Document:

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EXHIBIT 10.86
FORM OF ZLP ADJUSTMENT WARRANT

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                         PEREGRINE PHARMACEUTICALS, INC.

                                     WARRANT

Warrant No. ADJ-[ ]                    Date of Original Issuance: August 9, 2002

         Peregrine Pharmaceuticals, Inc., a Delaware corporation (the
"COMPANY"), hereby certifies that, for value received, ZLP MASTER FUND LTD. or
its registered assigns (the "HOLDER"), is entitled to purchase from the Company
up to a number of shares of common stock, $.001 par value per share (the "COMMON
STOCK"), of the Company (each such share, a "WARRANT SHARE" and all such shares,
the "WARRANT SHARES"), determined pursuant to Section 4(a) hereof (as adjusted
from time to time as provided in Section 9), at an exercise price (the "EXERCISE
PRICE") per Warrant Share equal to the par value of the Common Stock of the
Company, at any time and from time to time from and after the 6th month
anniversary of the date hereof and through and including August 8, 2006 (the
"EXPIRATION DATE"), and subject to the following terms and conditions:

         1. DEFINITIONS. In addition to the terms defined elsewhere in this
Warrant, capitalized terms that are not otherwise defined herein that are
defined in the Securities Purchase Agreement, dated as of the date of original
issuance of this Warrant, to which the Company and the original Holder are
parties (the "PURCHASE AGREEMENT"), shall have the meanings given to such terms
in the Purchase Agreement.

         2. REGISTRATION OF WARRANT. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "WARRANT

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REGISTER"), in the name of the record Holder from time to time. The Company may
treat the registered Holder as the absolute owner of this Warrant for all
purposes, absent actual notice to the contrary.

         3. REGISTRATION OF TRANSFERS. The Company shall register the transfer
of any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Company at its address specified herein. Upon any such registration or
transfer, a new warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new warrant, a "NEW WARRANT"), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a Holder.

         4. EXERCISE AND DURATION.

             (a) The number of Warrant Shares subject to exercise pursuant to
the terms hereof shall be equal determined in accordance with Section 4.6 of the
Purchase Agreement and shall be set forth from time to time on the attached
Warrant Shares Exercise Log).

             (b) Subject to the provisions of Section 4, this Warrant shall be
exercisable by the registered Holder at any time and from time to time on or
after the 6th month anniversary of the date hereof to and including the
Expiration Date. At 6:30 p.m., New York City time on the Expiration Date, the
portion of this Warrant available for exercise and not exercised prior thereto
shall be and become void and of no value. The Company may not call or redeem all
or any portion of this Warrant without the prior written consent of the Holder.

         5. DELIVERY OF WARRANT SHARES.

             (a) To effect conversions hereunder, the Holder shall not be
required to physically surrender this Warrant unless the aggregate Warrant
Shares represented by this Warrant is being exercised. Upon delivery of the Form
of Election to Purchase to the Company (with the attached Warrant Shares
Exercise Log) at its address for notice set forth in Section 13 and upon payment
of the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, the Company shall promptly (but in no event later
than three Trading Days after the Date of Exercise (as defined herein)) issue
and deliver to the Holder, a certificate for the Warrant Shares issuable upon
such exercise free of restrictive legends unless otherwise required by the
Purchase Agreement. The Company shall, upon request of the Holder and subsequent
to the date on which a registration statement covering the resale of the Warrant
Shares has been declared effective by the Securities and Exchange Commission,
use its best efforts to deliver Warrant Shares hereunder electronically through
the Depository Trust Corporation or another established clearing corporation
performing similar functions, if available, provided, that, the Company may, but
will not be required to change its transfer agent if its current transfer agent
cannot deliver Warrant Shares electronically through the Depository Trust
Corporation.

         A "DATE OF EXERCISE" means the date on which the Holder shall have
delivered to the Company: (i) the Form of Election to Purchase attached hereto

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(with the Warrant Exercise Log attached to it), appropriately completed and duly
signed and (ii) payment of the Exercise Price for the number of Warrant Shares
so indicated by the Holder to be purchased.

             (b) If by the third Trading Day after a Date of Exercise the
Company fails to deliver the required number of Warrant Shares in the manner
required pursuant to Section 5(a), then the Holder will have the right to
rescind such exercise.

             (c) If by the third Trading Day after a Date of Exercise the
Company fails to deliver the required number of Warrant Shares in the manner
required pursuant to Section 5(a), and if after such third Trading Day the
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares
which the Holder anticipated receiving upon such exercise (a "BUY-IN"), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue by (B) the closing sales price of the
Common Stock at the time of the obligation giving rise to such purchase
obligation and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with a market price on the date
of exercise totaled $10,000, under clause (1) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In.

             (d) The Company's obligations to issue and deliver Warrant Shares
in accordance with the terms hereof are absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required pursuant to the
terms hereof.

         6. CHARGES, TAXES AND EXPENSES. Issuance and delivery of certificates
for shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the

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Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

         7. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.

         8. RESERVATION OF WARRANT SHARES. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant. The Company covenants that all Warrant
Shares so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.

         9. CERTAIN ADJUSTMENTS. The number of Warrant Shares issuable upon
exercise of this Warrant is subject to adjustment from time to time as set forth
in this Section 9.

             (a) STOCK DIVIDENDS AND SPLITS. If the Company, at any time while
this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, so that after such adjustment the aggregate Exercise
Price payable hereunder for the adjusted number of Warrant Shares shall be the
same as the aggregate Exercise Price in effect immediately prior to such
adjustment.

             (b) CALCULATIONS. All calculations under this SECTION 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common Stock.

             (c) NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment
pursuant to this SECTION 9, the Company at its expense will promptly compute
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the

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transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent.

