regarding the validity of the Common Shares being offered
hereby
***5.2 -- Opinion of Miles & Stockbridge, A Professional Corporation, regarding the validity of the Common
Shares being offered hereby
***8.1 -- Opinion of Stokes & Bartholomew, P.A., regarding certain federal income tax matters.
***8.2 -- Opinion of Sherrard & Roe, PLC, regarding certain federal income tax matters
**10.1 -- Form of Option Agreement Between CCA Prison Realty Trust and Corrections Corporation of America with
respect to the Option Facilities
**10.2 -- Form of Master Agreement to Lease Between CCA Prison Realty Trust and Corrections Corporation of
America
**10.3 -- Form of Lease Between CCA Prison Realty Trust and Corrections Corporation of America with respect to
the Leased Properties
**10.4 -- Form of Right to Purchase Agreement Between CCA Prison Realty Trust and Corrections Corporation of
America
*10.5 -- Form of Trade Name Use Agreement Between CCA Prison Realty Trust and Corrections Corporation of
America
*10.6 -- Commitment for Arrangement of Bank Credit Facility and Financing with Summary of Terms and Conditions
from First Union National Bank of Tennessee and First Union Capital Market Corp. and accepted by CCA
Prison Realty Trust
*10.7 -- Form of Officer and Trustee Indemnification Agreement between CCA Prison Realty Trust and its
trustees and officers
*10.8 -- Form of Employment Agreement between J. Michael Quinlan and CCA Prison Realty Trust
**10.9 -- Form of Employment Agreement between D. Robert Crants, III and CCA Prison Realty Trust
**10.10 -- Form of Employment Agreement between Michael W. Devlin and CCA Prison Realty Trust
*10.11 -- Form of CCA Prison Realty Trust 1997 Employee Share Incentive Option Plan
*10.12 -- Form of CCA Prison Realty Trust Non-Employee Trustees' Share Option Plan, as amended
*21 -- List of Subsidiaries of CCA Prison Realty Trust
***23.1 -- Consent of Stokes & Bartholomew, P.A. (included in Exhibits 5.1 and 8.1)
*23.2 -- Consent of Arthur Andersen LLP (with respect to Corrections Corporation of America)
*23.3 -- Consent of Arthur Andersen LLP (with respect to CCA Prison Realty Trust)
***23.4 -- Consent of Miles & Stockbridge, A Professional Corporation (included in Exhibit 5.2)
***23.5 -- Consent of Sherrard & Roe, PLC (included in Exhibit 8.2)
***23.6 -- Consent of Private Corrections Project Center for Studies in Criminology and Law -- University of
Florida at Gainesville
*24 -- Power of Attorney (included in the signature pages)
*27 -- Financial Data Schedule
</TABLE>

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

* Previously filed
** Filed herewith
*** To be filed by a future Amendment

II-4
<PAGE> 141

ITEM 36. UNDERTAKINGS.

(1) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required
by the Underwriters to permit prompt delivery to each purchaser.

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

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

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

II-5
<PAGE> 142

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment Number 2 to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly approved, in the City of
Nashville, State of Tennessee, on the 18th day of June, 1997.

CCA PRISON REALTY TRUST

By: /s/ D. ROBERT CRANTS, III

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

D. Robert Crants, III

President

Pursuant to the requirements of the Securities Act of 1933, this Amendment
Number 2 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
* Chief Executive Officer (Principal June 18, 1997
- --------------------------------------------------- Executive Officer) and Trustee
J. Michael Quinlan

* President and Trustee June 18, 1997
- ---------------------------------------------------
D. Robert Crants, III

* Chief Development Officer and June 18, 1997
- --------------------------------------------------- Trustee
Michael W. Devlin

* Chief Financial Officer (Principal June 18, 1997
- --------------------------------------------------- Financial and Accounting Officer)
Vida H. Carroll

* Chairman; Trustee June 18, 1997
- ---------------------------------------------------
Doctor R. Crants

* Trustee June 18, 1997
- ---------------------------------------------------
C. Ray Bell

* Trustee June 18, 1997
- ---------------------------------------------------
Richard W. Cardin

* Trustee June 18, 1997
- ---------------------------------------------------
Monroe J. Carell, Jr.

* Trustee June 18, 1997
- ---------------------------------------------------
John W. Eakin, Jr.

* Trustee June 18, 1997
- ---------------------------------------------------
Ted Feldman

* Trustee June 18, 1997
- ---------------------------------------------------
Jackson W. Moore
</TABLE>

II-6
<PAGE> 143

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <C>
* Trustee June 18, 1997
- ---------------------------------------------------
Rusty L. Moore

* Trustee June 18, 1997
- ---------------------------------------------------
Joseph V. Russell

* Trustee June 18, 1997
- ---------------------------------------------------
Charles W. Thomas, Ph.D

*By: /s/ D. ROBERT CRANTS, III
----------------------------------------------
D. Robert Crants, III
Attorney-in-Fact
</TABLE>

II-7
<PAGE> 144

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S> <C>
*1 -- Form of Underwriting Agreement..............................
*2 -- Form of Agreement of Sale and Purchase Between CCA Prison
Realty Trust and Corrections Corporation of America.........
*3.1 -- Amended and Restated Declaration of Trust of CCA Prison
Realty Trust................................................
*3.2 -- Amended and Restated Bylaws of CCA Prison Realty Trust......
*3.3 -- Specimen of certificate representing the Common Shares......
*4 -- Provisions defining the rights of shareholders are found
Sections 8-10 and 15 and Article II in the Amended and
Restated Declaration of Trust and Amended and Restated
Bylaws, respectively, of CCA Prison Realty Trust (included
as Exhibits 3.1 and 3.2 to the Registration Statement)......
***5.1 -- Opinion of Stokes & Bartholomew, P.A., regarding the
validity of the Common Shares being offered hereby..........
***5.2 -- Opinion of Miles & Stockbridge, A Professional Corporation,
regarding the validity of the Common Shares being offered
hereby
***8.1 -- Opinion of Stokes & Bartholomew, P.A., regarding certain
federal income tax matters..................................
***8.2 -- Opinion of Sherrard & Roe, PLC, regarding certain federal
income tax matters..........................................
**10.1 -- Form of Option Agreement Between CCA Prison Realty Trust and
Corrections Corporation of America with respect to the
Option Facilities...........................................
**10.2 -- Form of Master Agreement to Lease Between CCA Prison Realty
Trust and Corrections Corporation of America................
**10.3 -- Form of Lease Between CCA Prison Realty Trust and
Corrections Corporation of America with respect to the
Leased Properties...........................................
**10.4 -- Form of Right to Purchase Agreement Between CCA Prison
Realty Trust and Corrections Corporation of America.........
*10.5 -- Form of Trade Name Use Agreement Between CCA Prison Realty
Trust and Corrections Corporation of America................
*10.6 -- Commitment for Arrangement of Bank Credit Facility and
Financing with Summary of Terms and Conditions from First
Union National Bank of Tennessee and First Union Capital
Market Corp. and accepted by CCA Prison Realty Trust........
*10.7 -- Form of Officer and Trustee Indemnification Agreement
between CCA Prison Realty Trust and its trustees and
officers....................................................
*10.8 -- Form of Employment Agreement between J. Michael Quinlan and
CCA Prison Realty Trust.....................................
**10.9 -- Form of Employment Agreement between D. Robert Crants, III
and CCA Prison Realty Trust.................................
**10.10 -- Form of Employment Agreement between Michael W. Devlin and
CCA Prison Realty Trust.....................................
*10.11 -- Form of CCA Prison Realty Trust 1997 Employee Share
Incentive Option Plan.......................................
*10.12 -- Form of CCA Prison Realty Trust Non-Employee Trustees' Share
Option Plan, as amended.....................................
*21 -- List of Subsidiaries of CCA Prison Realty Trust.............
***23.1 -- Consent of Stokes & Bartholomew, P.A. (included in Exhibits
5.1 and 8.1)................................................
*23.2 -- Consent of Arthur Andersen LLP (with respect to Corrections
Corporation of America).....................................
*23.3 -- Consent of Arthur Andersen LLP (with respect to CCA Prison
Realty Trust)...............................................
***23.4 -- Consent of Miles & Stockbridge, A Professional Corporation
(included in Exhibit 5.2)...................................
***23.5 -- Consent of Sherrard & Roe, PLC (included in Exhibit 8.2)....
***23.6 -- Consent of Private Corrections Project Center for Studies in
Crimonology and Law -- University of Florida at Gainesville
*24 -- Power of Attorney (included in the signature pages).........
*27 -- Financial Data Schedule.....................................
</TABLE>

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

* Previously filed
** Filed herewith
*** To be filed by a future Amendment

<PAGE> 1

EXHIBIT 10.1

OPTION AGREEMENT

BY AND BETWEEN

CORRECTIONS CORPORATION OF AMERICA,
a Delaware corporation
("SELLER")

AND

CCA PRISON REALTY TRUST
a Maryland real estate investment trust
("PURCHASER")

, 1997
-----------------------------

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II Option to Sell and Purchase and Agreement to Lease

2.1 Option to Sell and Purchase . . . . . . . . . . . . . . . . . . . . .
2.2 Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3 Agreement to Lease . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE III Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . .

ARTICLE IV Items to be Furnished to Purchaser by Seller . . . . . . . . . . . . . . . . .

4.1 Due Diligence Materials . . . . . . . . . . . . . . . . . . . . . . .
4.2 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE V Title and Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.1 Title Commitment, Exception Documents and Survey . . . . . . . . . . .
5.2 Review Period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.3 Additional Exceptions . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE VI Representations, Warranties, Covenants and Agreements . . . . . . . . . . . .

6.1 Representations and Warranties of Seller . . . . . . . . . . . . . . .
6.2 Covenants and Agreements of Seller . . . . . . . . . . . . . . . . . .
6.3 Representations and Warranties of Purchaser . . . . . . . . . . . . .

ARTICLE VII Conditions to Obligations . . . . . . . . . . . . . . . . . . . . . . . . . .

7.1 Conditions to the Purchaser's Obligations . . . . . . . . . . . . . .
7.2 Failure of Conditions to Purchaser's Obligations . . . . . . . . . . .
7.3 Conditions to the Seller's Obligations . . . . . . . . . . . . . . . .
7.4 Failure of Conditions to Seller's Obligations . . . . . . . . . . . .

ARTICLE VIII Provisions with Respect to the Closing . . . . . . . . . . . . . . . . . . . .

8.1 Seller's Closing Obligations . . . . . . . . . . . . . . . . . . . . .
8.2 Purchaser's Closing Obligations . . . . . . . . . . . . . . . . . . .
</TABLE>

<PAGE> 3

<TABLE>
<S> <C> <C>
ARTICLE IX Expenses of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.1 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.2 Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.3 Commissions/Broker's Fees . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE X Default and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.1 Seller's Default; Purchaser's Remedies . . . . . . . . . . . . . . . . .
10.2 Purchaser's Default; Seller's Remedies . . . . . . . . . . . . . . . . .

ARTICLE XI Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.2 Right of Assignment . . . . . . . . . . . . . . . . . . . . . . . . . .
11.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.4 Entire Agreement; Modifications . . . . . . . . . . . . . . . . . . . . .
11.5 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.6 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.7 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.8 Extension of Dates . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.9 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . .
11.10 Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . .
11.11 Memorandum of Option . . . . . . . . . . . . . . . . . . . . . . . . . .

LIST OF EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

<PAGE> 4

OPTION AGREEMENT

THIS OPTION AGREEMENT (the "Agreement") is made and entered into by and
between CORRECTIONS CORPORATION OF AMERICA, a Delaware corporation (hereinafter
referred to as "'Seller"), and CCA PRISON REALTY TRUST, a Maryland real estate
investment trust (hereinafter referred to as "Purchaser"). Seller and
Purchaser are sometimes collectively referred to herein as the "Parties" and
each of the Parties is sometimes singularly referred to herein as a "Party".

WHEREAS, Seller is the owner of the Property (as hereinafter defined),
consisting of certain real property and improvements thereon being more
particularly described on Exhibit A, attached hereto and made a part hereof;
and,

WHEREAS, in connection with Purchaser's acquisition of certain
properties from Seller pursuant to an Agreement of Sale and Purchase dated of
even date herewith, Purchaser desires to obtain, and Seller desires to grant to
Purchaser, an option to acquire the Property, and, simultaneous with any such
acquisition, to enter into a lease transaction pursuant to which Purchaser
shall lease to Seller, and Seller shall lease from Purchaser, the Property;

NOW, THEREFORE, in consideration of the sum of One Hundred Dollars
($100.00) paid to Seller by Purchaser, the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

As used herein (including any Exhibits attached hereto), the following
terms shall have the meanings indicated:

"Accreditations" shall mean any and all accreditations and/or
certifications from any non-governmental entities required in connection with
the current or contemplated operation of the Property.

"Applicable Notices" shall mean any reports, notices of violation, or
notices of compliance issued in connection with any Accreditations or Permits.

"Bill of Sale" shall mean a bill or bills of sale in substantially the
same form as Exhibit B, attached hereto, and sufficient to transfer to
Purchaser all Personal Property.

"Business Agreements" shall mean any leases, contract rights, loan
agreements, mortgages, easements, covenants, restrictions or other agreements
or instruments affecting all or a portion

1
<PAGE> 5

of the Property, to the extent the same are assignable by Seller, but
specifically excluding all of Seller's Operating and Service Agreements.

"Business Day(s)" shall mean calendar days other than Saturdays, Sundays
and legal holidays.

"Certificate of Non-Foreign Status" shall mean a certificate dated as of
the Closing Date, addressed to Purchaser and duly executed by Seller, in
substantially the same form as Exhibit C, attached hereto.

"Claim" shall mean any obligation, liability, lien, encumbrance, loss,
damage, cost, expense or claim, including, without limitation, any claim for
damage to property or injury to or death of any person or persons.

"Closing" shall mean the consummation of the sale and purchase provided
for herein, to be held at the offices of Stokes & Bartholomew, P.A., 424 Church
Street, Suite 2800, Nashville, Tennessee, or such other place as the Parties
may mutually agree.

"Closing Certificate" shall mean a certificate in substantially the same
form as Exhibit D, attached hereto, wherein Seller and Purchaser, respectively,
shall represent that the representations and warranties of Seller and
Purchaser, respectively, contained in this Agreement are true and correct in
all material respects as of the Closing Date as if made on and as of the
Closing Date.

"Closing Date" shall mean the actual day on which a transaction
contemplated hereby is closed with the transfer of title to the Property. The
Parties agree that the closing date shall sixty (60) days following Purchaser's
exercise of the Option, or such earlier or later date as shall be hereafter
mutually agreed upon by the Parties.

"Deed" shall mean a deed in substantially the same form as Exhibit E,
attached hereto (as the same may be modified to comply with local law and
custom), executed by Seller, as grantor, in favor of Purchaser, as grantee,
conveying the Land and Improvements to Purchaser, subject only to the Permitted
Exceptions.

"Due Diligence Materials" shall mean the information to be provided by
Seller to Purchaser pursuant to the provisions of Section 4.1 hereof.

"Effective Date" shall mean the date the Option is validly exercised.

"Engineering Documents" shall mean all site plans, surveys, soil and
substrata studies, architectural drawings, plans and specifications,
engineering plans and studies, floor plans, landscape plans, Americans with
Disabilities Act compliance reports, environmental reports and studies,
professional inspection reports, construction and/or architect's reports or
certificates, feasibility studies, appraisals, and other similar plans and
studies that relate to the Real Property or the Personal Property, to the
extent the same are assignable by Seller.

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<PAGE> 6

"Exception Documents" shall mean true, correct and legible copies of
each document listed as an exception to title in the Title Commitment.

"Excluded Personal Property" shall mean all those items of tangible and
intangible personal property described on Exhibit F.

"Fixtures" shall mean all equipment, machinery, fixtures, and other
items of real and/or personal property, including all components thereof, now
or on the Closing Date located in, on or used in connection with, and
permanently affixed to or incorporated into, the Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
electronic security equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, and similar systems, all of which, to the
greatest extent permitted by law, are hereby deemed by the Parties to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all items
included within the definition of Personal Property and Excluded Personal
Property.

"Hazardous Materials" shall mean any substance, including without
limitation, asbestos or any substance containing asbestos and deemed hazardous
under any Hazardous Materials Law, the group of organic compounds known as
polychlorinated biphenyls, petroleum products, flammable explosives, radioactive
materials, infectious wastes, biomedical and medical wastes, chemicals known to
cause cancer or reproductive toxicity, pollutants, effluents, contaminants,
emissions or related materials and any items included in the definition of
hazardous or toxic wastes, materials or substances under any Hazardous
Materials Law.

"Hazardous Materials Law" shall mean any local, state or federal law
relating to environmental conditions and industrial hygiene, including, without
limitation, the Resource Conservation and Recovery Act of 1976 ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), the Hazardous Materials Transportation Act, the Federal Waste
Pollution Control Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Safe Drinking Water Act, and all similar federal,
state and local environmental statutes, ordinances and the regulations, orders,
or decrees now or hereafter promulgated thereunder.

"Improvements" shall mean all buildings, improvements, structures and
Fixtures now or on the Closing Date located on the Land, including, without
limitation, landscaping, parking lots and structures, roads, drainage and all
above ground and underground utility structures, equipment systems and other
so-called "infrastructure" improvements.

"Intangible Property" means all Permits, Business Agreements and other
intangible property or any interest therein now or on the Closing Date owned or
held by Seller in connection with the Real Property, including all water rights
and reservations, rights to use the trade name applicable to the Property, as
depicted on Exhibit A hereof, and zoning rights related to the Real Property,

3
<PAGE> 7

or any part thereof, to the extent the same are assignable by Seller; provided,
however, "Intangible Property" shall not include the general corporate
trademarks, trade names (except as set forth in the preceding sentence),
service marks, logos or insignia or the books and records of Seller, Seller's
accounts receivable and Seller's business and operating licenses for the
facilities on the Real Property.

"Land" means the real property more particularly described on Exhibit A,
attached hereto and made a part hereof, together with all of Seller's rights,
titles, appurtenant interests, covenants, licenses, privileges and benefits
thereto belonging, and Seller's right, title and interest in and to any
easements, rights-of-way, rights of ingress or egress or other interests in,
on, or to any land, highway, street, road or avenue, open or proposed, in, on,
across, in front of, abutting or adjoining such real property including,
without limitation, any strips and gores adjacent to or lying between such real
property and any adjacent real property.

"Laws" means all federal, state and local laws, moratoria, initiatives,
referenda, ordinances, rules, regulations, standards, orders and other
governmental requirements, including, without limitation, those relating to the
environment, health and safety, disabled or handicapped persons.

"Lease" shall mean the Master Agreement to Lease and the Lease Agreement
in substantially the same form as Exhibit G, attached hereto and made a part
hereof, which shall be executed and delivered by Seller (or an affiliate of
Seller) and Purchaser at the Closing, and pursuant to the terms of which
Purchaser shall lease the Property to Seller (or an affiliate of Seller)
following the Closing.

"Material" and "Materially" shall mean a condition, noncompliance,
defect or other fact which would: (a) cost, in the aggregate, in excess of Five
Hundred Thousand Dollars ($500,000.00) and, with respect to any single defect
or fact, would cost in excess of Two Hundred Fifty Thousand Dollars
($250,000.00), to correct or repair; or (b) in the aggregate, result in a loss
to Purchaser or a reduction in the value of the Property in excess of Five
Hundred Thousand Dollars ($500,000.00) and, with respect to any single defect
or fact, would result in a loss to Purchaser or a reduction in the value of the
Property in excess of Two Hundred Fifty Thousand Dollars ($250,000.00).

"Option" shall mean the option to purchase the Property granted by
Seller to Purchaser pursuant to Section 2.1 hereof.

"Permits" shall mean all permits, licenses (but excluding Seller's
business and operating licenses,) approvals, entitlements and other
governmental, quasi-governmental and nongovernmental authorizations including,
without limitation, certificates of use and occupancy, required in connection
with the ownership, planning, development, construction, use, operation or
maintenance of the Real Property, to the extent the same are assignable by
Seller. As used herein, "quasi-governmental" shall include the providers of
all utility services to the Real Property.

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<PAGE> 8
"Permitted Exceptions" shall mean those title exceptions which have
been approved in writing by Purchaser, or are deemed to have been approved by
Purchaser as set forth in Sections 5.2 and 5.3 hereof.

"Personal Property" shall mean all Intangible Property, Warranties, and
Engineering Documents, and all those items of tangible personal property
described on Exhibit H, attached hereto, other than the Fixtures and the
Excluded Personal Property, now or on the Closing Date owned by Seller and
located on or about the Land or Improvements or used in connection with the
operation thereof (specifically excluding personal property owned by employees
of Seller and personal property owned by inmates housed at the Real Property).

"Property" shall mean, collectively, the Land, the Improvements, the
Fixtures, and the Personal Property.

"Purchase Price" shall mean Seller's actual costs and expenses to
acquire, develop, design, construct and equip the property ("Seller's Cost"), as
reflected on the books of Seller, plus five percent (5%) of Seller's Cost.
Seller shall provide to Purchaser a statement of Seller's Cost as soon as same
can reasonably be determined by Seller.

"Real Property" shall mean the Land, the Improvements and the Fixtures.

"Review Period" means a period commencing on the Effective Date and
ending thirty (30) days from the date of Purchaser's receipt of the last of the
following documents: Title Commitment, Exception Documents, Search Reports,
Survey or Due Diligence Materials.

"Search Reports" shall mean reports of searches made of the Uniform
Commercial Code Records of the County in which the Property is located, and of
the office of the Secretary of State of the State in which the Property is
located and in the State in which the principal office of Seller is located,
which searches shall reflect that none of the Property is encumbered by liens
or security interests, which will remain on the Property after the Closing. The
Search Reports shall be updated, at Seller's expense, at or within fifteen (15)
days prior to Closing.

"Seller's Operating and Service Agreements" shall mean all management,
service and operating agreements and contracts entered into by Seller with
respect to the Property, including, but not limited to, agreements and
contracts to house inmates at the Property, food service and equipment
agreements, inmate pay telephone service agreements, medical and pharmaceutical
service and supply agreements, drug testing service agreements, public
performance and licensing agreements for motion picture video cassettes, inmate
educational and instructional service agreement, refuse service agreements,
pest control service agreements and machinery, equipment and uniform rental and
service agreements.

"Seller's Personal Property" shall mean all machinery, equipment,
tools, furniture, furnishings, movable walls or partitions, computers, signage,
trade fixtures or other tangible and intangible personal property, including
Seller's accounts receivable and business and operating

<PAGE> 9

licenses, and consumable inventory and supplies, used or useful in Seller's
business on the Property, other than those items included within the definition
of Personal Property.

"Survey" shall mean a current "as-built" ALTA survey, certified to ALTA
requirements, prepared by an engineer or surveyor licensed in the State in
which the Land is located and reasonably acceptable to Purchaser, which shall:
(a) include a narrative legal description of the Land by metes and bounds
(which shall include a reference to the recorded plat, if any), and a
computation of the area comprising the Land in both acres and gross square
feet (to the nearest one thousandth of said respective measurement; (b)
accurately show the location on the Land of all improvements (dimensions
thereof at the ground surface level and the distance therefrom to the facing
exterior property lines of the Land), building and set-back lines, parking
spaces (including number of spaces), fences, evidence of abandoned fences,
ponds, creeks, streams, rivers, officially designated 100-year flood plains and
flood prone areas, canals, ditches, easements, roads, rights-of-way and
encroachments; (c) location of encroachments, if any, upon adjoining property,
or from adjoining property, upon the Land; (d) state the zoning classification
of the Land; (e) be certified as of the date of the Survey to the Seller, the
Purchaser, the Title Company, and any third-party lender designated by
Purchaser; (f) legibly identify any and all recorded matters shown on said
survey by appropriate volume and page recording references; (g) show the
location and names of all adjoining streets and the distance to the nearest
streets intersecting the streets that adjoin the Land; (h) be satisfactory to
(and updated from time to time as may be required by) the Title Company so as
to permit it to delete the standard exception for survey matters and replace it
with an exception for the matters shown on the Survey; and (i) include a
written Surveyor's Certification in substantially the same form as set forth on
Exhibit I, attached hereto.

"Title Commitment" shall mean a current commitment issued by the Title
Company to the Purchaser pursuant to the terms of which the Title Company shall
commit to issue the Title Policy to Purchaser in accordance with the provisions
of this Agreement, and reflecting all matters which would be listed as
exceptions to coverage on the Title Policy.

"Title Company" shall mean Lawyer's Title Insurance Corporation or the
national service office of another title insurance company licensed in the state
in which the Property is located and selected by Seller and reasonably
satisfactory to Purchaser.

"Title Policy" shall mean an ALTA Extended Coverage Owner's Policy of
Title Insurance (10/17/92 Form), or comparable state promulgated policy, with
liability in the amount of the Purchase Price, dated as of the Closing Date,
issued by the Title Company, insuring title to the fee interest in the Real
Property in Purchaser, subject only to the Permitted Exceptions and to the
standard printed exceptions included in the ALTA standard form owner's extended
coverage policy of title insurance, with the following modifications: (a) the
exception for survey matters shall be deleted and replaced by an exception for
the matters shown on the Survey; (b) the exception for ad valorem taxes shall
reflect only taxes for the current and subsequent years; (c) any exception as to
parties in possession shall be limited to rights of Seller in possession, as
lessee only, pursuant to the Lease; and (d) there shall be no general exception
for visible and apparent easements or roads and highways or similar items (with
any exception for visible and apparent

6
<PAGE> 10

easements or roads and highways or similar items to be specifically referenced
to and shown on the Survey and also identified by applicable recording
information).

"Warranties" shall mean all warranties and guaranties with respect to
the Real Property or Personal Property, whether express or implied, which Seller
now holds or under winch Seller is the beneficiary, to the extent the same are
assignable by Seller.

ARTICLE II

OPTION TO SELL AND PURCHASE AND AGREEMENT TO LEASE

2.1 Option to Sell and Purchase. Seller hereby grants Purchaser the
exclusive Option to purchase the Property for the Purchase Price. The Option
shall expire at 5:00 p.m. on, 2,000, if not validly exercised by Purchaser
prior to such time. Upon Purchaser's valid exercise of the Option, this
Agreement shall be deemed a contract between Seller and Purchaser whereby, on
the Closing Date, Seller shall sell, convey, assign, transfer and deliver to
Purchaser and Purchaser shall purchase, acquire and accept from Seller, the
Property, for the Purchase Price and subject to the terms and conditions of
this Agreement. Purchaser acknowledges that Seller may elect to transfer some or
all of the Property to one or more affiliates of Seller prior to the Closing
Date subject to the terms and conditions of this Agreement. In such event,
Seller shall, upon the exercise of the Option by Purchase and in accordance
with the terms and conditions of this Agreement, cause such affiliates to sell,
convey, assign, transfer and deliver to Purchaser such portion(s) of the
Property as may be transferred to such affiliate(s), In the event of any such
transfers of some or all of the Property to any affiliate of Seller, Seller
shall not be relieved of any of its obligations or liability hereunder. In the
event of any such transfers of some or all of the Property to any affiliate of
Seller, Seller shall not be relieved of any obligations or liability hereunder.
From and after the date of any such transfer, the term "Seller" as used herein
shall refer to both Corrections Corporation of America and the recipient of such
transfer collectively, and to each such party individually.

2.2 Exercise of Option. Purchaser may exercise the Option only by
providing to Seller Purchaser's written, unqualified notice of its exercise of
the Option, in accordance with the provisions of Section 11.3 hereof. The
effective time and date of such exercise shall be the date such notice is
deemed received by Seller pursuant to the provisions of Section 11.3 hereof. In
the event the Option is not duly exercised by Purchaser within the time set
forth in Section 2.1 above, the Option and this Agreement shall expire and the
Parties shall have no further obligation hereunder. Notwithstanding any other
term or provision hereof, the Option shall not be exercisable unless and until
(i) Seller has completed its development and construction of the Improvements
on the Property (other than minor punch list items, which shall be diligently
and promptly completed should Purchaser exercise the Option) and Seller has
received final certificates of use and occupancy, and such other permits,
licenses, approvals, agreements and authorizations as are required for the
operation of the Property for its intended use and (ii) Seller and Purchaser
shall have consummated the transactions contemplated by that certain Agreement
of Sale and Purchase, of even date herewith.

<PAGE> 11

2.3 Agreement to Lease. If Purchaser exercises the Option, then, on the
Closing Date, and subject to performance by the Parties of the terms and
provisions of this Agreement, Purchaser shall lease to Seller and Seller shall
lease from Purchaser, the Property at the rental and upon the terms and
conditions set forth in the Lease. The annual base rent under the Lease for the
Property shall be the greater of (i) the fair market rental value of the
Property as reasonably and mutually determined by Seller and Purchaser as of
the Effective Date and (ii) eleven percent (11%) of the Purchase Price.

