Document:

EXHIBIT 4.7

                          REGISTRATION RIGHTS AGREEMENT

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

                              W I T N E S S E T H:

     WHEREAS, pursuant to that certain Common Stock Investment Agreement,  dated
the date hereof, among the Company and the Investors (the "Purchase Agreement"),
the Company  has agreed to sell and issue to the  Investors,  and the  Investors
have agreed to purchase from the Company,  inter alia, the number of shares (the
"Initial  Shares")  specified in the Purchase  Agreement of the Company's common
stock, $.03 par value ("Common Stock"), and certain warrants,  all as more fully
specified  and  subject to the terms and  conditions  set forth in the  Purchase
Agreement;

     WHEREAS,  pursuant to the terms of, and in partial  consideration  for, the
Investors'  agreement  to enter into the  Purchase  Agreement,  the  Company has
agreed to issue the Initial Warrants and Adjustment  Warrants  described therein
(collectively,  the  "Warrants")  exercisable  for  shares of Common  Stock (the
"Warrant Shares" and "Adjustment Shares", respectively);

     WHEREAS,  pursuant to the Purchase  Agreement one of the Investors has been
granted a warrant (the "Call Warrant") to purchase  additional  shares of Common
Stock (the "Optional Shares") and warrants (the "Optional Adjustment  Warrants")
to purchase shares of Common Stock (the "Optional Adjustment Shares").

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

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

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

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

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

     "Effectiveness Deadline" has the meaning specified in Section 2(a).

     "Fair  Market  Value"  shall have the meaning  ascribed to such term in the
Warrants.

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

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

     "Monthly  Delay  Payment"  shall  have the  meaning  specified  in  Section
2(b)(i)(C).

     "Premium Redemption Price" shall mean the following:

          (a) as to the  Initial  Shares,  the  greater of (i) 120% of the Share
Purchase  Price and (ii) the highest Common Stock closing price on the Principal
Market  between  and  including  date  of the  event  triggering  the  right  of
redemption and the trading day immediately prior to the actual redemption of the
Purchased Shares;

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

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

     "Purchased  Shares"  means  the  Initial  Shares,  Warrant  Shares  and the
Adjustment  Shares  issued or issuable  for the  current or previous  Adjustment
Periods.

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

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     "Registrable  Securities"  shall  mean:  (i) the Initial  Shares;  (ii) the
Warrant Shares;  (iii) the Adjustment Shares;  (iv) the Optional Shares; (v) the
Optional  Adjustment  Shares;  (vi) securities issued or issuable upon any stock
split,  stock  dividend,  recapitalization  or similar event with respect to the
foregoing;  and  (vii)  any  other  security  issued  as  a  dividend  or  other
distribution  with  respect  to,  in  exchange  for  or in  replacement  of  the
securities referred to in the preceding clauses.

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

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

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

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

     "Securities"  means the  Initial  Shares,  the  Warrants,  the  Units,  the
Optional  Shares,  the  Optional  Warrant  Shares,  the  Warrant  Shares and the
Adjustment Shares.

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

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

     "Trading  Day" shall mean (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>

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

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

               (i) But in any event within 30 days thereafter,  prepare and file
          a  registration  statement  with the  Commission on Form S-3 under the
          Securities  Act (or in the event that the Company is ineligible to use
          such form, such other form as the Company is eligible to use under the
          Securities Act) covering the Registrable Securities (such registration
          statement,   including  any  amendments  or  supplements  thereto  and
          prospectuses   contained  therein,   is  referred  to  herein  as  the
          "Registration Statement"), which Registration Statement, to the extent
          allowable   under  the  Securities  Act  and  the  rules   promulgated
          thereunder  (including Rule 416),  shall state that such  Registration
          Statement also covers such number of additional shares of Common Stock
          as may  become  issuable  to  prevent  dilution  resulting  from stock
          splits,  stock  dividends or similar  events.  The number of shares of
          Common Stock initially  included in such Registration  Statement shall
          be no less than 100% of the  Initial  Shares and 160% of the number of
          shares  of Common  Stock  underlying  the  Warrants.  Thereafter,  the
          Company  shall  use  its  best  efforts  to  cause  such  Registration
          Statement to be declared effective as soon as practicable,  and in any
          event prior to the earlier of (i) 60 days  following  the Closing Date
          or (ii) five days after SEC  clearance  to request  acceleration  (the
          "Effectiveness Deadline"). The Company shall provide Holders and their
          legal counsel  reasonable  opportunity to review any such Registration
          Statement or amendment or supplement thereto prior to filing.  Without
          limiting the foregoing,  the Company will promptly  respond to all SEC
          comments,  inquiries and requests,  and shall request  acceleration of
          effectiveness at the earliest possible date.

