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<TYPE>10-Q
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<PERIOD>20010331
<FILING-DATE>20010515
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CORNELL COMPANIES INC
<CIK>0001016152
<ASSIGNED-SIC>8744
<IRS-NUMBER>760433642
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
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<ACT>34
<FILE-NUMBER>001-14472
<FILM-NUMBER>1639639
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<BUSINESS-ADDRESS>
<STREET1>1700 WEST LOOP SOUTH
<STREET2>STE 1500
<CITY>HOUSTON
<STATE>TX
<ZIP>77027
<PHONE>7136230790
</BUSINESS-ADDRESS>
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<STREET1>1700 WEST LOOP SOUTH
<STREET2>STE 1500
<CITY>HOUSTON
<STATE>TX
<ZIP>77027
</MAIL-ADDRESS>
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<FORMER-CONFORMED-NAME>CORNELL CORRECTIONS INC
<DATE-CHANGED>19960604
</FORMER-COMPANY>
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<SEQUENCE>1
<FILENAME>a2049153z10-q.txt
<DESCRIPTION>10-Q
<TEXT>

<PAGE>

--------------------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q

(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       OR

( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD __________ TO _______________

                         COMMISSION FILE NUMBER 1-14472

                             CORNELL COMPANIES, INC.
              -----------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                        76-0433642
 ---------------------------------                     ----------------------
   (STATE OR OTHER JURISDICTION                            (I.R.S. EMPLOYER
 OF INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)


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



Indicate by a check mark whether Registrant (1) has filed all reports required
to be filed by Sections 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
                                                    ---     -----

               At April 30, 2001 Registrant had outstanding 9,266,767 shares of
its Common Stock.

--------------------------------------------------------------------------------
<PAGE>

PART I   FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

                            CORNELL COMPANIES, INC.
                          CONSOLIDATED BALANCE SHEETS
                                 (UNAUDITED)
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                         MARCH 31,    DECEMBER 31,
                                                                                           2001              2000
                                                                                    ------------------------------------
<S>                                                                                 <C>               <C>
                                     ASSETS

CURRENT ASSETS:
     Cash and cash equivalents......................................................   $      150       $     620
     Accounts receivable, net.......................................................       56,349          55,262
     Deferred tax asset.............................................................          667             667
     Prepaids and other.............................................................        4,559           4,363
     Restricted assets..............................................................        2,051           2,011
                                                                                       ----------       ---------
         Total current assets.......................................................       63,776          62,923
PROPERTY AND EQUIPMENT, net.........................................................      203,312         201,683
OTHER ASSETS:
     Intangible assets, net.........................................................       16,510          16,861
     Deferred costs and other.......................................................       10,402           9,972
                                                                                       ----------       ---------
         Total assets...............................................................   $  294,000       $ 291,439
                                                                                       ==========       =========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable and accrued liabilities.......................................   $   28,208       $  33,179
     Current portion of long-term debt..............................................           42              41
                                                                                       ----------       ---------
         Total current liabilities..................................................       28,250          33,220
LONG-TERM DEBT......................................................................      153,957         146,926
DEFERRED TAX LIABILITIES............................................................          643             643
OTHER LONG-TERM LIABILITIES.........................................................        5,672           6,330

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred stock, $.001 par value, 10,000,000 shares authorized,
       none outstanding.............................................................           --              --
     Common stock, $.001 par value, 30,000,000 shares authorized, 10,230,267
       and 10,161,113 shares issued and outstanding, respectively...................           10              10
     Additional paid-in capital.....................................................       91,965          91,625
     Notes from shareholders........................................................         (615)           (609)
     Retained earnings..............................................................       20,051          19,227
     Treasury stock (955,500 shares of common stock, at cost).......................       (5,933)         (5,933)
                                                                                       ----------       ---------
         Total stockholders' equity.................................................      105,478         104,320
                                                                                       ----------       ---------
         Total liabilities and stockholders' equity.................................   $  294,000       $ 291,439
                                                                                       ==========       =========
</TABLE>

                The accompanying notes are an integral part of
                   these consolidated financial statements.

                                     - 2 -
<PAGE>

                             CORNELL COMPANIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                               THREE MONTHS ENDED
                                                                                                    MARCH 31,
                                                                                            ------------------------
                                                                                               2001          2000
                                                                                            ----------    ----------
<S>                                                                                         <C>           <C>
REVENUES..................................................................................   $  60,628    $  53,468
OPERATING EXPENSES........................................................................      47,448       41,638
PRE-OPENING AND START-UP EXPENSES.........................................................       3,578          349
DEPRECIATION AND AMORTIZATION.............................................................       2,040        1,778
GENERAL AND ADMINISTRATIVE EXPENSES.......................................................       3,482        2,802
                                                                                             ---------    ---------

INCOME FROM OPERATIONS....................................................................       4,080        6,901
INTEREST EXPENSE..........................................................................       4,007        3,593
INTEREST INCOME...........................................................................         (19)         (27)
                                                                                             ---------    ---------

INCOME BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE
   EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE...............................................          92        3,335
PROVISION FOR INCOME TAXES................................................................          38        1,364
                                                                                             ---------    ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
   PRINCIPLE..............................................................................          54        1,971

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
   NET OF RELATED INCOME TAX PROVISION OF $535 IN 2001....................................         770           --
                                                                                             ---------    ---------

NET INCOME................................................................................   $     824    $   1,971
                                                                                             =========    =========

EARNINGS PER SHARE:
     BASIC
       Income before cumulative effect of change in accounting principle..................   $     .01    $     .21
       Cumulative effect of change in accounting principle................................         .08           --
                                                                                             ---------    ---------
       Net income.........................................................................   $     .09    $     .21
                                                                                             =========    =========

     DILUTED
       Income before cumulative effect of change in accounting principle..................   $     .01    $     .21
       Cumulative effect of change in accounting principle................................         .08           --
                                                                                             ---------    ---------
       Net income.........................................................................   $     .09    $     .21
                                                                                             =========    =========

NUMBER OF SHARES USED IN PER SHARE COMPUTATION:
     BASIC................................................................................       9,227        9,452
     DILUTED..............................................................................       9,428        9,602
</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                     - 3 -
<PAGE>

                             CORNELL COMPANIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                               THREE MONTHS ENDED
                                                                                                    MARCH 31,
                                                                                            ------------------------
                                                                                               2001          2000
                                                                                            ----------    ----------
<S>                                                                                         <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income.............................................................................   $     824    $   1,971
   Adjustments to reconcile net income to net cash provided by (used in)
     operating activities --
     Cumulative effect of change in accounting principle..................................        (770)          --
     Depreciation.........................................................................       1,201        1,048
     Amortization.........................................................................         839          730
     Non-cash interest expense............................................................         294          282
     Provision for bad debts..............................................................         241          174
     Loss on sale of property and equipment...............................................          47           43
     Change in assets and liabilities
         Accounts receivable..............................................................      (1,328)      (1,177)
         Restricted assets................................................................         (40)         184
         Other assets.....................................................................         255         (582)
         Accounts payable and accrued liabilities.........................................      (4,845)      (1,381)
         Deferred revenues and other liabilities..........................................        (658)        (287)
                                                                                             ---------    ---------
     Net cash provided by (used in) operating activities..................................      (3,940)       1,005
                                                                                             ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures...................................................................      (3,335)      (2,341)
   Proceeds from sales of property and equipment..........................................          --           77
                                                                                             ---------    ---------
     Net cash used in investing activities................................................      (3,335)      (2,264)
                                                                                             ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt...........................................................      32,000       21,400
   Payments on long-term debt.............................................................     (25,000)     (21,650)
   Payments on capital lease obligations..................................................         (10)          --
   Payments for debt issuance and other financing costs...................................        (399)        (115)
   Proceeds from issuance of common stock.................................................         214           97
   Proceeds from exercises of stock options...............................................          --           25
                                                                                             ---------    ---------
     Net cash provided by (used in) financing activities..................................       6,805         (243)
                                                                                             ---------    ---------

NET DECREASE IN CASH AND CASH EQUIVALENTS.................................................        (470)      (1,502)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..........................................         620        1,763
                                                                                             ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................................   $     150    $     261
                                                                                             =========    =========

SUPPLEMENTAL CASH FLOW DISCLOSURE:
   Interest paid, net of amounts capitalized..............................................   $   4,247    $   4,270
                                                                                             =========    =========
   Income taxes paid......................................................................   $      29    $   3,915
                                                                                             =========    =========
</TABLE>

                The accompanying notes are an integral part of
                   these consolidated financial statements.

                                     - 4 -
<PAGE>

                             CORNELL COMPANIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been
prepared by Cornell Companies, Inc. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion
of management, all adjustments and disclosures necessary for a fair
presentation of these financial statements have been included. These
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's 2000 Annual Report on
Form 10-K as filed with the Securities and Exchange Commission.

2.   CREDIT FACILITIES

     As of March 31, 2001, the Company had borrowings outstanding under its
2000 Credit Facility of $65.0 million. Under the 2000 Credit Facility, the
Company has a $75.0 million revolving line of credit. At March 31, 2001, the
remaining borrowing capacity was $10.0 million. The revolving credit
commitment is reduced by $2.7 million quarterly beginning in January 2002.
The 2000 Credit Facility matures in 2005 and bears interest, at the election
of the Company, at either the prime rate plus a margin of 1.0% to 2.0% or a
rate which is 2.0% to 3.0% above the applicable LIBOR rate. At March 31,
2001, the margin was at 3.0% above the LIBOR rate. A commitment fee of 0.5%
is charged on the unused portion of the revolving credit commitment. The 2000
Credit Facility is secured by substantially all of the Company's assets,
including the stock of all the Company's subsidiaries; does not permit the
payment of cash dividends; and requires the Company to comply with certain
leverage, net worth and debt service coverage covenants. Additionally, the
2000 Credit Facility provides the Company with the ability to enter into
future operating lease agreements that provide for residual value guarantees.

