EXHIBIT 10.2

 

CORNELL COMPANIES, INC.

 

RESTRICTED STOCK AWARD AGREEMENT

 

(Performance Based)

 

This Award Agreement is made effective as of April 1, 2010 (the “Date of Grant”)
by CORNELL COMPANIES, INC. (the “Company”) to                              (the
“Participant”).

 

1.                                       Grant.

 

(a)           Shares.  Pursuant to the Company’s 2006 Incentive Plan, as amended
and restated (the “Plan”),                                    contingent,
performance-based restricted shares (the “Restricted Shares”) of the Company’s
common stock, par value $0.001 (the “Common Stock”), will be issued as
hereinafter provided in the Participant’s name.  Such Restricted Shares shall be
subject to certain restrictions as hereinafter described pursuant to the Plan
and this Award Agreement.  The Restricted Shares will accumulate (but not vest)
in accordance with the provisions of Section 2(d) and will vest in accordance
with the provisions of Section 2(e).  The exact number of Restricted Shares that
will actually accumulate and thereafter vest and be earned by you (if any) is
expressly subject to the accumulation and vesting requirements described below.

 

(b)           Issuance of Shares.  The Restricted Shares will be issued upon
acceptance of this Award Agreement by the Participant.  The Restricted Shares
may, in the discretion of the Company, be issued in either book entry or
certificate form.  During the period the Restricted Shares are subject to the
prohibitions and restrictions set forth herein with respect to the sale or other
disposition of the Restricted Shares and the obligation to forfeit and surrender
such Restricted Shares to the Company (the “Forfeiture Restrictions”) any
certificates representing the Restricted Shares shall bear a restrictive legend
to the effect that ownership of such Restricted Shares (and any such Retained
Distributions (as that term is defined below)), and the enjoyment of all rights
appurtenant thereto, are subject to the restrictions, terms, and conditions
provided in the Plan and this Award Agreement.  The Participant shall have the
right to vote the Restricted Shares awarded to the Participant and to receive
and retain all cash dividends with respect to such Restricted Shares, and to
exercise all other rights, powers and privileges of a holder of the Common
Stock, with respect to such Restricted Shares, with the exception that (a) the
Participant shall not be entitled to delivery of the stock certificate or
certificates representing such Restricted Shares or electronic delivery of the
such Restricted Shares until the Forfeiture Restrictions applicable thereto
shall have expired, (b) the Company shall retain custody of all Retained
Distributions made or declared with respect to the Restricted Shares (and such
Retained Distributions shall be subject to the same

 

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

 

restrictions, terms and conditions as are applicable to the Restricted Shares)
until such time, if ever, as the Restricted Shares with respect to which such
Retained Distributions shall have been made, paid, or declared shall have become
vested, and such Retained Distributions shall not bear interest or be segregated
in separate accounts and (c) the Participant may not sell, assign, transfer,
pledge, exchange, encumber, or dispose of the Restricted Shares or any Retained
Distributions during the period in which the Restricted Shares may not be sold,
assigned, transferred, pledged, or otherwise encumbered (the “Restricted
Period”).  Upon issuance of any certificates for the Restricted Shares such
certificate shall be delivered to the Secretary of the Company or to such other
depository as may be designated by the Company as a depository for safekeeping
until the forfeiture of such Restricted Shares occurs or the Forfeiture
Restrictions lapse, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer to the Company of
all or any portion of the Restricted Shares and any securities constituting
Retained Distributions which shall be forfeited in accordance with the Plan and
this Award Agreement.  For purposes of this Award Agreement, the term “Retained
Distribution” means any securities or other property (other than cash dividends)
distributed by the Company in respect of the Restricted Shares during any
Restricted Period.  To the extent that all or a portion of the Restricted Shares
vest as provided in this Agreement, the Company will distribute such vested
Shares to the Participant in a reasonable time period after vesting, which may
consist of share certificates or electronic transfer to brokerage accounts
required to be established by the Participant and such shares of the Common
Stock shall be transferable by the Participant  (except to the extent that any
proposed transfer would, in the opinion of counsel satisfactory to the Company,
constitute a violation of applicable securities law).  The Participant agrees
that the Participant may be required to open a brokerage account as directed by
the Company for administration of the Participants equity awards from the
Company.