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

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<PAGE>

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

               (i) Delay in Effectiveness of Registration Statement.

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

                    (B) If the  Registration  Statement  has not  been  declared
          effective  within  60 days of the  Effectiveness  Deadline,  then each
          Holder  shall have the right but not the  obligation  to  require  the
          Company to redeem the Warrants and/or Registrable Securities, in whole
          or in part at the Premium Redemption Price. Each Holder shall exercise
          such right by providing the Company with written  notice  thereof (the
          "Put Notice"), which such Put Notice shall include the type and amount
          of each  security  that the Holder seeks to redeem and a date at least
          five (5) business days

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<PAGE>

          from the date  thereof on which the  Holder  seeks the  redemption  to
          occur (the "Redemption Date").

                    (C) As used in this  Agreement,  a "Monthly  Delay  Payment"
          shall be a payment in immediately  available  funds equal to 2% of the
          Share Purchase Price of the Purchased Shares held by a Holder for each
          30 day period (or portion  thereof)  that the  specified  condition in
          this Section 2(c) has not been  fulfilled or the specified  deficiency
          has not been remedied, (prorated in each case as appropriate). Payment
          of the Monthly Delay  Payments and Premium  Redemption  Price shall be
          due and  payable  from the  Company  to such  Holder  within  five (5)
          business days of demand therefor.  Without limiting the foregoing,  if
          payment in immediately available funds of the Premium Redemption Price
          is not made within such 5 business  day period,  the Holder may revoke
          and  withdraw in whole or in part its election to cause the Company to
          make such mandatory  purchase at any time prior to its receipt of such
          cash,  without  prejudice  to its  ability  to elect to  receive  that
          particular or other Premium Redemption Price payments in the future.

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

                    (A) In the  event  that the  Company  fails,  refuses  or is
          unable to cause the Registrable Securities covered by the Registration
          Statement to be listed with the applicable  Approved  Markets and each
          other securities exchange and market on which the Common Stock is then
          traded at all times during the period  ("Listing  Period")  commencing
          the earlier of the effective date of the Registration Statement or the
          Effectiveness  Deadline and  continuing  thereafter for so long as the
          Warrants or Optional Warrants are outstanding,  then the Company shall
          pay in cash or Common Stock, as provided in Section  2(b)(v),  to each
          Holder a Monthly  Delay  Payment  for each  30-day  period (or portion
          thereof)  during  the  Listing  Period  from and after  such  failure,
          refusal or inability to so list the Registrable  Securities  until the
          Registrable Securities are so listed.

                    (B) In the event that shares of Common  Stock of the Company
          are  delisted  from  the  applicable  Approved  Markets  at  any  time
          following  the  Closing  Date and remain  delisted  for 5  consecutive
          business  days,  then at the  option of each  Holder and to the extent
          such  Holder so elects,  the Company  shall on 2 business  days notice
          either  (1)  pay in cash or  Common  Stock  (as  provided  in  Section
          2(b)(v)) to such Holder a Monthly Delay Payment for each 30-day period
          that the shares are delisted or (2) redeem the Securities held by such
          Holder,  in whole  or in  part,  at a  redemption  price  equal to the
          Premium Redemption Price (as defined above);  provided,  however, that
          such  Holder may revoke  such  request at

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          any time prior to receipt of payment of such Monthly Delay Payments or
          Premium Redemption Price, as the case may be.