     The Company has outstanding $50.0 million of Senior Secured Notes
("Senior Notes"). The Senior Notes, which bear interest at a fixed rate of
7.74%, mature on July 15, 2010. Under the Senior Notes purchase agreements,
the Company is required to make eight annual principal payments of $6.25
million beginning on July 15, 2003 and comply with certain financial
covenants. Earlier payments of principal are allowed subject to certain
prepayment provisions. Interest is payable semi-annually. The holders of the
Senior Notes and the lenders under the 2000 Credit Facility have a
collateral-sharing agreement whereby both sets of creditors have an equal
security interest in all the assets of the Company.

     The Company has outstanding $40.0 million under its Note and Equity
Purchase Agreement (the "Subordinated Notes") entered into in July 2000. The
Subordinated Notes have a seven-year term, are interest-only payable
quarterly at a fixed rate of 12.875%, and contain certain financial covenants.

3.   CHANGE IN ACCOUNTING FOR SUPPLIES INVENTORY

     On January 1, 2001, management changed its method of accounting for
supplies whereby the Company capitalizes durable operating supply purchases
such as uniforms, linens and books and amortizes these costs to operating
expense over the estimated period of benefit of 18 months. Effective January
1, 2001, the Company capitalized a portion of previously expensed supplies
and recognized a benefit in the consolidated statements of operations of
$770,000 (net of income taxes of $535,000) which has been reflected as a
cumulative effect of a change in accounting principle in the accompanying
consolidated statements of operations. For the three months ended March 31,
2000, the pro-forma impact of this change in accounting would have been
immaterial.

                                     - 5 -
<PAGE>

4.   DEFERRED COSTS AND OTHER

     At March 31, 2001, the Company had deferred professional fees and other
costs totaling $2.2 million related to its efforts to sell and leaseback
certain facilities owned by the Company. Upon consummation of this
transaction, the transaction costs will be included in the determination of
the gain from the sale which will be deferred over the initial lease term. If
management of the Company determines that it is doubtful that this
transaction will be consummated, these transaction costs will be expensed in
the period such determination is made.

     At March 31, 2001, the Company had deferred acquisition costs totaling
$652,000 related to the anticipated purchase of real property located near
Fort Greely, Alaska. Management anticipates that this property will be used
in conjunction with the operations of an adult secure institution for the
State of Alaska. If management determines that a contract to operate this
facility near Fort Greely, Alaska will not be awarded, the Company will
likely not purchase the real property and the deferred acquisition costs will
be expensed.

     At March 31, 2001, accounts receivable include costs totaling $1.3
million for direct costs incurred by the Company since June 1999 for payroll
and other operating costs related to the Moshannon Valley Correctional Center
since the issuance of the Stop-Work Order. These costs were incurred at the
direction of the Federal Bureau of Prisons ("FBOP") with the understanding
that such costs would be reimbursed. Although no formal written agreement
exists, management believes that these costs will be reimbursed by the FBOP.
In the event any portion of these costs are not reimbursed, such costs will
be expensed.

5.   EARNINGS PER SHARE

     Basic earnings per share ("EPS") is computed by dividing net income by
the weighted average number of shares of common stock outstanding during the
period. Diluted EPS reflects the potential dilution from the exercise or
conversion of securities, such as stock options and warrants, into common
stock.

6.   SEGMENT DISCLOSURE

     The Company's three operating divisions are its reportable segments. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies in the Notes to Consolidated
Financial Statements included in the Company's 2000 Annual Report on Form
10-K. Intangible assets are not included in each segment's reportable assets,
and the amortization of intangible assets is not included in the
determination of a segment's operating income or loss. The Company evaluates
performance based on income or loss from operations before general and
administrative expenses, retention and incentive bonuses, amortization of
intangibles, interest and income taxes. Corporate and other assets are
comprised primarily of cash, accounts receivable, deposits, deferred costs,
property and equipment and deferred taxes.

                                     - 6 -
<PAGE>

     The only significant non-cash item reported in the respective segments'
income or loss from operations is depreciation and amortization (excluding
intangibles):

<TABLE>
<CAPTION>
                                                                                               (IN THOUSANDS)
                                                                                             THREE MONTHS ENDED
                                                                                                 MARCH 31,
                                                                                          ------------------------
                                                                                             2001          2000
                                                                                          ----------    ----------
<S>                                                                                       <C>           <C>
Revenues
     Adult secure institutional.......................................................    $   23,840    $  21,081
     Juvenile.........................................................................        24,495       20,496
     Pre-release......................................................................        12,293       11,891
                                                                                          ----------    ---------
Total revenues........................................................................    $   60,628    $  53,468
                                                                                          ==========    =========

Pre-opening and start-up expenses
     Adult secure institutional.......................................................    $       --    $     349
     Juvenile.........................................................................         3,578           --
     Pre-release......................................................................            --           --
                                                                                          ----------    ---------
Total pre-opening and start-up expenses...............................................    $    3,578    $     349
                                                                                          ==========    =========

Income from operations
     Adult secure institutional.......................................................    $    4,931    $   4,836
     Juvenile.........................................................................         1,893        2,402
     Pre-release......................................................................         2,532        2,908
     General and administrative expense...............................................        (3,482)      (2,802)
     Retention and incentive bonuses..................................................        (1,188)          --
     Amortization of intangibles......................................................          (381)        (382)
     Corporate and other..............................................................          (225)         (61)
                                                                                          ----------    ---------
Total income from operations..........................................................    $    4,080    $   6,901
                                                                                          ==========    =========



                                                                                           MARCH 31,    DECEMBER 31,
                                                                                             2001           2000
                                                                                          ----------     ----------
Assets
     Adult secure institutional.......................................................    $  145,876   $  143,743
     Juvenile.........................................................................        60,963       59,630
     Pre-release......................................................................        51,845       51,802
     Intangible assets, net...........................................................        16,510       16,861
     Corporate and other..............................................................        18,806       19,403
                                                                                          ----------   ----------
Total assets..........................................................................    $  294,000   $  291,439
                                                                                          ==========   ==========
</TABLE>

                                     - 7 -
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

     The Company is a leading private provider of corrections, treatment and
education services to government agencies. As of March 31, 2001, the Company
had contracts to operate 71 facilities with a total service capacity of
14,492. The Company's facilities are located in 13 states and the District of
Columbia.

     The Company provides integrated facility development, design,
construction and operational services to governmental agencies within three
operating divisions: (a) adult secure institutional, correctional and
detention services; (b) juvenile treatment, educational and detention
services and (c) pre-release correctional and treatment services. The
following table sets forth, for the periods indicated, total service
capacity, the service capacity and contracted beds in operation at the end of
the periods shown, billed mandays and the average occupancy percentages.

<TABLE>
<CAPTION>
                                                                                     MARCH 31,        MARCH 31,
                                                                                        2001            2000
                                                                                    ------------    ------------
<S>                                                                                 <C>             <C>
            Total service capacity (1):
                Residential......................................................       11,446         12,026
                Non-residential community-based..................................        3,046          2,819
                  Total..........................................................       14,492         14,845
            Service capacity in operation (end of period)........................       13,173         13,046
            Contracted beds in operation (end of period) (2).....................        9,991          9,835
            Average occupancy based on contracted beds in operation (2) (3)......         95.2%          95.1%
            Average occupancy excluding start-up operations (2)..................         96.3%          96.9%
</TABLE>

-----------
(1)  The Company's service capacity is comprised of the number of beds available
     for service upon completion of construction of residential facilities and
     the average program capacity of non-residential community-based programs.

(2)  Occupancy percentages are based on contracted service capacity of
     residential facilities in operation. Since certain facilities have service
     capacities that exceed contracted capacities, occupancy percentages can
     exceed 100% of contracted capacity.

(3)  Occupancy percentages reflect less than normalized occupancy during the
     start-up phase of any applicable facility, resulting in a lower average
     occupancy in periods when the Company has substantial start-up activities.

     The Company derives substantially all its revenues from providing
corrections, treatment and educational services to federal, state and local
government agencies in the United States. Revenues for the Company's services
are generally recognized on a per diem rate based upon the number of occupant
days or hours served for the period or cost-plus reimbursement.

     Factors which the Company considers in determining the per diem rate to
charge include: (a) the programs specified by the contract and the related
staffing levels; (b) wage levels customary in the respective geographic
areas; (c) whether the proposed facility is to be leased or purchased and (d)
the anticipated average occupancy levels which the Company believes could
reasonably be maintained.

     Although the Company has experienced higher operating margins in its
adult secure institutional and pre-release divisions as compared to the
juvenile division, the Company's operating margins generally vary from
facility to facility based on the level of competition for the contract
award, the proposed length of the

                                     - 8 -
<PAGE>

contract, the occupancy levels for a facility, the level of capital
commitment required with respect to a facility, the anticipated changes in
operating costs over the term of the contract, and the Company's ability to
increase contract revenues. The Company has and expects to experience interim
period operating margin differences due to the number of calendar days in the
period, higher payroll taxes in the first half of the year, and salary and
wage increases which are incurred prior to certain contract revenue increases.