ARTICLE III

PURCHASE PRICE

3.1 Payment of Purchase Price. The Purchase Price shall be paid by
Purchaser delivering to the Seller, at the Closing, Federal Reserve wire
transfer funds or other immediately available collected funds payable to the
order of the Seller in the sum equal to the Purchase Price, subject to
adjustment as herein provided. On or before the Closing, the Parties shall agree
on an allocation of the Purchase Price as between the Real Property and the
Personal Property.

ARTICLE IV

ITEMS TO BE
FURNISHED TO PURCHASER BY SELLER

4.1 Due Diligence Materials. Within fifteen (15) days after the
Effective Date, Seller shall deliver to Purchaser for its review the following
items:

a. True, correct, complete and legible copies of all Business
Agreements, Warranties, Permits, Accreditations, Applicable Notices, Engineering
Documents and Seller's Operating and Service Agreements (solely for the purposes
of this Section 4.la., the terms Business Agreements, Warranties, Permits, and
Engineering Documents shall include all agreements, documents, and instruments
otherwise included within such definitions, whether or not the same are
assignable by Seller);

b. True, correct, complete and legible copies of tax statements or
assessments for all real estate and personal property taxes assessed against the
Property for the current and the two prior calendar years, if available;

c. True, correct and legible listing of all Fixtures, Personal Property
and Excluded Property, including a current depreciation schedule;

d. True, correct, complete and legible copies of all existing fire and
extended coverage insurance policies and any other insurance policies pertaining
to the Property, if any;

e. True, correct, complete and legible copies of all instruments
evidencing, governing or securing the payment of any loans secured by the
property or related thereto. Seller

<PAGE> 12

may make such instruments available for inspection and copying by Purchaser at
Seller's principal office;

f. True, correct, complete and legible copies of any and all
environmental studies or impact reports relating to the Property, if any, and
any approvals, conditions, orders or declarations issued by any governmental
authority relating thereto (such studies and reports shall include, but not be
limited to, reports indicating whether the Property is or has been contaminated
by Hazardous Materials and whether the Property is in compliance with the
Americans with Disabilities Act and Section 504 of the Rehabilitation Act of
1973, as applicable);

g. True, correct, complete and legible copies of any and all litigation
files with respect to any pending litigation and claim files for any claims made
or threatened, the outcome of which might materially affect the Property or the
use and operation of the Property. Seller may make such files available for
inspection and copying by Purchaser at Seller's principal office.

4.2 Due Diligence Review, During the Review Period, Purchaser shall be
entitled to review the Due Diligence Materials delivered by Seller to Purchaser
pursuant to the provisions of Section 4.1 above. If Purchaser shall, for any
reason in Purchaser's sole discretion, judgment and opinion, disapprove or be
dissatisfied with any aspect of such information, or the Property, then
Purchaser shall be entitled to terminate this Agreement by giving written notice
thereof to Seller on or before the expiration of the Review Period, whereupon
this Agreement shall automatically be rendered null and void, all moneys which
have been delivered by Purchaser to Seller or the Title Company shall be
immediately returned to Purchaser and thereafter neither Party shall have any
further obligations or liabilities to the other hereunder. Alternatively,
Purchaser may give written notice setting forth any defect, deficiency or
encumbrance and specify a time within which Seller way remedy or cure such
matter (before or after the expiration of the Review Period), but Seller shall
have no obligation to remedy or cure any such matters objected to by Purchaser.
If any defect, deficiency or encumbrance, so noticed, is not satisfied or
resolved to the satisfaction of Purchaser, in Purchaser's sole discretion,
within the time period specified in the written notice, this Agreement shall, at
the option of Purchaser, terminate as provided in this Section; said option to
terminate to be exercised, if at all, by Purchaser giving written notice thereof
to Seller and simultaneously paying Seller the sum of One Hundred Dollars
($100.00) within three (3) Business Days after the expiration of said specified
time period. In the event Purchaser fails to exercise its option to terminate
this Agreement within the time and in the manner set forth in this Section 4.2,
then Purchaser shall be deemed to have accepted and approved the Due Diligence
Materials and the Property, and to have waived any such defect, deficiency or
encumbrance.

ARTICLE V

TITLE AND SURVEY

5.1 Title Commitment, Exception Documents and Survey. Within thirty (30)
days after the Effective Date, Seller shall deliver or cause to be delivered to
Purchaser, the Title Commitment, Exception Documents, Survey, and Search
Reports.

<PAGE> 13

5.2 Review Period. Purchaser shall have the right to review the Title
Commitment, Exception Documents, Survey and Search Reports for a period of
thirty (30) days from the date of Purchaser's receipt of the last of such
items. In the event any matters appear therein that are unacceptable to
Purchaser, other than the Permitted Exceptions, Purchaser shall, within said
thirty (30) day period, notify Seller in writing of such fact. Upon the
expiration of said thirty (30) day period, Purchaser shall be deemed to have
accepted all exceptions to title referenced in the Title Commitment and all
matters shown on the Survey except for matters which are the subject of a
notification made under the preceding sentence, and such accepted exceptions
shall be included in the term "Permitted Exceptions" as used herein; provided,
however, in no event shall any of the items listed on Schedule B-1 or C of the
Title Commitment constitute Permitted Exceptions for purposes hereof. In the
event that Purchaser objects to any such matters within the thirty (30) day
Review Period, Seller shall have thirty (30) days from receipt of such notice
within which to eliminate or modify any such unacceptable exceptions or items,
however, Seller shall have no obligation to eliminate or modify any such
unacceptable exceptions or items. In the event that Seller is unable or
unwilling to eliminate or modify such unacceptable items to the satisfaction of
Purchaser on or before the expiration of said thirty (30) day period, Purchaser
may either (a) waive such objections and accept title to the Property subject
to such unacceptable items (which items shall then be deemed to constitute part
of the "Permitted Exceptions"), or (b) terminate this Agreement by written
notice to Seller, whereupon this Agreement shall automatically be rendered null
and void, all moneys which have been delivered by Purchaser to Seller or the
Title Company shall be immediately returned to Purchaser, and thereafter
neither Party shall have any further obligations or liabilities to the other
hereunder.

5.3 Additional Exceptions. In the event that at any time the Title
Commitment, Exception Documents, Survey or Search Reports are modified (other
than the deletion or elimination of any item as to which Purchaser has made an
objection), Purchaser shall have the right to review and approve or disapprove
any such modification and to terminate this Agreement in the event that Seller
is unwilling or unable to eliminate any such matters to the satisfaction of
Purchaser in accordance with the provisions of Section 5.2 above, except that
Purchaser's Review Period as to such additional items shall be for a period
expiring on the date that is the earlier to occur of (a) fifteen (15) days
following the date of Purchaser's receipt of such modification, and (b) the date
of Closing, and all other time periods referred to in Section 5.2 shall expire
on the date that is the earlier of (i) the final day of the specified time
period as set forth therein, and (ii) the Closing Date.

ARTICLE VI

REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS

6.1 Representations and Warranties of Seller. To induce Purchaser to
enter into this Agreement and to purchase the Property, Seller represents and
warrants to Purchaser as follows;

a. Seller has and at the Closing will have, and, upon Purchaser's valid
exercise of the Option, will convey, transfer and assign to Purchaser, good,
indefeasible and insurable title to the Land, free and clear of any deeds of
trust, mortgages, liens, encumbrances, leases,

<PAGE> 14

tenancies, licenses, chattel mortgages, conditional sales agreements, security
interests, covenants, conditions, restrictions, judgments, rights-of-way,
easements, encroachments, claims and any other matters affecting title or use of
the Property, except the Permitted Exceptions.

b. Seller has duly and validly authorized and executed this Agreement,
and has full right, title, power and authority to enter into this Agreement and
to consummate the transactions provided for herein, and the joinder of no
person or entity will be necessary to convey the Property fully and completely
to Purchaser at Closing and to lease the Property from Purchaser following
Closing. The consummation of the transactions contemplated herein does not
require the approval of Seller's shareholders or any third party, except such
third party approvals as Seller has obtained or will obtain prior to the
Closing Date. The execution by Seller of this Agreement and the consummation by
Seller of the transactions contemplated hereby do not, and at the Closing will
not, result in a breach of any of the terms or provisions of, or constitute a
default or a condition which upon notice or lapse of time or both would ripen
into a default under, any indenture, agreement, instrument or obligation to
which Seller is a party or by which the Property or any portion thereof is
bound; and does not, and at the Closing will not, to Seller's knowledge,
constitute a violation of any Laws, order, rule or regulation applicable to
Seller or any portion of the Property of any court or of any federal, state or
municipal regulatory body or administrative agency or other governmental body
having jurisdiction over Seller or any portion of the Property.

C. There are no adverse or other parties in possession of the Property
or of any part thereof. Seller has not granted to any party any license, lease
or other right relating to the use or possession of the Property.

d. As of the date of this Agreement, no notice has been received from
any insurance company that has issued a policy with respect to any portion of
the Property or from any board of fire underwriters (or other body exercising
similar functions), claiming any defects or deficiencies or requiring the
performance of any repairs, replacements, alterations or other work and as of
the Closing no such notice will have been received which shall not have been
cured. As of the date of this Agreement, no notice has been received by Seller
from any issuing insurance company that any of such policies will not be
renewed, or will be renewed only at a higher premium rate than is presently
payable therefor.

e. No pending condemnation, eminent domain, assessment or similar
proceeding or charge affecting the Property or any portion thereof exists as of
the date of this Agreement. Seller has not heretofore received any notice, and
has no knowledge, that any such proceeding or charge is contemplated. Seller, as
of the date of this Agreement, has not received any notice of a proposed
increase in the assessed valuation of the Property.

f. All Improvements (including all utilities) have been, or as of the
Closing will be, substantially completed and installed in accordance with the
plans and specifications approved by the governmental authorities having
jurisdiction to the extent applicable and are transferable to Purchaser without
additional cost. Permanent certificates of occupancy, all licenses, permits,
authorizations and approvals required by all governmental authorities having
jurisdiction, and the

<PAGE> 15

requisite certificates of the local board of fire underwriters (or other body
exercising similar functions) have been, or as of the Closing will be, issued
for the Improvements, and, as of the Closing, where required, all of the same
will be in full force and effect. Except as may be set forth in any of the Due
Diligence Materials, the Improvements, as designed and constructed, comply or
will comply with all statutes, restrictions, regulations and ordinances
applicable thereto, including but not limited to the Americans with Disabilities
Act and Section 504 of the Rehabilitation Act of 1973, as applicable.

g. As of the Closing, the water, sewer, gas and electricity lines,
storm sewer and other utility systems on the Land will be adequate to serve the
utility needs of the Property. All utilities required for the operation of the
Improvements will enter the Land through adjoining public streets or through
adjoining private land in accordance with valid public or private easements that
will inure to the benefit of Purchaser. As of the Closing, all approvals,
licenses and permits required for said utilities will have been obtained and
will be, in force and effect. All of said utilities are installed and operating,
or will be, and all installation and connection charges have been or will be
paid in full.

h. Except as my be set forth in any of the Due Diligence Materials, the
location, construction, occupancy, operation and use of the Property (including
the Improvements) do not violate any applicable law, statute, ordinance, rule,
regulation, order or determination of any governmental authority or any board of
fire underwriters (or other body exercising similar functions), or any
restrictive covenant or deed restriction (recorded or otherwise) affecting the
Property or the location, construction, occupancy, operation or use thereof,
including, without limitation, all applicable zoning ordinances and building
codes, flood disaster laws and health and environmental laws and regulations,
the Americans with Disabilities Act and Section 504 of the Rehabilitation Act of
1973, as applicable.

i. Except as may be set forth in any of the Due Diligence Materials,
there are not any structural defects in any of the buildings or other
Improvements constituting the Property. The Improvements, all heating,
electrical, plumbing and drainage at, or servicing, the Property and all
facilities and equipment relating thereto, will be, as of the Closing, in good
condition and working order and adequate in quantity and quality for the normal
operation of the Property. No part of the Property has been destroyed or damaged
by fire or other casualty. To Seller's knowledge, there are no unsatisfied
requests for repairs, restorations or alterations with regard to the Property
from any person, entity or authority, including but not limited to any lender,
insurance provider or governmental authority.

j. There exist no service contracts, management or other agreements
applicable to the Property, to which Seller is a party or otherwise known to
Seller, other than Seller's Operating and Service Agreements and those
agreements furnished to Purchaser pursuant to Section 4.1.

k. Seller is not in default in any manner which would result in a
material adverse effect on Seller under any of the Business Agreements, or
Seller's Operating and Service Agreements or any of the covenants, conditions,
restrictions, rights-of-way or easements affecting

<PAGE> 16

the Property or any portion thereof and, to Seller's knowledge, no other party
to any of the foregoing is in default thereunder.

1. There are no actions, suits or proceedings pending or, to Seller's
knowledge, threatened against or affecting the Property or any portion thereof,
or relating to or arising out of the ownership or operation of the Property, or
by any federal, state, county or municipal department, commission, board, bureau
or agency or other governmental instrumentality, other than those disclosed to
Purchaser pursuant to Section 4.1. All judicial proceedings concerning the
Property" will be finally dismissed and terminated prior to Closing, excluding
inmate lawsuits and other lawsuits in which Seller is involved in its
ordinary course of business.

m. The Property has free and unimpeded access to presently existing
public highways and/or roads (either directly or by way of perpetual casements);
and, to Seller's knowledge, all approvals necessary therefor will be in full
force and effect as of the Closing. To Seller's knowledge, no fact or condition
exists which would result in the termination of the current access from the
Property to any presently existing public highways and/or roads adjoining or
situated on the Property.

n. There are no attachments, executions, assignments for the benefit of
creditors, or voluntary or involuntary proceedings in bankruptcy or under any
other debtor relief laws contemplated by or, to Seller's knowledge, pending or
threatened against Seller or the Property.

o. Except as may be set forth in any of the Due Diligence Materials, no
Hazardous Materials have been installed, used, generated, manufactured, treated,
handled, refined, produced, processed, stored or disposed of, or otherwise
present in, on or under the Property by Seller or to Seller's knowledge. No
activity has been undertaken on the Property by Seller or to Seller's knowledge
which would cause (i) the Property to become a hazardous waste treatment,
storage or disposal facility within the meaning of, or otherwise bring the
Property within the ambit of RCRA or any Hazardous Materials Law, (ii) a release
or threatened release of Hazardous Materials from the Property within the
meaning of, or otherwise bring the Property within the ambit of, CERCLA or SARA
or any Hazardous Materials Law or (iii) the discharge of Hazardous Materials
into any watercourse, body of surface or subsurface water or wetland, or the
discharge into the atmosphere of any Hazardous Materials which would require a
permit under any Hazardous Materials Law. No activity has been undertaken with
respect to the Property by Seller or to Seller's knowledge which would cause a
violation or support a claim under RCRA, CERCLA, SARA or any Hazardous Materials
Law. No investigation, administrative order, litigation or settlement with
respect to any Hazardous Materials is in existence with respect to the Property,
nor, to Seller's knowledge, is any of the foregoing threatened. No notice has
been received by Seller from any entity, governmental body or individual
claiming any violation of any Hazardous Materials Law, or requiring compliance
with any Hazardous Materials Law, or demanding payment or contribution for
environmental damage or injury to natural resources. Seller has not obtained
and, to Seller's knowledge, is not required to obtain, and Seller has no
knowledge of any reason Purchaser will be required to obtain, any permits,
licenses, or similar authorizations to occupy, operate or use the Improvements
or any part of the Property by reason of any Hazardous Materials Law.
Notwithstanding the representations made herein, such

<PAGE> 17

representations are and shall be deemed to be limited by the matters detailed in
any Phase I Preliminary Site Assessment or other Due Diligence Materials
obtained by or provided to Purchaser in connection herewith.

p. The Property includes all items of property, tangible and
intangible, currently used by Seller in connection with the operation of the
Property, other than the Excluded Personal Property, Seller's Operating and
Service Agreements, and property expressly excluded from the definition of the
Property

q. To Seller's knowledge, the Due Diligence Materials delivered to
Purchaser are true, correct and complete in all material respects,

Provided Purchaser shall have first validly exercised the Option, Seller
hereby agrees to indemnify and defend, at its sole cost and expense, and hold
Purchaser, its successors and assigns, harmless from and against and to
reimburse Purchaser with respect to any and all claims, demands, actions, causes
of action, losses, damages, liabilities, costs and expenses (including, without
limitation, reasonable attorney's fees and court costs) actually incurred of any
and every kind or character, known or unknown, fixed or contingent, asserted
against or incurred by Purchaser at any time and from time to time by reason of
or arising out of (a) the material breach of any representation or warranty of
Seller set forth in Section 6.1, (b) the failure of Seller, in whole or in
part, to perform any obligation required to be performed by Seller pursuant to
Section 6.1 or (c) the ownership, construction, occupancy, operation, use and
maintenance by Seller or its agents of the Property prior to the Closing Date.
This indemnity applies, without limitation, to the violation on or before the
Closing Date of any Hazardous Materials Law in effect on or before the Closing
Date and any and all matters arising out of any act, omission, event or
circumstance existing or occurring on or prior to the Closing Date (including,
without limitation, the presence on the Property or release from the Property of
Hazardous Materials disposed of or otherwise released prior to the Closing
Date), regardless of whether the act, omission, event or circumstance
constituted a violation of any Hazardous Materials Law at the time of its
existence or occurrence. Subject to the provisions of Section 11.1, the
provisions of this Section 6. 1 shall survive the Closing of the transaction
contemplated by this Agreement and shall continue thereafter in full force and
effect for the benefit of Purchaser, its successors and assigns, Notwithstanding
any provision of this Agreement to the contrary, Purchaser may exercise any
right or remedy Purchaser may have at law or in equity should Seller fail to
meet, comply with or perform its indemnity obligations required by this Section
6.1. In the event a defect, claim or deficiency is discovered by Purchaser prior
to Closing or is noticed in writing by Seller to Purchaser prior to Closing,
Purchaser shall either terminate the Agreement as provided herein or waive the
defect, claim or deficiency and proceed to Closing.

The representations and warranties of Seller given herein are, and shall be
deemed to be, effective only in the event Purchaser validly exercises the Option
and only following the Effective Date.

6.2 Covenants and Agreements of-Seller. Seller covenants and agrees with
Purchaser, from the Effective Date until the Closing or earlier termination of
this Agreement:

<PAGE> 18

a. Upon Completion of construction of the Improvements, Seller shall
(i) operate the Property in the ordinary course of Seller's business and in the
same manner as currently operated; and (ii) fully maintain and repair the
Improvements, the Fixtures, and the Personal Property in good condition and
repair.

b. Purchaser shall be entitled to make all inspections or
investigations desired by Purchaser with respect to the Property or any portion
thereof, and shall have complete physical access to the Property, which access
shall occur at such times and in such manner so as to not unreasonably interfere
with Seller's business operations or constitute a safety hazard, as reasonably
determined by Seller.

c. Seller shall cause to be maintained in full force and effect fire
and extended coverage insurance upon the Property and public liability insurance
with respect to damage or injury to persons or property occurring on or relating
to operation of the Property in commercially reasonable amounts.

d. Seller shall pay when due all bills and expenses of the Property.
Seller shall not voluntarily enter into or assume any new Business Agreements
with regard to the Property which are in addition to or different from those
furnished and disclosed to Purchaser and reviewed and approved pursuant to
Section 4. 1.

e. Seller shall not create or voluntarily permit to be created any
liens, easements or other conditions affecting any portion of the Property or
the uses thereof without the prior written consent of Purchaser.

f. Seller will pay, as and when due, all interest and principal and all
other charges payable under any indebtedness of Seller secured by the Property
from the date hereof until Closing, and will not suffer or permit any default or
amend or modify the documents evidencing or securing any such indebtedness
without the prior consent of Purchaser.

g. Seller will, subject to limitations provided by law with respect to
privacy rights of inmates, give to Purchaser, its attorneys, accountants and
other representatives, during normal business hours and as often as may be
reasonably requested, full access to all books, records and files relating to
the Property, so long as the same does not unreasonably interfere with Seller's
business operations.

h. Seller shall not remove any Personal Property or Fixtures from the
Land or Improvements without replacing same with substantially similar items of
equal or greater value and repairing the damage, if any, to the Property as a
result of such removal.

i. During the pendency of this Agreement, Seller, its corporate
officers, directors, and agents shall not negotiate the sale or other
disposition of the Property with any person or entity other than Purchaser, and
shall not take any steps to initiate, consummate or document the

<PAGE> 19

sale or other disposition of the Property, or any portion thereof, to any person
or entity other than Purchaser.

j. Prior to the Closing Date, Seller agrees to notify Purchaser in
writing within three (3) Business Days of any offer received by, delivered to or
communicated to Seller for the purchase, sale, acquisition or other disposition
of the Property.

k. Seller shall provide representations, warranties and consents as may
be reasonably required in connection with any public offering of stock or debt
obligations by Purchaser, including but not limited to, inclusion of financial
statements, summary financial information and other required information
concerning Seller, or Seller as lessee under the Lease, in any Securities and
Exchange Commission filings.

6.3 Representations and Warranties of Purchaser. To induce Seller to enter
into this Agreement and to sell the Property, Purchaser represents and warrants
to Seller as follows:

a. Purchaser has duly and validly authorized and executed this
Agreement, and has full right, title, power and authority to enter into this
Agreement and to consummate the transactions provided for herein, and the
joinder of no person or entity will be necessary to purchase the Property from
Seller at Closing, and to lease the Property to Seller following Closing,

b. The execution by Purchaser of this Agreement and the consummation by
Purchaser of the transactions contemplated hereby do not, and at the Closing
will not, result in a breach of any of the terms or provisions of, or constitute
a default or a condition which upon notice or lapse of time or both would ripen
into a default under, any indenture, agreement, instrument or obligation to
which Purchaser is a party; and does not, and at the Closing will not,
constitute a violation of any Laws, order, rule or regulation applicable to
Purchaser of any court or of any federal, state or municipal regulatory body or
administrative agency or other governmental body having jurisdiction over
Purchaser.

ARTICLE VII

CONDITIONS TO OBLIGATIONS

7.1 Conditions to the Purchaser's Obligations. The obligations of Purchaser
to purchase the Property from Seller and to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at all times
following the Effective Date and as of the Closing (or such other time period
specified below), of each of the following conditions:

a. All of the representations and warranties of Seller set forth in
this Agreement shall be true in all material respects and Seller shall deliver a
Closing Certificate in substantially the same form attached hereto as Exhibit D
updating such representations and warranties.

<PAGE> 20

b. Seller shall have delivered, performed, observed and complied with,
all of the items, instruments, documents, covenants, agreements and conditions
required by this Agreement to be delivered, performed, observed and complied
with by it prior to, or as of, the Closing.

c. Seller shall not be in receivership or dissolution or have made any
assignment for the benefit of creditors, or admitted in writing its inability to
pay its debts as they mature, or have been adjudicated a bankrupt, or have filed
a petition in voluntary bankruptcy, a petition or answer seeking reorganization
or an arrangement with creditors under the federal bankruptcy law or any other
similar law or statute of the United States or any state and no such petition
shall have been filed against it.

d. No material or substantial adverse change shall have occurred with
respect to the condition, financial or otherwise, of the Seller or the Property.

e. Neither the Property nor any part thereof or interest therein shall
have been taken by execution or other process of law in any action prior to
Closing.

f. Seller shall have obtained and delivered to Purchaser a current
report, dated no more than ten (10) days prior to this Agreement, from a
licensed pest control company reasonably acceptable to Purchaser, and which must
show the Property to be free of all termite, or other destructive insect and
pest infestation.

g. During the Review Period, Seller shall have obtained at Seller's
expense and delivered to Purchaser a Phase I environmental site assessment
report, dated no more than 60 days prior to this Agreement, and performed by a
licensed firm.

h. During the Review Period, Purchaser shall have satisfactorily
completed an inspection of the Property with respect to the physical condition
thereof by agents or contractors selected by Purchaser.

i. During the Review Period, Purchaser shall have received, in form
acceptable to Purchaser, evidence of compliance by the Property with all
building codes, zoning ordinances and other governmental entitlements as
necessary for the operation of the Property for the current and intended use,
including, without limitation, certificates of occupancy and such other permits,
licenses, approvals, agreements and authorizations as are required for the
operation of the Property for the current and intended use.

j. During the Review Period, all necessary approvals, consents and the
like of third parties to the validity and effectiveness of the transactions
contemplated hereby have been obtained.

k. During the Review Period, Purchaser is reasonably satisfied that the
Property is sufficient adequate for Seller to carry on the business now being
conducted thereon and the Property is in good condition and repair as reasonably
required for the proper operation and use thereof in compliance with applicable
laws.

<PAGE> 21

1. During the Review Period, Purchaser has reviewed and satisfied
itself with respect to the Due Diligence Materials and shall not have terminated
this Agreement pursuant to the provisions of Section 4.2 hereof.

m. No material portion of the Property shall have been destroyed by
fire or casualty.

n. No condemnation, eminent domain or similar proceedings shall have
been commenced or threatened with respect to any material portion of the
Property.

o. Purchaser shall have been successful in causing the formation of a
real estate investment trust whose interests have been sold to the public and in
connection therewith shall have raised capital in an amount not less than $___.

7.2 Failure of Conditions to Purchaser's Obligations. In the event any one
or more of the conditions to Purchaser's obligations are not satisfied or waived
in whole or in part at any time prior to or as of the Closing, Purchaser, at
Purchaser's option, shall be entitled to: (a) terminate this Agreement by
giving written notice thereof to Seller, whereupon all moneys, if any, which
have been delivered by Purchaser to Seller or the Title Company shall be
immediately refunded to Purchaser and Purchaser shall have no further
obligations or liabilities hereunder; or (b) proceed to Closing hereunder.

7.3 Conditions to the Seller's Obligations. The obligations of Seller to
sell the Property to Purchaser and to consummate the transactions contemplated
by this Agreement are subject to the satisfaction, at all times prior to and as
of the Closing (or such other time period specified below), of each of the
following conditions:

a. All of the representations and warranties of Purchaser set forth in
this Agreement shall be true at all times prior to, at and as of, the Closing in
all material respects and Purchaser shall deliver a Closing Certificate in
substantially the same form attached hereto as Exhibit D updating such
representations and warranties.

b. Purchaser shall have delivered, performed, observed and complied
with, all of the items, instruments, documents, covenants, agreements and
conditions required by this Agreement to be delivered, performed, observed and
complied with by it prior to, or as of, the Closing.

c. Purchaser shall not be in receivership or dissolution or have made
any assignment for the benefit of creditors, or admitted in writing its
inability to pay its debts as they mature, or have been adjudicated a bankrupt,
or have filed a petition in voluntary bankruptcy, a petition or answer seeking
reorganization or an arrangement with creditors under the federal bankruptcy law
or any other similar law or statute of the United States or any state and no
such petition shall have been filed against it.

<PAGE> 22

d. Purchaser shall have been successful in causing the formation of a
real estate investment trust whose interests have been sold to the public and in
connection therewith shall have raised capital in an amount not less than $___.

7.4 Failure of Conditions to Seller's Obligations. In the event any one or
more of the conditions to Seller's obligations are not satisfied or waived in
whole or in part at any time prior to or as of the Closing, Seller, at Seller's
option, shall be entitled to: (a) terminate this Agreement by giving written
notice thereof to Purchaser, whereupon all moneys, if any, which have been
delivered by Seller to Purchaser or the Title Company shall be immediately
refunded to Seller and Seller shall have no further obligations or liabilities
hereunder; or (b) proceed to Closing hereunder.

ARTICLE VIII

PROVISIONS WITH RESPECT TO THE CLOSING

8.1 Seller's Closing Obligations. At the Closing, Seller shall furnish and
deliver to the Title Company for delivery to Purchaser, at Seller's expense, the
following:

a. The Deed, Title Policy (or the Title Commitment marked-up and
initialed by the Title Company), Bill of Sale, Certificate of Non-Foreign
Status, Closing Certificate and Lease, each duly executed and acknowledged by
Seller and, as appropriate, in recordable form acceptable in the state and
county in which the Property is located.

b. Certificates of casualty and fire insurance for the Property and
satisfactory evidence of all other insurance coverages as required pursuant to
the Lease showing Purchaser as additional insured and loss payee thereunder,
where appropriate, with appropriate provisions for prior notice to Purchaser in
the event of cancellation or termination of such policies and otherwise in form
and substance reasonably satisfactory to Purchaser.

c. Search Reports, dated not more than fifteen (15) days prior to
Closing, evidencing no UCC-1 Financing Statements or other filings in the name
of Seller with respect to the Property which will remain on the Property after
the Closing.

d. Such affidavits or letters of indemnity as the Title Company shall
require in order to omit from the Title Insurance Policy all exceptions for
unfiled mechanic's, materialman's or similar liens.

e. Any and all transfer declarations or disclosure documents, duly
executed by the appropriate parties, required in connection with the Deed by any
state, county or municipal agency having jurisdiction over the Property or the
transactions contemplated hereby.

f. An opinion of Seller's counsel, dated as of the Closing Date, in the
form of Exhibit J-1, attached hereto.