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

               (iv)  Redemption for Exercise  Deficiency.  In the event that the
          Company  does not have a  sufficient  number of shares of Common Stock
          available  to satisfy  the  Company's  obligations  to any Holder upon
          receipt of a notice of exercise of a Warrant or Optional  Warrant from
          an  Investor,  or is otherwise  unable or unwilling  for any reason to
          issue  Common  Stock  as  required  by,  and in  accordance  with  the
          provisions  of, the  Warrants,  the Optional  Warrants or the Purchase
          Agreement (each, an "Exercise Deficiency"), then:

                    (A) The Company shall provide to each Holder a Monthly Delay
          Payment  for each 30 day  period  or  portion  thereof  (appropriately
          prorated) following the Exercise Deficiency, on the terms set forth in
          Section 2(b)(i)(B) above.

                    (B) At any time five (5) days after the  commencement of the
          running of the first 30-day  period  described  above in clause (A) of
          this  paragraph  (iv),  at the  request  of any  Holder,  the  Company
          promptly shall  purchase from such Holder,  and on the terms set forth
          in Section  2(b)(i)(B)  above, the Securities in each case as a result
          of the Exercise  Deficiency at the Premium  Redemption  Price,  on the
          terms set forth in Section 2(b)(i)(B) above.

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               (v) Premium Redemption Price for Defaults.

                    (A) The Company  acknowledges  that any failure,  refusal or
          inability by the Company to perform the  obligations  described in the
          foregoing paragraphs (i) through (iv) will cause the Holders to suffer
          damages in an amount that will be  difficult to  ascertain,  including
          without limitation damages resulting from the loss of liquidity in the
          Registrable  Securities and the additional  investment risk in holding
          the  Registrable  Securities.  Accordingly,  the parties agree,  after
          consulting  with counsel,  that it is  appropriate  to include in this
          Agreement the  foregoing  provisions  for Monthly  Delay  Payments and
          mandatory  redemptions  in order to  compensate  the  Holders for such
          damages.  The parties  acknowledge  and agree that the  Monthly  Delay
          Payments  and  mandatory  redemptions  set forth above  represent  the
          parties'  good faith  effort to quantify  such  damages  and, as such,
          agree  that  the  form  and  amount  of such  payments  and  mandatory
          redemptions are reasonable and will not constitute a penalty.

                    (B) In the event that the  Company  fails to pay any Monthly
          Delay Payment within 5 business days of demand  therefor,  each Holder
          shall  have  the  right  to  sell  to  the  Company  any or all of its
          Securities at the Premium  Redemption  Price on the terms set forth in
          Section 2(b)(i)(B) above.

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

               (vii) Certain Acknowledgments.  The Company acknowledges that any
          failure,  refusal  or  inability  by  the  Company  described  in  the
          foregoing  paragraphs (i) through (v) will cause the Holders to suffer
          damages in an amount that will be  difficult to  ascertain,  including
          without limitation damages resulting from the loss of liquidity in the
          Registrable  Securities and the additional  investment risk in holding
          the Registrable Securities.  Accordingly, the parties agree that it is
          appropriate to include in this Agreement the foregoing  provisions for
          Monthly  Delay   Payments  and  mandatory   redemptions  in  order  to
          compensate the Holders for such

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<PAGE>

          damages.  The parties  acknowledge  and agree that the  Monthly  Delay
          Payments  and  mandatory  redemptions  set forth above  represent  the
          parties'  good faith  effort to quantify  such  damages  and, as such,
          agree  that the form and amount of such  Monthly  Delay  Payments  and
          mandatory  redemptions  are  reasonable  and  will  not  constitute  a
          penalty.  The parties  agree that the  provisions of this clause (vii)
          consist of  certain  acknowledgments  and  agreements  concerning  the
          remedies  of the  Holders  set forth in clauses  (i)  through  (v) and
          paragraph (vi) of this paragraph; nothing in this clause (vii) imposes
          any  additional   default  payments  and  mandatory   redemptions  for
          violations under this Agreement.

