Document:

EXHIBIT 10(d)

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

                                            Date of Issuance: September 26, 2003

                                                                $_______________

                            4% CONVERTIBLE DEBENTURE
                               DUE MARCH 31, 2005

      THIS DEBENTURE is one of a series of duly authorized and issued 4%
Convertible Debentures of Pharmos Corporation, a Nevada corporation, having a
principal place of business at 99 Wood Avenue, Suite 311, Iselin, New Jersey
08830 (the "Company"), designated as its 4% Convertible Debenture, due March 31,
2005 (the "Debentures").

      FOR VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the "Holder"), the principal
sum of $_______________ on March 31, 2005 or such earlier date as the Debentures
are required or permitted to be repaid as provided hereunder (the "Maturity
Date"), and to pay interest to the Holder on the aggregate unconverted and then
outstanding principal amount of this Debenture at the rate of 4% per annum,
payable quarterly on March 31, June 30, September 30 and December 31, beginning
on the first such date after the Original Issue Date and on each Conversion Date
(as to that principal amount then being converted) and on the Maturity Date
(except that, if any such date is not a Business Day, then such payment shall be
due on the next succeeding Business Day) (each such date, an "Interest Payment
Date") in cash or shares of Common Stock at the Interest Conversion Rate, or a
combination thereof; provided, however, payment in shares of Common Stock may
only occur if: (i) there is an effective Registration Statement pursuant to

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which the Holder is permitted to utilize the prospectus thereunder to resell all
of the shares issuable pursuant to the Transaction Documents, including shares
of Common Stock to be issued in lieu of cash (and the Company believes, in good
faith, that such effectiveness will continue uninterrupted for the foreseeable
future), (ii) the Common Stock is listed for trading on a Trading Market (and
the Company believes, in good faith, that trading of the Common Stock on a
Trading Market will continue uninterrupted for the foreseeable future), (iii)
there is a sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all of the shares issuable pursuant
to the Transaction Documents, including the shares to be issued for interest in
lieu of cash and (iv) there is then existing no Event of Default or event which,
with the passage of time or the giving of notice, would constitute and Event of
Default, (v) the issuance of such shares, when added to the shares issued or
issuable upon conversion of the Debentures in full and issued and issuable upon
exercise of the Warrants in full would not violate the limitations set forth in
Section 4(a)(ii) and (vi) the Interest Conversion Rate is greater than or equal
to $1.972, subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Stock
that occur after the Original Issue Date. Subject to the terms and conditions
herein, the decision whether to pay interest hereunder in shares of Common Stock
or cash shall be at the discretion of the Company. Not less than 10 Trading Days
prior to each Interest Payment Date, the Company shall provide the Holder with
written notice of its election to pay interest hereunder either in cash or
shares of Common Stock (the Company may indicate in such notice that the
election contained in such notice shall continue for later periods until
revised). Within 10 Trading Days prior to an Interest Payment Date, the
Company's election (whether specific to an Interest Payment Date or continuous)
shall be irrevocable as to such Interest Payment Date. Subject to the
aforementioned conditions, failure to timely provide such written notice shall
be deemed an election by the Company to pay the interest on such Interest
Payment Date in cash. Interest shall be calculated on the basis of a 360-day
year and shall accrue daily commencing on the Original Issue Date until payment
in full of the principal sum, together with all accrued and unpaid interest and
other amounts which may become due hereunder, has been made. Payment of interest
in shares of Common Stock shall otherwise occur pursuant to Section 4(b) and
only for purposes of the payment of interest in shares, the Interest Payment
Date shall be deemed the Conversion Date. Interest shall cease to accrue with
respect to any principal amount converted, provided that the Company in fact
delivers the Underlying Shares within the time period required by Section
4(b)(i). Interest hereunder will be paid to the Person in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of Debentures (the "Debenture Register"). Except as otherwise provided
herein, if at anytime the Company pays interest partially in cash and partially
in shares of Common Stock, then such payment shall be distributed ratably among
the Holders based upon the principal amount of Debentures held by each Holder.
All overdue accrued and unpaid interest to be paid hereunder shall entail a late
fee at the rate of 15% per annum (or such lower maximum amount of interest
permitted to be charged under applicable law) ("Late Fee") which will accrue
daily, from the date such interest is due hereunder through and including the
date of payment. Notwithstanding anything to the contrary contained herein, if
on any Interest Payment Date the Company has elected to pay interest in Common
Stock and is not able to pay accrued interest in the form of Common Stock

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because it does not then satisfy the conditions for payment in the form of
Common Stock set forth above (other than as a result of clause (vi) above),
then, at the option of the Holder, the Company, in lieu of delivering either
shares of Common Stock pursuant to Section 4 hereof or paying the regularly
scheduled cash interest payment, shall deliver, within three Trading Days of
each applicable Interest Payment Date, an amount in cash equal to the product of
the number of shares of Common Stock otherwise deliverable to the Holder in
connection with the payment of interest due such Interest Payment Date and the
highest Closing Price during the period commencing on the Interest Payment Date
and ending on the Trading Day prior to the date such payment is made. If on any
Interest Payment Date the Company has elected to pay interest in Common Stock
and is not able to pay accrued interest in the form of Common Stock because it
does not then satisfy the conditions for such form of payment as a result of
clause (vi) above, then the Company, in lieu of delivering shares of Common
Stock pursuant to Section 4 hereof, shall pay the regularly scheduled cash
interest payment. Except as set forth in Section 5, the Company may not prepay
any portion of the principal amount of this Debenture without the prior written
consent of the Holder.

      This Debenture is subject to the following additional provisions:

      Section 1. This Debenture is exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.

      Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement and
may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations. Prior to due
presentment to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the Person in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.

      Section 3. Events of Default.

            a) "Event of Default", wherever used herein, means any one of the
      following events (whatever the reason and whether it shall be voluntary or
      involuntary or effected by operation of law or pursuant to any judgment,
      decree or order of any court, or any order, rule or regulation of any
      administrative or governmental body):

                  i) any default in the payment of the principal of, interest
            (including Late Fees) on, or liquidated damages in respect of, any
            Debentures, free of any claim of subordination, as and when the same
            shall become due and payable (whether on a Conversion Date or the
            Maturity Date or by acceleration or

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            otherwise) which default is not cured, if possible to cure, within 5
            days of notice of such default sent by the Holder;

                  ii) the Company shall fail to observe or perform any other
            covenant, agreement or warranty contained in, or otherwise commit
            any breach of any of the Transaction Documents (other than a breach
            by the Company of its obligations to deliver shares of Common Stock
            to the Holder upon conversion or interest payment which breach is
            addressed in clause (x) below) which is not cured, if possible to
            cure, within 10 days of notice of such default sent by the Holder;

