Document:

EXHIBIT 4.9

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 CALL 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.

                                  CALL WARRANT

No. [__]

                               To Receive Units 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, 2001 (the  "Termination  Date"),
but not thereafter, in not more than two (2) transactions of at least $1,000,000
each  to  subscribe  for  and  purchase  from  PHARMOS  CORPORATION,   a  Nevada
corporation (the "Company"),  Units (as defined below) having an aggregate value
of up to $2,000,000,  as calculated pursuant to this Call Warrant. The "Exercise
Price" is as provided in Section 3(b) below.  The "Units"  shall consist of that
number of shares of Common  Stock (the  "Optional  Shares")  and such  number of
warrants  in the form  annexed  hereto as  Exhibit 3 (the  "Optional  Adjustment
Warrants") as shall be calculated  pursuant to Section 3(c).  The Exercise Price
and the number of shares  for which the Call  Warrant  is  exercisable  shall be
subject to adjustment as provided  herein.  This Call Warrant is being issued in
connection  with the Common Stock  Investment  Agreement dated September 1, 2000
(the "Agreement") entered into between the Company and the Investor.

<PAGE>

1.   Title of Call  Warrant.  Prior to the  expiration  hereof  and  subject  to
     compliance with applicable laws, this Call Warrant and all rights hereunder
     are transferable,  in whole or in respect of the right to purchase any part
     of the Units,  at the office or agency of the Company by the holder  hereof
     in person  or by duly  authorized  attorney,  upon  surrender  of this Call
     Warrant  together with (a) the Assignment  Form annexed hereto as Exhibit 2
     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
     Call Warrant  will,  upon exercise of the rights  represented  by this Call
     Warrant and payment of the Exercise  Price as set forth herein will be duly
     authorized,  validly issued, fully paid and nonassessable and free 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 Call Warrant.

(a)  The Investors have the option but not the obligation,  by delivering one or
     more written  notices of exercise in the form  annexed  hereto as Exhibit 1
     (each a  "Notice")  to the  Company  at any  time up to and  including  the
     Termination  Date, to purchase in no more than two (2)  transactions of not
     less than $1,000,000  each, up to $2,000,000  worth of Units as provided in
     this Section 3. The date of such Notice shall be deemed the "Notice Date."

(b)  Prerequisite. The Investor may only deliver a Notice if the average closing
     bid price of a share of Common Stock on the  Principal  Market for the five
     (5) Trading Days  immediately  preceding but not  including the  applicable
     Notice Date  exceeds  the Share  Purchase  Price,  such  average  being the
     "Exercise Price."

(c)  Calculations  and  Closing.  The Notice  shall  specify the dollar value of
     Units the Investor wishes to purchase (the "Notice Amount").  At 10:00 a.m.
     on the third (3rd) Trading Day following the Notice Date,  the Company will
     deliver to the Investor,  at the offices of KKWC,  Units  consisting of (i)
     the number of Optional  Shares  determined by dividing the Notice Amount by
     the  applicable  Exercise  Price,  and (ii)  Optional  Adjustment  Warrants
     covering such Optional Shares.  The Optional  Adjustment  Warrants shall be
     substantially  in the form of Exhibit 3 hereto.  At such closing (each,  an
     "Optional  Closing"),   the  Investor  will  deliver  to  the  Company  the
     applicable  Notice  Amount,  whereupon  it will be deemed  the  record  and
     beneficial owner of all the applicable Units as of the Notice Date.

(d)  Alternatively,  the Call  Warrant  holder may but shall not be  required to
     exercise  this  Call  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 Call  Warrant,  together  with a
     Notice  specifying the number of Units to be delivered to such Call Warrant
     holder ("Deliverable  Units") and the number of shares of Common Stock with

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     respect to which this Call Warrant is being  surrendered  in payment of the
     aggregate Exercise Price for the Deliverable Units ("Surrendered Shares").

     The number of Deliverable Units shall be calculated as follows:

<TABLE>
<S>  <C>
     # of Deliverable Units = # 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 Call Warrant is not exercised in full,  the number of
     Units  shall be  reduced  by the  number of such  Units for which this Call
     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 Call Warrant  holder a new Call Warrant of like tenor in the name of
     Call Warrant holder or as Call Warrant holder (upon payment by Call Warrant
     holder of any  applicable  transfer  taxes) may  request,  reflecting  such
     adjusted Units.

