Document:

EX-10.28 Asset Purchase Agreement

 

    EXHIBIT
    10.28

 

    THE GEO
    GROUP, INC.

    2006 STOCK INCENTIVE PLAN

 

    1.
    ESTABLISHMENT, EFFECTIVE DATE AND TERM

 

    The GEO Group, Inc., a Florida corporation hereby establishes
    The GEO Group, Inc. 2006 Stock Incentive Plan. The Effective
    Date of the Plan shall be the date that the Plan was approved by
    the shareholders of GEO in accordance with the laws of the State
    of Florida or such later date as provided in the resolutions
    adopting the Plan; provided, however, no Award may be granted
    unless and until the Plan has been approved by the shareholders
    of GEO. Unless earlier terminated pursuant to Section 15(k)
    hereof, the Plan shall terminate on the tenth anniversary of the
    Effective Date. Capitalized terms used herein are defined in
    Annex A attached hereto.

 

    2.
    PURPOSE

 

    The purpose of the Plan is to enable GEO to attract, retain,
    reward and motivate Eligible Individuals by providing them with
    an opportunity to acquire or increase a proprietary interest in
    GEO and to incentivize them to expend maximum effort for the
    growth and success of the Company, so as to strengthen the
    mutuality of the interests between the Eligible Individuals and
    the shareholders of GEO.

 

    3.
    ELIGIBILITY

 

    Awards may be granted under the Plan to any Eligible Individual,
    as determined by the Committee from time to time, on the basis
    of their importance to the business of the Company pursuant to
    the terms of the Plan.

 

    4.
    ADMINISTRATION

 

    (a) Committee. The Plan shall be administered by the
    Committee, which shall have the full power and authority to take
    all actions, and to make all determinations not inconsistent
    with the specific terms and provisions of the Plan deemed by the
    Committee to be necessary or appropriate to the administration
    of the Plan, any Award granted or any Award Agreement entered
    into hereunder. The Committee may correct any defect or supply
    any omission or reconcile any inconsistency in the Plan or in
    any Award Agreement in the manner and to the extent it shall
    deem expedient to carry the Plan into effect as it may determine
    in its sole discretion. The decisions by the Committee shall be
    final, conclusive and binding with respect to the interpretation
    and administration of the Plan, any Award or any Award Agreement
    entered into under the Plan.

 

    (b) Delegation to Officers or Employees. The
    Committee may designate officers or employees of the Company to
    assist the Committee in the administration of the Plan. The
    Committee may delegate authority to officers or employees of the
    Company to grant Awards and execute Award Agreements or other
    documents on behalf of the Committee in connection with the
    administration of the Plan, subject to whatever limitations or
    restrictions the Committee may impose and in accordance with
    applicable law.

 

    (c) Designation of Advisors. The Committee may
    designate professional advisors to assist the Committee in the
    administration of the Plan. The Committee may employ such legal
    counsel, consultants, and agents as it may deem desirable for
    the administration of the Plan and may rely upon any advice and
    any computation received from any such counsel, consultant, or
    agent. The Company shall pay all expenses and costs incurred by
    the Committee for the engagement of any such counsel,
    consultant, or agent.

 

    (d) Participants Outside the U.S. In order to
    conform with the provisions of local laws and regulations in
    foreign countries in which the Company operates, the Committee
    shall have the sole discretion to (i) modify the terms and
    conditions of the Awards granted under the Plan to Eligible
    Individuals located outside the United States;
    (ii) establish subplans with such modifications as may be
    necessary or advisable under the circumstances present by local
    laws and regulations; and (iii) take any action which it
    deems advisable to

    

    1

 

    comply with or otherwise reflect any necessary governmental
    regulatory procedures, or to obtain any exemptions or approvals
    necessary with respect to the Plan or any subplan established
    hereunder.

 

    (e) Liability and Indemnification. No Covered
    Individual shall be liable for any action or determination made
    in good faith with respect to the Plan, any Award granted
    hereunder or any Award Agreement entered into hereunder. The
    Company shall, to the maximum extent permitted by applicable law
    and the Articles of Incorporation and Bylaws of GEO, indemnify
    and hold harmless each Covered Individual against any cost or
    expense (including reasonable attorney fees reasonably
    acceptable to the Company) or liability (including any amount
    paid in settlement of a claim with the approval of the Company),
    and amounts advanced to such Covered Individual necessary to pay
    the foregoing at the earliest time and to the fullest extent
    permitted, arising out of any act or omission to act in
    connection with the Plan, any Award granted hereunder or any
    Award Agreement entered into hereunder. Such indemnification
    shall be in addition to any rights of indemnification such
    individuals may have under applicable law or under the Articles
    of Incorporation or Bylaws of GEO. Notwithstanding anything else
    herein, this indemnification will not apply to the actions or
    determinations made by a Covered Individual with regard to
    Awards granted to such Covered Individual under the Plan or
    arising out of such Covered Individual’s own fraud or bad
    faith.

 

    5. SHARES
    OF COMMON STOCK SUBJECT TO PLAN

 

    (a) Shares Available for Awards. The Common Stock
    that may be issued pursuant to Awards granted under the Plan
    shall be treasury shares or authorized but unissued shares of
    the Common Stock. The total number of shares of Common Stock
    that may be issued pursuant to Awards granted under the Plan
    shall be the sum of Three Hundred Thousand (300,000) shares.

 

    (b) Maximum Shares Issuable During a Fiscal Year.
    The maximum number of shares of Common Stock that may be
    issued under all Awards granted in a fiscal year shall not
    exceed three percent (3%) of GEO’s maximum authorized and
    outstanding shares of Common Stock at any time during said
    fiscal year; provided, however, that (i) such limitation
    shall not include any substitute grants made in settlement of
    any awards under any other plan sponsored by GEO or substitute
    grants or equity assumed in connection with a corporate
    transaction, and (ii) any shares of Common Stock
    repurchased or redeemed by GEO after any Awards have been made
    which have been authorized by the Board shall nevertheless be
    deemed to be outstanding for purposes of calculating whether
    there has been a violation of this Section 5(b).

 

    (c) Certain Limitations on Specific Types of Awards.
    The granting of Awards under this Plan shall be subject to
    the following limitations:

 

    (i) With respect to the shares of Common Stock reserved
    pursuant to this Section, a maximum of One Hundred and Fifty
    Thousand (150,000) of such shares may be subject to grants of
    Incentive Stock Options;

 

    (ii) With respect to the shares of Common Stock reserved
    pursuant to this Section, a maximum of One Hundred and Fifty
    Thousand (150,000) of such shares may be issued in connection
    with Awards, other than Stock Options and Stock Appreciation
    Rights, that are settled in Common Stock;

 

    (iii) With respect to the shares of Common Stock reserved
    pursuant to this Section, a maximum of One Hundred and Fifty
    Thousand (150,000) of such shares may be subject to grants of
    Options or Stock Appreciation Rights to any one Eligible
    Individual during any one fiscal year;

 

    (iv) With respect to the shares of Common Stock reserved
    pursuant to this Section, a maximum of One Hundred and Fifty
    Thousand (150,000) of such shares may be subject to grants of
    Performance Shares, Restricted Stock, and Awards of Common Stock
    to any one Eligible Individual during any one fiscal year; and

 

    (v) The maximum value at Grant Date of grants of
    Performance Units which may be granted to any one Eligible
    Individual during any one fiscal year shall be $1,000,000.

    

    2

 

    (d) Reduction of Shares Available for Awards. Upon
    the granting of an Award, the number of shares of Common Stock
    available under this Section hereof for the granting of further
    Awards shall be reduced as follows:

 

    (i) In connection with the granting of an Option or Stock
    Appreciation Right, the number of shares of Common Stock shall
    be reduced by the number of shares of Common Stock subject to
    the Option or Stock Appreciation Right;

 

    (ii) In connection with the granting of an Award that is
    settled in Common Stock, other than the granting of an Option or
    Stock Appreciation Right, the number of shares of Common Stock
    shall be reduced by the number of shares of Common Stock subject
    to the Award; and

 

    (iii) Awards settled in cash shall not count against the
    total number of shares of Common Stock available to be granted
    pursuant to the Plan.

 

    (e) Cancelled, Forfeited, or Surrendered Awards.
    Notwithstanding anything to the contrary in this Plan, if
    any Award is cancelled, forfeited or terminated for any reason
    prior to exercise or becoming vested in full, the shares of
    Common Stock that were subject to such Award shall, to the
    extent cancelled, forfeited or terminated, immediately become
    available for future Awards granted under the Plan as if said
    Award had never been granted; provided, however, that any shares
    of Common Stock subject to an Award which is cancelled,
    forfeited or terminated in order to pay the Exercise Price,
    purchase price or any taxes or tax withholdings on an Award
    shall not be available for future Awards granted under the Plan.

 

    (f) Recapitalization. If the outstanding shares of
    Common Stock are increased or decreased or changed into or
    exchanged for a different number or kind of shares or other
    securities of GEO by reason of any recapitalization,
    reclassification, reorganization, stock split, reverse split,
    combination of shares, exchange of shares, stock dividend or
    other distribution payable in capital stock of GEO or other
    increase or decrease in such shares effected without receipt of
    consideration by GEO occurring after the Effective Date, an
    appropriate and proportionate adjustment shall be made by the
    Committee to (i) the aggregate number and kind of shares of
    Common Stock available under the Plan, (ii) the aggregate
    limit of the number of shares of Common Stock that may be
    granted pursuant to an Incentive Stock Option, (iii) the
    limits on the number of shares of Common Stock that may be
    granted to an Eligible Employee in any one fiscal year,
    (iv) the calculation of the reduction of shares of Common
    Stock available under the Plan, (v) the number and kind of
    shares of Common Stock issuable upon exercise (or vesting) of
    outstanding Awards granted under the Plan; (vi) the
    Exercise Price of outstanding Options granted under the Plan,
    and/or (vii) the number of shares of Common Stock subject
    to Awards granted to Non-Employee Directors under
    Section 10. No fractional shares of Common Stock or units
    of other securities shall be issued pursuant to any such
    adjustment under this Section 5(f), and any fractions
    resulting from any such adjustment shall be eliminated in each
    case by rounding downward to the nearest whole share or unit.
    Any adjustments made under this Section 5(f) with respect
    to any Incentive Stock Options must be made in accordance with
    Code Section 424.

 

    6.
    OPTIONS

 

    (a) Grant of Options. Subject to the terms and
    conditions of the Plan, the Committee may grant to such Eligible
    Individuals as the Committee may determine, Options to purchase
    such number of shares of Common Stock and on such terms and
    conditions as the Committee shall determine in its sole and
    absolute discretion. Each grant of an Option shall satisfy the
    requirements set forth in this Section.

 

    (b) Type of Options. Each Option granted under the
    Plan may be designated by the Committee, in its sole discretion,
    as either (i) an Incentive Stock Option, or (ii) a
    Non-Qualified Stock Option. Options designated as Incentive
    Stock Options that fail to continue to meet the requirements of
    Code Section 422 shall be re-designated as Non-Qualified
    Stock Options automatically on the date of such failure to
    continue to meet such requirements without further action by the
    Committee. In the absence of any designation, Options granted
    under the Plan will be deemed to be Non-Qualified Stock Options.

 

    (c) Exercise Price. Subject to the limitations set
    forth in the Plan relating to Incentive Stock Options, the
    Exercise Price of an Option shall be fixed by the Committee and
    stated in the respective Award Agreement,

    

    3

 

    provided that the Exercise Price of the shares of Common Stock
    subject to such Option may not be less than Fair Market Value of
    such Common Stock on the Grant Date, or if greater, the par
    value of the Common Stock.

 

    (d) Limitation on Repricing. Unless such action is
    approved by GEO’s shareholders in accordance with
    applicable law: (i) no outstanding Option granted under the
    Plan may be amended to provide an Exercise Price that is lower
    than the then-current Exercise Price of such outstanding Option
    (other than adjustments to the Exercise Price pursuant to
    Sections 5(d) and 12); (ii) the Committee may not
    cancel any outstanding Option and grant in substitution
    therefore new Awards under the Plan covering the same or a
    different number of shares of Common Stock and having an
    Exercise Price lower than the then-current Exercise Price of the
    cancelled Option (other than adjustments to the Exercise Price
    pursuant to Sections 5(f) and 12); and (iii) the
    Committee may not authorize the repurchase of an outstanding
    Option which has an Exercise Price that is higher than the
    then-current fair market value of the Common Stock (other than
    adjustments to the Exercise Price pursuant to Sections 5(f)
    and 12).

