Document:

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                                                                   EXHIBIT 10.11

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is effective as of December
14, 1999 (the "Effective Date"), by and between HEARx Ltd., a Delaware
corporation ("HEARx"), and Stephen J. Hansbrough ("Executive").

                                    RECITALS

        1.      HEARx operates a network of hearing care centers which provide a
full range of audiological products and services for the hearing impaired (the
"Business");

        2.      Executive is recognized as having experience in the management
and operation of companies that are in the Business;

        3.      HEARx's Board of Directors (the "Board") has determined that it
is in the best interests of HEARx and its stockholders to assure that HEARx will
have the continued dedication of Executive, notwithstanding the possibility,
threat or occurrence of a Change in Control (as defined in Section 4.7);

        4.      The Board believes it is imperative (a) to diminish the
inevitable and significant distractions of Executive and dilution of the time of
Executive, by virtue of the personal uncertainties and risks created by a
pending or threatened Change in Control, (b) to encourage Executive's full
attention and dedication to HEARx currently and in the event of any threatened
or pending Change in Control and (c) to provide Executive with compensation
arrangements in the event of a Change in Control which provide Executive with
financial security, which are competitive with those of other companies, and
which ensure that Executive receives the compensation and benefits intended to
be provided to Executive by HEARx through this Agreement and HEARx's various
employee benefit and compensation plans and arrangements without regard to any
Excise Tax (as defined in Section 4.11(a)); and

        5.      To accomplish the objectives described in the two immediately
preceding recitals, the Board desires to cause HEARx to enter into this
Agreement as set forth herein.

        NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by the
parties, HEARx and Executive agree as follows:

                                    ARTICLE I
                        EMPLOYMENT, REPORTING AND DUTIES

        1.1     EMPLOYMENT. On the terms and subject to the conditions of this
Agreement, HEARx hereby employs and engages the services of Executive to serve
as, and Executive agrees to serve as and perform the functions of, President and
Chief Operating Officer (collectively, the "Office") of HEARx for the Term (as
defined in Section 4.1) and for the compensation and benefits stated herein.

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        1.2     MAJOR RESPONSIBILITIES; AUTHORITY. Executive shall have the
authorities, duties, responsibilities and status (including offices, titles and
reporting requirements) usually associated with the Office of companies having
operations and assets similar in nature and value to the operations and assets
of HEARx and at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the 90-day
period immediately preceding the Effective Date, and such other duties as the
Board shall determine and Executive shall accept from time to time.

        1.3     EXTENT OF SERVICE. During the Term, and excluding any periods of
vacation and sick leave to which Executive is entitled, Executive agrees to
devote reasonable time and energies to the Business consistent with past
practice and shall not, during the Term, be engaged in any business activity
which would interfere or prevent Executive from carrying out his duties under
this Agreement; provided, however, that this Section 1.3 shall not be construed
as preventing Executive from investing his assets in such form or manner as will
not require services on the part of Executive in the operation of the affairs of
any company in which such investments are made.

        1.4     LOCATION. Executive shall not be required to move from
Executive's home in Palm Beach County, Florida in the performance of his duties,
responsibilities and obligations hereunder.

                                   ARTICLE II
                         COMPENSATION AND RELATED ITEMS

        2.1     COMPENSATION.

                (a)     BASE SALARY. Until a Change in Control occurs, as
compensation and in consideration for the services to be rendered by Executive
under this Agreement and for the performance by Executive of the usual
obligations of such employment, HEARx agrees to pay Executive, and Executive
agrees to accept, a base salary (the "Base Salary") effective January 1, 2000 of
at least $275,000 per annum which shall be paid in accordance with HEARx's
standard payroll practice. Executive's Base Salary shall be subject to review
annually by the Board in accordance with HEARx's review policies and practices
for executives as in effect at the time of any such review. If a Change in
Control occurs, Executive's Base Salary for the next calendar year and each
subsequent calender year during the Term must increase by at least 20% over his
Base Salary during the previous calendar year.

                (b)     BONUS. At the end of each calendar year during the Term,
the Executive shall be eligible to receive an annual bonus (the "Annual Bonus"),
based upon a performance evaluation criteria which shall be consistent with the
criteria used by the Board for its current evaluation of Executive; provided
that, if, in any calender year during the Term, HEARx achieves the net income
target approved by the Board for such calendar year (the "Net Income Target")
the Executive must receive an Annual Bonus equal to at least 50% of Executive's
Base Salary for the previous calender year. For the purposes of this Agreement,
net income must be determined in accordance with generally accepted accounting
principles, consistently applied.

                (c)     PERCENTAGE OF NET INCOME. If, in any calender year
during the Term, HEARx achieves the Net Income Target approved by the Board for
such calendar year, no more than 100

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days after the end of such calender year, HEARx must pay to Executive an amount
equal to 1% of HEARx's net income for such calender year.