             (d) NOTICE OF CORPORATE EVENTS. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary or (ii) authorizes the voluntary dissolution, liquidation or winding
up of the affairs of the Company, then the Company shall deliver to the Holder a
notice describing the material terms and conditions of such transaction, at
least 20 calendar days prior to the applicable record or effective date on which
a Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps reasonably
necessary in order to insure that the Holder is given the practical opportunity
to exercise this Warrant prior to such time so as to participate in or vote with
respect to such transaction; provided, however, that the failure to deliver such
notice or any defect therein shall not affect the validity of the corporate
action required to be described in such notice.

             (e) FUNDAMENTAL TRANSACTION. If, at any time while this Warrant is
outstanding: (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
"FUNDAMENTAL TRANSACTION"), then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the "ALTERNATE CONSIDERATION").
For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction.

         10. PAYMENT OF EXERCISE PRICE. The Holder shall pay the Exercise Price
by surrendering this Warrant to the Company together with a notice of cashless
exercise, in which event the Company shall issue to the Holder the number of
Warrant Shares determined as follows

                        X = Y [(A-B)/A]

             where:

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                        X = the number of Warrant Shares to be issued to the
                            Holder.

                        Y = the number of Warrant Shares with respect to which
                            this Warrant is being exercised.

                        A = the average of the closing bid prices for the five
                            Trading Days immediately prior to (but not
                            including) the Exercise Date.

                        B = the Exercise Price.

         For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Purchase Agreement.

         11. LIMITATIONS ON EXERCISE.

             (a) Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by the Holder upon any
exercise of this Warrant shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 4.999% of the total number of issued and outstanding shares of Common
Stock (including for such purpose the shares of Common Stock issuable upon such
exercise). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. Each delivery of an Exercise Notice hereunder will
constitute a representation by the Holder that it has evaluated the limitation
set forth in this paragraph and determined that issuance of the full number of
Warrant Shares requested in such Exercise Notice is permitted under this
paragraph. The provisions of this Section may be waived by a Holder (but only as
to itself and not to any other Holder) upon not less than 61 days' prior notice
to the Company. Other Holders shall be unaffected by any such waiver.

             (b) Notwithstanding anything to the contrary contained herein, the
number of shares of Common Stock that may be acquired by the Holder upon any
exercise of this Warrant shall be limited to the extent necessary to insure
that, following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 9.999% of the total number of issued and outstanding shares of Common
Stock (including for such purpose the shares of Common Stock issuable upon such
exercise). For such purposes, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. Each delivery of an Exercise Notice hereunder will
constitute a representation by the Holder that it has evaluated the limitation
set forth in this paragraph and determined that issuance of the full number of
Warrant Shares requested in such Exercise Notice is permitted under this
paragraph.

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             (c) If the Company has not obtained the Shareholder Approval (as
defined below), then the Company may not issue in excess of 22,054,931 shares of
Common Stock less: (A) any shares of Common Stock issued on the Closing Date
pursuant to the Purchase Agreement and (B) any shares of Common Stock issued
upon exercise of this Warrant, (C) any shares of Common Stock issued pursuant to
the Adjustable Warrants (as defined in the Purchase Agreement), (D) any shares
of Common Stock issued pursuant to the Concurrent Purchase Agreement (and the
transactions contemplated thereby, including upon the conversion or exercise of
the debentures and warrants, as the case may be) and (E) any sales of up to
2,900,000 shares of Common Stock (as adjusted for stock splits, reverse stock
splits, combinations and other similar transactions) to an Approved Purchaser
(as defined in the Purchase Agreement) subsequent to the date hereof pursuant to
the Company's Registration Statement No. 333-71086 (such number of shares, as
adjusted from time to time, the "ISSUABLE MAXIMUM"). The Holder shall be
entitled to a portion of the Issuable Maximum equal to the quotient obtained by
dividing (x) the number of shares of Common Stock issued and sold to the Holder
on the Closing Date by (y) the number of shares of Common Stock issued and sold
by the Company on the Closing Date. If the Holder shall no longer hold the
Warrant due to exercise or cancellation of the Warrant, then the Holder's
remaining portion of the Issuable Maximum shall be allocated pro-rata among the
remaining Holders. If on any Date of Exercise: (A) the aggregate number of
shares of Common Stock that would then be issuable upon exercise in full of this
Warrant would exceed the Issuable Maximum, and (B) the Company shall not have
previously obtained the vote of shareholders (the "SHAREHOLDER APPROVAL"), if
any, as may be required by the applicable rules and regulations of the Nasdaq
SmallCap Market (or any successor entity) applicable to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof, then the Company shall issue to the Holder a number of shares of Common
Stock equal to the Holder's pro-rata portion (which shall be calculated pursuant
to the terms hereof) of the Issuable Maximum, with respect to the remainder of
the Warrant Shares then issuable under the Warrant for which an exercise in
accordance with the applicable exercise price would result in an issuance of
shares of Common Stock in excess of the Holder's pro-rata portion (which shall
be calculated pursuant to the terms hereof) of the Issuable Maximum (the "EXCESS
WARRANT Shares"), the Company shall use its best efforts to obtain the
Shareholder Approval applicable to such issuance as soon as is possible, but in
any event not later than the 90th day after such request. In connection
therewith, the board of directors of the Company shall: (a) adopt proper
resolutions authorizing such increase in such authorized shares, (b) recommend
to and otherwise use its best efforts to promptly and duly obtain the
Shareholder Approval to carry out such resolutions (and hold a special meeting
of the stockholders as soon as practicable, but in any event not later than the
90th day after the delivery of the proxy materials relating to such meeting).
The Company and the Holder understand and agree that shares of Common Stock
issued to and then held by the Holder as a result of exercise of this Warrant
shall not be entitled to cast votes on any resolution to obtain Shareholder
Approval pursuant hereto. If the Company shall have used its best efforts to
obtain the Shareholder Approval but nevertheless failed to obtain such
Shareholder Approval, then this Warrant shall be cancelled and of no further
force and effect.