                  iii) the Company or any of its subsidiaries shall commence, or
            there shall be commenced against the Company or any such subsidiary
            a case under any applicable bankruptcy or insolvency laws as now or
            hereafter in effect or any successor thereto, or the Company
            commences any other proceeding under any reorganization,
            arrangement, adjustment of debt, relief of debtors, dissolution,
            insolvency or liquidation or similar law of any jurisdiction whether
            now or hereafter in effect relating to the Company or any subsidiary
            thereof or there is commenced against the Company or any subsidiary
            thereof any such bankruptcy, insolvency or other proceeding which
            remains undismissed for a period of 60 days; or the Company or any
            subsidiary thereof is adjudicated insolvent or bankrupt; or any
            order of relief or other order approving any such case or proceeding
            is entered; or the Company or any subsidiary thereof suffers any
            appointment of any custodian or the like for it or any substantial
            part of its property which continues undischarged or unstayed for a
            period of 60 days; or the Company or any subsidiary thereof makes a
            general assignment for the benefit of creditors; or the Company
            shall fail to pay, or shall state that it is unable to pay, or shall
            be unable to pay, its debts generally as they become due; or the
            Company or any subsidiary thereof shall call a meeting of its
            creditors with a view to arranging a composition, adjustment or
            restructuring of its debts; or the Company or any subsidiary thereof
            shall by any act or failure to act expressly indicate its consent
            to, approval of or acquiescence in any of the foregoing; or any
            corporate or other action is taken by the Company or any subsidiary
            thereof for the purpose of effecting any of the foregoing;

                  iv) the Company shall default in any of its obligations under
            any other Debenture or any mortgage, credit agreement or other
            facility, indenture agreement, factoring agreement or other
            instrument under which there may be issued, or by which there may be
            secured or evidenced any indebtedness for borrowed money or money
            due under any long term leasing or factoring arrangement of the
            Company in an amount exceeding $150,000, whether such indebtedness
            now exists or shall hereafter be created and such default shall
            result in such indebtedness becoming or being declared due and
            payable prior to the date on which it would otherwise become due and
            payable;

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                  v) the Common Stock shall not be eligible for quotation on or
            quoted for trading on a Trading Market and shall not again be
            eligible for and quoted or listed for trading thereon within five
            Trading Days;

                  vi) the Company shall be a party to any Change of Control
            Transaction, shall agree to sell or dispose of all or in excess of
            50% of its assets in one or more transactions (whether or not such
            sale would constitute a Change of Control Transaction) or shall
            redeem or repurchase more than a de minimis number of its
            outstanding shares of Common Stock or other equity securities of the
            Company (other than redemptions of Conversion Shares and repurchases
            of shares of Common Stock or other equity securities of departing
            officers and directors of the Company; provided no repurchase shall
            exceed $100,000 for any officer or director);

                  vii) a Registration Statement shall not have been declared
            effective by the Commission on or prior to the 150th calendar day
            after the Original Issue Date;

                  viii) if, during the Effectiveness Period (as defined in the
            Registration Rights Agreement), the effectiveness of the
            Registration Statement lapses for any reason or the Holder shall not
            be permitted to resell Registrable Securities (as defined in the
            Registration Rights Agreement) under the Registration Statement, in
            either case, for more than 15 consecutive Trading Days or 25
            non-consecutive Trading Days during any 12 month period;

                  ix) an Event (as defined in the Registration Rights Agreement)
            shall not have been cured to the satisfaction of the Holder prior to
            the expiration of thirty days from the Event Date (as defined in the
            Registration Rights Agreement) relating thereto (other than an Event
            resulting from a failure of an Registration Statement to be declared
            effective by the Commission on or prior to the Effectiveness Date
            (as defined in the Registration Rights Agreement), which shall be
            covered by Section 3(a)(vii));

                  x) the Company shall fail for any reason to deliver
            certificates to a Holder prior to the seventh Trading Day after a
            Conversion Date pursuant to and in accordance with Section
            4(b)(unless the conversion has been rescinded by the Holder pursuant
            to Section 4(b)(i)) or the Company shall provide notice to the
            Holder, including by way of public announcement, at any time, of its
            intention not to comply with requests for conversions of any
            Debentures in accordance with the terms hereof; or

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                  xi) the Company shall fail for any reason to deliver the
            payment in cash pursuant to a Buy-In (as defined herein) within
            seven days after notice thereof is delivered hereunder.

            b) If any Event of Default occurs and is continuing, the full
      principal amount of this Debenture, together with interest and other
      amounts owing in respect thereof, to the date of acceleration shall become
      at the Holder's election, immediately due and payable in cash. The
      aggregate amount payable upon such acceleration following an Event of
      Default shall be equal to the Mandatory Prepayment Amount. Commencing 5
      days after the occurrence of any Event of Default that results in the
      eventual acceleration of this Debenture, the interest rate on this
      Debenture shall accrue at the rate of 15% per annum (or such lower maximum
      amount of interest permitted to be charged under applicable law). All
      Debentures for which the full prepayment price hereunder shall have been
      paid in accordance herewith shall promptly be surrendered to or as
      directed by the Company. The Holder need not provide and the Company
      hereby waives any presentment, demand, protest or other notice of any
      kind, and the Holder may immediately and without expiration of any grace
      period enforce any and all of its rights and remedies hereunder and all
      other remedies available to it under applicable law. Such declaration may
      be rescinded and annulled by Holder at any time prior to payment hereunder
      and the Holder shall have all rights as a Debenture holder until such
      time, if any, as the full payment under this Section shall have been
      received by it. No such rescission or annulment shall affect any
      subsequent Event of Default or impair any right consequent thereon.

      Section 4. Conversion.

            a) i) At any time after the Original Issue Date until this Debenture
            is no longer outstanding, this Debenture shall be convertible into
            shares of Common Stock at the option of the Holder, in whole or in
            part (in increments of at least $100,000 principal amount) at any
            time and from time to time (subject to the limitations on conversion
            set forth in Section 4(a)(ii) hereof). The Holder shall effect
            conversions by delivering to the Company the form of Notice of
            Conversion attached hereto as Annex A (a "Notice of Conversion"),
            specifying therein the principal amount of Debentures to be
            converted and the date on which such conversion is to be effected (a
            "Conversion Date"). If no Conversion Date is specified in a Notice
            of Conversion, the Conversion Date shall be the date that such
            Notice of Conversion is provided hereunder. To effect conversions
            hereunder, the Holder shall not be required to physically surrender
            Debentures to the Company unless the entire principal amount of this
            Debenture plus all accrued and unpaid interest thereon has been so
            converted. Conversions hereunder shall have the effect of lowering
            the outstanding principal amount of this Debenture in an amount
            equal to the applicable conversion. The Holder and the Company shall
            maintain records showing the principal amount converted and the date
            of such

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            conversions. The Company shall deliver any objection to any Notice
            of Conversion within 1 Business Day of receipt of such notice. In
            the event of any dispute or discrepancy, the records of the Company
            shall be controlling and determinative in the absence of manifest
            error. The Holder and any assignee, by acceptance of this Debenture,
            acknowledge and agree that, by reason of the provisions of this
            paragraph, following conversion of a portion of this Debenture, the
            unpaid and unconverted principal amount of this Debenture may be
            less than the amount stated on the face hereof.

