Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”)
is made and entered into as of this 14th day of March, 2005, by and between
Cornell Companies, Inc., a Delaware corporation (the “Company”) and
James E. Hyman (the “Employee”).

 

1.                                       Employment and Term. The Company agrees to employ
the Employee and the Employee agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement, for the period
beginning on the date hereof.  From the
date hereof, Employee’s employment term shall be a rolling two-year term, which
will automatically extend so as to terminate in two (2) years from the last day
worked by the Employee (the “Employment Period”).

 

2.                                       Duties and
Powers of Employee.
During the Employment Period, the Employee shall serve as the Chief Executive
Officer and Chairman of the Board of Directors of the Company and shall have
the duties, powers and authority as set forth in the bylaws and such other
powers consistent therewith as are delegated to him in writing from time to
time by the Board of Directors of the Company (the “Board”). The
Employee’s services shall be performed in Houston, Texas.  During the Employment Period, Employee shall
devote substantially his full time and undivided attention during normal
business hours to the business and affairs of the Company, except for vacations
in accordance with Company policy and except for Disability (as defined below),
but nothing in this Agreement shall preclude Employee from serving as a director
of no more than one for-profit company involving no conflict of interest with
the interests of the Company, from engaging in charitable and community
activities, or from managing his personal investments, provided that such
activities do not materially interfere with the regular performance of his
duties and responsibilities under this Agreement.

 

3.                                       Duties of Fiduciary and of
Loyalty.  The Employee acknowledges and
agrees that, at all times during the Employment Period, the Employee owes
fiduciary duties to the Company, including, but not limited to, fiduciary
duties of the highest loyalty, fidelity and allegiance, to act at all times in
the best interests of the Company, to make full disclosure to the Company of
all information that pertains to the Company’s business and interests, to do no
act which would injure the Company’s business, its interests, or its
reputation, and to refrain from using for the Employee’s own benefit or for the
benefit of others any information or opportunities pertaining to the Company’s
business or interests that are entrusted to the Employee or that he learned
while employed by the Company.  The
Employee acknowledges and agrees that, upon termination of the Employment
Period, the Employee shall continue to refrain from using for his own benefit
or the benefit of others, or from disclosing to others, any Confidential
Information (as defined in Section 10) or confidential
opportunities pertaining to the Company’s business or interests that were
entrusted to the Employee during the employment relationship or that he learned
while employed by the Company.

 

4.                                       Cash Compensation. The Employee shall receive the
following compensation for his services:

 

(a)                                  Salary.  During the Employment Period, Employee shall
be paid an annual base salary (“Annual Base Salary”) at the rate of not
less than $475,000 per year, 

 

 

in substantially
equal bi-weekly installments, and subject to any and all required withholdings
and deductions for Social Security, income taxes and the like. The Compensation
Committee of the Board of Directors of the Company (hereinafter referred to as
the “Compensation Committee”) may from time to time direct such upward
adjustments to Annual Base Salary as the Compensation Committee deems to be
appropriate.

 

(b)                                 Signing Bonus.  Upon execution of this Agreement, Employee
shall be entitled to a one-time payment of $165,000 (the “Signing Bonus”);
provided, however, that (i) if Employee is terminated by the Company for Cause
(as defined below in Section 7(c)) or Employee terminates his
employment other than for Good Reason (as defined below in Section 7(d))
on or before January 24, 2006, Employee shall be obligated to repay the
Signing Bonus in its entirety to the Company immediately upon such termination,
and (ii) if Employee is terminated by the Company for Cause, or Employee
terminates his employment for other than Good Reason after January 24,
2006 but on or before January 24, 2007, Employee shall be obligated to
repay 50% of the Signing Bonus to the Company immediately upon such
termination.  If Employee terminates his
employment due to death, Disability or for Good Reason or if the Company
terminates Employee’s employment without Cause, Employee shall not be obligated
to repay the Signing Bonus.

 

(c)                                  Incentive Cash Compensation.  During the Employment Period, Employee shall
be eligible annually for a cash bonus, at a targeted amount of $25,000 plus 80%
of Employee’s Annual Base Salary, based on the achievement of certain
performance goals established by the Compensation Committee (such aggregate
awards for each year are hereinafter referred to as the “Annual Bonus”).
Each Annual Bonus, if any, shall be paid within two and a half months following
the fiscal year for which the Annual Bonus is awarded, unless the Employee
shall elect to defer the receipt of such Annual Bonus in accordance with a
deferred plan approved by the Company. 
The Annual Bonus for fiscal year 2005 shall be equal to at least 40% of
the Annual Base Salary Employee would receive as if the performance goals had
been met.  All bonus payments will be
subject to all applicable tax withholdings.

 

5.                                       Long Term Incentive Compensation.

 

(a)                                  Restricted Shares.  Upon execution of this Employment Agreement,
the Company shall issue to Employee 85,000 restricted shares of common stock,
par value $0.001 per share, of the Company (“Restricted Shares”).  The terms and conditions governing the
Restricted Shares awarded shall be as set forth in the Restricted Stock
Agreement executed as of the date hereof.

 

(b)                                 Stock Options.  The Company has adopted and its stockholders
have approved the Amended and Restated 1996 Stock Option Plan (the “1996
Plan”).  On the date the Employee
commences his employment, the Company shall award Employee 50,000 options to
purchase shares of common stock pursuant to the 1996 Plan (the “1996 Plan
Stock”).  The terms and conditions
governing the 1996 Plan Stock awarded shall be as set forth in the Stock Option
Agreement executed as of the date hereof.

 

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6.                                       Employee Benefits.  During the Employment Period, Employee shall
be eligible to receive the additional benefits available to senior executive
officers of the Company, which may include the following:

 

(a)                                  Incentive and Savings and
Retirement Plans.  During the Employment Period, the Employee
shall be entitled to participate in all incentive, savings and retirement
plans, practices, policies and programs applicable generally to other senior
management employees of the Company and for which Employee qualifies in
accordance with the terms of such plans.