     The Company is responsible for all facility operating expenses, except
for certain debt service and lease payments with respect to facilities for
which the Company has only a management contract (ten facilities in
operation at March 31, 2001).

     A majority of the Company's facility operating expenses consist of fixed
costs. These fixed costs include lease and rental expense, insurance,
utilities and depreciation. As a result, when the Company commences operation
of new or expanded facilities, fixed operating expenses increase. The amount
of the Company's variable operating expenses, including food, medical
services, supplies and clothing, depend on occupancy levels at the facilities
operated by the Company. The Company's largest single operating expense,
facility payroll expense and related employment taxes and costs, has both a
fixed and a variable component. The Company can adjust the staffing and
payroll to a certain extent based on occupancy at a facility, but a minimum
fixed number of employees is required to operate and maintain any facility
regardless of occupancy levels. Personnel costs are subject to increase in
tightening labor markets based on local economic and other conditions.

       Pre-opening and start-up expenses consist primarily of payroll,
benefits, training and other operating costs prior to opening a new or
expanded facility and during the period of operation while occupancy is
ramping up to break-even levels.

     General and administrative expenses consist primarily of salaries of the
Company's corporate and administrative personnel who provide senior
management, finance, accounting, human resources, payroll, information
systems and other services and costs of business development.

     Newly opened facilities are staffed according to contract requirements
when the Company begins receiving offenders or clients. Offenders or clients
are typically assigned to a newly opened facility on a phased-in basis over a
one-to three-month period, although certain programs require a longer time
period to reach break-even occupancy levels. The Company incurs pre-opening
and start-up operating losses at new facilities until break-even occupancy
levels are reached. Quarterly results can be substantially affected by the
timing of the commencement of operations as well as development and
construction of new facilities.

     Working capital requirements generally increase immediately prior to the
Company's commencing management of a new or expanded facility as the Company
incurs pre-opening and start-up costs and purchases necessary equipment and
supplies before facility management revenue is realized.

                                     - 9 -
<PAGE>

RESULTS OF OPERATIONS

       The following table sets forth for the periods indicated the
percentages of revenue represented by certain items in the Company's
historical consolidated statements of operations.

<TABLE>
<CAPTION>
                                                                                            THREE MONTHS
                                                                                           ENDED MARCH 31,
                                                                                    ----------------------------
                                                                                        2001            2000
                                                                                    ------------    ------------
<S>                                                                                 <C>             <C>
            Total revenues.......................................................       100.0%         100.0%
            Operating expenses...................................................        78.3           77.9
            Pre-opening and start-up expenses....................................         5.9            0.7
            Depreciation and amortization........................................         3.4            3.3
            General and administrative expenses..................................         5.6            5.2
                                                                                    ---------      ---------
            Income from operations...............................................         6.8           12.9
            Interest expense, net................................................         6.6            6.7
                                                                                    ---------      ---------
            Income before provision for income taxes and
               cumulative effect of change in accounting principle...............         0.2            6.2
            Provision for income taxes...........................................         0.1            2.6
                                                                                    ---------      ---------
            Income before cumulative effect of change
               in accounting principle...........................................         0.1%           3.6%
                                                                                    =========      =========
</TABLE>

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000

    REVENUES. Revenues increased 13.4% to $60.6 million for the three months
ended March 31, 2001 from $53.5 million for the three months ended March 31,
2000.

    Adult secure institutional division revenues increased 13.1% to $23.8
million for the three months ended March 31, 2001 from $21.1 million for the
three months ended March 31, 2000 due principally to (a) the final 550 bed
expansion of the D. Ray James Prison which began housing inmates late in the
first quarter of 2000 and (b) the commencement of a management contract at
the Valencia County Detention Center in the fourth quarter of 2000. Revenues
attributable to start-up operations for the D. Ray James Prison were
approximately $44,000 for the three months ended March 31, 2000. There were
no revenues attributable to start-up operations for the three months ended
March 31, 2001. Average occupancy, excluding start-up operations in 2000, was
97.5% for the three months ended March 31, 2001 compared to 99.0% for the
three months ended March 30, 2000.

    Juvenile division revenues increased 19.5% to $24.5 million for the three
months ended March 31, 2001 from $20.5 million for the three months ended
March 31, 2000 due primarily to the New Morgan Academy which began operations
late in the fourth quarter of 2000. Revenues attributable to start-up
operations for the New Morgan Academy were approximately $2.7 million for the
three months ended March 31, 2001. There were no revenues attributable to
start-up operations for the three months ended March 31, 2000. Average
occupancy, excluding start-up operations in 2001, was 90.1% for the three
months ended March 31, 2001 compared to 94.0% for the three months ended
March 31, 2000.

    Pre-release division revenues increased 3.4% to $12.3 million for the
three months ended March 31, 2001 from $11.9 million for the three months
ended March 31, 2000 due to fluctuations in occupancy over the two periods.
Average occupancy for the three months ended March 31, 2001 was 94.5%
compared to 93.0% for the three months ended March 31, 2000.

                                     - 10 -
<PAGE>

    OPERATING EXPENSES. Operating expenses increased 14.0% to $47.4 million
for the three months ended March 31, 2001 from $41.6 million for the three
months ended March 31, 2000.

    Adult secure institutional division operating expenses increased 22.5% to
$18.6 million for the three months ended March 31, 2001 from $15.2 million
for the three months ended March 31, 2000 due principally to (a) the final
550 bed expansion of the D. Ray James Prison which began housing inmates late
in the first quarter of 2000, (b) an increase in personnel and employee
retention costs, unusually high utility costs during the winter months,
particularly natural gas, and the increased inmate medical costs at certain
secure institutions, and (c) the commencement of a management contract at the
Valencia County Detention Center in the fourth quarter of 2000. As a
percentage of revenues, excluding start-up operations in 2000, adult secure
institutional division operating expenses were 77.9% for the three months
ended March 31, 2001 compared to 72.0% for the three months ended March 31,
2000. The operating margin was impacted unfavorably due to increased
personnel, inmate medical and utilities expenses, and due to one less
calendar day in the 2001 period. Management anticipates that the adult secure
institutional division operating margin will improve during the remainder of
2001 due to certain negotiated and contracted revenue rate increases.

    Juvenile division operating expenses increased 7.6% to $19.2 million for
the three months ended March 31, 2001 from $17.6 million for the three months
ended March 31, 2000. As a percentage of revenues, excluding the start-up
operations of the New Morgan Academy in 2001, operating expenses were 88.0%
for the three months ended March 31, 2001 compared to 85.6% for the three
months ended March 31, 2000. The increase in operating expenses and the
decrease in operating margin was due principally to increased personnel and
employee retention costs and utility costs.

    Pre-release division operating expenses increased 11.9% to $9.7 million
for the three months ended March 31, 2001 from $8.9 million for the three
months ended March 31, 2000. As a percentage of revenues, operating expenses
were 78.9% for the three months ended March 31, 2001 compared to 74.8% for
the three months ended March 31, 2000. The increase in operating expenses and
the decrease in operating margin was due principally to increased personnel
and employee retention costs and utility costs. Additionally, the operating
margin for the three-months ended March 31, 2001 was impacted unfavorably due
to the expiration of the San Diego Center contract in early 2001.

    PRE-OPENING AND START-UP EXPENSES. Pre-opening and start-up expenses were
$3.6 million for the three months ended March 31, 2001 and were attributable
to the start-up activities of the New Morgan Academy and to an expansion of
the Cornell Abraxas Center for Adolescent Females ("ACAF "). Pre-opening and
start-up expenses for the three months ended March 31, 2000 were $349,000 and
were attributable to the start-up activities of the final 550 bed expansion
of the D. Ray James Prison.

    DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
14.7% to $2.0 million for the three months ended March 31, 2001 from $1.8
million for the three months ended March 31, 2000 due to (a) depreciation of
furniture and equipment purchased for the New Morgan Academy, (b)
depreciation associated with the expansion of the Big Spring Complex, and (c)
depreciation associated with various facility expansions and furniture and
equipment additions.

    GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 24.3% to $3.5 million for the three months ended March 31, 2001
from $2.8 million for the three months ended March 31, 2000. The increase in
general and administrative expenses resulted principally from additional
personnel providing public affairs and business development services, certain
consulting costs, and other administrative infrastructure.

    INTEREST. Interest expense, net of interest income, increased to $4.0
million for the three months ended March 31, 2001 from $3.6 million for the
three months ended March 31, 2000 due principally to (a) increased borrowings
to fund various facility expansions and the associated increases in working
capital and

                                     - 11 -
<PAGE>

(b) an increase in the Company's interest rate margin on its 2000 Credit
Facility. Capitalized interest for the three months ended March 31, 2001 was
approximately $40,000 and related to an expansion at the Big Spring Complex.
There was no capitalized interest for the three months ended March 31, 2000.

    INCOME TAXES. For the three months ended March 31, 2001 and 2000, the
Company recognized a provision for income taxes at an estimated effective
rate of 41%.

LIQUIDITY AND CAPITAL RESOURCES

    GENERAL. The Company's primary capital requirements are for (a)
construction of new facilities, (b) acquisitions, (c) expansions of existing
facilities, (d) working capital, (e) pre-opening and start-up costs related
to new operating contracts, (f) information systems hardware and software,
and (g) furniture, fixtures and equipment. Working capital requirements
generally increase immediately prior to the Company commencing management of
a new facility as the Company incurs pre-opening and start-up costs and
purchases necessary equipment and supplies before facility management revenue
is realized.