                (d)     1999 BONUS. Notwithstanding the foregoing, for the
calendar year ended December 31, 1999, the Executive's Annual Bonus must not be
less than $112,500.

                (e)     ADDITIONAL COMPENSATION. In addition to the Base Salary
provided for in Section 2.1(a), Executive or Executive's family, as the case may
be, shall be entitled to:

                        (i)     participate in, and shall receive all benefits
        under:

                                (A)     any and all welfare benefit and similar
                employee benefit plans, programs, arrangements or policies that
                are generally made available by HEARx and its affiliates (as
                defined in Section 4.11(l)) now or at any time in the future to
                other key employees or retired key employees, including any
                hospitalization, medical, prescription, dental, disability,
                salary continuance, individual life insurance, executive life
                insurance, group life insurance, accidental death insurance and
                travel accident insurance plans, programs, arrangements and
                policies; and

                                (B)     in addition to the incentive
                compensation provided for in Section 2.1(b), Executive will be
                entitled to any and all incentive, savings, retirement, profit
                sharing, pension, stock option, restricted stock, employee stock
                ownership, supplemental executive retirement and other employee
                benefit plans, programs, arrangements and policies that are
                generally made available by HEARx and its affiliates now or at
                any time in the future to officers and other key employees;
                additionally, pension benefits from HEARx when Executive is
                eligible for and elects retirement shall be calculated so as to
                provide a benefit based on actual credited years and months of
                service with HEARx plus a benefit calculated equivalent to an
                added ten years of credited service;

                        (ii)    annual vacations and sick leave in accordance
        with the vacation and sick leave policies of HEARx and its affiliates
        that are now or at any time in the future in effect with respect to
        officers and other key employees, during which time Executive's
        compensation shall be paid in full; and

                        (iii)   fringe benefits in accordance with the fringe
        benefit policies of HEARx and its affiliates that are now or at any time
        in the future in effect with respect to officers and other key
        employees.

        2.2     EXPENSES. HEARx agrees that, during the Term, Executive shall be
allowed reasonable and necessary business expenses in connection with the
performance of his duties hereunder within guidelines established by the Board
as in effect at any time with respect to key employees ("Business Expenses"),
including reasonable and necessary expenses for food, travel, lodging,
entertainment and other items in the promotion of the Business within such
guidelines. HEARx shall promptly reimburse Executive for all Business Expenses
incurred by Executive upon Executive's presentation to HEARx of an itemized
account thereof, together with receipts, vouchers

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or other supporting documentation. After termination or expiration of the Term,
however such termination or expiration may come about, Executive shall have
ninety (90) days after the date of such termination or expiration to submit
Business Expenses incurred during the Term to HEARx for reimbursement.

                                   ARTICLE III
                                   EXCULPATION

        HEARx agrees that Executive will not be liable for any losses, expenses,
costs or damages caused by or resulting from the recommendations, suggestions,
actions, errors, omissions or mistakes of Executive undertaken or proposed by
Executive if Executive acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of HEARx. Executive's
rights under this Article III shall not be deemed exclusive of, but shall be
cumulative with, any and all other rights (including rights of indemnification
and advancement of expenses) to which Executive may now or at any time in the
future be entitled under applicable law, HEARx's certificate of incorporation,
HEARx's bylaws, any agreement (including this Agreement), any vote of
stockholders, any resolution of directors, or otherwise. Nothing contained in
this Article III will prevent the termination of Executive's employment in
accordance with the provisions of this Agreement.

                                   ARTICLE IV
                              TERM AND TERMINATION

        4.1     TERM. Subject to Section 4.2, the term of this Agreement shall
be for five (5) years commencing on the Effective Date ("Term"); provided,
however, that if a Change in Control occurs prior to the second anniversary of
the Effective Date, the Term shall be extended to end on the fifth anniversary
of such Change in Control.

        4.2     TERMINATION OF TERM. Except as may otherwise be provided herein,
the Term shall terminate:

                (a)     Thirty (30) days after written notice of termination is
given by either party to the other; or

                (b)     On Executive's death or, at HEARx's option, upon
Executive's becoming Disabled (as defined in Section 4.9).

Any notice of termination given by HEARx to Executive under Section 4.2(a) above
shall specify whether such termination is with or without Cause (as defined in
Section 4.4). Any notice of termination given by Executive to HEARx under
Section 4.2(a) above shall specify whether such termination is made with or
without Good Reason (as defined in Section 4.5) or Good Reason-Change in Control
(as defined in Section 4.6).

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        4.3     OBLIGATIONS OF HEARX UPON TERMINATION.

