Document:

Exhibit 10.3

EMPLOYMENT/SEPARATION AGREEMENT

                THIS EMPLOYMENT/SEPARATION
AGREEMENT (the “Agreement”) is made and entered into as of this 15th
day of March, 2005 (“Effective Date”), by and between Cornell Companies, Inc.,
a Delaware corporation (the “Company”) and John R. Nieser, an individual
(the “Employee”).

1.               Employment and Term.
The Company agrees to continue the employment of the Employee and the Employee
agrees to remain in the employ of the Company, in accordance with the terms and
provisions of this Agreement.  From the
Effective Date until March 14, 2007, Employee’s employment term shall be a
rolling two-year term, which will automatically extend so as to terminate in
two (2) years from the last day worked by the Employee.  If this Agreement has not already been
terminated, beginning on March 15, 2007 until March 14, 2008, the Employee’s
employment term shall be a rolling one year term, which will automatically
extend so as to terminate in one (1) year from the last day worked by the
Employee (these two terms together are the “Employment Period”).

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

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

 

 

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

(a)          
Salary.  During the Employment
Period, Employee shall be paid an annual base salary (“Annual Base Salary”)
at the rate of not less than $200,000 per year, in substantially equal
bi-weekly installments, and subject to any and all required withholdings and
deductions for Social Security, income taxes, elected benefits, and the like.
The Compensation Committee of the Board of Directors of the Company
(hereinafter referred to as the “Compensation Committee”) may from time
to time direct such upward adjustments to Annual Base Salary as the
Compensation Committee deems to be appropriate.

(b)           Incentive
Cash Compensation.  During the
Employment Period, Employee shall be eligible annually for a cash bonus, at a
targeted amount of 40% of Employee’s Annual Base Salary, based on the
achievement of certain performance goals established by the Compensation
Committee (such aggregate awards for each year are hereinafter referred to as
the “Annual Bonus”). Each Annual Bonus, if any, shall be paid no later
than the end of the third month of the fiscal year next following the fiscal
year for which the Annual Bonus is awarded, unless the Employee shall elect to
defer the receipt of such Annual Bonus in accordance with a deferred plan approved
by the Company.  All bonus payments will
be subject to all applicable tax withholdings.

5.             Long Term Incentive Compensation.

(a)           Stock
Options.  During the Employment Period,
Employee shall be eligible to receive stock options in amounts approved by the
Compensation Committee of the Cornell Board of Directors.  Nothing in this Agreement shall be construed
to contradict the terms and conditions regarding vesting, or otherwise, within
the 1996 Amended and Restated Stock Option Plan and/or the 2000 Broad-Based
Employee Stock Option Plan and/or any other stock plan which may arise
thereafter.

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

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

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

 

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for
which Employee and/or Employee’s family qualifies in accordance with the terms
of such plans.

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

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

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

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

(b)           Disability.  If the Company determines in good faith that
the Disability of the Employee has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give to the
Employee written notice in accordance with Section 15(b) of its
intention to terminate the Employment Period. In such event, the Employment
Period shall terminate effective on the 30th day after receipt of such notice
by the Employee (the “Disability Effective Date”), provided that, within
the 30 days after such receipt, the Employee shall not have returned to
full-time performance of the Employee’s duties. For purposes of this Agreement,
“Disability” shall mean the inability of the Employee to perform with
reasonable accommodations Employee’s essential functions and duties with the
Company on a full-time basis as a result of incapacity due to mental or
physical illness which continues for more than 180 days after the commencement
of such incapacity.

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

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

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

(iii)          gross
business misconduct by the Employee;

 

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

(v)           the
material violation of the Company’s policies and procedures, which violation is
not fully remedied within five (5) days after receipt of written notice from
the Company;

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

(vii)         material
breach of any other provision of this Agreement, which breach has not been
fully remedied within five (5) business days after receipt of written notice
from the Company.

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

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

(f)            Termination
following Change in Control.  In the
event there is a Change in Control of the Company (as hereinafter defined), the
Company may terminate the Employee’s employment with 30 days’ written
notice.  For purposes of this Agreement,
a “Change in Control” shall mean: (i) the consummation of a merger or
consolidation of the Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the continuing
or surviving entity’s securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger, consolidation or
other reorganization, (ii) the sale, transfer or other disposition of all or
substantially all of the Company’s assets, or (iii) a change in the composition of the Board of Directors of the
Company, as a result of which fewer than two-thirds of the incumbent directors
are directors who either (A) had been directors of the Company twelve (12)
months prior to such change, or (B) were elected, or nominated for election, to
the Board of Directors with the affirmative votes of at least two-thirds of the
directors who had been directors of the Company twelve (12) months prior to
such change and who were still in office at the time of the election or
nomination.  A
transaction shall not constitute a Change of Control if its sole purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who
held the Company’s securities immediately before such transaction.

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

(h)           Date
of Termination. “Date of Termination” means (i) if the Employee’s
employment is terminated by the Company for Cause or following a Change of
Control,

 

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

8.               Obligations of the Company Upon Termination.

(a)           Termination as a Result of Death.
If the Employee’s employment is terminated by reason of the Employee’s death
during the Employment Period pursuant to Section 7(a), in lieu of the
obligations of the Company hereunder, all Employee’s rights and benefits
provided for by this Agreement will terminate on the death; provided, however, that Employee’s estate will be paid, to the extent
Employee has not already been paid, Employee’s pro rata Annual Base Salary and
pro rata Annual Bonus as earned through the date of death.  This payment will be made within one month of
the date of death and will be subject to all applicable tax withholdings.

