Document:

Exhibit

10.1

 

EMPLOYMENT

AGREEMENT

 

 

This Employment Agreement (“Agreement”), is

entered into between CORNELL COMPANIES, INC., a Delaware corporation having

offices at 1700 West Loop South, Suite 1500, Houston, Texas 77027 (“Company”),

and STEVEN W. LOGAN (“Employee”) executed on September 18, 2002 and

effective as of October 1, 2002 (the “Effective Date”).

 

WITNESSETH:

 

WHEREAS, the Company is desirous of retaining the

services of Employee pursuant to the terms and conditions and for the

consideration set forth in this Agreement, and Employee is desirous of

providing services to the Company pursuant to such terms and conditions and for

such consideration;

 

NOW, THEREFORE, for and in consideration of the mutual

promises, covenants, and obligations contained herein, the Company and Employee

agree as follows:

 

ARTICLE

1: TERM AND DUTIES

 

1.1           The

Company agrees to retain Employee, and Employee agrees to provide services to

the Company, beginning as of the Effective Date and continuing until

December 31, 2003, subject to the terms and conditions of this Agreement

(the “Term”).

 

1.2           Employee

shall perform such responsibilities in the capacity of Transition Services

Facilitator as reasonably agreed to between Employee and the Board of Directors

or the Executive Chairman, such responsibilities to include corresponding with

federal and state regulatory agencies.

 

1.3           Employee has had and

continues to have access to confidential information including, but not limited

to, the Company’s books, records and documents, business acquisition and

expansion plans, technical information concerning the Company’s operational

methods, services and processes, construction plans, procurement procedures and

pricing techniques, the names of customers and other nonpublic information (e.g.,

credit and financial data) concerning the Company’s customers and business

associates, all of which comprise confidential business information and trade

secrets of the Company and all of which are valuable, special, and unique

assets of the Company that the Company uses in its business to obtain a

competitive advantage over the Company’s competitors which do not know or use

this information (“Confidential Information”).  Confidential Information shall not include any information that

is generally available to the public. 

Employee agrees that he will not disclose in any way to any person,

directly or indirectly, or use for his own benefit or for the benefit of anyone

else or any other person or entity, the Confidential Information gained while

employed by the Company.  Employee

acknowledges that money damages would not be sufficient remedy for any breach

of this section by Employee, and the Company shall be entitled to enforce any

provisions of this

 

 

section by terminating the employment relationship, terminating any

unvested payments then owing to 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, 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 Employee and his

agents involved in this breach.  For

purposes of this Section 1.3, the term “Company” shall also include Affiliates

(as defined below) of the Company.

 

1.4           Employee is not required

to provide full-time services to the Company. 

Employee is not required to maintain an office at the Company or any of

its subsidiaries.  Except as otherwise

provided in this Agreement, Employee may serve as an employee or consultant to an entity other than the

Company.  The Company and Employee shall

cooperate as to the level of interference of Employee’s services hereunder with

other business commitments of Employee during the Term so as to minimize the

level of inconvenience to Employee. 

Employee’s services shall be rendered by personal consultation at his

residence or office, wherever maintained, or by correspondence through the

mails, telephone, facsimile or electronic mail, including weekends and

evenings, as may be most convenient to Employee.  Employee shall not be obligated (i) to occupy any office of the

Company or any of its subsidiaries, or (ii) to render any services whatsoever

to the Company or any of its subsidiaries other than those specified in this

Article I.

 

1.5           It is understood

and agreed that Employee shall have no authority to act on behalf of the

Company or to bind the Company to any contract or obligation whatsoever.

 

ARTICLE

2: COMPENSATION AND BENEFITS

 

2.1           Employee’s

monthly compensation during the Term shall be $10,000 (the “Monthly

Compensation”), payable in accordance with the Company’s customary payroll

practices.  Employee shall be reimbursed

for reasonable expenses incurred in connection with the performance of his

duties under this Agreement and approved in advance by the Company’s Executive

Chairman or Chief Financial Officer.

 

2.2           The

Company shall provide, for 18 months following the Effective Date, health and

medical benefits to Employee and his family on a basis (and at a cost to the

Company) substantially similar to those benefits provided to employees of the

Company during the term of this Agreement (the “Benefits”).  The Employee shall not be entitled to

participate in any other benefit plans and programs of the Company.  At Employee’s election, and in lieu of

Benefits, the Company shall pay Employee the sum of $800.00 per month for the

referenced 18-month period.

 

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2.3           The

Company shall not by reason of this Article 2 be obligated to institute,

maintain, or refrain from changing, amending, or discontinuing, any such

benefit plan or program, so long as such actions are similarly applicable to

covered participants generally. 

Moreover, except as specifically provided herein to the contrary, none

of the benefits or arrangements described in this Article 2 shall be secured or

funded in any way, and each shall instead constitute an unfunded and unsecured

promise to pay money in the future exclusively from the general assets of the

Company.

 

2.4           The

Company may withhold from any compensation, benefits, or amounts payable under

this Agreement all federal, state, city, or other taxes as may be required

pursuant to any law or governmental regulation or ruling.

 

ARTICLE

3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION

 

3.1           Notwithstanding

any other provisions of this Agreement, the Company shall have the right to

terminate this Agreement at any time prior to the expiration of the Term for

any of the following reasons:

 

a.             For

“Cause” upon the good faith determination by the Company’s Board of

Directors that Cause exists for the termination of this Agreement.  As used in this Section 3.1.a, the term Cause

shall mean (i) Employee’s gross negligence or willful misconduct in the

performance of the duties and services required of Employee pursuant to this

Agreement, (ii) Employee’s felony indictment involving moral turpitude, (iii)

Employee’s material breach of any provision of this Agreement which remains

uncorrected for thirty (30) days following written notice to Employee by the

Company of such breach, (iv) Employee’s breach of any covenant or obligation in

Article 5 or (v) Employee becomes employed by or renders competitive business

services (whether for or without compensation) to any person or entity

transacting any Competitive Business (as defined below);

 

b.             for

any other reason whatsoever, including termination without Cause, in the sole

discretion of the Company;

 

c.             upon

Employee’s death; or

 

d.             upon

Employee’s becoming disabled as to entitle Employee to benefits under the

Company’s long-term disability plan or, if Employee is not eligible to

participate in such plan or if such plan is not available, then Employee is

permanently and totally unable to perform Employee’s duties for the Company as

a result of any medically determinable physical or mental impairment as

supported by a written medical opinion to the foregoing effect by a physician

selected by the Company and Employee’s spouse or other member of Employee’s

immediate family.  With respect to any

options granted, Employee shall be considered “disabled” in accordance with,

and “disability” shall have the meaning set forth in, the governing option plan

or plans under which the options were granted.