                  ii) Conversion Limitation. The Holder shall not have the right
            to convert any portion of this Debenture, pursuant to Section
            4(a)(i) or otherwise, to the extent that after giving effect to such
            conversion, the Holder (together with the Holder's affiliates), as
            set forth on the applicable Notice of Conversion, would beneficially
            own in excess of 4.99% of the number of shares of the Common Stock
            outstanding immediately after giving effect to such conversion. For
            purposes of the foregoing sentence, the number of shares of Common
            Stock beneficially owned by the Holder and its affiliates shall
            include the number of shares of Common Stock issuable upon
            conversion of this Debenture with respect to which the determination
            of such sentence is being made, but shall exclude the number of
            shares of Common Stock which would be issuable upon (A) conversion
            of the remaining, nonconverted portion of this Debenture
            beneficially owned by the Holder or any of its affiliates and (B)
            exercise or conversion of the unexercised or nonconverted portion of
            any other securities of the Company (including, without limitation,
            any other Debentures or the Warrants) subject to a limitation on
            conversion or exercise analogous to the limitation contained herein
            beneficially owned by the Holder or any of its affiliates. Except as
            set forth in the preceding sentence, for purposes of this Section
            4(a)(ii), beneficial ownership shall be calculated in accordance
            with Section 13(d) of the Exchange Act. To the extent that the
            limitation contained in this section applies, the determination of
            whether this Debenture is convertible (in relation to other
            securities owned by the Holder) and of which a portion of this
            Debenture is convertible shall be in the sole discretion of such
            Holder. To ensure compliance with this restriction, the Holder will
            be deemed to represent to the Company each time it delivers a Notice
            of Conversion that such Notice of Conversion has not violated the
            restrictions set forth in this paragraph and the Company shall have
            no obligation to verify or confirm the accuracy of such
            determination. For purposes of this Section 4(a)(ii), in determining
            the number of outstanding shares of Common Stock, the Holder may
            rely on the number of outstanding shares of Common Stock as
            reflected in (x) the Company's most recent Form 10-Q or Form 10-K,
            as the case may be, (y) a more recent public announcement by the
            Company or (z) any other notice by the Company or the Company's
            Transfer Agent setting forth the number of shares of Common Stock
            outstanding. Upon the written or oral request of the Holder, the
            Company shall within two Trading Days confirm orally and in writing
            to the

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            Holder the number of shares of Common Stock then outstanding. In any
            case, the number of outstanding shares of Common Stock shall be
            determined after giving effect to the conversion or exercise of
            securities of the Company, including this Debenture, by the Holder
            or its affiliates since the date as of which such number of
            outstanding shares of Common Stock was reported. The provisions of
            this Section 4(a)(ii) may be waived by the Holder upon, at the
            election of the Holder, not less than 61 days' prior notice to the
            Company, and the provisions of this Section 4(a)iii) shall continue
            to apply until such 61st day (or such later date, as determined by
            the Holder, as may be specified in such notice of waiver).

                  iii) Conversion Shares Issuable Upon Conversion of Principal
            Amount. The number of shares of Common Stock issuable upon a
            conversion shall be determined by the quotient obtained by dividing
            (x) the outstanding principal amount of this Debenture to be
            converted by (y) the Set Price.

            (b) i) Not later than five Trading Days after any Conversion Date,
            the Company will deliver to the Holder a certificate or certificates
            representing the Conversion Shares which shall be free of
            restrictive legends and trading restrictions (other than those
            required by the Purchase Agreement) representing the number of
            shares of Common Stock being acquired upon the conversion of
            Debentures (including, if so timely elected by the Company, shares
            of Common Stock representing the payment of accrued interest) and
            (B) a bank check in the amount of accrued and unpaid interest (if
            the Company has timely elected or is required to pay accrued
            interest in cash). The Company shall, if available and if allowed
            under applicable securities laws, use its best efforts to deliver
            any certificate or certificates required to be delivered by the
            Company under this Section electronically through the Depository
            Trust Corporation or another established clearing corporation
            performing similar functions. If in the case of any Notice of
            Conversion such certificate or certificates are not delivered to
            Holder (in the case of paper certificates) or made available under
            the electronic DWAC system by the Company's transfer agent for
            access by the Holder's broker designated in the Notice of Conversion
            as directed by the applicable Holder by the fifth Trading Day after
            a Conversion Date, the Holder shall be entitled by written notice to
            the Company at any time on or before its receipt of such certificate
            or certificates thereafter, to rescind such conversion, in which
            event the Company shall immediately return the certificates
            representing the principal amount of Debentures tendered for
            conversion.

            ii) If the Company fails for any reason to deliver to the Holder
            such certificate or certificates pursuant to Section 4(b)(i) by the
            fifth Trading Day after the Conversion Date, the Company shall pay
            to such Holder, in cash, as liquidated damages and not as a penalty,
            for each $5,000 of principal amount being converted, $50 per Trading
            Day for each Trading Day after such fifth Trading

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            Day until such certificates are delivered; provided, however, that
            such liquidated damages payable to any Holder shall not exceed 10%
            of the aggregate principal amount being converted. The Company's
            obligations to issue and deliver the Conversion Shares upon
            conversion of this Debenture in accordance with the terms hereof are
            absolute and unconditional, irrespective of any action or inaction
            by the Holder to enforce the same, any waiver or consent with
            respect to any provision hereof, the recovery of any judgment
            against any Person or any action to enforce the same, or any setoff,
            counterclaim, recoupment, limitation or termination, or any breach
            or alleged breach by the Holder or any other Person of any
            obligation to the Company or any violation or alleged violation of
            law by the Holder or any other person, and irrespective of any other
            circumstance which might otherwise limit such obligation of the
            Company to the Holder in connection with the issuance of such
            Conversion Shares; provided, however, such delivery shall not
            operate as a waiver by the Company of any such action the Company
            may have against the Holder. In the event a Holder of this Debenture
            shall elect to convert any or all of the outstanding principal
            amount hereof, the Company may not refuse conversion based on any
            claim that the Holder or any one associated or affiliated with the
            Holder of has been engaged in any violation of law, agreement or for
            any other reason, unless, an injunction from a court, on notice,
            restraining and or enjoining conversion of all or part of this
            Debenture shall have been sought and obtained and the Company posts
            a surety bond for the benefit of the Holder in the amount of 150% of
            the principal amount of this Debenture outstanding, which is subject
            to the injunction, which bond shall remain in effect until the
            completion of arbitration/litigation of the dispute and the proceeds
            of which shall be payable to such Holder to the extent it obtains
            judgment. In the absence of an injunction precluding the same, the
            Company shall issue Conversion Shares or, if applicable, cash, upon
            a properly noticed conversion. Nothing herein shall limit a Holder's
            right to pursue actual damages or declare an Event of Default
            pursuant to Section 3 herein for the Company's failure to deliver
            Conversion Shares within the period specified herein and such Holder
            shall have the right to pursue all remedies available to it at law
            or in equity including, without limitation, a decree of specific
            performance and/or injunctive relief. The exercise of any such
            rights shall not prohibit the Holders from seeking to enforce
            damages pursuant to any other Section hereof or under applicable
            law.