(b)          
Termination as a Result of Disability. 
If the Employee’s employment is terminated by reason of the Employee’s
Disability during the Employment Period pursuant to Section 7(b), in
lieu of the obligations of the Company hereunder, all Employee’s rights and
benefits provided for by this Agreement will terminate as of such date; provided, however, that Employee will be paid, to the extent he has not
already been paid, Employee’s pro rata Annual Base Salary and pro rata Annual
Bonus as earned through the date of termination.  This payment will be made within one month of
the date of termination and will be subject to all applicable tax
withholdings.  Employee will also be
entitled to extended health care benefits (COBRA) at Employee’s expense and to
the extent Employee is qualified for such benefits as provided by law.

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

(d)           Voluntary
Resignation by Employee.  If the
Employee’s employment shall be terminated during the Employment Period by the
Employee pursuant to Section 7(d), in lieu of the obligations of the
Company hereunder, all Employee’s rights and benefits provided for by this
Agreement will terminate as of such date; provided, however, that

 

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Employee
will be paid, to the extent he has not already been paid, Employee’s pro rata
Annual Base Salary as earned through the date of termination.  This payment will be made within one month of
the date of termination and will be subject to all applicable tax withholdings.  Employee will also be entitled to extended
health care benefits (COBRA) at Employee’s expenses and to the extent Employee
is qualified for such benefits as provided by law.

(e)           Termination
by Company without Cause.  If the
Employee’s employment shall be terminated during the Employment Period by the
Company without Cause pursuant to Section 7(e), in lieu of the
obligations of the Company hereunder, all Employee’s rights and benefits
provided for by this Agreement will terminate as of such date; provided, however, that Employee will be paid, to the extent he has not
already been paid, Employee’s pro rata Annual Base Salary and pro rata Annual
Bonus as earned through the date of termination.  Employee shall also be entitled to the
following payment: (1) If Termination Date occurs prior to March 9, 2007, the
Employee shall be entitled to two times his then-current Annual Base Salary; or
(ii) If Termination Date occurs between March 9, 2007 and March 8, 2008, the
Employee shall be entitled to one time his then-current Annual Base Salary.  This payment will be made within one month of
the date of termination and will be subject to all applicable tax
withholdings.  Employee will also be
entitled to extended health care benefits (COBRA) at Employee’s expense and to
the extent Employee is qualified for such benefits as provided by law.

(f)            Termination
Following Change in Control.  If the
Employee’s employment shall be terminated during the Employment Period by the
Company as the result of a Change in Control pursuant to Section 7(f), in lieu
of the obligations of the Company hereunder, all Employee’s rights and benefits
provided for by this Agreement will terminate as of such date; provided, however, that Employee will be
paid, to the extent he has not already been paid, Employee’s pro rata Annual
Base Salary and pro rata Annual Bonus as earned through the date of
termination.  Employee shall also be
entitled to the following payment: (i) If Termination Date occurs prior to
March 9, 2007, the Employee shall be entitled to two times his then-current
Annual Base Salary; or (ii) If Termination Date occurs between March 9, 2007
and March 8, 2008, the Employee shall be entitled to one time his then-current
Annual Base Salary.  This payment will be
made within one month of the date of termination and will be subject to all
applicable tax withholdings.  Employee
will also be entitled to extended health care benefits (COBRA) at Employee’s
expense and to the extent Employee is qualified for such benefits as provided
by law.

9.               Certain Additional Payments by the Company.

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

 

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excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the (“Excise Tax”), then the Employee shall
be entitled to receive an additional payment (a “Gross-Up Payment”) in
an amount such that after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.

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

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

 

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

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

 

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10.             Confidential Information.

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

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

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

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

 

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

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

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

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

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

 

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

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

13.             Obligations to Refrain From Competing Unfairly.

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

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

 

11

 

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

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

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

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

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

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

 

12

 

14.             Successors.

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

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

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

15.             Miscellaneous.

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

 

13

 

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

	
  If to the Employee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  John R. Nieser

  	
   

  	
   

  
	
  30 Martin’s Way

  	
   

  	
   

  
	
  Sugar Land, Texas 77479

  	
   

  	
   

  
	
  Telephone: (281) 265-7448

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the Company:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cornell Companies, Inc.

  	
   

  	
   

  
	
  1700 West Loop South, Suite 1500

  	
   

  	
   

  
	
  Houston, Texas 77027

  	
   

  	
   

  
	
  Attention: James E. Hyman, Chairman and CEO

  	
   

  	
   

  
	
  Telephone: (713) 335-9266

  	
   

  	
   

  
	
  Telecopy: (713) 623-2853

  	
   

  	
   

  

 

 

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

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

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

(e)          
The Employee’s or the Company’s failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the failure to
assert any right the Employee or the Company may have hereunder shall not be
deemed to be a waiver of such provision or right or any other provision or right
of this Agreement.

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

[Signature
page follows.]

 

14

 

IN WITNESS WHEREOF, the Employee and, pursuant to due authorization
from the Board, the Company have caused this Agreement to be executed this 15th
day of March, 2005.

 

	
   

  	
  Employee

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ John R. Nieser

  
	
   

  	
  John R. Nieser,

  
	
   

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patrick N. Perrin

  
	
   

  	
  Patrick N.
  Perrin,

  
	
   

  	
  Sr. V.P., Chief
  Administrative Officer

  

 

15Exhibit
10.4

 

On March 9, 2005, Cornell Companies, Inc.
(the “Company”) and Harry J. Phillips, Jr. entered into an oral agreement to
continue Mr. Phillips’ status as an employee of the Company.  Pursuant to the oral agreement, Mr. Phillips
will receive an annual salary of $70,000 and will assist with special projects
in order to facilitate the transition to the Company’s new Chief Executive
Officer.

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