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

(e)  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 Call 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
     Call Warrant holder by crediting the account of Call 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.

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<PAGE>

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

5.   Charges,  Taxes and Expenses.  Issuance of certificates  for Units upon the
     exercise of this Call 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  Call  Warrant  or in such  name or names as may be
     directed by the holder of this Call Warrant; provided, however, that in the
     event certificates for Units are to be issued in a name other than the name
     of the holder of this Call Warrant,  this Call 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 Call Warrant  certificates or
     any  certificates  for the Units other than the  issuance of a Call Warrant
     Certificate to the Investor in connection with the Investor's  surrender of
     a Call Warrant  Certificate  upon the exercise of less than all of the Call
     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
     Call Warrant.

7.   No Rights as Shareholder until Exercise. Subject to Section 12 of this Call
     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 Optional  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 Call Warrant shall
     have  been  exercised  as  provided  herein.  However,  at the  time of the
     exercise of this Call  Warrant  pursuant to Section 3 hereof,  the Units 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 Call Warrant shall have been exercised.

8.   Assignment and Transfer of Call Warrant.  This Call Warrant may be assigned
     in  whole  or in  part  by the  surrender  of  this  Call  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

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<PAGE>

     address of such holder  appearing on the books of the  Company);  provided,
     however,  that this Call 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  Call  Warrant  to the  effect  that  the
     transaction is so exempt.

9.   Loss, Theft, Destruction or Mutilation of Call Warrant. Upon receipt by the
     Company  of  evidence  reasonably  satisfactory  to it of the loss,  theft,
     destruction or mutilation of any Call Warrant or certificates  representing
     the  Units,  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 Call Warrant or Units, if mutilated, the Company will make and deliver
     a  new  Call  Warrant  or  Units  of  like  tenor  and  dated  as  of  such
     cancellation, in lieu of this Call Warrant or Units.

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 Call  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 Call Warrant shall have
     the right  thereafter  to  purchase,  by exercise of this Call  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  Call  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 Units.

     The number of and kind of securities purchasable upon exercise of this Call
     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 Call Warrant
     subdivide its outstanding

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<PAGE>

     securities as to which purchase  rights under this Call Warrant  exist,  by
     split-up,  spin-off, or otherwise, or combine its outstanding securities as
     to which  purchase  rights  under this Call  Warrant  exist,  the number of
     Optional Shares as to which this Call 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 Optional
     Shares purchasable under this Call 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 Common Stock issuable upon
     exercise or conversion thereof),  then the number of shares of Common Stock
     for which this Call 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 Optional  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 Optional Shares for which this Call
     Warrant is exercisable  shall be increased to equal: (i) the number of Call
     Warrant Shares for which this Call 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
     Call Warrant holder) of any and all such evidences of indebtedness,  shares
     of capital  stock,  other  securities  or  property,  so  distributed.  For
     purposes  of this Call  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

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<PAGE>

     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 Optional  Shares for
     which this Call Warrant is exercisable  immediately  before the adjustment,
     and (B) the denominator of which is the number of Optional Shares for which
     this Call 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
     Call  Warrant  holder  shall be  entitled  to  receive  upon or 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 Call
     Warrant  holder for the shares of stock  subject to this Call  Warrant  had
     this Call 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  Call  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 Call Warrant exist into the same or a different number of
     securities  of any other class or  classes,  then the Call  Warrant  holder
     shall thereafter be entitled to receive upon exercise of this Call 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 Call Warrant holder for the shares of stock subject to
     this Call Warrant had this Call 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 Call 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

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<PAGE>

     or future employee, director or bona fide consultant option plans or shares
     issued upon exercise of options, Call 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 of the Common Stock on the trading day next  preceding  such
     issue or sale, 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,  Call Warrants,  options or other rights to
     subscribe  for or to  purchase  or  exchange  for,  shares of Common  Stock
     ("Convertible  Securities"),  the maximum  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 Call 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 Units or number or kind of
     securities  or other  property  purchasable  upon the exercise of this Call
     Warrant or the Exercise Price is adjusted,  the Company shall promptly mail
     to the  holder of this Call  Warrant a notice  setting  forth the number of
     Units (and other  securities or property)  purchasable upon the exercise of
     this  Call  Warrant  and the  Exercise  Price  of  such  Units  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 Call
     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 and exercise of the Units

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<PAGE>

     upon the  exercise of any  purchase  rights  under this Call  Warrant.  The
     Company  further  covenants  that its issuance of this Call  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 Units upon the exercise of the purchase  rights under
     this Call Warrant.  The Company will take all such reasonable action as may
     be  necessary  to assure  that such  Units may be issued and  exercised  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 Call 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  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

                                       9
<PAGE>

          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 Call  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.