            (iii) In addition to any other rights available to the Holder, if
            the Company fails for any reason to deliver to the Holder such
            certificate or certificates pursuant to Section 4(b)(i) by the fifth
            Trading Day after the Conversion Date, and if after such fifth
            Trading Day the Holder is required by its brokerage firm to purchase
            (in an open market transaction or otherwise) Common Stock to deliver
            in satisfaction of a sale by such Holder of the Conversion Shares
            which the Holder anticipated receiving upon such conversion (a
            "Buy-In"), then the Company shall (A) pay in cash to the Holder (in
            addition to any remedies available to or elected by the

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            Holder) the amount by which (x) the Holder's total purchase price
            (including brokerage commissions, if any) for the Common Stock so
            purchased exceeds (y) the product of (1) the aggregate number of
            shares of Common Stock that such Holder anticipated receiving from
            the conversion at issue multiplied by (2) the actual sale price of
            the Common Stock at the time of the sale (including brokerage
            commissions, if any) giving rise to such purchase obligation and (B)
            at the option of the Holder, either reissue Debentures in principal
            amount equal to the principal amount of the attempted conversion or
            deliver to the Holder the number of shares of Common Stock that
            would have been issued had the Company timely complied with its
            delivery requirements under Section 4(b)(i). For example, if the
            Holder purchases Common Stock having a total purchase price of
            $11,000 to cover a Buy-In with respect to an attempted conversion of
            Debentures with respect to which the actual sale price of the
            Conversion Shares at the time of the sale (including brokerage
            commissions, if any) giving rise to such purchase obligation was a
            total of $10,000 under clause (A) of the immediately preceding
            sentence, the Company shall be required to pay the Holder $1,000.
            The Holder shall provide the Company written notice indicating the
            amounts payable to the Holder in respect of the Buy-In.
            Notwithstanding anything contained herein to the contrary, if a
            Holder requires the Company to make payment in respect of a Buy-In
            for the failure to timely deliver certificates hereunder and the
            Company timely pays in full such payment, the Company shall not be
            required to pay such Holder liquidated damages under Section
            4(b)(ii) in respect of the certificates resulting in such Buy-In.

            (iv) Notwithstanding anything herein to the contrary, if after the
            Effective Date the Closing Prices for 10 out of any 20 consecutive
            Trading Days (such period not commencing until after the Effective
            Date) exceeds $5.50, subject to adjustment for reverse and forward
            stock splits, stock dividends, stock combinations and other similar
            transactions of the Common Stock that occur after the Original Issue
            Date, the Company may on one occasion, within 3 Trading Days of any
            such period, deliver a notice to the Holder to cause the Holder to
            immediately convert all or part of up to 50% of the original
            aggregate principal amount of the Debentures pursuant to Section
            4(a)(i) ("$5.50 Forced Conversion"). The Company may only effect a
            $5.50 Forced Conversion or notice thereof if each of the Equity
            Conditions have been met with respect to such $5.50 Forced
            Conversion during the 20 Trading Day period relating to such $5.50
            Forced Conversion and until the date of such $5.50 Forced
            Conversion. If the Company elects to exercise its right to a $5.50
            Forced Conversion, it shall exercise such right ratably among all
            holders of Debentures.

            (v) Notwithstanding anything herein to the contrary, if after the
            Effective Date the Closing Prices for 10 out of any 20 consecutive
            Trading Days (such period not commencing until after the Effective
            Date) exceeds $6.50, subject to adjustment

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            for reverse and forward stock splits, stock dividends, stock
            combinations and other similar transactions of the Common Stock that
            occur after the Original Issue Date, the Company may on one
            occasion, within 3 Trading Days of any such period, deliver a notice
            to the Holder to cause the Holder to immediately convert all or part
            of up to 50% of the original aggregate principal amount of the
            Debenture pursuant to Section 4(a)(i) ("$6.50 Forced Conversion" and
            collectively with the $5.50 Forced Conversion, "Forced
            Conversions"). The Company may only effect a $6.50 Forced Conversion
            or notice thereof if each of the Equity Conditions have been met
            with respect to such $6.50 Forced Conversion during the 20 Trading
            Day period relating to such $6.50 Forced Conversion and until the
            date of such $6.50 Forced Conversion. If the Company elects to
            exercise its right to a $6.50 Forced Conversion, it shall exercise
            such right ratably among all holders of Debentures.

            (c) i) The conversion price in effect on any Conversion Date shall
            be equal to $4.04 (subject to adjustment herein)(the "Set Price").

            ii) If the Company, at any time while the Debentures are
            outstanding: (A) shall pay a stock dividend or otherwise make a
            distribution or distributions on shares of its Common Stock or any
            other equity or equity equivalent securities payable in shares of
            Common Stock (which, for avoidance of doubt, shall not include any
            shares of Common Stock issued by the Company pursuant to this
            Debenture, including as interest thereon), (B) subdivide outstanding
            shares of Common Stock into a larger number of shares, (C) combine
            (including by way of reverse stock split) outstanding shares of
            Common Stock into a smaller number of shares, or (D) issue by
            reclassification of shares of the Common Stock any shares of capital
            stock of the Company, then the Set Price shall be multiplied by a
            fraction of which the numerator shall be the number of shares of
            Common Stock (excluding treasury shares, if any) outstanding before
            such event and of which the denominator shall be the number of
            shares of Common Stock outstanding after such event. Any adjustment
            made pursuant to this Section shall become effective immediately
            after the record date for the determination of stockholders entitled
            to receive such dividend or distribution and shall become effective
            immediately after the effective date in the case of a subdivision,
            combination or re-classification.

            iii) [RESERVED]

            iv) [RESERVED]

            v) All calculations under this Section 4 shall be made to the
            nearest cent or the nearest 1/100th of a share, as the case may be.
            For purposes of this Section 4, the number of shares of Common Stock
            outstanding as of a given date shall be the

                                       11
<PAGE>

            sum of the number of shares of Common Stock (excluding treasury
            shares, if any) outstanding.

            vi) Whenever the Set Price is adjusted pursuant to any of Section
            4(c)(ii) - (v), the Company shall promptly mail to each Holder a
            notice setting forth the Set Price after such adjustment and setting
            forth a brief statement of the facts requiring such adjustment.

            vii) If (A) the Company shall declare a dividend (or any other
            distribution) on the Common Stock; (B) the Company shall declare a
            special nonrecurring cash dividend on or a redemption of the Common
            Stock; (C) the Company shall authorize the granting to all holders
            of the Common Stock rights or warrants to subscribe for or purchase
            any shares of capital stock of any class or of any rights; (D) the
            approval of any stockholders of the Company shall be required in
            connection with any reclassification of the Common Stock, any
            consolidation or merger to which the Company is a party, any sale or
            transfer of all or substantially all of the assets of the Company,
            of any compulsory share exchange whereby the Common Stock is
            converted into other securities, cash or property; (E) the Company
            shall authorize the voluntary or involuntary dissolution,
            liquidation or winding up of the affairs of the Company; then, in
            each case, the Company shall cause to be filed at each office or
            agency maintained for the purpose of conversion of the Debentures,
            and shall cause to be mailed to the Holders at their last addresses
            as they shall appear upon the stock books of the Company, at least
            20 calendar days prior to the applicable record or effective date
            hereinafter specified, a notice stating (x) the date on which a
            record is to be taken for the purpose of such dividend,
            distribution, redemption, rights or warrants, or if a record is not
            to be taken, the date as of which the holders of the Common Stock of
            record to be entitled to such dividend, distributions, redemption,
            rights or warrants are to be determined or (y) the date on which
            such reclassification, consolidation, merger, sale, transfer or
            share exchange is expected to become effective or close, and the
            date as of which it is expected that holders of the Common Stock of
            record shall be entitled to exchange their shares of the Common
            Stock for securities, cash or other property deliverable upon such
            reclassification, consolidation, merger, sale, transfer or share
            exchange; provided, that the failure to mail such notice or any
            defect therein or in the mailing thereof shall not affect the
            validity of the corporate action required to be specified in such
            notice. Holders are entitled to convert Debentures during the 20-day
            period commencing the date of such notice to the effective date of
            the event triggering such notice.