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

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

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

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

               (iii)   cause  to  be   delivered,   immediately   prior  to  the
          effectiveness  of the  Registration  Statement (and, in the case of an
          underwritten  offering,  at the time of  delivery  of any  Registrable
          Securities sold pursuant thereto), and at the beginning of each fiscal
          year following a

                                       10
<PAGE>

          year  during  which  the  Company's   independent   certified   public
          accountants shall have reviewed any of the Company's books or records,
          a "comfort"  letter from the Company's  independent  certified  public
          accountants  addressed  to the Holders and each  underwriter,  if any,
          stating  that such  accountants  are  independent  public  accountants
          within the meaning of the Securities Act and the applicable  published
          rules and regulations thereunder,  and otherwise in customary form and
          covering such  financial  and  accounting  matters as are  customarily
          covered by letters of the  independent  certified  public  accountants
          delivered in connection  with secondary  offerings;  such  accountants
          shall have  undertaken  in each such  letter to update the same during
          each  such  fiscal  year in which  such  books or  records  are  being
          reviewed so that each such letter  shall remain  current,  correct and
          complete  throughout such fiscal year; and each such letter and update
          thereof, if any, shall be reasonably satisfactory to the Holders.

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

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

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

          (e) The Company shall make  available  for  inspection by the Holders,
upon   reasonable   written   notice  and   during   regular   business   hours,
representative(s) of all the Holders together, any underwriter  participating in
any  disposition  pursuant  to a  Registration  Statement,  and any  attorney or
accountant  retained  by any  Holder or  underwriter,  all  financial  and other
records customary for purposes of the Holders' due diligence  examination of the
Company and review of any Registration Statement,  all SEC Documents (as defined
in the Purchase Agreement) filed subsequent to the Closing,

                                       11
<PAGE>

pertinent  corporate  documents  and  properties  of the Company,  and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such  representative,  underwriter,  attorney or  accountant in
connection with such Registration Statement, provided that such parties agree to
keep such information confidential.

          (f) The Company shall file a  Registration  Statement  with respect to
any newly  authorized  and/or  reserved shares with respect to its obligation to
reserve or  register  Registrable  Securities,  within  thirty  (30) days of any
corporate authorizing or reserving same and shall file a Registration  Statement
with respect to additional Registrable Securities within thirty (30) days of the
occurrence of an event  referred to in Section  2(a)(x),  and shall use its best
efforts,  in  either  case,  to cause  such  Registration  Statement  to  become
effective within  seventy-five (75) days of such corporate action or occurrence,
as the  case  may be.  If the  Holders  become  entitled,  pursuant  to an event
described  in clause  (iii) of the  definition  of  Registrable  Securities,  to
receive any  securities in respect of Registrable  Securities  that were already
included in a Registration  Statement,  subsequent to the date such Registration
Statement is declared effective,  and the Company is unable under the securities
laws to add such securities to the then effective  Registration  Statement,  the
Company shall promptly file, in accordance with the procedures set forth herein,
an  additional  Registration  Statement  with respect to such newly  Registrable
Securities.  The  Company  shall  use its best  efforts  to (i)  cause  any such
additional  Registration  Statement,  when filed, to become  effective under the
Securities Act, and (ii) keep such additional  Registration  Statement effective
during the period described in Section 5 below.  All of the registration  rights
and remedies under this Agreement shall apply to the  registration of such newly
reserved  shares  and  such  new  Registrable   Securities,   including  without
limitation the provisions providing for Monthly Delay Payments contained herein.

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

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

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

     6. Indemnification.

                                       12
<PAGE>

          (a) The Company  Indemnity.  The Company will  indemnify  each Holder,
each of its officers,  directors and partners,  and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations  thereunder  with respect to which  registration,  qualification  or
compliance has been effected  pursuant to this Agreement,  and each underwriter,
if any,  and each person who  controls,  within the meaning of Section 15 of the
Securities  Act and the  rules  and  regulations  thereunder,  any  underwriter,
against  all claims,  losses,  damages  and  liabilities  (or actions in respect
thereof)  arising out of or based on any untrue  statement  (or  alleged  untrue
statement) of a material fact contained in any prospectus,  offering circular or
other document (including any related  registration  statement,  notification or
the like) incident to any such  registration,  qualification  or compliance,  or
based on any omission (or alleged  omission)  to state  therein a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  or any violation by the Company of the  Securities Act or any state
securities law or in either case, any rule or regulation  thereunder  applicable
to the  Company and  relating  to action or inaction  required of the Company in
connection with any such  registration,  qualification  or compliance,  and will
reimburse each Holder,  each of its officers,  directors and partners,  and each
person  controlling  such  Holder,  each such  underwriter  and each  person who
controls any such underwriter,  for any legal and any other expenses  reasonably
incurred in connection with  investigating  and defending any such claim,  loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder to the extent that any such claim, loss, damage, liability
or expense  arises out of or is based on any untrue  statement or omission based
upon  written  information  furnished  to the  Company  by  such  Holder  or the
underwriter (if any) therefor and stated to be specifically for use therein. The
indemnity  agreement  contained  in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage,  liability or action if such
settlement is effected  without the consent of the Company  (which  consent will
not be unreasonably withheld).

