Document:

EXHIBIT 4.3

                          REGISTRATION RIGHTS AGREEMENT

     THIS  REGISTRATION  RIGHTS  AGREEMENT  ("Agreement")  is entered into as of
September 1, 2000 between Pharmos Corporation, a Nevada corporation with offices
at 99 Wood Avenue South, Suite 301, Iselin, New Jersey 08830 (the "Company") and
each of the entities listed under "Investors" on the signature page hereto (each
an  "Investor"  and  collectively  the  "Investors"),  each with  offices at the
address listed under such Investor's name on Schedule I hereto.

                              W I T N E S S E T H:

     WHEREAS,  pursuant to that  certain  Purchase  Agreement by and between the
Company and the Investors (the "Purchase Agreement"),  the Company has agreed to
sell and issue to the Investors,  and the Investors have agreed to purchase from
the Company,  an aggregate of $8 million  principal  amount of the  Company's 6%
Convertible Debentures Due February 28, 2002 (the "Debentures") on the terms and
conditions set forth therein;

     WHEREAS,  the Purchase  Agreement  contemplates that the Debentures will be
convertible  into shares (the "Common  Shares") of common stock, par value $.03,
of the Company ("Common Stock");

     WHEREAS,  pursuant to the terms of, and in partial  consideration  for, the
Investors'  agreement  to enter into the  Purchase  Agreement,  the  Company has
agreed to issue  warrants  exercisable  for shares of Common Stock (the "Warrant
Shares") (the "Warrants") in connection with the issuance of the Debentures;

     WHEREAS,  pursuant to the terms of, and in partial  consideration  for, the
Investors'  agreement  to enter into the  Purchase  Agreement,  the  Company has
agreed to provide the Investors with certain registration rights with respect to
the Common  Shares,  Warrant  Shares and certain  other rights and remedies with
respect to the Debentures as set forth in this Agreement;

     NOW, THEREFORE,  in consideration of the mutual promises,  representations,
warranties,  covenants and  conditions  set forth in the Purchase  Agreement and
this Agreement, the Company and the Investors agree as follows:

     1. Certain  Definitions.  Capitalized  terms used herein and not  otherwise
defined shall have the meaning ascribed thereto in the Purchase  Agreement,  the
Warrants or the Debentures. As used in this Agreement, the following terms shall
have the following respective meanings:

     "Closing" and "Closing Date" shall have the meanings ascribed to such terms
in the Purchase Agreement.

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     "Conversion Price" shall have meaning ascribed to such term in Section 5(c)
of the Debenture.

     "Conversion  Value" shall mean the value that a Holder would be entitled to
receive upon (i)  conversion  of the Debenture at the  Conversion  Price then in
existence,  without  reference to Sections 12 or 5(a) thereof or to Section 3.14
of the Purchase  Agreement,  followed by (ii) the subsequent  sale of the Common
Shares received  thereby at the greater of the Market Price for Shares of Common
Stock in existence at the time (A) of the closing of a redemption of a Debenture
or (B) of the event triggering the right to redemption.

     "Commission" or "SEC" shall mean the Securities and Exchange  Commission or
any other federal agency at the time administering the Securities Act.

     "Debenture  Amount"  shall mean the  Outstanding  Principal  Amount of, the
accrued but unpaid  interest on, and the accrued but unpaid  Delay  Payments on,
the Debentures.

     "Delay  Payment"  shall mean a payment equal to 2% of the Debenture  Amount
held by the relevant Holder.

     "Effectiveness Deadline" shall have the meaning set forth in Section 2(a).

     "Holder"  and  "Holders"   shall  mean  the  Investor  or  the   Investors,
respectively,  and any transferee of the Debentures,  Warrants,  Warrant Shares,
Option Shares or Common  Shares or  Registrable  Securities  which have not been
sold to the public to whom the  registration  rights conferred by this Agreement
have been transferred in compliance with this Agreement.

     "Interfering Events" shall have the meaning set forth in Section 2(b).

     "Market Price for Shares of Common  Stock" shall have the meaning  ascribed
to such term in the Debentures.

     "Outstanding Principal Amount" shall have the meaning ascribed to such term
in the Debentures.

     "Premium Redemption Price" shall mean the following:

          (a) as to the  Debentures,  the  greater of (i) 120% of the  Debenture
Amount and (ii) the Conversion Value;

          (b) as to the Warrant  Shares,  120% of the dollar amount which is the
product of (i) the number of shares to be  redeemed,  and (ii) the Market  Price
for  Shares of Common  Stock in  existence  at the time (x) of the  closing of a
redemption  of the Warrant  Shares or (y) of the event  triggering  the right to
redemption, whichever results in a greater Premium Redemption Price.

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          (c) as to the Warrants, 120% of the dollar amount which is the product
of (i) the number of Warrant  Shares to be issued to the Holder upon exercise of
Warrants  multiplied  by (ii) the  Market  Price for  Shares of Common  Stock in
existence  at the time (x) of the closing of the  redemption  Warrants or (y) of
the event  triggering  the right to redemption,  whichever  results in a greater
Premium Redemption Price.

     "Put Notice" shall have the meaning set forth in Section 2(b)(i)(B).

     "Registrable  Securities"  shall  mean:  (a) the Common  Shares and Warrant
Shares issued or issuable to each Holder or its permitted transferee or designee
upon conversion of the Debentures or exercise of the Warrants, as applicable, or
upon any stock split,  stock  dividend,  recapitalization  or similar event with
respect to such Common Shares or Warrant  Shares;  (b) any securities  issued or
issuable  to each  Holder  upon the  conversion,  exercise  or  exchange  of any
Debentures,  Warrants,  Warrant  Shares  or  Common  Shares;  and (c) any  other
security of the Company issued as a dividend or other  distribution with respect
to, conversion or exchange of, or in replacement of, Registrable Securities.

     The terms  "register",  "registered"  and  "registration"  shall refer to a
registration  effected  by  preparing  and filing a  registration  statement  in
compliance  with  the  Securities  Act  and  applicable  rules  and  regulations
thereunder,  and  the  declaration  or  ordering  of the  effectiveness  of such
registration statement.

     "Registration  Expenses"  shall mean all  expenses  to be  incurred  by the
Company  in  connection  with  each  Holder's  registration  rights  under  this
Agreement,  including,  without  limitation,  all  registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, "Blue Sky"
fees and  expenses,  reasonable  fees and  disbursements  of  counsel to Holders
(using a single counsel selected by a majority in interest of the Holders) for a
"due  diligence"  examination  of the  Company  and  review of the  Registration
Statement and related documents,  and the expense of any special audits incident
to or required by any such  registration  (but  excluding  the  compensation  of
regular  employees  of the  Company,  which  shall  be paid in any  event by the
Company).

     "Registration  Statement"  shall have the meaning set forth in Section 2(a)
herein.

     "Regulation  D" shall mean  Regulation  D as  promulgated  pursuant  to the
Securities Act, and as subsequently amended.

     "Securities  Act" or "Act"  shall  mean  the  Securities  Act of  1933,  as
amended.

     "Selling  Expenses"  shall  mean all  underwriting  discounts  and  selling
commissions  applicable  to the  sale of  Registrable  Securities,  all fees and
disbursements of counsel for Holders not included within "Registration Expenses"
and if the  Holders  engage a third party as an  underwriter  for the purpose of
distributing  Registrable  Securities  on an  underwritten  basis,  the fees and
expenses of such  underwriting  and any  additional  expenses  of an  accountant
incurred in order to obtain a "Comfort Letter."

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     2.  Registration  Requirements.  The Company  shall use its best efforts to
effect  the  registration  of  the  Registrable  Securities  (including  without
limitation the execution of an undertaking  to file  post-effective  amendments,
appropriate  qualification under applicable "Blue Sky" or other state securities
laws and appropriate  compliance with  applicable  regulations  issued under the
Securities  Act) as would permit or facilitate the sale or  distribution  of all
the Registrable  Securities in the manner  (including manner of sale) reasonably
requested by the Holder and in all U.S. jurisdictions.  Such best efforts by the
Company shall include the following:

          (a) The Company shall, as expeditiously  as reasonably  possible after
the Closing Date:

               (i) But in any event within 30 days thereafter,  prepare and file
          a  registration  statement  with the  Commission on Form S-3 under the
          Securities  Act (or in the event that the Company is ineligible to use
          such form, such other form as the Company is eligible to use under the
          Securities Act) covering the Registrable Securities (such registration
          statement,   including  any  amendments  or  supplements  thereto  and
          prospectuses   contained  therein,   is  referred  to  herein  as  the
          "Registration Statement"), which Registration Statement, to the extent
          allowable   under  the  Securities  Act  and  the  rules   promulgated
          thereunder  (including Rule 416),  shall state that such  Registration
          Statement also covers such number of additional shares of Common Stock
          as may  become  issuable  to  prevent  dilution  resulting  from stock
          splits,  stock  dividends or similar  events.  The number of shares of
          Common Stock initially  included in such Registration  Statement shall
          be no less  than the sum of (A) 1.6  times  the sum of the  number  of
          Common Shares that are as of the date of this Agreement  issuable upon
          conversion  of the  Debentures  plus (B) the number of Warrant  Shares
          issuable upon exercise of the Warrants in each case without  regard to
          any limitation on the Investor's  ability to convert the Debentures or
          Warrants.  Thereafter, the Company shall use its best efforts to cause
          such  Registration  Statement  to be  declared  effective  as  soon as
          practicable,  and in any  event  prior to the  earlier  of (i) 60 days
          following  the Closing  Date or (ii) five days after SEC  clearance to
          request acceleration (the "Effectiveness Deadline"). The Company shall
          provide  Holders and their legal  counsel  reasonable  opportunity  to
          review any such  Registration  Statement or  amendment  or  supplement
          thereto prior to filing.

               (ii)  Prepare  and  file  with  the  SEC  such   amendments   and
          supplements to such Registration  Statement and the prospectus used in
          connection  with such  Registration  Statement  as may be necessary to
          comply with the provisions of the Act with respect to the  disposition
          of all securities covered by such Registration Statement in accordance
          with the intended  methods of disposition by the seller thereof as set
          forth in the  Registration  Statement  and notify  the  Holders of the
          filing  and  effectiveness  of  such  Registration  Statement  and any
          amendments or supplements.

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               (iii) After the registration, furnish to each Holder such numbers
          of copies of a current prospectus  conforming with the requirements of
          the Act,  copies  of the  Registration  Statement,  any  amendment  or
          supplement thereto and any documents incorporated by reference therein
          and such other  documents  as such  Holder may  reasonably  require in
          order to facilitate the disposition of Registrable Securities owned by
          such Holder.

               (iv) Use its best efforts to register and qualify the  securities
          covered by such Registration  Statement under such other securities or
          "Blue Sky" laws of all U.S.  jurisdictions;  provided that the Company
          shall  not be  required  in  connection  therewith  or as a  condition
          thereto  to  qualify to do  business  or to file a general  consent to
          service of process in any such states or jurisdictions.

               (v) Notify each Holder  immediately of the happening of any event
          as a result of which the prospectus (including any supplements thereto
          or  thereof  and  any   information   incorporated  or  deemed  to  be
          incorporated  by  reference  therein)  included  in such  Registration
          Statement, as then in effect, includes an untrue statement of material
          fact or omits to state a material fact  required to be stated  therein
          or necessary to make the statements therein not misleading in light of
          the  circumstances  then existing,  and, pursuant to Section 2(f), use
          its best efforts to promptly update and/or correct such prospectus.

