10-K/A 1 a2079713z10-ka.txt 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 2 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 Commission File Number 1-14472 CORNELL COMPANIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 76-0433642 (State or other jurisdiction of (IRS Employer Identification No.) Incorporation or organization) 1700 West Loop South, Suite 1500, Houston, Texas 77027 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (713) 623 - 0790 Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF STOCK EXCHANGE --------------------- ------------------------ Common Stock, $.001 par value per share New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] At March 28, 2002, Registrant had outstanding 13,056,903 shares of its common stock. The aggregate market value of the Registrant's voting stock held by non-affiliates at this date was approximately $134,805,000 based on the closing price of $10.80 per share as reported on the New York Stock Exchange. For purposes of the foregoing calculation, all directors and officers of the Registrant have been deemed to be affiliates, but the Registrant disclaims that any of such directors or officers is an affiliate. Documents Incorporated by Reference: None EXPLANATORY NOTE On April 16, 2002, Cornell Companies, Inc. (the "Company") filed with the Securities and Exchange Commission (the "SEC") its Annual Report on Form 10-K for the year ended December 31, 2001 (the "Initial Form 10-K"). On April 30, 2002, the Company filed with the SEC Amendment No. 1 on Form 10-K/A ("Amendment No. 1") to amend Part III of the Initial Form 10-K in order to include those disclosures required by Part III of Form 10-K and to amend Part IV to include an exhibit that was not available when the Company filed its Initial Form 10-K. This Amendment No. 2 on Form 10-K/A amends and restates in its entirety Part III contained in Amendment No. 1. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS The following table lists the names, ages and positions of the Company's directors as of May 10, 2002. There are no family relationships between any of the directors or officers.
NAME AGE POSITION ---- --- -------- Anthony R. Chase.............................. 47 Director James H. S. Cooper............................ 47 Director David M. Cornell.............................. 66 Director Peter A. Leidel............................... 45 Director Arlene R. Lissner............................. 71 Director; Director of Special Projects Steven W. Logan............................... 40 Director; President Harry J. Phillips, Jr......................... 52 Director; Chairman of the Board; Executive Chairman Tucker Taylor................................. 63 Director Marcus A. Watts............................... 44 Director
ANTHONY R. CHASE has been a director of the Company since October 1999. Mr. Chase has served as Chairman and Chief Executive Officer of ChaseCom Limited Partnership since December 1998 and as President and Chief Executive Officer of Faith Broadcasting, L.P. since November 1993. Mr. Chase is also Chairman of the Board of the Telecom Opportunity Institute, a national, non-profit organization founded by ChaseCom Limited Partnership to increase career, education and job training opportunities in the telecommunications industry for people in historically underserved communities. Mr. Chase is a Professor of Law at the University of Houston Law Center. Mr. Chase is a director of Leap Wireless International, Inc., a nationwide provider of wireless phone service, a director of Northern Trust Bank of Texas, and a Member of the Council on Foreign Relations. JAMES H. S. COOPER has been a director of the Company since October 1999. Mr. Cooper is the founder and Chairman of Brentwood Capital Advisors LLC of Brentwood, Tennessee, where he has been since May 1999. Mr. Cooper was a Managing Director of SunTrust Equitable Securities Corporation of Nashville, Tennessee (and its predecessor, Equitable Securities Corp.) from April 1995 to April 1999, and served as Congressman, 4th District of Tennessee in the United States House of Representatives from 1983 to 1995. Mr. Cooper has also been an Adjunct Professor at the Owen School of Management at Vanderbilt University since 1995. Mr. Cooper serves as a director of several private companies. DAVID M. CORNELL has been a director since our founding and was Chairman of the Board from our founding until September 2000. Mr. Cornell also served as President and Chief Executive Officer of the Company from our founding until August 1999. Mr. Cornell is Chairman, President and Chief Executive Officer of eGovNet, Inc. PETER A. LEIDEL has been a director