**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-K/A**

 

**AMENDMENTNO. 1**

 

**ANNUAL REPORT PURSUANT TO SECTION13 OR 15(D)OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thefiscal year ended December 31, 2004**

**CommissionFile Number 1-14472**

 

**CORNELL COMPANIES, INC.**

(EXACTNAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 
| **Delaware**                                                     | ** ** | **76-0433642**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State  or other jurisdiction  of incorporation or organization) |       | (I.R.S.  Employer  Identification No.) |
|                                                             |       |                                   |
| **1700  West Loop South, Suite 1500, Houston, Texas**            | ** ** | **77027**                              |
| (Address  of Principal Executive Offices)                        |       | (Zip  Code)                            |

 

Registrant’s telephonenumber, including area code    **(713) 623 -0790**

 

Securitiesregistered pursuant to Section 12(b) of the Act:

 
| **Title of Each Class**                      | ** ** | **Name of Stock Exchange**   |
|----------------------------------------------|------------|------------------------------|
| **Common  Stock, $.001 par value per share** | ** ** | **New  York Stock Exchange** |
| **Preferred  Stock Purchase Rights**         | ** ** | **New  York Stock Exchange** |

 

Securitiesregistered pursuant to Section 12(g) of the Act:**  NONE**

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months and (2) has been subject to such filing requirements for the past 90days.  YES  ý  NO  o

 

Indicate by check mark ifdisclosure of delinquent files pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of the Registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by a check markwhether the registrant is an accelerated filer (as defined in Exchange Act Rule12b-2).  YES  ý NO o

 

At March 10, 2005, Registrant hadoutstanding 13,494,216 shares of its common stock.  The aggregate marketvalue of the Registrant’s voting stock held by non-affiliates as ofJune 30, 2004 was approximately $179,057,750 based on the closing price of$13.60 per share as reported on the New York Stock Exchange.

 

DocumentsIncorporated by Reference: **None**

 

 

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EXPLANATORYNOTE

 

On March 16, 2005, CornellCompanies, Inc. (the “Company”) filed with the Securities and ExchangeCommission (the “SEC”) its Annual Report on Form 10-K for the year endedDecember 31, 2004 (the “Initial Form 10-K”). In accordance with the SEC rules,the Company incorporated by reference Part III of the Initial Form 10-K fromthe Proxy Statement to be filed by the Company in connection with its 2005Annual Stockholders’ Meeting, which the Company anticipated filing on or beforeApril 30, 2005. Since filing the Initial Form 10-K, the Company has determinedthat it will not file its Proxy Statement prior to the April 30 deadline and,in accordance with SEC rules, must file an amendment to its Initial Form 10-Kto include the disclosures required by Part III of Form 10-K. This AmendmentNo. 1 on Form 10-K/A amends Part III of the Initial Form 10-K in order toinclude those disclosures required by Part III of Form 10-K.

 

PARTIII

 

ITEM10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

 

The following table liststhe names, ages and positions of the Company’s directors as of April 20, 2005.There are no family relationships between any of the directors or officers.

 
| **Name**                 | ** ** | **Age** | ** ** | **Position**                                                 |
|--------------------------|------------|---------|------------|--------------------------------------------------------------|
| Anthony R. Chase         |       | 50      |       | Director                                                     |
| Isabella C.M. Cunningham |       | 63      |       | Director                                                     |
| James E. Hyman           |       | 45      |       | Director, Chairman of the  Board and Chief Executive Officer |
| Harry J. Phillips, Jr.   |       | 55      |       | Director                                                     |
| D. Stephen Slack         |       | 55      |       | Director                                                     |
| Tucker Taylor            |       | 66      |       | Director                                                     |
| Robert F. Vagt           |       | 58      |       | Director                                                     |
| Marcus A. Watts          |       | 47      |       | Director                                                     |

 

**Anthony R. Chase** has been a director of the Company sinceOctober 1999. Mr. Chase has served as Chairman and Chief Executive Officer ofChaseCom Limited Partnership since December 1998 and as President and ChiefExecutive Officer of Faith Broadcasting, L.P. since November 1993. Mr. Chase isalso Chairman of the Board of the Telecom Opportunity Institute, a national,non-profit organization founded by ChaseCom Limited Partnership to increasecareer, education and job training opportunities in the telecommunicationsindustry for people in historically underserved communities. Mr. Chase is aProfessor of Law at the University of Houston Law Center.

 

**Dr. Isabella C.M. Cunningham** has been a director since January 2005.  Dr. Cunningham has held a variety of positionsin communications, marketing, law and business education in the United Statesand internationally.  Since 1983, she hasbeen the Ernest A. Sharpe Professor in Communication at the University of Texasat Austin.  Dr. Cunningham has served asa director of Dupont Photomasks, Inc. since October 2001.

 

**James E. Hyman**has been the Chief Executive Officer since January 2005 and was named Chairmanof the Board of Directors of the Company in February 2005.  Mr. Hyman was a Senior Managing Director atFTI Palladium Partners from October 2004 to January 2005.  From 2003 to 2004 Mr. Hyman was a Partnerwith Sandhurst Capital, from 1999 to 2002 Mr. Hyman was with Starwood Hotelsand Resorts Worldwide where he served as Executive Vice President, and from1996 to 1999, Mr. Hyman was with GE Capital where he served as President of aEuropean subsidiary.

 

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**Harry J. Phillips, Jr**. has been a director since January 2001. Mr.Phillips served as Chairman of the Board of Directors of the Company from February2002 to February 2005, as Executive Chairman of the Company from April 2002 toAugust 2003 and as Chief Executive Officer from August 2003 to January2005.  Mr. Phillips is President ofTimberlake Interests, Inc. and Phillips Investments, Inc. Mr. Phillipspreviously served as Chairman and Chief Executive Officer of American EcologyCorporation from 1992 to 1995.

 

**D. Stephen Slack** has been a director since March 2003. Mr.Slack has been President and Chief Executive Officer of South Bay Resources,L.L.C., an energy exploration company, since March 2003. Mr. Slack was ChiefFinancial Officer and Principal of Andex Resources, LLC, an energy explorationand production company, from June 2000 to January 2003. From 1995 to 2000, Mr.Slack was Chief Financial Officer of Inventory Management & DistributionCompany, an independent manager of natural gas storage and transportationassets. Mr. Slack previously served as Chief Financial Officer of PogoProducing Company.

 

**Tucker Taylor** has been a director since October 1996. Mr.Taylor has been President of CBCA, Inc., a company that administers healthbenefits for self-insured employers, since July 2000. From 1992 to 1999, Mr.Taylor was Executive Vice President of Medical Care International and, after anacquisition, a Senior Vice President at Columbia/HCA.

 

**Robert F. Vagt** has been a director since June 2003. Mr.Vagt has been the President of Davidson College since July 1997. Beforeassuming his position at Davidson College, Mr. Vagt served as President and CEOof Seagull Energy Corporation and also served as President, CEO and Chairman ofGlobal Natural Resources.

