Exhibit 4.5

                                ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this "Agreement") is made as of September 26, 2003, by
and among Pharmos Corporation, a corporation incorporated under the laws of
Nevada having an address at 99 Wood Avenue South, Suite 301, Iselin, New Jersey
08830 (the "Company"), the purchasers signatory hereto (each an "Purchaser" and
together the "Purchasers"), and Feldman Weinstein LLP, with an address at 420
Lexington Avenue, Suite 2620, New York, New York 10170 (the "Escrow Agent").
Capitalized terms used but not defined herein shall have the meanings set forth
in the Securities Purchase Agreement referred to in the first recital.

                               W I T N E S S E T H

      WHEREAS, the Company and the Purchasers have entered into a Securities
Purchase Agreement, dated September 26, 2003 (the "Purchase Agreement") pursuant
to which the Purchasers are purchasing from the Company, the Company's 4%
Convertible Debentures due March 31, 2005 (the "Debentures") and Warrants;

      NOW, THEREFORE, it is agreed as follows:

      1. Closing.

            (a) Upon the Escrow Agent's receipt of the $21,000,000 into its
      master escrow account, together with the Purchasers' executed counterparts
      of this Agreement, the Purchase Agreement and the Registration Rights
      Agreement, it shall telephonically advise the Company, or the Company's
      designated attorney or agent, of the amount of funds it has received into
      its master escrow account.

            (b) Wire transfers to the Escrow Agent shall be made as follows:

                           STERLING NATIONAL BANK
                           622 3RD AVENUE
                           NEW YORK, NY 10017
                           Account Name: Feldman Weinstein LLP
                           ABA ROUTING NO:
                           ACCT NO:
                           Remark: PARS/[FUND NAME]

            (c) The Company, upon receipt of (i) said notice and (ii) a
      "transaction form" or related confirmation from the Nasdaq Listing
      Qualifications Group acknowledging receipt of the Company's Notification
      Form: Listing of Additional Shares regarding the issuance of securities to
      be issued pursuant to the Purchase Agreement (a copy of which shall be
      provided to the Escrow Agent), shall deliver to the Escrow Agent the
      certificates representing the Debentures and the Warrants to be issued to
      each Purchaser at the Closing together with:

                            (i) the executed counterpart of the Registration
      Rights Agreement;

                            (ii) the executed opinions of Company Counsel and
      Nevada Counsel;

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                            (iii) the executed counterpart of the Purchase
      Agreement; and

                            (iv) an executed counterpart of this Escrow
      Agreement.

            (d) In the event that the foregoing items are not in the Escrow
      Agent's possession within five (5) Trading Days of the Escrow Agent
      receiving the Subscription Amounts (net of permitted deductions pursuant
      to the Purchase Agreement), then each Purchaser shall have the right to
      demand the return of their Subscription Amounts.

            (e) Once the Escrow Agent receives all of the items required to be
      delivered hereunder, it shall wire 5% of the gross proceeds raised
      pursuant to the Purchase Agreement per the written instruction of Rodman &
      Renshaw, Inc. ("Rodman") as its fee in connection with the transaction
      described herein, $20,000 to Feldman Weinstein LLP for the legal costs and
      expenses of Rodman, $16,000,000 ("Secured Proceeds") shall be initially
      transferred into a separate non-interest bearing escrow account of the
      Escrow Agent ("Escrow Account") and the remaining balance per the written
      instructions of the Company. Thereafter the Escrow Account shall be
      maintained by the Escrow Agent in accordance with the terms of this
      Agreement and may be invested in an interest-bearing government securities
      or commercial money market fund designated from time to time by the
      Company and made available by the Escrow Agent's bank. The Escrow Agent,
      by its execution and delivery of this Agreement, hereby agrees to accept
      receipt of the Secured Proceeds.

            (f) Once the funds (as set forth above) have been sent per the
      Company's instructions, the Escrow Agent shall then arrange to have the
      Purchase Agreement, the Warrants, the Debentures, the Registration Rights
      Agreement, the Escrow Agreement and the opinions of counsel delivered to
      the appropriate parties.