since May 1991 and has been Chairman of the Board from September 2000 to July 2001. Mr. Leidel is co-founder and partner of Yorktown Partners LLC, which manages private investment funds. In September 1997, Mr. Leidel resigned as Senior Vice President of Dillon Read & Co, Inc. (a 2 predecessor of UBS PaineWebber Inc.) where he worked since 1983 managing private investment funds. Mr. Leidel is a director of Willbros Group, Inc., an oil and gas industry contractor, Carbon Energy Corporation, an oil and gas exploration company, and several private companies. ARLENE R. LISSNER has been a director since September 1997 when we acquired Abraxas, and is Director of Special Projects. Ms. Lissner founded Abraxas in 1973, where she served as President and Chief Executive Officer until 1977, at which time she left that position to become Chairperson of the Board of Directors of Abraxas. Ms. Lissner resumed her role as President and Chief Executive Officer of Abraxas from April 1996 through September 1997. STEVEN W. LOGAN has been a director and the President since August 1999. Mr. Logan served as Chief Executive Officer from August 1999 to April 2002 and as Chairman of the Board from July 2001 to February 2002. Prior to August 1999, Mr. Logan served as Executive Vice President from April 1998 and was Chief Operating Officer from April 1998 through December 1998. Previously, Mr. Logan served as Senior Vice President from November 1997 to April 1998, and Chief Financial Officer, Treasurer and Secretary from 1993 to April 1998. From 1984 to 1993, Mr. Logan served in various positions with Arthur Andersen LLP, Houston. HARRY J. PHILLIPS, JR. has been a director since January 2001. Mr. Phillips was named Chairman of the Board of Directors of the Company on February 6, 2002 and Executive Chairman of the Company on April 16, 2002. Mr. Phillips is President of Timberlake Interests, Inc. and Phillips Investments, Inc. Mr. Phillips previously served as Chairman and Chief Executive Officer of American Ecology Corporation from 1992 to 1995. Mr. Phillips is a director of Conservatek Industries, Inc. and Aeriform, Inc. TUCKER TAYLOR has been a director since October 1996. Mr. Taylor has been President of CBCA, Inc., a company that administers health benefits for self-insured employers, since July 2000. From 1992 to 1999, Mr. Taylor was Executive Vice President of Medical Care International and, after an acquisition, a Senior Vice President at Columbia/HCA. Mr. Taylor is also a director of SuperShuttle, a privately held ground transportation company, and Severn Healthcare, a healthcare provider. MARCUS A. WATTS has been a director since January 2001. Mr. Watts is a partner of the law firm of Locke Liddell & Sapp LLP where he has practiced corporate and securities law since 1984. Mr. Watts is a director of Aeriform, Inc. and serves on the board of various civic and charitable organizations. DIRECTOR COMPENSATION Ms. Lissner does not receive compensation for serving as a director. In 2001, Messrs. Chase, Cooper, Cornell, Leidel, Phillips, Taylor and Watts received an annual fee of $15,000, a fee of $1,500 for attendance at each Board of Directors meeting and a fee of $1,000 for attendance at each committee meeting (unless held on the same day as a Board of Directors meeting). In February 2000, the Board approved the payment of fees in cash or common stock of the Company, at the election of the director, subject to the provisions of the Cornell Companies, Inc. 2000 Directors Stock Plan, which was adopted by stockholders at the Company's 2001 Annual Meeting. In January 2001, the Company granted to Mr. Phillips and Mr. Watts nonqualified options to purchase 15,000 shares of Common Stock under the 1996 Plan in connection with their appointment to the Board. The options to Messrs. Phillips and Watts vested 25% on the date of the grant and the remainder vest ratably over three years with a term of 10 years and have a per share exercise price equal to the market value of a share of Common Stock on the date of the grant. Additionally, Messrs. Chase, Cooper, Cornell, Leidel and Taylor were each granted nonqualified options to purchase 2,000 shares of Common Stock under the 1996 Plan in January 2001. These options vested 100% on the date of the grant with a term of 10 years and have a per share exercise price equal to the market value of a share of Common Stock on December 31, 2000. All directors are reimbursed for out-of-pocket expenses incurred in attending meetings of the Board of Directors or committees thereof and for other expenses incurred in their capacity as directors. EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES The following table sets forth the names, ages and positions of the persons who are not directors and who are executive officers and other key employees of the Company as of May 10, 2002: 3