             (d) The provisions set forth in this Section 11 shall not restrict
the number of shares of Common Stock which a Holder may receive or beneficially
own in order to determine the amount of securities or other consideration that
such Holder may receive in the event of a merger or other business combination
or reclassification involving the Company as contemplated in Section 9 of this
Warrant.

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         12. NO FRACTIONAL SHARES. No fractional shares of Warrant Shares will
be issued in connection with any exercise of this Warrant. In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay cash
equal to the product of such fraction multiplied by the closing bid price of one
Warrant Share as reported on the Nasdaq SmallCap Market on the date of exercise.

         13. NOTICES. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (i) if to
the Company, to Peregrine Pharmaceuticals, Inc., 14272 Franklin Avenue, Tustin,
California 92780, Facsimile No.: (714) 838-9433, Attn: Chief Financial Officer,
or (ii) if to the Holder, to the address or facsimile number appearing on the
Warrant Register or such other address or facsimile number as the Holder may
provide to the Company in accordance with this Section.

         14. WARRANT AGENT. The Company shall serve as warrant agent under this
Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

         15. MISCELLANEOUS.

             (a) This Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any
Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant. This Warrant may be amended only
in writing signed by the Company and the Holder and their successors and
assigns.

             (b) All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement

                                      -8-
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and defense of the transactions contemplated by this Warrant (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of this Warrant), and hereby irrevocably waives, and agrees not
to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto (including its affiliates,
agents, officers, directors and employees) hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Warrant or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Warrant, then the prevailing party
in such action or proceeding shall be reimbursed by the other party for its
attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.

             (c) The headings herein are for convenience only, do not constitute
a part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.

             (d) In case any one or more of the provisions of this Warrant shall
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Warrant shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to agree
upon a valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

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         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                                            PEREGRINE PHARMACEUTICALS, INC.

                                            By:
                                                --------------------------------
                                                Name: Paul Lytle
                                                Title: V.P. Finance & Accounting

                                      -10-
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                          FORM OF ELECTION TO PURCHASE

To Peregrine Pharmaceuticals, Inc.:

         In accordance with Warrant No. ________ issued to the undersigned, the
undersigned hereby elects to purchase _____________ shares of common stock
("COMMON STOCK"), $.001 par value per share, of Peregrine Pharmaceuticals, Inc.,
by means of the cashless exercise provision set forth in this Warrant.

         By its delivery of this Form of Election To Purchase, the Holder
represents and warrants to the Company that in giving effect to the exercise
evidenced hereby the Holder will not beneficially own in excess of the number of
shares of Common Stock (determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934) permitted to be owned under Section 11 of this
Warrant to which this notice relates.

         The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of

                                            PLEASE INSERT SOCIAL SECURITY OR TAX
                                            IDENTIFICATION NUMBER

                         (Please print name and address)

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                           WARRANT SHARES EXERCISE LOG
                           ---------------------------

----------------    -----------------     -----------------    -----------------
Date                Number of Warrant     Number of Warrant    Number of Warrant
                    Shares Available      Shares Exercised     Shares Remaining
                    to be Exercised                            to be Exercised
----------------    -----------------     -----------------    -----------------

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

<PAGE>

                               FORM OF ASSIGNMENT

           [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Peregrine
Pharmaceuticals, Inc., to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Peregrine
Pharmaceuticals, Inc., with full power of substitution in the premises.

Dated:   _______________, ____

                                   _____________________________________________
                                   (Signature must conform in all respects to
                                   name of holder as specified on the face of
                                   the Warrant)

                                   _____________________________________________
                                   Address of Transferee

                                   _____________________________________________

                                   _____________________________________________

In the presence of:

__________________________<PAGE>

                                                                 Exhibit 10.72.6

                       SIXTH AMENDMENT TO CREDIT AGREEMENT

         THIS SIXTH AMENDMENT TO CREDIT AGREEMENT is made as of the 31st day of
July, 2002 by and among CORRECTIONAL SERVICES CORPORATION, a corporation duly
organized and validly existing under the laws of the State of Delaware (the
"Company"); each of the Subsidiaries of the Company that is a signatory hereto
or that, pursuant to Section 9.1.20(b) of the Credit Agreement (as hereinafter
defined), shall become a party hereto (individually, a "Subsidiary Guarantor"
and, collectively, the "Subsidiary Guarantors"; and the Subsidiary Guarantors,
collectively with the Company, are sometimes hereinafter referred to as the
"Obligors"); each of the lenders that is a signatory hereto or that, pursuant to
Section 12.6(b) of the Credit Agreement, shall become a "Lender" hereunder
(individually, a "Lender" and, collectively, the "Lenders"); and FLEET NATIONAL
BANK, a national banking association and successor by merger to Summit Bank, as
syndication agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Syndication Agent").

                              W I T N E S S E T H:

         WHEREAS, the Company, the Subsidiary Guarantors, the Lenders and the
Syndication Agent entered into a Credit Agreement dated August 31, 1999, as
amended by a first amendment thereto dated as of November 10, 2000, a second
amendment thereto dated in or about August, 2001, a third amendment thereto
dated in or about November, 2001, a fourth amendment thereto dated as of
November 28, 2001, and a fifth amendment thereto dated as of March 28, 2002
(collectively, the "Credit Agreement"); and

         WHEREAS, the Company, the Syndication Agent and the Lenders have agreed
to make certain amendments to the Credit Agreement, subject to and in accordance
with the terms and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1.       Defined Terms. Except as otherwise indicated herein, all words
and terms defined in the Credit Agreement shall have the same meanings when used
herein.