 

    (e) Limitation on Option Period. Subject to the
    limitations set forth in the Plan relating to Incentive Stock
    Options, Options granted under the Plan and all rights to
    purchase Common Stock thereunder shall terminate no later than
    the tenth anniversary of the Grant Date of such Options, or on
    such earlier date as may be stated in the Award Agreement
    relating to such Option. In the case of Options expiring prior
    to the tenth anniversary of the Grant Date, the Committee may in
    its discretion, at any time prior to the expiration or
    termination of said Options, extend the term of any such Options
    for such additional period as it may determine, but in no event
    beyond the tenth anniversary of the Grant Date thereof.

 

    (f) Limitations on Incentive Stock Options.
    Notwithstanding any other provisions of the Plan, the
    following provisions shall apply with respect to Incentive Stock
    Options granted pursuant to the Plan.

 

    (i) Limitation on Grants. Incentive Stock Options
    may only be granted to Section 424 Employees. The aggregate
    Fair Market Value (determined at the time such Incentive Stock
    Option is granted) of the shares of Common Stock for which any
    individual may have Incentive Stock Options which first become
    vested and exercisable in any calendar year (under all incentive
    stock option plans of the Company) shall not exceed $100,000.
    Options granted to such individual in excess of the $100,000
    limitation, and any Options issued subsequently which first
    become vested and exercisable in the same calendar year, shall
    automatically be treated as Non-Qualified Stock Options.

 

    (ii) Minimum Exercise Price. In no event may the
    Exercise Price of a share of Common Stock subject an Incentive
    Stock Option be less than 100% of the Fair Market Value of such
    share of Common Stock on the Grant Date.

 

    (iii) Ten Percent Shareholder. Notwithstanding any
    other provision of the Plan to the contrary, in the case of
    Incentive Stock Options granted to a Section 424 Employee
    who, at the time the Option is granted, owns (after application
    of the rules set forth in Code Section 424(d)) stock
    possessing more than ten percent of the total combined voting
    power of all classes of stock of GEO, such Incentive Stock
    Options (i) must have an Exercise Price per share of Common
    Stock that is at least 110% of the Fair Market Value as of the
    Grant Date of a share of Common Stock, and (ii) must not be
    exercisable after the fifth anniversary of the Grant Date.

 

    (g) Vesting Schedule and Conditions. No Options may
    be exercised prior to the satisfaction of the conditions and
    vesting schedule provided for in the Award Agreement relating
    thereto. Except as otherwise provided by the Committee in an
    Award Agreement in its sole and absolute discretion, subject to
    Sections 10, 12 and 13 of the Plan, Options covered by any
    Award under this Plan that are subject solely to a future
    service requirement shall vest as follows: (i) 20% of the
    Options subject to an Award shall vest immediately upon the
    Grant Date; and (ii) the remaining 80% of the Options
    subject to an Award shall vest over the four-year period
    immediately following the Grant Date in equal annual increments
    of 20%, with one increment vesting on each anniversary date of
    the Grant Date.

 

    (h) Exercise. When the conditions to the exercise of
    an Option have been satisfied, the Participant may exercise the
    Option only in accordance with the following provisions. The
    Participant shall deliver to GEO a

    

    4

 

    written notice stating that the Participant is exercising the
    Option and specifying the number of shares of Common Stock which
    are to be purchased pursuant to the Option, and such notice
    shall be accompanied by payment in full of the Exercise Price of
    the shares for which the Option is being exercised, by one or
    more of the methods provided for in the Plan. Said notice must
    be delivered to GEO at its principal office and addressed to the
    attention of John J. Bulfin, General Counsel, The GEO Group
    Inc., 621 NW 53rd Street, Suite 700, Boca Raton, Florida
    33487. An attempt to exercise any Option granted hereunder other
    than as set forth in the Plan shall be invalid and of no force
    and effect.

 

    (i) Payment. Payment of the Exercise Price for the
    shares of Common Stock purchased pursuant to the exercise of an
    Option shall be made by one of the following methods:

 

    (i) by cash, certified or cashier’s check, bank draft
    or money order;

 

    (ii) through the delivery to GEO of shares of Common Stock
    which have been previously owned by the Participant for the
    requisite period necessary to avoid a charge to GEO’s
    earnings for financial reporting purposes; such shares shall be
    valued, for purposes of determining the extent to which the
    Exercise Price has been paid thereby, at their Fair Market Value
    on the date of exercise; without limiting the foregoing, the
    Committee may require the Participant to furnish an opinion of
    counsel acceptable to the Committee to the effect that such
    delivery would not result in GEO incurring any liability under
    Section 16(b) of the Exchange Act; or

 

    (iii) by any other method which the Committee, in its sole
    and absolute discretion and to the extent permitted by
    applicable law, may permit, including, but not limited to, any
    of the following: (A) through a “cashless exercise
    sale and remittance procedure” pursuant to which the
    Participant shall concurrently provide irrevocable instructions
    (1) to a brokerage firm approved by the Committee to effect
    the immediate sale of the purchased shares and remit to GEO, out
    of the sale proceeds available on the settlement date,
    sufficient funds to cover the aggregate Exercise Price payable
    for the purchased shares plus all applicable federal, state and
    local income, employment, excise, foreign and other taxes
    required to be withheld by the Company by reason of such
    exercise and (2) to GEO to deliver the certificates for the
    purchased shares directly to such brokerage firm in order to
    complete the sale; or (B) by any other method as may be
    permitted by the Committee.

 

    (j) Termination of Employment, Disability or Death.
    Unless otherwise provided in an Award Agreement, upon the
    termination of the employment or other service of a Participant
    with Company for any reason, all of the Participant’s
    outstanding Options (whether vested or unvested) shall be
    subject to the rules of this paragraph. Upon such termination,
    the Participant’s unvested Options shall expire.
    Notwithstanding anything in this Plan to the contrary, the
    Committee may provide, in its sole and absolute discretion, that
    following the termination of employment or other service of a
    Participant with the Company for any reason (i) any
    unvested Options held by the Participant that vest solely upon a
    future service requirement shall vest in whole or in part, at
    any time subsequent to such termination of employment or other
    service, and or (ii) a Participant or the
    Participant’s estate, devisee or heir at law (whichever is
    applicable), may exercise an Option, in whole or in part, at any
    time subsequent to such termination of employment or other
    service and prior to the termination of the Option pursuant to
    its terms. Unless otherwise determined by the Committee,
    temporary absence from employment because of illness, vacation,
    approved leaves of absence or military service shall not
    constitute a termination of employment or other service.

 

    (i) Termination for Reason Other Than Cause, Disability
    or Death. If a Participant’s termination of employment
    or other service is for any reason other than death, Disability,
    Cause or a voluntary termination within ninety (90) days
    after occurrence of an event which would be grounds for
    termination of employment or other service by the Company for
    Cause, any Option held by such Participant, may be exercised, to
    the extent exercisable at termination, by the Participant at any
    time within a period not to exceed ninety (90) days from
    the date of such termination, but in no event after the
    termination of the Option pursuant to its terms.

 

    (ii) Disability. If a Participant’s termination
    of employment or other service with the Company is by reason of
    a Disability of such Participant, the Participant shall have the
    right at any time within a period

    

    5

 

    not to exceed one (1) year after such termination, but in
    no event after the termination of the Option pursuant to its
    terms, to exercise, in whole or in part, any vested portion of
    the Option held by such Participant at the date of such
    termination; provided, however, that if the Participant
    dies within such period, any vested Option held by such
    Participant upon death shall be exercisable by the
    Participant’s estate, devisee or heir at law (whichever is
    applicable) for a period not to exceed one (1) year after
    the Participant’s death, but in no event after the
    termination of the Option pursuant to its terms.

 

    (iii) Death. If a Participant dies while in the
    employment or other service of the Company, the
    Participant’s estate or the devisee named in the
    Participant’s valid last will and testament or the
    Participant’s heir at law who inherits the Option has the
    right, at any time within a period not to exceed one
    (1) year after the date of such Participant’s death,
    but in no event after the termination of the Option pursuant to
    its terms, to exercise, in whole or in part, any portion of the
    vested Option held by such Participant at the date of such
    Participant’s death.

 

    (iv) Termination for Cause. In the event the
    termination is for Cause or is a voluntary termination within
    ninety (90) days after occurrence of an event which would
    be grounds for termination of employment or other service by the
    Company for Cause (without regard to any notice or cure period
    requirement), any Option held by the Participant at the time of
    such termination shall be deemed to have terminated and expired
    upon the date of such termination.

 

    7. STOCK
    APPRECIATION RIGHTS

 

    (a) Grant of Stock Appreciation Rights. Subject to
    the terms and conditions of the Plan, the Committee may grant to
    such Eligible Individuals as the Committee may determine, Stock
    Appreciation Rights, in such amounts and on such terms and
    conditions as the Committee shall determine in its sole and
    absolute discretion. Each grant of a Stock Appreciation Right
    shall satisfy the requirements as set forth in this Section.

 

    (b) Terms and Conditions of Stock Appreciation Rights.
    Unless otherwise provided in an Award Agreement, the terms
    and conditions (including, without limitation, the limitations
    on the Exercise Price, exercise period, repricing and
    termination) of the Stock Appreciation Right shall be
    substantially identical (to the extent possible taking into
    account the differences related to the character of the Stock
    Appreciation Right) to the terms and conditions that would have
    been applicable under Section 6 above were the grant of the
    Stock Appreciation Rights a grant of an Option.

 

    (c) Exercise of Stock Appreciation Rights. Stock
    Appreciation Rights shall be exercised by a Participant only by
    written notice delivered to the General Counsel of GEO,
    specifying the number of shares of Common Stock with respect to
    which the Stock Appreciation Right is being exercised.

 

    (d) Payment of Stock Appreciation Right. Unless
    otherwise provided in an Award Agreement, upon exercise of a
    Stock Appreciation Right, the Participant or Participant’s
    estate, devisee or heir at law (whichever is applicable) shall
    be entitled to receive payment, in cash, in shares of Common
    Stock, or in a combination thereof, as determined by the
    Committee in its sole and absolute discretion. The amount of
    such payment shall be determined by multiplying the excess, if
    any, of the Fair Market Value of a share of Common Stock on the
    date of exercise over the Fair Market Value of a share of Common
    Stock on the Grant Date, by the number of shares of Common Stock
    with respect to which the Stock Appreciation Rights are then
    being exercised. Notwithstanding the foregoing, the Committee
    may limit in any manner the amount payable with respect to a
    Stock Appreciation Right by including such limitation in the
    Award Agreement.

 

    8.
    RESTRICTED STOCK

 

    (a) Grant of Restricted Stock. Subject to the terms
    and conditions of the Plan, the Committee may grant to such
    Eligible Individuals as the Committee may determine, Restricted
    Stock, in such amounts and on such terms and conditions as the
    Committee shall determine in its sole and absolute discretion.
    Each grant of Restricted Stock shall satisfy the requirements as
    set forth in this Section.

 

    (b) Restrictions. The Committee shall impose such
    restrictions on any Restricted Stock granted pursuant to the
    Plan as it may deem advisable including, without limitation;
    time based vesting restrictions, or the

    

    6

 

    attainment of Performance Goals. Except as otherwise provided by
    the Committee in an Award Agreement in its sole and absolute
    discretion, subject to Sections 10, 12 and 13 of the Plan,
    Restricted Stock covered by any Award under this Plan that are
    subject solely to a future service requirement shall vest over
    the four-year period immediately following the Grant Date in
    equal annual increments of 25%, with one increment vesting on
    each anniversary date of the Grant Date. Shares of Restricted
    Stock subject to the attainment of Performance Goals will be
    released from restrictions only after the attainment of such
    Performance Goals has been certified by the Committee in
    accordance with Section 9(c).