NAME AGE POSITION ---- --- -------- Leslie A. Balonick............. 50 Vice President, Mid-West Region Luis A. Collazo................ 35 Corporate Controller and Chief Accounting Officer John C. Godlesky............... 55 Vice President, Eastern Region John L. Hendrix................ 53 Senior Vice President and Chief Financial Officer Gary L. Henman................. 62 Vice President, Adult Secure Institutions Thomas R. Jenkins.............. 54 Senior Vice President and Chief Operating Officer Kevin B. Kelly................. 39 Treasurer and Corporate Secretary Patrick N. Perrin.............. 41 Vice President and Chief Administrative Officer Laura J. Shol.................. 47 Vice President, Western Region Kevin T. Smyley................ 51 Managing Director, Business Development Marvin H. Wiebe, Jr............ 54 Senior Vice President
LESLIE A. BALONICK has been Vice President, Mid-West Region since we acquired Interventions in November 1999. She previously served as Acting Clinical Director for BHS Consulting Corp. from September 1998 to November 1999 and as Director of Planning and Business Development from 1996 to August 1998. From 1991 to 1996, she served as Regional Manager for Interventions. Ms. Balonick serves as a member of the Women's Committee of the Illinois Department of Human Services, Office of Alcoholism and Substance Abuse Advisory Board and is a Clinically Certified Substance Abuse Counselor. LUIS A. COLLAZO has been Corporate Controller and Chief Accounting Officer since November 1999. Prior to November 1999, Mr. Collazo served as Corporate Controller and Vice President of Accounting and Business Processes for IKON Document Services, a division of IKON Office Solutions from September 1993 to November 1999. Mr. Collazo is a Certified Public Accountant. JOHN C. GODLESKY has been Vice President, Eastern Region, since November 1999 and Vice President, Juvenile since January 1999. He previously served as Director, Division of Residential Programs of Abraxas from June 1993 to December 1998, and was responsible for the overall development, direction and management of Abraxas' juvenile residential programs. JOHN L. HENDRIX has been Senior Vice President and Chief Financial Officer since September 1999. Mr. Hendrix previously served as Senior Vice President and Chief Financial Officer of GC Services from 1998 to August 1999. From 1996 to 1998, Mr. Hendrix served as Senior Vice President and Chief Financial Officer of APS Holding Corporation. Mr. Hendrix served as Senior Vice President and Chief Financial Officer at Kay-Bee Toy Stores in 1996 and held various senior financial positions at Kay-Bee Toy Stores since 1991. Mr. Hendrix is a Certified Public Accountant. GARY L. HENMAN has been Vice President, Adult Secure Institutions since October 1998 and National Director of Quality Assurance since June 1998. He was previously an associate professor at Louisiana State University from 1997 to September 1998. From 1973 to 1997, Mr. Henman was with the Federal Bureau of Prisons ("FBOP"), progressing to Deputy Regional Director and Warden of five facilities, including the United States Penitentiaries at Leavenworth, Kansas and Marion, Illinois. Mr. Henman was Chairman of both the FBOP High Security Facility Task Force and the FBOP Task Force on Vocational Training. THOMAS R. JENKINS has been Senior Vice President since May 1999 and Chief Operating Officer of the Company since January 1999. Mr. Jenkins previously served as Vice President, Juvenile since September 1997. From November 1995 through September 1997 he served as Vice President---Operations of Abraxas. From 1973 through November 1995, Mr. Jenkins served with the Department of Public Welfare, Commonwealth of Pennsylvania in various capacities ranging from Director of various juvenile facilities to Director of the Pennsylvania Child Welfare Services. KEVIN B. KELLY has served as Treasurer and Corporate Secretary since November 1999 and was Corporate Controller and Chief Accounting Officer from January 1996 to November 1999. Prior to January 1996, Mr. Kelly 4 was Assistant Controller and Corporate Financial Reporting Manager for American Ecology Corporation from 1993 to 1995. Mr. Kelly is a Certified Public Accountant. PATRICK N. PERRIN has been Vice President since June 2001 and Chief Administrative Officer since November 1998. Prior to November 1998, Mr. Perrin served as Corporate Director of Risk Management, Employee Benefits and Retirement Plans for Tracor, Inc. from November 1991 to