         2.       Amendments to Credit Agreement.

                  (a)      The following definitions appearing in Section 1.1 of
the Credit Agreement are hereby amended to read in their entirety as follows
(changes from the Credit Agreement are indicated in bold-face type):

                  "Qualified Accounts" shall mean an Account that meets all of
         the following requirements on its date of invoice or other origination
         date and continuing thereafter until collected:

<PAGE>

                           (a)   such Account represents a complete bona fide
         transaction which requires no further act under any circumstances on
         the part of any Obligor to make such Account payable by the Account
         Debtor;

                           (b)   such Account shall not be unpaid more than 60
         days beyond its payment terms, not to exceed 90 days beyond the invoice
         date;

                           (c)   the goods the sale of which gave rise to such
         Account were shipped or delivered to the Account Debtor on an absolute
         sale basis and not on a bill and hold sale basis, a consignment sale
         basis, a guaranteed sale basis, a sale or return basis, or on the basis
         of any other similar understanding, and no part of such goods has been
         returned or rejected;

                           (d)   such Account is not evidenced by chattel paper,
         a note or an instrument of any kind;

                           (e)   the Account Debtor with respect to such Account
         is not insolvent or the subject of any bankruptcy or insolvency
         proceedings of any kind or of any other proceeding or action, which
         might have a materially adverse effect on the business of such Account
         Debtor or is not, in the reasonable discretion of the Syndication Agent
         based upon a change in circumstances or objective facts, deemed
         ineligible for credit for any other reason;

                           (f)   if such Account arises from the performance of
         services, such services have been fully rendered, and such Account does
         not represent a progress billing;

                           (g) the Account Debtor with respect thereto is
         located within the United States of America or Puerto Rico;

                           (h)   such Account is a valid, legally enforceable
         obligation of the Account Debtor with respect thereto and is not
         subject to any present or contingent, and no facts exist which are the
         basis for any future, offset or counterclaim or other defense on the
         part of such Account Debtor, including without limitation, any account
         payable, rental or other amount owing by the Obligor to such Account
         Debtor; provided, however, that any Account subject to an offset,
         counterclaim or defense shall be deemed ineligible under this
         subsection (h) only to the extent of such offset, counterclaim or
         defense;

                           (i)   the Syndication Agent has a first position
         perfected Lien (for the benefit of the Lenders) in such Account, which
         is subject to no other Lien;

                           (j)   such Account is evidenced by an invoice or
         other documentation in a form  acceptable to the Syndication Agent;

                                       2

<PAGE>

                           (k)   such Account does not arise out of any
         transaction with a Subsidiary  or an Affiliate of the Obligors;

                           (l)   such Account is not subject to any provision
         prohibiting its assignment or requiring notice of or consent to such
         assignment, other than the type of notice required under subsection (o)
         below;

                           (m)   if applicable, the goods giving rise to such
         Account were not, at the time of the sale thereof, subject to any Lien;

                           (n) such Account (or portion thereof) does not
         represent  amounts  owing as a late  fee, interest or service charge;

                           (o)   the Account Debtor with respect to such Account
         is not the United States government or any instrumentality or agency
         thereof or, if the Account Debtor with respect to such Account is the
         United States government or any instrumentality or agency thereof, such
         Account has, in the opinion of the Syndication Agent or its counsel,
         been properly assigned to the Agent pursuant to the Assignment of
         Claims Act of 1940, 31 U.S.C. 3727 and 41 U.S.C. 15;

                           (p)   at least 50% (in dollar amount) of all Accounts
         owing to any Obligor from such Account Debtor (including the Account in
         question) constitute Qualified Accounts; and

                           (q)   such Account does not arise out of that certain
         Contract for the Provision, Operation and Management of a Secure
         Private Prison (Contract No. 010039DC) between the Arizona Department
         of Corrections and the Company.

                  "Revolving Credit Commitment" shall mean, for each Lender, the
         obligation of such Lender to make Loans in an aggregate principal
         amount at any one time outstanding up to but not exceeding the amount
         set forth opposite the name of such Lender on Schedule 1 under the
         caption "Amount of Commitment for Revolving Credit Loan" (as the same
         may be reduced from time to time pursuant to Section 2.3 hereof). As of
         July 31, 2002, the aggregate principal amount of the Revolving Credit
         Commitments is $13,000,000.

                  (b)      Section 9.1.30 of the Credit Agreement is hereby
amended to read in its entirety as follows (changes from the Credit Agreement
are indicated in bold-face type):

                  Section 9.1.30 Evidence of Refinancing; Condition to
                  Refinancing.

                  (a)      By no later than April 30, 2002, the Company shall

         provide to the Syndication Agent a letter evidencing the Company's
         request to refinance with a

                                       3

<PAGE>

         third-party lender all of the obligations of the Company and the
         Subsidiary Guarantors under the Basic Documents and the Operative
         Documents.

                  (b)      Concurrently with repaying all of its obligations
         under the Basic Documents and the Operative Documents, and as a
         condition precedent thereto, the Company shall obtain a substitute
         letter of credit to replace that certain standby letter of credit in
         the maximum amount of $1,400,000 which, in a transaction unrelated to
         this Agreement, is being issued by Fleet National Bank at the request
         of the Company in favor of National Bank of Arizona, as the
         beneficiary.

                  (c)      Part 1 of Schedule 1 to the Credit Agreement is
hereby deleted and replaced with Part 1 of Schedule 1 attached to this
Agreement.

         3.       Substitute Notes. To evidence the decrease in the aggregate
Revolving Credit Commitment from $21,000,000 to $13,000,000, the Company is,
concurrently herewith, executing and delivering to each of the Revolving Credit
Lenders a substitute Revolving Credit Note (each a "Substitute Note") in
substitution for, but not repayment of, the Revolving Credit Note (each a "Prior
Note") heretofore issued to each such Revolving Credit Lender. The parties
acknowledge and agree that the execution and delivery of the Substitute Notes
shall not constitute a repayment, refinancing, accord and satisfaction or
novation of the Prior Notes or the indebtedness evidenced thereby.