 

    (c) Certificates and Certificate Legend. With
    respect to a grant of Restricted Stock, the Company may issue a
    certificate evidencing such Restricted Stock to the Participant
    or issue and hold such shares of Restricted Stock for the
    benefit of the Participant until the applicable restrictions
    expire. The Company may legend the certificate representing
    Restricted Stock to give appropriate notice of such
    restrictions. In addition to any such legends, each certificate
    representing shares of Restricted Stock granted pursuant to the
    Plan shall bear the following legend:

 

    “The sale or other transfer of the shares of stock
    represented by this certificate, whether voluntary, involuntary,
    or by operation of law, are subject to certain terms,
    conditions, and restrictions on transfer as set forth in The GEO
    Group, Inc. 2006 Stock Incentive Plan (the “Plan”),
    and in an Agreement entered into by and between the registered
    owner of such shares and The GEO Group, Inc. (the
    “Company”),
    dated          
    (the “Award Agreement”). A copy of the Plan and the
    Award Agreement may be obtained from the Secretary of the
    Company.”

 

    (d) Removal of Restrictions. Except as otherwise
    provided in the Plan, shares of Restricted Stock shall become
    freely transferable by the Participant upon the lapse of the
    applicable restrictions. Once the shares of Restricted Stock are
    released from the restrictions, the Participant shall be
    entitled to have the legend required by paragraph (c) above
    removed from the share certificate evidencing such Restricted
    Stock and the Company shall pay or distribute to the Participant
    all dividends and distributions held in escrow by the Company
    with respect to such Restricted Stock.

 

    (e) Shareholder Rights. Unless otherwise provided in
    an Award Agreement, until the expiration of all applicable
    restrictions, (i) the Restricted Stock shall be treated as
    outstanding, (ii) the Participant holding shares of
    Restricted Stock may exercise full voting rights with respect to
    such shares, and (iii) the Participant holding shares of
    Restricted Stock shall be entitled to receive all dividends and
    other distributions paid with respect to such shares while they
    are so held. If any such dividends or distributions are paid in
    shares of Common Stock, such shares shall be subject to the same
    restrictions on transferability and forfeitability as the shares
    of Restricted Stock with respect to which they were paid.
    Notwithstanding anything to the contrary, at the discretion of
    the Committee, all such dividends and distributions may be held
    in escrow by the Company (subject to the same restrictions on
    forfeitability) until all restrictions on the respective
    Restricted Stock have lapsed.

 

    (f) Termination of Service. Unless otherwise
    provided in a Award Agreement, if a Participant’s
    employment or other service with the Company terminates for any
    reason, all unvested shares of Restricted Stock held by the
    Participant and any dividends or distributions held in escrow by
    GEO with respect to such Restricted Stock shall be forfeited
    immediately and returned to the Company. Notwithstanding this
    paragraph, all grants of Restricted Stock that vest
    solely upon the attainment of Performance Goals shall be treated
    pursuant to the terms and conditions that would have been
    applicable under Section 9(c) as if such grants of
    Restricted Stock were Awards of Performance Shares.
    Notwithstanding anything in this Plan to the contrary, the
    Committee may provide, in its sole and absolute discretion, that
    following the termination of employment or other service of a
    Participant with the Company for any reason, any unvested shares
    of Restricted Stock held by the Participant that vest solely
    upon a future service requirement shall vest in whole or in
    part, at any time subsequent to such termination of employment
    or other service.

 

    9.
    PERFORMANCE SHARES AND PERFORMANCE UNITS

 

    (a) Grant of Performance Shares and Performance Units.
    Subject to the terms and conditions of the Plan, the
    Committee may grant to such Eligible Individuals as the
    Committee may determine, Performance Shares

    

    7

 

    and Performance Units, in such amounts and on such terms and
    conditions as the Committee shall determine in its sole and
    absolute discretion. Each grant of a Performance Share or a
    Performance Unit shall satisfy the requirements as set forth in
    this Section.

 

    (b) Performance Goals. Performance Goals will be
    based on one or more of the following criteria, as determined by
    the Committee in its absolute and sole discretion: (i) the
    attainment of certain target levels of, or a specified increase
    in, GEO’s enterprise value or value creation targets;
    (ii) the attainment of certain target levels of, or a
    percentage increase in, GEO’s after-tax or pre-tax profits
    including, without limitation, that attributable to GEO’s
    continuing and/or other operations; (iii) the attainment of
    certain target levels of, or a specified increase relating to,
    GEO’s operational cash flow or working capital, or a
    component thereof; (iv) the attainment of certain target
    levels of, or a specified decrease relating to, GEO’s
    operational costs, or a component thereof (v) the
    attainment of a certain level of reduction of, or other
    specified objectives with regard to limiting the level of
    increase in all or a portion of bank debt or other of GEO’s
    long-term or short-term public or private debt or other similar
    financial obligations of GEO, which may be calculated net of
    cash balances and/or other offsets and adjustments as may be
    established by the Committee; (vi) the attainment of a
    specified percentage increase in earnings per share or earnings
    per share from GEO’s continuing operations; (vii) the
    attainment of certain target levels of, or a specified
    percentage increase in, GEO’s net sales, revenues, net
    income or earnings before income tax or other exclusions;
    (viii) the attainment of certain target levels of, or a
    specified increase in, GEO’s return on capital employed or
    return on invested capital; (ix) the attainment of certain
    target levels of, or a percentage increase in, GEO’s
    after-tax or pre-tax return on shareholder equity; (x) the
    attainment of certain target levels in the fair market value of
    GEO’s Common Stock; (xi) the growth in the value of an
    investment in the Common Stock assuming the reinvestment of
    dividends; and/or (xii) the attainment of certain target
    levels of, or a specified increase in, EBITDA (earnings before
    income tax, depreciation and amortization). In addition,
    Performance Goals may be based upon the attainment by a
    subsidiary, division or other operational unit of GEO of
    specified levels of performance under one or more of the
    measures described above. Further, the Performance Goals may be
    based upon the attainment by GEO (or a subsidiary, division,
    facility or other operational unit of GEO) of specified levels
    of performance under one or more of the foregoing measures
    relative to the performance of other corporations. To the extent
    permitted under Code Section 162(m) of the Code (including,
    without limitation, compliance with any requirements for
    shareholder approval), the Committee may, in its sole and
    absolute discretion: (i) designate additional business
    criteria upon which the Performance Goals may be based;
    (ii) modify, amend or adjust the business criteria
    described herein; or (iii) incorporate in the Performance
    Goals provisions regarding changes in accounting methods,
    corporate transactions (including, without limitation,
    dispositions or acquisitions) and similar events or
    circumstances. Performance Goals may include a threshold level
    of performance below which no Award will be earned, levels of
    performance at which an Award will become partially earned and a
    level at which an Award will be fully earned.

 

    (c) Terms and Conditions of Performance Shares and
    Performance Units. The applicable Award Agreement shall set
    forth (i) the number of Performance Shares or the dollar
    value of Performance Units granted to the Participant;
    (ii) the Performance Period and Performance Goals with
    respect to each such Award; (iii) the threshold, target and
    maximum shares of Common Stock or dollar values of each
    Performance Share or Performance Unit and corresponding
    Performance Goals, and (iv) any other terms and conditions
    as the Committee determines in its sole and absolute discretion.
    The Committee shall establish, in its sole and absolute
    discretion, the Performance Goals for the applicable Performance
    Period for each Performance Share or Performance Unit granted
    hereunder. Performance Goals for different Participants and for
    different grants of Performance Shares and Performance Units
    need not be identical. Unless otherwise provided in an Award
    Agreement, the Participants’ rights as a shareholder in
    Performance Shares shall be substantially identical to the terms
    and conditions that would have been applicable under
    Section 8 above if the Performance Shares were Restricted
    Stock. Unless otherwise provided in an Award Agreement, a holder
    of Performance Units is not entitled to the rights of a holder
    of Common Stock.

 

    (d) Determination and Payment of Performance Units or
    Performance Shares Earned. As soon as practicable after the
    end of a Performance Period, the Committee shall determine the
    extent to which Performance Shares or Performance Units have
    been earned on the basis of the Company’s actual
    performance

    

    8

 

    in relation to the established Performance Goals as set forth in
    the applicable Award Agreement and shall certify these results
    in writing. As soon as practicable after the Committee has
    determined that an amount is payable or should be distributed
    with respect to a Performance Share or a Performance Unit, the
    Committee shall cause the amount of such Award to be paid or
    distributed to the Participant or the Participant’s estate,
    devisee or heir at law (whichever is applicable). Unless
    otherwise provided in an Award Agreement, the Committee shall
    determine in its sole and absolute discretion whether payment
    with respect to the Performance Share or Performance Unit shall
    be made in cash, in shares of Common Stock, or in a combination
    thereof. For purposes of making payment or a distribution with
    respect to a Performance Share or Performance Unit, the cash
    equivalent of a share of Common Stock shall be determined by the
    Fair Market Value of the Common Stock on the day the Committee
    designates the Performance Shares or Performance Units to be
    payable.

 

    (e) Termination of Employment. Unless otherwise
    provided in an Award Agreement, if a Participant’s
    employment or other service with the Company terminates for any
    reason, all of the Participant’s outstanding Performance
    Shares and Performance Units shall be subject to the rules of
    this Section.

 

    (i) Termination for Reason Other Than Death or
    Disability. If a Participant’s employment or other
    service with the Company terminates prior to the expiration of a
    Performance Period with respect to any Performance Units or
    Performance Shares held by such Participant for any reason other
    than death or Disability, the outstanding Performance Units or
    Performance Shares held by such Participant for which the
    Performance Period has not yet expired shall terminate upon such
    termination and the Participant shall have no further rights
    pursuant to such Performance Units or Performance Shares.

 

    (ii) Termination of Employment for Death or Disability.
    If a Participant’s employment or other service with the
    Company terminates by reason of the Participant’s death or
    Disability prior to the end of a Performance Period, the
    Participant, or the Participant’s estate, devisee or heir
    at law (whichever is applicable) shall be entitled to a payment
    of the Participant’s outstanding Performance Units and
    Performance Share at the end of the applicable Performance
    Period, pursuant to the terms of the Plan and the
    Participant’s Award Agreement; provided, however,
    that the Participant shall be deemed to have earned only that
    proportion (to the nearest whole unit or share) of the
    Performance Units or Performance Shares granted to the
    Participant under such Award as the number of full months of the
    Performance Period which have elapsed since the first day of the
    Performance Period for which the Award was granted to the end of
    the month in which the Participant’s termination of
    employment or other service, bears to the total number of months
    in the Performance Period, subject to the attainment of the
    Performance Goals associated with the Award as certified by the
    Committee. The right to receive any remaining Performance Units
    or Performance Shares shall be canceled and forfeited.

 

    10.
    VESTING OF AWARD GRANTS TO NON-EMPLOYEE DIRECTORS

 

    Notwithstanding the minimum vesting provisions in
    Section 6(g) and 8(b) of the Plan, any Award granted to a
    Non-Employee Director in lieu of cash compensation shall not be
    subject to any minimum vesting requirements.

 

    11. OTHER
    AWARDS

 

    Awards of shares of Common Stock, phantom stock, restricted
    stock units and other awards that are valued in whole or in part
    by reference to, or otherwise based on, Common Stock, may also
    be made, from time to time, to Eligible Individuals as may be
    selected by the Committee. Such Common Stock may be issued in
    satisfaction of awards granted under any other plan sponsored by
    the Company or compensation payable to an Eligible Individual.
    In addition, such awards may be made alone or in addition to or
    in connection with any other Award granted hereunder. The
    Committee may determine the terms and conditions of any such
    award. Each such award shall be evidenced by an Award Agreement
    between the Eligible Individual and the Company which shall
    specify the number of shares of Common Stock subject to the
    award, any consideration therefore, any vesting or performance
    requirements and such other terms and conditions as the
    Committee shall determine in its sole and absolute discretion.

