ex10-2



 



Exhibit 10.2



ESCROW AGREEMENT


     THIS ESCROW AGREEMENT (the “Agreement”) is made as of this 13th day of
December, 2001, by and among AMERICAN STOCK TRANSFER & TRUST COMPANY, a New
York corporation (the “Escrow Agent”), HEARx LTD., a Delaware corporation (the
“Company”), and ADVANTAGE FUND II LTD. (the “Investor”).


W I T N E S S E T H :


     WHEREAS, pursuant to the terms and conditions of the Exchange and
Redemption Agreement, dated as of December 4, 2001 the Company and the Investor
(the “Exchange Agreement”), the Company has issued 470,530 shares of its common
stock, $.10 par value per share (the “Common Stock”), to the Investor (such
shares together with 129,470 shares of Common Stock currently held by the
Investor are hereinafter referred to as the “Escrowed Shares”); and


     WHEREAS, the Company and the Investor desire that the Escrowed Shares be
held in escrow pending their sale or disposition by the Investor pursuant to
the terms and conditions of this Agreement; and


     WHEREAS, the Escrow Agent acts as the Company’s transfer agent for its
Common Stock and is willing to act as the escrow agent for the Escrowed Shares.


     NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which the parties acknowledge, the parties hereby agree as
follows:


     1.     Establishment of Escrow Account. Investor and the Company hereby
appoint Escrow Agent to serve as escrow agent hereunder. Escrow Agent hereby
accepts such appointment and, upon receipt of the Escrowed Shares, agrees to
hold, invest, disburse and release the Escrowed Shares in accordance with this
Escrow Agreement. Concurrently herewith, the Company and the Investor shall
deposit with the Escrow Agent the Escrowed Shares. The Company shall deliver
four of the certificates representing the Escrowed Shares in denominations of
100,000 shares of Common Stock and one certificate in the denomination of
70,530 shares of Common Stock, each such certificate shall be registered in the
name of the Investor (each such certificate, a “Certificate”), and the Investor
shall deposit with the Escrow Agent, by electronic delivery through DTC,
129,470 shares of Common Stock (the “DTC Shares.”)


     2.     Voting Rights. The Investor shall have the right to vote all Escrowed
Shares owned by it of record with respect to any matter to which the holders of
the Common Stock of the Company are entitled to vote.


 






 


     3.     Dividends and Distributions. In the case that during the term of this
Agreement a dividend or other distribution shall be made or issued upon or on
account of any of the Escrowed Shares any (i) cash dividends paid by the
Company; (ii) stock dividends in the form of additional shares of Common Stock
or other securities of the Company; or (iii) any other funds or any property
through a distribution by the Company to its stockholders or a capital
transaction affecting the Common Stock of the Company, such dividend or other
distribution shall be kept by the Escrow Agent as Escrowed Shares subject to
this Agreement, if in shares of Common Stock, and shall be delivered promptly
to the Investor, if in cash or other securities of the Company or other funds
or property.


     4.     Tax Treatment. The Company and the Investor agree that, for United
States Federal income tax purposes, the Investor will be treated as the sole
owners of the Escrowed Shares.


     5.     Disbursements From the Escrow Account.


            (a)  Except to the extent of one or more Investor Notices (as defined
below) or the removal or resignation of the Escrow Agent in accordance with
Section 7, the Escrowed Shares will be held by the Escrow Agent in accordance
with this Agreement at its place of business specified in Section 10.


            (b)  The Investor is entitled to deliver to the Escrow Agent one or more
written notices instructing the Escrow Agent to release Escrowed Shares in the
circumstances and with the results set forth in Sections 5(c), (d) and (e) of
this Agreement. In order to be effective under this Agreement, each such
notice (each, an “Investor Notice”) that directs the release of all or a
portion of the Escrowed Shares based upon the stock price of the Common Stock
must have attached or set forth thereon a listing of the stock price for the
Common Stock as reported by the Wall Street Journal (or another reporting
service mutually agreed to in writing by each of the Company and the Investor
for such purpose for the relevant period and provided to the Escrow Agent). In
addition, each Investor Notice shall specify (a) the number of shares
represented by a Certificate that will be delivered to it pursuant to such
Investor Notice or (b) that the DTC Shares will be delivered to it by
electronic delivery pursuant to the Investor Notice. The Investor will provide
a copy of each Investor Notice to the Company via facsimile concurrently with
such delivery to the Escrow Agent. Absent an error in calculation, the parties
understand and agree that the Escrow Agent is bound to act in accordance with
Investor Notices, without any investigation on the part of the Escrow Agent,
and no notice or instruction received from or on behalf of the Company shall
affect the Escrow Agent’s obligation to act in accordance with any Investor
Notice (absent an error in calculation) or to honor subsequent Investor
Notices. The Company agrees that it shall have no right to deliver any such
contradictory notices. The Escrow Agent shall deliver all Certificates and DTC
Shares hereunder as soon as practicable following the receipt of an Investor
Notice directing such release and shall immediately notify the Company of such
delivery.