         4.       Guaranty Reaffirmation. The Subsidiary Guarantors hereby
acknowledge and agree to the amendments to the Credit Agreement effected by this
Agreement. Each of the Subsidiary Guarantors hereby reaffirms all of the terms
and conditions of the guaranty set forth in Section 6 of the Credit Agreement
and agrees that such guaranty is applicable to all of the Guaranteed
Obligations, as amended by this Agreement. The Subsidiary Guarantors hereby
acknowledge and agree that they have no defenses, offsets or counterclaims with
respect to the Guaranteed Obligations and hereby waive and release all claims
against the Syndication Agent and the Lenders with respect thereto.

         5.       Representations, Warranties and Other Covenants. In order to
induce the Syndication Agent and the Lenders to enter into this Agreement and
amend the Credit Agreement as provided herein, each Obligor hereby represents
and warrants to the Syndication Agent and the Lenders that:

                  (a)      All of the representations and warranties of the
Obligors set forth in the Credit Agreement are true, complete and correct in all
material respects on and as of the date hereof with the same force and effect as
if made on and as of the date hereof and as if set forth at length herein.

                  (b)      No Default or Event of Default presently exists and
is continuing on and as of the date hereof.

                                       4

<PAGE>

                  (c)      Since the date of the Obligors' most recent financial
statements delivered to the Syndication Agent, no Material Adverse Effect has
occurred, and no event has occurred or failed to occur which has had or is
likely to have a Material Adverse Effect.

                  (d)      Each Obligor has full power and authority to execute,
deliver and perform any action or step which may be necessary to carry out the
terms of this Agreement and all other agreements, documents and instruments, if
any, executed and delivered by the Obligors to the Syndication Agent and the
Lenders concurrently herewith or in connection herewith (collectively, the
"Amendment Documents"); each Amendment Document to which any of the Obligors is
a party has been duly executed and delivered by such Obligors and is the legal,
valid and binding obligation of such Obligor enforceable in accordance with its
terms, subject to any applicable bankruptcy, insolvency, general equity
principles or other similar laws affecting the enforcement of creditors' rights
generally.

                  (e)      The execution, delivery and performance of the
Amendment Documents will not (i) violate any provision of any existing law,
statute, rule, regulation or ordinance binding upon the Obligors, (ii) conflict
with, result in a breach of, or constitute a default under (A) the certificate
of incorporation or by-laws or other equivalent formation documents of any
Obligor, (B) any order, judgment, award or decree of any court, governmental
authority, bureau or agency, or (C) any mortgage, indenture, material lease,
contract or other material agreement or undertaking to which any Obligor is a
party or by which any Obligor or its properties or assets may be bound, or (iii)
result in the creation or imposition of any lien or other encumbrance upon or
with respect to any property or asset now owned or hereafter acquired by any
Obligor, other than liens in favor of the Syndication Agent for the ratable
benefit of the Lenders.

                  (f)      No consent, license, permit, approval or
authorization of, exemption by, notice to, report to, or registration, filing or
declaration with any Person is required in connection with the execution,
delivery, performance by the Obligors of the Amendment Documents or the
transactions contemplated thereby.

         6.       Acknowledgment by Lenders. Each of the Lenders acknowledges
and agrees that (a) it has been notified of, and offered the opportunity to
participate in, a transaction (the "L/C Transaction") unrelated to the loans
under the Credit Agreement, pursuant to which Fleet National Bank will, at the
request of the Company, issue a standby letter of credit in the original face
amount of $1,400,000 (the "L/C") in favor of National Bank of Arizona, as the
beneficiary, which L/C will be secured by a first lien on and security interest
in a certificate of deposit in the minimum amount of $1,400,000 to be issued by
Fleet National Bank to the Company (the "CD"), (b) Suntrust Bank, Nashville,
N.A. has elected not to participate in the L/C Transaction, (c) it has been
advised that the Company will purchase the CD with the proceeds of an advance
under the Credit Agreement, (d) in the event the Company fails to repay all of
its obligations under the Basic Documents and the Operative Documents and
provide a substitute letter of credit pursuant to Section 9.1.30 of the Credit
Agreement by the Revolving Credit Commitment Termination Date, the CD may remain
outstanding beyond 90 days but will still be deemed a Permitted Investment, and
(e) notwithstanding any provision contained in the Credit Agreement or the
Security Agreement, the lien on and security interest in the CD will be for the
sole benefit of Fleet National

                                       5

<PAGE>

Bank in its individual capacity as the issuing bank under, and Banco Popular
North America as a participant in, the L/C Transaction (which is unrelated to
any transaction under the Credit Agreement), and each Lender waives and releases
any claim in and to the CD as a result of or pursuant to the provisions of the
Credit Agreement or the Security Agreement.

         7.       Syndication Agent's Costs. The Company shall on demand
reimburse the Syndication Agent for all of its out-of-pocket costs, including
legal fees and expenses, incurred by the Syndication Agent in connection with
this Agreement, the transactions referenced herein (except for the L/C
Transaction) and the administration of the facilities described in the Credit
Agreement. The Company hereby authorizes the Syndication Agent to charge the
Company's account(s) with the Syndication Agent (or its affiliate) in the amount
of such out-of-pocket costs.

         8.       No Change. Except as expressly set forth herein or modified
hereby, all of the terms and provisions of the Credit Agreement and the other
Basic Documents are hereby reaffirmed in their entirety and shall continue in
full force and effect.

         9.       Counterparts; Effectiveness. This Agreement may be executed
in any number of counterparts, each of which shall be an original and all of
which shall constitute one and the same instrument. This Agreement shall not be
binding upon any party until all parties hereto have executed this Agreement and
delivered it to the Syndication Agent.

         10.      No Defenses. The Company hereby acknowledges and agrees that
it has no defenses, offsets or counterclaims with respect to its obligations
under the Credit Agreement, the Notes, the other Basic Documents and the
Operative Documents and hereby waives and releases all claims against the
Syndication Agent and the Lenders with respect thereto.

                [The rest of this page left intentionally blank]

                                       6

<PAGE>

     11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

     IN WITNESS WHEREOF, the undersigned have caused their duly authorized
representatives to execute and deliver this Agreement as of the day and year
first above written.