               (vi)  Notify  each  Holder  immediately  of the  issuance  by the
          Commission  or any state  securities  commission or agency of any stop
          order suspending the  effectiveness  of the Registration  Statement or
          the initiation of any proceedings for that purpose.  The Company shall
          use its best efforts to prevent the issuance of any stop order and, if
          any stop  order is  issued,  to  obtain  the  lifting  thereof  at the
          earliest possible time.

               (vii)  Permit a single  firm of counsel,  designated  as Holders'
          counsel by the  Holders of a majority  of the  Registrable  Securities
          included in the  Registration  Statement,  to review the  Registration
          Statement  and  all  amendments  and  supplements   thereto  within  a
          reasonable period of time prior to each filing, and shall not file any
          document in a form to which such counsel reasonably objects.

               (viii) Use its best  efforts to list the  Registrable  Securities
          covered by such Registration Statement with all securities exchange(s)
          and/or  markets on which the Common  Stock is then  listed and prepare
          and  file  any  required  filings  with the  National  Association  of
          Securities  Dealers,  Inc. or any  exchange or market where the Common
          Stock is then traded.

               (ix) If applicable, take all steps necessary to enable Holders to
          avail  themselves of the  prospectus  delivery  mechanism set forth in
          Rule 153 (or successor thereto) under the Act.

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               (x) File  additional  Registration  Statements  if the  number of
          Registrable Securities at any time exceeds 85% of the number of shares
          of  Common  Stock  then   registered  in  the  existing   Registration
          Statements hereunder.

          (b) Set forth below in this Section 2(b) are (I) events that may arise
that the Investors  consider  will  interfere  with the full  enjoyment of their
rights under the  Debentures,  the Purchase  Agreement and this  Agreement  (the
"Interfering  Events"),  and (II) certain  remedies  applicable in each of these
events.

          Paragraphs  (i)  through  (iv)  of  this  Section  2(b)  describe  the
          Interfering   Events,   provide  a  remedy  to  the  Investors  if  an
          Interfering  Event occurs and provide that the  Investors  may require
          that  the  Company  redeem  outstanding   Debentures,   Warrants,   or
          Registrable  Securities  at a specified  price if certain  Interfering
          Events are not timely cured.

          Paragraph  (v) provides,  inter alia,  that each Holder shall have the
          option as to whether it would like to receive any payment  required as
          a remedy in the case of certain of the  Interfering  Events in cash or
          shares of Common Stock.

          Paragraph (vi) provides,  inter alia, that if payments required as the
          remedy in the case of certain of the  Interfering  Events are not paid
          when due,  the  Company may be  required  by the  Investors  to redeem
          outstanding  Debentures,  Warrants,  or  Registrable  Securities  at a
          specified price.

          Paragraph  (viii)  provides,  inter alia,  that the Investors have the
          right to specific performance.

     The preceding paragraphs in this Section 2(b) are meant to serve only as an
introduction to this Section 2(b), are for  convenience  only, and are not to be
considered in applying, construing or interpreting this Section 2(b).

               (i) Delay in Effectiveness of Registration Statement.

                    (A) In the event  that the  Registration  Statement  has not
          been  declared  effective  by the  Effectiveness  Deadline,  then  the
          Company  shall pay in cash or common  stock,  as  provided  in Section
          2(b)(v),  to each  Holder a Delay  Payment  for each 30 day period (or
          portion thereof)  thereafter  during which the Registration  Statement
          has not been declared effective, which Delay Payments shall not in the
          aggregate exceed the maximum percentage permitted by law.

                    (B) If the  Registration  Statement  has not  been  declared
          effective  within  60 days of the  Effectiveness  Deadline,  then each
          Holder  shall  have the right to  require  the  Company  to redeem the
          Debentures, Warrants, Common Shares, and/or Warrant Shares in whole or
          in part at the Premium  Redemption Price set forth in clauses (a), (b)
          and/or  (c)

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<PAGE>

          (only) of the  definition  thereof.  Each Holder shall  exercise  such
          right by providing the Company with written  notice  thereof (the "Put
          Notice"),  which such Put Notice shall  include the type and amount of
          each security that the Holder seeks to redeem and a date at least five
          (5) business  days from the date thereof on which the Holder seeks the
          redemption to occur (the "Redemption  Date").  Nothing herein shall be
          construed as  precluding  the Holder from  exercising  its  conversion
          rights under the  Debenture  unless the Company  redeems the Debenture
          and pays the Premium Redemption Price set forth above in full pursuant
          to  Section  2(b)(i)(B).  Delay  Payments  shall no  longer  accrue on
          Debentures  after such  Debentures  have been  redeemed by the Company
          pursuant hereto.

               (ii) No Listing;  Premium Price Redemption for Delisting of Class
          of Shares.

                    (A) In the  event  that the  Company  fails,  refuses  or is
          unable to cause the Registrable Securities covered by the Registration
          Statement to be listed with the applicable  Approved  Markets and each
          other securities exchange and market on which the Common Stock is then
          traded at all times during the period  ("Listing  Period")  commencing
          the earlier of the effective date of the Registration Statement or the
          60th day following the Closing Date, and continuing  thereafter for so
          long as the Debentures are outstanding,  then the Company shall pay in
          cash or Common Stock, as provided in Section 2(b)(v), to each Holder a
          Delay Payment for each 30-day period (or portion  thereof)  during the
          Listing Period from and after such failure, refusal or inability to so
          list the Registrable  Securities until the Registrable  Securities are
          so listed,  which Delay Payments shall not in the aggregate exceed the
          maximum percentage permitted by law.

                    (B) In the event that shares of Common  Stock of the Company
          are  delisted  from  the  applicable  Approved  Markets  at  any  time
          following  the  Closing  Date and remain  delisted  for 5  consecutive
          business  days,  then at the  option of each  Holder and to the extent
          such  Holder so elects,  the Company  shall on 2 business  days notice
          either  (1)  pay in cash or  Common  Stock  (as  provided  in  Section
          2(b)(v))  to such Holder a Delay  Payment for each 30-day  period that
          the shares are delisted or (2) redeem the Debentures  and/or  Warrants
          and/or  Common Shares and/or  Warrant  Shares held by such Holder,  in
          whole  or  in  part,  at a  redemption  price  equal  to  the  Premium
          Redemption  Price (as defined  above);  provided,  however,  that such
          Holder may revoke such request at any time prior to receipt of payment
          of such Delay Payments or Premium  Redemption  Price,  as the case may
          be. Delay  Payments  shall no longer accrue on  Debentures  after such
          Debentures have been redeemed by the Company pursuant to the foregoing
          provision.

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               (iii) Blackout Periods. In the event any Holder is unable to sell
          Registrable  Securities under the Registration Statement for more than
          (A) seven (7) consecutive days or (B) an aggregate of thirty (30) days
          in any 12 month period ("Suspension Grace Period"),  including without
          limitation by reason of a suspension of trading of the Common Stock on
          the Approved Market,  any suspension or stop order with respect to the
          Registration  Statement  or the fact that an event has  occurred  as a
          result of which the  prospectus  (including any  supplements  thereto)
          included in such  Registration  Statement  then in effect  includes an
          untrue  statement of material  fact or omits to state a material  fact
          required  to be stated  therein or  necessary  to make the  statements
          therein not misleading in light of the circumstances then existing, or
          the  number  of shares of Common  Stock  covered  by the  Registration
          Statement  is  insufficient  at  such  time  to  make  such  sales  (a
          "Blackout"),  then the Company  shall pay in cash or Common  Stock (as
          provided in Section  2(b)(v)) to each Holder a Delay  Payment for each
          30-day period (or portion  thereof)  from and after the  expiration of
          the Suspension Grace Period,  which Delay Payment shall not exceed the
          maximum  percentage  permitted by law. In lieu of receiving  the Delay
          Payment as provided  above,  a Holder shall have the right but not the
          obligation  to  elect  to have  the  Company  redeem  its  Debentures,
          Warrants,  Common Shares and Warrant  Shares at the price equal to the
          Premium Redemption Price.

               (iv)  Conversion   Deficiency;   Premium  Price   Redemption  for
          Conversion  Deficiency.  In the event that the Company does not have a
          sufficient  number of Common Shares available to satisfy the Company's
          obligations  to any Holder  upon  receipt of a  Conversion  Notice (as
          defined in the Debenture) or is otherwise unable or unwilling to issue
          such Common  Shares  (including  without  limitation  by reason of the
          limit  described in Section 10 below) in accordance  with the terms of
          the  Debenture  for any reason after  receipt of a Conversion  Notice,
          then:

                    (A)  The  Company  shall  pay in cash or  Common  Stock  (as
          provided in Section  2(b)(v)) to each Holder a Delay  Payment for each
          30-day  period (or portion  thereof) that the Company fails or refuses
          to issue Common Shares in accordance with the Debenture  terms,  which
          Delay  Payment  shall not exceed the maximum  percentage  permitted by
          law;  provided,  however,  that if such failure is the result of there
          being  insufficient  shares  authorized  to make such  issuance,  such
          amount shall not be payable if the Company  promptly (but in any event
          within ten (10) calendar days) authorizes and issues such shares, and

                    (B) At any time five  days  after  the  commencement  of the
          running of the first 30-day  period  described  above in clause (A) of
          this  paragraph  (iv),  at the  request  of any Holder  pursuant  to a
          redemption  notice,  the Company promptly (1) shall purchase from such
          Holder, at a purchase price equal to the Premium Redemption Price, the
          Debenture

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          Amount of  Debentures  equal to such  Holder's  pro rata  share of the
          Deficiency  (as such term is defined  below),  if the failure to issue
          Common Shares results from the lack of a sufficient number thereof and
          (2) shall  purchase  all (or such portion as such Holder may elect) of
          such  Holder's  Debentures  at such  Premium  Redemption  Price if the
          failure to issue  Common  Shares  results  from any other  cause.  The
          "Deficiency" shall be equal to the Debenture Amount of Debentures that
          would  not be  able  to be  converted  for  Common  Shares,  due to an
          insufficient number of Common Shares available, if all the outstanding
          Debentures  were submitted for conversion at the Conversion  Price set
          forth in the Debentures as of the date such  Deficiency is determined.
          Any request by a Holder  pursuant to this  paragraph  (iv)(B) shall be
          revocable  by that  Holder  at any time  prior to its  receipt  of the
          Premium Redemption Price.

               (v) Delay Payment  Terms;  Status of Unpaid Delay  Payments.  All
          Delay Payments  (which  payments shall be pro rata on a per diem basis
          for any period of less than 30 days) required to be made in connection
          with the above  provisions  shall be paid at any time upon demand,  by
          the  fifteenth  (15th) day of each  calendar  month for the partial or
          full calendar month  occurring prior to that date. Such Delay Payments
          shall be payable in cash or Common Stock, as determined by each Holder
          in its sole  discretion.  If the  Holder  elects  to be paid in Common
          Stock, the Holder shall be entitled to that number of shares of Common
          Stock as shall equal to the amount of such Delay Payment multiplied by
          a fraction, the numerator of which is one and the denominator of which
          is equal to the average of the Market Price for Shares of Common Stock
          for the three (3) business days prior to, but not including,  the date
          upon which such  payments are due.  Unless the Company  shall  receive
          written notice to the contrary from the respective  Holder,  the Delay
          Payments  shall  be paid in  cash.  Until  paid  as  required  in this
          Agreement, Delay Payments shall be deemed added to, and a part of, the
          Outstanding Principal Amount of a Holder's Debentures.