 

3

 

The termination of Employee by the Company prior to

the expiration of the Term shall constitute a “Termination for Cause” if

made pursuant to Section 3.1.a, and the effect of such termination is specified

in Section 3.4.  The termination of

Employee by the Company prior to the expiration of the Term shall constitute an

“Involuntary Termination” if made pursuant to Section 3.1.b, and the

effect of such termination is specified in Section 3.5.  The effect of this Agreement being

terminated pursuant to Section 3.1.c as a result of Employee’s death is

specified in Section 3.6.  The effect of

this Agreement being terminated pursuant to Section 3.1.d as a result of

Employee becoming disabled is specified in Section 3.7.

 

3.2           Employee

shall have the right to terminate this Agreement at any time prior to the

expiration of the Term, for any reason whatsoever, in the sole discretion of

Employee, on ten (10) days prior written notice to the Company.  The termination of this Agreement by

Employee prior to the expiration of the Term shall constitute a “Voluntary

Termination” if made pursuant to this Section 3.2, and the effect of such

termination is specified in Section 3.3.

 

3.3           Upon

a Voluntary Termination of this Agreement by Employee prior to expiration of

the Term, all future compensation to which Employee is entitled and all future

benefits for which Employee is eligible, with the exception of any and all

statutory rights and benefits, shall cease and terminate as of the date of such

termination.  Employee shall be entitled

to pro rata Monthly Compensation through the date of such termination.  Vested options shall be exercisable pursuant

to the terms of the option plan or plans under which they were granted and

unvested options shall terminate on the date of termination.

 

3.4           If

this Agreement is terminated by the Company for Cause prior to expiration of

the Term, all future compensation to which Employee is entitled and all future

benefits for which Employee is eligible, with the exception of any and all

statutory rights and benefits, shall cease and terminate as of the date of such

termination.  Employee shall be entitled

to pro rata Monthly Compensation through the date of such termination.  Vested options shall be exercisable pursuant

to the terms of the option plan or plans under which they were granted and

unvested options shall terminate on the date of termination.

 

3.5           Upon

an Involuntary Termination of this Agreement prior to expiration of the Term,

Employee shall be entitled to receive the Monthly Compensation for the

remainder of the Term and Benefits as provided for in Section 2.2.  In addition, Employee’s unvested options

shall continue to vest for the remainder of the Term, and shall be exercisable

as if Employee had remained employed through the remainder of the Term.

 

3.6           Upon

termination of this Agreement during the Term as a result of Employee’s death,

Employee’s heirs, administrators, or legatees shall be entitled to receive the

Monthly Compensation for the remainder of the Term and Benefits as provided for

in Section 2.2.  Vested options shall be

exercisable pursuant to the terms of the option plan or plans under which they

were granted and unvested options shall terminate on the date of Employee’s

death.

 

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3.7           Upon

termination of this Agreement during the Term as a result of Employee’s

disability, Employee shall be entitled to receive the Monthly Compensation for

the remainder of the Term and Benefits as provided for in Section 2.2.  Vested options shall be exercisable pursuant

to the terms of the Plan and unvested options shall terminate on the date of

termination of this Agreement as a result of Employee’s disability.

 

3.8           Upon

expiration of the Term or termination of this Agreement pursuant to Section

3.1.a or Section 3.2, whichever occurs first, Employee shall be entitled to no

further compensation or benefits, with the exception of (a) any and all

statutory rights and benefits and (b) compensation and benefits vested or

accrued prior to such termination, subject to the terms and provisions of the

plans and programs pursuant to which such benefits were accrued.

 

3.9           In

all cases, the compensation and benefits payable to Employee under this

Agreement upon termination of this Agreement shall be offset against any

amounts to which Employee may otherwise be entitled under any and all severance

plans, and policies of the Company or its affiliates; provided, however, that

there shall be no offset against any sums that might be payable to Employee

pursuant to any Company-provided life insurance, deferred bonus plan,

short-term or long-term disability insurance, or any 401(k) or similar welfare

or benefit plans.

 

3.10         Termination

of this Agreement does not terminate those obligations imposed by this

Agreement which are continuing obligations, including, without limitation,

Employee’s obligations under Section 1.3, Article 5 and Article 7.

 

ARTICLE

4: EXPIRATION OF THE TERM OF EMPLOYMENT RELATIONSHIP

 

4.1           Upon

expiration of the Term, the Company shall have no obligation to agree to any

renewal of this Agreement or to offer Employee a new employment agreement.

 

ARTICLE

5: RELATIONSHIP OBLIGATIONS AFTER END OF FULL-TIME EMPLOYMENT

 

5.1           As

part of the consideration for the compensation and benefits to be paid to

Employee hereunder and in order to protect the Company’s interest in the trade

secrets of the Company, and as an additional consideration and incentive for

the Company to enter into this Agreement, the Company and Employee agree to the

provisions of this Article.

 

5.2           Except

as set forth in Section 5.4, the obligations in this Article shall commence on

the Effective Date and shall continue for a period ending on December 31, 2003

(the “Covenant Period”) regardless of any prior termination of the

employment relationship pursuant to Article 3 hereof.

 

5.3           Employee

hereby acknowledges and agrees that:  (i)

the Company would not enter into this Agreement or retain Employee if Employee

had not executed and delivered this

 

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Agreement to the Company and (ii) Employee has had and may have

throughout his employment relationship with the Company or its Affiliates (as

defined below), access to Confidential Information with respect to which the

Company is entitled to the protections afforded by this Agreement and to the

remedies for enforcement of this Agreement provided by law or in equity.