          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 Units acquired upon the exercise of
     this Call 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 Units 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

                                       10
<PAGE>

     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  Call  Warrant  or  Units in  compliance  with  all  applicable
     securities laws, the Investor of this Call Warrant,  by acceptance  hereof,
     acknowledges  that  this  Call  Warrant  and the  Units 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 Call Warrant or any Units 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 Call  Warrant,  the  Investor  shall,  if requested by the
     Company,  confirm in writing,  in a form satisfactory to the Company,  that
     the Units of Common Stock so purchased  are being  acquired  solely for the
     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  Call  Warrant  nor any  share of Common  Stock  issued  upon
     exercise of this Call 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 Call  Warrant  and the  Units
     involves a high degree of risk, and Investor is in a financial  position to
     hold the Call Warrant and the Call Warrant Shares  indefinitely and is able
     to bear the economic risk and  withstand a complete loss of its  investment
     in the Call Warrant and the Units. 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

                                       11
<PAGE>

     Company (and any person acting on its behalf)  concerning  the Call Warrant
     and the Units 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 Call 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 CALL
     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
     CALL  WARRANT  SHALL BE  BINDING  UPON ANY  SUCCESSORS  OR  ASSIGNS  OF THE
     COMPANY.  THIS CALL 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 CALL WARRANT AND
     HEREBY  WAIVES,  TO THE MAXIMUM  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 CALL 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 CALL 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 Call 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 Call Warrant and the Company.  No
     waivers of, or exceptions to, any term, condition

                                       12
<PAGE>

     or provision of this Call 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 Call 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 Call Warrant shall
     be interpreted in such manner as to be effective and valid under applicable
     law,  but if any  provision  of this Call  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 Call Warrant in such jurisdiction or affect the validity,  legality or
     enforceability  of any provision in any other  jurisdiction,  but this Call
     Warrant shall be reformed,  construed and enforced in such  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 Call 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 Call Warrant Holder against  impairment.  Without
     limiting the generality of the foregoing, the Company (a) will not increase
     the par value of any Call 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  Units on the  exercise  of this Call
     Warrant.

                                       13
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Call 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>

                                                                       Exhibit 1

                                     NOTICE

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>

                                                                       Exhibit 2

                                 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.EXHIBIT 4.10

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 ADJUSTMENT 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.

                           OPTIONAL ADJUSTMENT WARRANT

No. [___]

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

                               PHARMOS CORPORATION

     THIS  CERTIFIES  that,  for  value   received,   [NAME  OF  INVESTOR]  (the
"Investor")  is  entitled,  upon the  terms,  at the  times and  subject  to the
conditions  hereinafter  set  forth,  prior to 5:00  p.m.  New York City Time on
February 28, 2002 (the "Termination Date"), but not thereafter, to subscribe for
and  purchase  from  time  to time ( but  not  more  than  twice)  from  PHARMOS
CORPORATION,  a Nevada corporation (the "Company"), a number of shares of Common
Stock of the  Company  determined  in  accordance  with  Section  3 hereof  (the
"Adjustment  Shares").  The "Exercise Price" is $.03. The Exercise Price and the
number  of shares  for which the  Adjustment  Warrant  is  exercisable  shall be
subject to  adjustment  as provided  herein.  This  Adjustment  Warrant is being
issued in  connection  with the Common Stock  Investment  Agreement  dated as of
September  1, 2000 (the  "Agreement")  entered  into between the Company and the
Investor.  Any capitalized terms used but not defined in this Adjustment Warrant
shall have the meaning specified in the Agreement.

1.   Title of Adjustment Warrant.  Prior to the expiration hereof and subject to
     compliance  with applicable  laws,  this Adjustment  Warrant and all rights
     hereunder are transferable,  in whole or in respect of the right to receive
     any part of the Adjustment  Shares,  at the office or agency of the Company
     by the  holder  hereof  in  person  or by duly  authorized  attorney,  upon
     surrender of this Adjustment  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.