 

**Marcus A. Watts** has been a director since January 2001. Mr.Watts is a partner in the law firm of Locke Liddell & Sapp LLP where he haspracticed corporate and securities law since 1984. Mr. Watts serves on theboard of various civic and charitable organizations.  Mr. Watts has notified the Company that heintends to not stand for re-election to the Board of Directors at the Company’s2005 Annual Meeting of Shareholders.

 

**DIRECTOR COMPENSATION**

 

Mr. Hyman does not receivecompensation for serving as a director. Mr. Phillips did not receive compensation for serving as a directorduring his tenure as Chief Executive Officer. In 2004, Messrs. Chase, Slack,Taylor, Vagt and Watts each received an annual fee of $35,000, a fee of $3,000for attendance at each Board of Directors meeting and a fee of $2,000 forattendance at each committee meeting (unless held on the same day as a Board ofDirectors meeting). Additionally, committee members each receive an annualretainer fee of $3,500. The Chairs of the Nominating Committee and CompensationCommittee receive an additional $3,500 annual retainer fee and the Chairman ofthe Audit Committee receives an additional $7,500 annual retainer fee. InFebruary 2000, the Board approved the payment of fees in cash or Common Stockof the Company, at the election of the director, subject to the provisions ofthe 2000 Director Stock Plan.  In 2004, thedirectors who so elected (Messrs. Slack and Watts) pursuant to the 2000Director Stock Plan received an aggregate of 17,914 shares of Common Stock ofthe Company pursuant to their elections to have director fees paid in shares ofCommon Stock.  All directors arereimbursed for out-of-pocket expenses incurred in attending meetings of theBoard of Directors or committees thereof and for other expenses incurred intheir capacity as directors.

 

In March 2004, Messrs. Chase,Slack, Taylor, Vagt and Watts were each granted nonqualified options topurchase 5,000 shares of Common Stock under the Company’s Amended and Restated1996 Stock Option Plan (“the 1996 Plan”). These options vested 100% on the dateof the grant with a term of ten

 

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years and have a per share exercise price equal to the market value ofa share of Common Stock on the date of grant.

 

In connection with herelection to the Board, in February 2005, Dr. Cunningham was grantednonqualified options to purchase 15,000 shares of Common Stock under the 1996Plan.  These options vested 25% on thedate of grant with the remainder vesting ratably over the next three years.These options have a term of ten years and have a per share exercise priceequal to the market value of a share of Common Stock on the date of grant.

 

In connection with hisemployment agreement, in March 2005, Mr. Hyman was granted incentive options topurchase 50,000 shares of Common Stock under the 1996 Plan.  These options will vest 33% on January 24,2006; January 24, 2007; and January 24, 2008, provided Mr. Hyman remainscontinuously employed by the Company.  Theseoptions have a term of ten years and have a per share exercise price equal tothe market value of a share of Common Stock on the date of grant.  In addition, Mr. Hyman was also granted85,000 shares of restricted stock of the Company which shall vest based on thefollowing criteria:

 

1.     25,000 shares will vest on January 24, 2008provided he remains continuously employed by the Company from the date ofissuance;

 

2.     30,000 shares will vest upon the Companyachieving a certain stock price within a certain time period as established bythe Compensation Committee of the Board of Directors; and

 

3.     30,000 shares will vest upon the Companyachieving a certain earnings per share within a certain time period asestablished by the Compensation Committee of the Board of Directors.

 

**EXECUTIVE OFFICERS AND OTHER KEYEMPLOYEES**

 

The following table setsforth the names, ages and positions of the persons who are not directors andwho are executive officers and other key employees of the Company as of April 20,2005:

 
| **Name**          | ** ** | **Age** | ** ** | **Position**                                                                 |
|-------------------|------------|---------|------------|------------------------------------------------------------------------------|
| Luis A. Collazo   |       | 38      |       | Vice President, Corporate  Controller and Chief Accounting Officer           |
| John C. Godlesky  |       | 58      |       | Senior Vice President,  Eastern Region                                       |
| Gary L. Henman    |       | 65      |       | Senior Vice President,  Adult Secure Institutional Services                  |
| James E. Hyman    |       | 45      |       | Chief Executive Officer                                                      |
| John R. Nieser    |       | 46      |       | Chief Financial Officer  and Treasurer                                       |
| Patrick N. Perrin |       | 44      |       | Senior Vice President,  Chief Administrative Officer and Corporate Secretary |
| Mark Thompson     |       | 48      |       | Senior Vice President,  Western Region                                       |

 

**Luis A. Collazo** has been Corporate Controller and ChiefAccounting Officer since November 1999, and a Vice President since December2002. Prior to November 1999, Mr. Collazo served as Corporate Controller andVice President of Accounting and Business Processes for IKON Document Services,a division of IKON Office Solutions from September 1993 to November 1999. Mr.Collazo is a Certified Public Accountant. On April 12, 2005, Mr. Collazo entered into an agreement with theCompany pursuant to which his employment with the Company will terminateeffective June 3, 2005.

 

**John C. Godlesky** was named Senior Vice President, EasternRegion in June 2003, and was Vice President, Eastern Region, from November 1999to June 2003 and Vice President, Juvenile from January 1999 to November 1999.He previously served as Director, Division of Residential Programs of TheAbraxas Group, Inc. (“Abraxas”) from June 1993 to December 1998, and wasresponsible for the overall development, direction and management of Abraxas’juvenile residential programs.  Mr.Godlesky will

 

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retire from his position with the Company on June 30, 2005.

 

**Gary L. Henman** was named Senior Vice President, AdultSecure Institutional Services in June 2003, and was Vice President, AdultSecure Institutional Services from October 1998 to June 2003 and NationalDirector of Quality Assurance from June 1998 to October 1998. He was previouslyan associate professor at Louisiana State University from 1997 to September1998. From 1973 to 1997, Mr. Henman was with the Federal Bureau of Prisons (“FBOP”),progressing to Deputy Regional Director and Warden of five facilities,including the United States Penitentiaries at Leavenworth, Kansas and Marion,Illinois. Mr. Henman was Chairman of both the FBOP High Security Facility TaskForce and the FBOP Task Force on Vocational Training.

 

**James E. Hyman.**  Seeabove for discussion of Mr. Hyman’s background.

 

**John R. Nieser** was named Chief Financial Officer inFebruary 2005.  Mr. Nieser has served asTreasurer since April 2004 and Acting Chief Financial Officer since August2004.  Prior to joining Cornell in April2004, he served as Controller from December 2000 to June 2003 for a number oforganizations including GE Aero Energy Products. He also served GuardianSavings and Loan Association in various capacities including senior vicepresident, chief financial officer and treasurer from September 1988 to March2000.