 

5.4           Until

April 30, 2003, Employee shall not, and shall cause each of his Affiliates not

to:

 

a.             within

the United States (the “Territory”), transact any Competitive Business

(as defined below), carry on or be engaged or otherwise take part in any

Competitive Business (whether for his own account or for the account of any

person or entity, other than the Company), or render competitive business

services (whether for or without compensation) to any person or entity (other

than the Company) who or which is, to the knowledge of Employee, engaged in any

Competitive Business at the time the service is rendered.

 

b.             share

in the earnings of, or beneficially own or hold any security issued by, or

otherwise own or hold any interest (including, without limitation, any debt)

in, any person or entity who or which is directly or indirectly engaged in any

Competitive Business within the Territory.

 

5.5           Until

December 31, 2003, Employee shall not carry on or be engaged or otherwise take

part in any Prohibited Activity (as defined below), or render competitive

business services (whether for or without compensation) to any person or entity

to directly assist in any Prohibited Activity at the time the service is

rendered.

 

5.6           Without

limiting the generality of the provisions of this Article 5, Employee (or an

Affiliate of Employee) shall be deemed to transact or be engaged in a

particular business if Employee or any Affiliate (whether alone or in

association with one or more other persons or other entities) is, without

limitation, an owner, proprietor, partner, member, stockholder, officer,

employee, agent, independent contractor, director or joint venturer of, or a

consultant or lender to, or an investor in any manner in, any person or entity

who or which is, to the knowledge of Employee, directly or through an

Affiliate, engaged in any such Competitive Business, including, without

limitation, any such person or entity with respect to which a member of the

immediate family of the Employee is an Affiliate.  Notwithstanding the foregoing provisions of this Article 5,

Employee (or an Affiliate of Employee) may own, solely as an investment,

securities if Employee (or an Affiliate of Employee) (i) is not an Affiliate of

the issuer of such securities and (ii) does not, directly or indirectly,

beneficially own more than 5% of the class of which such securities are a part.

 

5.7           During

the Covenant Period, Employee shall not, and shall cause each of his Affiliates

not to, whether for his own account or for the account of any other person or

other entity (other than the Company or any Affiliate of the Company), solicit

the employment or services of, or cause or attempt to cause to leave the

employment or services of the Company or any Affiliate of the Company, any

person or entity who or which is employed by, or otherwise

 

6

 

engaged to perform services for the Company or any Affiliate of the

Company (whether in the capacity of employee, consultant, independent

contractor or otherwise).  This section

shall not prohibit Employee or any Affiliate from employing any person or

entity who, without prohibited solicitations, seeks employment.

 

5.8           Employee

acknowledges that money damages would not be sufficient remedy for any breach

of this Article 5 by Employee, and the Company shall be entitled to

enforce the provisions of this Article 5 by terminating the employment

relationship, terminating any unvested payments then owing to 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 Article 5, 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 Employee and his Affiliates involved in such breach.

 

ARTICLE

6:  RELEASE AND WAIVER BY EMPLOYEE

 

6.1           In additional exchange

for the consideration referred to in this Agreement, Employee, on behalf of

himself, his heirs, executors, successors, administrators and assigns

(collectively, “Employee Parties”), does hereby knowingly and

voluntarily release, acquit and forever discharge the Company, its officers,

shareholders, employees, directors, attorneys, parent companies, subsidiaries,

affiliates, successors and assigns and any other entity in which the Company

owns, directly or indirectly, an interest and their respective officers,

shareholders, employees, directors, attorneys, parent companies, subsidiaries,

affiliates, successors and assigns (collectively, the “Company Parties”)

from any and all claims, charges, complaints, grievances or promises of any and

every kind, whether known or unknown, that are based upon facts occurring prior

to the Effective Date of this Agreement, including but not limited to, the

following:  (a) any contractual

claims arising under any written or oral agreements between Employee and the

Company Parties, (b) any statutory claims under the Age Discrimination in

Employment Act of 1967, the Americans with Disabilities Act of 1990,

the Family and Medical Leave Act of 1993, the Civil Rights Acts

of 1964 and 1991, the Employee 

Retirement Income Security Act, Chapter 451 of the Texas Labor

Code, the Texas Payday Law, and/or the Texas Commission on Human Rights Act, or

arising from any other federal, state, or local statute, ordinance or

regulation, (c) any tort or contract claims, (d) any claims, matters

or actions related to Employee’s employment and/or affiliation with or

separation from the Company.  It is

further agreed that, in the event that the Company initiates any claim, charge,

complaint or grievance against Employee other than a complaint arising from an

alleged violation of Section 1.3 or Article 5 herein then the foregoing release

of claims by Employee shall be extinguished and no longer be in effect solely

to the extent necessary to defend or respond to such claim, charge, complaint

or grievance, including any counter claims, cross claims, demands or other

actions in any way relating to such claim, charge, complaint or grievance.  The above notwithstanding, it is expressly

agreed that Employee is not releasing and does not release (a) any right to

indemnification or advancement of expenses from the Company (i) to the extent

he is determined to be entitled to such indemnification by the Company under

Delaware or applicable law, or the bylaws or charter of the Company, (ii) to

the extent Employee is determined to be entitled to the

 

7

 

benefits offered under

any directors and officers insurance policy maintained by the Company and (iii)

arising under the Indemnification Agreement between the Company and Employee

dated October 1, 1996 (the “Indemnification Agreement”); and (b) any

right conferred by this Agreement.

 

ARTICLE

7:  COOPERATION

 

7.1           Employee agrees that he

will act at all times hereafter in a manner consistent with the interests of

the Company with respect to its shareholders, customers, employees, agents, and

third parties. Employee will not engage in any act or make any comments

(written or oral), which are intended, or reasonably may be expected, to harm

the Company or its employees; provided, however, that (i) this provision shall

not prohibit Employee from cooperating in any investigation by any governmental

agency and such cooperation in any such action shall not be deemed a breach of

this provision and (ii) Employee shall comply with any subpoena, decree or

order issued by a court of competent jurisdiction or governmental entity.  Employee further agrees that he will provide

reasonable cooperation to the Company at reasonable and mutually agreeable

times in response to requests made by the Company in matters relating to

internal investigations, external investigations, and/or judicial or

administrative proceedings arising out of or relating in any way to any facts

occurring prior to Effective Date of this Agreement, including but not limited

to, participating in conferences and meetings, advising counsel, making himself

available for interviews, providing documents or information, aiding in the

analysis of documents, testifying, or complying with any other reasonable

requests by the Company; provided, that such cooperation will not require

Employee to waive any privilege or to forgo his constitutional right to decline

to testify against himself in any investigation, Congressional hearing, grand

jury, or any other judicial or administrative proceeding.  Employee agrees to maintain in confidence

