THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Cornell Companies, Inc. (CRN)

5/10/2006 Proxy Information

James E. Hyman

In March 2005, the Company entered into an employment agreement with James E. Hyman, pursuant to which Mr. Hyman serves as the Company's Chief Executive Officer and Chairman of the Board.

The agreement has a rolling two-year term (the "Employment Period"). Under the agreement, Mr. Hyman's current annual base salary is $482,125, and he is eligible to receive a bonus upon the achievement of certain performance objectives equal to $25,000 plus a targeted amount of 80% of Mr. Hyman's annual base salary. Mr. Hyman also received a $165,000 signing bonus. Mr. Hyman is required to return 50% of the signing bonus if his employment is terminated by the Company for cause (as defined in the agreement) or if he voluntarily terminates his employment without good reason (as defined in the agreement) before January 24, 2007.

Pursuant to the agreement, Mr. Hyman was granted options to purchase 50,000 shares of Common Stock pursuant to the 1996 Plan, with an exercise price equal to the closing price of the Common Stock of the Company on the New York Stock Exchange on the Effective Date (the "Hyman Stock Options"). One third of the Hyman Stock Options become exercisable on January 24, 2006, 2007, and 2008, respectively, provided that Mr. Hyman has remained continuously employed by the Company.

Mr. Hyman was also granted 85,000 restricted shares of Common Stock (the "Restricted Stock") under the agreement. The shares of Restricted Stock vest as follows: 25,000 shares of Restricted Stock vest on January 24, 2008; 30,000 shares of Restricted Stock shall vest upon the Company achieving a certain stock price within a certain time period as established by the Compensation Committee; and 30,000 shares of Restricted Stock vest upon the Company achieving a certain earnings per share within a certain time period as established by the Compensation Committee, subject, in each case to Mr. Hyman's continued employment with the Company through each such date.

Pursuant to the agreement, if Mr. Hyman's employment is terminated by the Company for cause, Mr. Hyman is entitled to receive his base salary accrued through the termination date and reimbursement of all reasonable expenses incurred by Mr. Hyman. If Mr. Hyman's employment is terminated due to his death or disability (as defined in the agreement), Mr. Hyman or his estate will receive (i) his base salary accrued through the date of death or disability, (ii) a prorated bonus for the year in which the death or disability occurs, (iii) reimbursement of all reasonable expenses incurred by Mr. Hyman and (iv) extended health care benefits (COBRA) at the Company's expense for six months.

If the Company terminates the employment of Mr. Hyman without cause or he voluntarily terminates his employment with good reason, then, he is entitled to receive the following: (i) base salary accrued through the termination date, (ii) a prorated bonus for the year in which the termination occurs, (iii) an amount equal to Mr. Hyman's base salary plus his target bonus for the remainder of the Employment Period, (iv) reimbursement of all reasonable expenses incurred by Mr. Hyman, (v) extended health care benefits (COBRA) at the Company's expense for eighteen months following his termination, and (vi) all shares of Restricted Stock immediately vest. All cash payments due from the Company upon termination are due to Mr. Hyman or his estate within one month of the date of termination.

In the event that Mr. Hyman voluntarily terminates his employment with good reason within 180 days following a change in control, then, such termination will be considered to be with good reason, and Mr. Hyman shall be entitled to receive the same benefits as above, except that no vesting of Mr. Hyman's Restricted Stock will occur. Mr. Hyman will also receive reimbursement for relocation expenses if his employment is terminated without cause or for good reason within 180 days following a change in control.

John R. Nieser

In March 2005, the Company and Mr. Nieser, the Company's Chief Financial Officer, entered into an employment/separation agreement. The agreement begins with a rolling two-year term until March 14, 2007 and then beginning March 15, 2007 has a rolling one-year term. Mr. Nieser's current annual base salary is $215,000 per year, and he is eligible for a discretionary cash bonus at a targeted amount of 50% of his annual base salary. If Mr. Nieser's employment is terminated due to death or disability (as defined in the agreement), Mr. Nieser or his estate is entitled to his base salary and bonus earned through the date of termination (as defined in the agreement). If Mr. Nieser's employment is terminated for cause (as defined in the agreement) or due to voluntary resignation, Mr. Nieser is entitled to his base salary through the date of termination. If Mr. Nieser is terminated without cause or due to a change in control (as defined in the agreement), he is entitled to his base salary and bonus through the date of termination and (i) two times his base salary if the termination occurs prior to March 9, 2007 or (ii) one time his base salary if termination occurs between March 9, 2007 and March 8, 2008.

Mark S. Croft

In November 2005, the Company and Mr. Croft entered into an employment/severance arrangement. Mr. Croft's current annual base salary is $205,000 per year, and he is eligible for a discretionary cash bonus at a targeted amount of 30% of his annual base salary. Under the terms of the severance agreement, if, within one year after a change in control (as defined in the agreement), Mr. Croft's employment is terminated for any reason, with or without cause, he will receive a lump sum cash payment, concurrent with the date of his termination, equal to the sum of (i) Mr. Croft's highest annual base salary as of the date of termination or the date the change in control occurs, plus (ii) the average of the annual bonus paid or payable to Mr. Croft in respect of the two most recent full fiscal years ending on or prior to the date of his termination (or if Mr. Croft has not been employed for two full fiscal years, then the annual bonus in respect of the most recent full fiscal year). In addition, all stock options, restricted stock awards and similar awards granted to Mr. Croft prior to the date of termination will immediately vest on the date of termination.

Patrick N. Perrin

In December 1999, the Company entered into an employment/severance agreement with Patrick N. Perrin. Mr. Perrin's current annual base salary is $186,000 per year, and he is eligible for a discretionary cash bonus at a targeted amount of 25% of his annual base salary. If Mr. Perrin's employment is terminated for any reason within a year after a change in control (as defined in the severance agreement), all stock options, restricted stock awards and similar awards granted to Mr. Perrin prior to the termination date will vest immediately on the date of termination.

In addition, pursuant to the agreement, the Company will remit to Mr. Perrin, as severance, a payment equal to the sum of (i) his highest annual base salary as of the termination date and the change in control date, and (ii) the average bonus paid to him for the two most recent full fiscal years ending on or prior to the termination date. The Company has agreed to pay the severance amounts in a lump sum in cash (a) on the termination date if the Company terminates Mr. Perrin, or (b) within thirty days after the termination date if Mr. Perrin's employment is terminated by him or upon his death or retirement.