          (b) Holder Indemnity.  Each Holder will, severally and not jointly, if
Registrable  Securities  held by it are included in the  securities  as to which
such registration,  qualification or compliance is being effected, indemnify the
Company, each of its directors,  officers,  partners,  and each underwriter,  if
any, of the Company's securities covered by such a registration statement,  each
person who  controls  the  Company  or such  underwriter  within the  meaning of
Section 15 of the Securities Act and the rules and regulations thereunder,  each
other Holder (if any), and each of their officers,  directors and partners,  and
each person  controlling  such other  Holder(s),  against  all  claims,  losses,
damages and liabilities (or actions in respect  thereof) arising out of or based
on any untrue  statement  (or  alleged  untrue  statement)  of a  material  fact
contained in any such registration statement,  prospectus,  offering circular or
other  document,  or any  omission  (or  alleged  omission)  to state  therein a
material fact  required to be stated  therein or necessary to make the statement
therein not misleading,  and will reimburse the Company and such other Holder(s)
and their directors, officers and partners,  underwriters or control persons for
any  legal  or  any  other  expenses  reasonably  incurred  in  connection  with
investigating and defending any such claim, loss,  damage,  liability or action,
in each case to the extent,  but only to the extent,  that such untrue statement
(or alleged untrue  statement) or omission (or alleged omission) is made in such
registration  statement,

                                       13
<PAGE>

prospectus,  offering  circular  or  other  document  in  reliance  upon  and in
conformity with written information  furnished to the Company by such Holder and
stated to be specifically for use therein,  and provided that the maximum amount
for which such Holder shall be liable under this indemnity  shall not exceed the
net  proceeds  received  by  such  Holder  from  the  sale  of  the  Registrable
Securities.  The  indemnity  agreement  contained in this Section 6(b) shall not
apply to amounts  paid in  settlement  of any such  claims,  losses,  damages or
liabilities  if such  settlement is effected  without the consent of such Holder
(which consent shall not be unreasonably withheld).

          (c)  Procedure.  Each party  entitled  to  indemnification  under this
Section 6 (the  "Indemnified  Party") shall give notice to the party required to
provide   indemnification   (the  "Indemnifying   Party")  promptly  after  such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought,  and shall  permit the  Indemnifying  Party to assume the defense of any
such claim in any litigation resulting therefrom,  provided that counsel for the
Indemnifying  Party,  who  shall  conduct  the  defense  of  such  claim  or any
litigation  resulting  therefrom,  shall be  approved by the  Indemnified  Party
(whose approval shall not be unreasonably  withheld),  and the Indemnified Party
may participate in such defense at such party's  expense,  and provided  further
that the failure of any  Indemnified  Party to give  notice as  provided  herein
shall not relieve the Indemnifying  Party of its obligations  under this Article
except to the extent that the  Indemnifying  Party is  materially  and adversely
affected  by such  failure to provide  notice.  No  Indemnifying  Party,  in the
defense of any such claim or litigation,  shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which  does not  include  as an  unconditional  term  thereof  the giving by the
claimant or plaintiff to such Indemnified  Party of a release from all liability
in respect to such claim or  litigation.  Each  Indemnified  Party shall furnish
such  information  regarding  itself or the claim in question as an Indemnifying
Party may reasonably  request in writing and as shall be reasonably  required in
connection with the defense of such claim and litigation resulting therefrom.