 

**Patrick N. Perrin** was named Corporate Secretary in August 2004and has served as Senior Vice President since June 2003, Vice President fromJune 2001 to June 2003 and Chief Administrative Officer since November 1998.Prior to November 1998, Mr. Perrin served as Corporate Director of RiskManagement, Employee Benefits and Retirement Plans for Tracor, Inc. fromNovember 1991 to October 1998.

 

**Mark K. Thompson** was named Senior Vice President in November2004 and has served as Vice President, Western Region of the Company since June2003. Prior to that, Mr. Thompson served as marketing director for the Company’sWestern Region and in other capacities. Mr. Thompson has worked for the Companysince 1990.

 

**AUDIT COMMITTEE MATTERS**

 

The Company’s Audit Committee has been established in accordance withsection 3(a)(58)(A) of the Exchange Act. As of April 20, 2005, the members of the Company’s Audit Committee areAnthony R. Chase, Isabella C.M. Cunningham and D. Stephen Slack.  Under the rules of the New York StockExchange, all of the members of the Audit Committee are independent.

 

The Audit Committee plays an important role in promoting effectivecorporate governance, and it is imperative that members of the Audit Committeehave requisite financial literacy and expertise. All members of the Company’sAudit Committee meet the financial literacy standard required by the NYSE rulesand at least one member qualifies as having accounting or related financial managementexpertise under the NYSE rules.  Inaddition, as required by the Sarbanes-Oxley Act of 2002, the SEC adopted rulesrequiring that public companies disclose whether or not its audit committee hasan “audit committee financial expert” as a member. An “audit committeefinancial expert” is defined as a person who, based on his or her experience,satisfies all of the following attributes:

 

•      An understanding of generally-acceptedaccounting principles and financial statements.

 

•      An ability to assess the general applicationof such principles in connection with the accounting for estimates, accruals,and reserves.

 

•      Experience preparing, auditing, analyzing orevaluating financial statements that present a breadth

 

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and level of complexity ofaccounting issues that are generally comparable to the breadth and level ofcomplexity of issues that can reasonably be expected to be raised by Cornell’sfinancial statements, or experience actively supervising one or more personsengaged in such activities.

 

•      An understanding of internal controls andprocedures for financial reporting.

 

•      An understanding of audit committeefunctions.

 

TheBoard of Directors has affirmatively determined that Mr. Slack satisfiesthe definition of “audit committee financial expert,” and has designated him asan “audit committee financial expert.”   Mr.Slack is an independent director, as that term is used in Item 7(d)(3)(iv) ofSchedule 14A under the Exchange Act.

 

**SECTION 16(A) BENEFICIALOWNERSHIP REPORTING COMPLIANCE**

 

Section 16(a) of theSecurities Exchange Act of 1934, as amended (the “Exchange Act”), requires theCompany’s directors and executive officers to file with the Securities andExchange Commission and the New York Stock Exchange initial reports ofownership and reports of changes in ownership of Common Stock. Based solely ona review of the copies of such reports furnished to the Company and writtenrepresentations that no other reports were required, the Company believes thatall its directors and executive officers during 2004 complied on a timely basiswith all applicable filing requirements under Section 16(a) of the ExchangeAct, except that the Form 4 filed on August 3, 2004 for D. Stephen Slack didnot properly report a grant of restricted stock to Mr. Slack.  Anamendment to such Form 4 was filed on April 18, 2005.

 

**CERTIFICATIONS**

 

The Company submitted our2004 Annual Section 303A.12(a) CEO Certification with the New York StockExchange. The certification was not qualified in any respect. Additionally, theCompany filed with the Securities and Exchange Commission as exhibits to ourForm 10-K for the year ended December 31, 2004 the CEO and CFO Certificationsrequired under Section 302 of the Sarbanes-Oxley Act of 2002.

 

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ITEM11.        EXECUTIVE COMPENSATION

 

The following table setsforth compensation information as of the year-end 2004 for the chief executiveofficer, the former chief financial officer and the four other most highlycompensated executive officers (the “named executive officers”) of the Companyduring the Company’s fiscal years 2004, 2003 and 2002.

 

SUMMARYCOMPENSATION TABLE

 
| ** **                                      | ** ** | ** ** | ** ** | ** **              | ** ** | ** **     | ** ** | **Long-Term**    | ** ** | ** **       | ** ** |
|-------------------------------------------------|------------|------------|------------|-------------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                      | ** ** | ** ** | ** ** | ** **              | ** ** | ** **     | ** ** | **Compensation** | ** ** | **(1)**          | ** ** |
| ** **                                      | ** ** | ** ** | ** ** | ** **              | ** ** | ** **     | ** ** | **Securities**   | ** ** | **All**          | ** ** |
| ** **                                      | ** ** | **Fiscal** | ** ** | **Annual Compensation** | ** ** | **Underlying** | ** ** | **Other**        | ** ** |
| **Name and Principal Position**                 | ** ** | **Year**   | ** ** | **Salary**              | ** ** | **Bonus**      | ** ** | **Options**      | ** ** | **Compensation** | ** ** |
| ** **                                      | ** ** | ** ** | ** ** | **($)**                 | ** ** | **($)**        | ** ** | **(#)**          | ** ** | **($)**          | ** ** |
|                                            |       |       |       |                    |       |           |       |             |       |             |       |
| Harry J. Phillips, Jr. (2)                      |       | 2004       |       | 430,002                 |       | —         |       | 20,000           |       | 6,908            |       |
| Former Chief Executive Officer                  |       | 2003       |       | 394,500                 |       | —         |       | —           |       | 6,937            |       |
|                                            |       | 2002       |       | 180,000                 |       | —         |       | 125,000          |       | 5,412            |       |
|                                            |       |       |       |                    |       |           |       |             |       |             |       |
| Thomas R. Jenkins (3)                           |       | 2004       |       | 307,543                 |       | —         |       | 15,000           |       | 8,027            |       |
| Former President and                            |       | 2003       |       | 280,812                 |       | —         |       | 12,330           |       | 7,263            |       |
| Chief Operating Officer                         |       | 2002       |       | 265,000                 |       | —         |       | 15,000           |       | 6,884            |       |
|                                            |       |       |       |                    |       |           |       |             |       |             |       |
| John L. Hendrix (4)                             |       | 2004       |       | 204,668                 |       | —         |       | 15,000           |       | 9,820            |       |
| Former Chief Financial Officer                  |       | 2003       |       | 271,625                 |       | —         |       | 9,250            |       | 6,143            |       |
| And Executive Vice President                    |       | 2002       |       | 265,000                 |       | —         |       | 15,000           |       | 5,590            |       |
|                                            |       |       |       |                    |       |           |       |             |       |             |       |
| Patrick N. Perrin                               |       | 2004       |       | 168,108                 |       | —         |       | 10,000           |       | 5,131            |       |
| Senior Vice President, Chief                    |       | 2003       |       | 164,000                 |       | —         |       | 3,730            |       | 5,056            |       |
| Administrative Officer and Corporate  Secretary |       | 2002       |       | 160,000                 |       | —         |       | 10,000           |       | 5,381            |       |
|                                            |       |       |       |                    |       |           |       |             |       |             |       |
| John C. Godlesky                                |       | 2004       |       | 150,388                 |       | —         |       | 5,000            |       | 4,320            |       |
| Senior Vice President,                          |       | 2003       |       | 143,365                 |       | —         |       | 2,460            |       | 4,067            |       |
| Eastern Region                                  |       | 2002       |       | 140,000                 |       | —         |       | 2,500            |       | 4,208            |       |
|                                            |       |       |       |                    |       |           |       |             |       |             |       |
| Mark K. Thompson                                |       | 2004       |       | 149,496                 |       | —         |       | 10,000           |       | 4,648            |       |
| Senior Vice President,                          |       | 2003       |       | 120,731                 |       | 15,000         |       | 13,280           |       | 5,198            |       |
| Western Region                                  |       | 2002       |       | 109,438                 |       | —         |       | —           |       | 4,189            |       |