    

    9

 

    12.
    CHANGE IN CONTROL

 

    Unless otherwise provided in an Award Agreement, upon the
    occurrence of a Change in Control of GEO, the Committee may in
    its sole and absolute discretion, provide on a case by case
    basis that (i) some or all outstanding Awards may become
    immediately exercisable or vested, without regard to any
    limitation imposed pursuant to this Plan, (ii) that all
    Awards shall terminate, provided that Participants shall have
    the right, immediately prior to the occurrence of such Change in
    Control and during such reasonable period as the Committee in
    its sole discretion shall determine and designate, to exercise
    any vested Award in whole or in part, (iii) that all Awards
    shall terminate, provided that Participants shall be entitled to
    a cash payment equal to the Change in Control Price with respect
    to shares subject to the vested portion of the Award net of the
    Exercise Price thereof (if applicable), (iv) provide that,
    in connection with a liquidation or dissolution of GEO, Awards
    shall convert into the right to receive liquidation proceeds net
    of the Exercise Price (if applicable) and (v) any
    combination of the foregoing. In the event that the Committee
    does not terminate or convert an Award upon a Change in Control
    of GEO, then the Award shall be assumed, or substantially
    equivalent Awards shall be substituted, by the acquiring, or
    succeeding corporation (or an affiliate thereof).

 

    13.
    CHANGE IN STATUS OF PARENT OR SUBSIDIARY

 

    Unless otherwise provided in an Award Agreement or otherwise
    determined by the Committee, in the event that an entity or
    business unit which was previously a part of the Company is no
    longer a part of the Company, as determined by the Committee in
    its sole discretion, the Committee may, in its sole and absolute
    discretion: (i) provide on a case by case basis that some
    or all outstanding Awards held by a Participant employed by or
    performing service for such entity or business unit may become
    immediately exercisable or vested, without regard to any
    limitation imposed pursuant to this Plan; (ii) provide on a
    case by case basis that some or all outstanding Awards held by a
    Participant employed by or performing service for such entity or
    business unit may remain outstanding, may continue to vest,
    and/or may remain exercisable for a period not exceeding one
    (1) year, subject to the terms of the Award Agreement and
    this Plan; and/or (ii) treat the employment or other
    services of a Participant employed by such entity or business
    unit as terminated if such Participant is not employed by GEO or
    any entity that is a part of the Company immediately after such
    event.

 

    14.
    REQUIREMENTS OF LAW

 

    (a) Violations of Law. The Company shall not be
    required to sell or issue any shares of Common Stock under any
    Award if the sale or issuance of such shares would constitute a
    violation by the individual exercising the Award, the
    Participant or the Company of any provisions of any law or
    regulation of any governmental authority, including without
    limitation any provisions of the Sarbanes-Oxley Act, and any
    other federal or state securities laws or regulations. Any
    determination in this connection by the Committee shall be
    final, binding, and conclusive. The Company shall not be
    obligated to take any affirmative action in order to cause the
    exercise of an Award, the issuance of shares pursuant thereto or
    the grant of an Award to comply with any law or regulation of
    any governmental authority.

 

    (b) Registration. At the time of any exercise or
    receipt of any Award, the Company may, if it shall determine it
    necessary or desirable for any reason, require the Participant
    (or Participant’s heirs, legatees or legal representative,
    as the case may be), as a condition to the exercise or grant
    thereof, to deliver to the Company a written representation of
    present intention to hold the shares for their own account as an
    investment and not with a view to, or for sale in connection
    with, the distribution of such shares, except in compliance with
    applicable federal and state securities laws with respect
    thereto. In the event such representation is required to be
    delivered, an appropriate legend may be placed upon each
    certificate delivered to the Participant (or Participant’s
    heirs, legatees or legal representative, as the case may be)
    upon the Participant’s exercise of part or all of the Award
    or receipt of an Award and a stop transfer order may be placed
    with the transfer agent. Each Award shall also be subject to the
    requirement that, if at any time the Company determines, in its
    discretion, that the listing, registration or qualification of
    the shares subject to the Award upon any securities exchange or
    under any state or federal law, or the consent or approval of
    any governmental regulatory body, is necessary or desirable as a
    condition of or in connection with, the issuance or purchase of
    the shares thereunder, the Award may not be exercised in whole
    or in part and the restrictions on an Award

    

    10

 

    may not be removed unless such listing, registration,
    qualification, consent or approval shall have been effected or
    obtained free of any conditions not acceptable to the Company in
    its sole discretion. The Participant shall provide the Company
    with any certificates, representations and information that the
    Company requests and shall otherwise cooperate with the Company
    in obtaining any listing, registration, qualification, consent
    or approval that the Company deems necessary or appropriate. The
    Company shall not be obligated to take any affirmative action in
    order to cause the exercisability or vesting of an Award, to
    cause the exercise of an Award or the issuance of shares
    pursuant thereto, or to cause the grant of Award to comply with
    any law or regulation of any governmental authority.

 

    (c) Withholding. The Committee may make such
    provisions and take such steps as it may deem necessary or
    appropriate for the withholding of any taxes that the Company is
    required by any law or regulation of any governmental authority,
    whether federal, state or local, domestic or foreign, to
    withhold in connection with the grant or exercise of an Award,
    or the removal of restrictions on an Award including, but not
    limited to: (i) the withholding of delivery of shares of
    Common Stock until the holder reimburses the Company for the
    amount the Company is required to withhold with respect to such
    taxes; (ii) the canceling of any number of shares of Common
    Stock issuable in an amount sufficient to reimburse the Company
    for the amount it is required to so withhold;
    (iii) withholding the amount due from any such
    person’s wages or compensation due to such person; or
    (iv) requiring the Participant to pay the Company cash in
    the amount the Company is required to withhold with respect to
    such taxes.

 

    (d) Governing Law. The Plan shall be governed by,
    and construed and enforced in accordance with, the laws of the
    State of Florida.

 

    15.
    GENERAL PROVISIONS

 

    (a) Award Agreements. All Awards granted pursuant to
    the Plan shall be evidenced by an Award Agreement. Each Award
    Agreement shall specify the terms and conditions of the Award
    granted and shall contain any additional provisions as the
    Committee shall deem appropriate, in its sole and absolute
    discretion (including, to the extent that the Committee deems
    appropriate, provisions relating to confidentiality,
    non-competition, non-solicitation and similar matters). The
    terms of each Award Agreement need not be identical for Eligible
    Individuals provided that all Award Agreements comply with the
    terms of the Plan.

 

    (b) Purchase Price. To the extent the purchase price
    of any Award granted hereunder is less than par value of a share
    of Common Stock and such purchase price is not permitted by
    applicable law, the per share purchase price shall be deemed to
    be equal to the par value of a share of Common Stock.

 

    (c) Dividends and Dividend Equivalents. Except as
    provided by the Committee in its sole and absolute discretion or
    as otherwise provided in Section 5(d) and subject to
    Section 8(e) of the Plan, a Participant shall not be
    entitled to receive, currently or on a deferred basis, cash or
    stock dividends, Dividend Equivalents, or cash payments in
    amounts equivalent to cash or stock dividends on shares of
    Commons Stock covered by an Award which has not vested or an
    Option. The Committee in its absolute and sole discretion may
    credit a Participant’s Award with Dividend Equivalents with
    respect to any Awards. To the extent that dividends and
    distributions relating to an Award are held in escrow by the
    Company, or Dividend Equivalents are credited to an Award, a
    Participant shall not be entitled to any interest on any such
    amounts. The Committee may not grant Dividend Equivalents to an
    Award subject to performance-based vesting to the extent that
    the grant of such Dividend Equivalents would limit the
    Company’s deduction of the compensation payable under such
    Award for federal tax purposes pursuant to Code
    Section 162(m).

 

    (d) Deferral of Awards. The Committee may from time
    to time establish procedures pursuant to which a Participant may
    elect to defer, until a time or times later than the vesting of
    an Award, receipt of all or a portion of the shares of Common
    Stock or cash subject to such Award and to receive Common Stock
    or cash at such later time or times, all on such terms and
    conditions as the Committee shall determine. The Committee shall
    not permit the deferral of an Award unless counsel for GEO
    determines that such action will not result in adverse tax
    consequences to a Participant under Section 409A of the
    Code. If any such deferrals are permitted, then notwithstanding
    anything to the contrary herein, a Participant who elects to
    defer receipt of Common Stock shall not have any rights as a
    shareholder with respect to deferred shares of Common Stock
    unless and

    

    11

 

    until shares of Common Stock are actually delivered to the
    Participant with respect thereto, except to the extent otherwise
    determined by the Committee.

 

    (e) Prospective Employees. Notwithstanding anything
    to the contrary, any Award granted to a Prospective Employee
    shall not become vested prior to the date the Prospective
    Employee first becomes an employee of the Company.

 

    (f) Issuance of Certificates; Shareholder Rights.
    GEO shall deliver to the Participant a certificate
    evidencing the Participant’s ownership of shares of Common
    Stock issued pursuant to the exercise of an Award as soon as
    administratively practicable after satisfaction of all
    conditions relating to the issuance of such shares. A
    Participant shall not have any of the rights of a shareholder
    with respect to such Common Stock prior to satisfaction of all
    conditions relating to the issuance of such Common Stock, and,
    except as expressly provided in the Plan, no adjustment shall be
    made for dividends, distributions or other rights of any kind
    for which the record date is prior to the date on which all such
    conditions have been satisfied.

 

    (g) Transferability of Awards. A Participant may not
    Transfer an Award other than by will or the laws of descent and
    distribution. Awards may be exercised during the
    Participant’s lifetime only by the Participant. No Award
    shall be liable for or subject to the debts, contracts, or
    liabilities of any Participant, nor shall any Award be subject
    to legal process or attachment for or against such person. Any
    purported Transfer of an Award in contravention of the
    provisions of the Plan shall have no force or effect and shall
    be null and void, and the purported transferee of such Award
    shall not acquire any rights with respect to such Award.
    Notwithstanding anything to the contrary, the Committee may in
    its sole and absolute discretion permit the Transfer of an Award
    to a Participant’s “family member” as such term
    is defined in the Form 8 Registration Statement under the
    Securities Act of 1933, as amended, under such terms and
    conditions as specified by the Committee. In such case, such
    Award shall be exercisable only by the transferee approved of by
    the Committee. To the extent that the Committee permits the
    Transfer of an Incentive Stock Option to a “family
    member”, so that such Option fails to continue to satisfy
    the requirements of an incentive stock option under the Code
    such Option shall automatically be re-designated as a
    Non-Qualified Stock Option.

 

    (h) Buyout and Settlement Provisions. Except as
    prohibited in Section 6(d) of the Plan, the Committee may
    at any time on behalf of GEO offer to buy out any Awards
    previously granted based on such terms and conditions as the
    Committee shall determine which shall be communicated to the
    Participants at the time such offer is made.

 

    (i) Use of Proceeds. The proceeds received by GEO
    from the sale of Common Stock pursuant to Awards granted under
    the Plan shall constitute general funds of GEO.

 

    (j) Modification or Substitution of an Award.
    Subject to the terms and conditions of the Plan, the
    Committee may modify outstanding Awards. Notwithstanding the
    following, no modification of an Award shall adversely affect
    any rights or obligations of the Participant under the
    applicable Award Agreement without the Participant’s
    consent. The Committee in its sole and absolute discretion may
    rescind, modify, or waive any vesting requirements or other
    conditions applicable to an Award. Notwithstanding the
    foregoing, without the approval of the shareholders of GEO in
    accordance with applicable law, an Award may not be modified to
    reduce the exercise price thereof nor may an Award at a lower
    price be substituted for a surrender of an Award, provided that
    (i) the foregoing shall not apply to adjustments or
    substitutions in accordance with Section 5 or
    Section 12, and (ii) if an Award is modified, extended
    or renewed and thereby deemed to be in issuance of a new Award
    under the Code or the applicable accounting rules, the exercise
    price of such Award may continue to be the original Exercise
    Price even if less than Fair Market Value of the Common Stock at
    the time of such modification, extension or renewal.

 

    (k) Amendment and Termination of Plan. The Board
    may, at any time and from time to time, amend, suspend or
    terminate the Plan as to any shares of Common Stock as to which
    Awards have not been granted; provided, however, that the
    approval of the shareholders of GEO in accordance with
    applicable law and the Articles of Incorporation and Bylaws of
    GEO shall be required for any amendment: (i) that changes
    the class of individuals eligible to receive Awards under the
    Plan: (ii) that increases the maximum number of shares of
    Common Stock in the aggregate that may be subject to Awards that
    are granted under the Plan (except as

    

    12

 

    permitted under Section 5 or Section 12 hereof):
    (iii) the approval of which is necessary to comply with
    federal or state law (including without limitation
    Section 162(m) of the Code and Rule 16b-3 under the
    Exchange Act) or with the rules of any stock exchange or
    automated quotation system on which the Common Stock may be
    listed or traded; or (iv) that proposed to eliminate a
    requirement provided herein that the shareholders of GEO must
    approve an action to be undertaken under the Plan. Except as
    permitted under Section 5 or Section 12 hereof, no
    amendment, suspension or termination of the Plan shall, without
    the consent of the holder of an Award, alter or impair rights or
    obligations under any Award theretofore granted under the Plan.
    Awards granted prior to the termination of the Plan may extend
    beyond the date the Plan is terminated and shall continue
    subject to the terms of the Plan as in effect on the date the
    Plan is terminated.