 

(b)                                 Welfare Benefit Plans.  During the Employment Period, the Employee
and/or the Employee’s family, as the case may be, shall be eligible for
participation in all welfare benefit plans, practices, policies and programs
provided by the Company (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other senior management employees of the Company and for which Employee and/or
Employee’s family qualifies in accordance with the terms of such plans.

 

(c)                                  Business Expenses.  During the Employment Period and for so long
as the Employee is employed by the Company, Employee shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the
Employee in accordance with the policies, practices and procedures of the
Company from time to time in effect.

 

(d)                                 Relocation Expenses.  The Company shall reimburse Employee for all
reasonable relocation expenses incurred by Employee in connection with moving
to Houston, Texas in connection with this Agreement.  If the Employee’s employment is terminated
without Cause or for Good Reason within 180 days of a Change in Control, then
the Company shall reimburse Employee for all relocation expenses incurred by
Employee in connection with locating to a new location within a twelve month
period following such termination.  This section shall
survive the termination of Employee’s employment.

 

(e)                                  Vacation and Other Absences.  During the Employment Period, the Employee
shall be entitled to paid vacation and such other paid absences whether for
holidays, illness, personal time or any similar purposes, in accordance with
the plans, policies, programs and practices of the Company.

 

7.                                       Termination of Employment.  Employee’s employment may be terminated prior
to the expiration of the Employment Period as set forth below:

 

(a)                                  Death.  The Employment Period shall terminate automatically
upon the Employee’s death during the Employment Period.

 

(b)                                 Disability.  If the Company determines in good faith that
the Disability of the Employee has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give to the
Employee written notice in accordance with Section 15(b) of its
intention to terminate the Employment Period. In such event, the

 

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Employment Period
shall terminate effective on the 30th day after receipt of such notice by the
Employee (the “Disability Effective Date”), provided that, within the 30
days after such receipt, the Employee shall not have returned to full-time
performance of the Employee’s duties. For purposes of this Agreement, “Disability”
shall mean the inability of the Employee to perform with reasonable
accommodations Employee’s essential functions and duties with the Company on a
full-time basis as a result of incapacity due to mental or physical illness
which continues for more than 180 days after the commencement of such
incapacity.

 

(c)                                  Cause.  The Company may terminate the Employment
Period for Cause.  For purposes of this
Agreement, “Cause” shall mean a written determination by the Board of
the occurrence of any of the following events:

 

(i)                                     the conviction of the Employee
or a plea of guilty or nolo contendere
by the Employee, 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 by the
Employee, regardless of whether a criminal conviction is pursued or obtained;

 

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

 

(iv)                              the violation by the Employee 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;

 

(vi)                              material breach of Sections
3, 10, 11, 13 of this Agreement; or

 

(vii)                           material breach of any other
provision of this Agreement.

 

If the Board
determines that Cause has occurred, the Board shall notify Employee in writing
with reasonable specificity as to allegations. 
If the basis of the Cause is a violation of provision (v) or (vii) of
this Section 7(c), Employee shall have twenty (20) days after
receipt of written notice from the Company to remedy such violation.  If, however, the basis of Cause is a
violation of any other section provision of this Section 7(c),
Employee shall have no opportunity to remedy the violation and Employee’s
termination shall be effective as of the date such notice is received.

 

(d)                                 Good Reason.  The Employee’s employment may be terminated
by the Employee for Good Reason (as defined below).  For purposes of this Agreement, “Good
Reason” shall mean:

 

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(i)                                     the assignment to the Employee
of duties which are materially inconsistent with the Employee’s position
(including office and reporting requirements), authority or duties, excluding
for this purpose an action not taken in bad faith and which is remedied by the
Company within 30 days after receipt of written notice thereof given by the
Employee;

 

(ii)                                  the Company’s requiring the
Employee to be based at any office or location more than 50 miles from the Company’s
current offices as described in Section 2; or

 

(iii)                               the material breach by the
Company of any provision of this Agreement not fully remedied within twenty
(20) days of written notice from Employee.

 

(e)                                  Voluntary Resignation.  The Employee’s employment may be terminated
by the Employee voluntarily for any reason upon 30 days’ written notice.

 

(f)                                    Employer’s Termination without
Cause. The
Company may terminate Employee’s employment without Cause provided that the
Company provides Employee with 30 days’ written notice.

 

(g)                                 Termination following Change in
Control.  In the event there is a Change in Control of
the Company (as hereinafter defined), the Employee shall have the right to
voluntarily terminate his employment for any reason within one hundred and
eighty (180) days following the effective date of such Change in Control, and
such termination shall automatically be deemed to be for “Good Reason” for
purposes of this Agreement, except that it will not trigger the acceleration of
vesting of any shares of restricted stock. 
This provision is limited to instances in which there is a voluntary
termination of employment by Employee within one hundred and eighty (180) days
following the effective date of a Change in Control.  This provision is not automatically
triggered by a Change in Control. 
Furthermore, this provision is not triggered by a termination based on
death or disability of Employee, a termination by the Company (with or without
Cause), or a termination by the Employee outside of the one hundred and eighty
(180) day window period referenced above, all of which shall be governed by
their respective termination provisions set forth herein.  For purposes of this Agreement, a “Change
in Control” shall mean: (i) the consummation of a merger or consolidation
of the Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the continuing
or surviving entity’s securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger, consolidation or
other reorganization, (ii) the sale, transfer or other disposition of all or
substantially all of the Company’s assets, or (iii) a change
in the composition of the Board of Directors of the Company, as a result of
which fewer than two-thirds of the incumbent directors are directors who either
(A) had been directors of the Company twelve (12) months prior to such change,
or (B) were elected, or nominated for election, to the Board of Directors with
the affirmative votes of at least two-thirds of the directors who had been
directors of the Company twelve (12) months prior to such change and who were
still in office at the time of the

 

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election or nomination.  A transaction shall not constitute a Change in Control if
its sole purpose is to change the state of the Company’s incorporation or to
create a holding company that will be owned in substantially the same
proportions by the persons who held the Company’s securities immediately before
such transaction.