 

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(1)   Amounts in 2004 for Messrs. Phillips,Jenkins, Perrin, Godlesky and Thompson include (i) the Company’s 401(k)matching contributions of $5,873, $6,768, $4,991, $3,816 and $4,438 respectively,and (ii) group term life insurance premiums of $1,035, $1,259, $140, $504 and $165,respectively. Amounts in 2004 for Mr. Hendrix include (i) the Company’s 401(k)matching contribution of $4,727, (ii) group term life insurance premiums of $770and (iii) payment for outplacement assistance in the amount of $4,323.

(2)   Mr. Phillips served his last day as ChiefExecutive Officer on January 24, 2005. Mr. Phillips remains employed by the Company and continues to serve as amember of the Board of Directors.

(3)   Mr. Jenkins served his last day as President onMarch 10, 2005.

(4)   Mr. Hendrix served as Chief Financial Officersince September 20, 1999 and served his last day as Chief Financial Officer on August3, 2004.  As a result, compensation shownis for a partial year.

 

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The following table presentsinformation regarding options granted to each of the named executive officersin 2004.

 

**OPTIONGRANTS IN 2004**

 
| ** **             | ** ** | ** **     | ** ** | **Percentage** | ** ** | ** **    | ** ** | ** **     | ** ** | **Potential Realizable** | ** ** |
|------------------------|------------|----------------|------------|----------------|------------|---------------|------------|----------------|------------|--------------------------|------------|
| ** **             | ** ** | **Number of**  | ** ** | **of Total**   | ** ** | ** **    | ** ** | ** **     | ** ** | **Value at Assumed**     | ** ** |
| ** **             | ** ** | **Securities** | ** ** | **Options**    | ** ** | ** **    | ** ** | ** **     | ** ** | **Rates of Stock Price** | ** ** |
| ** **             | ** ** | **Underlying** | ** ** | **Granted to** | ** ** | **Exercise**  | ** ** | ** **     | ** ** | **Appreciation**         | ** ** |
| ** **             | ** ** | **Options**    | ** ** | **Employees**  | ** ** | **Price**     | ** ** | **Expiration** | ** ** | **for Option Term (1)**  | ** ** |
| **Name**               | ** ** | **Granted**    | ** ** | **in 2004**    | ** ** | **Per Share** | ** ** | **Date**       | ** ** | **5%**                   | ** ** | **10%** | ** ** |
|                   |       |           |       |           |       |          |       |           |       |                     |       |   |   |
| Harry J. Phillips, Jr. |       | 20,000         |       | 11.96          | %          | $             | 13.98      |           | 6/8/2014   |                     | $          | 175,839 |   | $ | 445,610 |   |
| Thomas R. Jenkins      |       | 15,000         |       | 8.97           | %          | $             | 13.68      |           | 6/18/2014  |                     | $          | 129,049 |   | $ | 327,036 |   |
| John L. Hendrix        |       | 15,000         |       | 8.97           | %          | $             | 13.80      |           | 6/25/2014  |                     | $          | 130,181 |   | $ | 329,905 |   |
| Patrick N. Perrin      |       | 10,000         |       | 5.98           | %          | $             | 13.68      |           | 6/18/2014  |                     | $          | 86,033 |   | $ | 218,024 |   |
| John C. Godlesky       |       | 5,000          |       | 3.0            | %          | $             | 13.79      |           | 10/27/2014 |                     | $          | 43,362 |   | $ | 109,889 |   |
| Mark K. Thompson       |       | 5,000          |       | 3.0            | %          | $             | 13.79      |           | 10/27/2014 |                     | $          | 43,362 |   | $ | 109,889 |   |
|                   |       | 5,000          |       | 3.0            | %          | $             | 14.56      |           | 11/18/2014 |                     | $          | 45,784 |   | $ | 116,024 |   |

 

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(1)   The values shown are based on the indicatedassumed annual rates of appreciation compounded annually. Actual gainsrealized, if any, on stock option exercises and Common Stock holdings are dependenton the future performance of the Common Stock and overall stock marketconditions. There can be no assurance that the values shown in this table willbe achieved.

 

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The following table presentsinformation regarding options exercised in 2004 and the value of optionsoutstanding at December 31, 2004 for each of the named executive officers.

 

**AGGREGATEDOPTION EXERCISES IN LAST FISCAL YEAR AND**

**FISCALYEAR-END OPTION VALUES**

 
| ** **             | ** ** | ** **          | ** ** | ** **   | ** ** | **Number of Securities**       | ** ** | **Value of Unexercised**   | ** ** |
|------------------------|------------|---------------------|------------|--------------|------------|--------------------------------|------------|----------------------------|------------|
| ** **             | ** ** | **Number of**       | ** ** | ** **   | ** ** | **Underlying Unexercised**     | ** ** | **In-the-Money Options**   | ** ** |
| ** **             | ** ** | **Shares Acquired** | ** ** | **Value**    | ** ** | **Options at Fiscal Year End** | ** ** | **at Fiscal Year End (1)** | ** ** |
| **Name**               | ** ** | **on Exercise**     | ** ** | **Realized** | ** ** | **Exercisable**                | ** ** | **Unexercisable**          | ** ** | **Exercisable** | ** ** | **Unexercisable** | ** ** |
| ** **             | ** ** | ** **          | ** ** | ** **   | ** ** | ** **                     | ** ** | **(2)**                    | ** ** | ** ** | ** ** | **(2)** | ** ** |
| Harry J. Phillips, Jr. |       | —              |       | $            | —     |                           | 90,000     |                       | 70,000     |   | $ | 536,250 |   | $ | 283,500 |   |
| Thomas R. Jenkins      |       | —              |       | $            | —     |                           | 57,732     |                       | 32,932     |   | $ | 379,048 |   | $ | 122,079 |   |
| John L. Hendrix        |       | 63,500              |       | $            | 371,000    |                           | —     |                       | —     |   | $ | — |   | $ | — |   |
| Patrick N. Perrin      |       | —              |       | $            | —     |                           | 27,238     |                       | 18,992     |   | $ | 91,774 |   | $ | 56,166 |   |
| John C. Godlesky       |       | —              |       | $            | —     |                           | 16,060     |                       | 8,900      |   | $ | 127,267 |   | $ | 38,672 |   |
| Mark K. Thompson       |       | —              |       | $            | —     |                           | 5,180      |                       | 19,600     |   | $ | 17,390 |   | $ | 44,898 |   |

 

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(1)   The excess, if any, of the market value ofCommon Stock at December 31, 2004 ($15.18) over the option exercise price(s).

