Document:

EX-10.21 The GEO Group Stock Incentive Plan

 

EXHIBIT 10.21

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

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circumstances present by local laws and regulations; and
(iii) take any action which it deems advisable to 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.

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(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

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Agreement, 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

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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

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    period 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.

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(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 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.

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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 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.

8

 

     
(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 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

9

 

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.

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

10

 

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 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

11

 

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 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;

12

 

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 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.

13

 

     
(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 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-10.1 Second Amendment to the Credit Agreement

 

Exhibit 10.1

SECOND AMENDMENT TO CREDIT AGREEMENT

     THIS
SECOND AMENDMENT TO CREDIT AGREEMENT (this
“Amendment”), dated as of Februar 12,
2008, is by and among SUNAIR SERVICES CORPORATION (f/k/a SUNAIR ELECTRONICS, INC., a Florida
corporation (the “Borrower”), each of those subsidiaries of the Borrower party hereto
(each a “Guarantor”, and collectively, the “Guarantors”), the several banks and
other financial institutions (the “Lenders”) from time to time party to the Credit
Agreement (defined below) and WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent for the
Lenders (the “Agent”).

RECITALS

     A. The Borrower, the Guarantors, the Lenders and the Agent have entered into that certain
Credit Agreement, dated as of June 7, 2005, as amended by that certain First Amendment to Credit
Agreement dated May 14, 2007 (as amended, supplemented or otherwise modified, the “Credit
Agreement”).

     B. The Borrower, the Guarantors, the Lenders and the Agent have agreed to modify the Credit
Agreement as follows:

     NOW, THEREFORE, the parties hereto agree as follows:

     1. The Credit Agreement is hereby amended as follows:

     (a) Section 1.1 is hereby amended by amending in their entirety the following
definitions so that such definitions now read as follows:

     “Applicable
Percentage” shall mean, for any day, five percent (5%).

     “Consolidated EBITDA” shall mean, for any applicable period of
computation, (a) Consolidated Net Income for such period plus (b) the sum of the
following to the extent deducted in calculating Consolidated Net Income: (i)
Consolidated Interest Expense for such period, (ii) the provision for Federal,
state, local and foreign income taxes payable by the Borrower and its Subsidiaries
for such period, (iii) depreciation and amortization expense for such period, (iv)
other non-cash expenses of the Borrower and its Subsidiaries, including, but not
limited to, stock based compensation, equity based compensation, bad debt reserves,
goodwill impairment and any other non-cash expenses reflected on the Borrower’s
financial statements, and (v) after October 1, 2007, any accrued but unpaid
management fees due to RPC Financial Advisors, LLC; provided,
however, any such
management fees that are actually paid shall be deducted from the Consolidated
EBITDA during the period paid.

     “Funded Debt” shall mean, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, including,
without limitation, all Indebtedness of Borrower to any Seller that is not

 

 

Subordinated
Debt, (c) all obligations of such Person under conditional sale
or other title retention agreements relating to property purchased by such Person
(other than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (d) all obligations of
such Person issued or assumed as the deferred purchase price of property or services
purchased by such Person (other than trade debt incurred in the ordinary course of
business and due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (e) the principal portion of
obligations of such Person under Capital Leases, (f) the maximum amount of all
letters of credit issued or bankers’ acceptances facilities created for the account
of such Person and, without duplication, all drafts drawn thereunder (to the extent
reimbursed), including, without limitation, all LOC Obligations, (g) all preferred
Capital Stock issued by such Person and which by the terms thereof could be (at the
request of the holders thereof or otherwise) subject to mandatory
sinking (fund payments, redemption or other acceleration, (h) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product, (i) obligations of such Person under
non-compete agreements to the extent such obligations have been determined, (j) all
obligations of such Person under Hedging Agreements, excluding any portion thereof
which would be accounted for as interest expense under GAAP, (k) all Indebtedness
of others of the type described in clauses (a) through (j) hereof secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the proceeds of
production from, property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (l) all Guaranty Obligations of such
Person with respect to Indebtedness of another Person of the type described in
clauses (a) through (j) hereof, and (m) all Indebtedness of the type described in
clauses (a) through (j) hereof of any partnership or unincorporated joint venture in
which such Person is a general partner or a joint venturer;
provided, however, that
Funded Debt shall not include Indebtedness among the Credit Parties.

     “Revolving
Commitment Termination Date” shall mean January 7, 2009.