<PAGE> 23

g. Such instruments or documents as are necessary, or reasonably
required by Purchaser or the Tide Company, to evidence the status and capacity
of Seller and the authority of the person or persons who are executing the
various documents on behalf of Seller in connection with the purchase and sale
transaction contemplated hereby.

h. Such other documents as are reasonably required by Purchaser to
carry out the terms and provisions of this Agreement.

i. Duplicates of keys, combinations, codes and security information to
all locks on the Property in the possession of Seller, but not to include access
to [describe restricted areas, if any) or areas with controlled substances.

8.2 Purchaser's Closing Obligations. At the Closing, Purchaser shall
furnish and deliver to Seller, at Purchaser's expense, the following:

a. Federal Reserve, wire transfer funds or other immediately available
collected funds, payable to the order of Seller representing the cash portion of
the Purchase Price due in accordance with Section 3.1 herein.

b.The Closing Certificate and Lease, duly executed and acknowledged by
Purchaser.

c. Such instruments or documents as are necessary, or reasonably
required by Seller or the Title Company, to evidence the status and capacity of
Purchaser and the authority of the person or persons who are executing the
various documents on behalf of Purchaser in connection with the purchase and
sale transaction contemplated hereby.

d. An Opinion of Purchaser's counsel, dated as of the Closing Date, in
the form of Exhibit J-2, attached hereto.

e. Such other documents as are reasonably required by Seller to carry
out the terms and provisions of this Agreement.

f. All necessary approvals, consents, certificates and the like of
third parties to the validity and effectiveness of the transaction contemplated
hereby.

ARTICLE IX

EXPENSES OF CLOSING

9.1 Adjustments. There shall be no adjustment of taxes, assessments, water
or sewer charges, gas, electric, telephone or other utilities, operating
expenses, employment charges, premiums on insurance policies, rents or other
normally proratable items, it being agreed and understood by the Parties that
the Seller shall be obligated to pay such items under the terms of the Lease.

<PAGE> 24

9.2 Closing Costs. Seller shall pay (a) all title examination fees
and premiums for the Title Policy; (b) the cost of the Search Reports; (c) the
cost of the Survey; (d) Seller's legal, accounting and other professional fees
and expenses and the cost of all opinions, certificates, instruments, documents
and papers required to be delivered, or to cause to be delivered, by Seller
hereunder, including without limitation, the cost of performance by Seller of
its obligations hereunder; and (e) all other costs and expenses which are
required to be paid by Seller pursuant to other provisions of this Agreement.
Purchaser shall pay (a) any and all state, municipal or other documentary or
transfer taxes payable in connection with the delivery of any instrument or
document provided in or contemplated by this Agreement or any agreement or
commitment described or referred to herein;(b) the charges for or in connection
with the recording and/or filing of any instrument or document provided herein
or contemplated by this Agreement or any agreement or document described or
referred to herein; (c) Purchaser's legal, accounting and other professional
fees and expenses and the cost of all opinions, certificates, instruments,
documents and papers required to be delivered, or to cause to be delivered, by
Purchaser hereunder, including, without limitation, the cost of performance by
Purchaser of its obligations hereunder; and (d) all other costs and expenses
which are required to be paid by Purchaser pursuant to other provisions of this
Agreement. Purchaser and Seller shall each be responsible for other costs in
the usual and customary manner for this kind of transaction in the county where
the Property is located.

9.3 Commissions/Broker's Fees. Seller hereby represents and
warrants to Purchaser that it has not contacted any real estate broker, finder
or any other party in connection with this transaction, and that it has not
taken any action which would result in any real estate broker's, finder's or
other fees being due or payable to any party with respect to the transaction
contemplated hereby. Purchaser hereby represents and warrants to Seller that
Purchaser has not contacted any real estate broker, finder or any other party
in connection with this transaction, and that it has not taken any action which
would result in any real estate broker's, finder's or other fees being due or
payable to any party with respect to the transaction contemplated hereby. Each
Party hereby indemnifies and agrees to hold the other Party harmless from any
loss, liability, damage, cost or expenses (including reasonable attorneys'
fees) resulting to such other Party by reason of a breach of the
representation and warranty made by such Party herein.

ARTICLE X

DEFAULT AND REMEDIES

10.1 Seller's Default; Purchaser's Remedies.

a. Seller's Default. Seller shall be deemed to be in
default hereunder upon the occurrence of one of the following events: (i) any
of Seller's warranties or representations set forth herein shall be untrue in
any material respect when made or at Closing; or (ii) Seller shall fail to
meet, comply with, or perform any covenant, agreement or obligation on its part
required within the time limits and in the manner required in this Agreement,
which, in either of such events, is not cured by Seller within ten (10) days
following receipt by Seller of written notice of default from Purchaser.

<PAGE> 25

b. Purchaser's Remedies. In the event Seller shall be
deemed to be in default hereunder Purchaser may, at Purchaser's sole option, do
any one or more of the following: (i) terminate this Agreement by written
notice delivered to Seller on or before the Closing; and/or (ii) enforce
specific performance of this Agreement against Seller including Purchaser's
reasonable costs and attorneys fees in connection therewith; and/or (iii)
exercise any other right or remedy Purchaser may have at law or in equity by
reason of such default including, but not limited to, the recovery of
reasonable attorneys' fees incurred by Purchaser in connection herewith.

c. Return of Payments. Upon the occurrence of any event
deemed to be a default by Seller hereunder, all payments previously made by
Purchaser to Seller or the Title Company hereunder shall be forthwith returned
to Purchaser by the Title Company on receipt of written notice from Purchaser
that Seller has defaulted under this Agreement, which written notice need not
be accompanied by any other document or consent of any other party hereto. If
such sums are to be returned to Purchaser in accordance with this Section
10.1(c), Seller shall promptly, on written request from Purchaser, execute and
deliver such documents as may be required to cause the Title Company to return
such sums to Purchaser.

10.2 Purchaser's Default; Seller's Remedies.

a. Purchaser's Default. Purchaser shall be deemed to be in
default hereunder upon the occurrence of one of the following events: (i) any
of Purchaser's warranties or representations set forth herein shall be untrue
in any material respect when made or at Closing; or (ii) Purchaser shall fail
to meet, comply with, or perform any covenant, agreement or obligation on its
part required within the time limits and in the manner required in this
Agreement, which, in either of such events, is not cured by Purchaser within
ten (10) days following receipt by Purchaser of written notice of default from
Seller.

b. Seller's Remedies. In the event Purchaser shall be
deemed to be in default hereunder Seller may, at Seller's sole option, do any
one or more of the following: (i) terminate this Agreement by written notice
delivered to Purchaser on or before the Closing; and/or (ii) enforce specific
performance of this Agreement against Purchaser including Seller's reasonable
costs and attorneys fees in connection therewith; and/or (iii) exercise any
other right or remedy Seller may have at law or in equity by reason of such
default including, but not limited to, the recovery of reasonable attorneys'
fees incurred by Seller in connection herewith.

c. Return of Payments. Upon the occurrence of any event
deemed to be a default by Purchaser hereunder, all payments previously made by
Purchaser to Seller or the Title Company hereunder shall be forthwith paid to
Seller by the Title Company on receipt of written notice from Seller that
Purchaser has defaulted under this Agreement, which written notice need not be
accompanied by any other document or consent of any other party hereto. If such
sums are to be paid to Seller in accordance with this Section 10.1(c),
Purchaser shall promptly, on written request from Seller, execute and deliver
such documents as may be required to cause the Title Company to pay such sums
to Seller.

22
<PAGE> 26

ARTICLE XI

MISCELLANEOUS

11.1 Survival. All of the representations, warranties, covenants,
agreements and indemnities of Seller and Purchaser contained in this Agreement,
to the extent not performed at the Closing, shall survive the Closing for the
period of one (1) year after the Closing Date and shall not be deemed to merge
upon the acceptance of the Deed by Purchaser.

11.2 Right of Assignment. Neither this Agreement nor any interest
herein may be assigned or transferred by Purchaser to any person, firm,
corporation or other entity without the prior written consent of Seller, which
consent may be given or withheld in the sole discretion of Seller.

11.3 Notices. All notices, requests and other communications under
this Agreement shall be in writing and shall be either (a) delivered in person,
(b) sent by certified mail, return-receipt requested, (c) delivered by a
recognized delivery service or (d) sent by facsimile transmission and addressed
as follows:

If intended for Purchaser: CCA Prison Realty Trust
2200 Abbott Martin Road, Suite 201
Nashville, Tennessee 37215
Phone: (615) 460-1220
Fax: (615) 460-1206
Attention: Michael W. Devlin

With a copy to: Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Phone: (615) 742-4200
Fax: (615) 742-4539
Attention: Kim A. Brown

If intended for Seller: Corrections Corporation of America
102 Woodmont Boulevard, Suite 800
Nashville, Tennessee 37205
Phone: (615) 292-3100
Fax: (615) 269-8635
Attention: Darrell K. Massengale

23
<PAGE> 27

With a copy to: Stokes & Bartholomew, P.A.
424 Church Street, Suite 2800
Nashville, Tennessee 37219
Phone: (615) 259-1450
Fax: (615) 259-1470
Attention: Elizabeth E. Moore

or at such other address, and to the attention of such other person, as the
parties shall give notice as herein provided. A notice, request and other
communication shall be deemed to be duly received if delivered in person or by
a recognized delivery service, when delivered to the address of the recipient,
if sent by mail, on the date of receipt by the recipient as shown on the
return-receipt card, or if sent by facsimile, upon receipt by the sender of an
acknowledgment or transmission report generated by the machine from which the
facsimile was sent indicating that the facsimile was sent in its entirety to
the recipient's facsimile number; provided that if a notice, request or other
communication is served by hand or is received by facsimile on a day which is
not a Business Day, or after 5:00 P.M. on any Business Day at the addressee's
location, such notice or communication shall be deemed to be duly received by
the recipient at 9:00 a.m. on the first Business Day thereafter.

11.4 Entire Agreement; Modifications. This Agreement embodies and
constitutes the entire understanding between the Parties with respect to the
transactions contemplated herein, and all prior or contemporaneous agreements,
understandings, representations and statements (oral or written) are merged
into this Agreement. Neither this Agreement nor any provision hereof may be
waived, modified, amended, discharged or terminated except by an instrument in
writing signed by the Party against whom the enforcement of such waiver,
modification, amendment, discharge or termination is sought, and then only to
the extent set forth in such instrument.

11.5 Applicable Law. THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TENNESSEE. The Parties agree that jurisdiction and venue
for any litigation arising out of this Agreement shall be in the Courts of
Davidson County, Tennessee or the U.S. District Court for the Middle District
of Tennessee and, accordingly, consent thereto.

11.6 Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe, or limit the
scope or intent of this Agreement or any of the provisions hereof.

11.7 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors, and assigns.

11.8 Extension of Dates. Notwithstanding anything to the contrary
contained in this Agreement, if Seller shall fail to deliver any document or
item required pursuant to any of the terms and provisions of Article IV and/or
Article V within the applicable time period required,

<PAGE> 28

Purchaser, at its option, shall have the right to extend the date of expiration
of the Review Period and correspondingly the date of Closing by the number of
days elapsing from the date such items were required to be delivered and the
date such items were actually delivered to Purchaser. Nothing herein shall
diminish Seller's obligation to timely furnish such items.

11.9 Time is of the Essence. With respect to all provisions of this
Agreement, time is of the essence. However, if the first date of any period
which is set out in any provision of this Agreement falls on a day which is not
a Business Day, then, in such event, the time of such period shall be extended
to the next day which is a Business Day.

11.10 Waiver of Conditions. Any Party may at any time or times, at
its election, waive any of the conditions to its obligations hereunder, but any
such waiver shall be effective only if contained in a writing signed by such
Party. No waiver by a Party of any breach of this Agreement or of any warranty
or representation hereunder by the other Party shall be deemed to be a waiver
of any other breach by such other Party (whether preceding or succeeding and
whether or not of the same or similar nature), and no acceptance of payment or
performance by a Party after any breach by the other Party shall be deemed to
be a waiver of any breach of this Agreement or of any representation or
warranty hereunder by such other Party, whether or not the first Party knows of
such breach at the time it accepts such payment or performance. No failure or
delay by a Party to exercise any right it may have by reason of the default of
the other Party shall operate as a waiver of default or modification of this
Agreement or shall prevent the exercise of any right by the first Party while
the other Party continues to be so in default.

11.11 Memorandum of Option. Upon request of Purchaser, Seller agrees
to execute a memorandum of option, in form and substance reasonably
satisfactory to the Parties, suitable for recording, evidencing the granting of
the Option herein contained.

<PAGE> 29

EXECUTED to be effective as of the date shown on the front cover hereof.

PURCHASER:

CCA PRISON REALTY TRUST

By:
--------------------------------------
Its:
-------------------------------------

Date:
-------------------------------------

Purchaser's Tax Identification Number:
---

SELLER:

CORRECTIONS CORPORATION OF AMERICA

By:
--------------------------------------
Its:
-------------------------------------

Date:
-------------------------------------

Seller's Tax Identification Number:
------

<PAGE> 30

AGREEMENT OF TITLE COMPANY

By its execution of this Agreement, the Title Company agrees to: (a)
timely file a return with the Internal Revenue Service on Form 1099-B, Form
1099-S and/or such other form or forms as the Internal Revenue Service may by
form or regulation require, and (b) furnish Purchaser with a written statement
showing the name and address of the Title Company and the information shown on
such form or forms with respect to Purchaser, and (c) comply with the
provisions of the Agreement which are applicable to the Title Company. Such
form or forms shall be filed in order that the parties to this transaction will
be in compliance with Section 6045 of the Internal Revenue Code of 1986, as
amended. Purchaser and Seller shall each provide their taxpayer identification
numbers to the Title Company so that such information may be included in the
form or forms filed by the Title Company.

LAWYERS TITLE INSURANCE CORPORATION

By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------

marquis

27
<PAGE> 31

LIST OF EXHIBITS

Exhibit A - Real Property Description

Exhibit B - Bill of Sale and Assignment

Exhibit C - Certificate of Non-Foreign Status

Exhibit D - Closing Certificate

Exhibit E - Deed

Exhibit F - Excluded Personal Property

Exhibit G - Master Agreement to Lease and Lease Agreement

Exhibit H - Personal Property

Exhibit I - Surveyor's Certificate

Exhibit J-1 - Opinion of Seller's Counsel

Exhibit J-2 - Opinion of Purchaser's Counsel
<PAGE> 32

EXHIBITS

OPTION AGREEMENT

BY AND BETWEEN

CORRECTIONS CORPORATION OF AMERICA,
a Delaware corporation
("SELLER")

AND

CCA PRISON REALTY TRUST
a Maryland real estate investment trust

("PURCHASER")
<PAGE> 33

EXHIBIT A

PROPERTY DESCRIPTION
<PAGE> 34

EXHIBIT B

BILL OF SALE AND ASSIGNMENT

STATE OF ______________________ Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF _____________________ Section

THAT, CORRECTIONS CORPORATION OF AMERICA, a Delaware corporation ("Grantor" or
"Seller"), for and in consideration of the sum of Ten and No/100 Dollars
($10.00) and other good and valuable consideration to it in hand paid by CCA
PRISON REALTY TRUST, a Maryland real estate investment trust ("Grantee" or
"Purchaser"), to the extent legally permissible, has GRANTED, SOLD, ASSIGNED,
TRANSFERRED, CONVEYED, and DELIVERED and does by these presents GRANT, SELL,
ASSIGN, TRANSFER, CONVEY, and DELIVER unto the said Purchaser, all of Seller's
right, title and interest in and to the following described properties, rights,
and interests (such properties, rights and interests being hereinafter
collectively referred to as the "Personal Property", as defined in that certain
Agreement of Sale and Purchase, dated as of ______________, 199___, by and
between Seller and Purchaser and being hereinafter referred to as the
"Agreement"), located on or about that certain land described on Exhibit A,
attached hereto and incorporated herein for all purposes, or the buildings,
improvements, structures and Fixtures (as defined in the Agreement) thereon
(such land, buildings, improvements, structures and Fixtures being hereinafter
collectively referred to as the "Real Property" as defined in the Agreement),
or used in connection with the operation thereof:

All permits, licenses (but excluding Seller's business and
operating licenses), approvals, entitlements and other governmental,
quasi-governmental and nongovernmental authorizations including, without
limitation, certificates of use and occupancy, required in connection
with the ownership, planning, development, construction, use, operation
or maintenance of the Real Property, to the extent the same are
assignable by Seller (the "Permits" as defined in the Agreement), any
leases, contract rights, loan agreements, mortgages, easements,
covenants, restrictions or other agreements or instruments affecting all
or a portion of the Real Property or Personal Property, to the extent
the same are assignable by Seller, but specifically excluding all of
Seller's Operating and Service Agreements (as defined in the Agreement)
(the "Business Agreements" as defined in the Agreement), and other
intangible property or any interest therein owned or held by Seller in
connection with the Real Property, including all water rights and
reservations, rights to use the trade name applicable to the Real
Property, and zoning rights related to the Real Property, or any part
thereof, to the extent the same are assignable by Seller; provided,
however, such Personal Property shall not include the general corporate
trademarks, trade names (except as set forth above), service marks,
logos or insignia or the books and records of Seller, Seller's accounts
receivable and Seller's business and operating licenses for the
facilities on the Real Property (the "Intangible Property" as defined in
the Agreement).

<PAGE> 35
All warranties and guaranties with respect to the Real
Property or Personal Property, whether express or implied, which Seller
now holds or under which Seller is the beneficiary, to the extent the
same are assignable by Seller (the "Warranties" as defined in the
Agreement).

All site plans, surveys, soil and substrata studies,
architectural drawings, plans and specifications, engineering plans and
studies, floor plans, landscape plans, Americans with Disabilities Act
compliance reports, environmental reports and studies, professional
inspection reports, construction and/or architect's reports or
certificates, feasibility studies, appraisals, and other similar plans
and studies that relate to the Real Property, to the extent the same are
assignable by Seller or the Personal Property (the "Engineering
Documents" as defined in the Agreement).

All those items of tangible personal property described on
Exhibit B, attached hereto and incorporated herein for all purposes, now
or on the Closing Date owned by Seller.

THERE IS EXPRESSLY EXCLUDED FROM THE PERSONAL PROPERTY THE FOLLOWING:
(i) Excluded Personal Property as defined in the Agreement, (ii) Fixtures as
defined in the Agreement, (iii) personal property owned by employees of Seller
and personal property owned by inmates housed at the Real Property, and (iv)
Seller's Operating and Service Agreements as defined in the Agreement.

TO HAVE AND TO HOLD the Personal Property unto the said Purchaser, its
successors and assigns, forever, and Seller does hereby bind itself and its
successors to warrant and forever defend, all and singular, title to the said
Personal Property unto the said Purchaser, its successors and assigns, against
every person whomsoever lawfully claiming or to claim the same, or any part
thereof by, through or under Seller, but not further or otherwise.

Seller and its successors hereby warrants, represents, covenants and
agrees with Purchaser as follows:

(i) That Seller is the owner of the Personal Property, which
Personal Property is free and clear of any and all liens, security interests,
or other encumbrances except the Permitted Exceptions (as defined in the
Agreement) and attached hereto as Schedule A and incorporated herein by
reference for all purposes, and this sale and assignment is made and accepted
expressly subject to the matters set forth on Schedule A attached hereto;

(ii) That Seller shall indemnify and hold harmless Purchaser from
and against any and all liability, loss, damage, cost or expense, including
reasonable attorneys' fees, which Purchaser may suffer or incur by reason of
any act or cause of action occurring or accruing prior to the effective date
hereof and arising out of the ownership and/or operation of the Real Property
or the Personal Property, except for (a) any obligations expressly assumed
under the Agreement by the Purchaser; and (b) any liability, loss, damage, cost
or expense arising out of the actions or omissions of the Purchaser.

<PAGE> 36
Purchaser and its successors and assigns hereby warrant, represent,
covenant and agree with Seller that Purchaser shall indemnify and hold harmless
Seller from and against any and all liability, loss, damage, cost or expense,
including reasonable attorneys' fees, which Seller may suffer or incur by
reason of any act or cause of action occurring or accruing subsequent to the
effective date hereof and arising out of the ownership and/or operation of the
Real Property or the Personal Property, except (i) any obligations which are
expressly retained by the Seller pursuant to the terms and provisions of a
written agreement with the Purchaser, and (ii) any liability, loss, damage,
cost or expense arising out of the actions or omissions of the Seller.

The agreements, covenants, warranties and representations herein set
forth shall be binding upon and shall inure to the benefit of Seller and
Purchaser and their respective successors and assigns.

IN WITNESS WHEREOF, the parties hereto have caused this Bill of Sale and
Assignment to be executed by its duly authorized officers effective as of the
day of _____________, 19___.

SELLER:

CORRECTIONS CORPORATION OF AMERICA

By:___________________________________

Its:__________________________________

PURCHASER:

CCA PRISON REALTY TRUST

By:____________________________________

Its:___________________________________
<PAGE> 37

STATE OF ____________________________________ )
COUNTY OF ___________________________________ )

Before me, the undersigned, a Notary Public of the State and County
aforesaid, personally appeared ________________________________, with whom I am
personally acquainted (or proved to me on the basis of satisfactory evidence),
and who, upon oath, acknowledged _____self to be _________________ of
CORRECTIONS CORPORATION OF AMERICA, the within named bargainor, a Delaware
corporation, and that ____he, as such ________________________________, being
authorized so to do, executed the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by ___self as
________________________________.

WITNESS my hand, at office, this _______ day of ____________________,
1997.

________________________________
Notary Public
My Commission Expires:
______________________________

STATE OF __________________________ )
COUNTY OF _________________________ )

Before me, the undersigned, a Notary Public of the State and County
aforesaid, personally appeared ________________________________, with whom I am
personally acquainted (or proved to me on the basis of satisfactory evidence),
and who, upon oath, acknowledged _____self to be _____________________ of CCA
PRISON REALTY TRUST, the within named bargainor, a Maryland real estate
investment trust, and that ____he, as such _________________, being authorized
so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the real estate investment trust by ___self
as ________________________________.

Witness my hand, at office, this _________ day of _____________________,
1997.

________________________________
Notary Public
My Commission Expires:
______________________________
<PAGE> 38

Exhibit A to Bill of Sale and Assignment

Property Description
<PAGE> 39

Exhibit B to Bill of Sale and Assignment

Items of Personal Property
<PAGE> 40

Schedule A to Bill of Sale and Assignment

Permitted Exceptions
<PAGE> 41

EXHIBIT C

CERTIFICATE OF NON-FOREIGN STATUS

STATE OF __________________________ Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF _________________________ Section

BEFORE ME, the undersigned authority, on this day personally appeared
_______________________ ("Affiant"), of CORRECTIONS CORPORATION OF AMERICA
("Seller"), who after being duly sworn, upon Seller's oath did depose and state
under penalty of perjury that for purposes of Section 1445 of the Internal
Revenue Code of 1986, as amended, in connection with the sale, transfer and
conveyance of that certain property located and particularly described on
Exhibit A attached hereto and incorporated herein for all purposes (the
"Property"), and in order to inform CCA PRISON REALTY TRUST, a Maryland real
estate investment trust ("Purchaser"), that withholding of tax is not required
upon the disposition of the Property by Seller:

(i) that Seller is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as these terms are defined
in the Internal Revenue Code and Income Tax Regulations);

(ii) that Seller's United States taxpayer identification number is
_________________________________________;

(iii) that Seller's mailing address is 102 Woodmont Boulevard, Suite
800, Nashville, Tennessee 37205; and

(iv) that Seller understands that this Affidavit may be disclosed
to the Internal Revenue Service by Purchaser and that any
false statement contained herein could be punishable by fine,
imprisonment or both.

Under penalties of perjury Affiant declares that he has examined this
Affidavit, that to the best of his knowledge and belief it is true, correct and
complete, and that Affiant has the authority to sign this Affidavit on behalf
of Seller.

CORRECTIONS CORPORATION OF AMERICA

By:____________________________________

Its:____________________________________
<PAGE> 42

STATE OF ____________________________________ )
COUNTY OF ___________________________________ )

WITNESS my hand, at office, this _______ day of ____________________,
1997.

________________________________________
Notary Public
My Commission Expires:
______________________________
<PAGE> 43

Exhibit A to Certificate of Non-Foreign Status

Property Description
<PAGE> 44

EXHIBIT D

CLOSING CERTIFICATE

The undersigned hereby certifies that the representations and warranties
contained in Section [5.1/5.3] of that certain Agreement of Sale and Purchase
(the "Agreement") dated _______________________________, by and between
CORRECTIONS CORPORATION OF AMERICA, a Delaware corporation ("Seller"), and CCA
PRISON REALTY TRUST, a Maryland real estate investment trust ("Purchaser"),
which representations and warranties are incorporated herein as though set out
in full herein, are true and correct in all material respects as of the Closing
Date defined in the Agreement as if made on and as of the Closing Date, shall
survive the consummation of the purchase and sale transaction as contemplated
by and for the time period provided in the Agreement and shall not be deemed to
merge upon the acceptance of the deed by Purchaser delivered in connection with
the consummation of such purchase and sale transaction.

This certificate is given to [Seller/Purchaser] with the realization and
understanding that all matters referenced above are material to the decision of
[Seller/Purchaser] to close said sale and purchase on the Closing Date and
[Seller/Purchaser] is acting in reliance thereon.

Dated this ________ day of _______________________, 199___.

____________________________________

By:_________________________________

Its:________________________________

<PAGE> 1
EXHIBIT 10.2

MASTER AGREEMENT TO LEASE

BETWEEN

CCA PRISON REALTY TRUST, LANDLORD

AND

CORRECTIONS CORPORATION OF AMERICA, TENANT

DATED: ____________, 1997
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
ARTICLE I SEPARATE LEASE AGREEMENTS; PREMISES AND TERM . . . . . . . . . . . . . . . . . . . . . . . . . .
1.01 Separate Lease Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.02 Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.03 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.04 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.05 Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE II RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.01 Bast Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.02 Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.02.01 Other Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.03 Place(s) of Payment of Rent; Direct Payment of Other Additional Rent . . . . . . . . . . . . . .
2.04 Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.05 No Termination, Abatement, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE III IMPOSITIONS AND UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.01 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.02 Definition of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.03 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.04 Escrow of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.05 Discontinuance of Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE IV INSURANCE . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.01 Property Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.02 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.03 Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.04 Replacement Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.05 Blanket Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.06 No Separate Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.07 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.08 Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE V INDEMNITY; HAZARDOUS SUBSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.01 Tenant's Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.02 Hazardous Substances or Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.03 Limitation of Landlord's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE VI USE AND ACCEPTANCE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.01 Use of Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.02 Acceptance of Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.03 Conditions of Use and Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

</TABLE>

i
<PAGE> 3

<TABLE>
<S> <C>
6.04 Financial Statements and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE VII REPAIRS, COMPLIANCE WITH LAWS, AND MECHANICS' LIENS . . . . . . . . . . . . . . . . . . . . . . .
7.01 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.02 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.03 Required Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.04 Mechanics' Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.05 Replacements of Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE VIII ALTERATIONS AND SIGNS; TENANT'S PROPERTY; CAPITAL
ADDITIONS TO THE LEASED PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.01 Tenant's Right to Construct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.02 Scope of Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.03 Cooperation of Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.04 Commencement of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.05 Rights in Tenant Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.06 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.07 Requirements for Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.08 Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.09 Financings of Capital Additions to a Leased Property . . . . . . . . . . . . . . . . . . . . . .