            (g) The Escrow Agent shall hold the Secured Proceeds in escrow and
      not release such proceeds, except as provided herein.

      2. Release of Secured Proceeds upon Conversion of Debentures. At any time
after the principal amount outstanding of a Debenture(s) held by a Purchaser has
been reduced by an amount at least equal to such Purchaser's Pro Rata Portion of
$5,000,000, whether by conversion, redemption or otherwise, upon the conversion
by a Purchaser of all or part of the principal amount of the Debentures held by
such Purchaser (the "Converted Principal Amount"), whether voluntarily or by
means of a Forced Conversion pursuant to the terms of the Debenture, such
Purchaser and the Company shall promptly thereafter execute a joint certificate
to the Escrow Agent certifying that such Converted Principal Amount has been
converted by the Purchaser (a "Conversion Certificate"). Upon receipt of a
Conversion Certificate, the Escrow Agent shall release, to the account specified
in the written instructions of the Company, the Converted Principal Amount out
of the Secured Proceeds. "Pro Rata Portion" is the ratio of (x) such Purchaser's
Subscription Amount and (y) the aggregate sum of all of the Subscription
Amounts. Notwithstanding anything in this Agreement to the contrary, the Escrow
Agent shall only release funds to the Company or a Purchaser, if such release
relates solely to a Purchaser, up to such Purchaser's Pro Rata Portion of the
Secured Proceeds.

      3. Release of Secured Proceeds upon Monthly Redemption of Debentures. At
any time after the principal amount outstanding of a Debenture(s) held by a
Purchaser has been reduced by an amount at least equal to such Purchaser's Pro
Rata Portion of $5,000,000, whether by conversion, redemption or otherwise, such
Purchaser and the Company shall execute a joint certificate to the Escrow Agent
certifying that such required Monthly Redemption amounts have been received in
full by Purchaser, whether by conversion, redemption or otherwise (a "Redemption
Certificate"). Upon receipt of a Redemption Certificate and upon written
instructions from the Company to effect a Monthly Redemption, the Escrow Agent
shall release to such

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Purchaser its Pro-Rata Portion of the Secured Proceeds in satisfaction of the
payment of such Monthly Redemption Amount.

      4. Release of Secured Proceeds Upon Consent of Purchasers. Upon receipt by
the Company of written consent of holders of at least 75% of the principal
amount of Debentures then outstanding to release any portion of Secured
Proceeds, all of the consenting Purchasers and the Company shall execute a joint
certificate to the Escrow Agent certifying that consent to release such Secured
Proceeds has been obtained, which certificate shall include the amount of
Secured Proceeds to be released, representations from each Purchaser as to the
outstanding principal amount of Debentures held by it at the time such consent
was obtained and a representation by the Company's chief financial officer as to
the aggregate principal amount of Debentures outstanding at the time consent was
obtained (a "Consent Certificate"). Upon receipt of the Consent Certificate, the
Escrow Agent shall release, to the account designated in the written
instructions of the Company, such portion of the Secured Proceeds. If less than
all of the Secured Proceeds are released, the remaining amount, for purposes of
calculating each Purchaser's rights hereunder, shall be re-allocated according
to such Purchaser's Pro-Rata Portion. Upon any release of Secured Proceeds
pursuant to this Section 4, such Secured Proceeds shall be used solely for
purposes of funding an acquisition by the Company.

      5. Release of Secured Proceeds Upon Events of Default under the
Debentures.

            (a) If, on the maturity date of the Debentures, any Debentures shall
      remain unpaid, then upon receipt by the Escrow Agent of a written notice
      from a Purchaser holding such Debentures certifying that such Debentures
      remain unpaid, the Escrow Agent shall release to such Purchaser their Pro
      Rata Portion of the Secured Proceeds remaining in the Escrow Account
      relating to such Purchaser (but not more than the amount due under such
      Debentures then held by such Purchaser and amounts due under the Purchase
      Agreement to such Purchaser), and such Secured Proceeds shall be applied
      to reduce amounts due and owing to such Purchaser with the respect to the
      Debentures and the Purchase Agreement as follows: first, to the payment of
      fees and expenses, second, to interest payable in cash with respect to the
      Debentures, and third, to the outstanding principal under the Debentures.