 

(2)   All of these options become immediatelyexercisable upon a change in control of the Company.

 

**COMPENSATION COMMITTEEINTERLOCKS AND INSIDER PARTICIPATION**

 

The members of theCompensation Committee of the Board are Messrs. D. Stephen Slack, TuckerTaylor and Robert F. Vagt.  None of thesedirectors has at any time been an officer or employee of the Company and noneof these directors serves as a member of the board of directors or compensationcommittee of any entity that has one or more executive officers serving as amember of the Company’s Board or Compensation Committee.

 

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| ITEM 12. |   | SECURITIES  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER  MATTERS |
|----------|--------|----------------------------------------------------------------------------------------------------|

 

The following table setsforth information with respect to the shares of Common Stock (the onlyoutstanding class of voting securities of the Company) owned of record andbeneficially as of April 8, 2005, unless otherwise specified, by (i) allpersons known to possess voting or dispositive power over more than 5% of theCommon Stock, (ii) each director and named executive officer, and (iii) alldirectors and executive officers of the Company as a group:

 
| ** **                                                                                       | ** ** | **Amount and Nature of**     | ** ** | **Percentage** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------------------------|------------|----------------|------------|
| ** **                                                                                       | ** ** | **Beneficial Ownership (1)** | ** ** | **of Class**   | ** ** |
|                                                                                             |       |                         |       |           |       |
| Thomas R. Hudson, Jr. and Pirate Capital,  LLC (2)                                               |       | 1,999,100                    |       | 14.80          | %          |
| 200 Connecticut Avenue, 4th  Floor                                                               |       |                         |       |           |       |
| Norwalk, CT 06854                                                                                |       |                         |       |           |       |
|                                                                                             |       |                         |       |           |       |
| Merrill Lynch & Co. (on behalf of  Merrill Lynch Investment Managers (“MILM”)) (3) |       | 1,841,700                    |       | 13.60          | %          |
| World Financial Center, North Tower                                                              |       |                         |       |           |       |
| 250 Vesey Street                                                                                 |       |                         |       |           |       |
| New York, NY 10381                                                                               |       |                         |       |           |       |
|                                                                                             |       |                         |       |           |       |
| Wellington Management Company, LLP (4)                                                           |       | 1,144,400                    |       | 8.45           | %          |
| 75 State Street                                                                                  |       |                         |       |           |       |
| Boston, MA 02109                                                                                 |       |                         |       |           |       |
|                                                                                             |       |                         |       |           |       |
| Dimensional Fund Advisors, Inc. (5)                                                              |       | 1,107,550                    |       | 8.18           | %          |
| 1299 Ocean Avenue, 11th Floor                                                                    |       |                         |       |           |       |
| Santa Monica, CA 90401                                                                           |       |                         |       |           |       |
|                                                                                             |       |                         |       |           |       |
| Wynnefield Partners Small Cap Value, L.P.  (6)                                                   |       | 975,400                      |       | 7.52           | %          |
| 450 Seventh Avenue                                                                               |       |                         |       |           |       |
| New York, NY 10123                                                                               |       |                         |       |           |       |
|                                                                                             |       |                         |       |           |       |
| Bank of America Corporation (7)                                                                  |       | 901,400                      |       | 6.66           | %          |
| 100 North Tyron Street, Floor 25                                                                 |       |                         |       |           |       |
| Bank of America Corporate Center                                                                 |       |                         |       |           |       |
| Charlotte, NC 28255                                                                              |       |                         |       |           |       |
|                                                                                             |       |                         |       |           |       |
| Barclays Global Investors, N.A. (8)                                                              |       | 838,590                      |       | 6.19           | %          |
| 45 Fremont Street                                                                                |       |                         |       |           |       |
| San Francisco, CA 94105                                                                          |       |                         |       |           |       |
|                                                                                             |       |                         |       |           |       |
| Albert Fried & Company, LLC (9)                                                              |       | 739,100                      |       | 5.48           | %          |
| 60 Broad Street, 39th Floor                                                                      |       |                         |       |           |       |
| New York, NY 10004                                                                               |       |                         |       |           |       |
|                                                                                             |       |                         |       |           |       |
| Anthony R. Chase                                                                                 |       | 46,586                       |       |           | *          |
| Isabella C.M. Cunningham                                                                         |       | 3,750                        |       |           | *          |
| John C. Godlesky                                                                                 |       | 18,976                       |       |           | *          |
| John L. Hendrix (10)                                                                             |       | —                       |       | 0.0            | %          |
| James E. Hyman                                                                                   |       | —                       |       | 0.0            | %          |
| Thomas R. Jenkins                                                                                |       | 87,294                       |       |           | *          |
| Patrick N. Perrin                                                                                |       | 80,126                       |       |           | *          |
| Harry J. Phillips, Jr.                                                                           |       | 205,000                      |       | 1.5            | %          |
| D. Stephen Slack                                                                                 |       | 48,834                       |       |           | *          |
| Tucker Taylor                                                                                    |       | 67,166                       |       |           | *          |
| Mark K. Thompson                                                                                 |       | 6,099                        |       |           | *          |
| Robert F. Vagt                                                                                   |       | 25,500                       |       |           | *          |
| Marcus A. Watts                                                                                  |       | 54,176                       |       |           | *          |
| All directors and executive officers as a  group (13 persons)                                    |       | 643,507                      |       | 4.8            | %          |

 

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*              Less than 1.0%.

 

(1)   Shares of Common Stock listed include sharessubject to stock options exercisable within 60 days (39,600 for Mr. Chase, 3,750for Dr. Cunningham, 16,060 for Mr. Godlesky, 58,965 for Mr. Jenkins, 27,611 forMr. Perrin, 115,000 for Mr. Phillips, 26,250 for Mr. Slack, 40,933 for Mr.Taylor, 5,180 for Mr. Thompson, 22,500 for Mr. Vagt, 35,600 for Mr. Watts, and 391,449for all the above as a group).