 

    (l) Section 409A of the Code. With respect to
    Awards subject to Section 409A of the Code, this Plan is
    intended to comply with the requirements of such Section, and
    the provisions hereof shall be interpreted in a manner that
    satisfies the requirements of such Section and the related
    regulations, and the Plan shall be operated accordingly. If any
    provision of this Plan or any term or condition of any Award
    would otherwise frustrate or conflict with this intent, the
    provision, term or condition will be interpreted and deemed
    amended so as to avoid this conflict.

 

    (m) Notification of 83(b) Election. If in connection
    with the grant of any Award, any Participant makes an election
    permitted under Code Section 83(b), such Participant must
    notify the Company in writing of such election within ten
    (10) days of filing such election with the Internal Revenue
    Service.

 

    (n) Detrimental Activity. All Awards shall be
    subject to cancellation by the Committee in accordance with the
    terms of this Section 15(n) if the Participant engages in
    any Detrimental Activity. To the extent that a Participant
    engages in any Detrimental Activity at any time prior to, or
    during the one year period after, any exercise or vesting of an
    Award but prior to a Change in Control, the Company shall, upon
    the recommendation of the Committee, in its sole and absolute
    discretion, be entitled to (i) immediately terminate and
    cancel any Awards held by the Participant that have not yet been
    exercised, and/or (ii) with respect to Awards of the
    Participant that have been previously exercised, recover from
    the Participant at any time within two (2) years after such
    exercise but prior to a Change in Control (and the Participant
    shall be obligated to pay over to the Company with respect to
    any such Award previously held by such Participant):
    (A) with respect to any Options exercised, an amount equal
    to the excess of the Fair Market Value of the Common Stock for
    which any Option was exercised over the Exercise Price paid
    (regardless of the form by which payment was made) with respect
    to such Option; (B) with respect to any Award other than an
    Option, any shares of Common Stock granted and vested pursuant
    to such Award, and if such shares are not still owned by the
    Participant, the Fair Market Value of such shares on the date
    they were issued, or if later, the date all vesting restrictions
    were satisfied; and (C) any cash or other property (other
    than Common Stock) received by the Participant from the Company
    pursuant to an Award. Without limiting the generality of the
    foregoing, in the event that a Participant engages in any
    Detrimental Activity at any time prior to any exercise of an
    Award and the Company exercises its remedies pursuant to this
    Section 15(n) following the exercise of such Award, such
    exercise shall be treated as having been null and void, provided
    that the Company will nevertheless be entitled to recover the
    amounts referenced above.

 

    (o) Disclaimer of Rights. No provision in the Plan,
    any Award granted hereunder, or any Award Agreement entered into
    pursuant to the Plan shall be construed to confer upon any
    individual the right to remain in the employ of or other service
    with the Company or to interfere in any way with the right and
    authority of the Company either to increase or decrease the
    compensation of any individual, including any holder of an
    Award, at any time, or to terminate any employment or other
    relationship between any individual and the Company. The grant
    of an Award pursuant to the Plan shall not affect or limit in
    any way the right or power of the Company to make adjustments,
    reclassifications, reorganizations or changes of its capital or
    business structure or to merge, consolidate, dissolve or
    liquidate, or to sell or transfer all or any part of its
    business or assets.

 

    (p) Unfunded Status of Plan. The Plan is intended to
    constitute an “unfunded” plan for incentive and
    deferred compensation. With respect to any payments as to which
    a Participant has a fixed and vested interest

    

    13

 

    but which are not yet made to such Participant by the Company,
    nothing contained herein shall give any such Participant any
    rights that are greater than those of a general creditor of the
    Company.

 

    (q) Nonexclusivity of Plan. The adoption of the Plan
    shall not be construed as creating any limitations upon the
    right and authority of the Board to adopt such other incentive
    compensation arrangements (which arrangements may be applicable
    either generally to a class or classes of individuals or
    specifically to a particular individual or individuals) as the
    Board in its sole and absolute discretion determines desirable.

 

    (r) Other Benefits. No Award payment under the Plan
    shall be deemed compensation for purposes of computing benefits
    under any retirement plan of the Company or any agreement
    between a Participant and the Company, nor affect any benefits
    under any other benefit plan of the Company now or subsequently
    in effect under which benefits are based upon a
    Participant’s level of compensation.

 

    (s) Headings. The section headings in the Plan are
    for convenience only; they form no part of this Agreement and
    shall not affect its interpretation.

 

    (t) Pronouns. The use of any gender in the Plan
    shall be deemed to include all genders, and the use of the
    singular shall be deemed to include the plural and vice versa,
    wherever it appears appropriate from the context.

 

    (u) Successors and Assigns. The Plan shall be
    binding on all successors of the Company and all successors and
    permitted assigns of a Participant, including, but not limited
    to, a Participant’s estate, devisee, or heir at law.

 

    (v) Severability. If any provision of the Plan or
    any Award Agreement shall be determined to be illegal or
    unenforceable by any court of law in any jurisdiction, the
    remaining provisions hereof and thereof shall be severable and
    enforceable in accordance with their terms, and all provisions
    shall remain enforceable in any other jurisdiction.

 

    (w) Notices. Any communication or notice required or
    permitted to be given under the Plan shall be in writing, and
    mailed by registered or certified mail or delivered by hand, to
    GEO, to its principal place of business, attention: John J.
    Bulfin, General Counsel, The GEO Group Inc., and if to the
    holder of an Award, to the address as appearing on the records
    of the Company.

    

    14

 

    ANNEX
    A

 

    DEFINITIONS

 

    “Award” means any Common Stock, Option, Performance
    Share, Performance Unit, Restricted Stock, Stock Appreciation
    Right or any other award granted pursuant to the Plan.

 

    “Award Agreement” means a written agreement entered
    into by GEO and a Participant setting forth the terms and
    conditions of the grant of an Award to such Participant.

 

    “Board” means the board of directors of GEO.

 

    “Cause” means, with respect to a termination of
    employment or other service with the Company, a termination of
    employment or other service due to a Participant’s
    dishonesty, fraud, insubordination, willful misconduct, refusal
    to perform services (for any reason other than illness or
    incapacity) or materially unsatisfactory performance of the
    Participant’s duties for the Company; provided, however,
    that if the Participant and the Company have entered into an
    employment agreement or consulting agreement which defines the
    term Cause, the term Cause shall be defined in accordance with
    such agreement with respect to any Award granted to the
    Participant on or after the effective date of the respective
    employment or consulting agreement. The Committee shall
    determine in its sole and absolute discretion whether Cause
    exists for purposes of the Plan.

 

    “Change in Control” shall be deemed to occur upon:

 

    (a) any “person” as such term is used in
    Sections 13(d) and 14(d) of the Exchange Act (other than
    GEO, any trustee or other fiduciary holding securities under any
    employee benefit plan of the Company, or any company owned,
    directly or indirectly, by the shareholders of GEO in
    substantially the same proportions as their ownership of common
    stock of GEO), is or becomes the “beneficial owner”
    (as defined in Rule 13d-3 under the Exchange Act), directly
    or indirectly, of securities of GEO representing thirty percent
    (30%) or more of the combined voting power of GEO’s then
    outstanding securities;

 

    (b) during any period of two (2) consecutive years,
    individuals who at the beginning of such period constitute the
    Board, and any new director (other than a director designated by
    a person who has entered into an agreement with the Company to
    effect a transaction described in paragraph (a), (c), or
    (d) of this Section) whose election by the Board or
    nomination for election by GEO’s shareholders was approved
    by a vote of at least two-thirds of the directors then still in
    office who either were directors at the beginning of the
    two-year period or whose election or nomination for election was
    previously so approved, cease for any reason to constitute at
    least a majority of the Board;

 

    (c) a merger, consolidation, reorganization, or other
    business combination of GEO with any other entity, other than a
    merger or consolidation which would result in the voting
    securities of GEO outstanding immediately prior thereto
    continuing to represent (either by remaining outstanding or by
    being converted into voting securities of the surviving entity)
    more than fifty percent (50%) of the combined voting power of
    the voting securities of GEO or such surviving entity
    outstanding immediately after such merger or consolidation;
    provided, however, that a merger or consolidation effected to
    implement a recapitalization of GEO (or similar transaction) in
    which no person acquires more than twenty-five percent (25%) of
    the combined voting power of GEO’s then outstanding
    securities shall not constitute a Change in Control; or

 

    (d) the shareholders of GEO approve a plan of complete
    liquidation of GEO or the consummation of the sale or
    disposition by GEO of all or substantially all of GEO’s
    assets other than (x) the sale or disposition of all or
    substantially all of the assets of GEO to a person or persons
    who beneficially own, directly or indirectly, at least fifty
    percent (50%) or more of the combined voting power of the
    outstanding voting securities of GEO at the time of the sale or
    (y) pursuant to a spin-off type transaction, directly or
    indirectly, of such assets to the shareholders of GEO.

 

    However, to the extent that Section 409A of the Code would
    cause an adverse tax consequence to a Participant using the
    above definition, the term “Change in Control” shall
    have the meaning ascribed to the

    

    15

 

    phrase “Change in the Ownership or Effective Control of a
    Corporation or in the Ownership of a Substantial Portion of the
    Assets of a Corporation” under Treasury Department Proposed
    Regulation 1.409A-3(g)(5), as revised from time to time in
    either subsequent proposed or final regulations, and in the
    event that such regulations are withdrawn or such phrase (or a
    substantially similar phrase) ceases to be defined, as
    determined by the Committee.

 

    “Change in Control Price” means the price per share of
    Common Stock paid in any transaction related to a Change in
    Control of GEO.

 

    “Code” means the Internal Revenue Code of 1986, as
    amended, and the regulations promulgated thereunder.

 

    “Committee” means a committee or sub-committee of the
    Board consisting of two or more members of the Board, none of
    whom shall be an officer or other salaried employee of the
    Company, and each of whom shall qualify in all respects as a
    “non-employee director” as defined in Rule 16b-3
    under the Exchange Act, and as an “outside director”
    for purposes of Code Section 162(m). If no Committee
    exists, the functions of the Committee will be exercised by the
    Board; provided, however, that a Committee shall be
    created prior to the grant of Awards to a Covered Employee and
    that grants of Awards to a Covered Employee shall be made only
    by such Committee. Notwithstanding the foregoing, with respect
    to the grant of Awards to non-employee directors, the Committee
    shall be the Board.

 

    “Common Stock” means the common stock, par value $0.01
    per share, of GEO.

 

    “Company” means The GEO Group, Inc., a Florida
    corporation, the subsidiaries of The GEO Group, Inc., and all
    other entities whose financial statements are required to be
    consolidated with the financial statements of The GEO Group,
    Inc. pursuant to United States generally accepted accounting
    principles, and any other entity determined to be an affiliate
    of The GEO Group, Inc. as determined by the Committee in its
    sole and absolute discretion.

 

    “Covered Employee” means “covered employee”
    as defined in Code Section 162(m)(3).

 

    “Covered Individual” means any current or former
    member of the Committee, any current or former officer or
    director of the Company, or any individual designated pursuant
    to Section 4(c).

 

    “Detrimental Activity” means any of the following:
    (i) the disclosure to anyone outside the Company, or the
    use in other than the Company’s business, without written
    authorization from the Company, of any confidential information
    or proprietary information, relating to the business of the
    Company, acquired by a Participant prior to a termination of the
    Participant’s employment or service with the Company;
    (ii) activity while employed or providing services that is
    classified by the Company as a basis for a termination for
    Cause; (iii) the Participant’s Disparagement, or
    inducement of others to do so, of the Company or its past or
    present officers, directors, employees or services; or
    (iv) any other conduct or act determined by the Committee,
    in its sole discretion, to be injurious, detrimental or
    prejudicial to the interests of the Company. For purposes of
    subparagraph (i) above, the Chief Executive Officer and the
    General Counsel of the Company shall each have authority to
    provide the Participant with written authorization to engage in
    the activities contemplated thereby and no other person shall
    have authority to provide the Participant with such
    authorization.