October 1998. LAURA J. SHOL has been Vice President, Western Region since November 1999 and as Vice President, Pre-Release since November 1997, and was Managing Director of Pre-Release Centers since May 1997. She previously served as Director of Community Corrections of the Company from June 1996 through May 1997, and was Senior Regional Administrator of Eclectic from 1986 to June 1996. KEVIN T. SMYLEY has been Vice President, Business Development since January 2002 and was Managing Director, Business Development from January 2001 through December 2001. Mr. Smyley was Director of Public Policy since September 1999 and a Vice President of Cornell Interventions, Inc., one of our subsidiaries, since July 1999. From 1997 to 1999, Mr. Smyley served as Co-Executive Director and Project Manager for the Kid's Stuff Foundation. From 1991 to 1997, Mr. Smyley worked for Lockheed Martin IMS serving as Vice President of Criminal Justice Services from 1995 to 1997. Mr. Smyley is a member of the National Organization of Black Law Enforcement Executives, the ACA and the American Probation and Parole Association. MARVIN H. WIEBE, JR. has been Senior Vice President since November 1997 and Vice President since we acquired Eclectic Communications, Inc. in 1994. He was previously Vice President---Administration and Finance, Vice President---Secure Detention and Chief Financial Officer of Eclectic, where he was employed for 11 years. Mr. Wiebe has served as President of the International Community Corrections Association and as an auditor for the ACA Commission on Accreditation for Corrections and is a member of the International Community Corrections Association, the California Probation Parole & Correctional Association and the ACA. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's directors and executive officers to file with the Securities and Exchange Commission and the New York Stock Exchange initial reports of ownership and reports of changes in ownership of Common Stock. Based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, the Company believes that all its directors and executive officers during 2001 complied on a timely basis with all applicable filing requirements under Section 16(a) of the Exchange Act, except that Tucker Taylor, director of the Company, did not timely file a Form 4. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth compensation information for the chief executive officer and the four other most highly compensated executive officers (the "named executive officers") of the Company during the Company's fiscal years 2001, 2000 and 1999. 5
SUMMARY COMPENSATION TABLE LONG-TERM ANNUAL COMPENSATION COMPENSATION ---------------------------- --------------- SECURITIES ALL FISCAL UNDERLYING OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1) --------------------------- -------- ----------- ------------- --------------- ----------------- ($) ($) (#) ($) Steven W. Logan (2)................. 2001 425,000 205,000(3) 75,000 6,128 President and Chief 2000 300,000 --- 36,667 5,441 Executive Officer 1999 252,404 --- 100,000 5,380 John L. Hendrix (4)................. 2001 250,000 65,000 --- 4,802 Senior Vice President and Chief 2000 225,000 --- 70,000 1,744 Financial Officer 1999 64,904 --- 100,000(5) 1,869 Thomas R. Jenkins................... 2001 250,000 80,000 --- 5,952 Senior Vice President and Chief 2000 180,000 --- 33,333 5,062 Operating Officer 1999 158,557 --- --- 17,805 Patrick N. Perrin................... 2001 150,000 30,000 --- 1,920 Vice President and Chief 2000 135,000 --- 7,500 2,794 Administrative Officer 1999 120,000 --- --- --- Kevin T. Smyley (6) ................ 2001 140,000 25,000 --- 1,056 Vice President, Business 2000 140,000 --- --- 239 Development 1999 66,912 --- 20,000 ---
--------------- (1) Amounts in 2001 for Messrs. Logan, Hendrix, Jenkins, Perrin and Smyley include (i) the Company's 401(k) matching contributions of $5,678, $4,250, $5,400, $1,800 and $808, respectively, and (ii) group term life insurance premiums of $450, $552, $552, $120 and $248, respectively. (2) Mr. Logan served as Chief Executive Officer from August 1999 to April 2002. (3) Includes $80,000 cash bonus awarded in April 2001 and $125,000, which amount represents that portion of Mr. Logan's bonus pursuant to the Deferred Bonus Plan that vested during the fiscal year ended December 31, 2001. (4) Mr. Hendrix has served as Senior Vice President and Chief Financial Officer since September 1999. (5) These options are no longer outstanding. (6) Mr. Smyley has been employed by the Company since July 1999. The following table presents information regarding options granted to each of the named executive officers in 2001.