ARTICLE IX DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.03 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.04 Performance of Tenant's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.05 Late Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.06 Litigation; Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.07 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.08 Escrows and Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.09 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE X DAMAGE AND DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.01 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.02 Landlord's Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.03 Landlord's Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.04 Rent Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.05 Substantial Damage During Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.06 Damage Near End of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE XI CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.01 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.02 Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

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<TABLE>
<S> <C>
11.03 Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.04 Landlord's Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.05 Award Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.06 Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE XII TENANT'S RIGHT OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.01 Rights of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.02 Restriction on Exercise of Purchase Refusal Right . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE XIII ASSIGNMENT AND SUBLETTING; ATTORNMENT . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .
13.01 Prohibition Against Subletting and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . .
13.02 Changes of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.03 Operating/Service Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.03.01 Permitted Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.03.02 Terms of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.03.03 Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.03.04 Assignment of Rights in Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.03.05 Licenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.04 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.05 REIT Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.06 Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE XIV ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.01 Controversies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.02 Appointment of Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.03 Arbitration Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.04 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.05 Enforcement of the Arbitration Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE XV QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT, ESTOPPEL
CERTIFICATES . . . . . . . . . . . . . . . . . . . . .
15.01 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.02 Landlord Mortgages; Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.03 Attornment; Non-Disturbance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.04 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE XVI MISCELLANEOUS . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.02 Advertisement of Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.03 Landlord's Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.04 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.05 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.06 Captions and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ARTICLE XVII NONDISCLOSURE AND RELATED MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.01 Covenant Not to Disclose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.02 Non-Interference Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.03 Business Materials and Property Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.04 Breach by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>

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<TABLE>
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16.07 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.08 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.09 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.10 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.11 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.12 Transfer of Permits, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.13 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.14 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.15 No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.16 Laches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.18 Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.19 Construction of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.20 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.21 Relationship of Landlord and Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.22 Landlord's Status as a REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.23 Sale of Real Estate Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

</TABLE>

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MASTER AGREEMENT TO LEASE

This Master Agreement to Lease ("Agreement") dated as of the ______
day of _______________________, 1997 by and between CCA PRISON REALTY TRUST, a
Maryland real estate investment trust ("Landlord") and CORRECTIONS CORPORATION
OF AMERICA, a Delaware corporation ("Tenant").

RECITALS

WHEREAS, Tenant (or one or more of Tenant's affiliates) has
concurrently conveyed to Landlord various properties upon which Tenant engages
in the business of the development and management of correctional and detention
facilities, which properties are listed on Schedule A attached hereto (the
"Real Estate Conveyance"), and Landlord and Tenant desire to provide for the
lease by Landlord back to the Tenant of such properties; and

WHEREAS, Landlord may from time to time lease additional properties
that Landlord may acquire to Tenant; and

WHEREAS, Landlord and Tenant desire that each of the properties listed
on Schedule A and each additional property that Landlord may lease to Tenant
shall be the subject of a separate and individual lease agreement describing
said property, the rent and various other terms of said lease (each such lease
agreement referred to individually as a "Lease," and the property that is the
subject of an individual Lease being referred to as "Leased Property"); and

WHEREAS, Landlord and Tenant desire to set forth in this Agreement
certain terms and conditions applicable to all Leases of all Leased Properties,
except as any individual Lease with respect to a particular Leased Property may
otherwise provide;

NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein and in each Lease, Landlord and
Tenant agree as follows:

ARTICLE I
SEPARATE LEASE AGREEMENTS; PREMISES AND TERM

1.01 Separate Lease Agreements. Landlord and Tenant are
concurrently entering into a separate Lease for each of the Leased Properties
referred to in Schedule A hereto, and may in the future enter into one or more
additional separate Leases for one or more additional Leased Properties.
Except as specifically set forth in a separate Lease, or any amendment,
supplement, schedule or exhibit thereto, all of the provisions of this
Agreement shall be deemed to be incorporated into and made a part of each such
separate Lease made between the Landlord as landlord (or Lessor) and the Tenant
as tenant (or Lessee) during the term of such separate Lease.
<PAGE> 7

1.02 Leased Property. Except as set forth in an individual Lease
(including any schedule or exhibit thereto), the property that is the subject
of each Lease and that shall be considered as leased by the Landlord to the
Tenant thereunder shall consist of:

(a) The land described in the Lease, together with all
rights, titles, appurtenant interests, covenants, licenses, privileges
and benefits thereto belonging, and any easements, rights-of-way,
rights of ingress or egress or other interests in, on, or to any land,
highway, street, road or avenue, open or proposed, in, on, across, in
front of, abutting or adjoining such real property including, without
limitation, any strips and gores adjacent to or lying between such
real property and any adjacent real property (the "Land");

(b) All buildings, improvements, structures and Fixtures
now located or to be located or to be constructed on the Land,
including, without limitation, landscaping, parking lots and
structures, roads, drainage and all above ground and underground
utility structures, equipment systems and other so-called
"infrastructure" improvements (the "Improvements");

(c) All equipment, machinery, fixtures, and other items
of real and/or personal property, including all components thereof,
located in, on or used in connection with, and permanently affixed to
or incorporated into, the Improvements, including, without limitation,
all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and
theft protection equipment, and similar systems, all of which, to the
greatest extent permitted by law, are hereby deemed to constitute real
estate, together with all replacements, modifications, alterations and
additions thereto (collectively the "Fixtures");

(d) All furniture, equipment, inventory and other
personal property identified on Schedule B attached hereto and
incorporated herein by reference (the "Personal Property"). For
purposes hereof, (i) Personal Property shall include all items of
property which Tenant is obligated to install, place, use,
maintain, repair and/or replace pursuant to the provisions of Sections
8.06 and 8.07 hereof, however, such Personal Property is and shall
remain the property of Tenant until the expiration or termination of
this Lease, and (ii) Personal Property shall not include certain
proprietary property of Tenant as set forth on Schedule C.

The Land, Improvements, Fixtures and Personal Property are hereinafter referred
to as the "Leased Property."

SUBJECT, HOWEVER, to the easements, liens, encumbrances, restrictions,
agreements, and other title matters listed or specifically referred to in any
individual Lease ("Permitted Exceptions").

1.03 Term. The term of each Lease shall be as set forth in the
individual Lease for a particular Leased Property.

1.04 Holding Over. Should Tenant, without the express consent of
Landlord, continue to hold and occupy the Leased Property after the expiration
of the Term, such holding over beyond the

2
<PAGE> 8

Term and the acceptance or collection of Rent by the Landlord shall operate and
be construed as creating a tenancy from month-to-month and not for any other
term whatsoever. During any such holdover period Tenant shall pay to Landlord
for each month (or portion thereof) Tenant remains in the Leased Property one
hundred fifty percent (150%) of the Base Rent in effect on the expiration date.
Said month-to-month tenancy may be terminated by Landlord by giving Tenant ten
(10) days written notice, and at any time thereafter Landlord may re-enter and
take possession of the Leased Property.

1.05 Surrender. Except as a result of (i) Tenant Improvements and
Capital Additions (as such terms are defined in Section 8.01 hereof); (ii)
normal and reasonable wear and tear (subject to the obligation of Tenant to
maintain the Leased Property in good order and repair during the Term); and
(iii) casualty, taking or other damage and destruction not required to be
repaired by Tenant, Tenant shall surrender and deliver up the Leased Property,
including all Personal Property and replacements thereof required to be
provided by Tenant pursuant to the terms of Sections 8.06 and 8.07 hereof, at
the expiration or termination of the Term broom clean, free of all Tenant's
personal property (but not the Personal Property), and in as good order and
condition as of the Commencement Date.

ARTICLE II
RENT

2.01 Base Rent. Unless otherwise provided in an individual Lease,
Tenant shall pay Landlord annual base rent for each Leased Property that is the
subject of a Lease without notice, demand, set-off or counterclaim in advance,
in lawful money of the United States of America in the amount specified therein
(the "Base Rent") for the Term in consecutive monthly installments payable in
advance on the Commencement Date of each Lease and thereafter on the first day
of each month during the Term, in accordance with the Base Rent Schedule set
forth in or attached to each individual Lease.

2.02 Additional Rent. Beginning on the first day of the month
following the first anniversary date of each Lease, the Tenant shall pay
Landlord an amount (the "Additional Rent") each year equal to a percentage of
the prior year Total Rent (for the purposes hereof, Total Rent is Base Rent
plus Additional Rent) under such Lease, such percentage being the greater of
(i) four percent (4%) or (ii) the percentage which is twenty-five percent (25%)
of the percentage increase in gross management revenues realized by Tenant from
its operations at the applicable Leased Property for such prior year exclusive
of any such increase as is attributable to an expansion in the size or number
of beds in such Leased Property. The Additional Rent shall be payable monthly,
in advance, along with Base Rent, and otherwise in the manner as set forth in
Section 2.01 above. Tenant shall provide to Landlord, not later than thirty
(30) days following each anniversary date of each Lease, Tenant's statement,
certified by Tenant's chief financial officer, setting forth such percentage
increase in gross management revenues realized by Tenant for the applicable
Leased Facility for the prior year.

3
<PAGE> 9

2.02.01 Other Additional Rent. In addition to Base Rent and
Additional Rent, Tenant shall pay all other amounts, liabilities, obligations
and Impositions (as hereinafter defined ) which Tenant assumes or agrees to pay
under this Agreement or any Lease and any fine, penalty, interest, charge and
cost which may be added for nonpayment or late payment of such items
(collectively the "Other Additional Rent").

2.03 Place(s) of Payment of Rent; Direct Payment of Other
Additional Rent. The Base Rent, Additional Rent and Other Additional Rent are
hereinafter referred to as "Rent." Landlord shall have all legal, equitable
and contractual rights, powers and remedies provided either in this Agreement,
in any Lease or by statute or otherwise in the case of nonpayment of the Rent.
Tenant shall make all payments of Base Rent and Additional Rent at Landlord's
principal place of business or as Landlord may otherwise from time to time
direct in writing, and all payments of Other Additional Rent directly to the
person or persons to whom such amount is owing at the time and times when such
payments are due, and shall give to Landlord such evidence of such direct
payments as Landlord shall reasonably request.

2.04 Net Lease. Each Lease shall be deemed and construed to be an
"absolute net lease" or "triple net lease," and Tenant shall pay all Rent,
Impositions, and other charges and expenses in connection with each Leased
Property throughout the Term, without abatement, deduction or set-off.

2.05 No Termination, Abatement, Etc. Except as otherwise
specifically provided in this Agreement or a particular Lease, Tenant shall
remain bound by this Agreement or such Lease in accordance with its terms.
Except as otherwise specifically provided in the Agreement or a particular
Lease, Tenant shall not, without the prior written consent of Landlord, modify,
surrender or terminate the Agreement or such Lease, nor seek nor be entitled to
any abatement, deduction, deferment or reduction of Rent, or set-off against
the Rent. Except as specifically provided in this Agreement or a particular
Lease, the obligations of Landlord and Tenant shall not be affected by reason
of (i) the lawful or unlawful prohibition of, or restriction upon, Tenant's use
of the Leased Property, or any part thereof, the interference with such use by
any person, corporation, partnership or other entity, or by reason of eviction
by paramount title; (ii) any claim which Tenant has or might have against
Landlord or by reason of any default or breach of any warranty by Landlord
under this Agreement or a particular Lease or any other agreement between
Landlord and Tenant, or to which Landlord and Tenant are parties; (iii) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceeding affecting Landlord or any assignee
or transferee of Landlord; or (iv) any other cause, whether similar or
dissimilar to any of the foregoing, other than a discharge of Tenant from any
such obligations as a matter of law. Except as otherwise specifically provided
in this Agreement or a particular Lease, and to the maximum extent permitted by
law, Tenant hereby specifically waives all rights, including but not limited to
any rights under any statute relating to rights of tenants in any state in
which any Leased Property is located, arising from any occurrence whatsoever,
which may now or hereafter be conferred upon it by law (a) to modify, surrender
or terminate any Lease or quit or surrender the Leased Property or any portion
thereof; or (b) entitling Tenant to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Tenant hereunder. The
obligations of Landlord and Tenant

4
<PAGE> 10

hereunder shall be separate and agreements and the Rent and all other sums
shall continue to be payable in all events unless the obligations to pay the
same shall be terminated pursuant to the express provisions of this Agreement
or a particular Lease or by termination of this Agreement or a particular Lease
other than by reason of an Event of Default.

ARTICLE III
IMPOSITIONS AND UTILITIES

3.01 Payment of Impositions. Subject to the adjustments set forth
herein, Tenant shall pay, as Other Additional Rent, all Impositions (as
hereinafter defined) that may be levied or become a lien on the Leased Property
or any part thereof at any time (whether prior to or during the Term), without
regard to prior ownership of said Leased Property, before the same becomes
delinquent. Tenant shall furnish to Landlord on an annual basis copies of
official receipts or other satisfactory proof evidencing such payments.
Tenant's obligation to pay such Impositions shall be deemed absolutely fixed
upon the date such Impositions become a lien upon the Leased Property or any
part thereof. Tenant, at its expense, shall prepare and file all tax returns
and reports in respect of any Imposition as may be required by governmental
authorities, provided, Landlord shall be responsible for the preparation and
filing of any such tax returns or reports in respect of any real or personal
property owned by Landlord. Tenant shall be entitled to any refund due from
any taxing authority if no Event of Default (as hereinafter defined) shall have
occurred hereunder and be continuing. Landlord shall be entitled to any refund
from any taxing authority if an Event of Default has occurred and is
continuing. Any refunds retained by Landlord due to an Event of Default shall
be applied as provided in Section 9.08. Landlord and Tenant shall, upon
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports. In the event governmental
authorities classify any property covered by this Lease as personal property,
Landlord and Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file with respect to their respective
owned personal property. Landlord, to the extent it possesses the same, and
Tenant, to the extent it possess the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for
any property so classified as personal property. Where Landlord is legally
required to file personal property tax returns, Tenant will be provided with
copies of assessment notices indicating a value in excess of the reported value
in sufficient time for Tenant to file a protest. Tenant may, upon notice to
Landlord, at Tenant's option and at Tenant's sole cost and expense, protest,
appeal, or institute such other proceedings as Tenant may deem appropriate to
effect a reduction of real estate or personal property assessments and
Landlord, at Tenant's expense as aforesaid, shall fully cooperate with Tenant
in such protest, appeal, or other action. Tenant shall provide Landlord copies
of all materials filed or presented in connection with any such proceeding.
Tenant shall promptly reimburse Landlord for all personal property taxes paid
by Landlord upon receipt of billings accompanied by copies of a bill therefor
and payments thereof which identify the personal property with respect to which
such payments are made. Impositions imposed in respect to the tax-fiscal
period during which the Term commences

5
<PAGE> 11
and terminates shall be adjusted and prorated between Landlord and Tenant on a
per diem basis, with Tenant being obligated to pay its pro rata share from
and including the Commencement Date to and including the expiration or
termination date of the Term, whether or not such Imposition is imposed before
or after such commencement or termination, and Tenant's obligation to pay its
prorated share thereof shall survive such termination. Tenant shall also pay
to Landlord a sum equal to the amount which Landlord may be caused to pay of
any privilege tax, sales tax, gross receipts tax, rent tax, occupancy tax or
like tax (excluding any tax based on net income), hereinafter levied, assessed,
or imposed by any federal, state, county or municipal governmental authority,
or any subdivision thereof, upon or measured by rent or other consideration
required to be paid by Tenant under this Agreement.

3.02 Definition of Impositions. "Impositions" means, collectively,
(i) taxes (including without limitation, all real estate and personal property
ad valorem (whether assessed as part of the real estate or separately assessed
as unsecured personal property, sales and use, business or occupation, single
business, gross receipts, transaction, privilege, rent or similar taxes, but not
including income or franchise or excise taxes payable with respect to
Landlord's receipt of Rent); (ii) assessments (including without limitation,
all assessments for public improvements or benefits, whether or not commenced
or completed prior to the date hereof and whether or not to be completed with
in the Term); (iii) ground rents, water, sewer or other rents and charges,
excises, tax levies, and fees (including without limitation, license, permit,
inspection, authorization and similar fees); (iv) to the extent they may become
a lien on the Leased Property all taxes imposed on Tenant's operations of the
Leased Property including without limitation, employee withholding taxes,
income taxes and intangible taxes; and (v) all other governmental charges, in
each case whether general or special, ordinary or extraordinary, or foreseen or
unforseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to
any failure in payment by Tenant), which at any time prior to, during or in
respect of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon (a) Landlord or Landlord's interest in the Leased Property or any
part thereof; (b) the Leased Property or any part thereof or any rent therefrom
or any estate, right, title or interest therein; or (c) any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased
Property or any part thereof. Tenant shall not, however, be required to pay
(i) any tax based on net income (whether denominated as a franchise or capital
stock or other tax) imposed on Landlord; or (ii) except as provided in Section
13.01, any tax imposed with respect to the sale, exchange or other disposition
by Landlord of any Leased Property or the proceeds thereof; provided, however,
that if any tax, assessment, tax levy or charge which Tenant is obligated to
pay pursuant to the first sentence of this definition and which is in effect at
any time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (i) or (ii) immediately
above is levied, assessed or imposed expressly in lieu thereof Tenant shall
then pay such tax, levy, or charge set forth in said clause (i) or (ii).

3.03 Utilities. Tenant shall contract for, in its own name, and
will pay, as Other Additional Rent all taxes, assessments, charges/deposits,
and bills for utilities, including without limitation charges for water, gas,
oil, sanitary and storm sewer, electricity, telephone service, trash
collection,

6
<PAGE> 12
and all other utilities which may be charged against the occupant of the
Improvements during the Term. Tenant shall at all times maintain that amount
of heat necessary to ensure against the freezing of water lines. Tenant hereby
agrees to indemnify and hold Landlord harmless from and against any liability
or damages to the utility systems and the Leased Property that may result from
Tenant's failure to maintain sufficient heat in the Improvements.

3.04 Escrow of Impositions. In the event Tenant persistently fails
to timely pay Impositions with respect to any Leased Facility, then, upon
thirty (30) days written notice from Landlord to Tenant, Tenant shall
thereafter deposit with Landlord on the first day of each month during the
remaining Term hereof and any extended Term, a sum equal to one-twelfth
(1/12th) of the Impositions assessed against such Leased Property which sums
shall be used by Landlord toward payment of such Impositions. If, at the end
of any applicable tax year, any such funds held by Landlord are insufficient to
make full payment of taxes or other Impositions for which such funds are held,
Tenant, on demand, shall pay to Landlord any additional funds necessary to pay
and discharge the obligations of Tenant pursuant to the provisions of this
section. If, however, at the end of any applicable tax year, such funds held
by Landlord are in excess of the total payment required to satisfy taxes or
other Impositions for which such funds are held, Landlord shall apply such
excess amounts to Tenant's tax and Imposition escrow fund for the next tax
year. If any such excess exists following the expiration or earlier
termination of any Lease, and subject to Section 9.08 below, Landlord shall
promptly refund such excess amounts to Tenant. The receipt by Landlord of the
payment of such Impositions by and from Tenant shall only be as an
accommodation to Tenant and the taxing authorities, and shall not be construed
as rent or income to Landlord, Landlord serving, if at all, only as a conduit
for delivery purposes. All such deposits by Tenant shall be held in an
interest-bearing account with one or more national banks having total assets of
not less than $1,000,000,000, with all interest thereon accruing in favor of
Tenant. In lieu of making escrow deposits as aforesaid, Tenant may elect to
provide Landlord with a letter of credit, or a payment bond, in the face amount
of one year's Impositions on the subject Leased Property, issued by a national
bank or reputable bonding or surety company, in all respects reasonably
acceptable to Landlord. Said letter of credit or payment bond shall be
drawable or callable, as the case may be, upon Tenant's failure to timely pay
any such Impositions, for the sole purpose of providing the funds necessary to
pay such Impositions, and shall otherwise be in form and substance reasonably
satisfactory to Landlord.

For purposes hereof, "persistently fails to timely pay Impositions"
shall mean failure to timely pay any Imposition with respect to any Leased
Premises for any two (2) Lease Years in any five (5) Lease Year Period,
notwithstanding Tenant's subsequent payment of such Impositions.

3.05 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business
for any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of Rent or operate to
release Tenant from any of Tenant's obligations under this Lease.

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ARTICLE IV
INSURANCE

4.01 Property Insurance. Tenant shall, at Tenant's expense, keep
the Improvements, Fixtures, and other components of the Leased Property insured
against the following risks:

(a) Loss or damage by fire, vandalism and malicious
mischief, sprinkler leakage and all other physical loss perils
commonly covered by "All Risk" insurance in an amount not less than
one hundred percent (100%) of the then full replacement cost thereof
(as hereinafter defined). Such policy shall include an agreed amount
endorsement if available at a reasonable cost. Such policy shall also
include endorsements for contingent liability for operation of
building laws, demolition costs, and increased cost of construction.

(b) Loss or damage by explosion of steam boilers,
pressure vessels, or similar apparatus, now or hereafter installed on
the Leased Property, in commercially reasonable amounts acceptable to
Landlord.

(c) Loss of rent under a rental value or business
interruption insurance policy covering risk of loss during the first
six (6) months of reconstruction necessitated by the occurrence of any
hazards described in Sections 4.01(a) or 4.01(b), above, and which
causes an abatement of Rent as provided in Article X hereof, in an
amount sufficient to prevent Landlord or Tenant from becoming a
co-insurer, containing endorsements for extended period of indemnity
and premium adjustment, and written with an agreed amount clause, if
the insurance provided for in this clause (c) is available.

(d) If the Land is located in whole or in part within a
designated flood plain area, loss or damage caused by flood in
commercially reasonable amounts acceptable to Landlord.

(e) Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or paper
currency, depositor's forgery, and loss of property accepted by Tenant
for safekeeping, in commercially reasonable amounts acceptable to
Landlord.

(f) In connection with any repairs or rebuilding by
Tenant under Article X hereof, Tenant shall maintain (or cause its
contractor to maintain) appropriate builder's risk insurance covering
any loss or casualty to the subject Improvements during the course of
such repairs or rebuilding.

4.02 Liability Insurance. Tenant shall, at Tenant's expense,
maintain liability insurance against the following:

(a) Claims for personal injury or property damage
commonly covered by comprehensive general liability insurance with
endorsements for blanket, contractual,

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personal injury, owner's protective liability, real property,fire
damage, legal liability, broad form property damage, and extended
bodily injury, with commercially reasonable amounts for bodily injury
and property damage acceptable to Landlord, but with a combined single
limit of not less than Five Million Dollars ($5,000,000.00) per
occurrence and Ten Million Dollars ($10,000,000.00) in the aggregate.
At Landlord's request, such $5,000,000.00 and $10,000,000.00 minimum
requirements shall be increased by up to four percent (4%) per year.

(b) Claims commonly covered by worker's compensation
insurance for all persons employed by Tenant on the Leased Property.
Such worker's compensation insurance shall be in accordance with the
requirements of all applicable local, state, and federal law.

4.03 Insurance Requirements. The following provisions shall apply
to all insurance coverages required hereunder:

(a) The carriers of all policies shall have a Best's
Rating of "A-" or better and a Best's Financial Category of XII or
larger and shall be authorized to do insurance business in the state
in which the Leased Property is located.

(b) Tenant shall be the "named insured" and Landlord and
any mortgagee of Landlord shall be an "additional named insured" on
each policy.

(c) Tenant shall deliver to Landlord certificates or
policies showing the required coverages and endorsements. The
policies of insurance shall provide that the policy may not be
canceled or not renewed, and no material change or reduction in
coverage may be made, without at least thirty (30) days' prior written
notice to Landlord.

(d) The policies shall contain a severability of interest
and/or cross-liability endorsement, provide that the acts or omissions
of Tenant will not invalidate the Landlord's coverage, and provide
that Landlord shall not be responsible for payment of premiums.

(e) All loss adjustment shall require the written consent
of Landlord and Tenant, as their interests may appear.

(f) At least ten (10) days prior to the expiration of
each policy, Tenant shall deliver to Landlord a certificate showing
renewal of such policy and payment of the annual premium therefor.

Landlord shall have the right to review the insurance coverages
required hereunder with Tenant from time to time, to obtain the input of third
party professional insurance advisors (at Landlord's expense) with respect to
such insurance coverages, and to consult with Tenant in Tenant's annual review
and renewal of such insurance coverages. All insurance coverages hereunder
shall be in such form, substance and amounts as are customary or standard in
Tenant's industry.

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4.04 Replacement Cost. The term "full replacement cost" means the
actual replacement cost thereof from time to time including increased cost of
construction, with no reductions or deductions. Tenant shall, not later than
thirty (30) days after the anniversary of each policy of insurance, of the Term,
increase the amount of the replacement cost endorsement for the Improvements.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased
Property, Landlord may have such full replacement cost redetermined at any time
after such Permitted Alterations are made, regardless of when the full
replacement cost was last determined.

4.05 Blanket Policy. Tenant may carry the insurance required by
this Article under a blanket policy of insurance, provided that the coverage
afforded Tenant will not be reduced or diminished or otherwise be different
from that which would exist under a separate policy meeting all of the
requirements of this Agreement.

4.06 No Separate Insurance. Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing
insurance by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including Landlord and any mortgagees, are included therein as additional named
insureds or loss payees, the loss is payable under said insurance in the same
manner as losses are payable under this Agreement, and such additional
insurance is not prohibited by the existing policies of insurance. Tenant
shall immediately notify Landlord of the taking out of such separate insurance
or the increasing of any of the amounts of the existing insurance by securing
an additional policy or additional policies. The term "mortgages" as used in
this Agreement includes Deeds of Trust and the term "mortgagees" includes
trustees and beneficiaries under a Deed of Trust.

4.07 Waiver of Subrogation. Each party hereto hereby waives any
and every claim which arises or may arise in its favor and against the other
party hereto during the Term or any extension or renewal thereof, for any and
all loss of, or damage to, any of its property located within or upon, or
constituting a part of, the Leased Property, which loss or damage is covered by
valid and collectible insurance policies, to the extent that such loss or
damage is recoverable under such policies. Said mutual waiver shall be in
addition to, and not in limitation or derogation of, any other waiver or
release contained in this Lease with respect to any loss or damage to property
of the parties hereto. Inasmuch as the said waivers will preclude the
assignment of any aforesaid claim by way of subrogation (or otherwise) to an
insurance company (or any other person), each party hereto agrees immediately
to give each insurance company which has issued to it policies of insurance,
written notice of the terms of said mutual waivers, and to have such insurance
policies properly endorsed, if necessary, to prevent the invalidation of said
insurance coverage by reason of said waivers, so long as such endorsement is
available at a reasonable cost.

4.08 Mortgages. The following provisions shall apply if Landlord
now or hereafter places a mortgage on the Leased Property or any part thereof:
(i) Tenant shall obtain a standard form of mortgage clause insuring the
interest of the mortgagee; (ii) Tenant shall deliver evidence of insurance to
such mortgagee; (iii) loss adjustment shall require the consent of the
mortgagee; and

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(iv) Tenant shall obtain such other coverages and provide such other
information and documents as may be reasonably required by the mortgagee.

ARTICLE V
INDEMNITY; HAZARDOUS SUBSTANCES

5.01 Tenant's Indemnification. Subject to Section 4.07, Tenant
hereby agrees to indemnify and hold harmless Landlord, its agents, and
employees from and against any and all demands, claims, causes of action,
fines, penalties, damages (including consequential damages), losses,
liabilities (including strict liability), judgments, and expenses (including,
without limitation, attorneys' fees, court costs, and the costs set forth in
Section 9.06) incurred in connection with or arising from: (i) the use,
condition, operation or occupancy of each Leased Property; (ii) any activity,
work, or thing done, or permitted or suffered by Tenant in or about the Leased
Property; (iii) any acts, omissions, or negligence of Tenant or any person
claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; (iv) any claim of any person
incarcerated in the Leased Premises, including claims alleging breach or
violation of such person's civil or legal rights; (v) any breach, violation,
or nonperformance by Tenant or any person claiming under Tenant or the
employees, agents, contractors, invitees, or visitors of Tenant or of any such
person, of any term, covenant, or provision of this Agreement or any Lease or
any law, ordinance, or governmental requirement of any kind; (vi) any injury or
damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property under the express or implied invitation of Tenant; and (vii) and any
accident, injury to or death of persons or loss of damage to any item of
property occurring at the Leased Property. If any action or proceeding is
brought against Landlord, its employees, or agents by reason of any such claim,
Tenant, upon notice from Landlord, will defend the claim at Tenant's expense
with counsel reasonably satisfactory to Landlord. In the event Landlord
reasonably determines that its interests and the interests of Tenant in any
such action or proceeding are not substantially the same and that Tenant's
counsel cannot adequately represent the interests of Landlord therein, Landlord
shall have the right to hire separate counsel in any such action or proceeding
and the reasonable costs thereof shall be paid for by Tenant.

5.02 Hazardous Substances or Materials. Tenant shall not, either
with or without negligence, injure, overload, deface, damage or otherwise harm
any Leased Property or any part or component thereof; commit any nuisance;
permit the emission of any hazardous agents or substances; allow the release or
other escape of any biologically or chemically active or other hazardous
substances or materials so as to impregnate, impair or in any manner affect,
even temporarily, any element or part of any Leased Property, or allow the
storage or use of such substances or materials in any manner not sanctioned by
law or by the highest standards prevailing in the industry for the storage and
use of such substances or materials; nor shall Tenant bring onto any Leased
Property any such materials or substances; permit the occurrence of
objectionable noise or odors; or make, allow or suffer any waste whatsoever to
any Leased Property. Landlord may inspect the Leased Property from time to
time, and Tenant will cooperate with such inspections.