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            (c)  If at any time and from time to time prior to January 1, 2004, the
Escrow Agent receives an Investor Notice stating that the closing price (the
“Closing Price”) of the
Common Stock as reported by the Wall Street Journal (or another reporting
service mutually agreed to in writing by each of the Company and the Investor
and provided to the Escrow Agent) for the five consecutive trading days
immediately preceding the date of such notice equals or exceeds $2.46 per share
(subject to equitable adjustment in the event of any stock split, stock
combination or similar event affecting the Common Stock), then the Escrow Agent
shall deliver to or as directed by the Investor one Certificate or the DTC
Shares, as specified in such Investor Notice. If the Escrow Agent shall have
previously delivered one or more Certificates or the DTC Shares to the Investor
under this Section, then it shall be a condition to the Escrow Agent’s
obligation to deliver a Certificate or DTC Shares, as the case may be, on
account of the Investor Notice then at issue that the Investor Notice at issue
contain a certification of the Investor that the Investor has sold or otherwise
disposed of the shares of Common Stock represented by prior delivered
Certificate(s) or DTC Shares in a manner permitted by the Exchange Agreement,
including any effective volume limitations therein on the Investor’s right to
resale any such shares, if any.


            (d)  The Escrow Agent agrees to issue Certificates free of restrictive
legends if so directed by the Company and the Escrow Agent receives an opinion
of counsel to the Company to that effect. The parties hereto acknowledge and
agree that the DTC Shares will be delivered at all times free of restrictive
legend.


            (e)  If the Escrow Agent holds less than 200,000 Escrowed Shares on or
following January 1, 2004, then the Investor may deliver to the Escrow Agent an
Investor Notice directing the delivery to or as directed by it of all then
remaining Escrowed Shares, following the delivery of which this Agreement shall
terminate. If on or following January 1, 2004 the Escrow Agent holds 200,000
or more Escrowed Shares and the Investor has sold or otherwise disposed of all
of the shares represented by any previously delivered Certificates or the DTC
Shares, then the Escrow Agent shall deliver to the Investor one additional
Certificate or the DTC Shares, as specified in the Investor Notice. If the
Investor shall subsequently deliver to the Escrow Agent an Investor Notice
stating that it has sold or otherwise disposed of the shares represented by any
additional Certificates or the DTC Shares previously delivered under this
Section and certifies that the volume limitations set forth in Section 5(c)
above have been met, then the Escrow Agent shall deliver to the Investor an
additional Certificate or the DTC Shares, as specified in such Investor Notice,
until such time as no further Escrowed Shares are held by the Escrow Agent.


     6.     Resignation and Removal of Escrow Agent. Escrow Agent may resign from
the performance of its duties hereunder at any time and for any reason by
giving not less than twenty (20) days’ prior written notice to the parties, or
may be removed, with or without cause, by the parties, acting jointly by
furnishing a written notice to Escrow Agent, at any time by the giving of ten
(10) days’ prior written notice to Escrow Agent. Such resignation of removal
shall take effect upon the appointment of a successor escrow agent as provided
below or as otherwise agreed by the Company, the Investor and Escrow Agent.
Upon any such notice of resignation or removal, the Company and the Investor
jointly shall appoint a successor Escrow Agent hereunder. The parties hereto
agree that the successor Escrow Agent may be Robinson Silverman Pearce Aronsohn
& Berman LLP (“Robinson Silverman”). Upon the acceptance in writing of any
appointment as Escrow Agent


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hereunder by a successor Escrow Agent, such
successor Escrow Agent
shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Escrow Agent, and the retiring
Escrow Agent shall be discharged from its duties and obligations under this
Escrow Agreement, but shall not be discharged from any liability for actions
taken as Escrow Agent hereunder prior to such succession. After any retiring
Escrow Agent’s resignation or removal, the provisions of this Escrow Agreement
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Escrow Agent under this Escrow Agreement. In the event that a
successor escrow agent is not so appointed, then Escrow Agent may relinquish
its custody of the Escrowed Shares by delivering the Escrowed Shares to
Robinson Silverman.