            viii) If, at any time while this Debenture is outstanding, (A) the
            Company effects any merger or consolidation of the Company with or
            into another Person, (B) the Company effects any sale of its assets
            in one or a series of related transactions, (C) any tender offer or
            exchange offer (whether by the Company or

                                       12
<PAGE>

            another Person) is completed pursuant to which holders of Common
            Stock are permitted to tender or exchange their shares for other
            securities, cash or property, or (D) the Company effects any
            reclassification of the Common Stock or any compulsory share
            exchange pursuant to which the Common Stock is effectively converted
            into or exchanged for other securities, cash or property (in any
            such case, a "Fundamental Transaction"), then upon any subsequent
            conversion of this Debenture, the Holder shall have the right to
            receive, for each Underlying Share that would have been issuable
            upon such conversion absent such Fundamental Transaction, the same
            kind and amount of securities, cash or property as it would have
            been entitled to receive upon the occurrence of such Fundamental
            Transaction if it had been, immediately prior to such Fundamental
            Transaction, the holder of one share of Common Stock (the "Alternate
            Consideration"). For purposes of any such conversion, the
            determination of the Set Price shall be appropriately adjusted to
            apply to such Alternate Consideration based on the amount of
            Alternate Consideration issuable in respect of one share of Common
            Stock in such Fundamental Transaction, and the Company shall
            apportion the Set Price among the Alternate Consideration in a
            reasonable manner reflecting the relative value of any different
            components of the Alternate Consideration. If holders of Common
            Stock are given any choice as to the securities, cash or property to
            be received in a Fundamental Transaction, then the Holder shall be
            given the same choice as to the Alternate Consideration it receives
            upon any conversion of this Debenture following such Fundamental
            Transaction. To the extent necessary to effectuate the foregoing
            provisions, any successor to the Company or surviving entity in such
            Fundamental Transaction shall issue to the Holder a new debenture
            consistent with the foregoing provisions and evidencing the Holder's
            right to convert such debenture into Alternate Consideration. The
            terms of any agreement pursuant to which a Fundamental Transaction
            is effected shall include terms requiring any such successor or
            surviving entity to comply with the provisions of this paragraph (c)
            and insuring that this Debenture (or any such replacement security)
            will be similarly adjusted upon any subsequent transaction analogous
            to a Fundamental Transaction. Additionally, if the Company or any of
            its subsidiaries, at any time while the Debentures are outstanding,
            shall distribute to all holders of Common Stock evidences of its
            indebtedness or assets or cash or rights or warrants to subscribe
            for or purchase any security of the Company or any of its
            subsidiaries, then concurrently with such distributions to holders
            of Common Stock, the Company shall distribute to holders of the
            Debentures the amount of such indebtedness, assets, cash or rights
            or warrants which the holders of Debentures would have received had
            all their Debentures been converted into Common Stock at the lower
            of the Set Price and the Closing Price immediately prior to the
            record date for such distribution.

            (d) The Company covenants that it will at all times reserve and keep
      available out of its authorized and unissued shares of Common Stock solely
      for the purpose of

                                       13
<PAGE>

      issuance upon conversion of the Debentures and payment of interest on the
      Debenture, each as herein provided, free from preemptive rights or any
      other actual contingent purchase rights of persons other than the Holders,
      not less than such number of shares of the Common Stock as shall (subject
      to any additional requirements of the Company as to reservation of such
      shares set forth in the Purchase Agreement) be issuable (taking into
      account the adjustments and restrictions of Section 4(b)) upon the
      conversion of the outstanding principal amount of the Debentures and
      payment of interest hereunder. The Company covenants that all shares of
      Common Stock that shall be so issuable shall, upon issue, be duly and
      validly authorized and issued and fully paid, nonassessable and, if the
      Registration Statement is then effective under the Securities Act,
      registered for public sale in accordance with such Registration Statement.

            (e) Upon a conversion hereunder the Company shall not be required to
      issue stock certificates representing fractions of shares of the Common
      Stock, but may if otherwise permitted, make a cash payment in respect of
      any final fraction of a share based on the Closing Price at such time. If
      the Company elects not, or is unable, to make such a cash payment, the
      Holder shall be entitled to receive, in lieu of the final fraction of a
      share, one whole share of Common Stock.

            (f) The issuance of certificates for shares of the Common Stock on
      conversion of the Debentures shall be made without charge to the Holders
      thereof for any documentary stamp or similar taxes that may be payable in
      respect of the issue or delivery of such certificate, provided that the
      Company shall not be required to pay any tax that may be payable in
      respect of any transfer involved in the issuance and delivery of any such
      certificate upon conversion in a name other than that of the Holder of
      such Debentures so converted 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.

            (g) Any and all notices or other communications or deliveries to be
      provided by the Holders hereunder, including, without limitation, any
      Notice of Conversion, shall be in writing and delivered personally, by
      facsimile, sent by a nationally recognized overnight courier service,
      addressed to the Company, at the address set forth above, facsimile number
      (732) 452-9557, Attn: Robert W. Cook or such other address or facsimile
      number as the Company may specify for such purposes by notice to the
      Holders delivered in accordance with this Section. Any and all notices or
      other communications or deliveries to be provided by the Company hereunder
      shall be in writing and delivered personally, by facsimile, sent by a
      nationally recognized overnight courier service addressed to each Holder
      at the facsimile telephone number or address of such Holder appearing on
      the books of the Company, or if no such facsimile telephone number or
      address appears, at the principal place of business of the Holder. Any
      notice or other communication or deliveries hereunder shall be deemed
      given and effective on the

                                       14
<PAGE>

      earliest of (i) the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile telephone number specified in
      this Section prior to 5:30 p.m. (New York City time), (ii) the date after
      the date of transmission, if such notice or communication is delivered via
      facsimile at the facsimile telephone number specified in this Section
      later than 5:30 p.m. (New York City time) on any date and earlier than
      11:59 p.m. (New York City time) on such date, (iii) the second Business
      Day following the date of mailing, if sent by nationally recognized
      overnight courier service, or (iv) upon actual receipt by the party to
      whom such notice is required to be given.

      Section 5. Redemption; Extension of Maturity Date.

            (a) Monthly Redemption. On each Monthly Redemption Date, the Company
      shall redeem each Holder's Pro Rata Portion of the Monthly Redemption
      Amount plus accrued but unpaid interest plus the sum of all liquidated
      damages and any other amounts then owing to such Holder in respect of the
      Debenture. For purposes of this Section 5(b) only, "Pro Rata Portion" is
      the ration of (x) the principal amount of this Debenture on the Original
      Issue Date and (y) the sum of the aggregate original principal amounts of
      the Debentures issued to all Holders on the Closing Date. If any Holder
      shall no longer holds Debentures or if a Holder's outstanding principal
      amount is less than their Pro Rata Portion of the Monthly Redemption
      Amount, then such Holder's Monthly Redemption Amount shall be such lesser
      amount and the Pro Rata Portion shall be recalculated to exclude such
      Holder's principal amount (or portion thereof no longer outstanding) from
      clause (y) above and the Monthly Redemption Amount shall be allocated
      pro-rata among the remaining Holders. The Monthly Redemption Amount due on
      each Monthly Redemption Date shall, except as provided in this Section, be
      paid in cash. The Holders may convert, pursuant to Section 4(a)(i), any
      principal amount of the Debenture subject to a Monthly Redemption at any
      time prior to the date that the Monthly Redemption Amount and all amounts
      owing thereon are due and paid in full. The Company covenants and agrees
      that it will honor all Conversion Notices tendered up until such amounts
      are paid in full.