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Without limitation, "hazardous substances" for the purpose of this Section 5.02
shall include any substances regulated by any local, state or federal law
relating to environmental conditions and industrial hygiene, including,
without limitation, the Resource Conservation and Recovery Act of 1976
("RCRA"), the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Hazardous Materials Transportation
Act, the Federal Water Pollution Control Act, the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the Safe Drinking Water Act, and
all similar federal, state and local environmental statutes, ordinances and
the regulations, orders, or decrees now or hereafter promulgated thereunder.
Notwithstanding the foregoing, Tenant anticipates using, storing and disposing
of certain hazardous substances in connection with operation of correctional
or detention facilities which are not in violation of the foregoing laws.
Such substances include, but are not limited to the following: medical wastes,
diesel fuel, maintenance and janitorial supplies, and waste from reprographic
activities. Upon request by Landlord, Tenant shall submit to Landlord annual
reports regarding Tenant's use, storage, and disposal of any of the foregoing
materials, said reports to include information regarding continued hazardous
materials inspections, personal interviews, and federal, state and local agency
listings. In addition, Tenant shall execute affidavits, representations and
the like from time to time at Landlord's request concerning Tenant's best
knowledge and belief regarding the presence or absence of hazardous materials
on the Leased Property. Other than for circumstances involving Landlord's
gross negligence or intentional misconduct, Tenant shall indemnify and hold
harmless Landlord from and against all liabilities (including punitive
damages), costs and expenses (including reasonable attorneys' fees) imposed
upon or asserted against the Landlord or the Leased Property on account of,
among other things, any applicable federal, state or local law, ordinance,
regulation, order, permit, decree or similar items relating to hazardous
substances, human health or the environment (collectively, "Environmental
Laws") (irrespective of whether there has occurred any violation of any
Environmental Law ), in respect of the Leased Property, including (a) liability
for response costs and for costs of removal and remedial action incurred by the
United States Government, any state or local governmental unit to any other
person or entity, or damages from injury to or destruction or loss of natural
resources, including the reasonable costs of assessing such injury, destruction
or loss, incurred pursuant to any Environmental Law, (b) liability for costs
and expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any Environmental Law, (c) liability for personal injury or
property damage arising under any statutory or common-law tort theory,
including damages assessed for the maintenance of a public or private nuisance
or for carrying on of a dangerous activity or (d) by reason of a breach of an
environmental representation or warranty by Tenant.

5.03 Limitation of Landlord's Liability. Landlord, its agents and
employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from any Leased
Property or into any Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage,
obstruction, or

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other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from
construction, repair, or alteration of the Leased Property or from any acts or
omissions of any other occupant or visitor of the Leased Property, or from the
presence or release of any hazardous substance or material on or from the
Leased Property or from any other cause beyond Landlord's control.

ARTICLE VI
USE AND ACCEPTANCE OF PREMISES

6.01 Use of Leased Property. Tenant shall use and occupy each
Leased Property exclusively as a correctional or detention facility or other
purpose for which the Leased Property is being used at the Commencement Date of
the Term, and for no other purpose without the prior written consent of the
Landlord. Tenant shall obtain and maintain all approvals, licenses, and
consents needed to use and operate each Leased Property for such purposes.
Tenant shall promptly deliver to Landlord complete copies of surveys,
examinations, certification and licensure inspections, compliance certificates,
and other similar reports issued to Tenant by any governmental agency.

6.02 Acceptance of Leased Property. Except as otherwise
specifically provided in this Agreement or in any individual Lease, Tenant
acknowledges that (i) Tenant and its agents have had an opportunity to inspect
the Leased Property; (ii) Tenant has found the Leased Property fit for Tenant's
use; (iii) delivery of the Leased Property to Tenant is in an "as-is"
condition; (iv) Landlord is not obligated to make any improvements or repairs
to the Leased Property; and (v) the roof, walls, foundation, heating,
ventilating, air conditioning, telephone, sewer, electrical, mechanical,
utility, plumbing, and other portions of the Leased Property are in good
working order. Tenant waives any claim or action against Landlord with respect
to the condition of the Leased Property. LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY
PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO QUALITY OR THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE
TO BE BORNE BY TENANT.

6.03 Conditions of Use and Occupancy. Tenant agrees that during
the Term it shall use and keep the Leased Property in a careful, safe and
proper manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed
extra hazardous on account of fire or otherwise; keep the Leased Property in
such repair and condition as may be required by the local board of health, or
other city, state or federal authorities, free of all cost to Landlord; not
permit any acts to be done which will cause the cancellation, invalidation, or
suspension of any insurance policy; and permit Landlord and its agents to enter
upon the Leased Property at all reasonable times after notice to Tenant to
examine the condition thereof.

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6.04 Financial Statements and Other Information. Within ten (10)
days following Tenant's filing of quarterly and annual reports with the
Securities and Exchange Commission, Tenant shall deliver to Landlord copies of
such reports. Tenant shall provide Landlord at the same time Tenant provides
copies of its quarterly and annual reports as aforesaid (or more often as may
be reasonably requested by Landlord in writing), the following additional
financial information for each calendar quarter hereafter, with respect to each
Leased Property: gross revenues, average occupancy rates and total cash flow
(i.e., operating income plus depreciation and amortization plus Base Rent plus
Additional Rent hereunder). Tenant shall also deliver to Landlord such
additional financial information as Landlord may reasonably request, provided
the same is of a type normally maintained by Tenant or can be obtained without
undue cost or burden on Tenant's personnel and does not constitute information
which Tenant reasonably determines to be proprietary or confidential.
Additionally, upon Landlord's request, Tenant shall provide Landlord with
copies of Tenant's annual capital expenditure budgets for each Leased Property
and any reports generated by Tenant regarding maintenance and repairs of the
Leased Property.

ARTICLE VII
REPAIRS, COMPLIANCE WITH LAWS, AND MECHANICS' LIENS

7.01 Maintenance. Tenant shall maintain each Leased Property in
good order, repair and appearance, and repair each Leased Property, including
without limitation, all interior and exterior, structural and nonstructural
repairs and replacements to the roof, foundations, exterior walls, building
systems, HVAC systems, parking areas, sidewalks, water, sewer and gas
connections, pipes, and mains. Tenant shall pay as Other Additional Rent the
full cost of maintenance, repairs, and replacements. Tenant shall maintain all
drives, sidewalks, parking areas, and lawns on or about the Leased Property in
a clean and orderly condition, free of accumulations of dirt, rubbish, snow and
ice. Tenant shall permit Landlord to inspect the Leased Property at all
reasonable times, and shall implement all reasonable suggestions of the
Landlord as to the maintenance and replacement of the Leased Property.

7.02 Compliance with Laws. Tenant shall comply with all laws,
ordinances, orders, rules, regulations, and other governmental requirements
relating to the use, condition, or occupancy of each Leased Property, whether
now or hereafter enacted and in force including without limitation, (i)
licensure requirements for operation as a correctional or detention facility,
(ii) requirements of any board of casualty insurance underwriters or insurance
service office for any other similar body having jurisdiction over the Leased
Property, and (iii) all zoning and building codes and Environmental Laws. At
Landlord's request, from time to time, Tenant shall deliver to Landlord copies
of certificates or permits evidencing compliance with such laws, including
without limitation, copies of the correctional or detention facility licenses,
certificates of occupancy and building permits. Tenant shall provide Landlord
with copies of any notice from any governmental authority alleging any
non-compliance by Tenant or any Leased Facility with any of the foregoing
requirements and such evidence as Landlord may reasonably require of Tenant's
remediation thereof. Tenant hereby agrees to defend, indemnify and hold
Landlord harmless from and against

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any loss, liability (including strict liability), claim, damage (including
consequential damages), cost and expense (including attorneys' fees) resulting
from any failure by Tenant to comply with any laws, ordinances, rules,
regulations, and other governmental requirements.

7.03 Required Alterations. Tenant shall, at Tenant's sole cost and
expense, make any additions, changes, improvements or alterations to each
Leased Property, including structural alterations, which may be required by any
governmental authorities, including those required to continue licensure
requirements as a correctional or detention facility, whether such changes are
required by Tenant's use, changes in the law, ordinances, or governmental
regulations, defects existing as of the date of this Lease, or any other cause
whatsoever. Tenant shall provide prior written notice to Landlord of any
changes to each Leased Property pursuant to this Section 7.03 which involve
changes to the structural integrity of such Leased Property or materially
affect the operational capabilities or rated capacity of the Leased Facility.
All such additions, changes, improvements or alterations shall be deemed to be
a Tenant Improvement and shall comply with all laws requiring such alterations
and with the provisions of Section 8.01.

7.04 Mechanics' Liens. Tenant shall have no authority to permit or
create a lien against Landlord's interest in the Leased Property, and Tenant
shall post notices or file such documents as may be required to protect
Landlord's interest in the Leased property against liens. Tenant hereby agrees
to defend, indemnify, and hold Landlord harmless from and against any
mechanics' liens against the Leased Property by reason of work, labor services
or materials supplied or claimed to have been supplied on or to the Leased
Property. Tenant shall immediately remove, bond-off, or otherwise obtain the
release of any mechanics' lien filed against the Leased Property. Tenant shall
pay all expenses in connection therewith, including without limitation,
damages, interest, court costs and reasonable attorneys' fees.

7.05 Replacements of Fixtures. Tenant shall not remove Fixtures
from any Leased Property except to replace the Fixtures by other similar items
of equal quality and value. Items being replaced by Tenant may be removed and
shall become the property of Tenant and items replacing the same shall be and
remain the property of the Landlord. Tenant shall execute, upon written
request from Landlord, any and all documents necessary to evidence Landlord's
ownership of the Fixtures and replacements therefor. Tenant may finance
replacements for the Fixtures by equipment lease or by a security agreement and
financing statement; provided, however, that for any item of Fixtures or
Personal Property having a cost greater than or equal to Twenty Thousand
Dollars ($20,000.00), Tenant may not finance replacements by security agreement
or equipment lease unless (i) Landlord has consented to the terms and
conditions of the equipment lease or security agreement; (ii) the equipment
lessor or lender has entered into a nondisturbance agreement with the Landlord
upon terms and conditions acceptable to Landlord, including without limitation,
the following: (a) Landlord shall have the right (but not the obligation) to
assume such security agreement or equipment lease upon the occurrence of an
Event of Default by Tenant under any Lease; (b) the equipment lessor or lender
shall notify Landlord of any default by Tenant under the equipment lease or
security agreement and give Landlord a reasonable opportunity to cure such
default; and (c) Landlord shall have the right to assign its rights under the
equipment lease, security agreement, or

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nondisturbance agreement; and (iii) Tenant shall, within thirty (30) days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.

ARTICLE VIII
ALTERATIONS AND SIGNS; TENANT'S PROPERTY;
CAPITAL ADDITIONS TO THE LEASED PROPERTY

8.01 Tenant's Right to Construct. During the Term of this
Agreement, so long as no Event of Default shall have occurred and be continuing
as to the Leased Property that is the subject of such improvements, Tenant may
make Capital Additions (as defined herein), or other alterations, additions,
changes and/or improvements to any Leased Property as deemed necessary or
useful to operate the Leased Property as a correction or detention facility
(the "Primary Intended Use") (individually, a "Tenant Improvement," or
collectively, "Tenant Improvements"). "Capital Additions" shall mean the
construction of one or more new buildings or one or more additional structures
annexed to any portion of any of the Improvements on a particular Leased
Property, which are constructed on any parcel of land or portion of the Land of
a particular Leased Property during the Term of any individual Lease, including
the construction of a new floor, or the repair, replacement, restoration,
remodeling or rebuilding of the Improvements or any portion thereof on any
Leased Property which are not normal, ordinary or recurring to maintain the
Leased Property. Except as otherwise agreed to by Landlord in writing, any
such Tenant Improvement shall be made at Tenant's sole expense and shall become
the property of Landlord upon termination of this Lease. Unless made on an
emergency basis to prevent injury to person or property, Tenant will submit
plans to Landlord for Landlord's prior approval, such approval not to be
unreasonably withheld or delayed, for any Tenant Improvement which is not a
Capital Addition and which has a cost of more than $500,000 or a cost which,
when aggregated with the costs of all such Tenant Improvements for any
individual Leased Facility in the same Lease Year, would cause the total costs
of all such Tenant Improvements to exceed $1,000,000. Such $500,000 and
$1,000,000 amounts shall be increased by four percent (4%) per annum,
cumulatively for each subsequent Lease Year. Additionally, in connection with
any Tenant Improvement, including any Capital Addition, Tenant shall provide
Landlord with copies of any plans and specification therefor, Tenant's budget
relating thereto, any required government permits or approvals, any
construction contracts or agreements relating thereto, and any other
information relating to such Tenant Improvement as Landlord shall reasonably
request.

8.02 Scope of Right. Subject to Section 8.01 herein and Section
7.03 concerning required alterations, at Tenant's cost and expense, Tenant
shall have the right to:

(a) seek any governmental approvals, including building
permits, licenses, conditional use permits and any certificates of need
that Tenant requires to construct any Tenant Improvement;

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(b) erect upon the Leased Property such Tenant
Improvements as Tenant deems desirable;

(d) engage in any other lawful activities that Tenant
determines are necessary or desirable for the development of the Leased
Property in accordance with its Primary Intended Use;

provided, however, Tenant shall not make any Tenant Improvement which would, in
Landlord's reasonable judgment, impair the value or Primary Intended Use of any
Leased Property without Landlord's prior written consent and provided, further
that Tenant shall not be permitted to create a mortgage, lien or any other
encumbrance on any individual Leased Property without Landlord's prior written
consent.

8.03 Cooperation of Landlord. Landlord shall cooperate with Tenant
and take such actions, including the execution and delivery to Tenant of any
applications or other documents, reasonably requested by Tenant in order to
obtain any governmental approvals sought by Tenant to construct any Tenant
Improvement within ten (10) business days following the later of (a) the date
Landlord receives Tenant's request, or (b) the date of delivery of any such
application or document to Landlord, so long as the taking of such action,
including the execution of said applications or documents, shall be without
cost to Landlord (or if there is a cost to Landlord, such cost shall be
reimbursed by Tenant), and will not cause Landlord to be in violation of any
law, ordinance or regulation.

8.04 Commencement of Construction. Tenant agrees that:

(a) Tenant shall diligently seek all governmental
approvals relating to the construction of any Tenant Improvement;

(b) Once Tenant begins the construction of any Tenant
Improvement, Tenant shall diligently prosecute any such construction
to completion in accordance with applicable insurance requirements and
the laws, rules and regulations of all governmental bodies or agencies
having jurisdiction over the Leased Property;

(c) Landlord shall have the right at any time and from
time to time to post and maintain upon the Leased Property such
notices as may be necessary to protect Landlord's interest from
mechanics' liens, materialmen's liens or liens of a similar nature;

(d) Tenant shall not suffer or permit any mechanics'
liens or any other claims or demands arising from the work of
construction of any Tenant Improvement to be enforced against the
Leased Property or any part thereof, and Tenant agrees to hold
Landlord and said

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Leased Property free and harmless from all liability from any
such liens, claims or demands, together with all costs and
expenses in connection therewith;

(e) All work shall be performed in a good and
workmanlike manner consistent with standards in the industry;
and

(f) Subject to Section 8.09 in the case of
Capital Additions, Tenant shall not secure any construction or
other financing for the Tenant Improvements which is secured
by a portion of the Leased Property without Landlord's prior
written consent, and any such financing (i) shall not exceed
the cost of the Tenant Improvements, (ii) shall be subordinate
to any mortgage or encumbrance now existing or hereinafter
created with respect to the Leased Property, and (iii) shall
be limited solely to Tenant's interest in the Leased Property
that is the subject of the improvements.

8.05 Rights in Tenant Improvements. Notwithstanding
anything to the contrary in this Lease, all Tenant Improvements constructed
pursuant to Section 8.01, any and all subsequent additions thereto and
alterations and replacements thereof, shall be the sole and absolute property
of Tenant during the Term of the particular Lease. Upon the expiration or
early termination of any Lease, all such Tenant Improvements shall become the
property of Landlord. Without limiting the generality of the foregoing, Tenant
shall be entitled to all federal and state income tax benefits associated with
any Tenant Improvement during the Term of this Agreement.

8.06 Personal Property. Tenant shall install, place, and
use on the Leased Property such fixtures, furniture, equipment, inventory and
other personal property in addition to the Fixtures as may be required or as
Tenant may, from time to time, deem necessary or useful to operate the Leased
Property as a correctional or detention facility.

8.07 Requirements for Personal Property. Tenant shall
comply with all of the following requirements in connection with Personal
Property:

(a) With respect to each Leased Property, Tenant
shall notify Landlord within one hundred twenty (120) days
after each Lease Year of any additions, substitutions, or
replacements of an item of Personal Property at such Leased
Property which individually has a cost of more than
$25,000.00 and shall furnish Landlord with such other
information as Landlord may reasonably request from time to
time.

(b) The Personal Property shall be installed in
a good and workmanlike manner, in compliance with all
governmental laws, ordinances, rules, and regulations and all
insurance requirements, and be installed free and clear of any
mechanics' liens.

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(d) Tenant shall, at Tenant's sole cost and
expense, keep Personal Property insured against loss or damage
by fire, vandalism and malicious mischief, sprinkler leakage,
and other physical loss perils commonly covered by fire and
extended coverage, boiler and machinery, and difference in
conditions insurance in an amount not less than ninety percent
(90%) of the then full replacement cost thereof. Tenant shall
use the proceeds from any such policy for the repair and
replacement of Personal Property. The insurance shall meet
the requirements of Section 4.03.

(e) Tenant shall pay all taxes applicable to
Personal Property.

(f) If Personal Property is damaged or destroyed
by fire or any other case, Tenant shall promptly repair or
replace Personal Property unless Tenant is entitled to and
elects to terminate the Lease pursuant to Section 10.05.

(g) Unless an Event of Default (or any event
which, with the giving of notice of lapse of time, or both,
would constitute an Event of Default) has occurred and
remains uncured beyond any applicable grace period, Tenant may
remove Personal Property from the Leased Property from time to
time provided that (i) the items removed are not required to
operate the Leased Property as a licensed correctional or
detention facility (unless such items are being replaced by
Tenant); and (ii) Tenant repairs any damage to the Leased
Property resulting from the removal of Personal Property.

(h) Tenant shall remove any of Tenant's personal
property which does not constitute Personal Property
hereunder, upon the termination or expiration of the
Lease and shall repair any damage to the Leased Property
resulting from the removal of Tenant's personal property. If
Tenant fails to remove Tenant's personal property within
ninety (90) days after the termination or expiration of the
Lease, then Tenant shall be deemed to have abandoned Tenant's
personal property, Tenant's personal property shall become
the property of Landlord, and Landlord may remove, store and
dispose of Tenant's personal property. In such event, Tenant
shall have no claim or right against Landlord for such
property or the value thereof regardless of the disposition
thereof by Landlord. Tenant shall pay Landlord, upon demand,
all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's personal property and repairing any
damage caused by such removal. Tenant's obligations hereunder
shall survive the termination or expiration of the Lease.
It is understood and agreed that all property
constituting Personal Property hereunder shall be and/or
become the sole and exclusive property of Landlord upon the
expiration or termination of the Lease notwithstanding that
such Personal Property or Tenant installs, places, uses,
maintains, repairs, and/or replaces pursuant to the provisions
of Section 8.06 hereof and this Section 8.07 will be the
exclusive property of Tenant during the term until such
expiration or termination of the Lease.

(i) Tenant shall perform its obligations under any
equipment lease or security agreement for Personal Property.

8.08 Signs. Tenant may, at its own expense, erect and
maintain identification signs at the Leased Property, provided such signs
comply with all laws, ordinances, and regulations. Upon the occurrence of an
Event of Default or the termination or expiration of a Lease, Tenant shall,
within thirty (30) days after notice from Landlord, remove the signs and
restore the applicable Leased Property to its original condition.

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8.09 Financings of Capital Additions to a Leased Property.

(a) Landlord may, but shall be under no obligation to,
provide or arrange construction, permanent or other financing for a
Capital Addition proposed to be made to any Leased Property by Tenant.
Within thirty (30) days of receipt of such a request by Tenant,
Landlord shall notify Tenant as to whether it will finance the
proposed Capital Addition and, if so, the terms and conditions upon
which it would do so, including the terms of any amendment to an
individual Lease or a new lease agreement for such proposed Capital
Addition.

(b) If Landlord agrees to finance the proposed Capital
Addition of Tenant, Tenant shall provide Landlord with the following:

(i) all customary or other required loan
documentation which may be required;

(ii) any information, certificates, licenses,
permits or documents requested by either Landlord or any
lender with whom Landlord has agreed or may agree to provide
financing which are necessary to confirm that Tenant will be
able to use the Capital Addition upon completion thereof in
accordance with the Primary Intended Use (as defined in
Section 8.01), including all required, federal, state or local
government licenses and approvals;

(iii) a certificate from Tenant's architect,
setting forth in reasonable detail the projected (or actual,
if available) cost of the proposed Capital Addition;

(iv) an amendment to this Lease, or a new lease
agreement, duly executed and acknowledged, in form and
substance satisfactory to Landlord and Tenant, and containing
such provisions as may be necessary or appropriate, including
without limitation, any appropriate changes in the legal
description of the Land, the Rent, and other changes with
respect to the Capital Addition;

(v) a deed conveying title to Landlord to any
land acquired for the purpose of constructing the Capital
Addition, free and clear of any liens or encumbrances except
those approved by Landlord and, both prior to and following
completion of the Capital Addition, an as-built survey thereof
satisfactory to Landlord;

(vi) endorsements to any outstanding policy of
title insurance covering the Leased Property or a supplemental
policy of title insurance covering the Leased Property
satisfactory in form and substance to Landlord (a) updating
the same without any additional exceptions, except as may be
permitted by Landlord; and (b)

<PAGE> 26
increasing the coverage thereof by an amount equal to the fair
market value of the Capital Addition;

(vii) if required by Landlord, (a) an owner's
policy of title insurance insuring fee simple title to
any land conveyed to Landlord pursuant to subparagraph (v),
free and clear of all liens and encumbrances except those
approved by Landlord and (b) a lender's policy of title
insurance satisfactory in form and substance to Landlord and
any lending institution advancing a portion of the cost of the
Capital Addition;

(viii) if required by Landlord, upon completion of
the Capital Addition, an M.A.I. appraisal of the Leased
Property indicating that the value of the Leased Property upon
completion of the Capital Addition exceeds the fair market
value of the Leased Property prior thereto by an amount not
less than ninety-five percent (95%) of the cost of such
Capital Addition; and

(ix) such other certificates (including, but not
limited to, endorsements, increasing the insurance coverage,
if any, at the time required), documents, opinions of counsel,
appraisals, surveys, certified copies of duly adopted
resolutions of the board of directors of Tenant authorizing
the execution and delivery of any amendment to an individual
Lease or new lease agreement and any other instruments as may
be reasonably required by Landlord and any lending institution
advancing any portion of the cost of the Capital Addition.

(c) Upon making a request to finance a Capital Addition,
whether or not such financing is actually consummated, Tenant shall
pay or agree to pay, upon demand, all reasonable costs and expenses of
Landlord and any lending institution which has committed to finance
such Capital Addition which have been paid or incurred by them in
connection with the financing of the Capital Addition, including, but
not limited to, (i) the fees and expenses of their respective counsel,
(ii) all printing expenses, (iii) the amount of any filing,
registration and recording taxes and fees, (iv) documentary stamp
taxes, if any, (v) title insurance charges, appraisal fees, if any,
rating agency fees, if any, (vi) commitment fees, if any, and (vii)
costs of obtaining regulatory and governmental approvals for the
construction, operation, use or occupancy of the Capital Addition.

(d) (i) If Landlord and Tenant are unable to agree on
the terms of the financing of a Capital Addition by Landlord, Tenant
may undertake the cost of any such Capital Addition and seek
construction, permanent or other financing from other sources.

(ii) In the event Tenant shall construct any
Capital Addition and shall have obtained construction, permanent or
other financing in connection therewith from sources other than
Landlord, as set forth in the foregoing Section 8.09(d)(i), Landlord
shall have the

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option to acquire such Capital Addition for a period of three
(3) years following the date Tenant first receives inmates in such
Capital Addition ("Service Commencement Date"). The price at which
Landlord may acquire such Capital Addition shall be the fair market
value of the Capital Addition, as reasonably and mutually determined
by Landlord and Tenant, provided, Landlord and Tenant agree that for
the first two (2) years following the Service Commencement Date the
fair market value of such Capital Addition shall be deemed to be equal
to Tenant's actual costs and expenses to acquire, develop, design,
construct and equip such Capital Addition ("Tenant's Cost"), as
reflected on the books of Tenant, plus five percent (5%) of Tenant's
Cost. Landlord's exercise of such option shall require Landlord to
acquire such Capital Addition on such terms and conditions as Landlord
and Tenant shall reasonably agree, which shall be generally consistent
with the terms and conditions of Landlord's initial acquisition of the
related Leased Property from Tenant. Upon such acquisition, Landlord
shall lease such Capital Addition to Tenant on the terms and
conditions set forth herein, and Landlord and Tenant shall execute a
new Lease, or an amendment to the existing Lease, with respect
thereto. In such case, for acquisitions of Capital Additions within
five (5) years of the date hereof, the annual Base Rent shall be the
greater of (i) the fair market rental value of the Capital
Addition, as reasonably and mutually determined by Landlord and Tenant
and (ii) eleven percent (11%) of the purchase price of such Capital
Addition. For Capital Additions thereafter, the Base Rent shall be the
fair market rental value of the Capital Addition, as reasonably and
mutually determined by Landlord and Tenant. Regardless of whether the
foregoing option is exercised, all Capital Additions shall become the
property of Landlord upon the expiration or termination of this Lease.

ARTICLE IX
DEFAULTS AND REMEDIES

9.01 Events of Default. The occurrence of any one or more of the
following shall be an event of default ("Event of Default") hereunder:

(a) Tenant fails to pay in full any installment of Rent,
or any other monetary obligation payable by Tenant to Landlord under a
Lease, within fifteen (15) days after notice of nonpayment from
Landlord;

(b) Tenant fails to observe and perform any other
covenant, condition or agreement under this Agreement or a Lease to be
performed by Tenant (except those described in Section 9.01(a) of this
Agreement) and such failure continues for a period of thirty (30) days
after written notice thereof is given to Tenant by Landlord; or if, by
reason of the nature of such default, the same cannot with due
diligence be remedied within said thirty (30) days, such failure will
not be deemed to continue if Tenant proceeds promptly and with due
diligence to remedy the failure and diligently completes the remedy
thereof; provided, however, said cure period will not extend beyond
thirty (30) days if the facts or circumstances giving rise to the
default are creating a further harm to Landlord or the Leased Property
and Landlord makes a good faith determination that Tenant is not
undertaking remedial steps that Landlord would cause to be taken if
such Lease were then to terminate;

<PAGE> 28

(c) If Tenant: (a) admits in writing its inability to pay
its debts generally as they become due, (b) files a petition in
bankruptcy or a petition to take advantage of any insolvency act, (c)
makes an assignment for the benefit of its creditors, (d) is unable to
pay its debts as they mature, (e) consents to the appointment of a
receiver of itself or of the whole or any substantial part of its
property, or (f) files a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof;

(d) If Tenant, on a petition in bankruptcy filed against
it, is adjudicated as bankrupt or a court of competent jurisdiction
enters an order or decree appointing, without the consent of Tenant, a
receiver of Tenant of the whole or substantially all of its property,
or approving a petition filed against it seeking reorganization or
arrangement of Tenant under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof, and such judgment, order or decree is not vacated or set
aside or stayed within ninety (90) days from the date of the entry
thereof;

(e) If the estate or interest of Tenant in any Leased
Property or any part thereof is levied upon or attached in any
proceeding and the same is not vacated or discharged within the later
of ninety (90) days after commencement thereof or thirty (30) days
after receipt by Tenant of notice thereof from Landlord (unless Tenant
is contesting such lien or attachment in accordance with this
Agreement);

(f) Any representation or warranty made by Tenant in the
Agreement or any Lease or in any certificate, demand or request made
pursuant to any Lease proves to be incorrect, in any material respect
and any adverse effect on Landlord of any such misrepresentation or
breach of warranty has not been corrected to Landlord's satisfaction
within thirty (30) days after Tenant becomes aware of, or is notified
by the Landlord of the fact of, such misrepresentation or breach of
warranty;

(g) A default by Tenant in any payment of principal or
interest on any obligations for borrowed money having a principal
balance of Twenty-Five Million Dollars ($25,000,000) or more in the
aggregate (excluding obligations which are limited in recourse to
specific property of Tenant provided that such property is not a
substantial portion of the assets of Tenant and excluding any debt
which is denominated as "subordinated debt"), or in the performance of
any other provision contained in any instrument under which any such
obligation is created or secured (including the breach of any covenant
thereunder), if an effect of such default is that the holder(s) of
such obligation cause such obligation to become due prior to its
stated maturity; or

(h) A final, non-appealable judgment or judgments for the
payment of money in excess of Ten Million Dollars ($10,000,000) in the
aggregate not fully covered (excluding deductibles) by insurance is
rendered against Tenant and the same remains undischarged, unvacated,
unbonded or unstayed for a period of one hundred twenty (120)
consecutive days.