     (b) Section 2.1(a) is amended in its entirety so that such Section now

reads as follows:

     (a) Revolving Commitment. During the Commitment Period, subject to the terms
and conditions hereof, each Lender severally agrees to make revolving credit loans
(“Revolving Loans”) to the Borrower from time to time for the purposes hereinafter
set forth; provided, however, that (i) with regard to each Lender individually, the sum of
such Lender’s share of outstanding Revolving Loans plus such Lender’s LOC Commitment
Percentage of LOC Obligations shall not exceed such Lender’s Revolving Commitment Percentage
of the aggregate Revolving Committed Amount, and (ii) with regard to the Lenders
collectively, the sum of the aggregate amount of outstanding
Revolving Loans plus LOC
Obligations shall not exceed the aggregate Revolving Committed Amount then in effect. For
purposes hereof, the, aggregate amount available

2

 

hereunder
shall be THIRTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($13,500,000) (as
such aggregate maximum amount may be reduced from time to time as provided in Section 2.4
including, without limitation, scheduled mandatory reductions and the maintenance of
Reserves, the “Revolving Committed Amount”). Revolving Loans may consist of
Floating LIBOR Rate Loans or Fixed LIBOR Rate Loans, or a combination thereof, as the
Borrower may request, and may be repaid and reborrowed in accordance with the provisions
hereof; provided, however, the Revolving Loans made on the Closing Date or on either of the
two Business Days immediately following the Closing Date may only consist of Floating LIBOR
Rate Loans. Fixed LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office
and Floating LIBOR Rate Loans at its Domestic Lending Office.

     (c) Section 2.4(b) is amended in its entirety so that such Section now reads as
follows:

     (b) Mandatory Reductions. The Revolving Commitment Amount shall be reduced to
$12,750,000 on June 30, 2008, and to $11,750,000 on September 30, 2008. In addition, in the
event of the disposition of Telecom FL Limited, all cash proceeds resulting from such
disposition shall be paid to the Agent and shall be applied to permanently reduce the
Revolving Commitment.

     (d) Section 5.9(a) is amended in its entirety so that such Section now reads as
follows:

     (a) Leverage Ratio. The Leverage Ratio shall be less than or equal to the
following amounts as of the last day of each fiscal quarter ending during the following
periods:

	 	 	 	 	 	 	 	 
	 
	 	Period	 	 	Maximum Ratio	 
	 	Through December 31, 2007

	 	 	 	5.68	 	 
	 	January 1, 2008 through March 31, 2008

	 	 	 	10.50	 	 
	 	April 1, 2008 through June 30, 2008

	 	 	 	9.63	 	 
	 	July 1, 2008 through January 7, 2009

	 	 	 	4.22	 	 
	 

     (e) Section 5.9(b) is amended in its entirety so that such Section now reads as
follows:

     (b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio shall be at
least the following amounts as of the last day of each fiscal quarter ending during the
following periods:

3

 

	 	 	 	 	 	 	 	 
	 
	 	Period	 	 	Maximum Ratio	 
	 	Through December 31, 2007

	 	 	 	1.00	 	 
	 	January 1, 2008 through March 31, 2008

	 	 	 	0.95	 	 
	 	April 1, 2008 through June 30, 2008

	 	 	 	1.00	 	 
	 	July 1, 2008 through January 7, 2009

	 	 	 	1.14	 	 
	 

     (f) Section 5.9(c) is amended in its entirety so that such Section now reads as
follows:

     (c) Consolidated EBITDA. Consolidated EBITDA shall be at least each of the following
amounts for each of the following amounts for each of the rolling four fiscal quarterly
periods ending as of the last day of each fiscal quarter ending during the following
periods:

	 	 	 	 	 	 	 	 
	 
	 	Period	 	 	Minimum Amount	 
	 	Through December 31, 2007

	 	 	$	1,690,000	 	 
	 	January 1, 2008 through March 31, 2008

	 	 	$	1,027,000	 	 
	 	April 1; 2008 through June 30, 2008

	 	 	$	1,141,000	 	 
	 	July 1, 2008 through January 7, 2009

	 	 	$	2,373,000	 	 
	 

     2. In connection with the execution of this Second Amendment, Borrower agrees to pay the Agent
a loan modification fee in the amount of $70,000 on the date hereof and this Second Amendment shall
not be effective until the receipt in full of such amount.