     7.     Liability of Escrow Agent.


            (a)  Escrow Agent shall have no liability or obligation with respect to the
Escrowed Shares except for Escrow Agent’s willful misconduct or gross
negligence. Escrow Agent’s sole responsibility shall be for the safekeeping,
investment, and disbursement of the Escrowed Shares in accordance with the
terms of this Escrow Agreement. Escrow Agent shall have no implied duties or
obligations and shall not be charged with knowledge or notice of any fact or
circumstance not specifically set forth herein. Escrow Agent may rely upon any
instrument, not only as to its due execution, validity and effectiveness, but
also as to the truth and accuracy of any information contained therein, which
Escrow Agent shall in good faith believe to be genuine, to have been signed or
presented by the person or parties purporting to sign the same and to conform
to the provisions of this Escrow Agreement. In no event shall Escrow Agent be
liable for incidental, indirect, special, consequential or punitive damages.
Escrow Agent shall not be obligated to take any legal action or commence any
proceeding in connection with the Escrowed Shares or this Escrow Agreement, or
to appear in, prosecute or defend any such legal action or proceeding. Escrow
Agent may consult legal counsel selected by it in the event of any dispute or
question as to the construction of any of the provisions of this Agreement or
of any other agreement or of its duties hereunder, and shall incur no liability
and shall be fully indemnified from any liability whatsoever in acting in
accordance with the opinion or instruction of such counsel. The Company shall
promptly pay, upon demand, the reasonable fees and expenses of any such
counsel.


            (b)  The Escrow Agent is authorized, in its sole discretion, to comply with
orders issued or process entered by any court with respect to the Escrowed
Shares, without determination by the Escrow Agent of such court’s jurisdiction
in the matter. If any portion of the Escrowed Shares is at any time attached,
garnished or levied upon under any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by any court affecting such property or any part of
such proceeds, then and in any such event, the Escrow Agent is authorized, in
its sole discretion, to rely upon and comply with any such order, writ,
judgment or decree which it is advised by legal counsel selected by it is
binding


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upon it without the need for appeal or other action; and if the Escrow
Agent complies with any such order, writ, judgment or decree, it shall not be
liable to any of the parties or to any other person or entity by reason of such
compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated. Escrow Agent shall give
prompt written notice to the Company and the Investor of its compliance
with any such order, writ, judgment or decree.


     8.     Indemnification of Escrow Agent. From and at all times after the date
of this Escrow Agreement, the Company shall, to the fullest extent permitted by
law and to the extent provided herein, indemnify and hold harmless Escrow Agent
and each director, officer, employee, attorney, agent and affiliate of Escrow
Agent (collectively, the “Indemnified Parties”) against any and all actions,
claims (whether or not valid), losses, damages, liabilities, costs and expenses
of any kind or nature whatsoever (including without limitation reasonable
attorneys’ fees, costs and expenses) incurred by or asserted against any of the
Indemnified Parties from and after the date of this Agreement, whether direct,
indirect or consequential, as a result of or arising from or in any way
relating to any claim, demand, suit, action or proceeding (including any
inquiry or investigation) by any person (including, without limitation, the
Company or the Investor), whether threatened or initiated, asserting a claim
for any legal or equitable remedy against any person under any statute or
regulation (including, but not limited to, any federal or state securities
laws, or under any common law or equitable cause or otherwise), arising from or
in connection with the negotiation, preparation, execution, performance or
failure of performance of this Escrow Agreement or any transactions
contemplated herein, whether or not any such Indemnified Party is a party to
any such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the
right to be indemnified hereunder for any liability finally determined by a
court of competent jurisdiction, subject to no further appeal, to have resulted
from the gross negligence or willful misconduct of such Indemnified Party.


     9.     Fees and Expenses of Escrow Agent. The Company shall compensate Escrow
Agent for its services hereunder in accordance with Exhibit A attached to this
Agreement and, in addition, shall reimburse Escrow Agent for all of its
reasonable and actual out-of-pocket expenses, including travel expenses,
telephone and facsimile transmission costs, postage (including express mail and
overnight delivery charges), copying charges and the like. All of the
compensation and reimbursement obligations set forth in this Section 9 shall be
payable by the Company upon demand by Escrow Agent. The obligations of the
Company under this Section 9 shall survive any termination of this Escrow
Agreement and the resignation or removal of Escrow Agent.