 

    “Disability” means a “permanent and total
    disability” within the meaning of Code
    Section 22(e)(3); provided, however, that if a
    Participant and the Company have entered into an employment or
    consulting agreement which defines the term Disability for
    purposes of such agreement, Disability shall be defined pursuant
    to the definition in such agreement with respect to any Award
    granted to the Participant on or after the effective date of the
    respective employment or consulting agreement. The Committee
    shall determine in its sole and absolute discretion whether a
    Disability exists for purposes of the Plan.

 

    “Disparagement” means making any comments or
    statements to the press, the Company’s employees, clients
    or any other individuals or entities with whom the Company has a
    business relationship, which could adversely affect in any
    manner: (i) the conduct of the business of the Company
    (including, without limitation, any products or business plans
    or prospects), or (ii) the business reputation of the
    Company or any of its products, or its past or present officers,
    directors or employees.

    

    16

 

     
“Dividend Equivalents” means an amount equal to the
cash dividends paid by the Company upon one share of Common
Stock subject to an Award granted to a Participant under the
Plan.

     
“Effective Date” shall mean the date that the Plan was
approved by the shareholders of GEO in accordance with
applicable law or such later date as provided in the resolutions
adopting the Plan.

     
“Eligible Individual” means any employee, officer,
director (employee or non-employee director) or consultant of
the Company and any Prospective Employee to whom Awards are
granted in connection with an offer of future employment with
the Company.

     
“Exchange Act” means the Securities Exchange Act of
1934, as amended.

     
“Exercise Price” means the purchase price per share of
each share of Common Stock subject to an Award.

     
“Fair Market Value” means, unless otherwise required
by the Code, as of any date, the last sales price reported for
the Common Stock on the day immediately prior to such date
(i) as reported by the national securities exchange in the
United States on which it is then traded, or (ii) if not
traded on any such national securities exchange, as quoted on an
automated quotation system sponsored by the National Association
of Securities Dealers, Inc., or if the Common Stock shall not
have been reported or quoted on such date, on the first day
prior thereto on which the Common Stock was reported or
quoted;provided, however, that the Committee may modify
the definition of Fair Market Value to reflect any changes in
the trading practices of any exchange or automated system
sponsored by the National Association of Securities Dealers,
Inc. on which the Common Stock is listed or traded. If the
Common Stock is not readily traded on a national securities
exchange or any system sponsored by the National Association of
Securities Dealers, Inc., the Fair Market Value shall be
determined in good faith by the Committee.

     
“GEO” means The GEO Group, Inc., a Florida corporation.

     
“Grant Date” means the date on which the Committee
approves the grant of an Award or such later date as is
specified by the Committee and set forth in the applicable Award
Agreement.

     
“Incentive Stock Option” means an “incentive
stock option” within the meaning of Code Section 422.

     
“Non-Employee Director” means a director of GEO who is
not an active employee of the Company.

     
“Non-Qualified Stock Option” means an Option which is
not an Incentive Stock Option.

     
“Option” means an option to purchase Common Stock
granted pursuant to Sections 6 of the Plan.

     
“Participant” means any Eligible Individual who holds
an Award under the Plan and any of such individual’s
successors or permitted assigns.

     
“Performance Goals” means the specified performance
goals which have been established by the Committee in connection
with an Award.

     
“Performance Period” means the period during which
Performance Goals must be achieved in connection with an Award
granted under the Plan.

     
“Performance Share” means a right to receive a fixed
number of shares of Common Stock, or the cash equivalent, which
is contingent on the achievement of certain Performance Goals
during a Performance Period.

     
“Performance Unit” means a right to receive a
designated dollar value, or shares of Common Stock of the
equivalent value, which is contingent on the achievement of
Performance Goals during a Performance Period.

     
“Person” shall mean any person, corporation,
partnership, joint venture or other entity or any group (as such
term is defined for purposes of Section 13(d) of the
Exchange Act), other than a Parent or Subsidiary.

     
“Plan” means this The GEO Group, Inc. 2006 Stock
Incentive Plan.

17

 

     
“Prospective Employee” means any individual who has
committed to become an employee of the Company within sixty
(60) days from the date an Award is granted to such
individual.

     
“Restricted Stock” means Common Stock subject to
certain restrictions, as determined by the Committee, and
granted pursuant to Section 8 hereunder.

     
“Section 424 Employee” means an employee of GEO
or any “subsidiary corporation” or “parent
corporation” as such terms are defined in and in accordance
with Code Section 424. The term “Section 424
Employee” also includes employees of a corporation issuing
or assuming any Options in a transaction to which Code
Section 424(a) applies.

     
“Stock Appreciation Right” means the right to receive
all or some portion of the increase in value of a fixed number
of shares of Common Stock granted pursuant to Section 7
hereunder.

     
“Transfer” means, as a noun, any direct or indirect,
voluntary or involuntary, exchange, sale, bequeath, pledge,
mortgage, hypothecation, encumbrance, distribution, transfer,
gift, assignment or other disposition or attempted disposition
of, and, as a verb, directly or indirectly, voluntarily or
involuntarily, to exchange, sell, bequeath, pledge, mortgage,
hypothecate, encumber, distribute, transfer, give, assign or in
any other manner whatsoever dispose or attempt to dispose of.

18EX-10.38 AMENDED STOCK INCENTIVE PLAN

 

Exhibit 10.38

AMENDED AND RESTATED RIVERWOOD HOLDING, INC.

STOCK INCENTIVE PLAN

Section 1. Purpose

     The purpose of this Amended and Restated Riverwood Holding, Inc. Stock Incentive Plan is to
foster and promote the long-term financial success of the Company and the Subsidiaries and to
increase materially stockholder value by (a) motivating superior performance by
participants in the Plan, (b) providing participants in the Plan with an ownership interest
in the Company and (c) enabling the Company and the Subsidiaries to attract and retain the
services of an outstanding management team upon whose judgment, interest and special effort the
successful conduct of its operations is largely dependent.

Section 2. Definitions

     2.1. Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below:

     (a) “Affiliate” means, with respect to any person, any other person controlled by,
controlling or under common control with such person.

     (b) “Award Agreement” means the agreement evidencing the grant of any Incentive Award
under the Plan, including a Subscription Agreement and an Option Agreement.

     (c) “Board” means the Board of Directors of the Company.

     (d) “CD&R Fund” means the Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman
Islands exempted limited partnership, and any successor investment vehicle managed by
Clayton, Dubilier & Rice, Inc.

     (e) “Cause” shall mean (i) the willful failure of the Participant to perform
substantially his employment-related duties, (ii) the Participant’s willful or
serious misconduct that has caused or could reasonably be expected to result in material
injury to the business or reputation of Company or any Subsidiary, (iii) the
Participant’s conviction of, or entering a plea of guilty or nolo contendere
to, a crime constituting a felony or (iv) the breach by the Participant of any
written covenant or agreement with the Company or any Subsidiary not to disclose any
information pertaining to the Company or any Subsidiary, not to compete or interfere with the
Company or any Subsidiary or relating to the take-along rights described in Section 10.3
hereof; provided that, with respect to any Participant who is party to an employment or
individual severance agreement with the Company or RIC, “Cause” shall have the meaning, if
any specified in such agreement.

 

 

     (f) “Change in Control” means the first to occur of the following events after the
Effective Date:

     (i) the acquisition by any person, entity or “group” (as defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended), other than the Company, the
Subsidiaries, any employee benefit plan of the Company or the Subsidiaries, the CD&R
Fund, any Investor or any Affiliate of the CD&R Fund or of an Investor, of 50% or more
of the combined voting power of the Company’s or RIC’s then outstanding voting
securities;

     (ii) the merger or consolidation of the Company or RIC, as a result of which
persons who were stockholders of the Company or RIC, as the case may be, immediately
prior to such merger or consolidation, do not, immediately thereafter, own, directly
or indirectly, more than 50% of the combined voting power entitled to vote generally
in the election of directors of the merged or consolidated company;

     (iii) the liquidation or dissolution of the Company or RIC other than a
liquidation of RIC into the Company or into any Subsidiary; and

     (iv) the sale, transfer or other disposition of all or substantially all of the
assets of the Company or RIC to one or more persons or entities that are not,
immediately prior to such sale, transfer or other disposition, Affiliates of the
Company, RIC, the CD&R Fund or any Investor.

     (g) “Change in Control Price” means the price per share of Common Stock paid in
conjunction with any transaction resulting in a Change in Control (as determined in good
faith by the Board if any part of such price is payable other than in cash).

     (h) “Committee” means the Compensation Committee of the Board (or such other committee
of the Board which shall have jurisdiction over the compensation of officers).

     (i) “Common Stock” means the Class A Common Stock, par value $.01 per share, of the
Company.

     (j) “Company” means Riverwood Holding, Inc., a Delaware corporation formerly known as
New River Holding, Inc., and any successor thereto.

     (k) “EBITDA”, for any period, shall, unless otherwise provided in an Award Agreement,
have the meaning assigned to such term in the Credit Agreement, dated as of March 21, 1996,
among RIC Holding, Inc., the other borrowers party thereto, Chemical Bank, as administrative
agent, and the lenders party thereto from time to time, as such agreement may be assumed by
RIC as successor in interest to RIC Holding, Inc., and as the same may be amended from time
to time.

     (l) “Effective Date” means April 8, 1996.

 

 

     (m) “Employee” means any executive officer or other key management employee of the
Company.

     (n) “Extraordinary Termination” means a termination of a Participant’s employment with
the Company and the Subsidiaries by reason of the Participant’s death, Permanent Disability
or Retirement.

     (o) “Fair Market Value” means, as of any date, the fair market value on such date per
share of Common Stock as determined in good faith by the Executive Committee of the Board.
In making a determination of Fair Market Value, the Executive Committee shall give due
consideration to such factors as it deems appropriate, including, without limitation, the
earnings and certain other financial and operating information of the Company and the
Subsidiaries in recent periods, the potential value of the Company and the Subsidiaries as a
whole, the future prospects of the Company and the Subsidiaries and the industries in which
they compete, the history and management of the Company and the Subsidiaries, the general
condition of the securities markets, the fair market value of securities of companies engaged
in businesses similar to those of the Company and the Subsidiaries and a valuation of the
Common Stock, which shall be performed, with respect to the 1996 fiscal year, as promptly as
practicable following the first business day of the 1997 fiscal year of the Company and each
subsequent fiscal year by an independent valuation firm chosen by the Executive Committee,
provided, however, that the Fair Market Value per share of Common Stock determined as of any
date prior to January 1, 1997 shall be deemed to equal $100 unless the Executive Committee
determines otherwise. Notwithstanding the foregoing, following a Public Offering, Fair
Market Value shall mean the average of the high and low trading prices for a share of Common
Stock on the primary national exchange (including NASDAQ) on which the Common Stock is then
traded on the trading day immediately preceding the date as of which such Fair Market Value
is determined. The determination of Fair Market Value will not give effect to any
restrictions on transfer of the shares of Common Stock or the fact that such Common Stock
would represent a minority interest in the Company.

     (p) “Incentive Award” means an award of Options under the Plan or the right to purchase
Common Stock pursuant to Article VIII of the Plan.

     (q) “Investors” means each of the investors who purchased shares of Common Stock or
shares of Class B Common Stock of the Company concurrently with the consummation of the
merger contemplated by the Merger Agreement, and their “specified affiliates”, within the
meaning of the Stockholders Agreement of the Company, as amended from time to time.

     (r) “Merger Agreement” means the Agreement and Plan of Merger, dated as of October 25,
1995, among CDRO Acquisition Corporation, an indirect, wholly owned subsidiary of the
Company, RIC Holding, Inc. a wholly owned subsidiary of the Company, and Riverwood
International Corporation.

     (s) “New Employer” means a Participant’s employer, or the parent or a subsidiary of such
employer, immediately following a Change in Control.

     (t) “Option” means the right granted to a Participant under the Plan to purchase a
stated number of shares of Common Stock at a stated price, not less than Fair Market Value on
the date of grant, for a specified period of time.

