BI ENTERS MERGER AGREEMENT WITH KOHLBERG & COMPANY, L.L.C.

Boulder, Colorado -- BI Incorporated (NASDAQ: BIAC), a leading provider of integrated technology systems and treatment services for community-based corrections, today announced that it has entered into a definitive merger agreement providing for the acquisition of the Company by an investor group led by Kohlberg & Company, L.L.C., a private merchant banking firm with offices in Mount Kisco, NY and Palo Alto, CA. Under the terms of the merger agreement, KBII Acquisition Company, a company formed by the investor group, will acquire all the outstanding shares of common stock of the Company for $8.25 per share in cash, for a total transaction cost of approximately $85 million including the assumption of debt. Under the terms of the merger agreement, KBII Acquisition Company will commence as promptly as practicable a tender offer for all the outstanding shares of common stock of the Company. KBII Acquisition Company has received executed commitment letters, subject to certain customary provisions, which provide for sufficient funds to consummate the transactions.

The Company's Board of Directors has unanimously approved the agreement after receiving the unanimous recommendation of a Special Committee of independent members of the Board which had been formed to consider the proposal and intends to recommend to the Company's shareholders that they tender their shares. The Board has exempted the transaction from its rights plan.