                             CORRECTIONAL SERVICES CORPORATION,
                             a Delaware corporation

                             By:  /s/  Bernard A. Wagner
                                  ----------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                             YOUTH SERVICES INTERNATIONAL, INC.,
                             a Maryland corporation

                             By:  /s/  Bernard A. Wagner
                                  ----------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                             FF&E, INC., a New Jersey corporation

                             By:  /s/  Bernard A. Wagner
                                  ----------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                             YOUTH SERVICES INTERNATIONAL
                             OF NORTHERN IOWA, INC., an
                             Iowa corporation

                             By:  /s/  Bernard A. Wagner
                                  ----------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                       (Signatures continued on next page)

                                       7

<PAGE>

                             YOUTH SERVICES INTERNATIONAL
                             HOLDINGS, INC., a Delaware corporation

                             By:  /s/  Bernard A. Wagner
                                  ----------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                             YOUTH SERVICES INTERNATIONAL
                             REAL PROPERTY PARTNERSHIP, LLP,
                             a Maryland limited liability partnership

                             By:  /s/  Bernard A. Wagner
                                  ----------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                             YOUTH SERVICES INTERNATIONAL
                             OF ILLINOIS, INC., a Maryland
                             corporation

                             By:  /s/  Bernard A. Wagner
                                  ----------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                             YOUTH SERVICES INTERNATIONAL
                             OF SOUTH DAKOTA, INC., a South Dakota
                             corporation

                             By:  /s/  Bernard A. Wagner
                                  ----------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                       (Signatures continued on next page)

                                       8

<PAGE>

                            YOUTH SERVICES INTERNATIONAL
                            OF TEXAS, INC., a Texas corporation

                            By:  /s/  Bernard A. Wagner
                                 -----------------------------------------------
                                 Bernard A. Wagner
                                 Sr. Vice President and Chief Financial Officer

                            YSI OF CENTRAL IOWA, INC.,
                            an Iowa corporation

                            By:  /s/  Bernard A. Wagner
                                 ----------------------------------------------
                                 Bernard A. Wagner
                                 Sr. Vice President and Chief Financial Officer

                            YOUTH SERVICES INTERNATIONAL
                            OF IOWA, INC., a Maryland
                            corporation

                            By:  /s/  Bernard A. Wagner
                                 -----------------------------------------------
                                 Bernard A. Wagner
                                 Sr. Vice President and Chief Financial Officer

                            YOUTH SERVICES INTERNATIONAL
                            OF MICHIGAN, INC., a Michigan
                            corporation

                            By:  /s/  Bernard A. Wagner
                                 ----------------------------------------------
                                 Bernard A. Wagner
                                 Sr. Vice President and Chief Financial Officer

                       (Signatures continued on next page)

                                       9

<PAGE>

                             YOUTH SERVICES INTERNATIONAL
                             OF MISSOURI, INC., a Missouri
                             corporation

                             By:  /s/  Bernard A. Wagner
                                  ---------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                             CSC MANAGEMENT DE PUERTO RICO, INC.,
                             a Puerto Rico corporation

                             By:  /s/  Bernard A. Wagner
                                  ---------------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                             FLEET NATIONAL BANK,
                             as the Syndication Agent and a Lender

                             By:  ______________________________________________
                                  Name:
                                  Title:

                             SUNTRUST BANK, NASHVILLE, N.A.,
                             as a Lender

                             By:  ______________________________________________
                                  Name:
                                  Title:

                             BANCO POPULAR NORTH AMERICA,
                             as a Lender

                             By:  ______________________________________________
                                  Name:
                                  Title:

                                       10

<PAGE>

                                   SCHEDULE 1

                 Commitment of Lenders and Addresses for Notices

         Part 1-Commitment of Lenders and Address for Notices to Lenders

<TABLE>
<CAPTION>
                                    Amount of Commitment
                                    For Revolving Credit               Amount of Commit-         Total
Lender                              Loans                              ment for DD Loans         Commitment
------                              --------------------               -----------------         ----------
<S>                                 <C>                                <C>                       <C>
Fleet National Bank                 $8,629,117.12                             $0                 $8,629,117.12
750 Walnut Avenue
Cranford, New Jersey 07016
Attention: Craig Heal
Telecopier No.: (908) 653-1680
Telephone No.: (908) 709-5472

SunTrust Bank, Nashville, N.A.      $1,770,882.88                             $0                 $1,770,882.88
201 4th Avenue North
Nashville, TN 37219
Attention:  Bill Crawford
Telecopier No.: (615) 748-5269
Telephone No.: (615) 748-4629

Banco Popular North America         $2,600,000.00                             $0                 $2,600,000.00
7 West 51/st/ Street
New York, NY 10019
Attention: Ms. Karen Hamilton
           Senior Vice President
Telecopier No.: (212) 586-3537
Telephone No.: (212) 445-1811
</TABLE>

<PAGE>

                        SUBSTITUTE REVOLVING CREDIT NOTE

$8,629,117.12                                                As of July 31, 2002

         FOR VALUE RECEIVED, the undersigned, Correctional Services Corporation,
a Delaware corporation (the "Company"), hereby unconditionally promises to pay
on or before the Revolving Credit Commitment Termination Date (as defined in
that certain Credit Agreement dated August 31, 1999, as amended (the
"Agreement"), among the Company, certain of its subsidiaries as guarantors, the
lenders party thereto and Fleet National Bank, as syndication agent (the
"Syndication Agent")), to the order of Fleet National Bank (the "Lender"), at
the office of the Syndication Agent located at 750 Walnut Avenue, Cranford, New
Jersey, or at such other location as the Syndication Agent shall designate, in
lawful money of the United States of America and in immediately available funds,
the principal amount of the lesser of (i) $8,629,117.12, or (ii) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Lender to the
Company pursuant to the Agreement. Notwithstanding the foregoing, each Revolving
Credit Loan used by the Company to fund Pre-Development Costs shall be repaid on
or before the date that is nine months after the date such Loan was made to the
Company. Terms defined in the Agreement shall have the same meanings when used
herein.