 

 

     (u) “Option Agreement” means an agreement between the Company and the Participant
setting forth the terms and conditions of any Options granted hereunder, which agreement
shall, unless the Board otherwise determines, be substantially in the form attached hereto as
Exhibit B.

     (v) “Participant” means any Employee designated by the Board to participate in the
Plan.

     (w) “Performance Option” means an Option granted pursuant to the Plan which vests in
accordance with the provisions of Section 6.3(b) based upon the financial performance of the
Company and the Subsidiaries.

     (x) “Permanent Disability” means a physical or mental disability or infirmity that
prevents the performance of a Participant’s employment-related duties lasting (or likely to
last, in the judgment of the Board) for a period of six months or longer and within 30 days
after RIC notifies the Participant in writing that it intends to replace him, the Participant
shall not have returned to the performance of his employment-related duties on a full-time
basis. The Board’s reasoned and good faith judgment of Permanent Disability shall be final,
binding and conclusive and shall be based on such competent medical evidence as shall be
presented to it by such Participant and/or by any physician or group of physicians or other
competent medical expert employed by the Participant, the Company or RIC to advise the Board;
provided that, with respect to any Participant who is party to an employment or individual
severance agreement with the Company or RIC, “Permanent Disability” shall have the meaning,
if any, assigned in such agreement to such term or to a similar term such as “Disability” or
“Disabled”.

     (y) “Plan” means this Amended and Restated Riverwood Holding, Inc. Stock Incentive
Plan, as the same may be amended from time to time.

     (z) “Public Offering” means the first day as of which sales of Common Stock are made to
the public in the United States pursuant to an underwritten public offering of the Common
Stock led by one or more underwriters at least one of which is an underwriter of nationally
recognized standing.

     (aa) “Registration and Participation Agreement” means the Registration and Participation
Agreement, dated as of March 27, 1996, among the Company and certain stockholders of the
Company, as the same may be amended from time to time.

     (bb) “Retirement” means a Participant’s termination of employment with the Company or
its Subsidiaries with age and years of service credit totaling at least 65, with the minimum
age at which a participant may be considered retired being 55.

     (cc) “RIC” means Riverwood International Corporation, a Delaware corporation formerly
known as Riverwood International USA, Inc., and any successor thereto.

     (dd) “Service Option” means an Option granted pursuant to the Plan which vests in
accordance with the provisions of Section 6.3(a) based upon a Participant’s completion of
service.

     (ee) “Subscription Agreement” means the management stock subscription agreement entered
into by the Company and a Participant setting forth the terms and
conditions of any purchase of Common Stock by such Participant under the Plan which agreement shall be
substantially in the form attached hereto as Exhibit A, unless the Board determines
otherwise.

 

 

     (ff) “Subsidiary” means any corporation or other person, a majority of whose
outstanding voting securities or other equity interests is owned, directly or indirectly, by
the Company.

     2.2. Gender and Number. Except when otherwise indicated by the context, words in the
masculine gender used in the Plan shall include the feminine gender, the singular shall include the
plural, and the plural shall include the singular.

Section 3. Eligibility and Participation

     Participants in the Plan shall be those Employees selected by the Board to participate in the
Plan from time to time. The selection of an Employee as a Participant shall neither entitle such
Employee to nor disqualify such Employee from participation in any other award or incentive plan.

Section 4. Powers of the Board

     4.1. Power to Grant and Establish Terms of Awards. The Board shall, subject to the
terms of the Plan, determine the Participants to whom Incentive Awards shall be granted and the
terms and conditions of such Incentive Awards, provided that nothing in the Plan shall limit the
right of members of the Board who are Employees to receive Incentive Awards hereunder.

     4.2. Administration. The Board shall be responsible for the administration of the
Plan. Any authority exercised by the Board under the Plan shall be exercised by the Board in its
sole discretion. The Board, by majority action thereof, is authorized to prescribe, amend and
rescind rules and regulations relating to the administration of the Plan, to provide for conditions
and assurances deemed necessary or advisable to protect the interests of the Company and the
Subsidiaries, and to make all other determinations necessary or advisable for the administration
and interpretation of the Plan or to carry out its provisions and purposes. Determinations,
interpretations or other actions made or taken by the Board pursuant to the provisions of the Plan
shall be final, binding and conclusive for all purposes and upon all persons.

     4.3 Delegation by the Board. All of the powers, duties and responsibilities of the
Board specified in the Plan may, to the full extent permitted by applicable law, be exercised and
performed by the Committee or any other duly constituted committee of the Board, in any such case,
to the extent authorized by the Board to exercise and perform such powers, duties and
responsibilities.

Section 5. Stock Subject to Plan

     5.1. Number. Subject to the provisions of Section 5.3, the maximum number shares of
Common Stock subject to Incentive Awards under the Plan (including shares that become available for
grant pursuant to Section 5.2) may not exceed, in the aggregate, (i) 695,000 shares,
reduced by (ii) the number of shares of Common Stock, not to exceed 5,000 shares, covered
by Awards offered but not granted under Plan in the initial offering and grant of Awards hereunder.
The shares to be delivered under the Plan may consist, in whole or in part, of Common Stock held
in treasury or authorized but unissued shares of Common Stock, not reserved for any other purpose.

 

 

     5.2. Canceled, Terminated or Forfeited Awards. Any shares of Common Stock subject to
any portion of an Incentive Award which for any reason expires, or is canceled, terminated,
forfeited or otherwise settled without the issuance of such shares of Common Stock, shall again be
available for award under the Plan, subject to the maximum limitation specified in Section 5.1.

     5.3. Adjustment in Capitalization. The number and class of Incentive Awards (and the
number of shares of Common Stock available for issuance upon exercise or settlement of such
Incentive Awards) granted under the Plan, and the number, class and exercise price of any
outstanding Options, may be adjusted by the Board, in its sole discretion, if it shall deem such an
adjustment to be necessary or appropriate to reflect any Common Stock dividend, stock split or
share combination or any recapitalization, merger, consolidation, exchange of shares, liquidation
or dissolution of the Company.

Section 6. Terms of Options

     6.1. Grant of Options. Options may be granted to Participants at such time or times
as shall be determined by the Board. Each Option granted to a Participant shall be evidenced by an
Option Agreement that shall specify the exercise price at which a share of Common Stock may be
purchased pursuant to such Option, the duration of such Option and such other terms and conditions
consistent with the Plan as the Board shall determine, including customary representations,
warranties and covenants with respect to securities law matters. Unless otherwise determined by
the Board, such Option Agreement shall also state that the holder thereof is entitled to the
benefits of and shall be bound by the obligations set forth in the Registration and Participation
Agreement, dated as of March 27, 1996 and as the same may be amended from time to time, among the
Company and certain stockholders of the Company, to the extent set forth therein.

     6.2. Option Price. The exercise price per share of Common Stock to be purchased upon
exercise of an Option shall be determined by the Board but shall not be less than the Fair Market
Value on the date the option is granted.

     6.3. Exercise of Options.

     (a) Service Options. Unless otherwise provided by the Board in the Option
Agreement evidencing such Award, subject to the continuous employment of the Participant with
the Company or one of the Subsidiaries, Service Options granted to a Participant shall become
vested in five equal annual installments on each of the first five anniversaries of the date
of grant, provided that in all events 100% of such Service Options shall become
exercisable (i) at the time and under the circumstances described in Sections 9.1 or
10, if applicable, or (ii)(x) in the event that the CD&R
Fund and, if applicable, its Affiliates effect a sale or other disposition of all of the
Common Stock then held by the CD&R Fund and its Affiliates to one or more persons other than
any person who is an Affiliate of the CD&R Fund and (y) thereafter, the Participant’s
employment with the Company and the Subsidiaries is terminated by the Company other than for
Cause or, to the extent provided in the Award Agreement evidencing such Service Options, by
the Participant for “good reason” (as defined in such Option Agreement) (a “Disposition
Transaction and Termination”), as of the date of such termination.

     (b) Performance Options. Unless otherwise provided by the Board in the Option
Agreement evidencing such Award, subject to Section 9.1 and 10, no portion of any Performance
Options shall become vested unless and until the Company shall have achieved the EBITDA
target

 

 

specified in the Option Agreement evidencing such Performance Options and provided the
Participant is in the continuous employment of the Company or one of the Subsidiaries from
the date of grant to the date such target is achieved, provided, however, that in the event
of a Disposition Transaction and Termination, a proportionate share of any Performance
Options that have not vested and become exercisable on or prior to the date of such
Disposition Transaction and Termination shall vest and become exercisable as of such date,
such proportionate share to equal the product of (i) the percentage obtained by
dividing (x) the cumulative EBITDA achieved by the Company as of the last day of the
calendar quarter ending coincident with or immediately prior to the date of the Disposition
Transaction and Termination by (y) the EBITDA target specified in the Option
Agreement, multiplied by (ii) the total number of Shares subject to the Performance
Options. Notwithstanding the foregoing provisions of this paragraph (b), subject to the
continuous employment of the Participant with the Company or one of the Subsidiaries,
Performance Options shall become vested in full, nine years and six months following the date
of grant, regardless of whether the applicable EBITDA target shall have been achieved.

     (c) Conditions. Notwithstanding any other provision herein, the Board may
accelerate the vesting or exercisability of any Option, all Options or any class of Options,
at any time and from time to time. On or before the date upon which any Employee will
exercise any exercisable Option, the Company and such Employee shall enter into a
Subscription Agreement with respect to the Common Stock to be purchased upon exercise of such
Option. Notwithstanding any other provision of the Plan, no Option shall be exercisable for
more than 13 years after the date on which it is granted.

     6.4. Payment. The Board shall establish procedures governing the exercise of
Options, which procedures shall generally require that written notice of the exercise thereof be
given and that the exercise price thereof be paid in full in cash or cash equivalents, including by
personal check, at the time of exercise. The exercise price of any Options exercised at any time
following a Public Offering may be paid in full or in part in the form of shares of Common Stock
owned by the Participant, based on the Fair Market Value of such shares of Common Stock on the date
of exercise, subject to such rules and procedures as may be adopted by the Board and, if the Board
deems it necessary or appropriate, subject to shareholder approval of the Plan. Subject to Section
6.3, as soon as practicable after receipt of a written exercise notice and payment in full of the
exercise price of any Options, the Company shall deliver to the Participant a certificate or
certificates representing the shares of Common Stock acquired upon the exercise thereof, bearing
appropriate legends if applicable.

 

 

Section 7. Terms of Offers to Purchase Common Stock

     7.1. Offers to Purchase Common Stock. Offers to purchase Common Stock may be made to
Participants at such time or times as shall be determined by the Board. Each purchase of Common
Stock by a Participant shall be made pursuant to a Subscription Agreement that shall include
customary representations, warranties, covenants and other terms and conditions with respect to
securities law matters and such other terms and conditions as the Board shall determine. Unless
otherwise determined by the Board, such Subscription Agreement shall also state that in respect of
any shares of Common Stock purchased by the Participant pursuant to such Subscription Agreement
(i) prior to a Public Offering, such shares shall be subject to certain repurchase rights
of Holding and the CD&R Fund and (ii) such Participant shall be entitled to certain of the
benefits (relating to the right to participate in certain sales and purchases of Common Stock by
the Investors) set forth in the Registration and Participation Agreement and shall be bound by the
obligations set forth in such Registration and Participation Agreement, in each case, to the extent
set forth in the Subscription Agreement evidencing the purchase of such Common Stock.

     7.2. Purchase Price. The purchase price per share of Common Stock to be purchased
under the Plan shall be determined by the Board.

Section 8. Termination of Employment

     8.1. Extraordinary Termination. Unless otherwise provided in the Option Agreement or
otherwise determined by the Board, in the event that a Participant’s employment with the Company
and the Subsidiaries terminates by reason of an Extraordinary Termination, then (i) all
Service Options granted to such Participant shall become fully vested as of the date of such
termination, (ii) if the Performance Options granted to such Participant have not become
vested on or prior to the date of such termination, a proportionate share of such Performance
Options shall become vested as of the date of such termination, such proportionate share to equal
the percentage obtained by dividing (A) the cumulative EBITDA achieved during the period
from the date of grant (or such other date specified in the applicable Option Agreement) to the
last day of the calendar quarter ending coincident with or immediately prior to the Participant’s
termination of employment, by (B) the cumulative EBITDA target specified in such Option
Agreement and (iii) all such Service Options and vested Performance Options shall remain
exercisable solely until the first to occur of (x) the one year anniversary of the
Participant’s termination of employment due to death or Permanent Disability or the third
anniversary of the Participant’s termination of employment due to Retirement or (y) the
expiration of the term of any such Option. Any Performance Options held by the Participant that
are not vested as of the date of an Extraordinary Termination shall terminate and be canceled
immediately upon such Extraordinary Termination and all other Options that are not exercised within
the period described in the preceding sentence shall terminate and be canceled upon the expiration
of such period.