 

(c)           Plan Incorporated.  The Participant acknowledges receipt of a copy
of the Plan, and agrees that this grant of the Restricted Shares shall be
subject to all of the terms and provisions of the Plan, including future
amendments thereto, if any.

 

2.                                       Restrictions. The Participant hereby
accepts the Restricted Shares when issued and agrees with respect thereto as
follows:

 

(a)           In the event of termination of the Participant’s employment with
the Company and all Affiliates as a result of an involuntary termination without
Cause (as hereinafter defined) by the Company and such Affiliates, death or
disability (each, an “Involuntary Event”), the Participant shall vest in any
Restricted Shares accumulated through the date of such event, and if such event
occurs following the completion of a calendar year but prior to the time the
performance determination is made and finalized for such year, then the
Participant shall also vest in any Restricted Shares that would otherwise have
been accumulated for that previously completed calendar year as a result of the
achievement of the performance-based accumulation requirements in Section 2(d). 
The Participant shall, for no consideration, forfeit to the Company any
remaining Restricted Shares which do not vest in accordance with the preceding
sentence.

 

2

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

 

(b)           “Cause” shall mean any of the following events:

 

(i)            the conviction of the Participant or a plea of guilty or of nolo
contendere by the Participant, whether or not appeal be taken, of any
misdemeanor, or felony crime, involving personal dishonesty, moral turpitude or
willfully violent conduct;

(ii)           the commission of any act of theft, fraud, embezzlement or
wrongful diversion of funds of the Company or any Affiliate by the Participant,
regardless of whether a criminal conviction is pursued or obtained;

(iii)          gross business misconduct by the Participant, provided that this
shall not include any negligence, omissions, actions or judgments, if made in
good faith by the Participant;

(iv)          the willful violation by the Participant of federal or state
securities laws, as determined in good faith by the Company’s Board of
Directors;

(v)           the violation of the Company’s policies and procedures, provided
such conduct results in substantial harm to the Company or any Affiliate;

(vi)          the material breach by the Participant of his or her fiduciary and
loyal duties to the Company or any Affiliate;

(vii)         if the Participant and the Company or any Affiliate have entered
into an employment agreement, the material breach by the Participant of any
provision of such agreement not fully remedied within twenty (20) days of
written notice from Company or such Affiliate.

 

To the extent that the Participant and the Company or any Affiliate have entered
into an employment agreement that requires certain determinations or procedures
by the Company, such Affiliate, its Board or Directors or the Participant prior
to a finding of cause, then such determinations and/or procedures shall be
deemed incorporated into this definition of Cause for so long as such employment
agreement is in force.

 

(c)           Except as may be otherwise provided in the Plan or this Award
Agreement, in the event of termination of the Participant’s employment with the
Company and all Affiliates prior to April 1, 2013 for any reason other than an
Involuntary Event, the Participant shall, for no consideration, forfeit to the
Company all Restricted Shares, including any Restricted Shares that may have
accumulated prior to the time of termination.

 

The Committee may, in its discretion and pursuant to the Plan, accelerate the
time at which vesting conditions have been achieved with respect to any
Restricted Shares that have previously been accumulated under Section 2(d).

 

(d)           Subject in all respects to this Agreement, the Restricted Shares
shall accumulate (but not vest) only upon the Company achieving the performance
criteria set forth below and provided that the Participant remains employed with
the Company at the date of determination that the Company achieved the
performance criteria as described below, except as otherwise provided in
Section 2(a).  Except as otherwise provided in

 

3

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

 