 

(2)   Based on a filing made with the Securitiesand Exchange Commission (the “SEC”) by Thomas R Hudson, Jr. and Pirate Capital,LLC reflecting ownership of Common Stock as of April 5, 2005. The filingindicates sole voting power for 852,900 shares of Common Stock and soledispositive power for 1,999,100 shares of Common Stock.

 

(3)   Based on a filing made with the SECreflecting ownership of Common Stock as of December 31, 2004. The filingindicates shared voting power and shared dispositive power for the referencedshares of Common Stock. Merrill Lynch & Co., Inc. is a parent holdingcompany. Merrill Lynch Investment Managers is an operating division of MerrillLynch & Co., Inc. consisting of Merrill Lynch & Co., Inc.’sindirectly-owned asset management subsidiaries, including the following whichown certain shares of Common Stock: FAM ADV Federated Investment Management Co.,FAM ADV Gartmore Mutual Fund Capital Trust, FMA ADV Pacific Life InsuranceCompany, Fund Asset Management, Merrill Lynch Investment Managers, L.P. andMerrill Lynch Investment Managers, LLC.

 

(4)   Based on a filing made with the SECreflecting ownership of Common Stock as of December 31, 2004. The filingindicates shared voting power for 536,200 shares of Common Stock and shareddispositive power for 1,144,400 shares of Common Stock.

 

(5)   Based on a filing made with the SECreflecting ownership of Common Stock as of December 31, 2004. The filingindicates sole voting power and sole dispositive power with respect to thereferenced shares of Common Stock.

 

(6)   Based on a filing made with the SECreflecting ownership of Common Stock as of March 31, 2005 as filed by WynnefieldPartners Small Cap Value, L.P., Wynnefield Partners Small Cap Value, L.P. I,Wynnefield Small Cap Value Offshore Fund, Ltd., Channel Partnership II, L.P.,Wynnefield Capital Management LLC, Wynnefield Capital, Inc., Nelson Obus andJoshua Landes.  The filing indicatesshared voting and shared dispositive power with respect to the referencedshares of Common Stock.

 

10

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(7)   Based on a filing made with the SECreflecting ownership of Common Stock as of December 31, 2004. The filingindicates shared voting power for 886,600 shares of Common Stock and shareddispositive power for 901,400 shares of Common Stock with Fleet National Bank,Columbia Management Group, Inc. and Columbia Management Advisors, Inc.

 

(8)   Based on a filing made with the SECreflecting ownership of Common Stock as of December 31, 2004 by Barclays GlobalInvestors, NA., Barclays Global Fund Advisors, Barclays Global Investors, Ltd,Barclays Global Investors Japan Trust and Banking Company Limited, BarclaysLife Assurance Company Limited, Barclays Bank PLC, Barclays Capital SecuritiesLimited, Barclays Capital Inc., Barclays Private Bank & Trust (Isle of Man)Limited, Barclays Private Bank and Trust (Jersey) Limited, Barclays Bank TrustCompany Limited, Barclays Bank (Suisse) SA, Barclays Private Bank Limited,Bronco (Barclays Cayman) Limited, and Palomino Limited, HYMF Limited.  The filing indicates sole voting power for anaggregate of 712,539 shares of Common Stock and sole dispositive power for anaggregate of 838,590 shares of Common Stock.

 

(9)   Based on a filing made with the SECreflecting ownership of Common Stock as of March 11, 2005.  The filing indicates sole voting and sole dispositivepower with respect to the referenced shares of Common Stock.

 

(10)Mr. Hendrix served his last day as ChiefFinancial Officer on August 3, 2004.

 

11

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ITEM13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

**EMPLOYMENT/SEVERANCE AGREEMENTS**

 

**Patrick N. Perrin**

 

In December 1999, theCompany entered into an employment/severance agreement with Patrick N.Perrin.  If Mr. Perrin’s employmentwith the Company is terminated for any reason within a year after a change incontrol (as defined in the severance agreement), the Company has agreed thatall stock options, restricted stock awards and similar awards granted to theterminated officer by the Company prior to the termination date will vestimmediately on the termination date.

 

In addition, pursuant to theagreement, the Company will remit to Mr. Perrin, as severance, a payment equalto the sum of (a) his highest annual base salary as of the termination date andthe change in control date, and (b) the average bonus paid to him by theCompany or its affiliates of the two most recent full fiscal years ending on orprior to the termination date.  TheCompany has agreed to pay the severance amounts in a lump sum in cash (i) onthe termination date if the Company terminates the officer, or (ii) withinthirty days after the termination date if Mr. Perrin’s employment is terminatedby him or upon his death or retirement.

 

**John L. Hendrix**

 

In August 2004, the Companyentered into a severance/release of claims agreement with John L. Hendrix.  As consideration for the release of any andall claims against the Company, the Company agreed to pay Mr. Hendrix $11,500per month for eighteen months, plus $1,000 per month for eighteen months tocover the cost of COBRA benefit payments. Additionally, the Company agreed to accelerate the remaining value ofthe agreement should the agreement be terminated for any reason following achange of control (as defined in the agreement).

 

Additionally, the Companyentered into a consulting agreement with John L. Hendrix, terminating onFebruary 22, 2006.  As compensation for his services as a consultant, theCompany agreed to pay Mr. Hendrix $11,800 per month for the term of theagreement.  Additionally, the Company agreed to accelerate the remainingvalue of the agreement should the agreement be terminated for any reasonfollowing a change of control (as defined in the agreement).

 

**Mark K. Thompson**

 

In October 2004, the Companyentered into an employment/severance agreement with Mark K. Thompson.  This agreement sets out Mr. Thompson’scompensation structure, which includes a current base salary of $175,000,subject to increase from time to time, and a non-specified annual bonus to bedetermined by the Compensation Committee of the Board, as well as a non-competeclause which extends one year beyond termination of employment for anyreason.  Additionally, the agreement setsout severance terms if termination is caused either (a) by Mr. Thompson becauseof the Company’s breach of the agreement (as defined in the agreement), or (b)by the Company without cause.  For eitherreason, Mr. Thompson is entitled to (a) one time his annual base salary,and (b) up to 40 hours of Paid Time Off, as available.  Further, an addendum to this agreement setsout a separate severance structure wherein if Mr. Thompson’s employment isterminated within the six-month period immediately following a change ofcontrol (as defined in the addendum), he is entitled to eighteen months ofseverance pay, calculated using his annual base salary rate.  However, if no such termination occurs, hisseverance structure reverts back to that contemplated within the originalagreement.

 

**Harry J. Phillips, Jr.**

 

In March 2005, the Companyentered into an oral agreement with Harry J. Phillips, Jr., whereby he agreedto remain employed and to continue providing assistance with certain projectsuntil January 26, 2006.  His compensationis set at an annual salary rate of $70,000, with full benefits.