            (b) Following an Event of Default under the Debentures, a Purchaser
      may, at its option, deliver a certificate to the Escrow Agent and the
      Company specifying the nature of the Event of Default. If within ten days
      of receipt of such certificate, the Escrow Agent shall not have received
      written notice from the Company that it disputes the occurrence of an
      Event of Default under the Debentures, then the Escrow Agent shall release
      to such Purchaser such Purchaser's Pro Rata Portion of the Secured
      Proceeds remaining in the Escrow Account. In the event that the Company
      does deliver a timely notice to the Escrow Agent and the Purchaser that it
      disputes such determination, then such dispute shall be resolved between
      the Company and the Purchaser by arbitration conducted as follows: the
      arbitration shall be conducted in New York, New York, before an
      arbitration panel of three arbitrators, one of whom shall be selected by
      the Purchaser, one of whom shall be selected by the Company, with the
      remaining arbitrator to be agreed upon by the first two. The arbitration
      shall be conducted in accordance with the commercial arbitration rules of
      the American Arbitration Association then in effect. Any arbitration
      decision or award shall be final and conclusive as to the parties to this
      Agreement and their successors and assigns; judgment upon such decision or
      award may be entered in any competent Court. In the event that the
      arbitration shall be decided in favor of the Purchaser, then upon delivery
      of a written copy of such decision by the Purchaser to the Escrow Agent,
      the Escrow Agent shall immediately release the Purchaser's Pro Rata
      Portion of the remaining Secured Proceeds to the Purchaser.

      6. Security Agreement.

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            (a) The Company hereby grants to the Purchasers a continuing
      security interest in the Secured Proceeds held in the Escrow Account by
      the Escrow Agent. This Agreement secures the payment or performance of the
      following obligations (collectively, the "Obligations"): all present and
      future indebtedness, obligations, covenants, duties and liabilities of any
      kind or nature of the Company to the Purchasers (or any of them) now
      existing or hereafter arising under or in connection with the Transaction
      Documents.

            (b) The Company hereby represents and warrants to the Purchasers as
      follows:

                            (i) The grant of the security interest in the
      Secured Proceeds pursuant to this Agreement creates a valid and perfected
      first priority security interest in the Secured Proceeds, securing payment
      and performance of the Obligations; and

                            (ii) No consent of any other person or entity and no
      authorization, approval, or other action by, and no notice to or filing
      with, any governmental authority or regulatory body is required (i) for
      the grant of a security interest in the Secured Proceeds pursuant to this
      Agreement or for the execution, delivery or performance of this Agreement
      by the Company or (ii) for the perfection or maintenance of the security
      interest created hereby (including the first priority nature of such
      security interest).

            (c) Further Assurances.

                  (i) The Company agrees that at any time and from time to time,
            at the expense of the Company, the Company shall promptly execute
            and deliver all further instruments, documents and/or control
            agreements and take all further action, that may be necessary or
            desirable, or that the Purchasers may reasonably request, in order
            to perfect and protect any security interest granted or purported to
            be granted hereby or to enable any Purchaser to exercise and enforce
            its rights and remedies hereunder with respect to any Secured
            Proceeds; and

                  (ii) The Company agrees that it will not create or permit to
            exist any lien upon or with respect to any of the Secured Proceeds,
            except for the security interest granted pursuant to this Agreement.
            Notwithstanding the fact that the Company acknowledges and agrees
            that the filing of a financing statement is not required in order
            perfect the security interest in the Secured Proceeds, the Company
            consents to the Purchasers filing UCC-1s or other documents required
            to perfect the security interested granted hereunder.