OPTION GRANTS IN 2001 PERCENTAGE OF POTENTIAL REALIZABLE VALUE AT NUMBER OF TOTAL ASSUMED RATES OF STOCK SECURITIES OPTIONS PRICE APPRECIATION UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1) OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------------ NAME GRANTED IN 2001 PER SHARE DATE 5% 10% ------ ------------ --------------- ----------- ------------ ------------ ----------- Steven W. Logan........... 75,000 51.7% $16.25 12/4/11 $766,465 $1,942,374 John L. Hendrix........... --- --- --- --- --- --- Thomas R. Jenkins......... --- --- --- --- --- --- Patrick N. Perrin......... --- --- --- --- --- --- Kevin T. Smyley........... --- --- --- --- --- ---
---------------- 6 (1) The values shown are based on the indicated assumed annual rates of appreciation compounded annually. Actual gains realized, if any, on stock option exercises and Common Stock holdings are dependent on the future performance of the Common Stock and overall stock market conditions. There can be no assurance that the values shown in this table will be achieved. The following table presents information regarding options exercised in 2001 and the value of options outstanding at December 31, 2001 for each of the named executive officers. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT SHARES ACQUIRED VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1) NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(2) ---- --------------- ---------- -------------- ---------------- ------------ ---------------- Steven W. Logan.......... --- --- 197,374 151,667 $2,277,276 $823,838 John L. Hendrix.......... --- --- 24,000 46,000 $307,600 $597,900 Thomas R. Jenkins........ --- --- 22,999 25,335 $180,987 $294,477 Patrick N. Perrin........ --- --- 10,500 12,000 $37,035 $92,940 Kevin T. Smyley ......... --- --- 8,000 12,000 $20,200 $30,300
--------------- (1) The excess, if any, of the market value of Common Stock at December 31, 2001 ($17.65) over the option exercise price(s). (2) All of these options become immediately exercisable upon a change in control of the Company. SEVERANCE AGREEMENTS In December 1999, the Company entered into severance agreements with John L. Hendrix, Thomas R. Jenkins, Arlene R. Lissner and Steven W. Logan. If a listed officer's employment with the Company is terminated for any reason within a year after a change in control (as defined in the severance agreements), the Company has agreed that all stock options, restricted stock awards and similar awards granted to the terminated officer by the Company prior to the termination date will vest immediately on the termination date. In addition, the Company has agreed to make the following severance payments upon such a termination: (i) with respect to Mr. Logan, a payment equal to four times the sum of (a) his highest annual base salary as of the termination date and the change in control date and (b) the average annual bonus paid to him by the Company or its affiliates in respect of the two most recent full fiscal years (or one year if not employed for two years) ending on or prior to the termination date; (ii) with respect to each of Mr. Hendrix and Mr. Jenkins, a payment equal to two times the sum of (a) his highest annual base salary as of the termination date and the change in control date and (b) the average bonus paid to him by the Company or its affiliates in respect of the two most recent full fiscal years (or one year if not employed for two years) ending on or prior to the termination date; and (iii) with respect to Ms. Lissner, a payment equal to the sum of (a) her highest annual base salary as of the termination date and the change in control date and (b) the average bonus paid to her by the Company or its affiliates in respect of the two most recent full fiscal years (or one year if not employed for two years) ending on or prior to the termination date. The Company has agreed to pay the severance amounts in a lump sum in cash (i) on the termination date if the Company terminates the officer and (ii) within 30 days after the termination date if the officer's employment is terminated by the officer or upon the officer's death or retirement. 7 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee of the Board are Messrs. Taylor and Chase. None of these directors has at any time been an officer or employee of the Company and none of these directors serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company's Board or Compensation Committee. ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth information with respect to the shares of Common Stock (the only outstanding class of voting securities of the Company) owned of record and beneficially as of April 23, 2002, unless otherwise specified, by (i) all persons known to possess voting or dispositive power over more than 5% of the Common Stock, (ii) each director and named executive officer, and (iii) all directors and executive officers of the Company as a group:
AMOUNT AND NATURE OF PERCENTAGE BENEFICIAL OWNERSHIP (1) OF CLASS ------------------------- ------------ FMR Corp.(2)...................................................... 1,793,220 13.7% 82 Devonshire Street Boston, Massachusetts 02109 Royce & Associates, Inc. (3)...................................... 1,092,200 8.3% 1414 Avenue of the Americas New York, New York 10019 Wellington Management Company, LLP (4)............................ 889,200 6.8% 75 State Street Boston, Massachusetts 02109 Caxton Associates, L.L.C.(5)...................................... 798,000 6.1% Princeton Plaza, Building 2 731 Alexander Road Princeton, New Jersey 08540 Dimensional Fund Advisors Inc.(2)................................. 725,800 5.5% 1299 Ocean Avenue, 11th Floor Santa Monica, California 90401 Anthony R. Chase.................................................. 20,091 * James H. S. Cooper................................................ 31,271 * David M. Cornell (6).............................................. 382,893 2.9% John L. Hendrix................................................... 48,862 * Thomas R. Jenkins................................................. 39,521 * Peter A. Leidel................................................... 81,842 * Arlene R. Lissner................................................. 17,375 * Steven W. Logan................................................... 336,457 2.5% Patrick N. Perrin................................................. 65,988 * Harry J. Phillips, Jr............................................. 57,500 * Kevin T. Smyley................................................... 16,588 * Tucker Taylor..................................................... 38,621 * Marcus A. Watts................................................... 12,569 * All directors and executive officers as a group (13 persons)...... 1,149,578 8.5%
8 ----------------- * Less than 1.0%. (1) Shares of Common Stock listed include shares subject to stock options exercisable within 60 days (15,250 for Mr. Chase, 15,250 for Mr. Cooper, 141,334 for Mr. Cornell, 24,000 for Mr. Hendrix, 23,999 for Mr. Jenkins, 12,833 for Mr. Leidel, 14,000 for Ms. Lissner, 204,874 for Mr. Logan, 10,500 for Mr. Perrin, 7,500 for Mr. Phillips, 8,000 for Mr. Smyley, 20,333 for Mr. Taylor, 7,500 for Mr. Watts, and 505,373 for all the above as a group). (2) Based on a filing made with the SEC reflecting ownership of Common Stock as of December 31, 2001. The filing indicates sole voting power with respect to 39,500 shares of Common Stock and sole dispositive power with respect to 1,793,220 shares of Common Stock. (3) Based on a filing made with the SEC reflecting ownership of Common Stock as of December 31, 2001. The filing indicates sole voting and dispositive power with respect to the referenced shares of Common Stock. (4) Based on a filing made with the SEC reflecting ownership of Common Stock as of December 31, 2001. The filing indicates shared voting power for 550,100 shares of Common Stock and shared dispositive power for 889,200 shares of Common Stock. (5) Based on a filing made with the SEC reflecting ownership of Common Stock as of January 31, 2002. The filing indicates shared voting power and shared dispositive power for 798,000 shares of Common Stock. (6) Mr. Cornell has sole voting power for 382,393 shares of Common Stock and sole dispositive power for 362,428 shares of Common Stock, of which 141,334 shares are subject to stock options exercisable within 60 days. The total includes 19,965 shares over which Jane B. Cornell, the former wife of David M. Cornell, has sole dispositive power and, pursuant to a voting agreement, over which Mr. Cornell has sole voting power. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS At December 31, 2001, the Company had notes and accrued interest receivable from Mr. Cornell, a Director, and Mr. Logan, Company President, in the amounts of $746,386 and $364,165, respectively. These amounts were the largest amount of indebtedness outstanding at any time during 2001. Interest on the notes, which were incurred upon the exercise of stock options and in connection with other personal matters, is charged annually at a rate of 6.63% and the notes mature in June 2004. In September 1997, in connection with the acquisition of Abraxas, the Company entered into a covenant not to compete agreement with Ms. Lissner pursuant to which she agreed for a period of 20 years not to: (i) engage in any business in competition with any business operation of the Company or its