 

(h)                                 Notice of Termination.  Any termination by the Company or by the
Employee shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 15(b) and shall set forth
the effective Date of Termination (as defined below) if it is other than the
date of receipt of such notice.

 

(i)                                     Obligations to Survive
Termination.  The Company acknowledges that its obligations
to Employee (or his estate, as the case may be) set forth in this Agreement
shall survive its termination.

 

(j)                                     Date of Termination. “Date of Termination”
means (i) if the Employee’s employment is terminated by the Company for Cause,
or by the Employee for Good Reason (including a deemed termination for Good
Reason following a Change of Control), the Date of Termination shall be the
date of receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Employee’s employment is terminated by
the Company other than for Cause, Disability or Death the Date of Termination
shall be the date on which the Company notifies the Employee of such
termination, (iii) if the Employee’s employment is terminated by the Employee
other than for Good Reason, the Date of Termination shall be thirty (30) days
after Employee provides written notice to the Company, and (iv) if the Employee’s
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Employee or the Disability
Effective Date, as the case may be.

 

8.                                       Obligations of the Company Upon
Termination.

 

(a)                                  Termination as a Result of Death. If the Employee’s employment
is terminated by reason of the Employee’s death during the Employment Period
pursuant to Section 7(a), in lieu of the obligations of the Company
hereunder, all Employee’s rights and benefits provided for by this Agreement
will terminate on the death; provided, however,
that Employee’s estate will be paid, to the extent Employee has not already
been paid, Employee’s pro rata Annual Base Salary, any Annual Bonus for the
fiscal year prior to Employee’s termination and Employee’s pro rata Annual
Bonus as earned through the date of death. 
The Company will also reimburse Employee for all reasonable expenses
incurred by Employee on behalf of the Company. 
This payment will be made within one month of the date of death and will
be subject to all applicable tax withholdings. 
The Company will continue all insurance coverage in place at the time of
Employee’s death for Employee’s family for six (6) months following Employee’s
death.  Employee will also be entitled to
extended health care benefits (COBRA) at Employee’s expense and to the extent
Employee is qualified for such benefits as provided by law and the applicable
Company plan documents.

 

(b)                                 Termination as a Result of
Disability.  If the Employee’s employment is terminated by
reason of the Employee’s Disability during the Employment Period

 

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pursuant to Section 7(b),
in lieu of the obligations of the Company hereunder, all Employee’s rights and
benefits provided for by this Agreement will terminate as of such date; provided, however, that Employee will be paid, to
the extent he has not already been paid, Employee’s pro rata Annual Base
Salary, any Annual Bonus for the fiscal year prior to Employee’s termination
and Employee’s pro rata Annual Bonus as earned through the date of
termination.  The Company will also
reimburse Employee for all reasonable expenses incurred by Employee on behalf
of the Company.  This payment will be
made within one month of the date of termination and will be subject to all
applicable tax withholdings.  The Company
will continue all insurance coverage in place at the time of Employee’s
Disability for Employee and Employee’s family for six (6) months following
Employee’s Disability.  Employee will
also be entitled to extended health care benefits (COBRA) at Employee’s expense
and to the extent Employee is qualified for such benefits as provided by law
and the applicable Company plan documents.

 

(c)                                  Termination for Cause.  If the Employee’s employment shall be
terminated during the Employment Period by the Company for Cause pursuant to Section 7(c),
in lieu of the obligations of the Company hereunder, all Employee’s rights and
benefits provided for by this Agreement will terminate as of such date; provided, however, that Employee will be paid, to
the extent he has not already been paid, Employee’s pro rata Annual Base Salary
as earned through the date of termination and any Annual Bonus for the fiscal
year prior to Employee’s termination. 
The Company will also reimburse Employee for all reasonable expenses
incurred by Employee on behalf of the Company. 
This payment will be made within one month of the date of termination
and will be subject to all applicable tax withholdings.  Employee will also be entitled to extended
health care benefits (COBRA) at Employee’s expense and to the extent Employee
is qualified for such benefits as provided by law and the applicable Company
plan documents.

 

(d)                                 Termination for Good Reason.  If the Employee’s employment shall be
terminated during the Employment Period by the Employee for Good Reason pursuant
to Section 7(d) (or a deemed termination for Good Reason following
a Change in Control pursuant to Section 7(g) hereunder), in lieu of
the obligations of the Company hereunder, all Employee’s rights and benefits
provided for by this Agreement will terminate as of such date; provided, however, that Employee will be paid, to
the extent he has not already been paid, Employee’s pro rata Annual Base
Salary, any Annual Bonus for the fiscal year prior to Employee’s termination
and Employee’s pro rata Annual Bonus as earned through the date of
termination.  If Employee terminates his
employment for Good Reason (or a deemed termination for Good Reason following a
Change in Control pursuant to Section 7(g) hereunder), Employee
shall also be entitled to (i) two times his Annual Base Salary, and (ii) 100%
of the Annual Bonus he would have been entitled to receive for the remainder of
the Employment Period (that is, two years) as if the performance goals had been
met.  The Company will also reimburse
Employee for all reasonable expenses incurred by Employee on behalf of the
Company.  The payments shall be made by
the Company by lump sum payment within one month of the Date of Termination and
shall be subject to all applicable tax withholdings.  Employee will also be entitled to extended
health care benefits (COBRA) at Employer’s expense for eighteen

 

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(18) months
following the Date of Termination to the extent Employee is qualified for such
benefits as provided by law and the applicable Company plan documents.