<PAGE>

2.   Authorization  of Shares.  The Company  covenants that all shares of Common
     Stock  which may be issued  upon the  exercise  from time to time of rights
     represented by this  Adjustment  Warrant will,  upon exercise of the rights
     represented by this  Adjustment  Warrant will be duly  authorized,  validly
     issued,  fully paid and  nonassessable  and free 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 Adjustment Warrant for Adjustment Shares.

(a)  Definitions

     "Adjustment  Number"  means [____] [$1 MILLION / SHARE  PURCHASE  PRICE] in
     each of the two (2) Adjustment  Periods.  [COMPANY WILL SUPPLY  INFORMATION
     AND ALLOW SUBSTITUTION OF PAGE WHEN # IS KNOWN]

     Subject to Section 3(h), "Adjustment Period" means, as applicable,  (i) the
     period  starting  five (5)  Trading  Days after the later of (A)  Effective
     Registration  and (B) the  applicable  Notice  Date (as defined in the Call
     Warrant)  and ending on and  including  the 15th  consecutive  Trading  Day
     thereafter, and (ii) the next succeeding 15 consecutive Trading Day period.
     No Adjustment Period may commence until the preceding  Adjustment Period is
     completed in accordance with this Adjustment Warrant.

     "Adjusted Share Purchase Price" means 110% of the Share Purchase Price. The
     Adjusted Share Purchase  Price shall be  appropriately  adjusted to reflect
     stock splits, stock dividends, recapitalizations, etc.

     "Effective Registration" shall have the meaning specified in the Agreement.

     "Set Price" means, for a particular  Adjustment  Period, the average of the
     closing  bid prices for a share of Common  Stock for each of the 15 Trading
     Days in such Adjustment Period.

(b)  Company Election of Cash or Stock.  Subject to the other provisions of this
     Adjustment  Warrant,  the Company shall elect, by delivering written notice
     received by the Investor at least three (3) Trading Days prior to the start
     of a particular Adjustment Period, to satisfy, after exercise by the holder
     pursuant to Section 3(e) below,  its  adjustment  obligations  (if any) for
     such  Adjustment  Period  either  wholly in cash or  wholly  in  Adjustment
     Shares,  but not in a  combination  of the two.  The  number of  Adjustment
     Shares  deliverable  by the Company to the Investor  will be  calculated in
     accordance  with  Section  3(c) and the amount of cash  deliverable  by the
     Company to the Investor will be calculated in accordance with Section 3(d).
     If the  Company  fails to make any  election  for a  particular  Adjustment
     Period,  the default  method of payment by the Company to the Investor will
     be cash.  No payments  will be due pursuant to Sections 3(c) or 3(d) unless
     the Set  Price is less  than the  Adjusted  Share  Purchase  Price for such
     Adjustment Period.

                                       2
<PAGE>

(c)  Adjustment  Share  Calculations.  Subject to Sections  3(f) and (g), if the
     Company elects under Section 3(b) to pay in Adjustment  Shares,  the number
     of  Adjustment  Shares  (if  any)  issuable  in  respect  of  a  particular
     Adjustment  Period shall be calculated  immediately  following the close of
     the Principal  Market on the final Trading Day of such  Adjustment  Period,
     using the following formula:

<TABLE>
<S>  <C>
     # of Adjustment Shares = Adjustment Number   x   (Adjusted Share Purchase Price - Set Price)
                                                      -------------------------------------------
                                                                        Set Price
</TABLE>

     In addition to the number of Adjustment  Shares  resulting from the formula
     above,  if the  Investor  exercises  other than in a cashless  exercise the
     Company  shall also deliver a number of  additional  shares of Common Stock
     equal  to: (# of  Adjustment  Shares  due per above  formula x $.03) / Fair
     Market Value (as defined below).

(d)  Cash  Calculations.  If the Company  elects under Section 3(b) to pay cash,
     the amount of cash (if any) payable in respect of a  particular  Adjustment
     Period shall be calculated immediately following the close of the Principal
     Market  on the  final  Trading  Day of such  Adjustment  Period,  using the
     following formula:

  cash amount = Adjustment Number x (Adjusted Share Purchase Price - Set Price)

     In addition to the cash amount  resulting  from the formula  above,  if the
     Investor exercises other than in a cashless exercise the Company shall also
     pay cash to the Investor equal to the Adjustment Number x $.03.