(except pursuant to regulatory request, subpoena, court order, or any other

legal process) any nonpublic information regarding past, current or potential

claims, governmental proceedings, investigations or administrative or judicial

litigation relating to the Company, and agrees not to communicate with any

party(ies) who he knows or should have known is adverse or potentially adverse

to the Company, including attorneys (other than his own counsel), investigators

or others, except pursuant to valid regulatory request, subpoena, court order,

or other legal process; provided, however, that nothing in this sentence shall

prohibit Employee from discussing facts relevant to his conduct or performance

while employed by the Company with any prospective employer, his attorneys,

investors, investment advisors or other professional counselors, who in each

case, agree to maintain such information in confidence.  Employee agrees to provide notice of any

motion, subpoena, order, regulatory request or other correspondence relating to

the Company as soon as practicable and in any event no later than three

(3) days of his receipt of same, by forwarding such document or providing

notice of any oral request to the addresses set forth below under Section

8.4.  This cooperation is an integral

part of this Agreement, and Employee will not be compensated for such

cooperation, other than reimbursement for any reasonable expenses Employee may

incur in connection with such cooperation.

 

7.2           The Company agrees that

it will not engage in any act or make any comments

 

8

 

(written or oral)

that are intended, or might reasonably be expected, to harm Employee; provided,

however, that (i) this provision shall not prohibit the Company from

cooperating in any investigation by any governmental agency and such cooperation

in any such action shall not be deemed a breach of this provision and (ii) the

Company shall comply with any subpoena, decree or order issued by a court of

competent jurisdiction or governmental entity and with any disclosure

requirements under the federal or state securities laws.

 

ARTICLE

8:  MISCELLANEOUS

 

8.1           For

purposes of this Agreement, “Affiliate” means, with respect to any

person or entity, any person or entity that, directly or indirectly, Controls,

is Controlled by, or is under common Control with, such person or entity in

question. For the purposes of the definition of Affiliate, “Control”

(including, with correlative meaning, the terms “Controlled by” and “under

common Control with”) as used with respect to any person, shall mean the possession,

directly or indirectly, of the power to direct or cause the direction of the

management and policies of such person or entity, whether through the ownership

of voting securities or by contract or otherwise.

 

8.2           For

purposes of this Agreement “Competitive Business” means (i) any

business, enterprise or activity, whether or not for profit, that provides

management, maintenance, consultation, services, contracts, properties or

facilities relating to correction, detention, treatment, education or pre-release

services or (ii) any business, enterprise or activity, whether or not for

profit, that the Company, or any of its Affiliates, is engaged in or has

publicly stated its intent to engage in at any time prior to the Effective

Date; provided, however, that Competitive Business shall not include a not for

profit, industry trade organization.

 

8.3           For

purposes of this Agreement, “Prohibited Activity” means any attempt to

(a) compete for any existing contract or contract award of the Company or any

contract, proposed contract or bid identified on a list provided by the Company

to Employee as of the date hereof, or (b) cause any present customer of the

Company to cancel or terminate any existing contract with the Company.

 

8.4           For

purposes of this Agreement, notices and all other communications provided for

herein shall be in writing and shall be deemed to have been duly given when

personally delivered or when mailed by United States registered or certified

mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Company, to:

 

Cornell Companies, Inc.

1700 West Loop South, Suite 1500

Houston, Texas 77027

Attention: Secretary

 

9

 

With a copy to:

 

Locke Liddell & Sapp LLP

3500 JPMorgan Chase Tower

600 Travis

Houston, Texas 77002

Attention: David F. Taylor

 

If to Employee, to the address shown in the Company’s

records.

 

Either the Company or Employee may furnish a change of address to the

other in writing in accordance herewith, except that notices of changes of

address shall be effective only upon receipt.

 

8.5           This

Agreement shall be governed in all respects by the laws of the State of Texas,

excluding any conflict-of-law rule or principle that might refer to the

construction of the Agreement to the laws of another State or country.

 

8.6           No

failure by either party hereto at any time to give notice of any breach by the

other party of, or to require compliance with, any condition or provision of

this Agreement shall be deemed a waiver of similar or dissimilar provisions or

conditions at the same or at any prior or subsequent time.

 

8.7           If

a dispute arises out of or related to this Agreement, and if the dispute cannot

be settled through direct discussions, then the Company and Employee agree to first

endeavor to settle the dispute in an amicable manner by mediation, before

having recourse to any other proceeding or forum.

 

8.8           The

Company’s principal place of business is in Houston, Harris County, Texas.  This Agreement shall be performed in Houston,

Harris County, Texas.  Any litigation

that may be brought by either the Company or Employee involving the enforcement

of this Agreement or the rights, duties, or obligations of this Agreement,

shall be brought exclusively in the state or federal courts sitting in Houston,

Harris County, Texas.  In the event that

service of process cannot be effected upon a party, each party hereby

irrevocably appoints the Secretary of State for the State of Texas as its or

his agent for service of process to receive the summons and other pleadings in

connection with any such litigation.  In

the event of litigation between the parties regarding this Agreement, the

prevailing party shall, in addition to any sums recovered in the litigation, be

entitled to recover all sums expended by that party (including reasonable

costs, reasonable attorneys’ fees and reasonable expert witness’ fees) in

connection with that litigation.

 

8.9           It

is a desire and intent of the parties that the terms, provisions, covenants and

remedies contained in this Agreement shall be enforceable to the fullest extent

permitted by law.  If any such term,

provision, covenant, or remedy of this Agreement or the application thereof to

 

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any person, association, or entity or circumstances shall, to any

extent, be construed to be invalid or unenforceable in whole or in part, then

such term, provision, covenant, or remedy shall be construed in a manner so as

to permit its enforceability under the applicable law to the fullest extent

permitted by law.  In any case, the

remaining provisions of this Agreement or the application thereof to any

person, association, or entity or circumstances other than those to which they

have been held invalid or unenforceable, shall remain in full force and effect.