         The Company further agrees to pay interest in like money at the office
of the Syndication Agent on the unpaid principal amount hereof from time to time
at a rate or rates per annum and at such times as are provided in the Agreement.

         Subject to the provisions of Section 5.5 of the Agreement, this Note
may be prepaid, in whole or in part, at one time or from time to time, without
premium or penalty in accordance with Sections 2.3 and 2.9 of the Agreement. In
addition, this Note shall be prepaid in accordance with Section 2.10 of the
Agreement, upon the occurrence of any of the events described therein.

         This Note is secured by the Collateral described in the Security
Agreement and the real property described in the Mortgages.

         Upon the occurrence of an Event of Default, all principal, interest and
other amounts owing under this Note shall be, or may be declared to be,
immediately due and payable, all subject to and in accordance with the
provisions of Section 10.1 of the Agreement.

         Upon the occurrence of any Event of Default, the Lender may, in
addition to such other and further rights and remedies as provided by law or
under any of the Basic Documents, collect interest on such overdue amount from
the date of such maturity until paid at a rate per annum equal to the
Post-Default Rate.

         This Note is one of the Revolving Credit Notes referred to in, and
evidences certain indebtedness incurred by the Company to the Lender under, the
Agreement. The holder of this Note is entitled to all of the benefits and
security provided in the Agreement and the other Basic Documents.

         This Note is being executed and delivered by the Company to the Lender
in substitution for that certain Substitute Revolving Credit Note dated as of
March 28, 2002 from the Company in favor of the Lender in the maximum principal
amount of $13,939,343 (the "Prior Note"). The

                                       12

<PAGE>

execution and delivery of this Note by the Company shall not constitute a
repayment, refinancing, accord and satisfaction or novation of the Prior Note or
the indebtedness evidenced thereby.

         This Note may not be changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.

         Should the indebtedness represented by this Note or any part hereof be
collected at law or in equity, or in bankruptcy, receivership, or any other
court proceeding, or should this Note be placed in the hands of attorneys for
collection upon the occurrence of an Event of Default, the Company agrees to
pay, in addition to the principal and interest due and payable hereon, all
reasonable costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses.

         This Note shall be and remain in full force and effect and in no way
impaired until the actual payment thereof to the Lender, its successors or
assigns.

         Anything herein to the contrary notwithstanding, the obligations of the
Company under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment by
the Lender would be contrary to provisions of law applicable to the Lender
limiting the maximum rate of interest which may be charged or collected by the
Lender.

         The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand for payment, protest and notice of dishonor of this Note.

         This Note is binding upon the Company and its successors and assigns
and shall inure to the benefit of the Lender and its successors and assigns.

         This Note and the rights and obligations of the parties hereto shall be
subject to and governed by the laws of the State of New York.

         IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed by its authorized officer as of the day and year above written.

                              CORRECTIONAL SERVICES CORPORATION

                              By: /s/ Bernard A. Wagner
                                  ---------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                                       13

<PAGE>

                        SUBSTITUTE REVOLVING CREDIT NOTE

$1,770,882.88                                                As of July 31, 2002

         FOR VALUE RECEIVED, the undersigned, Correctional Services Corporation,
a Delaware corporation (the "Company"), hereby unconditionally promises to pay
on or before the Revolving Credit Commitment Termination Date (as defined in
that certain Credit Agreement dated August 31, 1999, as amended (the
"Agreement"), among the Company, certain of its subsidiaries as guarantors, the
lenders party thereto and Fleet National Bank, as syndication agent (the
"Syndication Agent")), to the order of SunTrust Bank, Nashville, N.A. (the
"Lender"), at the office of the Syndication Agent located at 750 Walnut Avenue,
Cranford, New Jersey, or at such other location as the Syndication Agent shall
designate, in lawful money of the United States of America and in immediately
available funds, the principal amount of the lesser of (i) $1,770,882.88, or
(ii) the aggregate unpaid principal amount of all Revolving Credit Loans made by
the Lender to the Company pursuant to the Agreement. Notwithstanding the
foregoing, each Revolving Credit Loan used by the Company to fund
Pre-Development Costs shall be repaid on or before the date that is nine months
after the date such Loan was made to the Company. Terms defined in the Agreement
shall have the same meanings when used herein.

         The Company further agrees to pay interest in like money at the office
of the Syndication Agent on the unpaid principal amount hereof from time to time
at a rate or rates per annum and at such times as are provided in the Agreement.

         Subject to the provisions of Section 5.5 of the Agreement, this Note
may be prepaid, in whole or in part, at one time or from time to time, without
premium or penalty in accordance with Sections 2.3 and 2.9 of the Agreement. In
addition, this Note shall be prepaid in accordance with Section 2.10 of the
Agreement, upon the occurrence of any of the events described therein.

         This Note is secured by the Collateral described in the Security
Agreement and the real property described in the Mortgages.

         Upon the occurrence of an Event of Default, all principal, interest and
other amounts owing under this Note shall be, or may be declared to be,
immediately due and payable, all subject to and in accordance with the
provisions of Section 10.1 of the Agreement.

         Upon the occurrence of any Event of Default, the Lender may, in
addition to such other and further rights and remedies as provided by law or
under any of the Basic Documents, collect interest on such overdue amount from
the date of such maturity until paid at a rate per annum equal to the
Post-Default Rate.

         This Note is one of the Revolving Credit Notes referred to in, and
evidences certain indebtedness incurred by the Company to the Lender under, the
Agreement. The holder of this Note is entitled to all of the benefits and
security provided in the Agreement and the other Basic Documents.