(e)  Exercise of Adjustment Warrant.  Exercise of the rights represented by this
     Adjustment  Warrant may be made at any time or times,  in whole or in part,
     after the termination of the applicable Adjustment Period and prior to 5:00
     p.m. New York City time on the  Termination  Date by delivery by fax on any
     business  day of a "Notice of  Exercise"  in the form  annexed  hereto duly
     completed  and  executed,  with hardcopy of the Notice of Exercise and this
     Adjustment  Warrant to follow  within  one  business  day 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);  whereupon
     the  holder of this  Adjustment  Warrant  shall be  entitled  to  receive a
     certificate  for the number of Adjustment  Shares or the amount of cash, as
     applicable,  for which this Adjustment  Warrant has been so exercised.  The
     Investor may exercise at its option either by paying the Exercise  Price in
     cash or by making a cashless  exercise as  provided in the next  paragraph.
     Certificates  for  Adjustment  Shares  or  cash,  as  applicable,  shall be
     delivered to the holder hereof within three (3) Trading Days after the date
     of the Notice of Exercise (each such event being a "Fill-up Closing").

     The holder may exercise this Adjustment  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 Adjustment Warrant,
     together  with a Notice of  Exercise  specifying  the number of  Adjustment
     Shares to be delivered to such holder ("Deliverable

                                       3
<PAGE>

     Shares")  and the number of  Adjustment  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>

     If the  holder  elects to make a cashless  exercise  when the  Company  has
     elected  pursuant to Section 3(b) to satisfy its  obligations  hereunder in
     cash, the holder shall not be required to deliver the Exercise Price.

(f)  Effective Registration During Stock Adjustment Period.

          (i) If at any time during an  Adjustment  Period for which the Company
     has elected to issue  Adjustment  Shares there shall be a lack of Effective
     Registration,  or the  Company has failed to deliver  Adjustment  Shares or
     cash in lieu thereof for any previous  Adjustment Period in accordance with
     this  Adjustment  Warrant,  the Investor may at its option either (x) waive
     the lack of Effective  Registration or non-delivery of Adjustment Shares or
     cash, in which case the Adjustment Period will continue  uninterrupted with
     respect to the Investor in  accordance  with the other  provisions  of this
     Section 3, or (y) by written notice to the Company (delivered no later than
     24 hours after actually receiving written  notification from the Company of
     such lack of  Effective  Registration)  elect to  suspend  such  Adjustment
     Period with respect to itself (a "Suspension Notice").

          (ii) If the  Investor  elects  pursuant  to  subsection  (i)  above to
     suspend a  particular  Adjustment  Period  and  Effective  Registration  is
     subsequently  re-established  or such Adjustment  Shares  delivered or cash
     paid,  either before or after the scheduled end of such Adjustment  Period,
     then the  Investor  may,  at its  option,  elect  either  (x) to treat such
     Adjustment  Period as tolled for the duration (however long) of the lack of
     Effective  Registration,   such  that  the  first  full  day  of  Effective
     Registration  following  delivery of the Suspension Notice shall be treated
     as and deemed to be the next day of that tolled  Adjustment  Period, or (y)
     to treat such Adjustment  Period as having never  commenced,  such that the
     first  full  day  of  Effective  Registration  following  delivery  of  the
     Suspension Notice shall be treated as and deemed to be the first day of the
     Adjustment Period  interrupted by the lack of Effective  Registration.  The
     Investor  shall have two (2) Trading Days after  receiving  written  notice
     from the Company of the re-establishment of Effective  Registration to make
     such election.

          (iii) Nothing in this Section 3(f) shall limit the Investor's right to
     be eligible to receive Adjustment Shares or immediately  available funds in
     respect of two (2) separate Adjustment  Periods.  There cannot be more than
     one Adjustment Period at one time.

                                       4
<PAGE>

(g)  Effective Registration as of Fill-up Closing. If the Company has elected to
     settle in Adjustment Shares and there is not Effective  Registration on the
     date of the Fill-up  Closing,  then the Investor  shall have the option but
     not the  obligation to receive from the Company,  in lieu of the Adjustment
     Shares  otherwise  deliverable,  an amount in immediately  available  funds
     equal to the  product of (i) the  highest  closing  bid price of the Common
     Stock on the Principal Market (as defined below) from the final Trading Day
     of the applicable  Adjustment  Period through and including the Trading Day
     immediately  prior to the date of the Fill-up Closing,  and (ii) the number
     of Adjustment Shares the Company otherwise would be obligated to deliver to
     the Investor at such Fill-up Closing.