    NEW FACILITIES AND PROJECTS UNDER CONSTRUCTION. The New Morgan Academy
was completed and became operational in two phases during the fourth quarter
of 2000 and the first quarter of 2001.

    In April 1999, the Company was awarded a contract to design, build and
operate a 1,095 bed prison for the FBOP in Moshannon Valley, Pennsylvania
("Moshannon Valley Correctional Center"). Construction and activation
activities commenced immediately. In June 1999, the FBOP issued a Stop-Work
Order pending a re-evaluation of their environmental documentation supporting
the decision to award the contract. The environmental study was completed
with a finding of no significant impact. While the Stop-Work Order remains in
effect at March 31, 2001, management of the Company believes it will be
lifted and construction will be resumed in the near-term.

    Development and construction costs for the New Morgan Academy and the
Moshannon Valley Correctional Center have been financed with the Company's
lease financing arrangement discussed below under "Long-Term Credit
Facilities".

    LONG-TERM CREDIT FACILITIES. Effective July 21, 2000, the Company
formalized terms under the 2000 Credit Facility with a group of financial
institutions. The 2000 Credit Facility provides for borrowings of up to $75.0
million under a revolving line of credit. The revolving credit commitment is
reduced by $2.7 million quarterly beginning in January 2002. The 2000 Credit
Facility matures in July 2005 and bears interest, at the election of the
Company, at either the prime rate plus a margin of 1.0% to 2.0%, or a rate
which is 2.0% to 3.0% above the applicable LIBOR rate, depending on the level
of borrowings. At March 31, 2001, the margin was 3.0% above the LIBOR rate.
The 2000 Credit Facility is secured by substantially all of the Company's
assets, including the stock of all of the Company's subsidiaries; does not
permit the payment of cash dividends; and requires the Company to comply with
certain leverage, net worth and debt service coverage covenants. At April 30,
2001, the Company had $66.5 million outstanding under the revolving line of
credit, therefore the remaining borrowing capacity was $8.5 million.

    Additionally, the 2000 Credit Facility provides the Company with the
ability to enter into operating lease agreements for the acquisition or
development of operating facilities. This lease financing arrangement
provides for funding to the lessor under the operating leases of up to $100.0
million, of which approximately $48.9 million had been utilized as of April
30, 2001. The remaining capacity under this lease financing arrangement is
expected to be utilized to complete the construction of the Moshannon Valley
Correctional Center. The leases under this arrangement have a term of five
years, include purchase and renewal options, and provide for residual value
guarantees for each lease which average 81.4% of the total cost and would be
due by the Company upon termination of the leases. Upon termination of a
lease, the Company could either exercise a purchase option or the facilities
could be sold to a third party. The Company believes the fair value of the
leased facilities will equal or exceed the residual guaranteed amounts. Lease
payments under the lease financing arrangement are variable and are adjusted
for changes in interest rates.

                                     - 12 -
<PAGE>

    The Company has outstanding $50.0 million of Senior Secured Notes (the
"Senior Notes"). The Senior Notes bear interest at a fixed rate of 7.74% and
mature on July 15, 2010. Under the Senior Notes purchase agreements, the
Company is required to make eight annual principal payments of $6.25 million
beginning July 15, 2003 and comply with certain financial covenants. Earlier
payments of principal are allowed subject to prepayment provisions. Interest
is payable semi-annually. The holders of the Senior Notes and the lenders
under the 2000 Credit Facility have a collateral-sharing agreement whereby
both sets of creditors have an equal security interest in all of the assets
of the Company.

    The Company has outstanding $40.0 million under its Note and Equity
Purchase Agreement (the "Subordinated Notes") entered into in July 2000. The
Subordinated Notes have a seven-year term, are interest-only payable
quarterly at a fixed rate of 12.875%, and contain certain financial covenants.

    DEFERRED COSTS AND OTHER. At March 31, 2001, the Company had deferred
professional fees and other costs totaling $2.2 million related to its
efforts to sell and leaseback certain facilities owned by the Company. Upon
consummation of this transaction, the transaction costs will be included in
the determination of the gain from the sale which will be deferred over the
initial lease term. If management of the Company determines that it is
doubtful that this transaction will be consummated, these transaction costs
will be expensed in the period such determination is made.

    At March 31, 2001, the Company had deferred acquisition costs totaling
$652,000 related to the anticipated purchase of real property located near
Fort Greely, Alaska. Management anticipates that this property will be used
in conjunction with the operations of an adult secure institution for the
State of Alaska. If management determines that a contract to operate this
facility near Fort Greely, Alaska will not be awarded, the Company will
likely not purchase the real property and the deferred acquisition costs will
be expensed.

    At March 31, 2001, accounts receivable include costs totaling $1.3
million for direct costs incurred by the Company since June 1999 for payroll
and other operating costs related to the Moshannon Valley Correctional Center
since the issuance of the Stop-Work Order. These costs were incurred at the
direction of the FBOP with the understanding that such costs would be
reimbursed. Although no formal written agreement exists, management believes
that these costs will be reimbursed by the FBOP. In the event any portion of
these costs are not reimbursed, such costs will be expensed.

    CAPITAL EXPENDITURES. Capital expenditures for the three months ended
March 31, 2001 were $3.3 million and related principally to (a) an expansion
at the Big Spring Complex, (b) the renovation of a building in Pennsylvania
related to an expansion of ACAF, (c) purchases of furniture and equipment for
the New Morgan Academy, and (d) normal building and leasehold improvements
and replacements of equipment.

    Management believes that the cash flows generated from operations,
together with the credit available under the 2000 Credit Facility and the
operating lease capacity thereunder, will provide sufficient liquidity to
meet the Company's committed capital and working capital requirements for
currently awarded contracts. It is not anticipated that the current financing
arrangements will provide sufficient financing to fund construction costs
related to future adult secure institutional contract awards, or significant
expansions or acquisitions. The Company anticipates obtaining additional
sources of financing to fund such activities.

INFLATION

    Other than personnel and inmate medical costs at certain facilities
during 2000 and into 2001, management believes that inflation has not had a
material effect on its results of operations during the past three years.
Most of the Company's facility management contracts provide for payments to
the Company of either fixed per diem fees or per diem fees that increase by
only small amounts during the terms of the contracts. Inflation could
substantially increase the Company's personnel costs (the largest component
of operating expenses) or other operating expenses at rates faster than any
increases in contract revenues.

                                     - 13 -
<PAGE>

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     In the normal course of business, the Company is exposed to market risk,
primarily from changes in interest rates. The Company continually monitors
exposure to market risk and develops appropriate strategies to manage this
risk. The Company is not exposed to any other significant market risks,
including commodity price risk, foreign currency exchange risk or interest
rate risks from the use of derivative financial instruments. Management does
not use derivative financial instruments for trading or to speculate on
changes in interest rates or commodity prices.

INTEREST RATE EXPOSURE

     The Company's exposure to changes in interest rates primarily results
from its long-term debt with both fixed and floating interest rates. The
Company's long-term debt with fixed interest rates consists of the Senior
Notes and the Subordinated Notes. The Company's only long-term debt with
variable interest is its revolving line of credit. At March 31, 2001,
approximately 42.2% ($65.0 million outstanding under the Company's revolving
line of credit) of the Company's long-term debt was subject to variable
interest rates. The detrimental effect of a hypothetical 100 basis point
increase in interest rates would be to reduce income before provision for
income taxes by approximately $147,000 for the three months ended March 31,
2001. At March 31, 2001, the fair value of the Company's fixed rate debt
approximated carrying value based upon discounted future cash flows using
current market prices.

FORWARD LOOKING STATEMENT DISCLAIMER

     This quarterly report on Form 10-Q may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on current plans and actual future
activities and results of operations may be materially different from those
set forth in the forward-looking statements. Important factors that could
cause actual results to differ include, among others, (a) risks associated
with acquisitions and the integration thereof (including the ability to
achieve administrative and operating cost savings and anticipated synergies),
(b) the timing and costs of expansions of existing facilities, (c) changes
in governmental policy to eliminate or discourage the privatization of
correctional, detention and pre-release services in the United States, (d)
availability of debt and equity financing on terms that are favorable to the
Company, (e) fluctuations in operating results because of occupancy,
competition (including competition from two competitors that are
substantially larger than the Company), increases in cost of operations,
fluctuations in interest rates and risks of operations and (f) significant
charges to expense for deferred costs associated with financing and other
projects in development if management determines that one or more of such
projects is unlikely to be successfully consummated.

                                     - 14 -
<PAGE>

PART II      OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

     The Company currently and from time to time is subject to claims and
suits arising in the ordinary course of business, including claims for
damages for personal injuries or for wrongful restriction of, or interference
with, inmate privileges. In the opinion of management of the Company, the
outcome of the proceedings to which the Company is currently a party will not
have a material adverse effect upon the Company's operations or financial
condition.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

             a.  Exhibits

                  3.1    Amended and Restated Bylaws of the Company

                 11.1    Statement Re: Computation of Per Share Earnings

                 18.1    Letter Re: Change in Accounting Principle

             b.  Reports on Form 8-K

                 None.


                                     - 15 -
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          CORNELL COMPANIES, INC.