               (vi) Premium Price Redemption for Delay Payment Defaults.  In the
          event  that the  Company  fails or  refuses  to pay any Delay  Payment
          provided for in the foregoing paragraphs (i) through (iv) when due, at
          any Holder's  request and option,  the Company shall purchase all or a
          portion of the  Debentures,  Warrants,  Common Shares  and/or  Warrant
          Shares held by such Holder (with Delay Payments  accruing  through the
          date of such  purchase),  within five (5) days of such  request,  at a
          purchase  price  equal to the  Premium  Redemption  Price (as  defined
          above);  provided that such Holder may revoke such request at any time
          prior to receipt of such payment of such  purchase  price.  Until such
          time as the Company  purchases such  Debentures at the request of such
          Holder pursuant to the preceding sentence, at any Holder's request and
          option the  Company  shall as to such Holder pay such amount by adding
          and  including  the  amount of

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          such Delay Payment to the Outstanding  Principal  Amount of a Holder's
          Debentures.

               (vii)  Cumulative  Remedies.  Each Delay Payment  triggered by an
          Interfering  Event  provided  for in  the  foregoing  paragraphs  (ii)
          through  (iv)  shall  be in  addition  to  each  other  Delay  Payment
          triggered by another Interfering Event; provided,  however, that in no
          event  shall the  Company  be  obligated  to pay to any  Holder  Delay
          Payments in an aggregate amount greater than one Delay Payment for any
          30-day period (or portion  thereof).  The Delay Payments and mandatory
          redemptions  provided  for above are in addition to and not in lieu or
          limitation  of any other rights the Holders may have at law, in equity
          or under the terms of the  Debentures,  the  Purchase  Agreement,  the
          Warrants or this Agreement,  including without limitation the right to
          specific  performance.  Each  Holder  shall be  entitled  to  specific
          performance  of any and all  obligations  of the Company in connection
          with the registration rights of the Holders hereunder.

               (viii) Certain Acknowledgments. The Company acknowledges that any
          failure,  refusal  or  inability  by  the  Company  described  in  the
          foregoing  paragraphs  (i) through (iv) and paragraph  (vi) will cause
          the Holders to suffer  damages in an amount that will be  difficult to
          ascertain,  including  without  limitation  damages resulting from the
          loss of liquidity in the  Registrable  Securities  and the  additional
          investment  risk in holding the Registrable  Securities.  Accordingly,
          the parties agree that it is  appropriate to include in this Agreement
          the foregoing provisions for Delay Payments and mandatory  redemptions
          in order to  compensate  the  Holders  for such  damages.  The parties
          acknowledge   and  agree  that  the  Delay   Payments  and   mandatory
          redemptions  set forth above  represent the parties' good faith effort
          to quantify such damages and, as such,  agree that the form and amount
          of such Delay  Payments and mandatory  redemptions  are reasonable and
          will not  constitute a penalty.  The parties agree that the provisions
          of  this  clause  (viii)  consist  of  certain   acknowledgments   and
          agreements concerning the remedies of the Holders set forth in clauses
          (i) through (iv) and paragraph (vi) of this paragraph; nothing in this
          clause (viii)  imposes any additional  default  payments and mandatory
          redemptions for violations under this Agreement.

          (c) If the Holder(s)  intend to distribute the Registrable  Securities
by means of an underwriting, the Holder(s) shall so advise the Company. Any such
underwriting  may  only  be  administered  by  investment   bankers   reasonably
satisfactory to the Company.

          (d) The  Company  shall  enter  into  such  customary  agreements  for
secondary  offerings  (including  a customary  underwriting  agreement  with the
underwriter or underwriters,  if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities.  In the event that
the offering in which the Registrable

                                       10
<PAGE>

Securities  are to be  sold  is  deemed  to be an  underwritten  offering  or an
Investor  selling  Registrable  Securities is deemed to be an  underwriter,  the
Company shall:

               (i) make such  representations  and warranties to the Holders and
          the underwriter or underwriters,  if any, in form, substance and scope
          as are  customarily  made by  issuers  to  underwriters  in  secondary
          offerings;

               (ii)  cause  to  be  delivered  to  the  sellers  of  Registrable
          Securities and the underwriter or  underwriters,  if any,  opinions of
          independent  counsel to the Company,  on and dated as of the effective
          day (or in the case of an  underwritten  offering,  dated  the date of
          delivery of any Registrable  Securities sold pursuant  thereto) of the
          Registration Statement,  and within ninety (90) days following the end
          of each fiscal year  thereafter,  which counsel and opinions (in form,
          scope and substance)  shall be reasonably  satisfactory to the Holders
          and the  underwriter(s),  if any,  and  their  counsel  and  covering,
          without limitation, such matters as the due authorization and issuance
          of the securities being registered and compliance with securities laws
          by the Company in  connection  with the  authorization,  issuance  and
          registration  thereof and other matters that are customarily  given to
          underwriters in underwritten  offerings,  addressed to the Holders and
          each underwriter, if any.

               (iii)   cause  to  be   delivered,   immediately   prior  to  the
          effectiveness  of the  Registration  Statement (and, in the case of an
          underwritten  offering,  at the time of  delivery  of any  Registrable
          Securities sold pursuant thereto), and at the beginning of each fiscal
          year following a year during which the Company's independent certified
          public  accountants  shall have reviewed any of the Company's books or
          records, a "comfort" letter from the Company's  independent  certified
          public accountants  addressed to the Holders and each underwriter,  if
          any, stating that such accountants are independent  public accountants
          within the meaning of the Securities Act and the applicable  published
          rules and regulations thereunder,  and otherwise in customary form and
          covering such  financial  and  accounting  matters as are  customarily
          covered by letters of the  independent  certified  public  accountants
          delivered in connection  with secondary  offerings;  such  accountants
          shall have  undertaken  in each such  letter to update the same during
          each  such  fiscal  year in which  such  books or  records  are  being
          reviewed so that each such letter  shall remain  current,  correct and
          complete  throughout such fiscal year; and each such letter and update
          thereof, if any, shall be reasonably satisfactory to the Holders.

               (iv) if an underwriting agreement is entered into, the same shall
          include customary  indemnification and contribution  provisions to and
          from  the  underwriters  and  procedures  for  secondary  underwritten
          offerings;

                                       11
<PAGE>

               (v) deliver such documents and  certificates as may be reasonably
          requested by the Holders of the Registrable  Securities  being sold or
          the  managing  underwriter  or  underwriters,   if  any,  to  evidence
          compliance  with  clause (i) above and with any  customary  conditions
          contained in the underwriting agreement, if any; and

               (vi) deliver to the Holders on the  effective day (or in the case
          of an  underwritten  offering,  dated  the  date  of  delivery  of any
          Registrable  Securities  sold  pursuant  thereto) of the  Registration
          Statement,  and at the beginning of each fiscal quarter thereafter,  a
          certificate in form and substance as shall be reasonably  satisfactory
          to the Holders, executed by an executive officer of the Company and to
          the effect that all the  representations and warranties of the Company
          contained in the Purchase  Agreement are still true and correct except
          as disclosed in such  certificate;  the Company shall, as to each such
          certificate delivered at the beginning of each fiscal quarter,  update
          or cause to be updated  each such  certificate  during such quarter so
          that it shall remain  current,  complete and correct  throughout  such
          quarter; and such updates received by the Holders during such quarter,
          if any, shall have been reasonably satisfactory to the Holders.

          (e) The Company shall make available for  inspection,  upon reasonable
written   notice  and  during   regular   business   hours,   by  the   Holders,
representative(s) of all the Holders together, any underwriter  participating in
any  disposition  pursuant  to a  Registration  Statement,  and any  attorney or
accountant  retained  by any  Holder or  underwriter,  all  financial  and other
records customary for purposes of the Holders' due diligence  examination of the
Company and review of any Registration Statement,  all SEC Documents (as defined
in the Purchase Agreement) filed subsequent to the Closing,  pertinent corporate
documents  and  properties  of the Company,  and cause the  Company's  officers,
directors and employees to supply all  information  reasonably  requested by any
such representative, underwriter, attorney or accountant in connection with such
Registration   Statement,   provided  that  such  parties  agree  to  keep  such
information confidential.

          (f) The Company shall file a  Registration  Statement  with respect to
any newly authorized  and/or reserved shares,  with respect to its obligation to
reserve or register  Registerable  Securities,  within 30 days of any  corporate
action  authorizing or reserving  same and shall file a  Registration  Statement
with  respect  to  additional  Registrable  Securities  within  30  days  of the
occurrence  of an event  referred  to in Section  2(a)(x) and shall use its best
efforts  to  cause,  in  either  case,  such  Registration  Statement  to become
effective  within 75 days of such corporate  action or such  occurrence,  as the
case may be. If the Holders become  entitled,  pursuant to an event described in
clause  (iii) of the  definition  of  Registrable  Securities,  to  receive  any
securities in respect of Registrable  Securities that were already included in a
Registration  Statement,  subsequent to the date such Registration  Statement is
declared  effective,  and the Company is unable under the securities laws to add
such securities to the then effective Registration Statement,  the Company shall
promptly file, in accordance with the procedures set forth herein, an additional
Registration  Statement with respect to such newly Registrable

                                       12
<PAGE>

Securities.  The  Company  shall  use its best  efforts  to (i)  cause  any such
additional  Registration  Statement,  when filed, to become  effective under the
Securities Act, and (ii) keep such additional  Registration  Statement effective
during the period described in Section 5 below.  All of the registration  rights
and remedies under this Agreement shall apply to the  registration of such newly
reserved  shares  and  such  new  Registrable   Securities,   including  without
limitation the provisions providing for Delay Payments contained herein.

     3.  Expenses  of  Registration.   All  Registration  Expenses  incurred  in
connection with any registration,  qualification or compliance with registration
pursuant  to this  Agreement  shall  be borne by the  Company,  and all  Selling
Expenses of a Holder shall be borne by such Holder.

     4.  Registration  on Form S-3; Other Forms.  The Company shall use its best
efforts to qualify for  registration  on Form S-3 or any comparable or successor
form or forms,  or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act.

     5.  Registration  Period.  In the case of the registration  effected by the
Company  pursuant to this  Agreement,  the Company  will use its best efforts to
keep  such  registration  effective  until  the  later to occur of (i) sales are
permitted of all Registrable  Securities without  registration under Rule 144(k)
or (ii) such time as there are no longer any Warrants outstanding.