 

(e)                                  Voluntary Resignation by
Employee.  If the Employee’s employment shall be
terminated during the Employment Period by the Employee other than for Good
Reason pursuant to Section 7(e), in lieu of the obligations of the
Company hereunder, all Employee’s rights and benefits provided for by this
Agreement will terminate as of such date; provided, however, that Employee will be paid, to the extent he has not
already been paid, Employee’s pro rata Annual Base Salary as earned through the
date of termination and any Annual Bonus for the fiscal year prior to Employee’s
termination.  The Company will also
reimburse Employee for all reasonable expenses incurred by Employee on behalf
of the Company.  This payment will be made
within one month of the date of termination and will be subject to all
applicable tax withholdings.  Employee
will also be entitled to extended health care benefits (COBRA) at Employee’s
expense and to the extent Employee is qualified for such benefits as provided
by law and the applicable Company plan documents.

 

(f)                                    Termination by Company without
Cause.  If the Employee’s employment shall be
terminated during the Employment Period by the Company without Cause pursuant
to Section 7(f), in lieu of the obligations of the Company
hereunder, all Employee’s rights and benefits provided for by this Agreement
will terminate as of such date; provided,
however, that Employee will be paid, to the extent he has not
already been paid, Employee’s pro rata Annual Base Salary, any Annual Bonus for
the fiscal year prior to Employee’s termination and Employee’s pro rata Annual
Bonus as earned through the date of termination.  If the Company terminates Employee’s
employment without Cause, Employee shall also be entitled to (i) two times his
Annual Base Salary, and (ii) 100% of the Annual Bonus he would have been
entitled to receive for the remainder of the Employment Period (that is, two
years) as if the performance goals had been met.  The Company will also reimburse Employee for
all reasonable expenses incurred by Employee on behalf of the Company.  The payments shall be made by the Company by
lump sum payment within one month of the Date of Termination and shall be
subject to all applicable tax withholdings. 
Employee will also be entitled to extended health care benefits (COBRA)
at Employer’s expense for eighteen (18) months following the Date of
Termination to the extent Employee is qualified for such benefits as provided
by law and the applicable Company plan documents.

 

9.                                       Certain Additional Payments by
the Company.

 

(a)                                  Anything in this Agreement to
the contrary notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a “Payment”) would
be subject to the excise tax imposed by Section 4999 (or a successor
provision of like import) of the Code or any interest or penalties are incurred
by the Employee with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as
the (“Excise Tax”), then the Employee shall be entitled to receive an

 

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additional payment
(a “Gross-Up Payment”) in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.

 

(b)                                 Subject to the provisions of Section 9(c),
all determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by an accounting firm of national reputation
selected by the Company (the “Accounting Firm”), which shall provide
detailed supporting calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is unwilling or unable to perform its obligations pursuant
to this Section 9(b), the Employee shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 9,
shall be paid by the Company to the Employee within thirty days of the receipt
of the Accounting Firm’s determination. If the Accounting Firm determines that
no Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee’s
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and
the Employee thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company within
thirty days of such Accounting Firm’s determination to or for the benefit of
the Employee.

 

(c)                                  The Employee shall notify the
Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
business days after the Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes, interest and/or penalties with respect to such claim is due).
If the Company notifies the Employee in writing prior to the expiration of such
period that it desires to contest such claim, the Company, subject to the
provisions of this Section 9(c), shall control all proceedings

 

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taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Employee to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner. In this connection, the Employee agrees, subject to
the provisions of this Section 9(c), to (i) prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine, (ii) give the Company any information reasonably requested by the
Company relating to such claim, (iii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,
(iv) cooperate with the Company in good faith in order to effectively contest
such claim and (v) permit the Company to participate in any proceedings
relating to such claim. The foregoing is subject, however, to the following:
(A) the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Employee harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect
thereto) imposed in connection therewith and the payment of costs and expenses
in such connection, (B) if the Company directs the Employee to pay such claim
and sue for a refund, the Company shall advance the amount of such payment to
the Employee, on an interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance, (C) any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to which such contested
amount is claimed to be due shall be limited solely to such contested amount
and (D) the Company’s control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.  Upon Employee’s request, the Company shall
advance Employee reasonable and necessary expenses the Employee is required to
directly pay to contest the claim pursuant to this Section 9(c).

 

(d)                                 If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 9(c),
the Employee becomes entitled to receive any refund with respect to such claim,
the Employee shall (subject to the Company’s complying with the requirements of
Section 9(c)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that the
Employee shall not be entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid to
the Company and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

 

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10.                                 Confidential Information.

 

(a)                                  Company Provided Access to
Confidential Information.  In connection with Employee’s employment by
the Company and in return for Employee’s promises herein, specifically
including those in Section 10(b), (c) and Section 13,
the Company promises to provide the Employee and does provide the Employee upon
the execution of this Agreement with the Company’s confidential information including,
without limitation, information pertaining to the Company’s past, current and
future business plans, corporate opportunities, operations, acquisition, merger
or sale strategies, marketing, cost and pricing structure, margins,
profitability, partners, partnership or other business arrangements or
agreements with third parties, customers, customer contracts, books, records
and documents, technical information (including, without limitation, facility
plans and designs), equipment and services (collectively, “Confidential
Information”).