(h)  Delay of Adjustment  Periods. By delivering a written notice to the Company
     prior to the commencement of the first Adjustment  Period, the Investor may
     elect one time only to delay the  commencement  of the  Adjustment  Periods
     applicable to such Investor for a single,  continuous  period not to exceed
     60 calendar days.  Such notice shall specify the  commencement  date of the
     delayed first adjustment period.

(i)  Remedies.  If  the  Company  fails  to  deliver  the  specified  number  of
     Adjustment Shares or amount of immediately  available funds, as applicable,
     to an Investor  within 3 Trading  Days of the date of the Fill-up  Closing,
     and at the  place  specified  in this  Section  3, then the  Investor  may,
     without  reducing its other rights at law or in equity,  compel the Company
     to  repurchase  all or a part of its  Securities  (including  the number of
     Adjustment Shares which, without regard to Effective  Registration,  should
     have been  delivered by the Company) at the applicable  Premium  Redemption
     Price  (as  defined  in,  and  as  specified,  in the  Registration  Rights
     Agreement).

(j)  Adjustments.  The  number  of  Adjustment  Shares  shall  be  appropriately
     adjusted to reflect any stock split,  stock dividend,  recapitalization  or
     similar  event  so  that  the  Investor   receives  the  same  economically
     equivalent  value of  Adjustment  Shares as it would in the absence of such
     event.

(k)  Miscellaneous. The Adjustment Shares shall upon delivery to the Investor be
     fully-paid,  nonassessable,  shares of Common Stock,  free and clear of all
     liens and encumbrances and duly eligible for trading on the Nasdaq National
     Market  System  or if the  Common  Stock  is not  quoted  thereon,  on such
     exchange or market (which for purposes of this Agreement shall mean the New
     York Stock  Exchange,  the American  Stock Exchange or the Nasdaq Small Cap
     Market)  upon which the Common  Stock is  principally  traded or quoted (in
     either case, the "Principal Market").

4.   Non-Certificated  Shares.  In  lieu  of  delivering  physical  certificates
     representing the Adjustment  Shares,  provided the Company's transfer agent
     is  participating  in the Depository  Trust Company  ("DTC") Fast Automated
     Securities  Transfer  ("FAST")  program,  upon  request  of the  Adjustment
     Warrant  holder,  the  Company  shall  use its best  efforts  to cause  its
     transfer  agent to  electronically  transmit the  Adjustment  Shares to the
     Adjustment  Warrant  holder by crediting the account of Adjustment  Warrant
     holder's  prime  broker  with DTC  through  its  Deposit  Withdrawal  Agent
     Commission  ("DWAC")

                                       5
<PAGE>

     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.

5.   No Fractional Shares or Scrip. No fractional  shares or scrip  representing
     fractional  shares  shall be issued  upon the  issuance  of the  Adjustment
     Shares

6.   Charges, Taxes and Expenses.  Issuance of certificates for shares of Common
     Stock upon the exercise of this  Adjustment  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  Adjustment
     Warrant or in such name or names as may be  directed  by the holder of this
     Adjustment 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  Adjustment  Warrant,  this  Adjustment  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
     Adjustment  Warrant  certificates  or any  certificates  for the Adjustment
     Shares other than the issuance of a Adjustment  Warrant  Certificate to the
     Investor  in  connection  with the  Investor's  surrender  of a  Adjustment
     Warrant  Certificate  upon the exercise of less than all of the  Adjustment
     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.

7.   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
     Adjustment Warrant.

8.   No Rights as  Shareholder  until  Exercise.  Subject  to Section 13 of this
     Adjustment  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 Adjustment  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

                                       6
<PAGE>

     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  Adjustment  Warrant  shall  have been  exercised  as
     provided  herein.  However,  at the time of the exercise of this Adjustment
     Warrant  pursuant to Section 3 hereof,  the Adjustment  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 of the  Notice of
     Exercise.

9.   Assignment and Transfer of Adjustment Warrant.  This Adjustment Warrant may
     be assigned in whole or in part by the surrender of this Adjustment 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
     Adjustment 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 Adjustment Warrant to the effect that the transaction is
     so exempt.

10.  Loss, Theft,  Destruction or Mutilation of Adjustment Warrant. Upon receipt
     by the  Company  of  evidence  reasonably  satisfactory  to it of the loss,
     theft,  destruction  or  mutilation  of any  Adjustment  Warrant  or  stock
     certificate  representing the Adjustment 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  Adjustment  Warrant  or  stock
     certificate,  if  mutilated,  the  Company  will  make  and  deliver  a new
     Adjustment  Warrant or stock certificate of like tenor and dated as of such
     cancellation, in lieu of this Adjustment Warrant or stock certificate.