Date:    May 15, 2001               By:   /s/ STEVEN W. LOGAN
                                          --------------------------------------
                                          STEVEN W. LOGAN
                                          Chief Executive Officer and President
                                          (Principal Executive Officer)


Date:    May 15, 2001               By:   /s/ JOHN L. HENDRIX
                                          --------------------------------------
                                          JOHN L. HENDRIX
                                          Senior Vice President and
                                          Chief Financial Officer
                                          (Principal Financial Officer)


                                     - 16 -
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>2
<FILENAME>a2049153zex-3_1.txt
<DESCRIPTION>EXHIBIT 3.1
<TEXT>

<PAGE>
                                                                     EXHIBIT 3.1

                           AMENDED AND RESTATED BYLAWS

                                       OF

                             CORNELL COMPANIES, INC.

                           ADOPTED SEPTEMBER 28, 2000

<PAGE>
                         AMENDED AND RESTATED BYLAWS OF

                                  CORNELL COMPANIES, INC.

                                Table of Contents

ARTICLE I OFFICES 1
      1.1   REGISTERED OFFICE................................................1
      1.2   OTHER OFFICES....................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS..........................................1
      2.1   PLACE OF MEETINGS................................................1
      2.2   ANNUAL MEETINGS..................................................1
      2.3   SPECIAL MEETINGS.................................................1
      2.4   NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS...................2
      2.5   REGISTERED HOLDERS OF SHARES; CLOSING OF SHARE TRANSFER RECORDS;
            AND RECORD DATE..................................................3
      2.6   QUORUM...........................................................4
      2.7   VOTING BY STOCKHOLDERS...........................................4
      2.8   PROXIES..........................................................5
      2.9   NO SHAREHOLDER ACTION WITHOUT MEETING............................5
ARTICLE III DIRECTORS........................................................5
      3.1   DUTIES AND POWERS................................................5
      3.2   NUMBER AND ELECTION OF DIRECTORS.................................6
      3.3   VACANCIES........................................................6
      3.4   RESIGNATIONS.....................................................6
      3.5   CHAIRMAN.........................................................6
      3.6   MEETINGS.........................................................6
      3.7   QUORUM...........................................................6
      3.8   ACTIONS WITHOUT A MEETING........................................6
      3.9   TELEPHONIC MEETINGS..............................................7
      3.10  COMMITTEES.......................................................7
      3.11  REIMBURSEMENT OF EXPENSES........................................7
      3.12  PROTECTION FOR RELIANCE..........................................7
      3.13  CONSIDERATION OF SOCIAL, ECONOMIC AND OTHER FACTORS IN
            EVALUATING A BID.................................................7
ARTICLE IV OFFICERS..........................................................8
      4.1   GENERAL..........................................................8
      4.2   ELECTION.........................................................8
      4.3   DUTIES...........................................................8
      4.4   CHIEF EXECUTIVE OFFICER..........................................8
      4.5   PRESIDENT........................................................8
      4.6   CHIEF FINANCIAL OFFICER..........................................9
      4.7   CHIEF OPERATING OFFICER..........................................9
      4.8   VICE PRESIDENTS..................................................9
      4.9   SECRETARY AND ASSISTANT SECRETARIES..............................9
      4.10  TREASURER AND ASSISTANT TREASURERS..............................10

                                       i
<PAGE>
      4.11  REMOVAL.........................................................10
      4.12  VOTING SECURITIES OWNED BY THE CORPORATION......................10
ARTICLE V STOCK   10
      5.1   FORM OF CERTIFICATES............................................10
      5.2   SIGNATURES......................................................10
      5.3   LOST CERTIFICATES...............................................11
      5.4   TRANSFERS.......................................................11
      5.5   BENEFICIAL OWNERSHIP............................................11
      5.6   DIVIDENDS.......................................................11
ARTICLE VI INDEMNIFICATION..................................................11
      6.1   GENERAL.........................................................11
      6.2   EXPENSES........................................................12
      6.3   ADVANCES........................................................12
      6.4   REQUEST FOR INDEMNIFICATION.....................................12
      6.5   NONEXCLUSIVITY OF RIGHTS........................................12
      6.6   INSURANCE AND SUBROGATION.......................................13
      6.7   SEVERABILITY....................................................13
      6.8   CERTAIN PERSONS NOT ENTITLED TO INDEMNIFICATION.................13
      6.9   DEFINITIONS.....................................................13
ARTICLE VII NOTICES.........................................................14
      7.1   NOTICES.........................................................14
      7.2   WAIVER OF NOTICE................................................14
ARTICLE VIII MISCELLANEOUS..................................................14
      8.1   FISCAL YEAR.....................................................14
      8.2   AMENDMENTS......................................................14



                                       ii
<PAGE>
                         AMENDED AND RESTATED BYLAWS OF

                             CORNELL COMPANIES, INC.


                                    ARTICLE I

                                     OFFICES

      1.1 REGISTERED OFFICE. The registered office of Cornell Companies, Inc., a
Delaware corporation (the "Corporation"), is The Corporation Trust Company, 1209
Orange Street, in the City of Wilmington, County of New Castle, State of
Delaware, 19801.

      1.2 OTHER OFFICES. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
of the Corporation (the "Board of Directors") may from time to time determine.

                                   ARTICLE II

                            MEETINGS OF STOCKHOLDERS

      2.1 PLACE OF MEETINGS. Annual or special meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware, as may be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof. If not so designated or
stated, such meeting shall be held at the registered office of the Corporation.

      2.2 ANNUAL MEETINGS. The annual meeting of stockholders shall be held on
such date and at such time as may be designated from time to time by the Board
of Directors and stated in the notice of such meeting. At the annual meeting,
the stockholders shall elect by a plurality vote a Board of Directors and
transact such other business as may properly be brought before the meeting.
Written notice of the annual meeting of stockholders of the Corporation stating
the place, date and hour of the meeting shall be sent to each stockholder
entitled to vote at such meeting not less than 10 nor more than 60 days before
the date of the meeting. Failure to hold the annual meeting shall not work a
forfeiture or dissolution of the Corporation or affect otherwise valid corporate
acts.

      2.3 SPECIAL MEETINGS. Unless otherwise prescribed by the Delaware General
Corporation Law ("DGCL") or by the Certificate of Incorporation of the
Corporation (as amended or restated from time to time, the "Certificate of
Incorporation"), special meetings of stockholders of the Corporation for any
purpose or purposes may be called at any time by the Chairman of the Board of
Directors or by any two or more directors of the Corporation. Written notice of
the special meeting stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called shall be given not less 10
nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting.

<PAGE>
2.4   NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.

            (a) NOMINATION OF DIRECTORS. Only persons who are nominated in
      accordance with the following procedures shall be eligible to serve as
      directors. Nominations of persons for election to the Board of Directors
      of the Corporation at a meeting of stockholders may be made (i) by or at
      the direction of the Board of Directors, or (ii) by any stockholder of the
      Corporation entitled to vote in the election of directors at the meeting
      who complies with the notice procedures set forth in this Section 2.4(a).
      Such nominations, other than those made by or at the direction of the
      Board of Directors, shall be made pursuant to timely notice in writing to
      the Secretary of the Corporation. To be timely, a stockholder's notice
      must be delivered to, or mailed and received by, the Secretary of the
      Corporation at the principal executive offices of the Corporation not less
      than ninety (90) days prior to the first anniversary of the date of the
      previous year's annual meeting of stockholders; provided, however, that if
      no annual meeting of stockholders was held in the previous year or if the
      date of the annual meeting is advanced by more than thirty (30) days prior
      to, or delayed by more than sixty (60) days after, such anniversary date,
      notice by the stockholder to be timely must be so delivered, or mailed and
      received, not later than the close of business on the tenth (10th) day
      following the day on which the date of such meeting has been first
      "publicly disclosed" (in the manner provided in the last sentence of this
      Section 2.4(a) by the Corporation). Any stockholder's notice pursuant to
      this Section 2.4(a) shall set forth (i) as to each person whom the
      stockholder proposes to nominate for election or re-election as a
      director, all information relating to such person that is required to be
      disclosed in solicitations of proxies for election of directors, or is
      otherwise required, in each case pursuant to Regulation 14A under the
      Securities Exchange Act of 1934, as amended (including such person's
      written consent to being named in the proxy statement as a nominee and to
      serving as director if elected); and (ii) as to the stockholder giving
      notice (A) the name and address, as they appear on the Corporation's
      books, of such stockholder and (B) the class and number of shares of the
      Corporation which are beneficially owned by such stockholder. At the
      request of the Board of Directors, any person nominated by the Board of
      Directors for election as a director shall furnish to the Secretary of the
      Corporation that information required to be set forth in a stockholder's
      notice of nomination which pertains to the nominee. No person shall be
      eligible to serve as a director of the Corporation unless nominated in
      accordance with the procedures set forth herein. The Chairman of the
      meeting shall, if the facts warrant, determine and declare to the meeting
      that a nomination was not properly brought before the meeting and in
      accordance with the provisions of these Amended and Restated Bylaws (these
      "Bylaws"), and if he or she should so determine, he or she shall so
      declare to the meeting and any such nomination not properly brought before
      the meeting shall be disregarded. For purposes of these Bylaws, "publicly
      disclosed" or "public disclosure" shall mean disclosure in a press release
      reported by the Dow Jones News Service, Associated Press or a comparable
      national news service or in a document publicly filed by the Corporation
      with the Securities and Exchange Commission.