     6. Indemnification.

          (a) The Company  Indemnity.  The Company will  indemnify  each Holder,
each of its officers,  directors and partners,  and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations  thereunder  with respect to which  registration,  qualification  or
compliance has been effected  pursuant to this Agreement,  and each underwriter,
if any,  and each person who  controls,  within the meaning of Section 15 of the
Securities  Act and the  rules  and  regulations  thereunder,  any  underwriter,
against  all claims,  losses,  damages  and  liabilities  (or actions in respect
thereof)  arising out of or based on any untrue  statement  (or  alleged  untrue
statement) of a material fact contained in any prospectus,  offering circular or
other document (including any related  registration  statement,  notification or
the like) incident to any such  registration,  qualification  or compliance,  or
based on any omission (or alleged  omission)  to state  therein a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  or any violation by the Company of the  Securities Act or any state
securities law or in either case, any rule or regulation  thereunder  applicable
to the  Company and  relating  to action or inaction  required of the Company in
connection with any such  registration,  qualification  or compliance,  and will
reimburse each Holder,  each of its officers,  directors and partners,  and each
person  controlling  such  Holder,  each such  underwriter  and each  person who
controls any such underwriter,  for any legal and any other expenses  reasonably
incurred in connection with  investigating  and defending any such claim,  loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any

                                       13
<PAGE>

such claim, loss, damage,  liability or expense arises out of or is based on any
untrue  statement or omission  based upon written  information  furnished to the
Company by such Holder or the  underwriter  (if any)  therefor  and stated to be
specifically for use therein.  The indemnity agreement contained in this Section
6(a)  shall not apply to amounts  paid in  settlement  of any such loss,  claim,
damage,  liability or action if such settlement is effected  without the consent
of the Company (which consent will not be unreasonably withheld).

          (b) Holder Indemnity.  Each Holder will, severally and not jointly, if
Registrable  Securities  held by it are included in the  securities  as to which
such registration,  qualification or compliance is being effected, indemnify the
Company, each of its directors,  officers,  partners,  and each underwriter,  if
any, of the Company's securities covered by such a registration statement,  each
person who  controls  the  Company  or such  underwriter  within the  meaning of
Section 15 of the Securities Act and the rules and regulations thereunder,  each
other Holder (if any), and each of their officers,  directors and partners,  and
each person  controlling  such other  Holder(s),  against  all  claims,  losses,
damages and liabilities (or actions in respect  thereof) arising out of or based
on any untrue  statement  (or  alleged  untrue  statement)  of a  material  fact
contained in any such registration statement,  prospectus,  offering circular or
other  document,  or any  omission  (or  alleged  omission)  to state  therein a
material fact  required to be stated  therein or necessary to make the statement
therein not misleading,  and will reimburse the Company and such other Holder(s)
and their directors, officers and partners,  underwriters or control persons for
any  legal  or  any  other  expenses  reasonably  incurred  in  connection  with
investigating and defending any such claim, loss,  damage,  liability or action,
in each case to the extent,  but only to the extent,  that such untrue statement
(or alleged untrue  statement) or omission (or alleged omission) is made in such
registration  statement,  prospectus,  offering  circular  or other  document in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company by such  Holder  and  stated to be  specifically  for use  therein,  and
provided  that the maximum  amount for which such Holder  shall be liable  under
this  indemnity  shall not exceed the net proceeds  received by such Holder from
the sale of the Registrable  Securities.  The indemnity  agreement  contained in
this  Section  6(b) shall not apply to amounts  paid in  settlement  of any such
claims,  losses,  damages or liabilities if such settlement is effected  without
the consent of such Holder (which consent shall not be unreasonably withheld).

          (c)  Procedure.  Each party  entitled  to  indemnification  under this
Section 6 (the  "Indemnified  Party") shall give notice to the party required to
provide   indemnification   (the  "Indemnifying   Party")  promptly  after  such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought,  and shall  permit the  Indemnifying  Party to assume the defense of any
such claim in any litigation resulting therefrom,  provided that counsel for the
Indemnifying  Party,  who  shall  conduct  the  defense  of  such  claim  or any
litigation  resulting  therefrom,  shall be  approved by the  Indemnified  Party
(whose approval shall not be unreasonably  withheld),  and the Indemnified Party
may participate in such defense at such party's  expense,  and provided  further
that the failure of any  Indemnified  Party to give  notice as  provided  herein
shall not relieve the Indemnifying  Party of its obligations  under this Article
except to the extent that the  Indemnifying  Party is  materially  and adversely
affected  by such  failure to

                                       14
<PAGE>

provide  notice.  No  Indemnifying  Party,  in the  defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement  which does not include as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party of a release  from all  liability in respect to such claim or
litigation.  Each  Indemnified  Party shall furnish such  information  regarding
itself or the claim in question as an Indemnifying  Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.

     7. Contribution. If the indemnification provided for in Section 6 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or  liabilities  referred  to herein  (other  than by  reason of the  exceptions
provided  therein),  then each such Indemnifying  Party, in lieu of indemnifying
each of such Indemnified Parties, shall contribute to the amount paid or payable
by each such Indemnified  Party as a result of such losses,  claims,  damages or
liabilities  as between the Company on the one hand and any Holder on the other,
in such  proportion  as is  appropriate  to reflect  the  relative  fault of the
Company and of such Holder in connection  with the statements or omissions which
resulted in such losses,  claims,  damages or liabilities,  as well as any other
relevant equitable considerations.  The relative fault of the Company on the one
hand and of any Holder on the other shall be  determined  by reference to, among
other things,  whether the untrue or alleged untrue statement of a material fact
or omission or alleged  omission to state a material fact relates to information
supplied by the Company or by such Holder.

     In no event shall the  obligation of any  Indemnifying  Party to contribute
under this Section 7 exceed the amount that such  Indemnifying  Party would have
been obligated to pay by way of indemnification if the indemnification  provided
for  under   Section  6(a)  or  6(b)  hereof  had  been   available   under  the
circumstances.

     The Company and the Holders  agree that it would not be just and  equitable
if  contribution  pursuant  to  this  Section  7 were  determined  by  pro  rata
allocation (even if the Holders or the  underwriters  were treated as one entity
for such  purpose)  or by any other  method of  allocation  which  does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs.  The amount paid or payable by an  Indemnified  Party as a result of
the losses,  claims,  damages  and  liabilities  referred to in the  immediately
preceding paragraphs shall be deemed to include,  subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection  with  investigating  or defending any such action or claim.
Notwithstanding  the provisions of this section,  no Holder or underwriter shall
be required to contribute any amount in excess of the amount by which (i) in the
case of any Holder,  the net  proceeds  received by such Holder from the sale of
Registrable Securities or (ii) in the case of an underwriter, the total price at
which the Registrable  Securities  purchased by it and distributed to the public
were offered to the public exceeds,  in any such case, the amount of any damages
that such Holder or underwriter  has otherwise been required to pay by reason of
such untrue or alleged  untrue  statement  or omission or alleged  omission.  No
person  guilty of  fraudulent  misrepresentation  (within the meaning of

                                       15
<PAGE>

Section 11(f) of the Securities Act) shall be entitled to contribution  from any
person who was not guilty of such fraudulent misrepresentation.

     8.  Survival.  The  indemnity  and  contribution  agreements  contained  in
Sections 6 and 7 and the  representations and warranties of the Company referred
to in  Section  2(d)(i)  shall  remain  operative  and in full  force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement or
any underwriting  agreement,  (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company,  and (iii) the consummation
of the sale or successive resales of the Registrable Securities.

     9. Information by Holders. Each Holder shall reasonably promptly furnish to
the Company such information  regarding such Holder and the distribution  and/or
sale  proposed by such Holder as the Company may  reasonably  request in writing
and as  shall be  reasonably  required  in  connection  with  any  registration,
qualification or compliance  referred to in this Agreement.  The intended method
or methods of disposition  and/or sale (Plan of Distribution) of such securities
as so provided by such  Investor  shall be included  without  alteration  in the
Registration  Statement  covering the  Registrable  Securities  and shall not be
changed without written consent of such Holder,  except that such Holder may not
require an intended method of disposition which violates  applicable  securities
law.

     10. NASDAQ Limit on Stock Issuances. Section 3.14 of the Purchase Agreement
shall  govern  limits  imposed by NASDAQ  Small Cap rules on the  conversion  of
Debentures.

     11. Replacement  Certificates.  The certificate(s)  representing the Common
Shares or Warrant  Shares held by the Investor (or then Holder) may be exchanged
by the  Investor  (or  such  Holder)  at any  time  and  from  time to time  for
certificates with different denominations representing an equal aggregate number
of Common Shares or Warrant Shares, as reasonably  requested by the Investor (or
such Holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.

     12.  Transfer or  Assignment.  Except as otherwise  provided  herein,  this
Agreement  shall be binding  upon and inure to the  benefit of the  parties  and
their successors and permitted  assigns.  The rights granted to the Investors by
the Company  under this  Agreement to cause the Company to register  Registrable
Securities  may be transferred or assigned (in whole or in part) to a transferee
or assignee of  Debentures  or  Warrants,  and all other  rights  granted to the
Investors  by the  Company  hereunder  may be  transferred  or  assigned  to any
transferee  or assignee of any  Debentures  or  Warrants;  provided in each case
that: (i) any transfer of Debentures shall be for at least $500,000 in principal
amount  thereof;  and (ii) the Company must be given written  notice by the such
Investor  at the time of or within a  reasonable  time  after said  transfer  or
assignment,  stating the name and  address of said  transferee  or assignee  and
identifying  the securities with respect to which such  registration  rights are
being transferred or assigned;  provided that the transferee or assignee of such
rights agrees in writing to be bound by the provisions of this Agreement.

                                       16
<PAGE>

     13. Miscellaneous.

          (a) Remedies. The Company and the Investors acknowledge and agree that
irreparable  damage would occur in the event that any of the  provisions of this
Agreement  were not performed in accordance  with their  specific  terms or were
otherwise breached.  It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in  addition  to any other  remedy to which any of them may be entitled by
law or equity.

          (b)  Jurisdiction.  THE COMPANY AND EACH OF THE  INVESTORS  (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE  JURISDICTION OF THE UNITED STATES DISTRICT
COURT,  THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES  SITTING
IN NEW YORK COUNTY,  NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES,  AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT  ACTION OR  PROCEEDING,  ANY CLAIM THAT IT IS NOT
PERSONALLY  SUBJECT TO THE JURISDICTION OF SUCH COURT,  THAT THE SUIT, ACTION OR
PROCEEDING  IS BROUGHT IN AN  INCONVENIENT  FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE INVESTORS CONSENTS
TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF  TO SUCH PARTY AT THE  ADDRESS  IN EFFECT  FOR  NOTICES TO IT UNDER THIS
AGREEMENT  AND AGREES THAT SUCH SERVICE  SHALL  CONSTITUTE  GOOD AND  SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR
LIMIT ANY RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

          (c) Notices.  Any notice or other communication  required or permitted
to be given  hereunder  shall  be in  writing  by  facsimile,  mail or  personal
delivery  and  shall be  effective  upon  actual  receipt  of such  notice.  The
addresses for such communications shall be:

                  to the Company:
                           99 Wood Avenue South
                           Suite 301
                           Iselin, New Jersey  08830
                           Phone:  (732) 452-9556
                           Attn:  Robert W. Cook, Chief Financial Officer

                  with copies to:

                           Ehrenreich Eilenberg & Krause LLP
                           11 East 44th Street, 17th Floor
                           New York, New York   10017
                           Attention:  Adam Eilenberg, Esq.