            (b) Redemption Procedure. The payment of cash pursuant to a Monthly
      Redemption shall be made on the Monthly Redemption Date. If any portion of
      the cash payment for a Monthly Redemption shall not be paid by the Company
      by the due date, interest shall accrue thereon at the rate of 15% per
      annum (or the maximum rate permitted by applicable law, whichever is less)
      until the payment of the Monthly Redemption Amount, plus all amounts owing
      thereon is paid in full. In addition, if any portion of the Monthly
      Redemption Amount remains unpaid after such date, the Holders subject to
      such redemption may elect, by written notice to the Company given at any
      time thereafter, to invalidate ab initio such redemption, notwithstanding
      anything herein contained to the contrary.

                                       15
<PAGE>

            (c) Extension of Maturity Date; Modification of Redemption Schedule.
      To the extent that any of the principal represented by this Debenture that
      is held in escrow in accordance with the terms of the Escrow Agreement is
      used by the Company in connection with an acquisition by the Company
      approved by the Holders in accordance with the provisions of the Escrow
      Agreement (the "Acquisition Principal Amount"), (i) the Maturity Date for
      the Acquisition Principal Amount shall be extended for an additional two
      years from the date of the closing of such acquisition, (ii) the first
      Monthly Redemption Date, as provided in Section 5 hereof, for the
      Acquisition Principal Amount shall occur on the first anniversary of the
      date of such acquisition and the Acquisition Principal Amount plus accrued
      and unpaid interest plus the sum of all liquidated damages and any other
      amounts then owing to the Holders in respect of the Acquisition Principal
      Amount shall be paid in twelve equal monthly installments commencing on
      such first anniversary and (iii) the Monthly Redemption Amount relating to
      all principal under the Debentures not constituting Acquisition Principal
      Amount shall be reduced correspondingly.

      Section 6. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement, and (b)
the following terms shall have the following meanings:

            "Business Day" means any day except Saturday, Sunday and any day
      which shall be a federal legal holiday in the United States or a day on
      which banking institutions in the State of New York are authorized or
      required by law or other government action to close.

            "Change of Control Transaction" means the occurrence after the date
      hereof of any of (i) an acquisition after the date hereof by an individual
      or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated
      under the Exchange Act) of effective control (whether through legal or
      beneficial ownership of capital stock of the Company, by contract or
      otherwise) of in excess of 40% of the voting securities of the Company, or
      (ii) a replacement at one time or within a three year period of more than
      one-half of the members of the Company's board of directors which is not
      approved by a majority of those individuals who are members of the board
      of directors on the date hereof (or by those individuals who are serving
      as members of the board of directors on any date whose nomination to the
      board of directors was approved by a majority of the members of the board
      of directors who are members on the date hereof), or (iii) the execution
      by the Company of an agreement to which the Company is a party or by which
      it is bound, providing for any of the events set forth above in (i) or
      (ii).

            "Commission" means the Securities and Exchange Commission.

                                       16
<PAGE>

            "Common Stock" means the common stock, $0.03 par value per share, of
      the Company and stock of any other class into which such shares may
      hereafter have been reclassified or changed.

            "Consent" shall mean the vote of the Holders of at least 75% of the
      principal amount of the Debentures then outstanding.

            "Conversion Date" shall have the meaning set forth in Section
      4(a)(i) hereof.

            "Conversion Shares" means the shares of Common Stock issuable upon
      conversion of Debentures in accordance with the terms hereof.

            "Equity Conditions" means each of the following: (i) the Company
      shall have duly honored all conversions occurring by virtue of one or more
      Conversion Notices prior to the applicable Forced Conversion, if any (ii)
      there is an effective Registration Statement pursuant to which the Holder
      is permitted to utilize the prospectus thereunder to resell all of the
      Underlying Shares issued to the Holder and all of the Underlying Shares as
      are issuable to the Holder upon conversion in full of this Debenture
      subject to the applicable Forced Conversion (and the Company believes, in
      good faith, that such effectiveness will continue uninterrupted for the
      foreseeable future), (iii) the Common Stock is listed for trading on a
      Trading Market (and the Company believes, in good faith, that trading of
      the Common Stock on a Trading Market will continue uninterrupted for the
      foreseeable future), (iv) all liquidated damages and other amounts owing
      in respect of the Debentures and Underlying Shares shall have been paid or
      will, concurrently with the issuance of the Underlying Shares, be paid in
      cash; (v) there is a sufficient number of authorized but unissued and
      otherwise unreserved shares of Common Stock for the issuance of all the
      Underlying Shares as are issuable to the Holder upon conversion in full of
      the Debentures subject to the applicable Forced Conversion; (vi) the
      issuance of such shares upon conversion of the Debentures in the
      applicable Forced Conversion would not violate the limitations set forth
      in Section 4(a)(ii), calculated in a manner consistent with the second
      sentence thereof, and (vii) no Event of Default nor any event that with
      the passage of time or notice or both would constitute an Event of Default
      has occurred and is continuing.

            "Exchange Act" means the Securities Exchange Act of 1934, as
      amended.

            "Interest Conversion Rate" means the average of the 5 Closing Prices
      immediately prior to the applicable Interest Payment Date.

            "Late Fees" shall have the meaning set forth in the second paragraph
      to this Debenture.

                                       17
<PAGE>

            "Mandatory Prepayment Amount" for any Debentures shall equal the sum
      of (i) the greater of: (A) 120% of the principal amount of Debentures to
      be prepaid, plus all accrued and unpaid interest thereon and all other
      accrued and unpaid amounts due hereunder, or (B) the principal amount of
      Debentures to be prepaid, plus all other accrued and unpaid interest
      hereon and other amounts due hereunder, divided by the Set Price on (x)
      the date the Mandatory Prepayment Amount is demanded or otherwise due or
      (y) the date the Mandatory Prepayment Amount is paid in full, whichever is
      less, multiplied by the Closing Price on (x) the date the Mandatory
      Prepayment Amount is demanded or otherwise due or (y) the date the
      Mandatory Prepayment Amount is paid in full, whichever is greater, and
      (ii) all other amounts, costs, expenses and liquidated damages due in
      respect of such Debentures.

            "Monthly Redemption" shall mean the redemption of the Debenture
      pursuant to Section 5(a) hereof.

            "Monthly Redemption Amount" shall mean, as to a Monthly Redemption,
      $1,615,384.60 in the aggregate among all Holders, or such lesser principal
      amount of the Debentures as is outstanding in the aggregate on the Monthly
      Redemption Date.

            "Monthly Redemption Date" means the last Trading Day of each month,
      commencing on the last Trading Day of March 2004 and ending upon the full
      redemption of this Debenture.

            "Original Issue Date" shall mean the date of the first issuance of
      the Debentures regardless of the number of transfers of any Debenture and
      regardless of the number of instruments which may be issued to evidence
      such Debenture.

            "Person" means a corporation, an association, a partnership,
      organization, a business, an individual, a government or political
      subdivision thereof or a governmental agency.

            "Purchase Agreement" means the Securities Purchase Agreement, dated
      as of September 26, 2003, to which the Company and the original Holder are
      parties, as amended, modified or supplemented from time to time in
      accordance with its terms.