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

     In no event shall the  obligation of any  Indemnifying  Party to contribute
under this Section 7 exceed the amount that such  Indemnifying  Party would have
been obligated to

                                       14
<PAGE>

pay by way of indemnification if the indemnification  provided for under Section
6(a) or 6(b) hereof had been available under the circumstances.

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

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

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

     10. NASDAQ Limit on Stock Issuances. Section 3.14 of the Purchase Agreement
shall govern limits imposed by NASDAQ rules on the issuance of Common Stock.

                                       15
<PAGE>

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

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

     13. Miscellaneous.

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

          (b)  Jurisdiction.  THE COMPANY AND EACH OF THE  INVESTORS  (I) HEREBY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE  JURISDICTION OF THE UNITED STATES DISTRICT
COURT,  THE NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES  SITTING
IN NEW YORK COUNTY,  NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES,  AND AGREES
NOT TO ASSERT IN ANY SUCH SUIT  ACTION OR  PROCEEDING,  ANY CLAIM THAT IT IS NOT
PERSONALLY  SUBJECT TO THE JURISDICTION OF SUCH COURT,  THAT THE SUIT, ACTION OR
PROCEEDING  IS BROUGHT IN AN  INCONVENIENT  FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. THE COMPANY AND EACH OF THE INVESTORS CONSENTS
TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY
THEREOF  TO SUCH PARTY AT THE  ADDRESS  IN EFFECT  FOR  NOTICES TO IT UNDER THIS
AGREEMENT  AND AGREES THAT SUCH SERVICE  SHALL  CONSTITUTE  GOOD AND  SUFFICIENT
SERVICE OF PROCESS AND NOTICE

                                       16
<PAGE>

THEREOF.  NOTHING  IN THIS  PARAGRAPH  SHALL  AFFECT OR LIMIT ANY RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

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

                  to the Company:

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

                  with copies to:

                           Ehrenreich Eilenberg & Krause LLP
                           11 East 44th Street, 17th Floor
                           New York, New York  10017
                           Attn:  Adam D. Eilenberg, Esq.
                           Phone:  (212) 986-9700
                           Fax:  (212) 986-2399

                  to the Investors:

                           To each Investor at the address and/or fax number set
                           forth on Schedule I of this Agreement

                  with copies to:

                           Kleinberg, Kaplan, Wolff & Cohen, P.C.
                           551 Fifth Avenue
                           New York, New York 10176
                           Facsimile:  (212) 986-8866
                           Attention:  Stephen M. Schultz, Esq.
                                       and Christopher P. Davis, Esq.

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

          (d) Indemnity. Each party shall indemnify each other party against any
loss,  cost or damages  (including  reasonable  attorney's  fees)  incurred as a
result of

                                       17
<PAGE>

such parties' breach of any representation,  warranty,  covenant or agreement in
this Agreement.

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

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

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

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

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

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

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

                                       18
<PAGE>

agreements, acts or omissions of any other Investor, and that any rights granted
to "Investors" hereunder shall be enforceable by each Investor hereunder.

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

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

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

                             Signature page follows

                                       19
<PAGE>

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

                                        PHARMOS CORPORATION

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

                                        INVESTORS:

                                        MILLENNIUM PARTNERS, LP (as an Investor
                                        in the Call Warrant only)

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

                                        LATERMAN & CO. L.P.

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

                                        STRONG RIVER INVESTMENTS, INC.

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

                 Signature page to Registration Rights Agreement

<PAGE>

                                   SCHEDULE I

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

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

With copies to:

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

Attn:  Mor Sagi

Laterman & Co., L.P.5
East 59th Street
New York, New York 10022
Phone: (212) 593-4222
Fax: (212) 593-4976
Attn: Bernard LatermanEXHIBIT 4.8

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.

                         COMMON STOCK ADJUSTMENT WARRANT

No. [__]

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

                               PHARMOS CORPORATION

     THIS CERTIFIES that, for value received, [____________] (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  November  1, 2001 (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 [____] [$0.5 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 one (1) Trading Day after the day on which a  registration
     statement  covering the Initial Shares is first  declared  effective by the
     SEC  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

[__________________]

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.

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