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     10.     Notices. All notices, instructions or correspondence required or
permitted to be given in connection with this Agreement shall be given by hand,
facsimile, overnight express service or certified mail, return receipt
requested, and shall be effective upon receipt, addressed to the parties as
follows:



	 
	If to the Company:
	 
	HEARx Ltd.
	1250 Northpoint Parkway
	West Palm Beach, FL 33407
	Facsimile No.: (501) 688-8883
	Attn:  Chairman
	 
	With copies to:
	 
	Bryan Cave LLP
	700 Thirteenth Street, N.W., Suite 700
	Washington, DC  20005-3960
	Facsimile No.: (202) 508-6200
	Attn: LaDawn Naegle, Esq
	 
	If to the Investor:
	 
	Genesee International Inc.
	10500 NE 8th Street
	Suite 1920
	Bellevue, WA 98004
	Facsimile: (425) 462-4645
	Attention: Howard Coleman
	 
	With copies to:
	 
	Robinson Silverman Pearce Aronsohn & Berman LLP
	1290 Avenue of the Americas
	New York, NY  10104
	Facsimile No.:  (212) 541-4630 and (212) 541-1432
	Attn:  Eric L. Cohen, Esq
	 
	If to Escrow Agent:
	 
	American Stock Transfer & Trust Company
	6201 15th Avenue - Third Floor
	Brooklyn, NY 11219
	Attention:    Mr. Herbert J. Lemmer
	Fax No.        (718) 331-1852



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     The parties may change the address to which notices shall be given by
giving notice to the other in the same manner as set forth above in this
Section 10.


     11.     Amendment or Waiver. This Escrow Agreement may be changed, waived,
discharged or terminated only by a writing signed by the Company, the Investor
and Escrow Agent. No delay or omission by any party in exercising any right
with respect to this Agreement shall operate as a waiver. A waiver on any one
occasion shall not be construed as a bar to, or waiver of, any right or remedy
on any future occasion.


     12.     Severability. To the extent any provision of this Escrow Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Escrow Agreement.


     13.     Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the internal laws (and not laws pertaining to
conflicts or choice of law) of the State of New York in all respects, including
all matters of validity, construction and performance of this Escrow Agreement.
All parties consent to the exercise of personal jurisdiction over them in New
York and agree that any lawsuit or arbitration arising out of or relating to
this Escrow Agreement shall be brought exclusively in a court of competent
subject matter jurisdiction located within the County of New York, State of New
York.


     14.     Entire Agreement. This Escrow Agreement constitutes the entire
agreement between the parties relating to the holding, investment, disbursement
and release of the Escrow Property and sets forth in their entirety the
obligations and duties of Escrow Agent with respect to the Escrowed Shares.


     15.     Binding Effect. All of the terms of this Escrow Agreement, as amended
from time to time, shall be binding upon, inure to the benefit of and be
enforceable by the respective heirs, successors and assigns of the Company, the
Investor and Escrow Agent.


     16.     Execution in Counterparts. This Escrow Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same agreement or direction. Each counterpart may consist of a number of
copies hereof each signed by less than all, but together signed by all of the
parties hereto. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.


     17.     Termination. Upon the first to occur of the disbursement or release
of all Escrowed Shares or the disbursement or release of all Escrowed Shares
pursuant to Section 7(b) of this Agreement, this Escrow Agreement shall
terminate and Escrow Agent shall have no further obligation or liability
whatsoever with respect to this Escrow Agreement or the Escrowed Shares.


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     18.     Construction. When used herein the masculine includes the feminine
and neuter and the singular includes the plural and vice versa.


     19.     Attorneys’ Fees. Should an action be instituted by any of the parties
to this Agreement in any court of law or equity pertaining to the enforcement
of any of the provisions of this Agreement, the prevailing party shall be
entitled to recover, in addition to any judgment or decree rendered in such
action, all court costs and reasonable attorneys’ fees and expenses.


     20.     No Party Deemed Drafter. The parties agree that no one party shall be
deemed to be the drafter of this Agreement and that in the event this Agreement
is ever construed by a court of law or equity, such court shall not construe
this Agreement or any provision of this Agreement against any party as the
drafter of the Agreement. The parties, and each of them, acknowledge that all
parties have contributed substantially and materially to the preparation of
this Agreement.


     21.     Equitable Relief. The parties agrees that any material breach or
attempted or threatened breach of this Agreement could result in irreparable
injury to the parties for which there would be no adequate remedy at law and
consents to injunctive relief without limiting the applicability of any other
remedies.


[Signature page follows.]


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



	 
	HEARx LTD.
	 
	By:/s/ Paul A Brown



Name: Paul A. Brown, M.D.

Title: Chairman and Chief Executive Officer
	 
	ADVANTAGE FUND II LTD.
	 
	By:/s/ Donald R. Morken



Name:
	Title:
	 
	AMERICAN STOCK TRANSFER & TRUST COMPANY
	 
	By:/s/ H. J. Lemmer



      Herbert J. Lemmer, Vice President



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Exhibit A


Fee of the Escrow Agent


     The Company shall pay the Escrow Agent an annual fee of $2,500, with the
first fee payment to be made on the date of this Agreement and each subsequent
payment shall be made on the each anniversary of the date of this Agreement.



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