Section 2(a), accumulated Restricted Shares are not earned or vested until three
(3) years following the Date of Grant as provided in Section 2(e).  The
performance criteria shall be based upon the Company’s annual basic earnings per
share of Common Stock, (“EPS”) targets set forth below, calculated as described
and contemplated herein. The accumulation of Restricted Shares is subject to
achievement of three separate EPS targets, with such shares accumulating in
one-third increments upon the achievement of each of the EPS targets with
respect to any calendar year from 2010 up to and including 2012. The first
target has two alternate EPS targets — the first alternate EPS target may only
be met in the 2010 performance year.  If the first alternate is met during 2010,
then the second alternate becomes inapplicable.  If the first alternate is not
met for the 2010 performance year, then the second alternate target becomes the
target and may be met with respect to the 2011 or 2012 fiscal years.   These
contingent Restricted Shares shall accumulate (if at all) as follows: one-third
(33.33%) of such shares (XX shares) accumulate upon the achievement of each of
the EPS targets set forth below with respect to a fiscal year of the Company up
to and including 2012 (except as noted above for the first target, the first
alternate of which may only be met in 2010):

 

Performance-based Accumulation Requirements

 

EPS Targets*
($ per share)

 

$
/

 

$

 

$

 

# Shares Accumulated (reduced by any EPS awards accumulated in prior periods and
at a lower EPS Target level; not in addition to that at a lower EPS Target level
**)

 

33

%

34

%

33

%

 

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

*                 Determination of Performance Results.  EPS shall be calculated
and determined by the Company.  The Compensation Committee of the Board of
Directors of the Company, in its sole and exclusive discretion, may, within
ninety (90) days of the beginning of the applicable performance period (in
accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended)
adjust the calculation of EPS for items similar to (but not limited to):

 

i.      Changes to accounting standards as required by GAAP or Financial
Accounting Standard Board (FASB) after the

 

4

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

 

performance goal has been set;

 

ii.     Unbudgeted capital transactions, including the expenses related to the
transaction;

 

iii.    Any profit or loss attributable to the business operations of any entity
acquired by the Company during the year with greater than 5% impact to EPS that
was unbudgeted.

 

Any and all adjustments made by the Compensation Committee as set forth above
shall be made for each calculation of EPS during the performance period.

 

The Participant expressly agrees that (i) the Company shall, in its sole and
absolute discretion, so calculate and determine EPS and the associated
performance under the targets, and (ii) Company’s determination will be
conclusive, final and binding.

 

**          By way of illustration, if prior to any EPS targets being met, the
EPS for a particular covered year were the amount set forth in Column 2, then
two-thirds (66.67%) of the Restricted Shares would accumulate (i.e., one-third
for achieving the EPS target in Column 1 and an additional one-third for
achieving the EPS target in Column 2).

 

(e)   Except as otherwise provided in Section 2(a), the Restricted Shares, to
the extent accumulated, will vest on April 1, 2013, provided that the
Participant remains employed with the Company at April 1, 2013.  Any shares of
Restricted Stock that did not accumulate on or prior to April 1, 2013 shall be
forfeited and shall revert back to the Company without any payment to you, and
you shall not thereafter have any rights with respect to such shares of
Restricted Stock.

 

3.             Transfer Restrictions.  The Restricted Shares granted hereunder
are not transferable by the Participant and may not be sold, assigned, pledged,
exchanged, hypothecated or otherwise transferred, encumbered or disposed of
(other than by will or the applicable laws of descent and distribution) to the
extent then subject to the Forfeiture Restrictions.  Any such attempted sale,
assignment, pledge, exchange, hypothecation, transfer, encumbrance or
disposition in violation of this Agreement shall be void and the Company shall
not be bound thereby.  Further, the Restricted Shares granted hereby that are no
longer subject to Forfeiture Restrictions may not be sold or otherwise disposed
of in any manner that would constitute a violation of any applicable federal or
state securities laws.  The Participant also agrees (a) that the Company may
refuse to cause the transfer of the Restricted Shares to be registered on the
applicable stock transfer records if such proposed transfer would in the opinion
of counsel satisfactory to the Company constitute a violation of any applicable
securities law and (b) that the Company may give related instructions to the
transfer agent, if any, to stop registration of the transfer of the Restricted
Shares.