 

8.10         This

Agreement shall be binding upon and inure to the benefit of the Company, and

any other person, association, or entity which may hereafter acquire or succeed

to all or substantially all of the business or assets of the Company by any

means whether direct or indirect, by purchase, merger, consolidation, or

otherwise.  This Agreement shall be

binding upon and inure to the benefit of Employee, and his heirs, successors

and permitted assigns.  Employee’s

rights and obligations under Agreement hereof are personal and such rights,

benefits, and obligations of Employee shall not be voluntarily or involuntarily

assigned, alienated, or transferred, whether by operation of law or otherwise,

without the prior written consent of the Company.

 

8.11         This

Agreement replaces and merges previous agreements and discussions pertaining to

the following subject matters covered herein: Employee’s prior employment by

the Company and any agreements regarding such relationship and the nature of

Employee’s relationship with the Company and the term and termination of such

relationship, except that this Agreement shall not replace or merge the

Indemnification Agreement, the Deferred Bonus Plan or the option grants.  This Agreement and the Waiver and

Termination Agreement executed as of the date hereof constitute the entire

agreement of the parties with regard to such subject matters, and contain all

of the covenants, promises, representations, warranties, and agreements between

the parties with respect to such subject matters; provided that Employee shall

also comply with all policies and procedures of the Company as established from

time to time.  Each party to this

Agreement acknowledges that no representation, inducement, promise, or agreement,

oral or written, has been made by either party with respect to such subject

matters, which is not embodied herein, and that no agreement, statement, or

promise relating to the relationship between the Company and Employee that is

not contained in this Agreement shall be valid or binding.  Any modification of this Agreement will be

effective only if it is in writing and signed by each party whose rights

hereunder are affected thereby, provided that any such modification must be

authorized or approved by the Board of Directors of the Company.

 

(The remainder of this page is

intentionally blank; counterpart signature pages follow.)

 

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IN WITNESS WHEREOF, the Company and Employee have duly

executed this Agreement in multiple originals to be effective on the Effective

Date of the Agreement.

 

 

	

  Company:

  	

  Employee:

  
	

   

  	

   

  
	

  CORNELL

  COMPANIES, INC.

  	

  STEVEN

  W. LOGAN

  
	

   

  	

   

  
	

   

  	

   

  
	

  By: 

  	

  /s/ Harry J. Phillips, Jr.

  	

   

  	

  /s/ Steven W. Logan

  	

   

  
	

  Name: 

  	

    Harry ­J. Phillips, Jr.­

  	

   

  	

   

  
	

   

  	

  Authorized Signatory

  	

   

  	

   

  

 

12Exhibit 10.43

 

	
  Schlotzsky’s, Inc.

  203 Colorado Street

  Austin, TX  78701

   

  BORROWER’S
  NAME AND ADDRESS

  “I” includes
  each borrower above, jointly and

  	
   

  	
  American Bank of
  Commerce

  522 Congress Ave.,
  Suite 100

  Austin, TX 
  78701

   

  LENDER’S
  NAME AND ADDRESS

  “You” means the
  lender, its successors and assigns

  	
   

   

  	
  Loan Number   403409

  Date  03/27/03

  Maturity Date  06/25/03

  Loan Amount  $ 150,000.00

  Renewal Of
                        

   

  	
   

  

For value received, I
promised to pay to you, or your order, at your address listed above the
PRINCIPAL sum
of            
One      

hundred fifty thousand
&
no/100                                                                                                       
Dollars $  $150,000.00

ý  Single Advance:  I will receive all of this principal sum on  03/27/03. 
No additional advances are contemplated under this note.

o  Multiple Advance: The principal sum shown
above is the maximum amount of principal I can borrow under this note.
On           
                                 I
will receive the amount of
$                                      and
future principal advances are contemplated.

Conditions:  The conditions for future advances are
                                                                                                                            

                                                                                                                                                                                                                  

o  Open End Credit: You and I agree that I may
borrow up to the maximum principal sum more than one time.  This feature is subject to all other
conditions and expires on  
                                                                    

o  Closed End Credit: 
You and I agree that I may borrow (subject to all other
conditions) up to the maximum principal sum only one time.

INTEREST: I agree to pay interest on the
outstanding principal balance from March 27, 2003 at the rate of 5.2000% per
year until June 25, 2003

o Variable Rate:
This rate may change as stated below.

o  Index Rate: The future rate will be
                                             the
following index rate
                                                         

o  Ceiling Rate: The interest rate ceiling for
this note is the        ceiling rate announced by
the Credit Commissioner from time to time.

o Frequency and Timing: The rate on this
note may change as often as
                                                                                           

A change in the interest
rate will take effect
                                                                                                                                     

o  Limitations: During the term of this loan,
the applicable annual interest rate will not be more
than                              %
or less than                              %.  The rate may not change more than
                                      %
each                                               

Effect of Variable Rate:
A change in the interest rate will have the following effect on the payments:

o The amount of each scheduled payment will
change.                 o
The amount of the final payment will change.

o                                                                                                                                                                                                             

ACCRUAL METHOD: Interest will be calculated
on a Actual/360 basis.

POST MATURITY RATE: I agree to pay interest
on the unpaid balance of this note owing after maturity, and until paid in
full, as stated below:

o  on
the same fixed or variable rate basis in effect before maturity (as indicated
above).

ý at a rate equal to 24.000%

o
LATE
CHARGE: If a payment is made more than
             days
after it is due, I agree to pay a late charge of  
                        .

ý
ADDITIONAL
CHARGES: In addition to interest, I agree to pay the following
charges which o are ý
are not included in the

principal amount
above:   $25.00 NSF FEE FOR EACH PAYMENT
RETURNED UNPAID.