 

(b)                                 Value and Non-Disclosure/Non-Use
of Confidential Information.  Employee acknowledges that the Company’s
business is highly competitive and that the Confidential Information and
opportunity to develop relationships with Company customers, clients, vendors
or partners promised by the Company are valuable, special, and unique assets of
the Company which the Company uses in its business to obtain a competitive
advantage over the Company’s competitors which do not know or use this
information.  Employee further
acknowledges that protection of the Confidential Information against
unauthorized disclosure and use is of critical importance to the Company in
maintaining its competitive position. 
Accordingly, Employee hereby agrees that he will not, at any time during
or after his employment by the Company, make any unauthorized disclosure of any
Confidential Information or make any use thereof or of any customer
relationships, except (a) for the benefit of, and on behalf of, the Company or
(b) as required to be disclosed pursuant to legal process (e.g., a subpoena),
provided that the Employee notifies the Company immediately upon receiving or
becoming aware of the legal process in question so that the Company may have
the opportunity to seek a protective or other order to restrict or prevent such
disclosure.

 

(c)                                  Return of Documents and
Electronic Data.  All written or electronic or other data or
materials, records and other documents made by, or coming into the possession
of, Employee during the period of his employment by the Company which contain
or disclose the Confidential Information and/or customer relationships shall be
and remain the property of the Company. 
Upon request, and in any event without request upon termination of
Employee’s employment by the Company, for any reason, he promptly shall deliver
the same, and all copies, derivatives and extracts thereof, to the Company.

 

(d)                                 Breach of this Section.  The Employee understands and agrees that the
restrictions in this Section 10 do not terminate when the Employee’s
employment terminates. The Employee understands and agrees that such
restrictions may limit his ability to engage in a business similar to the
Company’s business (specifically a business which is directly competitive with
the activities conducted by the Company or any of its affiliates within the
Correctional Industry (as defined in Section 13(a)(i))) in a
position

 

11

 

similar to his
position with the Company because such a position would inevitably and
unavoidably require him to disclose the Confidential Information protected
herein, but acknowledges that he will receive sufficient monetary and other
consideration from the Company hereunder to justify such restriction.  The Employee acknowledges that money damages
would not be sufficient remedy for any breach of this Section 10 by
the Employee, and the Company shall be entitled to enforce the provisions of
this Section 10 by (a) terminating any payments then owing to the
Employee under this Agreement and/or (b) specific performance and injunctive
relief, in each case as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the
exclusive remedies for a breach of this Section 10, but shall be in
addition to all remedies available at law or in equity to the Company,
including, without limitation, the recovery of damages from the Employee and
his agents involved in such breach.

 

11.                                 Compliance with Company Policies.  The Employee shall comply with all practices,
policies and procedures (including the Company’s conflict of interest policy)
as in effect from time to time.

 

12.                                 Ownership of Information, Ideas,
Concepts, Improvements, Discoveries and Inventions and all Original Works of
Authorship.

 

(a)                                  All information, ideas,
concepts, improvements, discoveries and inventions, whether patentable or not,
which are conceived, made, developed or acquired by Employee or which are
disclosed or made known to Employee, individually or in conjunction with
others, during Employee’s employment by the Company and which relate to the
Company’s business, products or services (including all such information
relating to corporate opportunities, research, financial and sales data,
pricing and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customer’s organizations or within the organization of
acquisition prospects, or marketing and merchandising techniques, prospective
names and marks) are and shall be the sole and exclusive property of the
Company. Moreover, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and
all other writings or materials of any type embodying any of such information,
ideas, concepts, improvements, discoveries and inventions are and shall be the
sole and exclusive property of the Company.

 

(b)                                 In particular, Employee hereby
specifically sells, assigns and transfers to the Company all of his worldwide
right, title and interest in and to all such information, ideas, concepts,
improvements, discoveries or inventions, and any United States or foreign
applications for patents, inventor’s certificates or other industrial rights
that may be filed thereon, including divisions, continuations,
continuations-in-part, reissues and/or extensions thereof, and applications for
registration of such names and marks. Both during the period of Employee’s
employment by the Company and thereafter, Employee shall assist the Company and
its nominee at all times in the protection of such information, ideas,
concepts, improvements, discoveries or inventions, both in the United States
and all foreign countries, including but not limited to, the execution of all
lawful oaths and all assignment documents requested by the Company or its
nominee in

 

12

 

connection with the
preparation, prosecution, issuance or enforcement of any applications for
United States or foreign letters patent, including divisions, continuations,
continuations-in-part, reissues, and/or extensions thereof, and any application
for the registration of such names and marks.

 

(c)                                  If during Employee’s employment
by the Company, Employee creates any original work of authorship fixed in any
tangible medium of expression which is the subject matter of copyright (such as
videotapes, written presentations on acquisitions, computer programs, drawings,
maps, architectural renditions, models, manuals, brochures or the like)
relating to the Company’s business, products, or services, whether such work is
created solely by Employee or jointly with others, the Company shall be deemed
the author of such work if the work is prepared by Employee in the scope of his
employment.  In the event such work is
neither prepared by the Employee within the scope of his employment or is not a
work specially ordered and deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to the Company all
of Employee’s worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee’s employment by
the Company and thereafter, Employee agrees to assist the Company and its
nominee, at any time, in the protection of the Company’s worldwide right, title
and interest in and to the work and all rights of copyright therein, including
but not limited to, the execution of all formal assignment documents requested
by the Company or its nominee and the execution of all lawful oaths and
applications for registration of copyright in the United States and foreign
countries.