         This Note is being executed and delivered by the Company to the Lender
in substitution for that certain Substitute Revolving Credit Note dated as of
March 28, 2002 from the Company in favor of the Lender in the maximum principal
amount of $2,860,657 (the "Prior Note"). The

                                       14

<PAGE>

execution and delivery of this Note by the Company shall not constitute a
repayment, refinancing, accord and satisfaction or novation of the Prior Note or
the indebtedness evidenced thereby.

         This Note may not be changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.

         Should the indebtedness represented by this Note or any part hereof be
collected at law or in equity, or in bankruptcy, receivership, or any other
court proceeding, or should this Note be placed in the hands of attorneys for
collection upon the occurrence of an Event of Default, the Company agrees to
pay, in addition to the principal and interest due and payable hereon, all
reasonable costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses.

         This Note shall be and remain in full force and effect and in no way
impaired until the actual payment thereof to the Lender, its successors or
assigns.

         Anything herein to the contrary notwithstanding, the obligations of the
Company under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment by
the Lender would be contrary to provisions of law applicable to the Lender
limiting the maximum rate of interest which may be charged or collected by the
Lender.

         The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand for payment, protest and notice of dishonor of this Note.

         This Note is binding upon the Company and its successors and assigns
and shall inure to the benefit of the Lender and its successors and assigns.

         This Note and the rights and obligations of the parties hereto shall be
subject to and governed by the laws of the State of New York.

         IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed by its authorized officer as of the day and year above written.

                             CORRECTIONAL SERVICES CORPORATION

                             By: /s/ Bernard A. Wagner
                                 ---------------------------
                                 Bernard A. Wagner
                                 Sr. Vice President and Chief Financial Officer

                                       15

<PAGE>

                        SUBSTITUTE REVOLVING CREDIT NOTE

$2,600,000                                                   As of July 31, 2002

     FOR VALUE RECEIVED, the undersigned, Correctional Services Corporation, a
Delaware corporation (the "Company"), hereby unconditionally promises to pay on
or before the Revolving Credit Commitment Termination Date (as defined in that
certain Credit Agreement dated August 31, 1999, as amended (the "Agreement"),
among the Company, certain of its subsidiaries as guarantors, the lenders party
thereto and Fleet National Bank, as syndication agent (the "Syndication
Agent")), to the order of Banco Popular North America (the "Lender"), at the
office of the Syndication Agent located at 750 Walnut Avenue, Cranford, New
Jersey, or at such other location as the Syndication Agent shall designate, in
lawful money of the United States of America and in immediately available funds,
the principal amount of the lesser of (i) $2,600,000, or (ii) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Lender to the
Company pursuant to the Agreement. Notwithstanding the foregoing, each Revolving
Credit Loan used by the Company to fund Pre-Development Costs shall be repaid on
or before the date that is nine months after the date such Loan was made to the
Company. Terms defined in the Agreement shall have the same meanings when used
herein.

     The Company further agrees to pay interest in like money at the office of
the Syndication Agent on the unpaid principal amount hereof from time to time at
a rate or rates per annum and at such times as are provided in the Agreement.

     Subject to the provisions of Section 5.5 of the Agreement, this Note may be
prepaid, in whole or in part, at one time or from time to time, without premium
or penalty in accordance with Sections 2.3 and 2.9 of the Agreement. In
addition, this Note shall be prepaid in accordance with Section 2.10 of the
Agreement, upon the occurrence of any of the events described therein.

     This Note is secured by the Collateral described in the Security Agreement
and the real property described in the Mortgages.

     Upon the occurrence of an Event of Default, all principal, interest and
other amounts owing under this Note shall be, or may be declared to be,
immediately due and payable, all subject to and in accordance with the
provisions of Section 10.1 of the Agreement.

     Upon the occurrence of any Event of Default, the Lender may, in addition to
such other and further rights and remedies as provided by law or under any of
the Basic Documents, collect interest on such overdue amount from the date of
such maturity until paid at a rate per annum equal to the Post-Default Rate.

     This Note is one of the Revolving Credit Notes referred to in, and
evidences certain indebtedness incurred by the Company to the Lender under, the
Agreement. The holder of this Note is entitled to all of the benefits and
security provided in the Agreement and the other Basic Documents.

     This Note is being executed and delivered by the Company to the Lender in
substitution for that certain Substitute Revolving Credit Note dated as of March
28, 2002 from the Company in favor of the Lender in the maximum principal amount
of $4,200,000.00 (the "Prior Note"). The

                                       16

<PAGE>

execution and delivery of this Note by the Company shall not constitute a
repayment, refinancing, accord and satisfaction or novation of the Prior Note or
the indebtedness evidenced thereby.

     This Note may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.

     Should the indebtedness represented by this Note or any part hereof be
collected at law or in equity, or in bankruptcy, receivership, or any other
court proceeding, or should this Note be placed in the hands of attorneys for
collection upon the occurrence of an Event of Default, the Company agrees to
pay, in addition to the principal and interest due and payable hereon, all
reasonable costs of collecting or attempting to collect this Note, including
reasonable attorneys' fees and expenses.

     This Note shall be and remain in full force and effect and in no way
impaired until the actual payment thereof to the Lender, its successors or
assigns.

     Anything herein to the contrary notwithstanding, the obligations of the
Company under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment by
the Lender would be contrary to provisions of law applicable to the Lender
limiting the maximum rate of interest which may be charged or collected by the
Lender.

     The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand for payment, protest and notice of dishonor of this Note.

     This Note is binding upon the Company and its successors and assigns and
shall inure to the benefit of the Lender and its successors and assigns.

     This Note and the rights and obligations of the parties hereto shall be
subject to and governed by the laws of the State of New York.

     IN WITNESS WHEREOF, the undersigned has caused this Note to be duly
executed by its authorized officer as of the day and year above written.

                              CORRECTIONAL SERVICES CORPORATION

                              By: /s/ Bernard A. Wagner
                                  -----------------------------------------
                                  Bernard A. Wagner
                                  Sr. Vice President and Chief Financial Officer

                                       17

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