                                      -2-
<PAGE>
            (b) NOTICE OF BUSINESS. Except as set forth in Section 2.4(a), at
      any meeting of the stockholders, only such business shall be conducted as
      shall have been brought before the meeting (a) by or at the direction of
      the Board of Directors or (b) by any stockholder of the Corporation who
      shall be entitled to vote at such meeting and who complies with the notice
      procedures set forth in this Section 2.4(b). For business to be properly
      brought before a stockholder meeting by a stockholder, the stockholder
      must have given timely notice thereof in writing to the Secretary of the
      Corporation. To be timely, a stockholder's notice must be delivered to, or
      mailed and received at, the principal executive offices of the Corporation
      not less than 50 days prior to the meeting; provided, however, that in the
      event that less than 55 days' notice or prior public disclosure of the
      date of the meeting is given or made to stockholders, notice by the
      stockholder to be timely must be received no later than the close of
      business on the tenth (10th) day following the day on which such notice of
      the date of the meeting was mailed or such public disclosure was made. A
      stockholder's notice to the Secretary shall set forth as to each matter
      the stockholder proposes to bring before the meeting (a) a brief
      description of the business desired to be brought before the meeting and
      the reasons for conducting such business at the meeting, (b) the name and
      address, as they appear on the Corporation's books, of the stockholder
      proposing such business, (c) the class and number of shares of the
      Corporation which are beneficially owned by the stockholder, and (d) any
      material interest of the stockholder in such business. Notwithstanding
      anything in these Bylaws to the contrary, no business shall be conducted
      at a stockholder meeting except (i) in accordance with the procedures set
      forth in this Section 2.4(b) or (ii) with respect to nominations of
      persons for election as directors of the Corporation, in accordance with
      the provisions of Section 2.4(a) hereof. The Chairman of the meeting
      shall, if the facts warrant, determine and declare to the meeting that
      business was not properly brought before the meeting and in accordance
      with the provisions of these Bylaws, and if he or she should so determine,
      he or she shall so declare to the meeting and any such business not
      properly brought before the meeting shall not be transacted.
      Notwithstanding the foregoing provisions of this Section 2.4(b), a
      stockholder shall also comply with all applicable requirements of the
      Securities Exchange Act of 1934, as amended, and the rules and regulations
      thereunder with respect to the matters set forth in this Section.

      2.5 REGISTERED HOLDERS OF SHARES; CLOSING OF SHARE TRANSFER RECORDS; AND
RECORD DATE.

            (a) REGISTERED HOLDERS AS OWNERS. Unless otherwise provided under
      Delaware law, the Corporation may regard the person in whose name any
      shares issued by the Corporation are registered in the stock transfer
      records of the Corporation at any particular time (including, without
      limitation, as of a record date fixed pursuant to paragraph (b) of this
      Section 2.5) as the owner of those shares at that time


                                      -3-
<PAGE>
      for purposes of voting those shares, receiving distributions thereon or
      notices in respect thereof, transferring those shares, exercising rights
      of dissent with respect to those shares, entering into agreements with
      respect to those shares, or giving proxies with respect to those shares;
      and neither the Corporation nor any of its officers, directors, employees
      or agents shall be liable for regarding that person as the owner of those
      shares at that time for those purposes, regardless of whether that person
      possesses a certificate for those shares.

            (b) RECORD DATE. For the purpose of determining stockholders of the
      Corporation entitled to notice of or to vote at any meeting of
      stockholders of the Corporation or any adjournment thereof, or entitled to
      receive a distribution by the Corporation (other than a distribution
      involving a purchase or redemption by the Corporation of any of its own
      shares) or a share dividend, or in order to make a determination of
      stockholders of the Corporation for any other proper purpose, the Board of
      Directors may fix in advance a date as the record date for any such
      determination of stockholders of the Corporation, such date in any case to
      be not more than 60 days and, in the case of a meeting of stockholders,
      not less than 10 days, prior to the date on which the particular action
      requiring such determination of stockholders of the Corporation is to be
      taken. The Board of Directors shall not close the books of the Corporation
      against transfers of shares during the whole or any part of such period.

If the Board of Directors does not fix a record date for any meeting of the
stockholders of the Corporation, the record date for determining stockholders of
the Corporation entitled to notice of or to vote at such meeting shall be at the
close of business on the day next preceding the day on which notice is given,
or, if in accordance with Section 7.2 of these Bylaws notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.

      2.6 QUORUM. Except as otherwise provided by law or by the Certificate of
Incorporation, the holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders of the
Corporation for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders of the Corporation,
the stockholders of the Corporation entitled to vote at such meeting, present in
person or represented by proxy, shall have the power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder entitled to vote at the meeting.

      2.7 VOTING BY STOCKHOLDERS.

            (a) VOTING ON MATTERS OTHER THAN THE ELECTION OF DIRECTORS. With
      respect to any matters as to which no other voting requirement is
      specified by the DGCL, the Certificate of Incorporation or these Bylaws,
      the affirmative vote required for stockholder action shall be that of a
      majority of the shares present in person or represented by proxy at the
      meeting (as counted for purposes of determining the existence of a quorum
      at the meeting). In the case of a matter submitted for a vote of the
      stockholders of the Corporation as to which a stockholder approval
      requirement is applicable under the stockholder approval policy of any
      stock exchange or quotation system on which the capital stock of the
      Corporation is traded or quoted, the


                                      -4-
<PAGE>
      requirements under the Securities Exchange Act of 1934, as amended (the
      "Exchange Act"), or any provision of the Internal Revenue Code, in each
      case for which no higher voting requirement is specified by the DGCL, the
      Certificate of Incorporation or these Bylaws, the vote required for
      approval shall be the requisite vote specified in such stockholder
      approval policy, the Exchange Act or Internal Revenue Code provision, as
      the case may be (or the highest such requirement if more than one is
      applicable). For the approval of the appointment of independent public
      accountants (if submitted for a vote of the stockholders of the
      Corporation), the vote required for approval shall be a majority of the
      votes cast on the matter.

            (b) VOTING IN THE ELECTION OF DIRECTORS. Unless otherwise provided
      in the Certificate of Incorporation or these Bylaws in accordance with the
      DGCL, directors shall be elected by a plurality of the votes cast by the
      holders of outstanding shares of capital stock of the Corporation entitled
      to vote in the election of directors at a meeting of stockholders at which
      a quorum is present.

            (c) OTHER. The Board of Directors, in its discretion, or the officer
      of the Corporation presiding at a meeting of stockholders of the
      Corporation, in his or her discretion, may require that any votes cast at
      such meeting shall be cast by written ballot.

      2.8 PROXIES. Each stockholder of the Corporation entitled to vote at a
meeting of stockholders of the Corporation may authorize another person or
persons to act for him or her by proxy. Proxies for use at any meeting of
stockholders of the Corporation shall be filed with the Secretary, or such other
officer as the Board of Directors may from time to time determine by resolution,
before or at the time of the meeting. All proxies shall be received and taken
charge of and all ballots shall be received and canvassed by the secretary of
the meeting who shall decide all questions relating to the qualification of
voters, the validity of the proxies and the acceptance or rejection of votes,
unless an inspector or inspectors shall have been appointed by the chairman of
the meeting, in which event such inspector or inspectors shall decide all such
questions.

      2.9 NO STOCKHOLDER ACTION WITHOUT MEETING. From and after the first date
as of which the Corporation has a class or series of capital stock registered
under the Exchange Act, no action required to be taken or that may be taken at
any annual or special meeting of the stockholders of the Corporation may be
taken without a meeting, and the power of the stockholders of the Corporation of
the Corporation to consent in writing to the taking of any action by written
consent without a meeting is specifically denied, except for action by unanimous
written consent, which is expressly allowed.

ARTICLE III.

                                    DIRECTORS

      3.1 DUTIES AND POWERS. The business, affairs and property of the
Corporation shall be managed by or under the directorship of the Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law, the Certificate of Incorporation or
these Bylaws authorized or required to be exercised or done by the stockholders
of the Corporation.

                                      -5-
<PAGE>
      3.2 NUMBER AND ELECTION OF DIRECTORS. The number of directors of the
Corporation shall be determined in the manner provided in the Corporation's
Certificate of Incorporation. Directors shall be elected for one (1) year or
other terms as specified in the Corporation's Certificate of Incorporation, and
each director elected shall hold office during the term for which he or she is
elected and until his or her successor is elected and qualified, subject,
however, to his or her prior death, resignation, retirement or removal for cause
from office.

      3.3 VACANCIES. Any vacancies occurring in the Board of Directors and newly
created directorships shall be filled in the manner provided in the
Corporation's Certificate of Incorporation.

      3.4 RESIGNATIONS. Any director of the Corporation may resign at any time
upon written notice to the Corporation. To be effective, such notice of
resignation need not be formally accepted by the Board of Directors. A director
of the Corporation need not be a stockholder of the Corporation or a resident of
the State of Delaware.

      3.5 CHAIRMAN. The Board of Directors may elect from among its members a
Chairman who shall preside over all meetings of the Board of Directors and the
stockholders of the Corporation. In his absence or inability to act, the Chief
Executive Officer shall preside over the meetings of the Board of Directors and
the stockholders. The Chairman shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him or her by
the Board of Directors.

      3.6 MEETINGS. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Regular meetings of the Board of Directors may be held without notice at such
time and at such place as may from time to time be determined by the Board of
Directors. Special meetings of the Board of Directors may be called by the
Chairman, if there be one, or by the President or by any two or more directors
of the Corporation. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than 48 hours
before the date of the meeting, by telephone, telegram or facsimile on 24 hours'
notice or on such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances. Unless otherwise
required by law, neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be specified in
the notice or waiver of notice of such meeting.

      3.7 QUORUM. Except as may be otherwise specifically provided by law, the
Certificate of Incorporation or these Bylaws, at all meetings of the Board of
Directors, a majority of the entire Board of Directors shall constitute a quorum
for the transaction of business and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.