 

13.                                 Obligations to Refrain From
Competing Unfairly.

 

(a)                                  The Employee acknowledges and
agrees that the restrictive covenants contained in this Section are
supported by adequate consideration to the Employee from the Company as
specified in this Agreement, including, but not limited to, the consideration
provided in Sections 1, 4, 6, 8, 9, and 10. In exchange for the
consideration specified herein and as a material incentive to enter into this
Agreement, and to enforce the Employee’s obligations under Section 10
hereof, the Employee agrees that during the Employment Period and for one (1)
year following the Date of Termination (“Non-Competition Period”) within
the territory of the United States, regardless of the reason for such
termination, he shall not at any time, directly or indirectly, for the benefit
of Employee or any other party than the Company:

 

(i)                                     engage in any activity, work,
business, or investment in the Correctional Industry, or any other business
that is directly competitive with the activities conducted by the Company or
any of its affiliates, during the Employee’s employment with the Company,
including any attempted or actual activity as an investor, employee, officer,
director, shareholder, consultant, independent contractor, partner, joint
venture, manager, sales representative, agent, owner, or any similar capacity
in the Correctional Industry; provided, however, the Employee may own an
investment interest of less than 1% in a publicly traded company.  “Correctional Industry” means
companies engaged as a

 

13

 

provider of corrections, treatment and
educational services to government agencies;

 

(ii)                                  render advice or services to, or
otherwise assist, any other person or entity who is engaged, directly or
indirectly, in the Correctional Industry or any other business that is directly
competitive with activities conducted by the Company or any of its affiliates
during the Employee’s employment with the Company;

 

(iii)                               solicit, call on, transact any
business with or consult with, directly or indirectly and in any manner,
current or potential customers, suppliers, venders, or contractors of the
Company or any affiliate of the Company with whom the Employee had contact with
or Confidential Information about or for whom the Employee supervised or
managed an another employee, who had such contact or information, if such
solicitation, business, or consultation would have or is likely to have an
adverse effect upon the Company or any of its affiliates; or

 

(iv)                              solicit, hire, or seek to
solicit or hire any employee of the Company or in any other manner attempt,
directly or indirectly, attempt to influence, induce, or encourage any employee
of the Company to leave the employment of the Company, nor shall the Employee
use or disclose to any person, partnership, entity, association, or corporation
any information concerning the names, addresses, personal telephone numbers,
work habits, or compensation of any employees of the Company.

 

(b)                                 The Employee understands that
the foregoing restrictions may limit his ability to engage in a business
similar to the Company’s business in specific geographic areas for the
Non-Competition Period, but acknowledges that he will receive sufficient
monetary and other consideration from the Company hereunder to justify such
restriction. The Employee acknowledges that money damages would not be
sufficient remedy for any breach of this Section 13 by Employee,
and the Company shall be entitled to terminate any payments then owing to the
Employee under this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the
exclusive remedies for a breach of this Section 13, but shall be in
addition to all remedies available at law or in equity to the Company,
including, without limitation, the recovery of damages from the Employee and
his agents involved in such breach.

 

(c)                                  It is expressly understood and
agreed that the Company and the Employee consider the restrictions contained in
Section 13 hereof to be reasonable and necessary for the purposes
of preserving and protecting the Confidential Information belonging to the
Company, nevertheless, if any of the aforesaid restrictions is found by a court
having jurisdiction to be unreasonable, over broad as to geographic area or
time or otherwise unenforceable, the parties intend for the restrictions
therein set forth to be modified by such court so as to be reasonable and
enforceable and, as so modified by the court, to be fully enforced.

 

14

 

14.                                 Successors.

 

(a)                                  This Agreement is personal to
the Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee’s legal representatives.

 

(b)                                 This Agreement shall inure to
the benefit of and be binding upon the Company and its successors and assigns.

 

(c)                                  The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, “Company”
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform the Company’s obligations
hereunder in the same manner and to the same extent that the Company would be
required to perform them if no such succession had taken place.  Employee expressly agrees and consents to
Employer’s assignment of this Agreement.

 

(d)                                 The Company will remain liable
for all of its obligations under this Agreement, even after any assumption of
the Agreement by any successor.

 

15.                                 Miscellaneous.

 

(a)                                  This Agreement supersedes all
previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to
principles of conflict of laws.  Each of
the parties hereto agrees that any action or proceeding brought to enforce the
rights or obligations of any party hereto under this Agreement may be commenced
and maintained in any court of competent jurisdiction located in Harris County,
Texas, and that any Texas State court or federal court sitting in Harris
County, Texas shall have exclusive jurisdiction over any such action or
proceeding brought by any of the parties hereto.  The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.

 

15

 

(b)                                 All notices and other
communications hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

 

	
  If to the Employee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  James E.
  Hyman

  	
   

  	
   

  
	
  755 Westover
  Road

  	
   

  	
   

  
	
  Stamford, CT
  06902

  	
   

  	
   

  
	
  Telephone:
  (203) 316-8228

  	
   

  	
   

  
	
  Telecopy:
  (203) 351-0949

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Alan L.
  Sklover

  	
   

  	
   

  
	
  Sklover
  & Associates, LLC

  	
   

  	
   

  
	
  10
  Rockefeller Plaza

  	
   

  	
   

  
	
  New York,
  New York 10020

  	
   

  	
   

  
	
  Telephone:
  (212) 757-5000

  	
   

  	
   

  
	
  Telecopy:
  (212) 757-5002

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the
  Company:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cornell
  Companies, Inc.

  	
   

  	
   

  
	
  1700 West
  Loop South, Suite 1500

  	
   

  	
   

  
	
  Houston,
  Texas 77027

  	
   

  	
   

  
	
  Attention:
  Human Resources

  	
   

  	
   

  
	
  Telephone:
  (713) 623-0790

  	
   

  	
   

  
	
  Telecopy:
  (713) 623-2797

  	
   

  	
   

  

 

or to such
other address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually
received by the addressee.

 

(c)                                  The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.

 

(d)                                 The Company may withhold from
any amounts payable under this Agreement such federal, state or local taxes as
shall be required to be withheld pursuant to any applicable law or regulation.

 

(e)                                  The Employee’s or the Company’s
failure to insist upon strict compliance with any provision hereof or any other
provision of this Agreement or the failure to assert any right the Employee or
the Company may have hereunder, including, without limitation, the right of the
Employee to terminate employment for Good Reason pursuant to Section 7(d)
of this Agreement, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.