                                       17
<PAGE>

                           Phone:  (212) 986-9700
                           Fax:  (212) 986-2399

                  to the Investors:

                           To each Investor at the address and/or fax number
                           set forth on Schedule I of this Agreement
                  with copies to:
                           Kleinberg, Kaplan, Wolff & Cohen, P.C.
                           551 Fifth Avenue
                           New York, New York 10176
                           Facsimile:       (212) 986-8866
                           Attention:       Stephen M. Schultz

     Any party  hereto may from time to time  change its  address for notices by
giving at least 10 days'  written  notice of such  changed  address to the other
parties hereto.

          (d) Indemnity. Each party shall indemnify each other party against any
loss,  cost or damages  (including  reasonable  attorney's  fees)  incurred as a
result of such  parties'  breach of any  representation,  warranty,  covenant or
agreement in this Agreement.

          (e) Waivers. No waiver by any party of any default with respect to any
provision,  condition or requirement  of this Agreement  shall be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right  hereunder in any manner impair the exercise of any such right accruing to
it  thereafter.  The  representations  and  warranties  and the  agreements  and
covenants of the Company and each  Investor  contained  herein shall survive the
Closing.

          (f)  Execution.  This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which shall be considered one and the same  agreement,  it
being understood that all parties need not sign the same counterpart.

          (g) Publicity.  The Company agrees that it will not disclose, and will
not include in any public  announcement,  the name of any  Investor  without its
express written approval, unless and until such disclosure is required by law or
applicable  regulation,  and then only to the  extent of such  requirement.  The
Company  agrees  to  deliver a copy of any  public  announcement  regarding  the
matters covered by this Agreement or any agreement or document executed herewith
to each Investor and any public  announcement  including the name of an Investor
to such Investor, prior to the publication of such announcements.

          (h) No Piggyback on  Registration.  Neither the Company nor any of its
security holders (other than Ladenburg Thalmann & Co., Inc. and SmallCaps OnLine
LLC and other than the  Holders in such  capacity  pursuant  hereto) may include
securities  of  the  Company  in  the  Registration  Statement  other  than  the
Registrable  Securities,  and the Company  shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.

                                       18
<PAGE>

          (i) Entire  Agreement.  This  Agreement,  together  with the  Purchase
Agreement,  the  Debentures,  the  Warrants  and the  agreements  and  documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the  parties,  and may not be  modified  or  terminated  except  by a written
agreement signed by both parties.

          (j) Governing Law. THIS AGREEMENT AND THE VALIDITY AND  PERFORMANCE OF
THE TERMS HEREOF SHALL BE GOVERNED BY AND  CONSTRUED  AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED
AND TO BE PERFORMED ENTIRELY IN SUCH STATE.

          (k) Severability. The parties acknowledge and agree that the Investors
are not agents,  affiliates or partners of each other, that all representations,
warranties,  covenants and agreements of the Investors hereunder are several and
not joint,  that no Investor shall have any  responsibility or liability for the
representations,  warrants, agreements, acts or omissions of any other Investor,
and that any rights  granted to  "Investors"  hereunder  shall be enforceable by
each Investor hereunder.

          (l) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY.

          (m) Titles. The titles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.

          (n)  Amendments  and  Waivers.   The  provisions  of  this  Agreement,
including  the  provisions  of this  sentence,  may not be amended,  modified or
supplemented,  and waivers or consents to departures from the provisions  hereof
may not be given,  unless the same shall be in writing and signed by the Company
and  the  Holders  of at  least  a  majority  of the  then  issued  or  issuable
Registrable  Securities;  provided,  however,  that,  for the  purposes  of this
sentence,  Registrable Securities that are owned, directly or indirectly, by the
Company, or an affiliate of the Company are not deemed outstanding.

                             Signature page follows

                                       19
<PAGE>

          IN WITNESS  WHEREOF,  the parties hereto have caused this Agreement to
be duly executed as of the date first above written.

                                        PHARMOS CORPORATION

                                        By:
                                           ------------------------------------
                                           Name:
                                           Title:

                                        INVESTORS:

                                        MILLENNIUM PARTNERS, LP

                                        By:
                                           ------------------------------------
                                           Name:
                                           Title:

                                        STRONG RIVER INVESTMENTS, INC.

                                        By:
                                           ------------------------------------
                                           Name:
                                           Title:

                                        ST. ALBANS PARTNERS, LTD.

                                        By:
                                           ------------------------------------
                                           Name:
                                           Title:

                 Signature page to Registration Rights Agreement

<PAGE>

                 Signature page to Registration Rights Agreement

<PAGE>

                                   SCHEDULE I

Investor
Millennium Partners, L.P.
c/o Millennium Management, LLC
666 Fifth Avenue
New York, New York 10103
Fax:  (212) 841-6302
Attn:  Dan Cardella

Strong River Investments, Inc.
c/o Icaza, Gonzalez-Ruiz & Aleman
(BVI) Ltd.
Vanterpool Plaza, 2nd Floor
Wickhams Cay 1, Road Town
Tortola, British Virgin Islands

With copies to:

Cavallo Capital Corp.
660 Madison Avenue
18th Floor
New York, New York 10021
Phone:  (212) 651-9000
Fax: (212) 651-9010

Attn:  Mor Sagi

St. Albans Partners, Ltd.
c/o Camden Asset Management
2049 Century Park East
Suite 330
Los Angeles, California 90067
Phone: (310) 785-9755
Fax: (310) 785-9780
Attn: Janice BrooksEXHIBIT 4.4

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES  SECURITIES AND
EXCHANGE  COMMISSION OR THE  SECURITIES  COMMISSION OF ANY STATE  PURSUANT TO AN
EXEMPTION FROM REGISTRATION  UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933,  AS  AMENDED  (THE  "ACT") OR  OTHERWISE.  THIS  WARRANT  SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION  WOULD BE UNLAWFUL.  THE
SECURITIES  ARE  "RESTRICTED"  AND MAY NOT BE  RESOLD OR  TRANSFERRED  EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

                          COMMON STOCK PURCHASE WARRANT

No. [__]

              To Purchase Shares of $.03 Par Value Common Stock of

                               PHARMOS CORPORATION

     THIS  CERTIFIES   that,  for  value   received,   [________________]   (the
"Investor")  is  entitled,   upon  the  terms  and  subject  to  the  conditions
hereinafter  set forth,  at any time on or after the date hereof and on or prior
to 5:00 p.m. New York City Time on September 1, 2005 (the  "Termination  Date"),
but not thereafter,  to subscribe for and purchase from PHARMOS  CORPORATION,  a
Nevada  corporation  (the "Company"),  [________]  shares of Common Stock of the
Company (the  "Warrant  Shares").  The "Exercise  Price" is $6.08.  The Exercise
Price and the number of shares for which the  Warrant  is  exercisable  shall be
subject to  adjustment  as  provided  herein.  This  Warrant is being  issued in
connection  with the  [___________]  Agreement  dated  September  1,  2000  (the
"Agreement") entered into between the Company and the Investor.

1.   Title of Warrant.  Prior to the expiration hereof and subject to compliance
     with  applicable   laws,   this  Warrant  and  all  rights   hereunder  are
     transferable,  in whole or in respect of the right to purchase  any part of
     the  Warrant  Shares,  at the office or agency of the Company by the holder
     hereof in person or by duly  authorized  attorney,  upon  surrender of this
     Warrant  together  with (a) the  Assignment  Form annexed  hereto  properly
     endorsed,  and (b) any other documentation  reasonably necessary to satisfy
     the  Company  that  such  transfer  is in  compliance  with all  applicable
     securities laws.

2.   Authorization  of Shares.  The Company  covenants that all shares of Common
     Stock which may be issued upon the exercise of rights  represented  by this
     Warrant will,  upon exercise of the rights  represented by this Warrant and
     payment of the Exercise Price as set forth herein will be duly  authorized,
     validly issued, fully paid and nonassessable and free

<PAGE>

     from all taxes,  liens and charges in respect of the issue  thereof  (other
     than taxes in respect of any transfer occurring contemporaneously with such
     issue or otherwise specified herein).

3.   Exercise of Warrant.

(a)  Exercise of the purchase rights  represented by this Warrant may be made at
     any time or times,  in whole or in part before the close of business on the
     Termination  Date, or such earlier date on which this Warrant may terminate
     as provided in paragraph 11 below,  by the surrender on any business day of
     this Warrant and the Notice of Exercise  annexed  hereto duly completed and
     executed,  at the principal  office of the Company (or such other office or
     agency of the  Company  as it may  designate  by notice in  writing  to the
     registered  holder  hereof at the address of such holder  appearing  on the
     books of the Company), together with delivery to the Company by such holder
     of all certifications or documentation  reasonably  necessary to establish,
     to the  satisfaction  of the  Company,  that  any  such  exercise  has been
     undertaken in compliance with all applicable  federal and state  securities
     laws,  and upon payment of the full  Exercise  Price of the shares  thereby
     purchased;  whereupon  the  holder of this  Warrant  shall be  entitled  to
     receive  a  certificate  for the  number  of  shares  of  Common  Stock  so
     purchased.  Certificates for shares purchased  hereunder shall be delivered
     to the holder  hereof within three (3) Trading Days after the date on which
     this  Warrant  shall  have been  exercised  as  aforesaid.  Payment  of the
     Exercise Price of the shares shall be by certified check or cashier's check
     or by wire  transfer  (of same day funds) to an account  designated  by the
     Company in an amount equal to the Exercise  Price  multiplied by the number
     of shares being purchased.

(b)  Alternatively,  and only in the event the Warrant Shares are not covered by
     an effective registration  statement,  the Warrant holder may exercise this
     Warrant,  in whole or in part in a "cashless"  or  "net-issue"  exercise by
     delivering  to the  offices of the  Company or any  transfer  agent for the
     Common Stock this Warrant,  together  with a Notice of Exercise  specifying
     the  number  of  Warrant  Shares to be  delivered  to such  Warrant  holder
     ("Deliverable  Shares")  and the number of Warrant  Shares with  respect to
     which  this  Warrant  is being  surrendered  in  payment  of the  aggregate
     Exercise Price for the Deliverable Shares ("Surrendered Shares").

     The number of Deliverable Shares shall be calculated as follows:

<TABLE>
<S>  <C>
     # of Deliverable Shares = # of Surrendered Shares x Fair Market Value of Common Stock less Exercise Price
                                                         -----------------------------------------------------
                                                         Fair Market Value of Common Stock
</TABLE>

     "Fair Market Value" shall have the meaning specified in Section 12(c)

     In the event  that the  Warrant  is not  exercised  in full,  the number of
     Warrant  Shares shall be reduced by the number of such  Warrant  Shares for
     which this Warrant is exercised and/or surrendered, and the Company, at its
     expense,  shall  within three (3) Trading Days issue and deliver to or upon
     the order of the Warrant  holder a new Warrant of like tenor

                                       2
<PAGE>

     in the name of Warrant holder or as Warrant holder (upon payment by Warrant
     holder of any  applicable  transfer  taxes) may  request,  reflecting  such
     adjusted Warrant Shares.