affiliates; (ii) request that any customer or supplier of the Company or any of its affiliates curtail or cancel its business with the Company or any such affiliate; or (iii) induce or attempt to influence any employee of the Company or any of its affiliates to terminate his or her employment with the Company or any such affiliate, or hire or retain the services of any such employee. In consideration of Ms. Lissner's agreements, the Company agreed to pay Ms. Lissner 10 annual installments of $60,000 each beginning on January 2, 1998. Such payments may be accelerated upon the mutual agreement of Ms. Lissner and the Company. Effective as of September 1, 1999, the Company entered into a consultant agreement with David M. Cornell. As compensation for his services, the Company agreed to pay Mr. Cornell an annual salary of at least $255,000 for each of the first four years of the seven-year initial term of the consultant agreement and an annual salary of at least $180,000 for each of the last three years of the seven-year initial term. If the Company and Mr. Cornell agree to renew the consultant agreement for an additional three-year renewal term, the Company has agreed to pay Mr. Cornell an annual salary of at least $300,000 for each of the three years of the renewal term. 9 As additional compensation for his services, the Company has agreed to pay Mr. Cornell an annual bonus, subject to certain limitations, equal to $75,000 during the first four years of the initial term and an annual bonus of $60,000 during the last three years of the initial term and during any renewal term. The Company has also agreed to grant Mr. Cornell options to purchase an aggregate of 120,000 shares of the Common Stock in four equal annual installments beginning on September 1, 2000. The options have an exercise price equal to the fair market value of the Common Stock on the date of grant and vest at the time such options are granted. Effective as of September 1, 1999, as part of the consultant agreement that the Company entered into with Mr. Cornell, Mr. Cornell agreed for a period of 10 years not to: (i) within the United States, transact or take part in any competitive business (as defined in the consultant agreement) or render any service to any person or entity engaged in a competitive business; (ii) share in the earnings of, beneficially own any security issued by, or otherwise own any interest in any person or entity engaged in a competitive business within the United States; or (iii) hire or solicit the services of any person or entity employed or engaged to perform services for the Company or any of its affiliates, or cause any such person or entity to leave the employment or services of the Company or any of its affiliates. In consideration of Mr. Cornell's agreements, the Company agreed to pay Mr. Cornell $10,000 per month during the seven-year initial term of the consultant agreement. Mr. Watts, a director of the Company, is a partner in the law firm of Locke Liddell & Sapp LLP ("LLS"). The Company paid legal fees to LLS and LLS performed legal services for the Company in 2001. 10 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. CORNELL COMPANIES, INC. By: /s/ HARRY J. PHILLIPS, JR. ------------------------------- Harry J. Phillips, Jr. Executive Chairman, Chairman of the Board and Director Pursuant to the requirements of the Securities Act of 1934, this report on Form 10-K/A has been signed below by the following persons on behalf of Cornell Companies, Inc. and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE ----------- ------- ------ /s/ HARRY J. PHILLIPS, JR. Executive Chairman, Chairman of the Board and May 13, 2002 -------------------------------- Director (Principal Executive Officer) Harry J. Phillips, Jr. /s/ JOHN L. HENDRIX Senior Vice President and Chief Financial May 13, 2002 -------------------------------- Officer (Principal Financial Officer and John L. Hendrix Principal Accounting Officer) /s/ ANTHONY R. CHASE Director May 13, 2002 -------------------------------- Anthony R. Chase /s/ JAMES H.S. COOPER Director May 13, 2002 -------------------------------- James H.S. Cooper /s/ DAVID M. CORNELL Director May 13, 2002 -------------------------------- David M. Cornell /s/ PETER A. LEIDEL Director May 13, 2002 -------------------------------- Peter A. Leidel /s/ ARLENE R. LISSNER Director May 13, 2002 -------------------------------- Arlene R. Lissner /s/ STEVEN W. LOGAN Director May 13, 2002 -------------------------------- Steven W. Logan /s/ TUCKER TAYLOR Director May 13, 2002 -------------------------------- Tucker Taylor /s/ MARCUS A. WATTS Director May 13, 2002 -------------------------------- Marcus A. Watts
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