 

16

 

(f)                                    The parties hereby acknowledge
that the right to trial by jury is a constitutional one, but that it may be
waived.  Each of the parties, after
consulting or having the opportunity to consult, with counsel of their choice,
knowingly, voluntarily and intentionally waives any right any of them may have
to a trial by jury in any litigation based upon or arising out of this
Agreement or any of the transactions contemplated hereby or any course of
conduct, dealing, statements (whether oral or written), or action of any of
them.

 

(g)                                 The Company will pay for all of
Employee’s legal fees in connection with the negotiation of this Agreement up
to $12,000.

 

(h)                                 If the Company fails to honor
any of its payment obligations to Employee, then Employee is relieved from all
post-termination obligations under this Agreement.

 

(i)                                     If Employee seeks to enforce
this Agreement against the Company, the Company shall pay all reasonable legal
costs in connection with that proceeding, but only if Employee is successful in
such proceeding.

 

(j)                                     Nothing in this Agreement serves
to deny Employee any payment, benefit or right set forth in any other written
agreement with the Company.

 

[Signature page follows.]

 

17

 

IN WITNESS WHEREOF, the Employee and,
pursuant to due authorization from the Board, the Company have caused this
Agreement to be executed this 14th day of March, 2005.

 

 

	
   

  	
  Employee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James E. Hyman

  	
   

  
	
   

  	
  James E. Hyman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patrick N. Perrin

  	
   

  
	
   

  	
  Name:

  	
  Patrick N. Perrin

  	
   

  
	
   

  	
  Its:

  	
  Senior Vice president

  and Secretary

  	
   

  
					

 

18Exhibit 10.2

 

RESTRICTED
STOCK AGREEMENT

 

THIS
RESTRICTED STOCK AGREEMENT (the “Agreement”) is made and entered into as
of this 14th day of March, 2005, by and between Cornell Companies, Inc., a
Delaware corporation (the “Company”) and James E. Hyman (the “Employee”).

 

WHEREAS,
pursuant to the Employment Agreement between the Company and the Employee dated
as of the date hereof (“Employment Agreement”), the Employee has become
the Chief Executive Officer and Chairman of the Board of Directors of the
Company;

 

WHEREAS, as
an inducement for the Employee to accept such employment, the Board of
Directors of the Company has approved and authorized the issuance of certain
shares of common stock of the Company to the Employee, subject to the terms and
conditions of this Agreement; and

 

WHEREAS,
capitalized terms not defined herein shall have the definitions set forth in
the Employment Agreement.

 

NOW,
THEREFORE, in consideration of the mutual terms, conditions and covenants, the
parties hereto agree as follows:

 

1.                                       Award of
Restricted Stock.  The Company hereby awards to the Employee,
effective as of the date hereof, eighty-five thousand (85,000) shares of common
stock, par value $0.001 per share, of the Company (the “Restricted Stock”).

 

2.                                       Vesting Schedule. 
Subject to the further provisions of this Agreement, the shares of
Restricted Stock shall vest as follows:

 

(a)                                  25,000 shares of Restricted
Stock shall vest on January 24, 2008; provided that the Employee has
remained continuously employed by the Company from the date hereof through January 24,
2008.

 

(b)                                 30,000 shares of Restricted
Stock shall vest upon the Company achieving a certain stock price within a
certain time period as established by the Compensation Committee of the Board
of Directors.

 

(c)                                  30,000 shares of Restricted
Stock shall vest upon the Company achieving a certain earnings per share within
a certain time period as established by the Compensation Committee of the Board
of Directors.

 

Subject to Sections 3 and 4 hereof, the period beginning on the date
hereof through and including the vesting date for any particular shares of
Restricted Stock shall be referred to herein as the “Restricted Period”
with respect to such shares of Restricted Stock.

 

 

3.                                       Acceleration of Vesting. 
Section 2 notwithstanding, in the event that the Company
terminates the Employee’s employment without Cause, or the Employee terminates
his employment for Good Reason (not including a deemed termination for Good
Reason following a Change in Control pursuant to Section 7(g) of the
Employment Agreement), all shares of Restricted Stock, to the extent not
already vested, granted hereunder which are then subject to the restrictions
set forth above shall immediately vest and cease to be subject to the
restrictions imposed hereby.

 

4.                                       Forfeiture. 
All unvested shares of Restricted Stock shall automatically expire and
be forfeited by the Employee upon the occurrence of the following events: (i)
the Company terminates the Employee’s employment for Cause, (ii) the Employee
voluntarily resigns without Good Reason, (iii) the Employee’s employment is
terminated by reason of death or Disability, or (iv) the Company fails to meet
the milestones specified in Sections 2(b) and 2(c) within the time
periods established by the Compensation Committee.

 

5.                                       Transferability.  During the Restricted Period, the unvested
shares of Restricted Stock may not be sold, assigned, transferred, pledged, or
otherwise disposed of under any circumstances. 
The unvested shares of Restricted Stock shall not be subject to
execution, attachment or similar process. 
Upon any attempt to transfer, assign, pledge, or otherwise dispose of
any unvested shares of Restricted Stock or any of such rights contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
any unvested shares of Restricted Stock or such rights, such unvested shares of
Restricted Stock and such rights shall immediately become null and void.  Vested shares of Restricted Stock may not be
sold, assigned, transferred, pledged, or otherwise disposed of, other than in
accordance all applicable requirements of federal and state securities laws and
with all applicable requirements of any stock exchange on which the Common
Stock may be listed at the time of such sale, assignment, transfer, pledge or
other disposition.