 

12

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**Thomas R. Jenkins**

 

In March 2005, the Companyentered into a severance/release of claims agreement with Thomas R.Jenkins.  As consideration for therelease of any and all claims against the Company, the Company agreed to payMr. Jenkins $24,770 per month for a total of twenty-four months.  Additionally, the Company paid to Mr. Jenkinsa one-time lump-sum payment in the amount of $25,000 for relocation andoutplacement services, plus a separate one-time lump sum payment in the amountof $315,000, plus a one-time, lump-sum bonus amount of $10,300.

 

**James E. Hyman**

 

In March 2005, theCompany entered into an employment agreement with James E. Hyman, pursuant towhich Mr. Hyman serves as the Company’s Chief Executive Officer and Chairman ofthe Board of Directors.

 

The agreement has arolling two-year term (the “Employment Period”).  Under the agreement, Mr.Hyman’s annual base salary is $475,000 and he will be eligible to receive abonus upon the achievement of certain performance objectives equal to $25,000plus 80% of Mr. Hyman’s annual base salary.  Mr. Hyman also received a$165,000 signing bonus.  Mr. Hyman is required to return all of thesigning bonus if his employment is terminated by the Company for cause (asdefined in the agreement) or if he voluntarily terminates his employmentwithout good reason (as defined in the agreement) before January 24, 2006 and50% if after January 24, 2006 but before January 24, 2007.

 

Pursuant to theagreement, Mr. Hyman was granted options to purchase 50,000 shares of Common Stockpursuant to the 1996 Plan, with an exercise price equal to the closing price ofthe Common Stock of the Company on the New York Stock Exchange on the EffectiveDate (the “Hyman Stock Options”). One third of the Hyman Stock Options becomeexercisable on January 24, 2006, 2007, and 2008, respectively, provided thatMr. Hyman has remained continuously employed by the Company.

 

The agreement alsoprovides that Mr. Hyman will be granted 85,000 restricted shares of Common Stock(the “Restricted Stock”).  The shares of Restricted Stock will vest asfollows: 25,000 shares of Restricted Stock shall vest on January 24, 2008;30,000 shares of Restricted Stock shall vest upon the Company achieving acertain stock price within a certain time period as established by theCompensation Committee of the Board of Directors; and 30,000 shares ofRestricted Stock shall vest upon the Company achieving a certain earnings pershare within a certain time period as established by the Compensation Committeeof the Board of Directors, subject, in each case to Mr. Hyman’s continuedemployment with the Company through each such date.

 

Pursuant to theagreement, if Mr. Hyman’s employment is terminated by the Company for cause,Mr. Hyman is entitled to receive his base salary accrued through thetermination date and reimbursement of all reasonable expenses incurred by Mr.Hyman.  If Mr. Hyman’s employment is terminated due to his death ordisability (as defined in the agreement), Mr. Hyman or his estate will receive(i) base salary accrued through the termination date, (ii) a prorated bonus forthe year in which the termination occurs, (iii) reimbursement of all reasonableexpenses incurred by Mr. Hyman and (iv) extended health care benefits (COBRA)at the Company’s expense for six months.  If the Company terminates theemployment of Mr. Hyman without cause or he voluntarily terminates hisemployment with good reason, then, he shall be entitled to receive thefollowing: (i) base salary accrued through the termination date, (ii) aprorated bonus for the year in which the termination occurs, (iii) an amountequal to Mr. Hyman’s base salary plus his target bonus for the remainder of theEmployment Period, (iv) reimbursement of all reasonable expenses incurred byMr. Hyman, (v) extended health care benefits (COBRA) at the Company’s expensefor eighteen months following his termination, and (vi) all shares ofRestricted Stock immediately vest.  All cash payments due from the Companyupon termination are due to Mr. Hyman or his estate within one month of thedate of termination.

 

13

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In the event that Mr.Hyman voluntarily terminates his employment with good reason within 180 daysfollowing a change in control, then, he shall be entitled to receive the samebenefits as above, except that no vesting of Mr. Hyman’s Restricted Stock willvest.  Mr. Hyman will also receive reimbursement for re-relocationexpenses if his employment is terminated without cause or for good reasonwithin 180 days following a change in control.

 

**John R. Nieser**

 

In March 2005, theCompany and John R. Nieser, the Company’s Chief Financial Officer, entered intoan Employment/Separation Agreement.  The agreement begins with a rollingtwo-year term until March 14, 2007 and then beginning March 15, 2007 has arolling one-year term.  Mr. Nieser’s annual base salary is not less than$200,000 per year and he is eligible for a cash bonus at a targeted amount of40% of his base salary.  If Mr. Nieser’s employment is terminated due todeath or disability (as defined in the agreement), Mr. Nieser or his estate isentitled to his base salary and bonus earned through the date of termination(as defined in the agreement).  If Mr. Nieser’s employment is terminatedfor cause (as defined in the agreement) or due to voluntary resignation, Mr.Nieser is entitled to his base salary through the date of termination.  IfMr. Nieser is terminated without cause or due to a change in control (asdefined in the agreement) of the Company, he is entitled to his base salary andbonus through the date of termination and (i) two times his base salary if thetermination occurs prior to March 9, 2007 or (ii) one time his base salaryif termination occurs between March 9, 2007 and March 8, 2008.

 

**Luis A. Collazo**

 

InApril 2005, the Company entered into a severance/release of claims agreementwith Luis A. Collazo with an effective date of June 3, 2005.  As consideration for the release of any andall claims against the Company, the Company agreed to pay Mr. Collazo an amountequivalent to one year’s salary of $155,960. Additionally, the Company shall pay Mr. Collazo for outplacementassistance in the amount of $1,500, plus $1,000 per month for six months toassist with the cost of COBRA benefits.

 

Additionally,the Company entered into an independent consulting agreement with Luis A.Collazo with an effective date of June 6, 2005. In exchange for Mr. Collazo’s continued assistance in smoothlytransitioning his position, he will be paid $12,996 per month for three months,plus a one-time, lump-sum bonus in the amount of $125,000, to be paidimmediately following August 31, 2005. Should Mr. Collazo provide assistance after August 31, 2005, he shall bepaid at a per diem rate of $599.85 per day.

 

**John C. Godlesky**

 

InApril 2005, the Company entered into a severance/release of claims agreementwith John C. Godlesky with an effective date of June 30, 2005.  As consideration for the release of any andall claims against the Company, the Company agreed to pay Mr. Godlesky anamount equivalent to one year’s salary, $150,774.  Additionally, the Company shall pay Mr.Godlesky a one-time, lump-sum payment in the amount of $100,000, outplacementassistance in the amount of $3,524, and relocation assistance in the amount of$2,000.

 

Additionally,the Company entered into an independent consulting agreement with John C.Godlesky with an effective date of July 1, 2005.  In exchange for Mr. Godlesky’s continuedassistance in smoothly transitioning his position, he will be paid $15,000 permonth for three months.  Should Mr. Godleskyprovide assistance after September 30, 2005, he shall be paid at a per diemrate of $579.90 per day.