     All  exercises  will be  deemed  to occur as of the date of the  Notice  of
     Exercise,  and certificates for shares of Common Stock purchased  hereunder
     shall be delivered to the holder hereof within three (3) Trading Days after
     the date on which this Warrant shall have been exercised as aforesaid.  The
     Warrant  holder may withdraw its Notice of Exercise  under  Section 3(a) or
     3(b) at any time  thereafter  if the  Company  fails to timely  deliver the
     applicable   certificates  to  the  Warrant  holder  as  provided  in  this
     Agreement.

(c)  In lieu of delivering physical  certificates  representing the Common Stock
     issuable  upon   exercise,   provided  the  Company's   transfer  agent  is
     participating  in the  Depository  Trust  Company  ("DTC")  Fast  Automated
     Securities  Transfer ("FAST") program,  upon request of the Warrant Holder,
     the  Company  shall use its best  efforts  to cause its  transfer  agent to
     electronically  transmit the Common  Stock  issuable  upon  exercise to the
     Warrant  Holder by crediting the account of Warrant  Holder's  prime broker
     with DTC through its Deposit  Withdrawal Agent Commission  ("DWAC") system.
     The time  periods  for  delivery  described  in the  immediately  preceding
     paragraph shall apply to the electronic transmittals described herein.

     The term  "Trading  Day" means (x) if the Common Stock is listed on the New
     York Stock Exchange or the American Stock Exchange, a day on which there is
     trading on such stock exchange, or (y) if the Common Stock is not listed on
     either of such stock  exchanges  but sale  prices of the  Common  Stock are
     reported  on an  automated  quotation  system,  a day on which  trading  is
     reported on the principal  automated quotation system on which sales of the
     Common  Stock  are  reported,  or  (z)  if  the  foregoing  provisions  are
     inapplicable,  a day on which quotations are reported by National Quotation
     Bureau Incorporated.

4.   No Fractional Shares or Scrip. No fractional  shares or scrip  representing
     fractional shares shall be issued upon the exercise of this Warrant.

5.   Charges, Taxes and Expenses.  Issuance of certificates for shares of Common
     Stock upon the exercise of this Warrant shall be made without charge to the
     holder hereof for any issue or transfer tax or other incidental  expense in
     respect  of the  issuance  of such  certificate,  all of  which  taxes  and
     expenses  shall  be paid by the  Company,  and such  certificates  shall be
     issued in the name of the  holder of this  Warrant or in such name or names
     as may be directed by the holder of this Warrant;  provided,  however, that
     in the event  certificates for shares of Common Stock are to be issued in a
     name other than the name of the holder of this  Warrant,  this Warrant when
     surrendered  for  exercise  shall be  accompanied  by the  Assignment  Form
     attached hereto duly executed by the holder hereof;  and provided  further,
     that the Company shall not be required to pay any tax or taxes which may be
     payable in respect of any transfer  involved in the issuance of any Warrant
     certificates  or any  certificates  for the Warrant  Shares  other than the
     issuance of a Warrant  Certificate  to the Investor in connection  with the
     Investor's  surrender  of a

                                       3
<PAGE>

     Warrant  Certificate  upon the  exercise  of less than all of the  Warrants
     evidenced  thereby,  and the  Company  shall  not be  required  to issue or
     deliver such certificates  unless or until the person or persons requesting
     the issuance  thereof shall have paid to the Company the amount of such tax
     or shall have  established to the satisfaction of the Company that such tax
     has been paid.

6.   Closing of Books.  The Company will at no time close its shareholder  books
     or records in any manner which  interferes with the timely exercise of this
     Warrant.

7.   No Rights as  Shareholder  until  Exercise.  Subject  to Section 12 of this
     Warrant  and the  provisions  of any other  written  agreement  between the
     Company and the  Investor,  the  Investor  shall not be entitled to vote or
     receive  dividends  or be deemed the holder of Warrant  Shares or any other
     securities  of the Company that may at any time be issuable on the exercise
     hereof for any purpose, nor shall anything contained herein be construed to
     confer upon the Investor,  as such,  any of the rights of a stockholder  of
     the Company or any right to vote for the  election of directors or upon any
     matter  submitted to  stockholders  at any meeting  thereof,  or to give or
     withhold    consent   to   any   corporate   action   (whether   upon   any
     recapitalization,  issuance of stock,  reclassification of stock, change of
     par  value,  or change  of stock to no par  value,  consolidation,  merger,
     conveyance or otherwise)  or to receive  notice of meetings,  or to receive
     dividends or subscription  rights or otherwise until the Warrant shall have
     been exercised as provided herein.  However, at the time of the exercise of
     this Warrant pursuant to Section 3 hereof,  the Warrant Shares so purchased
     hereunder  shall be deemed to be issued to such holder as the record  owner
     of such  shares  as of the  close of  business  on the  date on which  this
     Warrant shall have been exercised.

8.   Assignment  and Transfer of Warrant.  This Warrant may be assigned in whole
     or in part by the surrender of this Warrant and the Assignment Form annexed
     hereto duly  executed at the office of the Company (or such other office or
     agency of the  Company  as it may  designate  by notice in  writing  to the
     registered  holder  hereof at the address of such holder  appearing  on the
     books of the  Company);  provided,  however,  that this  Warrant may not be
     resold or  otherwise  transferred  except (i) in a  transaction  registered
     under the  Securities  Act of 1933,  as amended (the  "Act"),  or (ii) in a
     transaction pursuant to an exemption, if available, from registration under
     the Act and whereby,  if  requested  by the Company,  an opinion of counsel
     reasonably  satisfactory  to the  Company is obtained by the holder of this
     Warrant to the effect that the transaction is so exempt.

9.   Loss,  Theft,  Destruction  or Mutilation  of Warrant.  Upon receipt by the
     Company  of  evidence  reasonably  satisfactory  to it of the loss,  theft,
     destruction or mutilation of any Warrant or stock certificate  representing
     the Warrant Shares, and in case of loss, theft or destruction, of indemnity
     reasonably satisfactory to it, and upon reimbursement to the Company of all
     reasonable expenses incidental thereto.  Upon surrender and cancellation of
     such Warrant or stock certificate,  if mutilated, the Company will make and
     deliver a new  Warrant or stock  certificate  of like tenor and dated as of
     such cancellation, in lieu of this Warrant or stock certificate.

                                       4
<PAGE>

10.  Saturdays,  Sundays,  Holidays,  etc. If the last or appointed  day for the
     taking of any action or the  expiration  of any right  required  or granted
     herein shall be a Saturday, Sunday or a legal holiday, then such action may
     be taken or such right may be  exercised on the next  succeeding  day not a
     legal holiday.

11.  Effect of Certain Events.  If at any time while this Warrant or any portion
     thereof  is  outstanding  and  unexpired  there  shall  be  (i) a  sale  or
     conveyance of all or  substantially  all of the Company's  assets or (ii) a
     transaction  (by merger or  otherwise) in which more than 50% of the voting
     power of the  Company  is  disposed  of  (collectively,  a "Sale or  Merger
     Transaction"),  in which the consideration to be received by the Company or
     its shareholders  consists solely of cash, and in case the Company shall at
     any time effect a Sale or Merger  Transaction in which the consideration to
     be  received  by the  Company  or its  shareholders  consists  in  part  of
     consideration  other than cash,  the holder of this Warrant  shall have the
     right  thereafter  to purchase,  by exercise of this Warrant and payment of
     the aggregate  Exercise Price in effect  immediately  prior to such action,
     the kind and amount of shares and other  securities  and property  which it
     would have owned or have been  entitled to receive  after the  happening of
     such transaction had this Warrant been exercised immediately prior thereto,
     subject to further  adjustment  as provided in Section 12.  Notwithstanding
     the above, a Sale or Merger Transaction shall not be deemed to occur in the
     event the Company is the acquiring entity in connection with an acquisition
     by the Company.

12.  Adjustments of Exercise Price and Number of Warrant Shares.

     The number of and kind of  securities  purchasable  upon  exercise  of this
     Warrant and the Exercise Price shall be subject to adjustment  from time to
     time as follows:

(a)  Subdivisions, Combinations and other Issuances. If the Company shall at any
     time after the date  hereof  but prior to the  expiration  of this  Warrant
     subdivide its outstanding securities as to which purchase rights under this
     Warrant  exist,  by  split-up,  spin-off,  or  otherwise,  or  combine  its
     outstanding  securities  as to which  purchase  rights  under this  Warrant
     exist, the number of Warrant Shares as to which this Warrant is exercisable
     as of the date of such subdivision, split-up, spin-off or combination shall
     forthwith be  proportionately  increased in the case of a  subdivision,  or
     proportionately  decreased  in  the  case  of  a  combination.  Appropriate
     proportional adjustments (decrease in the case of subdivision,  increase in
     the case of  combination)  shall also be made to the Exercise Price payable
     per share,  so that the  aggregate  Exercise  Price  payable  for the total
     number of Warrant  Shares  purchasable  under this  Warrant as of such date
     shall  remain the same as it would have been  before  such  subdivision  or
     combination.

(b)  Stock Dividend. If at any time after the date hereof the Company declares a
     dividend or other  distribution  on Common Stock payable in Common Stock or
     other  securities or rights  convertible  into Common Stock  ("Common Stock
     Equivalents")  without  payment of any  consideration  by holders of Common
     Stock  for the  additional  shares  of  Common  Stock or the  Common  Stock
     Equivalents  (including the additional shares of

                                       5
<PAGE>

     Common Stock issuable upon exercise or conversion thereof), then the number
     of shares of Common Stock for which this Warrant may be exercised  shall be
     increased as of the record date (or the date of such dividend  distribution
     if no record date is set) for  determining  which  holders of Common  Stock
     shall be entitled to receive such dividends,  in proportion to the increase
     in the number of  outstanding  shares (and shares of Common Stock  issuable
     upon  conversion of all such securities  convertible  into Common Stock) of
     Common Stock as a result of such dividend,  and the Exercise Price shall be
     proportionately  reduced so that the aggregate  Exercise  Price for all the
     Warrant Shares issuable hereunder  immediately after the record date (or on
     the date of such  distribution,  if  applicable),  for such dividend  shall
     equal the  aggregate  Exercise  Price so payable  immediately  before  such
     record date (or on the date of such distribution, if applicable).

(c)  Other  Distributions.  If at any time  after the date  hereof  the  Company
     distributes  to  holders  of its  Common  Stock,  other than as part of its
     dissolution,  liquidation  or the winding up of its affairs,  any shares of
     its capital stock, any evidence of indebtedness or any of its assets (other
     than  Common  Stock),  then the  number of  Warrant  Shares  for which this
     Warrant  is  exercisable  shall be  increased  to equal:  (i) the number of
     Warrant Shares for which this Warrant is exercisable  immediately  prior to
     such event, (ii) multiplied by a fraction, (A) the numerator of which shall
     be the Fair Market  Value (as defined  below) per share of Common  Stock on
     the record date for the dividend or  distribution,  and (B) the denominator
     of which shall be the Fair Market  Value price per share of Common Stock on
     the record date for the dividend or distribution minus the amount allocable
     to one share of Common  Stock of the value (as jointly  determined  in good
     faith by the Board of Directors  of the Company and the Warrant  holder) of
     any and all such evidences of indebtedness,  shares of capital stock, other
     securities or property, so distributed. For purposes of this Warrant, "Fair
     Market Value" shall equal the 10 Trading Day average  closing trading price
     of the  Common  Stock  on the  Principal  Market  for the 10  Trading  Days
     preceding the date of  determination  or, if the Common Stock is not listed
     or admitted to trading on any Principal Market,  the average of the closing
     bid and asked prices on the over-the-counter market as furnished by any New
     York Stock Exchange  member firm  reasonably  selected from time to time by
     the Company for that purpose and reasonably  acceptable to the Holder,  or,
     if the Common  Stock is not listed or admitted to trading on the  Principal
     Market  or  traded   over-the-counter  and  the  average  price  cannot  be
     determined as contemplated above, the Fair Market Value of the Common Stock
     shall be as reasonably  determined in good faith by the Company's  Board of
     Directors with the  concurrence of the Holder.  The Exercise Price shall be
     reduced to equal: (i) the Exercise Price in effect  immediately  before the
     occurrence of any event (ii) multiplied by a fraction, (A) the numerator of
     which is the number of Warrant Shares for which this Warrant is exercisable
     immediately before the adjustment,  and (B) the denominator of which is the
     number of Warrant Shares for which this Warrant is exercisable  immediately
     after the adjustment.

