In this paper, we explore the underlay cognitive relay networks in the presence of hardware impairment. To avoid interfering with the primary user's communications, the transmission powers of the secondary source and relays are adaptively adjusted by considering the following three practical effects: i) the maximum transmission power constraint at the secondary transmission nodes, ii) the interference power constraint at the primary receiver, and iii) imperfect hardware. By taking the correlations among the received signal-to-interference-plus-noise ratios into account, exact closed form expressions for the outage probabilities are respectively derived for the cases with and without a direct secondary link over Rayleigh fading channels. We further conduct an asymptotic outage probability to evaluate the impact of hardware impairment on diversity order, and show both cases with and without direct secondary link can achieve the full diversity order. Finally, simulation results are presented to verify the correctness of our analytical derivations.