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Notwithstanding the foregoing, an Event of Default under the foregoing
subsections (a), (c), (d), (g) and (h) shall constitute an Event of Default
under all of the Leases and an Event of Default under the foregoing subsections
(b), (e) and (f) shall constitute an Event of Default only with respect to the
specific Lease and Leased Property to which such Event of Default applies.
Provided, with respect to the Events of Default under the foregoing subsections
(b), (e) and (f), if such Events of Default shall at any time be applicable to
Leased Properties for which the monthly Base Rent constitutes, in the
aggregate, greater than twenty-five percent (25%) of the monthly Base Rent for
all of the Leased Properties, then such Events of Default shall constitute
Events of Default under all of the Leases.

9.02 Remedies. To the extent any Event of Default is applicable
only to a specific Lease or Leases, or a specific Leased Property or Leased
Properties (in accordance with Section 9.01 above), the remedies set forth
herein shall be exercisable solely with respect to such Lease or Leases, or
Leased Property or Leased Properties, and shall not be exercisable with respect
to any other Leases or Leased Property. To the extent any Event of Default
constitutes an Event of Default under all of the Leases (in accordance with
Section 9.01 above), the remedies set forth herein shall be exercisable with
respect to all of the Leases and all of the Leased Properties. Subject to the
foregoing provisions, Landlord may exercise any one or more of the following
remedies upon the occurrence of an Event of Default:

(a) Landlord may terminate the applicable Lease, exclude
Tenant from possession of the subject Leased Property and use
reasonable efforts to lease such Leased Property to others. If any
Lease is terminated pursuant to the provisions of this subparagraph
(a), Tenant will remain liable to Landlord for damages in an amount
equal to the Rent and other sums which would have been owing by Tenant
under such Lease for the balance of the Term if the Lease had not been
terminated, less the net proceeds, if any, of any re-letting of the
subject Leased Property by Landlord subsequent to such termination,
after deducting all Landlord's expenses in connection with such
re-letting, including without limitation, the expenses set forth in
Section 9.02(b)(2) below. Landlord will be entitled to collect such
damages from Tenant monthly on the days on which the Rent and other
amounts would have been payable under the subject Lease if such Lease
had not been terminated and Landlord will be entitled to receive such
damages from Tenant on each such day. Alternatively, at the option of
Landlord, if such Lease is terminated, Landlord will be entitled to
recover from Tenant (a) all unpaid Rent then due and payable, and (b)
the worth at the time of the award (as hereafter defined) of the Rent
which would have been due and payable from the date of termination
through the Expiration Date as if the Lease had not been terminated.
The "worth at the time of award" of the amount referred to in clause
(b) is computed at "present value" using New York Prime Rate. For
purposes of this Agreement, "New York Prime Rate" shall mean that rate
of interest identified as prime or national prime by the Wall Street
Journal, or if not published or found, then the rate of interest
charged by the American bank with the greatest number of assets on
ninety (90) day unsecured notes to its preferred customers. For the
purpose of determining unpaid Rent under clause (b), the Rent reserved
in the Lease will be deemed to be the sum of the following: (i) the
Base Rent computed pursuant to Section 2.01;

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<PAGE> 30
(ii) the Additional Rent computed pursuant to Section 2.02; and
(iii) the Other Additional Rent computed pursuant to Section 2.02.01.
Such computation of Other Additional Rent shall be based on the Other
Additional Rent paid for the Lease Year preceding the date of
termination, increased by 4% per year thereafter. Following payments
by Tenant of the foregoing amounts, Landlord shall deliver and pay
over to Tenant all rent, income, and other proceeds of any nature
realized from the sale, lease or other disposition or utilization of
the Leased Premises, if any, actually received by Landlord, up to the
amounts so paid by Tenant less Landlord's reasonably incurred costs
and expenses of maintaining and re-leasing or selling the Leased
Premises.

(b) (1) Without demand or notice, Landlord may re-enter
and take possession of the applicable Leased Property or any part of
such Leased Property; and repossess such Leased Property as of the
Landlord's former estate; and expel the Tenant and those claiming
through or under Tenant from such Leased Property; and, remove the
effects of both or either, without being deemed guilty of any manner
of trespass and without prejudice to any remedies for arrears of Rent
or preceding breach of covenants or conditions. If Landlord elects to
re-enter, as provided in this paragraph (b) or if Landlord takes
possession of such Leased Property pursuant to legal proceedings or
pursuant to any notice provided by law, Landlord may, from time to
time, without terminating the subject Lease, re-let such Leased
Property or any part of such Leased Property, either alone or in
conjunction with other portions of the Improvements of which such
Leased Property are a part, in Landlord's name but for the account of
Tenant, for such term or terms (which may be greater or less than the
period which would otherwise have constituted the balance of the Term
of this Lease) and on such terms and conditions (which may include
concessions of free rent, and the alteration and repair of such Leased
Property) as Landlord, in its uncontrolled discretion, may determine.
Landlord may collect and receive the Rents for such Leased Property.
Landlord will not be responsible or liable for any failure to re-let
such Leased Property, or any part of such Leased Property, or for any
failure to collect any Rent due upon such re-letting. No such
re-entry or taking possession of such Leased Property by Landlord will
be construed as an election on Landlord's part to terminate this Lease
unless a written notice of such intention is given to Tenant. No
notice from Landlord under this Lease or under a forcible entry and
detainer statute or similar law will constitute an election by
Landlord to terminate this Lease unless such notice specifically says
so. Landlord reserves the right following any such re-entry or
re-letting, or both, to exercise its right to terminate this Lease by
giving Tenant such written notice, and, in that event such Lease will
terminate as specified in such notice.

(2) If Landlord elects to take possession of such
Leased Property according to this subparagraph (b) without terminating
such Lease, Tenant will pay Landlord (i) the Rent, Additional Rent and
other sums which would be payable under such Lease if such
repossession had not occurred, less (ii) the net proceeds, if any, of
any re-letting of such Leased Property after deducting all of
Landlord's expenses incurred in connection with such re-letting,
including without limitation, all repossession costs, brokerage
commissions, legal

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<PAGE> 31
expense, attorneys' fees, expense of employees, alteration,
remodeling, repair costs, and expense of preparation for such
re-letting. If, in connection with any re-letting, the new Lease term
extends beyond the existing Term or such Leased Property covered by
such re-letting includes areas which are not part of such Leased
Property, a fair apportionment of the Rent received from such
re-letting and the expenses incurred in connection with such
re-letting will be made in determining the net proceeds received from
such re-letting. In addition, in determining the net proceeds from
such re-letting, any rent concessions will be apportioned over the
term of the new Lease. Tenant will pay such amounts to Landlord
monthly on the days on which the Rent and all other amounts owing
under this Agreement or such Lease would have been payable if
possession had not been retaken, and Landlord will be entitled to
receive the rent and other amounts from Tenant on each such day.

(c) Landlord may re-enter the applicable Leased Property
and have, repossess and enjoy such Leased Property as if such Lease
had not been made, and in such event, Tenant and its successors and
assigns shall remain liable for any contingent or unliquidated
obligations or sums owing at the time of such repossession.

(d) Landlord may take whatever action at law or in equity
as may appear necessary or desirable to collect the Rent and other
amounts payable under the applicable Lease then due and thereafter to
become due, or to enforce performance and observance of any
obligations, agreements or covenants of Tenant under such Lease.

9.03 Right of Set-Off. Landlord may, and is hereby authorized by
Tenant, at any time and from time to time, after advance notice to Tenant, to
set-off and apply any and all sums held by Landlord, including all sums held in
any escrow for Impositions, any indebtedness of Landlord to Tenant, and any
claims by Tenant against Landlord, against any obligations of Tenant under this
Agreement or any Lease and against any claims by Landlord against Tenant,
whether or not Landlord has exercised any other remedies hereunder. The rights
of Landlord under this Section are in addition to any other rights and remedies
Landlord may have against Tenant.

9.04 Performance of Tenant's Covenants. Landlord may perform any
obligation of Tenant which Tenant has failed to perform within two (2) days
after Landlord has sent a written notice to Tenant informing it of its specific
failure (provided no such notice shall be required if Landlord has previously
notified Tenant of such failure under the provisions of Section 9.01). Tenant
shall reimburse Landlord on demand, as Other Additional Rent, for any
expenditures thus incurred by Landlord and shall pay interest thereon at the
New York Prime Rate (as herein defined).

9.05 Late Charge. Any payment not made by Tenant for more than ten
(10) days after the due date shall be subject to a late charge payable by
Tenant as Rent of three percent (3%) of the amount of such overdue payment.

9.06 Litigation; Attorneys' Fees. Within ten (10) days after
Tenant has knowledge of any litigation or other proceeding that may be
instituted against Tenant, against any Leased Property to

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secure or recover possession thereof, or that may affect the title to
or the interest of Landlord in such Leased Property, Tenant shall give written
notice thereof to Landlord. Within thirty (30) days of Landlord's presentation
of an invoice, Tenant shall pay all reasonable costs and expenses incurred by
Landlord in enforcing or preserving Landlord's rights under this Agreement and
each Lease, whether or not an Event of Default has actually occurred or has
been declared and thereafter cured, including without limitation, (i) the fees,
expenses, and costs of any litigation, receivership, administrative,
bankruptcy, insolvency or other similar proceeding; (ii) reasonable attorney,
paralegal, consulting and witness fees and disbursements; and (iii) the
expenses, including without limitation, lodging, meals, and transportation,
of Landlord and its employees, agents, attorneys, and witnesses in preparing
for litigation, administrative, bankruptcy, insolvency or other similar
proceedings and attendance at hearings, depositions, and trials in connection
therewith. All such costs, charges and fees as incurred shall be deemed to be
Other Additional Rent under this Agreement.

9.07 Remedies Cumulative. The remedies of Landlord herein are
cumulative to and not in lieu of any other remedies available to Landlord at
law or in equity. The use of any one remedy shall not be taken to exclude or
waive the right to use any other remedy.

9.08 Escrows and Application of Payments. As security for the
performance of its obligations hereunder, Tenant hereby assigns to Landlord all
its right, title and interest in and to all monies escrowed with Landlord under
this Agreement or under any Lease and all deposits with utility companies,
taxing authorities, and insurance companies; provided, however, that Landlord
shall not exercise its rights hereunder until an Event of Default has occurred.
Any payments received by Landlord under any provisions of this Agreement or
under any Lease during the existence, or continuance of an Event of Default
shall be applied to Tenant's obligations in the order which Landlord may
determine.

9.09 Power of Attorney. Tenant hereby irrevocably and
unconditionally appoints Landlord, or Landlord's authorized officer, agent,
employee or designee, as Tenant's true and lawful attorney-in-fact, to act,
after an Event of Default, for Tenant in Tenant's name, place, and stead, and
for Tenant's and Landlord's use and benefit, to execute, deliver and file all
applications and any and all other necessary documents or things, to effect a
transfer, reinstatement, renewal and/or extension of any and all licenses and
other governmental authorizations issued to Tenant in connection with Tenant's
operation of any Leased Property, and to do any and all other acts incidental
to any of the foregoing. Tenant irrevocably and unconditionally grants to
Landlord as its attorney-in-fact full power and authority to do and perform,
after an Event of Default, every act necessary and proper to be done in the
exercise of any of the foregoing powers as fully as Tenant might or could do if
personally present or acting, with full power of substitution, hereby ratifying
and confirming all that said attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and is
irrevocable prior to the full performance of the Tenant's obligations under
this Agreement and each Lease.

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ARTICLE X
DAMAGE AND DESTRUCTION

10.01 General. Tenant shall notify Landlord if any of the Leased
Property is damaged or destroyed by reason of fire or any other cause. Tenant
shall promptly repair, rebuild, or restore the Leased Property, at Tenant's
expense, so as to make the Leased Property at least equal in value to the
Leased Property existing immediately prior to such occurrence and as nearly
similar to it in character as is practicable and reasonable. Before beginning
such repairs or rebuilding, or letting any contracts in connection with such
repairs or rebuilding, Tenant will submit for Landlord's approval, which
approval Landlord will not unreasonably withhold or delay, complete and
detailed plans and specifications for such repairs or rebuilding. Promptly
after receiving Landlord's approval of the plans and specifications, Tenant
will begin such repairs or rebuilding and will prosecute the repairs and
rebuilding to completion with diligence, subject, however, to strikes,
lockouts, acts of God, embargoes, governmental restrictions, and other causes
beyond Tenant's reasonable control. Landlord will make available to Tenant the
net proceeds of any fire or other casualty insurance paid to Landlord for such
repair or rebuilding as the same progresses, after deduction of any costs of
collection, including attorneys' fees. Payment will be made against properly
certified vouchers of a competent architect in charge of the work and approved
by Landlord. Prior to commencing the repairing or rebuilding, Tenant shall
deliver to Landlord for Landlord's approval a schedule setting forth the
estimated monthly draws for such work. Landlord will contribute to such
payments out of the insurance proceeds an amount equal to the proportion that
the total net amount received by Landlord from insurers bears to the total
estimated cost of the rebuilding or repairing, multiplied by the payment by
Tenant on account of such work. Landlord may, however, withhold ten percent
(10%) from each payment until (i) the work of repairing or rebuilding is
completed and proof has been furnished to Landlord that no lien or liability
has attached or will attach to the Leased Property or to Landlord in connection
with such repairing or rebuilding, (ii) Tenant has obtained a certificate of
use and occupancy (or its functional equivalent) for the portion of the Leased
Premises repaired or rebuilt and (iii) if Tenant has an agreement with any
governmental authority for the detention of inmates at such Leased Property
which requires such governmental authority to approve such repairs or
rebuilding, such approval shall have been obtained. Upon the completion of
rebuilding or repairing and the furnishing of such proof, the balance of the
net proceeds of such insurance payable to Tenant on account of such repairing
or rebuilding will be paid to Tenant. Tenant will obtain and deliver to
Landlord a temporary or final certificate of occupancy before the Leased
Property is reoccupied for any purpose. Tenant shall complete such repairs or
rebuilding free and clear of mechanic's or other liens, and in accordance with
the building codes and all applicable laws, ordinances, regulations, or orders
of any state, municipal, or other public authority affecting the repairs or
rebuilding, and also in accordance with all requirements of the insurance
rating organization, or similar body. Any remaining proceeds of insurance
after such restoration will be Tenant's property.

10.02 Landlord's Inspection. During the progress of such repairs or
rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating

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to such repairs or rebuilding. Tenant will keep all plans, shop drawings,
and specifications available, and Landlord and its architects and engineers
may examine them at all reasonable times. If, during such repairs or
rebuilding, Landlord and its architects and engineers determine that the
repairs or rebuilding are not being done in accordance with the approved plans
and specifications, Landlord will give prompt notice in writing to Tenant,
specifying in detail the particular deficiency, omission, or other respect in
which Landlord claims such repairs or rebuilding do not accord with the
approved plans and specifications. Upon the receipt of any such notice, Tenant
will cause corrections to be made to any deficiencies, omissions, or such other
respect. Tenant's obligations to supply insurance, according to Article IV,
will be applicable to any repairs or rebuilding under this Section.

10.03 Landlord's Costs. Tenant shall, within thirty (30) days after
receipt of an invoice from Landlord, pay the reasonable costs, expenses, and
fees of any architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Agreement, or for any services performed by
Landlord's attorneys in connection therewith; provided, however, that Landlord
will consult with Tenant and notify Tenant of the estimated amount of such
expenses.

10.04 Rent Abatement. In the event that the provisions of Section
10.01 above shall become applicable, the Rent, real estate taxes and other
Impositions shall be abated or reduced proportionately during any period in
which, by reason of such damage or destruction, there is substantial
interference with the operation of the business of Tenant in the Leased
Property, having regard to the extent to which Tenant may be required to
discontinue its business in the Leased Property, and such abatement or
reduction shall continue for the period commencing with such destruction or
damage and ending with the substantial completion (defined below) by Tenant of
such work or repair and/or reconstruction. In the event that only a portion
of any Leased Property is rendered untenantable or incapable of such use, the
Base Rent and all real estate taxes and other Impositions payable hereunder
shall be reduced on a pro rata basis for the amount that the correctional or
detention facility at a particular Leased Property is rendered incapable of
occupancy because of such damage or destruction in proportion to the total size
of the Leased Property prior to such damage or destruction. For purposes of
this paragraph, substantial completion shall occur upon the earlier of (i) nine
(9) months from the date of the first disbursement of insurance proceeds, or
(ii) the issuance of a certificate of occupancy for the Leased Property.
Notwithstanding any other provision hereof, such rental abatement shall be
limited to the amount of any rental or business interruption insurance proceeds
actually received by Landlord.

10.05 Substantial Damage During Lease Term. Provided Tenant has
fully complied with Section 4.01 hereof (including actually maintaining in
effect rental value insurance or business interruption insurance provided for
in clause (c) thereof) and has satisfied the conditions of the last sentence of
this Section 10.05, if, at any time during the Term of the particular Lease,
the Leased Property is so damaged by fire or otherwise that more than fifty
percent (50%) of the correctional or detention facility at the Leased Property
is rendered unusable, Tenant may, within thirty (30) days after such damage,
give notice of its election to terminate the Lease subject to the particular
Leased

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Property and, subject to the further provisions of this Section, such
Lease will cease on the tenth (10th ) day after the delivery of such notice.
If the Lease is so terminated, Tenant will have no obligation to repair,
rebuild or replace the Leased Property, and the entire insurance proceeds will
belong to Landlord. If the Lease is not so terminated, Tenant shall rebuild
the Leased Property in accordance with Section 10.01. If Tenant elects to
terminate any Lease pursuant to this Section 10.05, Tenant will pay (or cause
to be paid) to Landlord, an amount equal to the difference between the amount
of all insurance proceeds received by Landlord, and the net book value of such
Leased Property as shown in Landlord's financial statements as of the date of
such termination.

10.06 Damage Near End of Term. Notwithstanding any provisions of
Section 10.01 to the contrary, if damage to or destruction of the Leased
Property occurs during the last twenty-four (24) months of the Term, and if
such damage or destruction cannot be fully repaired and restored within six (6)
months immediately following the date of loss, either party shall have the
right to terminate this Lease by giving notice to the other within thirty (30)
days after the date of damage or destruction, in which event Landlord shall be
entitled to retain the insurance proceeds and Tenant shall pay to Landlord on
demand the amount of any deductible or uninsured loss arising in connection
therewith; provided, however, that any such notice given by Landlord shall be
void and of no force and effect if Tenant exercises an available option to
extend the Term pursuant to provisions of the Lease for such Leased Property
within thirty (30) days following receipt of such termination notice.

ARTICLE XI
CONDEMNATION

11.01 Total Taking. If at any time during the Term any Leased
Property is totally and permanently taken by right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
("Condemnation"), the applicable Lease shall terminate on the Date of Taking
(which shall mean the date the condemning authority has the right to possession
of the property being condemned), and Tenant shall promptly pay all outstanding
rent and other charges through the date of termination, provided, however the
applicable Lease shall not so terminate if the Condemnation occurred due to the
failure of Tenant to maintain the Leased Property as required by Article VII of
this Agreement or other applicable provision of this Agreement, whether or not
such failure on the part of Tenant constituted an Event of Default under an
individual Lease at the time of the Condemnation.

11.02 Partial Taking. If a portion of any Leased Property is taken
by Condemnation, the subject Lease shall remain in effect if such Leased
Property is not thereby rendered Unsuitable for its Primary Intended Use (which
shall mean that the Leased Property is in such a state or condition such that
in the good faith judgment of Tenant, reasonably exercised, the Leased Property
cannot be operated on a commercially practicable basis as a correctional or
detention facility), but if such Leased Property is thereby rendered Unsuitable
for its Primary Intended Use, such Lease shall

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terminate on the Date of Taking, provided such Condemnation was not as a
result of Tenant's failure to maintain the Leased Property as provided for in
Section 11.01.

11.03 Restoration. If there is a partial taking of any Leased
Property and the subject Lease remains in full force and effect pursuant to
Section 11.02, Landlord shall furnish to Tenant the amount of the Award payable
to Landlord, as provided herein, in order for Tenant to accomplish all
necessary restoration. If Tenant receives an Award under Section 11.05, Tenant
shall repair or restore any Tenant Improvements up to but not exceeding the
amount of the Award payable to Tenant therefor. Before beginning such
restoration, or letting any contracts in connection with such restoration,
Tenant will submit for Landlord's approval, which approval Landlord will not
unreasonably withhold or delay, complete and detailed plans and specifications
for such restoration. Promptly after receiving Landlord's approval of the
plans and specifications,Tenant will begin such restoration and will prosecute
the repairs and rebuilding to completion with diligence, subject, however, to
strikes, lockouts, acts of God, embargoes, governmental restrictions, and other
causes beyond Tenant's reasonable control. Landlord will make available to
Tenant the net proceeds of any Award paid to Landlord for such restoration,
after deduction of any costs of collection, including attorneys' fees. Payment
will be made against properly certified vouchers of a competent architect in
charge of the work and approved by Landlord. Prior to commencing the
restoration, Tenant shall deliver to Landlord for Landlord's approval a
schedule setting forth the estimated monthly draws for such work. Landlord
may, however, withhold ten percent (10%) from each payment until the work of
restoration is completed and proof has been furnished to Landlord that no lien
or liability has attached or will attach to the Leased Property or to Landlord
in connection with such restoration. Upon the completion of restoration and
the furnishing of such proof, the balance of the Award will be paid to Tenant.
Tenant will obtain and deliver to Landlord a temporary or final certificate of
occupancy before the Leased Property is reoccupied for any purpose. Tenant
shall complete such restoration free and clear of mechanic's or other liens,
and in accordance with the building codes and all applicable laws, ordinances,
regulations, or orders of any state, municipal, or other public authority
affecting the restoration, and also in accordance with all requirements of the
insurance rating organization, or similar body. Any remaining proceeds of the
Award after such restoration will be Tenant's property.

11.04 Landlord's Inspection. During the progress of such
restoration, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such
restoration. Tenant will keep all plans, shop drawings, and specifications
available, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such restoration, Landlord and its architects
and engineers determine that the restoration is not being done in accordance
with the approved plans and specifications, Landlord will give prompt notice in
writing to Tenant, specifying in detail the particular deficiency, omission, or
other respect in which Landlord claims such restoration does not accord with the
approved plans and specifications. Upon the receipt of any such notice, Tenant
will cause corrections to be made to any deficiencies, omissions, or such other
respect. Tenant's obligations to supply insurance, according to Article IV,
will be applicable to any restoration under this Section.

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11.05 Award Distribution. The entire compensation, sums or anything
of value awarded, paid or received on a total or partial Condemnation (the
"Award") shall belong to and be paid to Landlord, except that, subject to the
rights of any mortgagee of Tenant, Tenant shall be entitled to receive from the
Award, if and to the extent such Award specifically includes such items, a sum
attributable to the value, if any, of: (i) any Tenant Improvements, and (ii)
the leasehold interest of Tenant under the subject Lease; provided, however,
that if the amount received by Landlord and said mortgagee is less than the
Condemnation Threshold (which shall mean, as of any given date, an amount equal
to the net book value of such Leased Property as shown on the financial
statements of Landlord as of the date of the Condemnation), then the amount of
the Award otherwise payable to Tenant for the value of its leasehold interest
under this Lease (and not any other funds of Tenant) shall instead be paid over
to Landlord up to the amount of the shortfall.

11.06 Temporary Taking. The taking of any Leased Property, or any
part thereof, by military or other public authority shall constitute a taking
by Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month
period, which shall be a temporary taking, all the provisions of the subject
Lease shall remain in full force and effect with no abatement of rent payable
by Tenant hereunder. In the event of any such temporary taking, the entire
amount of any such Award made for such temporary taking allocable to the Term
of such Lease, whether paid by way of damages, rent or otherwise, shall be paid
to Tenant.

ARTICLE XII
TENANT'S RIGHT OF FIRST REFUSAL

12.01 Rights of First Refusal. Subject to the terms and conditions
set forth in this Section 12.01 and provided that no Event of Default with
respect to the subject Leased Property has occurred and is continuing at such
time or at the expiration of this Agreement or the individual Lease, Tenant
shall have a right of first refusal (the "Purchase Refusal Right") to purchase
any Leased Property (including any Leased Property owned by an Affiliate [as
defined in Section 13.01 hereof] of Landlord). If during the Term or for a
period of ninety (90) days following termination of any Lease, Landlord or any
Affiliate of Landlord receives a bona fide third party offer to Transfer any
Leased Property, then, prior to accepting such third party offer, Landlord
shall send written notice and a copy thereof to Tenant ("Landlord's Notice").
Tenant shall have ninety (90) days after receipt of Landlord's Notice to
exercise Tenant's Purchase Refusal Right, by giving Landlord written notice
thereof. Failure of Tenant to exercise the Purchase Refusal Right within such
time period set forth above shall be deemed to extinguish the Purchase Refusal
Right for a period of one hundred eighty (180) days. Thereafter, prior to the
expiration of such one hundred eighty (180) days, Landlord or its Affiliates
may Transfer such Leased Property provided however, that the Transfer of the
Leased Property is at a price equal to or greater than the price contained in
the Landlord's Notice, and otherwise consistent in all material respects with
the terms and conditions set forth in Landlord's Notice. Tenant's Purchase
Refusal Right shall revive in the event that Landlord fails to Transfer the
Leased Property within said one hundred eighty (180) days. In the event that
Tenant elects to

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exercise the Purchase Refusal Right and to acquire the Leased Property
thereby, (a) Tenant shall acquire such Leased Property on the same terms and
conditions and subject to all time periods and other limitations as provided in
Landlord's Notice (provided, however, Tenant shall in all events have not less
than ninety (90) days to close its acquisition of the Leased Property following
its written notice exercising its Purchase Refusal Right), and (b) concurrently
with such acquisition, the Lease of such Leased Property shall terminate (but
Tenant shall remain liable to pay any unpaid Rent with respect to such Leased
Property and all indemnifications and other provisions that survive the
expiration of the individual Lease or of this Agreement shall continue in
effect), and this Agreement shall be appropriately amended to reflect the
termination of such Lease.

Notwithstanding the foregoing provisions, the Purchase Refusal Right
shall not be applicable to any Transfer of a Leased Property to any Affiliate
of Landlord, so long as such Affiliate acquires such Leased Property subject to
the Purchase Refusal Right.

A "Transfer" is any direct or indirect sale, conveyance or other
disposition, including any transfer of a controlling ownership interest in any
owning partnership, limited liability company or corporation, and including any
lease with a term in excess of five (5) years.

12.02 Restriction on Exercise of Purchase Refusal Right.
Notwithstanding any other provision of this Article XII, Landlord shall not be
required to Transfer any Leased Property, or any portion thereof, which is a
real estate asset as defined in Section 856(c) (6) (B), or functionally
equivalent successor provision, of the Code, to Tenant if Landlord's counsel
advises Landlord that such Transfer may not be a sale of property described in
Section 857(b) (6) (C), or functionally equivalent successor provision of the
Code. If Landlord determines not to Transfer such property pursuant to the
above sentence, Tenant's right, if any, to acquire any or all of such property
shall continue and be exercisable, upon and subject to all applicable terms and
conditions set forth in this Lease, at such time as the transaction, upon the
advise of Landlord's tax counsel, would be a sale of property described in
Section 857(b) (6) (C) of the Code, or functionally equivalent successor
provision, and until such time Tenant shall lease the Leased Property for the
lesser of the rent otherwise called for in the Lease or fair market rental. If
the Transfer of the Leased Property is delayed pursuant to this section,
Landlord will use its reasonable best efforts to Transfer such Leased Property
to Tenant as soon as practicable in the next calendar year.

ARTICLE XIII
ASSIGNMENT AND SUBLETTING; ATTORNMENT

13.01 Prohibition Against Subletting and Assignment. Subject to
Section 13.03, Tenant shall not, without the prior written consent of Landlord
(which consent Landlord may grant or withhold in its sole and absolute
discretion), assign, mortgage, pledge, hypothecate, encumber or otherwise
transfer (except to an Affiliate of Tenant) (as defined) this Agreement or any
Lease or any interest herein or therein, or all or any part of the Leased
Property, or suffer or permit any Lease or the leasehold estate created thereby
or any other rights arising under any Lease to be assigned,

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transferred, mortgaged, pledged, hypothecated or encumbered, in whole or
in part, whether voluntarily, involuntarily or by operation of law (except to
an Affiliate of Tenant). For purposes of this Section 13.01, an assignment of
any Lease shall be deemed to include any Change of Control of Tenant, as if
such Change of Control were an assignment of the Lease. No assignment shall in
any way impair the continuing primary liability of Tenant hereunder.