(d)  Merger,  etc. If at any time after the date hereof  there shall be a merger
     or  consolidation  of the  Company  with or into  or a  transfer  of all or
     substantially all of the assets of the Company to another entity,  then the
     Warrant  Holder shall be entitled to receive  upon or

                                       6
<PAGE>

     after such transfer,  merger or consolidation becoming effective,  and upon
     payment of the Exercise Price then in effect, the number of shares or other
     securities  or  property  of the  Company or of the  successor  corporation
     resulting from such merger or consolidation, which would have been received
     by Warrant  Holder for the shares of stock subject to this Warrant had this
     Warrant been exercised just prior to such transfer, merger or consolidation
     becoming  effective or to the applicable  record date thereof,  as the case
     may be. The Company  will not merge or  consolidate  with or into any other
     corporation,  or  sell or  otherwise  transfer  its  property,  assets  and
     business  substantially as an entirety to another  corporation,  unless the
     corporation  resulting  from  such  merger  or  consolidation  (if  not the
     Company),  or such  transferee  corporation,  as the  case  may  be,  shall
     expressly assume in writing the due and punctual performance and observance
     of each and every  covenant  and  condition of this Warrant to be performed
     and observed by the Company.

(e)  Reclassification,  etc. If at any time after the date hereof there shall be
     a reorganization or reclassification of the securities as to which purchase
     rights  under this  Warrant  exist into the same or a  different  number of
     securities  of any other class or classes,  then the Warrant  Holder  shall
     thereafter be entitled to receive upon exercise of this Warrant, during the
     period  specified  herein and upon  payment of the  Exercise  Price then in
     effect, the number of shares or other securities or property resulting from
     such reorganization or reclassification,  which would have been received by
     the Warrant Holder for the shares of stock subject to this Warrant had this
     Warrant at such time been exercised.

(f)  Exercise  Price  Adjustment.  In the event that the Company issues or sells
     any Common Stock or securities  which are convertible  into or exchangeable
     for its Common  Stock or any  convertible  securities,  or any  warrants or
     other  rights  to  subscribe  for or to  purchase  or any  options  for the
     purchase of its Common Stock or any such convertible securities (other than
     shares  or  options  issued  or which  may be  issued  pursuant  to (i) the
     Company's  current or future  employee,  director  or bona fide  consultant
     option plans or shares issued upon exercise of options,  warrants or rights
     outstanding  on the date of the Agreement and listed in the Company's  most
     recent  periodic  report  filed  under  the  Exchange  Act  (ii)  strategic
     corporate  alliances not  undertaken  principally  for financing  purposes,
     (iii)  arrangements  with  the  Investor,  or (iv)  acquisitions  of  other
     entities by the Company) at an effective  Exercise Price per share which is
     less than the Exercise  Price then in effect,  then the  Exercise  Price in
     effect  immediately  prior to such issue or sale shall be reduced effective
     concurrently with such issue or sale to an amount determined by multiplying
     the Exercise Price then in effect by a fraction, (x) the numerator of which
     shall be the sum of (1) the  number of shares of Common  Stock  outstanding
     immediately  prior to such issue or sale,  plus (2) the number of shares of
     Common Stock which the aggregate  consideration received by the Company for
     such  additional  shares  would  purchase  at such  Exercise  Price then in
     effect;  and (y) the  denominator of which shall be the number of shares of
     Common  Stock of the Company  outstanding  immediately  after such issue or
     sale.

     For the purposes of the foregoing  adjustment,  in the case of the issuance
     of any  convertible  securities,  warrants,  options  or  other  rights  to
     subscribe  for or to  purchase  or  exchange  for,  shares of Common  Stock
     ("Convertible  Securities"),  the maximum

                                       7
<PAGE>

     number of shares  of Common  Stock  issuable  upon  exercise,  exchange  or
     conversion  of  such   Convertible   Securities   shall  be  deemed  to  be
     outstanding,  provided  that no further  adjustment  shall be made upon the
     actual  issuance of Common Stock upon  exercise,  exchange or conversion of
     such Convertible Securities.

     The number of shares  which may be purchased  hereunder  shall be increased
     proportionately  to any  reduction  in  Exercise  Price  pursuant  to  this
     paragraph  12(f),  so that after such  adjustments  the aggregate  Exercise
     Price payable  hereunder  for the  increased  number of shares shall be the
     same  as the  aggregate  Exercise  Price  in  effect  just  prior  to  such
     adjustments.

13.  Voluntary  Adjustment by the Company. The Company may at its option, at any
     time  during the term of this  Warrant,  reduce but not  increase  the then
     current  Exercise  Price to any amount  and for any  period of time  deemed
     appropriate by the Board of Directors of the Company.

14.  Notice of  Adjustment.  Whenever the number of Warrant  Shares or number or
     kind of securities or other property  purchasable upon the exercise of this
     Warrant or the Exercise Price is adjusted,  the Company shall promptly mail
     to the holder of this Warrant a notice  setting forth the number of Warrant
     Shares (and other securities or property)  purchasable upon the exercise of
     this  Warrant and the  Exercise  Price of such  Warrant  Shares  after such
     adjustment and setting forth a brief  statement of the facts requiring such
     adjustment.

15.  Authorized Shares. The Company covenants that during the period the Warrant
     is  outstanding  and  exercisable,  it will reserve from its authorized and
     unissued  Common  Stock a  sufficient  number of shares to provide  for the
     issuance of the Warrant  Shares upon the  exercise of any  purchase  rights
     under this Warrant. The Company further covenants that its issuance of this
     Warrant  shall  constitute  full  authority to its officers who are charged
     with the duty of  executing  stock  certificates  to execute  and issue the
     necessary  certificates  for the Warrant  Shares  upon the  exercise of the
     purchase  rights  under  this  Warrant.  The  Company  will  take  all such
     reasonable  action as may be necessary  to assure that such Warrant  Shares
     may be issued as provided herein without violation of any applicable law or
     regulation,  or of any  requirements  of the American Stock Exchange or any
     domestic securities exchange upon which the Common Stock may be listed.

16.  9.9% Limitation.

(a)  Notwithstanding  anything to the contrary  contained herein,  the number of
     shares of Common Stock that may be acquired by the Investor  upon  exercise
     pursuant to the terms hereof shall not exceed a number that,  when added to
     the total  number of shares of Common Stock  deemed  beneficially  owned by
     such holder  (other than by virtue of the ownership of securities or rights
     to acquire securities  (including the Warrant) that have limitations on the
     Investor's right to convert, exercise or purchase similar to the limitation
     set  forth  herein),  together  with all  shares  of  Common  Stock  deemed
     beneficially  owned (other than by virtue of the ownership of securities or
     rights to acquire securities

                                       8
<PAGE>

     (including  the  Warrant)  that have  limitations  on the right to convert,
     exercise or purchase  similar to the  limitation  set forth  herein) by the
     holder's  "affiliates"  (as  defined  Rule  144 of the  Act)  ("Aggregation
     Parties") that would be aggregated  for purposes of  determining  whether a
     group  under  Section  13(d) of the  Securities  Exchange  Act of 1934,  as
     amended,  exists,  would exceed  9.99% of the total issued and  outstanding
     shares  of  the   Company's   Common  Stock  (the   "Restricted   Ownership
     Percentage").  Each  Holder  shall  have the right (w) at any time and from
     time to time to reduce its Restricted Ownership Percentage immediately upon
     notice  to the  Company  and (x) at any  time and  from  time to  time,  to
     increase its Restricted  Ownership  Percentage  immediately in the event of
     the announcement as pending or planned of an event of:

     (i)  any  consolidation  or  merger of the  Company  with or into any other
          corporation  or other entity or person  (whether or not the Company is
          the surviving corporation),  or any other corporate  reorganization or
          transaction  or series of related  transactions  in which in excess of
          50% of the  Company's  voting power is  transferred  through a merger,
          consolidation, tender offer or similar transaction,

     (ii) any person (as defined in Section 13(d) of the Exchange Act), together
          with its  affiliates and associates (as such terms are defined in Rule
          405  under  the  1933  Act),   beneficially   owns  or  is  deemed  to
          beneficially  own (as  described  in Rule 13d-3 under the Exchange Act
          without regard to the 60-day exercise  period) in excess of 50% of the
          Company's voting power,

     (iii)there is a  replacement  of more than  one-half  of the members of the
          Company's   Board  of  Directors   which  is  not  approved  by  those
          individuals who are members of the Company's Board of Directors on the
          date thereof, in one or a series of related transactions, or

     (iv) a sale or  transfer of all or  substantially  all of the assets of the
          Company, determined on a consolidated basis.

(b)  The  Investor  covenants  at all  times on each day  (each  such day  being
     referred  to as a "Covenant  Day") as  follows:  During the balance of such
     Covenant Day and the  succeeding  sixty-one  (61) days (the balance of such
     Covenant Day and the  succeeding 61 days being referred to as the "Covenant
     Period") such Investor will not acquire  shares of Common Stock pursuant to
     any  right  (including  the  exercise  of  the  Warrant)  existing  at  the
     commencement  of the Covenant  Period to the extent the number of shares so
     acquired  by  such  holder  and  its  Aggregation   Parties  (ignoring  all
     dispositions) would exceed:

     (x)  the Restricted  Ownership  Percentage of the total number of shares of
          Common Stock outstanding at the commencement of the Covenant Period,

     minus

     (y)  the  number of shares of Common  Stock  owned by such  holder  and its
          Aggregation Parties at the commencement of the Covenant Period.

                                       9
<PAGE>

          A new and  independent  covenant  will be  deemed  to be  given by the
     holder as of each moment of each Covenant Day. No covenant will  terminate,
     diminish  or modify any other  covenant.  The holder  agrees to comply with
     each such  covenant.  This  Section 16 controls in the case of any conflict
     with any other provision of the Transaction Documents.

          The  Company's  obligation to issue shares of Common Stock which would
     exceed such limits referred to in this Section 16 shall be suspended to the
     extent  necessary until such time, if any, as shares of Common Stock may be
     issued in compliance with such restrictions.