      7. Condition to Escrow Agent's Duties. The acceptance by the Escrow Agent
of its duties as such under this Agreement is subject to the following terms and
conditions, which all of the parties to this Agreement hereby agree shall govern
and control with respect to the rights, duties, liabilities and immunities of
the Escrow Agent:

            (a) The Escrow Agent is not a party to, nor is it bound by, any
      other agreement by which the other parties hereto may be bound (whether or
      not it has knowledge of such), other than as expressly herein set forth.

            (b) The Escrow Agent shall be protected in acting upon any written
      notice, request, waiver, consent, receipt or other document which the
      Escrow Agent, in good faith, believes to be genuine and what it purports
      to be. No waiver or any breach of any covenant or provision herein
      contained shall be deemed a waiver of any preceding or succeeding breach
      thereof, or of any other

<PAGE>

      covenant or provision herein contained. No extension of time for
      performance of any obligation or act shall be deemed an extension of the
      time for performance of any other obligation or act. If the Escrow Agent
      reasonably requires other or further instruments in connection with this
      Agreement or obligations in respect hereto, the necessary parties hereto
      shall join in furnishing such instruments.

            (c) The Escrow Agent shall be indemnified and held harmless by the
      Company and the Purchasers, jointly and severally, from and against any
      and all loss, expense, fees (including attorneys' fees) and damages that
      may be incurred by the Escrow Agent as a result of its agreeing to act in
      such capacity and its performance of this Agreement. The Escrow Agent
      shall not be obligated to any party for any error in judgment or for any
      act done or steps taken or omitted by it in good faith, or for any mistake
      of fact or law, or for anything which it may do or refrain from doing in
      connection therewith, except as a result of its own gross negligence or
      willful misconduct. This indemnity includes the costs of enforcing the
      indemnification (including attorneys' fees).

            (d) The Escrow Agent may consult with or retain legal counsel in
      connection with any dispute or question as to the construction of any of
      the provisions hereof or with regard to its duties and shall be held
      harmless and protected by the Company and the Purchasers in acting in good
      faith in accordance with the instructions of such counsel. Such counsel's
      fees and expenses shall be paid as set forth in Paragraph 7(f) hereof. The
      Escrow Agent may represent itself at its usual rates.

            (e) The Escrow Agent shall not be responsible or liable for the
      default or misconduct of its agents, attorneys or employees, if they are
      selected with reasonable care.

            (f) The Company will pay the Escrow Agent's fees (at the Escrow
      Agent's customary hourly rate for legal services) and out-of-pocket
      disbursements for time spent in performing its duties under this
      Agreement, and if any of Escrow Agent's invoices are not paid in full
      within 30 days, the Escrow Agent is directed to pay itself directly from
      the Escrow Account; provided that if fees are taken directly from the
      Escrow Account by the Escrow Agent, the Purchasers shall have no claim
      against the Escrow Agent for such funds but shall have a claim against the
      Company for reimbursement. The Company shall promptly replenish any funds
      that are disbursed to the Escrow Agent from the Escrow Account.

            (g) No modification of this Agreement shall, without the consent of
      the Escrow Agent and all other parties hereto, modify the provisions of
      this Agreement relating to the duties, obligations or rights of the Escrow
      Agent. This Agreement is the final expression of, and contains the entire
      agreement between, the parties with respect to the subject matter hereof
      and supersedes all prior understandings with respect thereto.

      8. Conflict with Respect to Secured Proceeds.

            (a) In the event the Escrow Agent before the termination of the
      escrow receives or becomes aware of conflicting demands or claims with
      respect to this escrow or the Secured Proceeds, the Escrow Agent shall
      have the right to discontinue any or all further acts on its part until
      such conflict is resolved to its satisfaction.