An "Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under common control with that Person.

A "Person" shall mean and include natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts, Indian tribes or other organizations, whether or not legal
entities, and governments and agencies and political subdivisions thereof.

13.02 Changes of Control. A Change of Control requiring the consent
of Landlord shall mean:

(a) the issuance and/or sale by Tenant or the sale by any
stockholder of Tenant of a Controlling (which shall mean, as applied
to any Person, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise) interest in Tenant to a Person other than an
Affiliate of Tenant, other than in either case a distribution to the
public pursuant to an effective registration statement under the
Securities Act of 1933, as amended (a "Registered Offering");

(b) the sale, conveyance or other transfer of all or
substantially all of the assets of Tenant (whether by operation of law
or otherwise); or

(c) any transaction pursuant to which Tenant is merged
with or consolidated into another entity (other than an entity owned
and Controlled by an Affiliate of Tenant), and Tenant is not the
surviving entity.

13.03 Operating/Service Agreements.

13.03.01 Permitted Agreements. Tenant shall, without Landlord's prior
approval, be permitted to enter into certain operating/service agreements for
portions of any Leased Property to various licensees in connection with
Tenant's operation of correctional or detention facilities as is customarily
associated with or incidental to the operation of such Leased Property, which
agreements may be in the nature of a sublease agreement.

13.03.02 Terms of Agreements. Each operating/service agreement
concerning any of the Leased Property shall be subject and subordinate to the
provisions of the applicable Lease. No agreement made as permitted by Section
13.03.01 shall affect or reduce any of the obligations of

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Tenant hereunder, and all such obligations shall continue in full force and
effect as if no agreement had been made. No agreement shall impose any
additional obligations on Landlord under the applicable Lease.

13.03.03 Copies. Tenant shall, within ten (10) days after the
execution and delivery of any operating/service agreement permitted by Section
13.03.01, deliver a duplicate original thereof to Landlord.

13.03.04 Assignment of Rights in Agreements. As security for
performance of its obligations under each Lease, Tenant hereby grants, conveys
and assigns to Landlord all right, title and interest of Tenant in and to all
operating/service agreements now in existence or hereinafter entered into for
any or all of the applicable Leased Property, and all extensions, modifications
and renewals thereof and all rents, issues and profits therefrom, to the extent
the same are assignable by Tenant. Landlord hereby grants to Tenant a license
to collect and enjoy all rents and other sums of money payable under any such
agreement concerning any of such Leased Property; provided, however, that
Landlord shall have the absolute right at any time after the occurrence and
continuance of an Event of Default upon notice to Tenant and any vendors or
licensees to revoke said license and to collect such rents and sums of money
and to retain the same. Tenant shall not (i) after the occurrence and
continuance of an Event of Default, consent to, cause or allow any material
modification or alteration of any of the terms, conditions or covenants of any
of the agreements or the termination thereof, without the prior written
approval of Landlord nor (ii) accept any rents (other than customary security
deposits) more than ninety (90) days in advance of the accrual thereof nor
permit anything to be done, the doing of which, nor omit or refrain from doing
anything, the omission of which, will or could be a breach of or default in the
terms of any of the agreements.

13.03.05 Licenses, Etc. For purposes of Section 13.03, the
operating/service agreements shall mean any licenses, concession arrangements,
or other arrangements relating to the possession or use of all or any part of
any Leased Property but specifically excluding any management agreement,
facility operating agreement or other agreement for the housing or detention of
inmates.

13.04 Assignment. No assignment shall in any way impair the
continuing primary liability of Tenant hereunder, and no consent to any
assignment in a particular instance shall be deemed to be a waiver of the
prohibition set forth in Article XIII. Any assignment shall be solely of
Tenant's entire interest in the subject Lease. Any assignment or other
transfer of all or any portion of Tenant's interest in any Lease in
contravention of Article XIII shall be voidable at Landlord's option.

13.05 REIT Limitations. Anything contained in this Agreement to the
contrary notwithstanding, Tenant shall not (i) sublet or assign any Leased
Property or any Lease on any basis such that the rental or other amounts to be
paid by the sublessee or assignee thereunder would be based, in whole or in
part, on the income or profits derived by the business activities of the
sublessee or assignee; (ii) sublet or assign any Leased Property or any Lease
to any person that Landlord owns, directly or indirectly (by applying
constructive ownership rules set forth in Section 856(d) (5) of the Code), a
ten percent (10%) or greater interest; or (iii) sublet or assign any Leased
Property or any

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Lease in any other manner or otherwise derive any income which could cause any
portion of the amounts received by Landlord pursuant to any Lease or any
sublease to fail to qualify as "rents from real property" within the meaning
of Section 856(d) of the Code, or which could cause any other income received
by Landlord to fail to qualify as income described in Section 856(c) (2) of
the Code. The requirements of this Section 13.05 shall likewise apply to any
further subleasing by any subtenant.

13.06 Attornment. Tenant shall insert in each sublease permitted
under Section 13.03.01 provisions to the effect that (a) such sublease is
subject and subordinate to all of the terms and provisions of the applicable
Lease (including this Agreement) and to the rights of Landlord hereunder, (b)
in the event such Lease shall terminate before the expiration of such sublease,
the sublessee thereunder will, at Landlords' option, attorn to Landlord and
waive any right the sublessee may have to terminate the sublease or to
surrender possession thereunder, as a result of the termination of such Lease,
and (c) in the event the sublessee receives a written notice from Landlord or
Landlord's assignees, if any, stating that Tenant is in default under such
Lease, the sublessee shall thereafter be obligated to pay all rentals accruing
under said sublease directly to the party giving such notice, or as such party
may direct. All rentals received from the sublessee by Landlord or Landlord's
assignees, if any, as the case may be, shall be credit against the amounts
owing by Tenant under such Lease.

ARTICLE XIV
ARBITRATION

14.01 Controversies. Except with respect to the payment of Rent
hereunder, which shall be subject to the provisions of Section 9.02, in the
case a controversy arises between the parties as to any of the requirements of
this Agreement or of any individual Lease or the performance thereunder which
the parties are unable to resolve, the parties agree to waive the remedy of
litigation (except for extraordinary relief in an emergency situation) and
agree that such controversy or controversies shall be determined by arbitration
as hereafter provided in this Article.

14.02 Appointment of Arbitrators. The party or parties requesting
arbitration shall serve upon the other a demand therefor, in writing,
specifying in detail the controversy and matter(s) to be submitted to
arbitration. The selection of arbitrators shall be conducted pursuant to the
rules for resolution of commercial disputes promulgated by the American
Arbitration Association. The party or parties giving notice shall request a
listing of available arbitrators from the American Arbitration Association, and
each party shall respond in the selection process within fifteen (15) days
after each receipt of such listings until a panel of three (3) arbitrators has
been designated. If either party fails to respond within fifteen (15) days, it
is agreed that the American Arbitration Association may make such selections as
are necessary to complete the panel of three (3) arbitrators.

14.03 Arbitration Procedure. Within fifteen (15) days after the
selection of the arbitration panel, the arbitrators shall give written notice
to each party as to the time and the place of each

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meeting, which shall be held in Nashville, Tennessee, at which the parties
may appear and be heard, which shall be no later than sixty (60) days
after certification of the arbitration panel. The parties specifically waive
discovery, and further waive the applicability of rules of evidence or rules of
procedure in the proceedings. The applicable rules shall be those in effect at
the time for the resolution of commercial disputes promulgated by the American
Arbitration Association. Notwithstanding the foregoing, the substantive law
governing the arbitration shall be the laws of the State of Tennessee. The
arbitrators shall take such testimony and make such examination and
investigations as the arbitrators reasonably deem necessary. The decision of
the arbitrators shall be in writing signed by a majority of the panel which
decision shall be final and binding upon the parties to the controversy.
Provided, however, in rendering their decisions and making awards, the
arbitrators shall not add to, subtract from or otherwise modify the provisions
of this Agreement.

14.04 Expenses. The expenses of the arbitration shall be assessed
by the arbitrators and specified in the written decision. In the absence of a
determination or assessment of expenses of the arbitration procedure in the
award, all of the expenses of such arbitration shall be divided equally between
Landlord and Tenant. Each party in interest shall be responsible for and pay
the fees, costs and expenses of its own counsel, unless the arbitration award
provides for an assessment of reasonable attorneys' fees and costs.

14.05 Enforcement of the Arbitration Award. There shall be no
appeal from the decision of the arbitrators, and upon the rendering of an
award, any party thereto may file the arbitrators' decision in the United
States District Court for the Middle District of Tennessee for enforcement as
provided by applicable law.

ARTICLE XV
QUIET ENJOYMENT, SUBORDINATION,
ATTORNMENT, ESTOPPEL CERTIFICATES

15.01 Quiet Enjoyment. So long as Tenant performs all of its
obligations under this Agreement and each Lease, Tenant's possession of the
Leased Property will not be disturbed by or through Landlord.

15.02 Landlord Mortgages; Subordination. Subject to Section 15.03,
without the consent of Tenant, Landlord may, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrances or title
retention agreement on the Leased Properties, or any portion thereof or any
interest therein, whether to secure any borrowing or other means of financing
or refinancing. This Agreement and each Lease and Tenant's rights under this
Agreement and each Lease are subordinate to any ground lease or underlying
lease, first mortgage, first deed of trust, or other first lien against any
Leased Property, together with any renewal, consolidation, extension,
modification or replacement thereof, which now or at any subsequent time
affects any Leased Property or any interest of Landlord in any Leased Property,
except to the extent that any such instrument expressly provides that this
Agreement and each Lease is superior. This provision will be self-operative,
and

37
<PAGE> 43
no further instrument or subordination will be required in order to effect
it. However, Tenant shall execute, acknowledge and deliver to Landlord, at any
time and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this Section, to confirm or effect any such
subordination. If Tenant fails or refuses to execute, acknowledge, and deliver
any such document within twenty (20) days after written demand, Landlord may
execute, acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
Section. This power of attorney is coupled with an interest and is irrevocable.

15.03 Attornment; Non-Disturbance. If any holder of any mortgage,
indenture, deed of trust, or other similar instrument described in Section
15.02 succeeds to Landlord's interest in any Leased Property, Tenant will pay
to such holder all Rent subsequently payable under the subject Lease. Tenant
shall, upon request of anyone succeeding to the interest of Landlord,
automatically become the tenant of, and attorn to, such successor in interest
without changing such Lease. The successor in interest will not be bound by
(i) any payment of Rent for more than one (1) month in advance; (ii) any
amendment or modification of such Lease made without its written consent; (iii)
any claim against Landlord arising prior to the date on which the successor
succeeded to Landlord's interest; or (iv) any claim or offset of Rent against
the Landlord. Upon request by Landlord or such successor in interest and
without cost to Landlord or such successor in interest, Tenant will execute,
acknowledge and deliver an instrument or instruments confirming the attornment.
If Tenant fails or refuses to execute, acknowledge and deliver any such
instrument within twenty (20) days after written demand, then Landlord or such
successor in interest will be entitled to execute, acknowledge, and deliver any
document on behalf of Tenant as Tenant's attorney-in-fact. Tenant hereby
constitutes and irrevocably appoints Landlord, its successors and assigns, as
Tenant's attorney-in-fact to execute, acknowledge, and deliver on behalf of
Tenant any such document. This power of attorney is coupled with an interest
and is irrevocable.

Landlord shall use reasonable efforts to obtain a non-disturbance
agreement from any such party referred to above which provides that in the
event such party succeeds to Landlord's interest under the Lease and provided
that no Event of Default by Tenant exists, such party will not disturb Tenant's
possession, use or occupancy of the Leased Property.

15.04 Estoppel Certificates. At the request of Landlord or any
mortgagee or purchaser of any Leased Property, Tenant shall execute,
acknowledge, and deliver an estoppel certificate, in recordable form, in favor
of Landlord or any mortgagee or purchaser of such Leased Property certifying
the following: (i) that the subject Lease is unmodified and in full force and
effect, or if there have been modifications that the same is in full force and
effect as modified and stating the modifications; (ii) the date to which Rent
and other charges have been paid; (iii) that neither Tenant nor Landlord is in
default nor is there any fact or condition which, with notice or lapse of time,
or both, would constitute a default, if that be the case, or specifying any
existing default; (iv) that Tenant has accepted and occupies such Leased
Property; (v) that Tenant has no defenses, set-offs,

38
<PAGE> 44
deductions, credits, or counterclaims against Landlord, if that be the case,
or specifying such that exist; (vi) that the Landlord has no outstanding
construction or repair obligations; and (vii) such other information as may
reasonably be requested by Landlord or any mortgagee or purchaser. Any
purchaser or mortgagee may rely on this estoppel certificate. If Tenant fails
to deliver the estoppel certificates to Landlord within ten (10) days after the
request of the Landlord, then Tenant shall be deemed to have certified that (a)
such Lease is in full force and effect and has not been modified, or that such
Lease has been modified as set forth in the certificate delivered to Tenant;
(b) Tenant has not prepaid any Rent or other charges except for the current
month; (c) Tenant has accepted and occupies such Leased Property; (d) neither
Tenant nor Landlord is in default nor is there any fact or condition which,
with notice or lapse of time, or both, would constitute a default; (e) Landlord
has no outstanding construction or repair obligation; and (f) Tenant has no
defenses, set-offs, deductions, credits, or counterclaims against Landlord.
Tenant hereby irrevocably appoints Landlord as Tenant's attorney-in-fact to
execute, acknowledge and deliver on Tenant's behalf any estoppel certificate
which Tenant does not object to within twenty (20) days after Landlord sends
the certificate to Tenant. This power of attorney is coupled with an interest
and is irrevocable.

ARTICLE XVI
MISCELLANEOUS

16.01 Notices. Landlord and Tenant hereby agree that all notices,
demands, requests, and consents (hereinafter "Notices") required to be given
pursuant to the terms of this Lease shall be in writing and shall be addressed
as follows:

<TABLE>
<S> <C>
If to Tenant: Corrections Corporation of America
102 Woodmont Boulevard, Suite 800
Nashville, Tennessee 37205
Attention: Darrell K. Massengale

With a copy to: Stokes & Bartholomew, P.A.
424 Church Street, Suite 2800
Nashville, Tennessee 37219
Attention: Elizabeth E. Moore

If to Landlord: CCA Prison Realty Trust
2200 Abbott Martin Road
Nashville, Tennessee 37215
Attention: Michael W. Devlin

With a copy to: Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Attention: Kim A. Brown

</TABLE>

39
<PAGE> 45

and shall be served by (i) personal delivery, (ii) certified mail, return
receipt requested, postage prepaid, or (iii) nationally recognized overnight
courier. All notices shall be deemed to be given upon the earlier of actual
receipt or three (3) days after mailing, or one (1) business day after deposit
with the overnight courier. Any Notices meeting the requirements of this
Section shall be effective, regardless of whether or not actually received.
Landlord or Tenant may change its notice address at any time by giving the
other party Notice of such change.

16.02 Advertisement of Leased Property. In the event the parties
hereto have not executed a renewal lease of any Leased Property within one (1)
year prior to the expiration of the Term, then Landlord or its agent shall have
the right to enter such Leased Property at all reasonable times for the purpose
of exhibiting such Leased Property to others and to place upon such Leased
Property for and during the period commencing two hundred ten (210) days prior
to the expiration of the Term "for sale" or "for rent" notices or signs.

16.03 Landlord's Access. Landlord shall have the right to enter
upon the Leased Property, upon reasonable prior notice to Tenant, for purposes
of inspecting the same and assuring Tenant's compliance with this Agreement
provided, any such entry by Landlord shall be subject to all rules, guidelines
and procedures prescribed by Tenant in connection therewith. Landlord shall
not be allowed entry to the Leased Premises unless accompanied by such of
Tenant's personnel as Tenant shall require.

16.04 Entire Agreement. This Agreement and the individual Leases
contain the entire agreement between Landlord and Tenant with respect to the
subject matter hereof and thereof. No representations, warranties, and
agreements have been made by Landlord except as set forth in this Agreement and
the Leases.

16.05 Severability. If any term or provision of this Agreement or
any Lease is held or deemed by Landlord to be invalid or unenforceable, such
holding shall not affect the remainder of this Agreement or any Lease and the
same shall remain in full force and effect, unless such holding substantially
deprives Tenant of the use of the Leased Property or Landlord of the Rents
therefor, in which event the Lease for such Leased Property shall forthwith
terminate as if by expiration of the Term.

16.06 Captions and Headings. The captions and headings are inserted
only as a matter of convenience and for reference and in no way define, limit
or describe the scope of this Agreement or the intent of any provision hereof.

16.07 Governing Law. This Agreement and each of the Leases shall be
construed under the laws of the State of Tennessee.

16.08 Memorandum of Lease. Landlord and Tenant agree that a record
of this Agreement or any Lease may be recorded by either party in a memorandum
of lease approved by Landlord and Tenant with respect to each Leased Property.

40
<PAGE> 46
16.09 Waiver. No waiver by Landlord of any condition or covenant
herein contained, or of any breach of any such condition or covenant, shall be
held or take to be a waiver of any subsequent breach of such covenant or
condition, or to permit or excuse its continuance or any future breach thereof
or of any condition or covenant, nor shall the acceptance of Rent by Landlord
at any time when Tenant is in default in the performance or observance of any
condition or covenant herein be construed as a waiver of such default, or of
Landlord's right to terminate this Agreement or any Lease or exercise any other
remedy granted herein on account of such existing default.

16.10 Binding Effect. This Agreement and each Lease will be binding
upon and inure to the benefit of the heirs, successors, personal
representatives, and permitted assigns of Landlord and Tenant.

16.11 Authority. The persons executing this Agreement or any Lease
on behalf of Tenant warrant that (i) Tenant has the power and authority to
enter into this Agreement or such Lease; (ii) Tenant is qualified to do
business in the state in which the Leased Property is located; and (iii) they
are authorized to execute this Agreement and each Lease on behalf of Tenant.
Tenant shall, at the request of Landlord, provide evidence satisfactory to
Landlord confirming these representation.

16.12 Transfer of Permits, Etc. Upon the expiration or earlier
termination of the Term of any Lease (whether pursuant to the provisions of
this Agreement or of such Lease), Tenant shall, at the option of Landlord,
transfer to and relinquish to Landlord or Landlord's nominee and to cooperate
with Landlord or Landlords' nominee in connection with the processing by
Landlord or such nominee of all licenses, operating permits, and other
governmental authorization and all contracts, including without limitation, the
correctional or detention facility license, and any other contracts with
governmental or quasi-governmental entities which may be necessary or
appropriate for the operation by Landlord or such nominee of the subject Leased
Property for the purposes of operating a correctional or detention facility;
provided that the costs and expenses of any such transfer or the processing of
any such application shall be paid by Landlord or Landlord's nominee; and
provided further that any management agreement, facility operating agreement or
other agreement for the housing or detention of inmates shall be expressly
excluded. Any such permits, licenses, certificates and contracts which are
held in Landlord's name now or at the termination of such Lease shall remain
the property of Landlord. To the extent permitted by law, Tenant hereby
irrevocably appoints Landlord, its successors and assigns and any nominee or
nominees specifically designated by Landlord or any successor or assign as
Tenant's attorney-in-fact to execute, acknowledge, deliver and file all
documents appropriate to such transfer or processing of any such application on
behalf of Tenant; this power of attorney is coupled with an interest and is
irrevocable.

16.13 Modification. This Agreement and any Lease may only be
modified by a writing signed by both Landlord and Tenant.

16.14 Incorporation by Reference. All schedules and exhibits
referred to in this Agreement are incorporated into this Agreement, and all
schedules and exhibits referred to in any Lease (as well as the provisions of
this Agreement, except to the extent specifically excluded from or inconsistent
with the terms of such Lease) are incorporated into such Lease.

41
<PAGE> 47
16.15 No Merger. The surrender of this Agreement or of any Lease by
Tenant or the cancellation of this Agreement or of any Lease by agreement of
Tenant and Landlord or the termination of this Agreement or of any Lease on
account of Tenant's default will not work a merger, and will, at Landlord's
option, terminate any subleases or operate as an assignment to Landlord of any
subleases. Landlord's option under this paragraph will be exercised by notice
to Tenant and all known subtenants of any applicable Leased Property.

16.16 Laches. No delay or omission by either party hereto to
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.

16.17 Waiver of Jury Trial. To the extent that there is any claim
by one party against the other that is not to be settled by arbitration as
provided in Article XIV hereof, Landlord and Tenant waive trial by jury in any
action, proceeding or counterclaim brought by either of them against the other
on all matters arising out of this Agreement or the use and occupancy of the
Leased Property (except claims for personal injury or property damage). If
Landlord commences any summary proceeding for nonpayment of Rent, Tenant will
not interpose, and waives the right to interpose, any counterclaim in any such
proceeding.

16.18 Permitted Contests. Tenant, on its own or on Landlord's
behalf (or in Landlord's name), but at Tenant's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition
or any legal requirement or insurance requirement or any lien, attachment,
levy, encumbrance, charge or claim provided that (i) in the case of an unpaid
Imposition, lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Landlord and from the Leased Property; (ii) neither the Leased
Property nor any Rent therefrom nor any part thereof or interest therein would
be in any immediate danger of being sold, forfeited, attached or lost; (iii) in
the case of a legal requirement, Landlord would not be in any immediate danger
of civil or criminal liability for failure to comply therewith pending the
outcome of such proceedings; (iv) in the event that any such contest shall
involve a sum of money or potential loss in excess of Fifty Thousand Dollars
($50,000.00), Tenant shall deliver to Landlord and its counsel an opinion of
Tenant's counsel to the effect set forth in clauses (i), (ii) and (iii), to the
extent applicable; (v) in the case of a legal requirement and/or an Imposition,
lien, encumbrance, or charge, Tenant shall give such reasonable security as may
be demanded by Landlord to insure ultimate payment of the same and to prevent
any sale or forfeiture of the affected Leased Property or the Rent by reason of
such nonpayment or noncompliance; provided, however, the provisions of this
Section shall not be construed to permit Tenant to contest the payment of Rent
(except as to contests concerning the method of computation or the basis of
levy of any Imposition or the basis for the assertion of any other claim) or
any other sums payable by Tenant to Landlord hereunder; (vi) in the case of an
insurance requirement, the coverage required by Article IV shall be maintained;
and (vii) if such contest be finally resolved against Landlord or Tenant,
Tenant shall, as Other Additional Rent due hereunder, promptly pay the amount
required to be paid, together with all interest and penalties accrued thereon,
or comply with the applicable legal requirement

42
<PAGE> 48
or insurance requirement. Landlord, at Tenant's expense, shall execute
and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein. Tenant
hereby agrees to indemnify and save Landlord harmless from and against any
liability, cost or expense of any kind that may be imposed upon Landlord in
connection with any such contest and any loss resulting therefrom.

16.19 Construction of Lease. This Agreement and each of the Leases
for Leased Properties have been reviewed by Landlord and Tenant and their
respective professional advisors. Landlord, Tenant, and their advisors believe
that this Agreement and such Leases are the product of all their efforts, that
they express their agreement, and agree that they shall not be interpreted in
favor of either Landlord or Tenant or against either Landlord or Tenant merely
because of any party's efforts in preparing such documents.

16.20 Counterparts. This Agreement and each Lease may be executed in
duplicate counterparts, each of which shall be deemed an original hereof or
thereof.

16.21 Relationship of Landlord and Tenant. The relationship of
Landlord and Tenant is the relationship of lessor and lessee. Landlord and
Tenant are not partners, joint venturers, or associates.

16.22 Landlord's Status as a REIT. Tenant acknowledges that
Landlord intends to elect to be taxed as a real estate investment trust
("REIT") under the Code. Tenant shall not do anything which would adversely
affect Landlord's status as a REIT. Tenant hereby agrees to modifications of
this Agreement which do not materially adversely affect Tenant's rights and
liabilities if such modifications are required to retain or clarify Landlord's
status as a REIT.

16.23 Sale of Real Estate Assets. Notwithstanding any other
provision of this Agreement or of any Lease, Landlord shall not be required to
sell or transfer Leased Property, or any portion thereof, which is a real
estate asset as defined in Section 856(c)(6) of the Code, to Tenant if
Landlord's counsel advises Landlord that such sale or transfer may not be a
sale of property described in Section 857(b)(6)(C) of the Code. If Landlord
determines not to sell such property pursuant to the above sentence, Tenant's
right, if any, to purchase the Leased Property shall continue and be
exercisable at such time as the transaction, upon the advice of Landlord's
counsel, would be a sale of property described in Section 857(b)(6)(C) of the
Code.

43
<PAGE> 49
17.01 Covenant Not to Disclose. Landlord agrees that, by virtue
of the relationship of trust and confidence between Landlord and Tenant, it
possesses and will possess certain data and knowledge of operations of the
Landlord which are proprietary in nature and confidential. Landlord covenants
and agrees that it will not knowingly, at any time, directly or indirectly, for
whatever reason, without Tenant's prior written consent, which may be given or
withheld in Tenants's sole discretion, reveal, divulge or make known to any
person or entity, any confidential or proprietary record, data, trade secret,
pricing policy, bid amount, pricing strategy, personnel policy, method or
practice of obtaining or doing business, or any other confidential or
proprietary information whatever (the "Confidential Information"), whether or
not obtained with the knowledge and permission of the Tenant and whether or not
developed, devised or otherwise created in whole or in part by the efforts of
Landlord, nor shall Landlord use such Confidential Information for its own
account. Confidential Information shall not include any information generally
available to the public other than as a result of a disclosure of such
information by Landlord. Notwithstanding anything to the contrary provided
herein, a disclosure of Confidential Information by Landlord will not be
considered a violation of this Article XVII in the event such disclosure is
involuntarily compelled by a final, non-appealable, order from a court of
competent jurisdiction.

17.02. Non-Interference Covenant. Landlord covenants and agrees
that it will not, at any time, directly or indirectly, for whatever reason,
whether for its own account or for the account of any other person, firm,
corporation or other organization, without Tenant's prior written consent,
which may be given or withheld in Tenant's sole discretion: (i) solicit,
employ, deal with or

<PAGE> 50

otherwise interfere with any of the Tenant's contracts or relationships with
any employee, officer, director or any independent contractor, whether the
person is employed by or associated with the Tenant on the date of this
Agreement or at any time hereafter; or (ii) solicit, accept, deal with or
otherwise interfere with any of the Tenant's contracts or relationships with
any independent contractor, customer, client or supplier. Notwithstanding the
foregoing, (i) Landlord may offer employment to the current employees of the
Tenant who are terminated by the Tenant subsequent to the date hereof, (ii)
Landlord shall in no way be liable for any actions by any entity leasing or
managing any facility owned by Landlord, and (iii) nothing provided herein
shall prevent Landlord from soliciting relationships with an entity or entities
to lease, license, manage or otherwise use any facility leased to the Tenant
subsequent to the termination of such lease with the Tenant.

17.03 Business Materials and Property Disclosure. All written
materials, records and documents made by Landlord or coming into its possession
concerning the business or affairs of the Tenant shall be the sole property of
the Tenant and, upon request by the Tenant, Landlord shall deliver the same to
the Tenant and shall retain no copies. The foregoing restrictions shall not be
applicable to any written materials, records and documents generally available
to the public other than as a result of a disclosure of such written materials,
records and documents by Landlord.

17.04 Breach by Landlord. It is expressly understood,
acknowledged and agreed by Landlord that: (i) the restrictions contained in
this Article XVII represent a reasonable and necessary protection of the
legitimate interests of the Tenant and that its failure to observe and comply
with its covenants and agreements in this Article XVII will cause irreparable
harm to the Tenant; (ii) it is and will continue to be difficult to ascertain
the nature, scope and extent of the harm; and (iii) a remedy at law for such
failure by Landlord will be inadequate. Accordingly, it is the intention of the
parties that, in addition to any other rights and remedies which the Tenant may
have in the event of any breach by Landlord of this Article XVII, the Tenant
shall be entitled, and is expressly and irrevocably authorized by Landlord, to
demand and obtain specific performance, including, without limitation,
temporary and permanent injunctive relief, and all other appropriate equitable
relief against Landlord in order to enforce against Landlord any of the
covenants and agreements contained in this Article XVII, and/or to prevent any
breach or any threatened breach by Landlord of the covenants and agreements of
Landlord contained in this Article XVII.

<PAGE> 51

IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused the same to be executed by their respective duly authorized officers as
of the date first set forth above.