            "Registration Rights Agreement" means the Registration Rights
      Agreement, dated as of the date of the Purchase Agreement, to which the
      Company and the original Holder are parties, as amended, modified or
      supplemented from time to time in accordance with its terms.

            "Registration Statement" means a registration statement meeting the
      requirements set forth in the Registration Rights Agreement, covering
      among other things the resale of the Conversion Shares and naming the
      Holder as a "selling stockholder" thereunder.

                                       18
<PAGE>

            "Securities Act" means the Securities Act of 1933, as amended, and
      the rules and regulations promulgated thereunder.

            "Set Price" shall have the meaning set forth in Section 4(c)(i).

            "Trading Day" means (a) a day on which the shares of Common Stock
      are traded on a Trading Market on which the shares of Common Stock are
      then listed or quoted, or (b) if the shares of Common Stock are not quoted
      on a Trading Market, a day on which the shares of Common Stock are quoted
      in the over-the-counter market as reported by the National Quotation
      Bureau Incorporated (or any similar organization or agency succeeding its
      functions of reporting prices); provided, that in the event that the
      shares of Common Stock are not listed or quoted as set forth in (a), (b)
      and (c) hereof, then Trading Day shall mean a Business Day.

            "Transaction Documents" shall have the meaning set forth in the
      Purchase Agreement.

      Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct debt obligation of the
Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as this Debenture is
outstanding, the Company shall not and shall cause it subsidiaries not to,
without the Consent of the Holders, (a) amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holders; (b) repay, repurchase or offer to repay, repurchase or otherwise
acquire more than a de minimis number of shares of its Common Stock or other
equity securities other than as to the Conversion Shares to the extent permitted
or required under the Transaction Documents or as otherwise permitted by the
Transaction Documents; or (c) enter into any agreement with respect to any of
the foregoing.

      Section 8. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.

      Section 9. So long as any portion of this Debenture is outstanding, the
Company will not and will not permit any of its subsidiaries to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness or liens of any kind, on or with respect to any of its property or
assets now owned or hereafter acquired or any interest therein or any income or

                                       19
<PAGE>

profits therefrom that is senior to, or pari passu with, in any respect, the
Company's obligations under the Debentures without the prior Consent of the
Holders.

      Section 10. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

      Section 11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.

      Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates
applicable laws governing usury, the applicable rate of interest due hereunder

                                       20
<PAGE>

shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on this Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.

      Section 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.

                              *********************

                                       21
<PAGE>

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

                                        PHARMOS CORPORATION

                                        By:_____________________________________
                                           Name:
                                           Title:

<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the 4% Convertible
Debenture of Pharmos Corporation (the "Company"), due on March 31, 2005, into
shares of common stock, $0.03 par value per share (the "Common Stock"), of the
Company according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Company's Common Stock does
not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.

The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

Conversion calculations:

                            Date to Effect Conversion:

                            Principal Amount of Debentures to be Converted:

                            Payment of Interest in Common Stock __ yes  __ no
                                 If yes, $_____ of Interest Accrued on Account
                                 of Conversion at Issue.

                            Number of shares of Common Stock to be issued:

                            Signature:

                            Name:

                            Address:

<PAGE>

                                   Schedule 1

                               CONVERSION SCHEDULE

4% Convertible Debentures due on March 31, 2005, in the aggregate principal
amount of $21,000,000 issued by Pharmos Corporation This Conversion Schedule
reflects conversions made under Section 4 of the above referenced Debenture.

                                     Dated:

=======================--------------------=============------------------------
                                             Aggregate
                                             Principal
                                               Amount
                                             Remaining
                                           Subsequent to
                                             Conversion
    Date of Conversion                      (or original
   (or for first entry,     Amount of        Principal
   Original Issue Date)     Conversion        Amount)          Company Attest
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                                       24EXHIBIT 10.12

THE  CONSULTING  AGREEMENT  made  as  of  the  1st  day  of  March  2003

BETWEEN:

               ENDEAVOR CAPITAL GROUP LLC, a corporation existing under the laws
               of  Florida

               (hereinafter  referred  to as the "Consultant") OF THE FIRST PART

               SPECTRUM  SCIENCES & SOFTWARE, INC., a corporation existing under
               the  laws  of  Florida

               (hereinafter referred to as the "Corporation") OF THE SECOND PART

WHEREAS  the  Corporation  wishes  to  retain  the Consultant to perform certain
investor  relations  and  corporate  communications  consulting services and the
Consultant  has  agreed  to  provide  such  services  to  the  Corporation.

NOW  THEREFORE  THIS  AGREEMENT  WITNESSETH that in consideration for the mutual
covenants  and  agreements  herein  contained  and  for  other good and valuable
consideration,  it  is  hereby  agreed  by  and  between the parties as follows:

                                    ARTICLE 1
                                   DEFINITIONS
                                   -----------

1.1     For  the purpose of this Agreement, "Consulting Services" shall mean the
corporate and investor relations services relating to the business, products and
services  of the Corporation to be provided by the Consultant, and in particular
but  without  restricting the generality of the foregoing, mean arranging broker
and  analyst  meetings,  contact,  and  under  the direction of the Corporation,
mailing  to  brokers, analysts, and investment advisors, and in assisting in the
preparation  of various corporate and product related materials.  The Consultant
shall  provide  such  materials  to individuals upon request and the Corporation
agrees  to  provide  the  Consultant  with  sufficient  materials to fulfill the
requests.

                                    ARTICLE 2
                   ENGAGEMENT OF THE CONSULTANT AND ITS DUTIES
                   -------------------------------------------

2.1     The  Corporation  hereby  engages the services of the Consultant ant the
Consultant  hereby  accepts  the  engagement of its services by the Corporation,
subject  to  the  terms  and  conditions  hereafter  contained.

2.2     The  Consultant shall provide the Consulting Services to the Corporation
in  such  manner as the Corporation and the Consultant may reasonably agree, and
shall  devote such of its time as is necessary to properly render the Consulting
Services  to  the Corporation and all its effort, skills, attention and energies
during  that  time  to  the  performance  of its duties as herein set forth.  In
addition  to  the  foregoing, the Consultant will ensure that the services to be

                                       32
<PAGE>

provided  will  be  carried  out  by  qualified  and  competent employees of the
Consultant  who  are  familiar  with  the  Corporations  affairs,  business  and
products.

2.3     The  Corporation  acknowledges that it is aware of the Consultant's many
outside  activities,  duties  and  financial  interests  and  agrees  that  the
performance  of  such  activities  and  duties and involvement of such financial
interest  will not be construed as a breach of this Agreement, provided that the
Consultant provides the Consulting Services on a basis which does not impair the
activities  and  business  interest of either the Corporation or the Consultant.

2.4     In the performance of the services to be rendered by the Consultant, the
Consultant  will  be relying upon information received from the Corporation, and
will  so  disclose  the  fact  in  all  communications from the Consultant.  The
Corporation  agrees  to  provide the Consultant with such information, financial
records,  documents and product information as may facilitate the performance of
the  Consulting Services by the Consultant.  The Consultant acknowledges that at
times  it  will be privy to confidential and sensitive information regarding the
Corporation  and  will use appropriate discretion with respect to the protection
and  use  of  this  information.

2.5     Prior  written  approval  will  be  obtained  by  the Consultant for all
material  to  be reproduced, distributed, mailed faxed or otherwise disseminated
either  directly  or  indirectly,  such approvals to be granted by an authorized
officer  of  the  Corporation.