 

6.                                       Stock
Certificate.  Upon
the grant of Restricted Stock hereunder, one or more stock certificates issued
in respect of such shares of Restricted Stock shall be registered in the name
of the Employee and shall be deposited by the Employee with the Company
together with a stock power endorsed in blank. 
The Company shall provide the Employee with a receipt for such stock
certificate acknowledging that the Company is holding such certificate pursuant
to the terms of this Agreement.  All
stock certificates for shares of Restricted Stock during the Restricted Period
shall bear the following legend:

 

“The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the agreement entered into between the registered
owner and Cornell Companies, Inc..  A
copy of such agreement is on file at the principal place of business of Cornell
Companies, Inc.”

 

With regard to
any shares of Restricted Stock which vest pursuant to Sections 2 or 3,
the Company shall, within 60 days of the date such shares cease to be subject
to restrictions, transfer 

 

2

 

such shares
free of all restrictions set forth in this Agreement to the Employee (or his
legal representative, beneficiary or heir); provided,
however, that such shares shall continue to be subject to the
restrictions on transfer imposed under applicable requirements of federal and
state securities laws and any stock exchange on which the Common Stock may be
listed at the time of such transfer.

 

7.                                       Stockholder’s
Rights.  Subject to the terms of this
Agreement, during the Restricted Period, the Employee shall have, with respect
to the Restricted Stock, all rights of a stockholder of the Company, including
the right to vote such shares and the right to receive all dividends paid with
respect to the shares of Restricted Stock; provided,
that the right to vote and receive dividends shall terminate immediately with
respect to any shares of Restricted Stock upon forfeiture of those shares
pursuant to Sections 4 hereof.

 

8.                                       Withholding Tax.  The Employee hereby
agrees that (i) he shall pay to the Company the amount of taxes which the
Company is required to withhold with respect to any benefit under the Plan or
this Agreement and (ii) in the event he fails to make such payment, the Company
may, in its sole discretion, withhold from any payment or consideration to be
paid to the Employee by the Company any such tax which the Company believes is
required to be withheld, or retain or sell without notice a sufficient number
of shares of Restricted Stock awarded hereunder to cover the amount to be
withheld.

 

9.                                       Representations. 
The Employee hereby represents and warrants to the Company that all
shares of Restricted Stock acquired upon the grant of Restricted Stock
hereunder have been acquired for his own account for investment purposes only
and not with a view toward the sale or distribution of any of the shares of
Restricted Stock.  The Employee
acknowledges that he has been afforded full opportunity to request any and all
relevant information and ask questions concerning the purposes and business of
the Company, has been provided all information and copies of all documents he
or she has requested, and has received answers to such questions to his full
satisfaction.  The Employee acknowledges
that the Company is under no obligation to register any shares of Restricted
Stock under any securities laws, and the Company has no present intention to do
so.

 

10.                                 Successors.

 

(a)                                  This Agreement is personal to
the Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee’s legal representatives.

 

(b)                                 This Agreement shall inure to
the benefit of and be binding upon the Company and its successors and assigns.

 

(c)                                  The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, “Company”

 

3

 

shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to
assume expressly and agree to perform the Company’s obligations hereunder in
the same manner and to the same extent that the Company would be required to
perform them if no such succession had taken place.  Employee expressly agrees and consents to
Employer’s assignment of this Agreement.

 

11.                                 Miscellaneous.

 

(a)                                  This Agreement supersedes all
previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to
principles of conflict of laws.  Each of
the parties hereto agrees that any action or proceeding brought to enforce the
rights or obligations of any party hereto under this Agreement may be commenced
and maintained in any court of competent jurisdiction located in Harris County,
Texas, and that any Texas State court or federal court sitting in Harris
County, Texas shall have exclusive jurisdiction over any such action or
proceeding brought by any of the parties hereto.  The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.

 

(b)                                 All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

 

If to the Employee:

 

James E. Hyman

755 Westover Road

Stamford, CT 06902

Telephone: (203) 316-8228

Telecopy: (203) 351-0949

 

With a copy to:

 

Alan L. Sklover

Sklover & Associates, LLC

10 Rockefeller Plaza

New York, New York 10020

Telephone: (212) 757-5000

 

4

 

Telecopy: (212) 757-5002

 

If to the Company:

 

Cornell Companies, Inc.

1700 West Loop South, Suite 1500

Houston, Texas 77027

Attention: Human Resources

Telephone: (713) 623-0790

Telecopy: (713) 623-2797

 

or to such
other address as either party shall have furnished to the other in writing in
accordance herewith. Notice and communications shall be effective when actually
received by the addressee.

 

(c)                                  The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.

 

(d)                                 The Company may withhold from
any amounts payable under this Agreement such federal, state or local taxes as
shall be required to be withheld pursuant to any applicable law or regulation.

 

(e)                                  The Employee’s or the Company’s
failure to insist upon strict compliance with any provision hereof or any other
provision of this Agreement or the failure to assert any right the Employee or
the Company may have hereunder, including, without limitation, the right of the
Employee to terminate employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.

 

(f)                                    The parties hereby acknowledge
that the right to trial by jury is a constitutional one, but that it may be
waived.  Each of the parties, after
consulting or having the opportunity to consult, with counsel of their choice,
knowingly, voluntarily and intentionally waives any right any of them may have
to a trial by jury in any litigation based upon or arising out of this
Agreement or any of the transactions contemplated hereby or any course of
conduct, dealing, statements (whether oral or written), or action of any of
them.

 

[Signature page follows.]

 

5

 

IN WITNESS WHEREOF, the Employee and, pursuant to due authorization
from the Board, the Company have caused this Agreement to be executed this 14th
day of March, 2005.

 

 

	
   

  	
  Employee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James E. Hyman

  	
   

  
	
   

  	
  James E.
  Hyman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patrick
  N. Perrin

  	
   

  
	
   

  	
  Name:

  	
  Patrick N.
  Perrin

  	
   

  
	
   

  	
  Its:

  	
  Senior Vice
  President

  and Secretary

  	
   

  
					

 

6

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