            (b)The Escrow Agent shall have the further right to commence or
      defend any action or proceedings for the determination of such conflict.
      The Company and the Purchasers jointly and severally agree to pay all
      costs, damages, judgments and expenses, including reasonable attorneys'
      fees, suffered or incurred by the Escrow Agent in connection with or
      arising out of this escrow in the

<PAGE>

      event of bona fide conflicting claims or demands with respect to this
      escrow, including, but without limiting the generality of the foregoing, a
      suit in interpleader brought by the Escrow Agent. In the event the Escrow
      Agent files a suit in interpleader, it shall thereupon be fully released
      and discharged from all further obligations to perform any and all duties
      or obligations imposed upon it by this Agreement (except it may not
      release the Secured Proceeds except as designated by the court).

      9. Acknowledgement. All parties hereto agree that the Escrow Agent is
counsel for Rodman, placement agent in connection with the consummation of the
Purchase Agreement and shall be entitled to represent such placement agent with
respect to the Purchase Agreement and the transactions contemplated thereunder.
The Company and each Purchaser hereby waives any right or claim to object to
such legal representation by Escrow Agent of the placement agent, and further
agrees that nothing in this Agreement or contemplated hereby shall constitute a
waiver of any attorney-client, work product or other privilege.

      10. Resignation of Escrow Agent. The Escrow Agent may at any time resign
hereunder by giving written notice of its resignation to the Company and the
Purchasers, at least ten (10) days prior to the date specified for such
resignation to take effect, and upon the effective date of such resignation, all
property then held by the Escrow Agent hereunder shall be delivered by it to
such person as may be designated by the Company and the Purchasers, in writing,
whereupon all the Escrow Agent's obligations hereunder shall cease and
terminate. If no such person shall have been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate. The Escrow Agent's sole responsibility thereafter shall be to keep
safely all property then held by it and to deliver the same to a person
designated by the parties hereto or in accordance with the directions of a final
order or judgment of a court of competent jurisdiction, or to file a suit in
interpleader as provided in Paragraph 8 above.

      11. Interest on Secured Proceeds. Except as otherwise provided in Section
1(e), the Escrow Agent shall deposit the Secured Proceeds in a
non-interest-bearing account.

      12. Successors and Assigns. Purchasers may assign their rights hereunder
in connection with the transfer of Debentures, provided that: (i) such transfer
is for at least $500,000 in principal amount of Debentures (or such lesser
amount representing the remaining amount outstanding under the Debentures held
by a Holder) and (ii) the transferee of Debentures agrees in writing to be bound
by the terms of this Agreement. In such event the Secured Proceeds for the
transferred Debentures shall be transferred to a new Escrow Account for the
transferee. The Company may not assign its rights under this Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, administrators, successors and assigns.

      13. Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, AND THE
PARTIES AGREE AND CONSENT TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
COURTS LOCATED IN NEW YORK COUNTY, NEW YORK IN ANY ACTION OR PROCEEDING
HEREUNDER, AND TO SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED
(WHICH SHALL CONSTITUTE "PERSONAL SERVICE").

      14. Amendment. No provision of this Agreement may be amended or waived
without the prior written consent of the Company and all the Purchasers;
provided, that any provision relating to the duties, obligations and rights of
the Escrow Agent shall in addition require the approval of the Escrow Agent, as
provided in paragraph 5(g) above.

      15. Notices. All notices or other communications between the parties
contemplated under, or relating to, this Agreement shall be in writing, shall be
signed by each person giving such notice or communication,

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and shall be delivered by hand, reputable overnight courier or by certified
mail, return receipt requested, to the parties at their respective addresses set
forth above or to such other address as to which the sending party has received
written notice in accordance with this Paragraph 15.

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.


                                PHARMOS CORPORATION

                                By: /S/ ROBERT W. COOK
                                    ------------------
                                        Name:  Robert W. Cook
                                        Title: Executive Vice President and
                                        Chief Financial Officer


                                ESCROW AGENT:
                                FELDMAN WEINSTEIN LLP

                                By: /S/ ROBERT CHARRON
                                        Name:  Robert Charron
                                        Title: Partner

                      [PURCHASERS' SIGNATURE PAGES FOLLOW]