PAYMENTS:  I agree to pay this note as follows:

ý  Interest: I agree to pay accrued interest
      On Demand, But If No Demand Is Made Then;
                                                             At
Maturity – June 25, 2003

ý
Principal:
I agree to pay the principal       On
Demand, But If No Demand is Made
Then;                                                                  

                                                                               
At Maturity – June 25,
2003                                                                                        

o  Installments: I agree to pay this note in
            payments.  The first payment will be in the amount of
$                          

and will be due
                                                 .
A payment of
$                                              will
be due
                                 

                                                                                                                       thereafter.  The final payment of the entire

unpaid balance of
principal and interest will be due 

PURPOSE: 
The purpose of this loan is Short term working capital

ADDITIONAL TERMS:

SECURITY

SECURITY INTEREST:  I give you a security interest in all of the
Property described below that I own or have a sufficient rights in which to
transfer an interest, now or in the future, wherever the Property is or will be
located, and all proceeds and products of the Property.  “Property” includes all parts, accessories,
repairs, replacements, improvements, and accessions to the Property.  “Proceeds” includes anything acquired upon
the sale, lease, license, exchange, or other disposition of the Property; any
rights and claims arising from the Property; and any collections and
distributions on account of the Property.

o            Accounts and Other Rights to Payment: All
rights to payment, whether or not earned by performance, including, but not
limited to, payment for property or services sold, leased, rented, licensed, or
assigned.  This includes any rights and
interests (including all liens) which I have by law or agreement against any
account debtor or obligor.

o            Inventory: 
All inventory held for ultimate sale or lease, or which has been or will
be supplied under contracts of service, or which are raw materials, work in
process, or materials used or consumed in my business.

o            Equipment: All equipment including, but not
limited to, machinery, vehicles, furniture, fixtures, manufacturing equipment,
farm machinery and equipment, shop equipment, office and record keeping
equipment, parts and tools.  The
Property includes any equipment described in a list or schedule I give to you,
but such a list is not necessary to create a valid security interest in all of
my equipment.

o            Instruments and Chattel Paper:  All instruments, including
negotiable instruments and promissory notes and any other writings or records
that evidence the right to payment of a monetary obligation, and tangible and
electronic chattel paper.

 

UNIVERSAL NOTE AND
SECURITY AGREEMENT

o            General Intangibles: All general
intangibles including, but not limited to tax refunds, patents and application
for patents, copyrights, trademarks, trade secrets, goodwill, trade names,
customer lists, permits and franchises, payment intangibles, computer programs
and all supporting information provided in connection with a transaction
relating to computer programs, and the right to use my name.

o            Documents: All documents of title
including, but not limited to, bills of lading, dock warrants and receipts, and
warehouse receipts.

o            Farm Products and Supplies: All farm
products including, but not limited to, all poultry and livestock and their
young, along with their produce, products, and replacements; all crops, annual
or perennial, and all products of the crops; and all feed, seed, fertilizer,
medicines, and other supplies used or produced in my farming operations.

 

 

o            Government Payments and Programs: All
payments, accounts, general intangibles, and benefits including, but not
limited to payments in kind, deficiency payments, letters of entitlement,
warehouse receipts, storage payments, emergency assistance and diversion
payments, production flexibility contracts, and conservation reserve payments
under any preexisting, current, or future federal or state government program.

o            Investment Property:  All investment property, including, but not
limited to, certificated securities, uncertificated securities, securities
entitlements, securities accounts, commodity contracts, commodity accounts, and
financial assets.

ý             Deposit Accounts: All deposit accounts
including, but not limited to, demand, time, savings, passbook, and similar
accounts.

ý             Specific Property Description: The Property
includes, but is not limited by, the following:

American Bank of Commerce
Certificate of Deposit #154427

In the name of Jeffrey J.
Wooley, in the amount of $150,000.00 and any renewals and extensions thereof.

If this agreement covers
timber to be cut, enter real estate description and record owner information:
                                                  

 

The Property will be used
for a o personal
                   ý
business
            o
agricultural             o
                           purpose.

Borrower/Owner State of
organization/registration (if applicable) TEXAS

 

ADDITIONAL
TERMS OF THE SECURITY AGREEMENT

 

GENERALLY – This agreement secures this note and any other debt
I have with you, now or later.  However,
it will not secure other debts if you fail with respect to such other debts, to
make any required disclosure about this security agreement or if you fail  to give any required notice of the right of
rescission.  If property described in this
agreement is located in another state, this agreement may also, in some circumstances,
be governed by the law of the state in which the Property is located.

NAME AND LOCATION- My name indicated on
page 1 is my exact legal name.  If I am
an individual, my address is my principal residence. If I am not an individual,
my address is the location of my chief executive offices or sole place of
business.  If I am an entity organized
and registered under state law, my address is located in the state in which I
am registered, unless otherwise indicated on page 2.  I will provide verification of registration and location upon
your request.  I will provide you with
at least 30 days notice prior to any change in my name, address or state of
organization or registration.

OWNERSHIP AND DUTIES TOWARD PROPERTY- I
represent that I own all of the Property, or to the extent this is a purchase
money security interest, I will acquire ownership of the Property with the
proceeds of the loan.  I will defend it
against any other claim.  Your claim to
the Property is ahead of the claims of any other of the claims of other
creditor.  I agree to do whatever you
require to protect your security interest and to keep your claim in the
Property ahead of the claims of other creditors.  I will not do anything to harm your position.  I will not use the Property for a purpose
that will violate any laws or subject the Property to forfeiture or seizure.

I will keep books,
records and accounts about the Property and my business in general.  I will let you examine these records at any
reasonable time.  I will prepare any
report or accounting you request, which deals with the Property.

I will keep the Property
in my possession and will keep it in good repair and use it only for the
purpose(s) described on page 3 of this agreement.  I will not change this specified use without your express written
permission.  I represent that I am the
original owner of the Property and, if I am not, that I have provided you with
a list of prior owners of the Property.

I will keep the Property
at my address listed on page 1 of this agreement, unless we agree I may keep it
at another location. If the Property is to be used in another state, I will
give you a list of those states.  I will
not try to sell the Property unless it is inventory or I receive your written
permission to do so.  If I sell the
Property, I will have the payment made payable to the order of you and me.

You may demand immediate
payment of the debt(s) if the debtor is not a natural person and without your
prior written consent:  (1) a beneficial
interest in the debtor is sold or transferred, or (2) there is a change in
either the identity or number of members of a partnership, or (3) there is a
change in ownership of more than 25 percent of the voting stock of a
corporation.

I will pay all taxes and
charges on the Property as they become due. 
You have the right of reasonable access in order to inspect the
Property.  I will immediately inform you
of any loss or damage to the Property.