     3. Borrower agrees to execute such additional documents as are reasonably requested by the
Agent to reflect the terms and conditions of this Second Amendment and will cause to be delivered
such certificates, legal opinions and other documents as are reasonably required by the Agent. In
addition, the Borrower will pay all costs and expenses in connection with the preparation,
execution and delivery of the documents executed in connection with this transaction, including,
without limitation, the reasonable fees and out-of-pocket expenses of special counsel to the Agent
as well as any and all filing and recording fees and stamp and other taxes with respect thereto and
to save the Agent harmless from any and all such costs, expenses and liabilities.

     4. Except as expressly amended hereby, all of the provisions of the Credit Agreement and the
Credit Documents shall remain unchanged and shall continue to be, and
shall remain, in full force
and effect in accordance with their respective terms. The amendments set forth herein shall be
limited precisely as provided for herein to the provisions expressly amended herein and any waivers
of any provisions of the Credit Agreement or other Credit Documents granted prior to the date
hereof shall be limited to such waiver on the date waived and, in each case, the amendments and the
waivers shall not be deemed to be a waiver of, an amendment to, consent to or modification of any
other term or provision of the Credit Agreement or any other

4

 

Credit Document or of any transaction or further or future action on the part of the Borrower
which would require the consent of the` Lenders under the Credit Agreement or any of the Credit
Documents.

     5. This Second Amendment is a Credit Document executed pursuant to the Credit Agreement and
shall (unless otherwise expressly indicated therein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.

     6. At such time as this Second Amendment shall become effective, all references in the Credit
Documents to the “Credit Agreement” shall be deemed to refer to the Credit Agreement as amended by
this Second Amendment.

     7. This Second Amendment shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.

     8. This Second Amendment may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original, and it shall not be necessary in making proof
of this Second Amendment to produce or account for more than one counterpart.

     9. THIS SECOND AMENDMENT AND THE OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN CONNECTION
HEREWITH (UNLESS SPECIFICALLY STIPULATED TO THE CONTRARY IN SUCH
DOCUMENT OR AGREEMENT), AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.

[Execution pages follow]

5

 

     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed
and delivered by its proper and duly authorized officers as of the day and year first above
written.

	 	 	 	 	 
	BORROWER:                           	SUNAIR SERVICES CORPORATION (f/k/a/ SUNAIR ELECTRONICS, INC.) 

 	 
	 	By:  	/s/ John Hayes
 	 
	 	 	Name:  	JOHN HAYES                                                      	 
	 	 	Title:  	President 	 
	 
	GUARANTORS:                         	MIDDLETON PEST CONTROL, INC. 

 	 
	 	By:  	/s/ John Hayes
 	 
	 	 	Name:  	JOHN HAYES                                                      	 
	 	 	Title:  	President 	 
	 
	 	SUNAIR SOUTHEAST PEST HOLDINGS, INC. 

 	 
	 	By:  	/s/ John Hayes
 	 
	 	 	Name:  	JOHN HAYES                                                      	 
	 	 	Title:  	President 	 
	 
	 	SUNAIR PEST HOLDINGS, INC. 

 	 
	 	By:  	/s/ John Hayes
 	 
	 	 	Name:  	JOHN HAYES                                                      	 
	 	 	Title:  	President 	 
	 
	 	SUNAIR HOLDINGS, INC. (f/k/a Sunair Services Corporation 

 	 
	 	By:  	/s/ John Hayes
 	 
	 	 	Name:  	JOHN HAYES                                                      	 
	 	 	Title:  	President 	 

6

 

	 	 	 	 	 

	 	 	 	 	 
	 	SUNAIR COMMUNICATIONS, INC. 

 	 
	 	By:  	/s/ John Hayes
 	 
	 	 	Name:  	JOHN HAYES                                                      	 
	 	 	Title:  	President 	 
	 
	 	SUNAIR FLORIDA PEST HOLDINGS, INC. 

 	 
	 	By:  	/s/ John Hayes
 	 
	 	 	Name:  	JOHN HAYES                                                      	 
	 	 	Title:  	President 	 
	 

7

 

	 	 	 	 	 
	ADMINISTRATIVE AGENT AND LENDERS:                           	WACHOVIA BANK, NATIONAL ASSOCIATION,
as Administrative Agent and as a Lender

 	 
	 	By:  	/s/
Marinus Otle
 	 
	 	 	Name:  	Marinus Otle                                                      	 
	 	 	Title:  	Senior Vice President 	 
	 

8

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