 

4.             Taxes.  All distributions under this Award are subject to
withholding of all applicable taxes.  Subject to the rules as may be established
by the Committee, such withholding obligations may be satisfied through the
surrender of Restricted Shares that the Participant is otherwise entitled to
under the Plan.

 

5

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

 

5.             Binding.  This Award shall be binding upon and inure to the
benefit of any successor to the Company and all persons lawfully claiming under
the Participant.

 

6.             Defined Terms.  Unless otherwise specifically defined herein,
each capitalized term used herein which is defined in the Plan shall have the
meaning assigned such term in the Plan.

 

7.             Amendment; Modification.  This Award may be amended by agreement
of the Participant and the Company, without the consent of any other person. 
The Company shall have the rights of amendment and modification set forth in the
Plan.

 

8.             Governing Law.  This Award shall be governed by, and construed in
accordance with the laws of the State of Texas.

 

9.             Restrictions on Resale.  Other than the restrictions expressly
described herein, there are no additional restrictions imposed by the Plan on
the resale of vested Restricted Shares acquired under the Plan.  However, under
the provisions of the Securities Act of 1933 (the “Securities Act”) and the
rules and regulations of the Securities and Exchange Commission (the “SEC”),
resales of shares acquired under the Plan by certain officers and directors of
the Company who may be deemed to be “affiliates” of the Company must be made
pursuant to an appropriate effective registration statement filed with the SEC,
pursuant to the provisions of Rule 144 issued under the Securities Act, or
pursuant to another exemption from registration provided in the Securities Act. 
At the present time, the Company does not have a currently effective
registration statement pursuant to which such resales may be made by
affiliates.  These restrictions do not apply to persons who are not affiliates
of the Company; provided, however, that all employees are subject to the
Company’s policies against insider trading, and restrictions on resale may be
imposed by the Company from time-to-time as may be necessary under applicable
law.

 

10.           Capital Adjustments and Reorganizations.  The existence of the
Restricted Shares shall not affect in any way the right or power of the Company
or any company the stock of which is awarded pursuant to this Award Agreement to
make or authorize any adjustment, recapitalization, reorganization or other
change in its capital structure or its business, engage in any merger or
consolidation, issue any debt or equity securities, dissolve or liquidate, or
sell, lease, exchange or otherwise dispose of all or any part of its assets or
business, or engage in any other corporate act or proceeding.

 

11.           Section 83(b) Election.  The Participant shall not exercise the
election permitted under section 83(b) of the Code with respect to the
Restricted Shares without the written approval of the Chief Financial Officer of
the Company.

 

12.           Legend.  The Participant consents to the placing on the
certificate for the Restricted Shares of an appropriate legend restricting
resale or other transfer of the Restricted Shares except in accordance with the
Securities Act of 1933 and all applicable rules thereunder.

 

6

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

 

13.           Effect on Other Benefits.  Income recognized by the Participant as
a result of the grant or vesting of the Restricted Shares or dividends on the
Restricted Shares will not be included in the formula for calculating benefits
under any of the Company’s retirement and disability plans or any other benefit
plans of the Company.

 

14.           Recoupment of Awards. The Company’s Board of Directors adopted a
recoupment policy on April 30, 2009 (the “Policy”), that may require an officer
of the Company to return incentive compensation if there is a restatement of the
financial results and the Board determines that the restatement was due, in
whole or in part, to the fraudulent or intentional misconduct of such officer. 
Participant acknowledges and agrees that, if Participant is an officer, the
Policy applies to this Award Agreement and that any payments or issuances of
Common Stock with respect to the Award Agreement may be subject to recoupment
pursuant to the terms of the Policy. This Award Agreement shall be deemed to
include the restrictions imposed by the Policy.

 

By signing this Award Agreement, the Participant acknowledges acceptance of the
terms and conditions set forth herein and in the Plan.

 

 

PARTICIPANT

 

 

 

 

 

 

 

CORNELL COMPANIES, INC.

 

 

 

By:

 

 

Name:

Patrick N. Perrin

 

 

Title:  Senior Vice President

 

 

Chief Administrative Officer

 

 

7

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