If I fail to perform any
of my duties under the security agreement, or any mortgage, deed of trust, lien
or other security interest, you may without notice to me perform the duties or
cause them to be performed.   Your right
to perform for me shall not create an obligation to perform and your failure to
perform will not preclude you from exercising any of your other rights under
the law of this security agreement.

PURCHASE MONEY SECURITY INTEREST – For the
sole purpose of determining the extent of a purchase money security interest
arising under this security agreement: (a) payments on any nonpurchase  money loan also secured by this agreement
will not be deemed to apply to the Purchase Money Loan, and (b) payments on the
Purchase Money Loan will be deemed to apply first to the nonpurchase money
portion of the loan, if any, and then to the purchase money obligations in the
order in which the items of collateral were acquired or if acquired at the same
time, in the order selected by you.  No
security interest will be terminated by application of this formula.  “Purchase Money Loan” means any loan the
proceeds of which, in whole or in part, are used to acquire any collateral
securing the loan and all extensions, renewals, consolidations and refinancing
of such loan.

PAYMENT BY LENDER – You are authorized to
pay, on my behalf, charges I am or may become obligated to pay to preserve or
protect the secured property (such as property insurance premiums).   You may treat those payments as advances
and add them to the unpaid principal under the note secured by this agreement or
you may demand immediate payment of the amount advanced.

INSURANCE -  I agree to buy insurance on the Property against the risks and for
the amounts you require and to furnish you continuing proof of coverage.  I will have the insurance company name you
as loss payee on any such policy.  You may
require added security if you agree that insurance proceeds may be used to
repair or replace the Property.  I will
buy insurance  from a firm licensed to
do business in the state where you are located.  The firm will be reasonably acceptable to you.  The insurance will last until the Property
is released from this agreement.  If I
fail to buy or maintain the insurance (or fail to name you as loss payee) you
may purchase it yourself.

WARRANTIES AND REPRESENTATIONS – If this
agreement includes accounts, I will not settle any account for less than its
full value without your written permission. 
I will collect all accounts until you tell me otherwise.  I will keep the proceeds from all the
accounts and any goods which are returned to me or which I take back in trust
for you.  I will not mix them with any
other property of mine.  I will deliver
them to you at your request.  If you ask
me to pay you the full price on any returned items or items retaken by myself,
I will do so.  You may exercise my
rights with respect to obligations of any account debtors, or other persons
obligated on the Property, to pay or perform, and you may enforce any security
interest that secures such obligations.

If this agreement covers
inventory, I will not dispose of it except in my ordinary course of business at
the fair market value for the Property, or at a minimum price established
between you and me.

	
  Any person who signs
  within this box does so to give you a security interest in the Property
  described on page 1 and this page.  This
  person does not promise to pay the note. 
  “I” as used in the security agreement will include the borrower and
  any person who signs within this box.

  Date:                

  Signed                                                                                    

  

 

2

 

If this agreement
covers farm products, I will provide you, at your request, a written list of
the buyers, commission merchants or selling agents to or through whom I may
sell my farm products.  In addition to
those parties named on this written list, I authorize you to notify at your
sole discretion any additional parties regarding your security interest in my
farm products.  I remain subject to all
applicable penalties for selling my farm products in violation of my agreement
with you and the Food Security Act.  In
this paragraph the terms farm products, buyers, commission merchants and
selling agents have the meanings given to them in the Federal Food Security Act
of 1985.

If this agreement covers
chattel paper or instruments, either as original collatoral or proceeds of the
Property, I will note your interest on the face of the chattel paper or
instruments.

DEFAULT – I will be in default on this
security agreement if I am in default on any note this agreement secures or if
I fail to keep any promise contained in the terms of this agreement.  Default shall also exist if any loan
proceeds are used for a purpose that will contribute to excessive erosion of
highly erodible land or in the conversion of wetlands to produce an
agricultural commodity, as further explained in 7 CFR Part 1940, Subpart G,
Exhibit M.

REMEDIES- If I default, you have all of the
rights and remedies provided in the note and under the Uniform Commercial
Code.  You may require me to make the
secured property available to you at a place which is reasonably
convenient.  You may take possession of
the secured property and sell it as provided by law.  The proceeds will be applied first to your expenses and then to
the debt.  I agree that 10 days written
notice sent to my last known address by first class mail will be reasonable
notice under the Uniform Commercial Code. 
My current address is on page 1.

PERFECTION OF SECURITY INTEREST- I
authorize you to file a financing statement covering the Property, I will
comply with, facilitate, and otherwise assist you in connection with obtaining
possession of or control over the Property for purposes of perfecting your
security interest under the Uniform Commercial Code.

 

ADDITIONAL
TERMS OF THE NOTE

 

DEFINITIONS-As used on pages 1 and 2, “ý
“ means the terms that apply to this loan. 
“I,” “me” or “my” means each Borrower who signs this note, and each
other person or legal entity (including guarantors, endorsors, and sureties)
who agrees to pay this note (together referred to as “us”).  “You” or “your” means the Lender and its
successors and assigns.

APPLICABLE LAW – The law of the state of
Texas will govern this agreement.  Any
term of this agreement which is contrary to applicable law will not be
effective unless the law permits you and me to agree to such a variation.  If an provision of this agreement cannot be
enforced according to its terms, this fact will not affect the enforceability
of the remainder of this agreement.  No
modification of this agreement may be made without your express written
consent.  Time is of the essence in this
agreement.

PAYMENTS – Each payment I make on this note
will first reduce the amount I owe you for charges which are neither interest
nor principal.  The remainder of each
payment will then reduce accrued and unpaid interest, and then unpaid
principal.  If you and I agree to a
different application of payments, we will describe our agreement on this note.  I may prepay a part of, or the entire
balance of this loan without penalty, unless we specify to the contrary on this
note.  Any partial prepayment will not
excuse or reduce any later scheduled payment until this note is paid in full
(unless, when I make the prepayment, you and I agree in writing to the contrary).