11.  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.

12.  Effect of Certain Events.  If at any time while this Adjustment  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

                                       7
<PAGE>

     of this Adjustment Warrant shall have the right thereafter to purchase,  by
     exercise of this Adjustment  Warrant,  the kind and amount of cash,  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
     Adjustment  Warrant been exercised  immediately  prior thereto,  subject to
     further adjustment as provided in Section 13.  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.

13.  Adjustments of Exercise Price and Number of Adjustment Warrant Shares.

     The number of and kind of  securities  purchasable  upon  exercise  of this
     Adjustment  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  Adjustment
     Warrant  subdivide its  outstanding  securities as to which purchase rights
     under this Adjustment Warrant exist, by split-up,  spin-off,  or otherwise,
     or combine its  outstanding  securities as to which  purchase  rights under
     this Adjustment  Warrant exist, the number of Adjustment Shares as to which
     this Adjustment  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.

(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 Common Stock issuable upon
     exercise or conversion thereof),  then the number of shares of Common Stock
     for which this Adjustment 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.

(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  Adjustment  Shares for which this
     Adjustment  Warrant is  exercisable  shall be increased  to equal:  (i) the
     number  of  Adjustment   Shares  for  which  this  Adjustment   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

                                       8
<PAGE>

     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 Adjustment Warrant holder) of any and all such evidences of
     indebtedness,  shares of capital stock,  other  securities or property,  so
     distributed. Alternatively, each Investor shall have the option but not the
     obligation to participate in such  distribution on an "on converted"  basis
     without  regard to Section  14. For  purposes of this  Adjustment  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.

(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
     Adjustment  Warrant  Holder shall be entitled to receive upon or after such
     transfer,  merger or consolidation becoming effective, 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 Adjustment  Warrant Holder for the shares of stock subject
     to this Adjustment  Warrant had this Adjustment 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  Adjustment  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  Adjustment  Warrant  exist into the same or a different
     number of  securities  of any other class or classes,  then the  Adjustment
     Warrant  Holder shall  thereafter  be entitled to receive upon  exercise of
     this Adjustment Warrant,  during the period specified herein, the number of
     shares or other securities or property  resulting from such  reorganization
     or  reclassification,  which  would have been  received  by the  Adjustment
     Warrant Holder for the shares of stock subject to this  Adjustment  Warrant
     had this Adjustment Warrant at such time been exercised.

                                       9
<PAGE>

(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  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  13(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.

14.  9.99% 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 that have

                                       10
<PAGE>

     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.

                                       11
<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 14 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 14 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.

15.  Miscellaneous.

(a)  Issue Date;  Choice Of Law;  Venue;  Jurisdiction.  THE  PROVISIONS OF THIS
     ADJUSTMENT  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  ADJUSTMENT  WARRANT SHALL BE BINDING UPON ANY  SUCCESSORS OR
     ASSIGNS OF THE COMPANY.  THIS  ADJUSTMENT  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  ADJUSTMENT  WARRANT AND HEREBY  WAIVES,  TO THE MAXIMUM
     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
     ADJUSTMENT 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 ADJUSTMENT 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 15(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.

                                       12
<PAGE>

(b)  Modification and Waiver.  This Adjustment 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  Adjustment  Warrant
     and the Company.  No waivers of, or exceptions  to, any term,  condition or
     provision of this Adjustment 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 Adjustment 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 15(c).

(d)  Severability.  Whenever possible, each provision of this Adjustment Warrant
     shall be  interpreted  in such  manner as to be  effective  and valid under
     applicable law, but if any provision of this Adjustment  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 Adjustment  Warrant in such  jurisdiction or
     affect the  validity,  legality or  enforceability  of any provision in any
     other  jurisdiction,   but  this  Adjustment  Warrant  shall  be  reformed,
     construed and enforced in such 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 Adjustment 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 Adjustment  Warrant  Holder  against  impairment.
     Without limiting the generality of the foregoing,  the Company (a) will not
     increase the par value of any  Adjustment  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  Adjustment  Warrant
     Shares on the exercise of this Adjustment Warrant.

                                       13
<PAGE>

     IN WITNESS  WHEREOF,  the Company has caused this Adjustment  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

[NAME OF INVESTOR]

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"}]]