CCA PRISON REALTY TRUST

By:
------------------------------

Title:
---------------------------

CORRECTIONS CORPORATION OF AMERICA

By:
------------------------------

Title:
---------------------------

44
<PAGE> 52

SCHEDULE A

The Facilities

<TABLE>
<CAPTION>
Location
Facility Name (City, State)
------------- -------------
<S> <C>
Bridgeport Pre-Parole Transfer Facility Bridgeport, Texas

Central Arizona Detention Center Florence, Arizona

Houston Processing Center Houston, Texas

Laredo Processing Center Laredo, Texas

Leavenworth Detention Center Leavenworth, Texas

Mineral Wells Pre-Parole Transfer Facility Mineral Wells, Texas

West Tennessee Detention Facility Mason, Tennessee

Eloy Detention Facility Eloy, Arizona

T. Don Hutto Correctional Facility Taylor, Texas

</TABLE>
<PAGE> 53

SCHEDULE B

Personal Property
<PAGE> 54

SCHEDULE C

[Tenant's Proprietary Property]

<PAGE> 1

EXHIBIT 10.3

LEASE AGREEMENT

THIS LEASE AGREEMENT ("Lease") dated as of the ______ day of
____________________________________, 1997, by and between CCA PRISON REALTY
TRUST, a Maryland real estate investment trust ("Landlord") and CORRECTIONS
CORPORATION OF AMERICA, a Delaware corporation ("Tenant").

RECITALS

WHEREAS, Tenant (or one of Tenant's affiliates) has concurrently
conveyed to Landlord the property described in Exhibit A hereto, and Landlord
and Tenant desire that Landlord lease such property back to Tenant; and

WHEREAS, Landlord and Tenant have entered into a Master Agreement to
Lease of even date herewith (the "Master Agreement") which sets forth certain
agreements of the parties with respect to the lease of various properties
including the property that is the subject of this Lease;

NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein, Landlord and Tenant agree as
follows:

ARTICLE I
PREMISES AND TERM

1.1 Leased Property. Landlord hereby leases to Tenant and Tenant
leases from Landlord the Land located in _______________, described in Exhibit
A hereto, and all Improvements, Fixtures, and Personal Property thereon or
thereto (each as defined in the Master Agreement, and, together with said
Land, the "Leased Property"); such Leased Property collectively known and
described at the date hereof as [Name of Correctional or Detention Facility];

SUBJECT, HOWEVER, to the lien of the mortgage debt described in
Exhibit B hereto, if any, and to all easements, liens, encumbrances,
restrictions, agreements, and other title matters existing as of the date
hereof and listed in Exhibit C hereto (collectively "Permitted Exceptions").

1.2 Term. The initial term (the "Fixed Term") of the Lease shall
be for a fixed term of _______________________ (______) years commencing on
__________________________, 1997 (the "Commencement Date") and expiring on
_______________________, 20____ (the "Expiration Date"). The Term of this
Lease may be renewed on the mutual agreement of Landlord and Tenant as follows:
(i) provided that Tenant gives Landlord notice on or before the date which is
six (6) months prior to the Expiration Date, upon the mutual agreement of
Landlord and Tenant, the Lease shall be renewed for one (1) additional five (5)
year term (the "Extended Term") on the same terms and provisions (other than
with respect to renewal) as the Fixed Term, as set forth in the Lease; (ii)
provided that Tenant gives Landlord notice on or before the date which is six
(6) months prior to the expiration of the Extended Term, upon the mutual
agreement of Landlord and Tenant, the Lease
<PAGE> 2

shall be renewed for one (1) additional five (5) year term (the "Second
Extended Term") on the same terms and provisions (other than with respect to
renewal) as the Fixed Term, as set forth in the Lease; and (iii) provided that
Tenant gives Landlord notice on or before the date which is six (6) months
prior to the expiration of the Second Extended Term, upon the mutual agreement
of Landlord and Tenant, the Lease shall be renewed for one (1) additional five
(5) year term (the "Third Extended Term") on the same terms and provisions
(other than with respect to renewal) as the Fixed Term, as set forth in the
Lease. Tenant's right to so extend the Term of the Lease is conditioned on
Landlord's prior approval of the Extended Term, Second Extended Term, or
Third Extended Term, as the case may be. The term "Term" used in this
Agreement means the Fixed Term, Extended Term, Second Extended Term and Third
Extended Term, as appropriate. The term "Lease Year" means each twelve (12)
month period during the Term commencing on January 1 and ending on December 31,
except the first Lease Year of each Lease shall be the period from the
Commencement Date through the following December 31, and the last Lease Year
shall end on the date of termination of the Lease if a day other than December
31. Landlord may terminate this Lease prior to the expiration of the Term
hereof, at any time following the date which is five (5) years from the date
hereof, upon written notice to Tenant not less than eighteen (18) months prior
to the effective date of such termination.

ARTICLE II
RENT

2.1 Base Rent. Tenant shall pay Landlord Base Rent for the Term
in advance in consecutive monthly installments payable on the first day of each
month during the Term, the Extended Term, Second Extended Term and the Third
Extended Term, commencing on the Commencement Date provided for in Section 1.03
of the Master Agreement, in accordance with the Base Rent Schedule attached
hereto as Exhibit B.

2.2 Additional Rent. The Base Rent shall be subject to such
increases over the Term as determined pursuant to Section 2.02 of the Master
Agreement.

2.3 Other Additional Rent. Tenant shall also pay all Other
Additional Rent with respect to the Leased Property, as set forth in the Master
Agreement.

ARTICLE III
OTHER TERMS AND CONDITIONS

3.1 Master Agreement Incorporated Herein. All provisions of the
Master Agreement (except any provisions expressly therein not to be a part of
an individual lease of leased property) are hereby incorporated in and are a
part of this Lease of the Leased Property.

3.2 Recordation. At the request of Landlord or Tenant, a short
form memorandum of this Lease may be recorded in the real estate records of any
county which Landlord or Tenant deems appropriate in order to provide legal
notice of the existence hereof.

2
<PAGE> 3

IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.

CCA PRISON REALTY TRUST

By:
--------------------------------
Title:
-----------------------------

CORRECTIONS CORPORATION OF AMERICA

By:
--------------------------------
Title:
-----------------------------

3
<PAGE> 4

EXHIBIT A

[Legal Description of Leased Property]
<PAGE> 5

EXHIBIT B

Base Rent Schedule

(Property:____________________________________________________________________)

Tenant will pay to Landlord annual Base Rent of______________________

payable in equal monthly instalments beginning on the Commencement Date of:

_________________________

Base Rent for the Extended Term, Second Extended Term and Third
Extended Term shall be equal to the fair market rental value of the Leased
Property as of the respective commencement dates thereof.
<PAGE> 6

EXHIBIT C

Mortgage Debt

(Property:__________________________________________________________________)

This property is subject to the following Mortgage Debt: (or
subsequent Mortgage Debt)
<PAGE> 7

EXHIBIT D

Permitted Exceptions

(Property:__________________________________________________________________)

<PAGE> 1

EXHIBIT 10.4

RIGHT TO PURCHASE AGREEMENT

THIS RIGHT TO PURCHASE AGREEMENT (the "Agreement"), dated as of
__________, 1997,is made and entered into by and between CORRECTIONS
CORPORATION OF AMERICA, a Delaware corporation (hereinafter referred to as
"CCA"), and CCA PRISON REALTY TRUST, a Maryland real estate investment trust
(hereinafter referred to as the "Company").

RECITALS

WHEREAS, the Company has as of the date herewith acquired from CCA the
property described in Exhibit A attached hereto, consisting of certain land,
improvements, appurtenances and fixtures thereon or thereto, which are operated
by CCA as correctional or detention facilities (hereinafter referred to as the
"Leased Facilities") and the Company has an option to acquire and lease back to
CCA certain other correctional or detention facilities (the "Option
Facilities") pursuant to certain Option Agreements of even date herewith (the
"Option Agreements"); and

WHEREAS, in addition to the Leased Facilities, CCA has or will have an
ownership interest in certain other existing correctional or detention
facilities and is developing or intending to develop or acquire additional
correctional and detention facilities in the future; and

WHEREAS, CCA desires to grant to the Company herewith a right of first
refusal under certain circumstances to purchase all Existing Facilities and
Future Facilities pursuant to the terms of this Agreement; and

WHEREAS, CCA further desires to grant the Company herewith a right of
first refusal to finance CCA's future acquisition of certain facilities,
pursuant to the terms of this Agreement; and

WHEREAS, CCA desires to grant to the Company herewith an option under
certain circumstances to purchase Future Facilities;

NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00),
the mutual covenants and agreements contained herein, in the Noncompetition
Agreement and in the Option Agreements, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
CCA and the Company agree as follows:

1. Right of First Refusal (Purchase). The Company shall have a
right of first refusal to purchase (hereinafter referred to as the "Purchase
Refusal Right") any correctional or detention facility owned by CCA or any of
its Affiliates (as defined herein), including the Option Facilities
<PAGE> 2

(hereinafter referred to as the "Existing Facilities") and any correctional or
detention facility which is acquired or developed in the future, and owned, by
CCA or any of its Affiliates (hereinafter referred to as the "Future
Facilities"), subject to the terms and conditions hereof. If, following the
date hereof, CCA shall receive a bona fide third party offer to Transfer any
Existing Facilities or Future Facilities, then, prior to accepting such third
party offer, CCA shall send written notice and a copy thereof to the Company
("CCA's Sale Notice"). The Company shall have ninety (90) days after receipt
of CCA's Sale Notice to exercise the Company's Purchase Refusal Right, by
giving CCA written notice thereof. Failure of the Company to exercise the
Purchase Refusal Right within such time period set forth above shall be deemed
to extinguish the Purchase Refusal Right for a period of one hundred eighty
(180) days. Thereafter, prior to the expiration of such one hundred eighty
(180) days, CCA may Transfer such Existing Facility or Future Facility provided
however, that the Transfer of the Existing Facility or Future Facility is at a
price equal to or greater than the price contained in CCA's Sale Notice, and
otherwise consistent in all material respects with the terms and conditions set
forth in CCA's Sale Notice. The Company's Purchase Refusal Right shall revive
in the event that CCA fails to Transfer the Existing Facility or Future
Facility within said one hundred eighty (180) days. In the event that the
Company elects to exercise the Purchase Refusal Right and to acquire the
Existing Facility or Future Facility thereby, the Company shall acquire such
Existing Facility or Future Facility on the same terms and conditions and
subject to all time periods and other limitations as provided in CCA's Sale
Notice (provided, however, the Company shall in all events have not less than
ninety (90) days to close its acquisition of the Existing Facility or Future
Facility following its written notice exercising its Purchase Refusal Right).

Notwithstanding the foregoing provisions, the Purchase Refusal Right
shall not be applicable to any Transfer of an Existing Facility or a Future
Facility to any Affiliate of CCA.

2. Right of First Refusal (Financing). The Company shall have a
right of first refusal to provide CCA with first mortgage financing for CCA's
costs of acquiring, developing or financing any correctional or detention
facility (the " Financed Facilities"), subject to the terms and conditions
hereof. If, following the date hereof, CCA determines to acquire, develop or
finance any Financed Facility and receives a proposal or commitment from a
third party lender to provide financing for at least ninety percent (90%) of
the costs of such acquisition or development (or 90% of the value of the
Financed Facility in the case of a financing of a facility not being acquired
or developed) secured by a first mortgage on such Financed Facility, CCA shall
send written notice and a copy thereof to the Company ("Financing Notice") and
further setting forth in reasonable detail the anticipated terms and conditions
of such acquisition, development or financing and such other information
regarding the Financed Facility as is reasonably available to CCA. If the
Company, within thirty (30) days after receipt of such Financing Notice,
provides a financing commitment on terms substantially similar or more
favorable to CCA than that set forth in such Financing Notice (the "Financing
Commitment"), CCA shall accept the Financing Commitment and acquire, develop or
finance the subject Financed Facility, and the financing shall proceed to close
in accordance with terms of the Financing Commitment. If the Company does not
provide a Financing Commitment, CCA may proceed to acquire, develop or finance
the Financed Facility and may obtain such alternative first mortgage financing
for such acquisition, development or financing as it shall desire provided, the
terms,

2
<PAGE> 3

conditions and costs of any such alternative first mortgage financing shall be
no less favorable to CCA than those contained in such Financing Notice, unless
CCA shall have again presented the Company with a Financing Notice and complied
with the provisions of this Section 2 with respect thereto.

3. Option. The Company shall have an option to acquire any
Future Facility for a period of three (3) years following the date CCA first
receives inmates in such Future Facility ("Service Commencement Date"). The
price at which Company may acquire such Future Facility shall be the fair
market value of the Future Facility, as reasonably and mutually determined by
Company and CCA, provided, Company and CCA agree that for the first two (2)
years following the Service Commencement Date the fair market value of any such
Future Facility shall be deemed to be equal to CCA's actual costs and expenses
to acquire, develop, design, construct and equip such Future Facility ("CCA's
Cost"), as reflected on the books of CCA, plus five percent (5%) of CCA's Cost.
Company's exercise of such option shall require Company to acquire such Future
Facility on such terms and conditions as Company and CCA shall reasonably
agree, which shall be generally consistent with the terms and conditions of
Company's initial acquisition of the Leased Facilities on the date hereof.
Upon such acquisition, Company shall lease such Future Facility to CCA on the
same terms and conditions as the Leased Facilities are leased to CCA, and
Company and CCA shall execute a new lease, or an amendment to the existing
lease, with respect thereto (any such new lease or amendment to an existing
lease shall constitute an "operating lease" for all tax and accounting
purposes). For Future Facilities acquired pursuant to this paragraph 3 within
five(5) years of the date hereof, the Base Rent shall be the greater of (i)
the fair market rental value of such Future Facility, as reasonably and
mutually determined by Company and CCA and (ii) eleven percent (11%) of the
purchase price of such Future Facility. For Future Facilities acquired
pursuant to this paragraph 3 thereafter, the Base Rent shall be the fair market
rental value of such Future Facility, as reasonably and mutually determined by
the Company and CCA.

4. Definitions. An "Affiliate" as used herein shall mean any
Person directly or indirectly controlling, controlled by, or under common
control with that Person.

A "Person" as used herein shall mean and include natural persons,
corporations, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.

A "Transfer" is any direct or indirect sale, conveyance or other
disposition, including any transfer of a controlling ownership interest in any
owning Person, and including any lease with a term in excess of five (5) years.

5. Term of the Agreement. This Agreement shall expire on the
earlier to occur of (i) the expiration or termination of all of the Leases
relating to any Existing Facilities or Future Facilities or (ii) fifteen (15)
years from the date hereof.

6. Remedies. In the event CCA breaches this Agreement, the
Company shall have all rights and remedies available at law or in equity and
the Company shall be entitled, and is expressly and irrevocably authorized by
CCA, to demand and obtain specific performance, including, without limitation,
temporary and permanent injunctive relief, and all other appropriate and
equitable relief

3
<PAGE> 4

against CCA in order to enforce against CCA any of the covenants and agreements
contained in this Agreement and/or to prevent any breach or threat of breach by
CCA of the covenants and agreements of CCA contained in this Agreement. Should
the Company prevail in any action to enforce this Agreement, the Company shall
be entitled to recover all of its costs and expenses relating thereto,
including reasonable attorney's fees and expenses.

7. Notices. CCA and the Company hereby agree that all notices,
demands, requests and consents (hereinafter "Notices") required to be given
pursuant to the terms of this Agreement shall be in writing and shall be
addressed as follows:

If to CCA: Corrections Corporation of America 102
Woodmont Boulevard, Suite 800
Nashville, Tennessee 37205
Attention: Darrell K. Massengale

With a copy to: Stokes & Bartholomew, P.A.
424 Church Street, Suite 2800
Nashville, Tennessee 37219
Attention: Elizabeth E. Moore

If to the Company: CCA Prison Realty Trust
2200 Abbott Martin Road
Nashville, Tennessee 37215
Attention: Michael W. Devlin

With a copy to: Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Attn: Kim A. Brown

and shall be served by (i) personal delivery, (ii) certified mail, return
receipt requested, postage prepaid, or (iii) nationally recognized overnight
courier. All Notices shall be deemed to be given upon the earlier of actual
receipt or three (3) days after mailing, or one (1) business day after deposit
with the overnight courier. Any Notices meeting the requirements of this
Section shall be effective, regardless of whether or not actually received.
CCA or the Company may change its notice address at any time by giving the
other party Notice of such change.

8 . Captions and Headings. The captions and headings are inserted
only as a matter of convenience and for reference and in no way define, limit
or describe the scope of this Agreement or the intent of any provision hereof.

9. Governing Law. This Agreement shall be construed under the
laws of the State of Tennessee.

4
<PAGE> 5

10. Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors, and assigns.

11. Time is of the Essence. With respect to all provisions of
this Agreement, time is of the essence.

12. Recordation. At the option of CCA or the Company, this
Agreement, or a memorandum hereof, may be recorded in the real estate records
of any county which Landlord or Tenant deems appropriate in order to provide
legal notice of the existence hereof.

CORRECTIONS CORPORATION OF AMERICA

By:
------------------------------
Title:
---------------------------

CCA PRISON REALTY TRUST

By:
------------------------------
Title:
---------------------------

5
<PAGE> 6

STATE OF
-------------------------
COUNTY OF
------------------------

Before me, ____________________________________________, a Notary
Public of the State and County aforesaid, personally appeared ______________
_____________________________________, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon oath,
acknowledged ______self to be _________________________________ of CORRECTIONS
CORPORATION OF AMERICA, the within named bargainor, a Delaware corporation, and
that ______ as such ______________________________________ being authorized so
to do, executed the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by _______self as ________________________
________________________________________________.

WITNESS my hand and official seal at ________________________________
__________________________________, __________________________________________
County, _______________________________, this _________ day of _______________
_____________________________, 1997.

---------------------------------------
Notary Public

My Commission Expires:
-----------------

STATE OF
--------------------------
COUNTY OF
------------------------

Before me,____________________________________________, a Notary
Public of the State and County aforesaid, personally appeared ________________
_____________________________________, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon oath,
acknowledged ______self to be _________________________________ of CCA PRISON
REALTY TRUST, the within named bargainor, a Maryland real estate investment
trust, and that ______ as such _____________________________________ being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the real estate investment trust by _________
_______self as _______________________________________________.

WITNESS my hand and official seal at _________________________________
__________________________________, ___________________________________________
County, _______________________________, this _________ day of ________________
_____________________________, 1997.

--------------------------------------
Notary Public

My Commission Expires:
----------------

6
<PAGE> 7

EXHIBIT A

The Leased Facilities

Location
Facility Name (City, State)
- ------------- -------------

Bridgeport Pre-Parole Transfer Facility Bridgeport, Texas

Central Arizona Detention Center Florence, Arizona

Houston Processing Center Houston, Texas

Laredo Processing Center Laredo, Texas

Leavenworth Detention Center Leavenworth, Texas

Mineral Wells Pre-Parole Transfer Facility Mineral Wells, Texas

West Tennessee Detention Facility Mason, Tennessee

T. Don Hutto Correctional Facility Taylor, Texas

Eloy Detention Facility Eloy, Arizona

<PAGE> 1
EXHIBIT 10.9

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made on this ______ day of _____________________,
1997, by and between CCA PRISON REALTY TRUST, a Maryland real estate investment
trust (the "Company"), and D. ROBERT CRANTS III (the "Employee").

WITNESSETH:

WHEREAS, the Company desires to retain the services of the Employee,
and the Employee desires to be employed by the Company, on the terms and
conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and conditions set forth below, the parties hereto agree
as follows:

1. Employment. The Company hereby employs the Employee as its
President, and the Employee hereby accepts such employment upon the terms and
conditions of this Agreement. In such capacity, the Employee shall have such
duties, functions, responsibilities and authority as are consistent with the
Employee's position, subject to the general direction, approval and control of
the Board of Trustees of the Company (the "Board"). The duties of the Employee
may be expanded, restricted or otherwise altered from time to time by the
Board, consistent with the general duties, authority, and responsibilities set
forth herein.

2. Compensation.

(a) Base Salary. In consideration of the services rendered by the
Employee pursuant to Section 1 hereof, the Company shall pay the Employee a
base salary (the "Base Salary") of $100,000 per annum payable in accordance
with the Company's normal payment practices but in no event less frequently
than monthly. At the end of each year during the term hereof, the Base Salary
shall be reviewed by the Compensation Committee of the Board (the "Compensation
Committee") and may be increased (but not decreased) in the Compensation
Committee's absolute discretion.

(b) Bonus. In the absolute discretion of the Compensation
Committee, the Employee may receive a bonus in an amount to be determined by
the Compensation Committee.

(i) to receive upon closing of the initial public
offering of the Common Shares (as herein defined) an "incentive stock
option" (as defined in Section 422 of the Internal Revenue Code of
1986, as amended) to purchase up to 200,000 common shares, $.01 par
value, of the Company (the "Common Shares") under the CCA Realty Trust
1997 Employee Share Incentive Plan (the "Share Incentive Plan"), such
option to vest in annual increments
<PAGE> 2

of 50,000 Common Shares beginning on the date hereof and to be
exercisable during the ten-year period beginning on the date of grant;

(ii) to receive, in the absolute discretion of the
Compensation Committee, additional share options (incentive or
non-qualified), restricted shares, deferred shares and other awards
under the Share Incentive Plan;

(iii) to participate in any executive deferred compensation
plan or qualified retirement plan adopted by the Company, subject to
and on a basis consistent with the terms, conditions and overall
administration of such plans; and

(iv) to participate in or receive benefits under any
employee benefit plan or other arrangement including, but not limited
to, any medical, dental, retirement, disability, life insurance, sick
leave and vacation plans or arrangements made available by the Company
to any of its employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans or
arrangements.

(d) Expenses. The Company shall promptly reimburse the Employee
for all reasonable travel and other business expenses incurred by the Employee
in the performance of his duties under this Agreement upon evidence of receipt.

3. Covenants of Employee.

(a) Non-Competition. The Company and the Employee recognize and
acknowledge that the Company's business has a national scope and the Company is
contemplating doing business in every state in the United States and that it is
reasonably anticipated that the Employee will perform his duties under this
Agreement in every state in the United States. During the term of this
Agreement (and thereafter for a period of three (3) years), the Employee will
not, within the United States, directly or indirectly, own, manage, operate,
control, be employed by, participate in, or be connected in any manner with the
ownership, management, operation, or control of a prison real estate investment
trust or compete, directly or indirectly, with the Company. The Employee
acknowledges that the provisions of this paragraph are essential to the
continued goodwill and profitability of the Company. Should any court
determine that the provisions of this paragraph shall be unenforceable in
respect to scope, duration, or geographic area, such court may substitute to
the extent enforceable, provisions similar hereto or other provisions so as to
provide the Company, to the fullest extent permitted by applicable law, the
benefits intended by this paragraph.

(b) Non-Disclosure. The Employee acknowledges that the Company's
knowledge of its business, its development plans, its method of operation and
managing the business, its cost control methods, its financial or other
performance data, its trade secrets, it methods for bidding on projects,
confidential information of the Company, its subsidiaries, affiliates, and
franchises and the Company's list of customers and prospective customers (as it
may exist from time to time) are valuable, special, and unique assets of the
Company and are proprietary to the Company. The

2
<PAGE> 3

Employee will not, during or after the term of his employment, disclose any
part thereof to any person, firm, corporation, association, or other entity for
any reason or purpose whatsoever.

(c) Remedies. In addition to any other rights and remedies
available under this Agreement, at law or otherwise, the Company shall be
entitled to an injunction to be issued by any court of competent jurisdiction
enjoining and restraining the Employee from committing any violation of
subsections (a) and (b) above. Any provisions of subsections (a) and (b) above
which are deemed invalid, illegal or unenforceable in any jurisdiction shall,
as to that jurisdiction and subject to this paragraph be ineffective to the
extent of such invalidity, illegality or unenforceability, without affecting in
any way the remaining provisions hereof in such jurisdiction or rendering that
or any other provisions of this Agreement invalid, illegal, or unenforceable in
any other jurisdiction. If any covenant should be deemed invalid, illegal or
unenforceable because its scope is considered excessive, such covenant shall be
modified so that the scope of the covenant is reduced only to the minimum
extent necessary to render the modified covenant valid, legal and enforceable.

4. Working Facilities. The Employee shall have such facilities
and services as are suitable to his position and appropriate for the
performance of his duties, as the Company may determine.

5. Term and Termination.

(a) Term. The term of this Agreement shall begin on the date first
written above, and shall terminate on the fourth anniversary date thereof. The
term of this Agreement may be extended for an additional period of time by
mutual written agreement of the Company and the Employee.

(b) Termination. The Company may terminate the Employee's
employment upon thirty (30) days prior written notice to the Employee upon the
happening of any of the following events: (i) any act of the Employee which
constitutes fraud, gross misconduct, gross negligence or a material breach of
this Agreement, (ii) frequent and repeated failure to perform services which
have been reasonably requested of the Employee by the Board and which are
consistent with the terms of this Agreement, (iii) the death of the Employee,
(iv) disability by the Employee (as determined under the Share Incentive Plan),
or (v) a decision by the Company to terminate its business and liquidate;
provided, however, that the Company shall not terminate the employment of the
Employee pursuant to clause (i) or (ii) hereof unless the Company (A) provides
the Employee with at least 15 days' prior written notice of its intention to
terminate the Employee's employment hereunder, which notice shall describe the
reasons for such termination, and (B) allows the Employee a reasonable
opportunity and a reasonable period of time to cure any curable acts or
omissions on which its decision to terminate is based.

6. Notices. Any notice required or desired to be given under
this Agreement shall be deemed given if in writing sent by certified mail to
his residence in the case of the Employee, or to its principal office in the
case of the Company.

3
<PAGE> 4

7. Waiver of Breach. The waiver by the Company of a breach of
any provision of this Agreement by the Employee shall not operate or be
construed as a waiver of any subsequent breach by the Employee. No waiver
shall be valid unless in writing and signed by an authorized officer of the
Company.

8. Assignment. The Employee acknowledges that the services to be
rendered by him are unique and personal. Accordingly, the Employee may not
assign any of his rights or delegate any of his duties or obligations under
this Agreement. The rights and obligations of the Company under this Agreement
shall inure to the benefit of and shall be binding upon the successors and
assigns of the Company.

9. Entire Agreement. This Agreement contains the entire
understanding of the parties. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.

10. Counterparts. This Agreement may be executed in two
counterparts, each of which may be considered an original but which taken
together shall constitute the same instrument.

11. Controlling Law. This Agreement shall be governed and
interpreted under the laws of the State of Tennessee.

4
<PAGE> 5

IN WITNESS WHEREOF, the parties have executed this Agreement this the
same day and date first written above.

COMPANY:

CCA PRISON REALTY TRUST

By:
-------------------------------------

Its:
------------------------------------

EMPLOYEE:

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

D. Robert Crants III

<PAGE> 1
EXHIBIT 10.10

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made on this ______ day of _____________________,
1997, by and between CCA PRISON REALTY TRUST, a Maryland real estate investment
trust (the "Company"), and MICHAEL W. DEVLIN (the "Employee").

WITNESSETH:

WHEREAS, the Company desires to retain the services of the Employee,
and the Employee desires to be employed by the Company, on the terms and
conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and conditions set forth below, the parties hereto agree
as follows:

1. Employment. The Company hereby employs the Employee as its
Chief Development Officer, and the Employee hereby accepts such employment upon
the terms and conditions of this Agreement. In such capacity, the Employee
shall have such duties, functions, responsibilities and authority as are
consistent with the Employee's position, subject to the general direction,
approval and control of the Board of Trustees of the Company (the "Board").
The duties of the Employee may be expanded, restricted or otherwise altered
from time to time by the Board, consistent with the general duties, authority,
and responsibilities set forth herein.

2. Compensation.

(b) Bonus. In the absolute discretion of the Compensation
Committee, the Employee may receive a bonus in an amount to be determined by
the Compensation Committee.

3. Covenants of Employee.

2
<PAGE> 3

Employee will not, during or after the term of his employment, disclose any
part thereof to any person, firm, corporation, association, or other entity
for any reason or purpose whatsoever.

4. Working Facilities. The Employee shall have such facilities
and services as are suitable to his position and appropriate for the
performance of his duties, as the Company may determine.

5. Term and Termination.

3
<PAGE> 4

10. Counterparts. This Agreement may be executed in two
counterparts, each of which may be considered an original but which taken
together shall constitute the same instrument.

11. Controlling Law. This Agreement shall be governed and
interpreted under the laws of the State of Tennessee.

4
<PAGE> 5

IN WITNESS WHEREOF, the parties have executed this Agreement this the
same day and date first written above.

COMPANY:

CCA PRISON REALTY TRUST

By:
-------------------------------------

Its:
------------------------------------

EMPLOYEE:

----------------------------------------
Michael W. Devlin