INTEREST – Interest accrues on the
principal remaining unpaid from time to time, until paid in full.  If I receive the principal in more than one
advance, each advance will start to earn interest only when I receive the
advance.  The interest rate in effect on
this note at any given time will apply to the entire principal sum outstanding
at that time.  Notwithstanding anything
to the contrary, I do not agree to pay and you do not intend to charge any rate
of interest that is higher than the maximum rate of interest you could charge
under applicable law for the extension of credit that is agreed to in this note
(either before or after maturity).  If
any notice of interest accrual is sent and is in error, we mutually agree to
correct it, and if you actually collect more interest than allowed by law and
this agreement, you agree to refund it to me.

INDEX RATE – The index will serve only as a
device for setting the interest rate on this note.  You do not guarantee by selecting this index, or the margin, that
the interest rate on this note will be the same rate you charge on any other
loans or class of loans you make to me or other borrowers.

POST MATURITY RATE – For purposes of
deciding when the “Post Maturity Rate” (shown on page 1) applies, the term
“maturity” means the date of the last scheduled payment indicated on page 1 of
this note or the date you accelerate payment on the note, whichever is earlier.

SINGLE ADVANCE LOANS – If this is a single
advance loan, you and I expect that you will make only one advance of
principal.  However, you may add other
amounts to the principal if you make any payments described in the “PAYMENTS BY
LENDER” paragraph on page 2.

MULTIPLE ADVANCE LOANS – If this is a
multiple advance loan, you and I expect that you will make more than one
advance of principal.  If this is closed
and credit, repaying a part of the principal will not entitle me to additional
credit.

SET-OFF – I agree that you may set off any
amount due and payable under this note against any right I have to receive
money from you.

“Right to receive money
from you” means:

(1)                        any
deposit account balance I have with you;

(2)                        any money
owed to me on an item presented to you or in your possession for collection or
exchange; and

(3)                        any
repurchase  agreement or other non-deposit
obligation.

“Any amount due and
payable under this note” means the total amount of which you are entitled to
demand payment under the terms of this note at the time you set off.  This total includes any balance the due date
for which you properly accelerate under this note.

If my right to receive
money from you is also owned by someone who has not agreed to pay this note,
your right of set-off will apply to my interest in the obligation and to any
other amounts I could withdraw on my sole request or endorsement.  Your right of set-off does not apply to an
account or other obligation where my rights are only as a representative.  It also does not apply to any Individual Retirement
Account or other tax deferred retirement account.

You will not be liable
for the dishonor of any check when the dishonor occurs because you set off the
debt against any of the accounts.  I
agree to hold you harmless from any such claims arising as a result of your
exercise of your right to set-off.

DEFAULT – I will be in default on this loan
and any agreement securing this loan if any one or more of the following
occurs:

(1)I fail to perform any
obligation which I have undertaken in this note or any agreement securing this
note; or

(2)You, in good faith,
believe that the prospect of payment or the prospect of  my performance of any other obligations
under the note or any agreement securing this note is impaired.

REMEDIES – If I am in default on this note,
you have, but are not limited to, the following remedies:

(1)                        You may demand
immediate payment of my debt  under this
note (principal, accrued unpaid interest and other accrued charges).

(2)                        You may
set off this debt against any right I have to the payment of money from you,
subject to the terms of the “SET-OFF” paragraph herein.

(3)                        You may
demand security, additional security, or additional parties to be obligated to
pay this note as a condition for not using any other remedy.

(4)                        You  may refuse to make advances to me or allow
purchases on credit by me.

(5)                        You may
use any remedy you have under state or federal law.

(6)                        You may
make use of any remedy given to you in any agreement securing this note.

By selecting any one or
more of these remedies you do not give up your right to use later any other
remedy.  By waiving your right to
declare an event to be a default, you do not waive your right to consider later
the event a default if it continues or happens again.

COLLECTION COSTS AND ATTORNEY’S FEES — I
agree to pay all costs of collection, replevin or any other or similar type of
cost if I am in default.  In addition,
if you hire an attorney to collect this note, I also agree to pay any fee you
incur with such attorney plus court costs (except where prohibited by law).  To the extent permitted by  the United States Bankruptcy Code,
I also agree top ay the reasonable attorney’s fees and costs you incur to
collect this debt as awarded by any court exercising jurisdiction under the
Bankruptcy Code.

WAIVER – I give up my rights to require you
to do certain things.  I will not require
you to:

(1)                        demand
payments of amounts due (presentment);

(2)                        obtain
official certification of non-payment (protest);

(3)                        give
notice that amounts due have not been paid (notice of dishonor);

(4)                        give
notice of intent to accelerate; or

(5)                        give
notice of acceleration.

I waive any defenses I
have based on suretyship or impairment of collateral.

OBLIGATIONS INDEPENDENT. – I understand
that I must pay this note even if someone else has also agreed to pay it (by,
for example, signing this form or a separate guarantee or endorsement).  You may sue me alone, or anyone else who is
obligated on this note, or any number of us together, to collect this
note.  You may without notice release
any party to this agreement without releasing any other party.  If you give up any of your rights, with or
without notice, it will not affect my duty to pay this note.  Any extension of new credit to any of us, or
renewal of this note by all or less than all of us will not release me from my
duty to pay it.  (Of course, you are entitled
to only one payment in full.)  I agree
that you may at our option extend this note or the debt represented by this
note, or any portion of the note or debt, from time to time without limit to
notice and for any term without affecting my liability for payment of the
note.  I will not assign my obligation
under this agreement without your prior written approval.

FINANCIAL INFORMATION – I agree to provide
you, upon request, any financial statement or information you may deem
necessary.  I warrant that the financial
statements and information I provide to you are or will be accurate, correct
and complete.

 

	
  THIS WRITTEN LOAN
  AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
  CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT, ORAL
  AGREEMENTS OF THE PARTIES.

  THERE ARE NO
  UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

  

 

SIGNATURES:  I AGREE TO THE TERMS OF THIS NOTE AND
SECURITY AGREEMENT (INCLUDING THOSE ON PAGES 1 AND 2).         I have received a copy of this note and security agreement
on today’s date.

Schlotzsky’s, Inc.

	
  /s/Jeffrey J. Wooley

  	
   

  	
  /s/ Charlie Avant

  	
   

  
	
  Jeffrey J. Wooley,
  Senior Vice President

  	
  CHARLIE AVANT, VICE
  PRESIDENT

  

 

3

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