17.  Compliance with Securities Laws.

(a)  The holder hereof  acknowledges  that the Warrant Shares  acquired upon the
     exercise  of this  Warrant,  if not  registered  (or if no  exemption  from
     registration  exists),  will have restrictions upon resale imposed by state
     and federal  securities  laws. Each  certificate  representing  the Warrant
     Shares  issued to the Holder  upon  exercise  (if not  registered  or if no
     exemption from registration exists) will bear the following legend:

     THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT 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,  TRANSFERRED,  SOLD OR OTHERWISE DISPOSED OF 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,  BASED ON AN OPINION LETTER OF COUNSEL
     SATISFACTORY  TO THE COMPANY OR A NO-ACTION  LETTER FROM THE SECURITIES AND
     EXCHANGE COMMISSION.

(b)  Without  limiting the  Investor's  right to  transfer,  assign or otherwise
     convey the  Warrant or Warrant  Shares in  compliance  with all  applicable
     securities  laws,  the  Investor of this  Warrant,  by  acceptance  hereof,
     acknowledges  that this  Warrant and the  Warrant  Shares to be issued upon
     exercise  hereof are being  acquired  solely for the Investor's own account
     and not as a nominee for any other party,  and that the  Investor  will not
     offer,  sell or otherwise  dispose of this Warrant or any Warrant Shares to
     be issued upon  exercise  hereof except under  circumstances  that will not
     result in a violation of applicable federal and state securities laws. Upon
     exercise of this Warrant,  the Investor shall, if requested by the Company,
     confirm in writing, in a form satisfactory to the Company, that the Warrant
     Shares of Common  Stock so  purchased  are being  acquired  solely  for the

                                       10
<PAGE>

     Investor's  own  account  and not as a  nominee  for any other  party,  for
     investment, and not with a view toward distribution or resale.

(c)  Neither this Warrant nor any Share of Common Stock issued upon  exercise of
     this Warrant may be offered for sale or sold, or otherwise  transferred  or
     sold in any  transaction  which would  constitute a sale thereof within the
     meaning of the Act,  unless (i) such security has been  registered for sale
     under the Act and registered or qualified under applicable state securities
     laws relating to the offer an sale of securities,  or (ii)  exemptions from
     the   registration   requirements  of  the  Act  and  the  registration  or
     qualification  requirements of all such state securities laws are available
     and the Company shall have received an opinion of counsel that the proposed
     sale or  other  disposition  of such  securities  may be  effected  without
     registration   under  the  Act,   such  counsel  and  such  opinion  to  be
     satisfactory to the Company.

(d)  Investor  recognizes  that  investing in the Warrant and the Warrant Shares
     involves a high degree of risk, and Investor is in a financial  position to
     hold the Warrant and the Warrant  Shares  indefinitely  and is able to bear
     the economic risk and  withstand a complete  loss of its  investment in the
     Warrant and the Warrant Shares.  The Investor is a  sophisticated  investor
     and is capable of  evaluating  the  merits  and risks of  investing  in the
     Company.  The  Investor  has had an  opportunity  to discuss the  Company's
     business,  management and financial affairs with the Company's  management,
     has been given  full and  complete  access to  information  concerning  the
     Company,  and has utilized such access to its  satisfaction for the purpose
     of  obtaining  information  or  verifying  information  and  have  had  the
     opportunity  to  inspect  the  Company's  operation.  Investor  has had the
     opportunity  to ask questions of, and receive  answers from, the management
     of the Company (and any person acting on its behalf) concerning the Warrant
     and the Warrant  Shares and the agreements  and  transactions  contemplated
     hereby,  and to obtain any  additional  information  as  Investor  may have
     requested in making its investment  decision.  The initial Investor in this
     Warrant is an "accredited investor", as defined by Regulation D promulgated
     under the Act.

18.  Miscellaneous.

(a)  Issue Date;  Choice Of Law;  Venue;  Jurisdiction.  THE  PROVISIONS OF THIS
     WARRANT  SHALL BE CONSTRUED AND SHALL BE GIVEN EFFECT IN ALL RESPECTS AS IF
     IT HAD BEEN ISSUED AND  DELIVERED BY THE COMPANY ON THE DATE  HEREOF.  THIS
     WARRANT  SHALL BE BINDING  UPON ANY  SUCCESSORS  OR ASSIGNS OF THE COMPANY.
     THIS WARRANT WILL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
     BY THE LAWS OF THE STATE OF NEW YORK,  EXCEPT FOR MATTERS ARISING UNDER THE
     ACT,  WITHOUT  REFERENCE TO  PRINCIPLES  OF  CONFLICTS OF LAW.  EACH OF THE
     PARTIES CONSENTS TO THE EXCLUSIVE  JURISDICTION OF THE U.S.  DISTRICT COURT
     SITTING  IN THE  STATE  OF CITY OF NEW  YORK IN THE  STATE  OF NEW  YORK IN
     CONNECTION  WITH ANY DISPUTE  ARISING UNDER THIS WARRANT AND HEREBY WAIVES,
     TO THE MAXIMUM

                                       11
<PAGE>

     EXTENT  PERMITTED BY LAW, ANY OBJECTION,  INCLUDING ANY OBJECTION  BASED ON
     FORUM  NON  CONVENIENS,  TO THE  BRINGING  OF ANY SUCH  PROCEEDING  IN SUCH
     JURISDICTION.  EACH PARTY  HEREBY  AGREES  THAT IF THE OTHER  PARTY TO THIS
     WARRANT OBTAINS A JUDGMENT AGAINST IT IN SUCH A PROCEEDING, THE PARTY WHICH
     OBTAINED SUCH  JUDGMENT MAY ENFORCE SAME BY SUMMARY  JUDGMENT IN THE COURTS
     OF ANY  COUNTRY  HAVING  JURISDICTION  OVER THE  PARTY  AGAINST  WHOM  SUCH
     JUDGMENT WAS OBTAINED,  AND EACH PARTY HEREBY WAIVES ANY DEFENSES AVAILABLE
     TO IT UNDER  LOCAL LAW AND AGREES TO THE  ENFORCEMENT  OF SUCH A  JUDGMENT.
     EACH PARTY TO THIS WARRANT  IRREVOCABLY  CONSENTS TO THE SERVICE OF PROCESS
     IN ANY SUCH  PROCEEDING  BY THE MAILING OF COPIES  THEREOF BY REGISTERED OR
     CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS IN ACCORDANCE
     WITH SECTION  18(C).  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO
     SERVE  PROCESS IN ANY OTHER MANNER  PERMITTED BY LAW. EACH PARTY WAIVES ITS
     RIGHT TO A TRIAL BY JURY.

(b)  Modification  and Waiver.  This  Warrant and any  provisions  hereof may be
     changed, waived,  discharged or terminated only by an instrument in writing
     signed by the party against which  enforcement  of the same is sought.  Any
     amendment  effected in accordance with this paragraph shall be binding upon
     the  Investor,  each  future  holder of this  Warrant and the  Company.  No
     waivers of, or  exceptions  to, any term,  condition  or  provision of this
     Warrant, in any one or more instances,  shall be deemed to be, or construed
     as,  a  further  or  continuing  waiver  of any  such  term,  condition  or
     provision.

(c)  Notices. Any notice,  request or other document required or permitted to be
     given or delivered to the Investor or future  holders hereof or the Company
     shall be  personally  delivered or shall be sent by certified or registered
     mail,  postage prepaid,  to the Investor or each such holder at its address
     as shown on the books of the  Company or to the  Company at the address set
     forth in the  Agreement.  All notices under this Warrant shall be deemed to
     have been given when received.

     A party may from time to time change the address to which notices to it are
     to be  delivered  or mailed  hereunder  by notice  in  accordance  with the
     provisions of this Section 18(c).

(d)  Severability.  Whenever  possible,  each provision of this Warrant shall be
     interpreted  in such manner as to be effective  and valid under  applicable
     law, but if any provision of this Warrant is held to be invalid, illegal or
     unenforceable  in any  respect  under  any  applicable  law or  rule in any
     jurisdiction,  such invalidity,  illegality or  unenforceability  shall not
     affect the validity,  legality or  enforceability of any other provision of
     this  Warrant in such  jurisdiction  or affect the  validity,  legality  or
     enforceability of any provision in any other jurisdiction, but this Warrant
     shall be reformed,  construed and enforced in such

                                       12
<PAGE>

     jurisdiction  as if such invalid,  illegal or  unenforceable  provision had
     never been contained herein.

(e)  No  Impairment.  The Company will not, by amendment of its  Certificate  of
     Incorporation   or  through   any   reorganization,   transfer  of  assets,
     consolidation,  merger,  dissolution,  issue or sale of  securities  or any
     other  voluntary  action,   avoid  or  seek  to  avoid  the  observance  or
     performance  of any of the terms of this Warrant,  but will at all times in
     good faith  assist in the  carrying out of all such terms and in the taking
     of all such action as may be necessary or  appropriate  in order to protect
     the rights of the Warrant Holder against  impairment.  Without limiting the
     generality  of the  foregoing,  the Company (a) will not  increase  the par
     value of any  Warrant  Shares  above the amount  payable  therefor  on such
     exercise,  and (b) will take all such action as may be reasonably necessary
     or  appropriate  in order that the Company  may  validly and legally  issue
     fully  paid  and  nonassessable  Warrant  Shares  on the  exercise  of this
     Warrant.

                                       13
<PAGE>

     IN WITNESS  WHEREOF,  the Company has caused this Warrant to be executed by
its officers thereunto duly authorized.

Dated: September 1, 2000

                                             PHARMOS CORPORATION

                                             By:
                                                --------------------------------
                                                Name:
                                                Title:
Agreed and Accepted
this 1st day of September, 2000

[____________________}

By:
    -------------------------------
    Name:
    Title:

                                       14
<PAGE>

                               NOTICE OF EXERCISE

To:  PHARMOS CORPORATION

(1)  The undersigned hereby elects:

     (A) to  purchase  ________  shares of Common  Stock of Pharmos  Corporation
pursuant to the terms of the attached  Warrant,  and tenders herewith payment of
the Exercise Price in full, together with all applicable transfer taxes, if any.

     (B)  in  a  "cashless"  or  "net-issue   exercise"  for,  and  to  purchase
thereunder,  ______ shares of Common Stock,  and herewith makes payment therefor
with _______ Surrendered Shares.

(2) Please  issue a  certificate  or  certificates  representing  said shares of
Common  Stock  in the  name  of the  undersigned  or in  such  other  name as is
specified below:

                           -------------------------------
                           (Name)

                           -------------------------------
                           (Address)
                           -------------------------------

(3) Please  issue a new  Warrant  for the  unexercised  portion of the  attached
Warrant in the name of the  undersigned  or in such  other name as is  specified
below:

                           Other Name: ___________________

                                     ------------------------------------------
                                     (Name)

---------------------------          ------------------------------------------
(Date)                               (Signature)

                                     ------------------------------------------
                                     (Address)

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

     FOR VALUE RECEIVED,  the foregoing  Warrant of Pharmos  Corporation and all
rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

____________________________________________________________________________.

____________________________________________________________________________.

                                                       Dated: ______________,

                           Holder's Signature: ______________________________

                           Holder's Address:   ______________________________

                                               ______________________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of  corporations  and  those  acting  in an  fiduciary  or other  representative
capacity  should  file  proper  evidence of  authority  to assign the  foregoing
Warrant.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00014-of-00352.parquet"}]]