2.6     In  the event of any misstatements or misreprestations in information as
provided  by the Corporation to the Consultant and as utilized by the Consultant
in  the  performance  of the Consulting Services that may result in liability to
the  Consultant,  the  Corporation  agrees  to  indemnify  and save harmless the
Consultant  against  such  claims  or  liabilities.

2.7     The  Consultant  agrees  that it will perform the Consulting Services in
accordance  with  all  applicable  laws  of  those jurisdictions under which the
Corporation  must  comply.

2.8     The  Consultant  agrees  to  indemnify  and  serve  the Corporation, its
directors, officers, employees and shareholders harmless with respect to any and
all  claims,  suits,  losses,  liabilities, penalties, proceedings or judgments,
whether  regulatory  or  of  a  court  of  competent jurisdiction, and including
without  limitation,  reasonable  legal fees and disbursements of legal counsel,
arising  from  or  in  connection with the performance or non-performance by the
Consultant  of  the  services  to  be  provided  hereunder.

2.9     The  term  of  the  Agreement  shall  commence  on    March  1,  2003
for  a  period  of  12  months  and  shall  terminate  March  1,  2004.

2.10     Notwithstanding  Section  2.9 either party may terminate this Agreement
by  providing  the  other  party  with  at  least on (1) months' written notice.

                                       33
<PAGE>

2.11     The  Consultant shall at all times be an independent contractor and not
the  servant  or  agent  of  the  Corporation.  No partnership, joint venture or
agency  will  be  created or will be deemed to be created by the Agreement or by
any action of the parties under this Agreement.  The Consultant has no authority
to incur any liabilities on behalf of the Corporation.  The Consultant is not an
agent,  servant or employee of the Corporation, nor shall it represent itself to
have  any  such  relationship  with the Corporation.  The Consultant shall be an
independent  contractor  with  control  over  the  manner  and  means  of  its
performance.  Neither  the  Consultant  nor  its  employees  or  agents shall be
entitled  to  rights  or  privileges applicable to employees of the Corporation,
including  but  not  limited  to, liability insurance, group insurance,  pension
plans, holiday paid vacation and other benefit plans which may be available from
time  to  time  between  the  Corporation  and  its  employees.

2.12     The Consultant shall be responsible for the management of its employees
and  without  limiting the generality of the foregoing, shall be responsible for
payment  to  the  proper  authorities  of  all  unemployment insurance premiums,
Internal  Revenue Services contributions, Workers' Compensation premiums and all
other employment expenses for all of the Consultant's employees.  The Consultant
shall  be  responsible  for  deduction and remittance of all income tax due from
itself  and  its  employees.

                                    ARTICLE 3
                                  COMPENSATION
                                  ------------

3.1     The  Corporation  agrees  to pay the Consultant, in consideration of the
provision  by  the Consultant of the Consulting Services to the Corporation, the
sum  of four thousand United States dollars (US $4,000) per month with the first
month  payable  immediately  upon  execution  of  the  Agreement. Thereafter the
consulting fee shall be due and payable on the first of the month those services
will  be  provided  for  the  duration  of  the  term  of  the  Agreement.

                                    ARTICLE 4
                                 CONFIDENTIALITY
                                 ---------------

4.1     The  Consultant  will  not,  directly  or  indirectly, use, disseminate,
disclose,  communicate,  divulge, reveal, publish, use for its own benefit, copy
make  notes  of,  input  into  a  computer  database  or  preserve  in  any  way
confidential  information  relating  the  Corporation  or  its  subsidiaries,
associates  or  affiliated corporations whether during the term of the Agreement
or  thereafter,  unless  it  first  received written permission to do so form an
authorized  officer  of  the  Corporation.

4.2     For  the  purpose  of  this  Agreement,  "confidential  information"  is
information  disclosed to or acquired by the Consultant relating to the business
of  the Corporation, or its subsidiaries, associates or affiliated corporations,
their  projects  or  the  personal  affairs  or  their  directors,  officers and
shareholders,  including  information  developed  or  gathered by the Consultant
which  has  not  been  approved  by  the  Corporation  for public dissemination.
Confidential  information  does  not  include confirmation in the public domain,

                                       34
<PAGE>

information  released  from provisions of the Agreement by written authorization
of  an  authorized  officer of the Corporation, information which is part of the
general  skill  and knowledge of the Consultant and does not relate specifically
to  the  business of the Corporation, and information which is authorized by the
Corporation  to  be  disclosed  in  the ordinary course or is required by law or
applicable  regulatory  policy  to  be  disclosed.

4.3     Forthwith  upon  termination  of  this  Agreement  for  any  reason, the
consultant  shall return to the Corporation all information, documents and other
material,  as  well  as any copies thereof, received by it from the Corporation.
All  documents,  notes  and  memoranda  prepared  by  the  Consultant  based  on
information  provided  by the Corporation shall be destroyed and the destruction
thereof  certified  by  the  Corporation.

                                    ARTICLE 5
                                  MISCELLANEOUS
                                  -------------

5.1     Any notice required or permitted to be given hereunder shall be given by
hand  delivery,  facsimile  transmission or by registered mail, postage prepaid,
addressed  to  the parties at their respective addresses as previously set forth
and  any  such notices given by hand delivery or by facsimile transmission shall
be  deemed  to have been received on the date of delivery or transmission and if
given  by  prepaid registered mail, shall be deemed to have been received on the
third business day immediately following the date of mailing.  The parties shall
be  entitled  to  give  notice  of changes of addresses from time to time in the
manner  hereinbefore  provided  for  the  giving  of  notice.

5.2     Time  shall  be  the  essence  of  this  Agreement.

5.3     The  provisions  of  the Agreement shall ensure to the benefit of and be
binding  upon the Corporation and the Consultant and their respective successors
and  assigns.  This  Agreement  shall  not  be  assignable  by  the  Consultant.

5.4     This  Agreement  constitutes  the  entire  agreement between the parties
hereto  pertaining  to  the  subject  matter hereof and supersedes all prior and
contemporaneous agreements, understanding, negotiations and discussions, whether
oral  or  written,  of  the parties hereto in connection with the subject matter
hereof,  no  supplement,  modification,  waiver  or termination of the Agreement
shall be binding, unless executed in writing by the parties to be bound thereby.
In  case  any  provision  of  this  Agreement  shall  be  invalid,  illegal  or
unenforceable,  the  validity,  legality  and  enforceability  of  the remaining
provisions  shall  not  be  affected  or  impaired  thereby.

                                       35
<PAGE>

5.5     This Agreement shall be governed by and construed in accordance with the
laws  of  Florida  and any applicable federal laws.  The parties agree to submit
to  the  jurisdiction  of  the  Florida  Courts.

IN  WITNESS  WHEREOF  this  Agreement  has  been  executed  by  the  parties.

                    )  Endeavor  Capital  Group  LLC.
                    )
                    )
                    )  Per:  /c/  Jeffrey  Schneider
                    )        Authorized  Signatory
                             President
                             Endeavor  Capital  Group  LLC
                    )
                    )

                    )  Spectrum  Sciences  and  Software.
                    )
                    )
                    )  Per:  /c/  Nancy  C.  Gontarek
                    )        Authorized  Signatory
                             Chief  Financial  Officer
                             Spectrum  Sciences  &  Software,  Inc.

                                       36
<PAGE>

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