 

**Other**

 

Mr. Watts, a director of theCompany, is a partner in the law firm of Locke Liddell & Sapp LLP.  The Company paid legal fees of approximately$2.0 million to LLS and LLS performed legal services for the

 

14

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Company in 2004.  Mr. Watts hasnotified the Company that he intends to not stand for re-election to the Boardof Directors at the Company’s 2005 Annual Meeting of Shareholders.

 

ITEM14.        PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

# **Informationon Independent Registered Public Accounting Firm**

# ** **

TheAudit Committee has considered the qualifications of PricewaterhouseCoopers LLPand will recommend that the Board of Directors appoint them as our independentregistered public accounting firm for the fiscal year ending December 31, 2005.

 

PricewaterhouseCoopersLLP served as our independent registered public accounting firm in 2004 and2003.  Representatives fromPricewaterhouseCoopers LLP are expected to be present at the annual meeting ofshareholders and will have an opportunity to make a statement, if they sodesire, as well as to respond to appropriate questions that may be asked byshareholders.

 

**Principal Accountant Fees andServices**

 

The following table setsforth the aggregate fees billed or estimated to be billed to the Company byPricewaterhouseCoopers LLP for the years ended December 31, 2004 and 2003:

 

| ** **             | ** ** | **2004**   | ** **    | **2003**    | ** ** |
|------------------------|------------|------------|---------------|-------------|------------|
|                   |       |       |          |        |       |
| **Audit Fees**         | ** ** | **$**      | **1,474,106** | ** **  | **$**      | **302,000** | ** ** |
| **Audit Related Fees** | ** ** | **53,825** | ** **    | **174,875** | ** ** |
| **Tax Fees**           | ** ** | **—** | ** **    | **—**  | ** ** |
| **All Other Fees**     | ** ** | **—** | ** **    | **—**  | ** ** |
| ** **             | ** ** | **$**      | **1,527,931** | ** **  | **$**      | **476,875** |   |

 

**Audit Fees**

 

Audit fees represent theaggregate fees billed or estimated to be billed to the Company for professionalservices rendered for the audit of our annual financial statements, review offinancial statements included in Form 10-Q’s and services normally provided byour accountants in connection with statutory and regulatory filings orengagements.  For 2004, attestationservices rendered in connection with the Sarbanes-Oxley Act of 2002 areincluded in Audit Fees.

 

**Audit Related Fees**

 

Audit related fees representthe aggregate fees billed to the Company or estimated to be billed to theCompany for assurance and related services that were reasonably related to theperformance of the audit or review of our financial statements and are notreported under “Audit Fees” above, including the implementation and readinessassistance with the requirements of the Sarbanes-Oxley Act of 2002, assistancewith registration statements, comfort letters and consents.

 

**Tax Fees**

 

Tax fees represent theaggregate fees billed to the Company or estimated to be billed to the Companyfor professional services rendered for tax compliance, tax advice and taxplanning.  The nature of the servicescomprising these fees were to support compliance with federal and state taxreporting and payment requirements, including tax return review and review oftax laws, regulations or cases.

 

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**All Other Fees**

 

All other fees represent theaggregate fees billed to the Company or estimated to be billed to the Companyfor products or services provided to the Company by PricewaterhouseCoopers LLP,other than the services reported in the above categories.  For 2004 and 2003, there were no fees billedrelated to other services.

 

The Audit Committee hasconsidered whether the provision of non-audit services byPricewaterhouseCoopers LLP is compatible with maintaining auditor independenceand has determined that auditor independence has not been compromised.

 

**Pre-approval Policies andProcedures**

 

The Audit Committee Charter,as amended in October 2004, is available through the Corporate Governance linkon the Company’s website at www.cornellcompanies.com and to any stockholderupon request, provides that the Audit Committee is responsible forpre-approving all audit services and permitted non-audit services to beperformed for the Company by the independent registered public accounting firm.All of the fees paid to the independent registered public accounting firm in2004 were pre-approved by the Audit Committee.

 

**PART IV**

 

ITEM15.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

 

31.3    Section 302 Certification of Chief ExecutiveOfficer

31.4    Section 302 Certification of Chief FinancialOfficer

 

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, Registrant has duly caused this Amendment No. 1 to this Annual Report tobe signed on its behalf by the undersigned, thereunto duly authorized.

 
|   |            | CORNELL  COMPANIES, INC. |
|--------|-----------------|--------------------------|
|   |            |                     |   |
| Dated: | April  22, 2005 | By:                      | /s/  James E. Hyman |   |
|   |            |                     | James  E. Hyman |
|   |            |                     | Chief  Executive Officer and |
|   |            |                     | Chairman  of the Board |

 
| **SIGNATURE**                 | ** ** | **TITLE**                         | ** **                   | **DATE** |
|-------------------------------|------------|-----------------------------------|------------------------------|----------|
|                          |       |                              |                         |     |
| /s/  James E. Hyman           |       |                              | Chief  Executive Officer and |     | April  22, 2005 |
| James  E. Hyman               |       | Chairman  of the Board            |                         |     |
|                          |       | (Principal  Executive Officer)    |                         |     |
|                          |       |                              |                         |     |
| /s/  John R. Nieser           |       |                              | Chief  Financial Officer     |     | April  22, 2005 |
| John  R. Nieser               |       | (Principal  Financial Officer and |                         |     |
|                          |       | Principal  Accounting Officer)    |                         |     |
|                          |       |                              |                         |     |
|                          |       |                              |                         |     |
| /s/  Anthony R. Chase         |       |                              | Director                     |     | April  22, 2005 |
| Anthony  R. Chase             |       |                              |                         |     |
|                          |       |                              |                         |     |
| /s/  Isabella C.M. Cunningham |       |                              | Director                     |     | April  22, 2005 |
| Isabella  C. M. Cunningham    |       |                              |                         |     |
|                          |       |                              |                         |     |
| /s/  Harry J. Phillips, Jr.   |       |                              | Director                     |     | April  22, 2005 |
| Harry  J. Phillips, Jr.       |       |                              |                         |     |
|                          |       |                              |                         |     |
| /s/  D. Stephen Slack         |       |                              | Director                     |     | April  22, 2005 |
| D.  Stephen Slack             |       |                              |                         |     |
|                          |       |                              |                         |     |
| /s/  Tucker Taylor            |       |                              | Director                     |     | April  22, 2005 |
| Tucker  Taylor                |       |                              |                         |     |
|                          |       |                              |                         |     |
| /s/  Robert F. Vagt           |       |                              | Director                     |     | April  22, 2005 |
| Robert  F. Vagt               |       |                              |                         |     |
|                          |       |                              |                         |     |
| /s/  Marcus A. Watts          |       |                              | Director                     |     | April  22, 2005 |
| Marcus  A. Watts              |       |                              |                         |     |
|                               |            |                                   |                              |          |  |  |  |  |  |  |  |  |

 

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