      3.8 ACTIONS WITHOUT A MEETING. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any


                                      -6-
<PAGE>
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committee.

      3.9 TELEPHONIC MEETINGS. Unless otherwise provided by the Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors or such committee by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 3.9 shall constitute presence in person at such meeting.

      3.10 COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors of the Corporation as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.

      3.11 REIMBURSEMENT OF EXPENSES. The directors of the Corporation shall be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary or other consideration as director. No
such reimbursement shall preclude any director from serving the Corporation in
any other capacity and receiving compensation therefor. Members of special or
standing committees shall be allowed like reimbursement for attending committee
meetings.

      3.12 PROTECTION FOR RELIANCE. Any member of the Board of Directors, or any
member of any committee designated by the Board of Directors, shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the Corporation and upon such information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or committees of the Board of Directors, or by any other person as to
matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation.

      3.13 CONSIDERATION OF SOCIAL, ECONOMIC AND OTHER FACTORS IN EVALUATING A
BID. The Board of Directors of the Corporation, when evaluating any offer of
another party to (a) purchase or exchange any securities or property for any
outstanding equity securities of the Corporation, (b) merge or consolidate the
Corporation with another corporation,


                                      -7-
<PAGE>
or (c) purchase or otherwise acquire all or substantially all of the properties
and assets of the Corporation, shall, in connection with the exercise of its
judgment in determining what is in the best interests of the Corporation and its
stockholders, give due consideration not only to the price or other
consideration being offered but also to all other relevant factors, including
without limitation (i) the financial and managerial resources and future
prospects of the party, (ii) the possible effects on the business of the
Corporation and its subsidiaries and on the employees, customers, suppliers and
creditors of the Corporation and its subsidiaries, and (iii) the effects on the
communities in which the Corporation's facilities are located.


                                   ARTICLE IV

                                    OFFICERS

      4.1 GENERAL. The officers of the Corporation shall be chosen by the Board
of Directors and shall be a President and a Secretary. The Board of Directors,
in its discretion, may also choose a Chief Financial Officer, a Treasurer and
one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and
other officers. Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or these Bylaws.
The officers of the Corporation need not be stockholders or directors of the
Corporation.

      4.2 ELECTION. The Board of Directors shall elect or appoint the officers
of the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are elected and qualified, or until the earlier of
their resignation or removal. Any officer elected by the Board of Directors may
be removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Corporation may be filled
by the Board of Directors.

      4.3 DUTIES. The officers of the Corporation shall have such powers and
duties as generally pertain to their offices, except as modified herein or by
the Board of Directors, as well as such powers and duties as from time to time
may be conferred by the Board of Directors.

      4.4 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, who need not be
chosen from among the directors, shall have active, executive management of the
operations of the Corporation, subject, however, to the control of the Board of
Directors. The Chief Executive Officer shall have the authority to manage and
direct the duties and responsibilities of any other officer or employee of the
Corporation. The Chief Executive Officer shall also preside at all meetings of
the stockholders of the Corporation and the Board of Directors, unless the Board
of Directors has appointed a Chairman of the Board, who would preside at all
such meetings of the stockholders and the Board of Directors. He or she shall,
in general, perform all duties incident to the office of the Chief Executive
Officer and such other duties as from time to time may be assigned to him by the
Board of Directors.

      4.5 PRESIDENT. The President shall, subject to the control of the Board of
Directors, have general supervision of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. At the request of the



                                      -8-
<PAGE>
Chief Executive Officer, the President may temporarily act in his or her place.
In the case of the death of the Chief Executive Officer, or in the case of his
absence or inability to act without having designated the President to act
temporarily in his or her place, the President shall perform the duties of the
Chief Executive Officer as designated by the Board of Directors. The President
shall also perform such other duties and may exercise such other powers as from
time to time may be assigned to him or her by the Board of Directors.

      4.6 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be the
principal financial officer of the Corporation; shall have charge and custody of
and be responsible for all funds of the Corporation and deposit all such funds
in the name of the Corporation in such depositories as may be designated by the
Board of Directors; shall receive and give receipts for moneys due and payable
to the Corporation from any source; and, in general, shall perform all the
duties incident to the office of the Chief Financial Officer and such other
duties as from time to time may be assigned to him or her by the Board of
Directors or by the Chief Executive Officer.

      4.7 CHIEF OPERATING OFFICER. The Chief Operating Officer shall assist the
Chief Executive Officer and the President in the operations of the Corporation
and shall have such powers and perform such duties as the Board of Directors or
the Chief Executive Officer may from time to time prescribe.

      4.8 VICE PRESIDENTS. At the request of the President or in his or her
absence or in the event of his inability or refusal to act, any Vice President
may perform the duties of the President and, when so acting, such officer shall
have all the powers of and be subject to all the restrictions upon the
President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe. If there
is no Vice President, the Board of Directors shall designate the officer of the
Corporation who, in the absence of the President or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President and, when so acting, such officer shall have all the powers of and be
subject to all the restrictions upon the President.

      4.9 SECRETARY AND ASSISTANT SECRETARIES. The Secretary or an Assistant
Secretary shall attend all meetings of the Board of Directors and all meetings
of stockholders of the Corporation and record all the proceedings at such
meetings in a book or books to be kept for that purpose, and the Secretary or an
Assistant Secretary shall also perform similar duties for the standing
committees when required. The Secretary or an Assistant Secretary shall give, or
cause to be given, notice of all meetings of the stockholders of the Corporation
and special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors, the Chairman of the
Board, the President or any Vice President. If a Secretary or Assistant
Secretary shall be unable or shall refuse to cause to be given notice of any
meeting of the stockholders of the Corporation or any special meeting of the
Board of Directors, then either the Board of Directors, the Chairman of the
Board, the President or any Vice President may choose another officer to cause
such notice to be given. The Secretary or an Assistant Secretary shall see that
all corporate books, reports, statements, certificates and other documents and
records required by law to be kept or filed are properly kept or filed, as the
case may be.

                                      -9-

<PAGE>
      4.10 TREASURER AND ASSISTANT TREASURERS. The Treasurer or an Assistant
Treasurer shall have custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. The Treasurer or an Assistant Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer, the President or the Chief Financial Officer and
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all his or her transactions as Treasurer or Assistant
Treasurer and of the financial condition of the Corporation.

      4.11 REMOVAL. Any officer may be removed, with or without cause, by the
Board of Directors. Any such removal shall be without prejudice to any rights
such officer may have pursuant to any employment contract he or she may have
with the Corporation. Any vacancy in an office may be filled by the Board of
Directors.

      4.12 VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name and on behalf
of the Corporation by the Chairman of the Board, the President or any Vice
President, and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time, confer like powers upon any other person or persons.

                                   ARTICLE V

                                      STOCK

      5.1 FORM OF CERTIFICATES. The shares of stock of the Corporation shall be
represented by certificates of stock, signed in the name of the Corporation (i)
by the Chairman of the Board, the President or a Vice President and (ii) by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary,
of the Corporation, certifying the number of shares of stock in the Corporation
owned by the holder named in the certificate.

      5.2 SIGNATURES. Where a certificate is countersigned by (i) a transfer
agent other than the Corporation or its employee or (ii) a registrar other than
the Corporation or its employee, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.


                                      -10-
<PAGE>
      5.3 LOST CERTIFICATES. The Board of Directors may direct a new certificate
to be issued in place of any certificate theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the delivery to the
Secretary of the Corporation of an affidavit of the fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate, the Board of Directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his or her legal representative, to
advertise the same in such manner as the Board of Directors shall require and/or
to give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.

      5.4 TRANSFERS. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these Bylaws. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate or
by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.

      5.5 BENEFICIAL OWNERSHIP. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and to hold liable for calls
and assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.

      5.6 DIVIDENDS. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting thereof,
and may be paid in cash, in property or in shares of capital stock of the
Corporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.

                                   ARTICLE VI

                                 INDEMNIFICATION

      6.1 GENERAL. The Corporation shall indemnify and hold harmless an
Indemnitee (as this and all other capitalized words used in this Article VI not
previously defined in these Bylaws are defined in Section 6.9 hereof) from and
against any and all judgments, penalties, fines (including excise taxes),
amounts paid in settlement and, subject to Section 6.2, Expenses (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such judgments, fines, penalties, amounts paid in settlement or
Expenses) arising out of any event or occurrence related to the fact that
Indemnitee is or was a director or officer of the Corporation. The Corporation
may, but shall not be required to, indemnify and hold harmless an Indemnitee
from and against any and all judgments, penalties, fines (including excise
taxes),


                                      -11-
<PAGE>
amounts paid in settlement and, subject to Section 6.2, Expenses (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such judgments, fines, penalties, amounts paid in settlement or
Expenses) arising out of any event or occurrence related to the fact that
Indemnitee is or was an employee or agent of the Corporation or is or was
serving in another Corporate Status.