     8.2. Termination for Cause. Unless otherwise provided in the Award Agreement or
otherwise determined by the Board, in the event a Participant’s employment with the Company and the
Subsidiaries is terminated by the Company or a Subsidiary for Cause, any Options held by such
Participant (whether or not then vested or exercisable) shall terminate and be canceled immediately
upon such termination of employment and any Common Stock purchased by the Participant may be
repurchased for a purchase price calculated in accordance with the terms of the Subscription
Agreement.

 

 

     8.3. Other Termination of Employment. Unless otherwise determined by the Board at
the time of grant, the Board shall provide in the Option Agreement evidencing options granted
hereunder that,, in the event that a Participant’s employment with the Company and the Subsidiaries
terminates for any reason other than (i) an Extraordinary Termination or (ii) for
Cause, any Options then held by such Participant that have become vested on or prior to the date of
such termination shall, subject to Section 8.4, remain exercisable until the first to occur of
(x) the 60th day after the expiration of the period, if any, specified in such
Participant’s Option Agreement during which the Company or the CD&R Fund has a right to purchase
such Options from the Participant or (y) the expiration of the term of such Option. Any
Options held by the Participant that are not vested Options as of the date of the Participant’s
termination of employment shall terminate and be canceled immediately upon such termination, and
any vested Options that are not exercised within the period described in the preceding sentence
shall terminate and be canceled upon the expiration of such period.

     8.4. Certain Rights upon Termination of Employment Prior to Public Offering. Unless
otherwise determined by the Board at the time of grant, the Board shall provide in each Award
Agreement evidencing Incentive Awards granted hereunder that, upon a termination of a Participant’s
employment with the Company and the Subsidiaries prior to a Public Offering for any reason, the
Company and the CD&R Fund and its Affiliates shall have successive rights to repurchase for cash
any vested Options or shares of Common Stock then held by the Participant, and, upon an
Extraordinary Termination, the Participant shall have the right to require the Company to
repurchase shares of Common Stock then owned by him (provided the Participant has held such shares
of Common Stock for at least six months), for a repurchase price equal to the Fair Market Value,
reduced in the case of any Options by the exercise price per share of Common Stock for such Option,
and upon such additional terms and conditions as are set forth in such Award Agreement.

Section 9. Change in Control

     9.1. Accelerated Vesting and Payment.

     (a)
Service Options and Vested Performance Options. Unless the Board otherwise
determines in the manner set forth in Section 9.2, in the event of a Change in Control, each
outstanding Service Option (regardless of whether such Option is at such time otherwise
exercisable) and each outstanding Performance Option that has become vested prior to the
Change in Control, without regard to this Section 9.1, shall be canceled in exchange for a
payment in cash of an amount equal to the product of (i) the excess, if any, of the
Change in Control Price over the Option Price, multiplied by
(ii) the number of shares of Common
Stock covered by such Option.

     (b) Performance Options. Unless the Board otherwise determines in the manner
set forth in Section 9.2, in the event of a Change of Control prior to the date as of which
Performance Options have become vested in accordance with Section 6.3(b), a proportionate
share (determined in accordance with the immediately succeeding sentence) of each outstanding
Performance Option shall be canceled in exchange for a payment in cash of an amount equal to
the product of (i) the excess, if any, of the Change in Control Price over the Option
Price, multiplied by (ii) the number of shares of Common Stock covered by the vested
portion of the Performance Option. Such proportionate share shall be determined in
accordance with the formula described in Section 8.1 based on the cumulative EBITDA achieved
as of the date of the Change in Control.

 

 

     (c) Timing of Option Cancellation Payments. The cash payment described in
paragraphs (a) and (b) above shall be payable in full, as soon as reasonably practicable, but
in no event later than, 30 days following the Change in Control, unless provided otherwise by
the Board in the Award Agreement evidencing such Options.

     9.2. Alternative Options. Notwithstanding Section 9.1, no cash settlement or other
payment shall be made with respect to any Option in the event that the transaction constituting the
Change in Control is to be accounted for using the “pooling of interest” method of accounting. In
such event, each Option then held by a Participant shall become fully vested immediately prior to
the consummation of such transaction and each such Participant shall have the right, subject to
compliance with all applicable securities laws, to (i) exercise his Options in connection
with the Change in Control or (ii) provided such opportunity is made available by the New
Employer, exchange such Options for fully exercisable options to purchase common stock of the New
Employer having substantially equivalent economic value to the Options being exchanged therefor
(determined at the time of the Change in Control).

     9.3 Certain Take-Along Rights Prior to a Public Offering. Unless otherwise
determined by the Board at time of grant, the Board shall provide in each Subscription Agreement
evidencing Incentive Awards granted hereunder that, upon certain transactions constituting a Change
in Control, the Participant will be required to sell shares of Common Stock then owned by him, for
a cash payment per share of Common Stock equal to the Change in Control Price, and upon such
additional terms and conditions as are set forth in such Subscription Agreement.

Section 10. Amendment, Modification, and

Termination of the Plan

     The Board at any time may terminate or suspend the Plan, and from time to time may amend or
modify the Plan. No amendment, modification, termination or suspension of the Plan shall in any
manner adversely affect any Incentive Award theretofore granted under the Plan, without the consent
of the Participant holding such Incentive Award. Shareholder approval of any such amendment,
modification, termination or suspension shall be obtained to the extent mandated by applicable law,
or if otherwise deemed appropriate by the Board.

Section 11. Miscellaneous Provisions

     11.1. Nontransferability of Awards. No Options granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by
the laws of descent and distribution. All rights with respect to any Option granted to a
Participant under the Plan shall be exercisable during his lifetime only by such Participant.
Restrictions, if any, on the transfer of Common Stock purchased pursuant to Section 7.1 of the Plan
or upon exercise of any Options shall be set forth in the applicable Award Agreement evidencing
such Incentive Award, including without limitations, restrictions described in Section 8.4 herein.

     11.2. Beneficiary Designation. Each Participant under the Plan may from time to time
name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid or by whom any right under the Plan is to be exercised in case
of his
death. Each designation will revoke all prior designations by the same Participant, shall be
in a form pre-

 

 

scribed by the Board and will be effective only when filed by the Participant in
writing with the Board during his lifetime. In the absence of any such designation, benefits
remaining unpaid or Options or Deferred Stock Units outstanding at the Participant’s death shall be
paid to or exercised by the Participant’s surviving spouse, if any, or otherwise to or by his
estate.

     11.3. No Guarantee of Employment or Participation. Nothing in the Plan shall
interfere with or limit in any way the right of the Company or any Subsidiary to terminate any
Participant’s employment at any time and for any reason, nor confer upon any Participant any right
to continue in the employ of the Company or any Subsidiary. No Employee shall have a right to be
selected as a Participant, or, having been so selected, to receive any Incentive Awards under the
Plan.

     11.4. Tax Withholding. The Company and the Subsidiaries shall have the power to
withhold, or require a Participant to remit to the Company or a Subsidiary promptly upon
notification of the amount due, an amount determined by the Company or such Subsidiary to be
sufficient to satisfy all Federal, state, local and foreign withholding tax requirements in respect
of any Incentive Award and the Company may (or may cause a Subsidiary to) defer payment of cash or
issuance or delivery of Common Stock until such requirements are satisfied. The Board may permit
or require a Participant to satisfy his tax withholding obligation hereunder in such other manner,
subject to such conditions, as the Board shall determine.

     11.5. Indemnification. Each person who is or shall have been a member of the
Committee or the Board shall be indemnified and held harmless by the Company and RIC to the fullest
extent permitted by law against and from any loss, cost, liability or expense (including any
related attorney’s fees and advances thereof) in connection with, based upon or arising or
resulting from any claim, action, suit or proceeding to which he may be made a party or in which he
may be involved by reason of any action taken or failure to act under or in connection with the
Plan or any Award Agreement and from and against any and all amounts paid by him in settlement
thereof, with the Company’s approval, or paid by him in satisfaction of any judgment in any such
action, suit or proceeding against him, provided he shall give the Company an opportunity, at its
own expense, to handle and defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive and shall be independent of
any other rights of indemnification to which such persons may be entitled under the Company’s or
RIC’s Articles of Incorporation or By-laws, by contract, as a matter of law or otherwise.

     11.6. No Limitation on Compensation. Nothing in the Plan shall be construed to limit
the right of the Company to establish other plans or to pay compensation to its employees in cash
or property, in a manner which is not expressly authorized under the Plan.

     11.7. Requirements of Law. The granting of Incentive Awards and the issuance of
shares of Common Stock shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national or foreign securities exchanges as may be
appropriate or required, as determined by the Board. Notwithstanding any other provision of the
Plan or any Award Agreement, no Incentive Awards shall be granted under the Plan, and no shares of
Common Stock shall be issued upon exercise of, or otherwise in connection with, any Incentive Award
granted under the Plan, if such grant or issuance would result in a violation of applicable law,
including the federal securities laws and any applicable state or foreign securities laws.

     11.8. Governing Law. The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of New York, except to the extent that the
corporate law of the State of Delaware specifically and mandatorily applies.

 

 

     11.9. No Impact On Benefits. Incentive Awards granted under the Plan are not
compensation for purposes of calculating an Employee’s rights under any employee benefit plan,
except to the extent provided in any such plan.

     11.10. Freedom of Action. Subject to Section 10, nothing in the Plan or any Award
Agreement shall be construed as limiting or preventing the Company or any Subsidiary from taking
any action with respect to the operation or conduct of its business that it deems appropriate or in
its best interest.

     11.11. Term of Plan. The Plan shall be effective as of the Effective Date. The Plan
shall expire on the tenth anniversary of the Effective Date (except as to Incentive Awards
outstanding on that date), unless sooner terminated pursuant to Section 10.

     11.12. No Right to Particular Assets. Nothing contained in this Plan and no action
taken pursuant to this Plan shall create or be construed to create a trust of any kind or any
fiduciary relationship between the Company and the Subsidiaries, on the one hand, and any
Participant or executor, administrator or other personal representative or designated beneficiary
of such Participant, on the other hand, or any other persons. Any reserves that may be established
by the Company or any Subsidiary in connection with this Plan shall continue to be held as part of
the general funds of the Company or such Subsidiary, and no individual or entity other than the
Company or such Subsidiary shall have any interest in such funds until paid to a Participant. To
the extent that any Participant or his executor, administrator or other personal representative, as
the case may be, acquires a right to receive any payment from the Company or any Subsidiary
pursuant to this Plan, such right shall be no greater than the right of an unsecured general
creditor of the Company or such Subsidiary.

     11.13. Notices. Each Participant shall be responsible for furnishing the Board with
the current and proper address for the mailing of notices and delivery of agreements and shares of
Common Stock. Any notices required or permitted to be given shall be deemed given if directed to
the person to whom addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to the addressee,
mailing will be suspended until the Participant furnishes the proper address.

     11.14. Severability of Provisions. If any provision of this Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions
hereof, and this Plan shall be construed and enforced as if such provision had not been included.

     11.15. Incapacity. Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receiving such benefit shall be deemed paid when
paid to such person’s guardian or to the party providing or reasonably appearing to provide for the
care of such person, and such payment shall fully discharge the Committee, the Company and other
parties with respect thereto.

     11.16. No Rights as Stockholder. No Participant shall have any voting or other
rights as a stockholder of the Company with respect to any Common Stock covered by any Incentive
Award until the issuance of a certificate or certificates to the Participant for such Common Stock.
No adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such
certificate or certificates.

     11.17. Headings and Captions. The headings and captions herein are provided for
reference and convenience only, shall not be considered part of this Plan and shall not be employed
in the construction of this Plan.

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