      6.2 EXPENSES. If Indemnitee is, by reason of his or her serving as a
director, officer, employee or agent of the Corporation, a party to and is
successful, on the merits or otherwise, in any Proceeding, the Corporation shall
indemnify such person against all Expenses actually and reasonably incurred by
such person or on his or her behalf in connection therewith. If Indemnitee is
not wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to any Matter in such Proceeding, the Corporation shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by such person
or on his or her behalf relating to such Matter. The termination of any Matter
in such a Proceeding by dismissal, with or without prejudice, shall be deemed to
be a successful result as to such Matter. If Indemnitee is, by reason of any
Corporate Status other than his or her serving as a director, officer, employee
or agent of the Corporation, a party to and is successful, on the merits or
otherwise, in any Proceeding, the Corporation may, but shall not be required to,
indemnify such person against all Expenses actually and reasonably incurred by
such person or on his or her behalf in connection therewith. To the extent that
the Indemnitee is, by reason of his or her Corporate Status, a witness in any
Proceeding, the Corporation may, but shall not be required to, indemnify such
person against all Expenses actually and reasonably incurred by such person or
on his or her behalf in connection therewith.

      6.3 ADVANCES. In the event of any threatened or pending Proceeding in
which Indemnitee is a party or is involved and that may give rise to a right of
indemnification under this Article VI, following written request to the
Corporation by Indemnitee, the Corporation may, but shall not be required to,
pay to Indemnitee amounts to cover Expenses reasonably incurred by Indemnitee in
such Proceeding in advance of its final disposition upon the receipt by the
Corporation of (i) a written undertaking executed by or on behalf of Indemnitee
providing that Indemnitee will repay the advance if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Corporation
as provided in these Bylaws and (ii) satisfactory evidence as to the amount of
such Expenses.

      6.4 REQUEST FOR INDEMNIFICATION. To request indemnification, Indemnitee
shall submit to the Secretary of the Corporation a written claim or request.
Such written claim or request shall contain sufficient information to reasonably
inform the Corporation about the nature and extent of the indemnification or
advance sought by Indemnitee. The Secretary of the Corporation shall promptly
advise the Board of Directors of such request.

      6.5 NONEXCLUSIVITY OF RIGHTS. This Article VI shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled to
under applicable law, the Certificate of Incorporation, these Bylaws, any
agreement, a vote of stockholders or a resolution of directors of the
Corporation, or otherwise. No amendment, alteration or repeal of this Article VI
or any provision hereof shall be effective as to any Indemnitee for acts, events
and circumstances that occurred, in whole or in part, before such amendment,
alteration or repeal. The provisions of this Article VI shall continue as to an
Indemnitee whose Corporate Status has


                                      -12-
<PAGE>
ceased for any reason and shall inure to the benefit of his or her heirs,
executors and administrators. Neither the provisions of this Article VI nor
those of any agreement to which the Corporation is a party shall be deemed to
preclude the indemnification of any person who is not specified in this Article
VI as having the potential to receive indemnification or is not a party to any
such agreement, but whom the Corporation has the power or obligation to
indemnify under the provisions of the DGCL.

      6.6 INSURANCE AND SUBROGATION. To the extent the Corporation maintains an
insurance policy or policies providing liability insurance for directors or
officers of the Corporation, an Indemnitee who is a director or officer of the
Corporation shall be covered by such policy or policies in accordance with its
or their terms to the maximum extent of coverage available for any such director
or officer under such policy or policies. In the event of any payment hereunder,
the Corporation shall be subrogated to the extent of such payment to all the
rights of recovery of Indemnitee, who shall execute all papers required and take
all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to enforce
such rights. The Corporation shall not be liable under this Article VI to make
any payment of amounts otherwise indemnifiable hereunder if, and to the extent
that, Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.

      6.7 SEVERABILITY. If any provision or provisions of this Article VI shall
be held to be invalid, illegal or unenforceable for any reason whatsoever, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby; and, to the fullest extent possible,
the provisions of this Article VI shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.

      6.8 CERTAIN PERSONS NOT ENTITLED TO INDEMNIFICATION. Notwithstanding any
other provision of this Article VI, no person shall be entitled to
indemnification or advancement of Expenses under this Article VI with respect to
any Proceeding, or any Matter therein, brought or made by such person against
the Corporation.

      6.9 DEFINITIONS. For purposes of this Article VI:

            (a) "CORPORATE STATUS" describes the status of a person who is or
      was a director, officer, employee or agent of the Corporation or of any
      other corporation, partnership, joint venture, trust, employee benefit
      plan or other enterprise which such person is or was serving at the
      written request of the Corporation. For purposes of this Agreement,
      "serving at the written request of the Corporation" includes any service
      by Indemnitee which imposes duties on, or involves services by, Indemnitee
      with respect to any employee benefit plan or its participants or
      beneficiaries.

            (b) "EXPENSES" shall include all reasonable attorneys' fees,
      retainers, court costs, transcript costs, fees of experts, witness fees,
      travel expenses, duplicating costs, printing and binding costs, telephone
      charges, postage, delivery service fees, and all other disbursements or
      expenses of the types customarily incurred in connection with prosecuting,
      defending, preparing to prosecute or defend, investigating, or being or
      preparing to be a witness in a Proceeding.


                                      -13-
<PAGE>
            (c) "INDEMNITEE" includes any person who is, or is threatened to be
      made, a witness in or a party to any Proceeding as described in Section
      6.1 or 6.2 hereof by reason of his Corporate Status.

            (d) "MATTER" is a claim, a material issue or a substantial request
      for relief.

            (e) "PROCEEDING" includes any action, suit, alternate dispute
      resolution mechanism, hearing or any other proceeding, whether civil,
      criminal, administrative, arbitrative, investigative or mediative, any
      appeal in any such action, suit, alternate dispute resolution mechanism,
      hearing or other proceeding and any inquiry or investigation that could
      lead to any such action, suit, alternate dispute resolution mechanism,
      hearing or other proceeding, except one initiated by an Indemnitee to
      enforce his or her rights under this Article VI.

                                  ARTICLE VII

                                     NOTICES

      7.1 NOTICES. Whenever written notice is required by law, the Certificate
of Incorporation or these Bylaws to be given to any director, member of a
committee or stockholder, such notice may be given by mail, addressed to such
director, member of a committee or stockholder at his or her address as it
appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex, facsimile or cable.

      7.2 WAIVER OF NOTICE. Whenever any notice is required by law, the
Certificate of Incorporation or these Bylaws to be given to any director, member
of a committee or stockholder of the Corporation, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.

                                  ARTICLE VIII

                                  MISCELLANEOUS

      8.1 FISCAL YEAR. The fiscal year of the Corporation shall end on December
31 of each year.

      8.2 AMENDMENTS. These Bylaws may be altered, amended or repealed or new
bylaws may be adopted only in the manner provided in the Corporation's
Certificate of Incorporation.


Adopted September 28, 2000


                                      -14-



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11.1
<SEQUENCE>3
<FILENAME>a2049153zex-11_1.txt
<DESCRIPTION>EXHIBIT 11.1
<TEXT>

<PAGE>

                             CORNELL COMPANIES, INC.

                 Statement Re: Computation of Per Share Earnings
                     (in thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                                  THREE MONTHS ENDED MARCH 31,
                                                                        ----------------------------------------------
                                                                                 2001                        2000
                                                                        -----------------------  ---------------------
                                                                          BASIC     DILUTED       BASIC        DILUTED
                                                                        -----------------------  ---------------------
<S>                                                                     <C>        <C>           <C>        <C>
Net Earnings                                                              $ 824      $ 824       $ 1,971       $ 1,971
                                                                        =======================  =====================

Shares used in computing net earnings per share:
     Weighted average common shares and
       common share equivalents                                          10,182     10,182        10,149        10,149


     Less treasury shares                                                  (955)      (955)         (697)         (697)

     Effect of shares issuable under stock options
       and warrants based on the treasury stock method                        -        201             -           150
                                                                        -----------------------  ---------------------

                                                                          9,227      9,428         9,452         9,602
                                                                        -----------------------  ---------------------

 Net earnings per share                                                  $ 0.09     $ 0.09        $ 0.21        $ 0.21
                                                                        =======================  =====================
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-18.1
<SEQUENCE>4
<FILENAME>a2049153zex-18_1.txt
<DESCRIPTION>EXHIBIT 18.1
<TEXT>

<PAGE>

May 4, 2001

Cornell Companies, Inc.
1700 West Loop 610 South
Houston, TX  77027

Re:  Form 10-Q Report for the quarter ended March 31, 2001


Gentlemen/Ladies:

This letter is written to meet the requirements of Regulation S-K calling for
a letter from a registrant's independent accountants whenever there has been
a change in accounting principle or practice.

We have been informed that, as of January 1, 2001, the Company changed from
the expense as incurred method of accounting for certain supplies to the
defer and amortize to expense method. The cost of certain supplies will be
capitalized and amortized over 18 months, a period of time that management
believes represents the useful life of those supplies. According to the
management of the Company, this change was made to better match the cost of
the supplies with the period these same supplies benefit the Company.

A complete coordinated set of financial and reporting standards for
determining the preferability of accounting principles among acceptable
alternative principles has not been established by the accounting profession.
Thus, we cannot make an objective determination of whether the change in
accounting described in the preceding paragraph is to a preferable method.
However, we have reviewed the pertinent factors, including those related to
financial reporting, in this particular case on a subjective basis, and our
opinion stated below is based on our determination made in this manner.

We are of the opinion that the Company's change in method of accounting is to
an acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is also preferable under
the circumstances in this particular case. In arriving at this opinion, we
have relied on the business judgment and business planning of your
management.

We have not audited the application of this change to the financial
statements of any period subsequent to December 31, 2000.  Further, we have
not examined and do not express an opinion with respect to your financial
statements for the three months ended March 31, 2001.


Very truly yours,
/s/ Arthur Andersen LLP
Arthur Andersen LLP


</TEXT>
</DOCUMENT>
</SUBMISSION>