                (a)     CAUSE; WITHOUT GOOD REASON; AND WITHOUT GOOD
REASON-CHANGE IN CONTROL. If HEARx terminates the Term with Cause pursuant to
Section 4.2(a), or if Executive terminates the Term without Good Reason or
without Good Reason-Change in Control pursuant to Section 4.2(a), the Term shall
terminate without further obligations to Executive, other than those obligations
owing or accrued to, vested in, or earned by Executive through the date of
termination, including:

                        (i)     Executive's Base Salary in effect at the time of
        such termination through the date of termination to the extent it
        remains unpaid; and

                        (ii)    all compensation previously deferred (together
        with any accrued interest thereon) and not yet paid by HEARx, and any
        accrued vacation pay not yet paid by HEARx; and

                        (iii)   all other amounts or benefits owing or accrued
        to, vested in or earned by Executive through the date of termination
        under the then existing or applicable plans, programs, arrangements and
        policies of HEARx and its affiliates, including any such plans,
        programs, arrangements or policies described in Section 2.1(b).

The obligations owing or accrued to, vested in, or earned by Executive through
the date of termination, including such amounts and benefits specified in
clauses (i), (ii) and (iii) of this Section 4.3(a), are collectively referred to
as the "Accrued Obligations." The aggregate amount of such obligations owing or
accrued to, vested in, or earned by Executive through the date of termination,
including the Accrued Obligations, shall be paid by HEARx to Executive in
accordance with the plans, programs or agreements under which the Accrued
Obligations were earned.

                (b)     GOOD REASON. If Executive terminates the Term with Good
Reason pursuant to Section 4.2(a):

                        (1)     HEARx shall pay the aggregate of the following
        amounts to Executive in one lump sum within thirty (30) days after the
        date of such termination or in a manner and at such later time as
        specified by Executive, provided that all such payments must be made no
        later than the end of the Term as in effect immediately before the date
        of such termination:

                                (i)     to the extent not theretofore paid,
                Executive's Base Salary in effect at the time of such
                termination (but prior to giving effect to any reduction of
                Executive's Base Salary which may have precipitated such
                termination) for the duration of the Term as in effect
                immediately before the date of such termination; and

                                (ii)    if more than three years of the Term
                have elapsed on the date of such termination, an amount equal to
                one (1) times Executive's Base Salary in

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                effect at the time of such termination (but prior to giving
                effect to any reduction of Executive's Base Salary which may
                have precipitated such termination); and

                                (iii)   an amount equal to (A) one (1) times the
                average of all bonus, profit sharing and other incentive
                payments made by HEARx to Executive in respect of the two (2)
                calendar years immediately preceding such termination, and (B)
                the pro-rata share of Executive's target bonus, profit sharing
                and other incentive payments for the calendar year in which such
                termination occurred based upon the proportion that the number
                of days that have elapsed in such calendar year up to and
                including the date of termination bears to 365; and

                                (iv)    in the case of compensation previously
                deferred by Executive, all amounts previously deferred (together
                with any accrued interest thereon) and not yet paid by HEARx,
                and any accrued vacation pay not yet paid by HEARx; and

                                (v)     all other amounts or benefits owing or
                accrued to, vested in, or earned by Executive through the date
                of termination under the then existing or applicable plans,
                programs, arrangements and policies of HEARx and its affiliates,
                including any such plans, programs, arrangements or policies
                described in Section 2.1(b); and

                                (vi)    any and all other Accrued Obligations
                not otherwise described in clauses (i), (ii), (iii) or (iv) of
                this Section 4.3(b)(1); and

                        (2)     Executive shall receive the following additional
        benefits:

                                (i)     for a 548-day period commencing on the
                date of termination of the Term (the "Good Reason Benefits
                Period"), Executive shall continue to be covered under each of
                the medical, dental, life insurance, accident benefit and other
                welfare benefit (exclusive of short- and long-term disability
                benefit) programs of HEARx in effect and applicable to Executive
                immediately prior to such termination, and HEARx shall pay the
                costs therefor except to the extent that Executive already pays
                all or any portion thereof; provided, however, that if Executive
                obtains any of the welfare benefits provided for under this
                sentence from a new employer, HEARx's obligation to provide such
                welfare benefits should be secondary to that of such new
                employer. Executive's coverage under HEARx's medical and dental
                programs for the Good Reason Benefits Period shall be included
                in the calculation of the "Period of Coverage" to be provided to
                Executive pursuant to Section 4980B(f)(2)(B) of the Internal
                Revenue Code of 1986, as amended (the "Code"), and Executive's
                right to "Continuation Coverage" under Section 4980B(f)(2) of
                the Code. The amount of the "Applicable Premium" to be charged
                Executive under Section 4980B(f)(4) for Continuation Coverage
                shall never be greater than the monthly amount charged Executive
                for medical and dental coverage prior to the termination of the
                Term; and

                                (ii)    shall be fully vested in any and all
                options, restricted stock, stock appreciation rights, cash
                equivalent stock appreciation rights or any other

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                similar rights based on the fair market value of or otherwise
                relating to HEARx's common stock (collectively, "Stock Incentive
                Rights") which are outstanding immediately prior to the
                termination of the Term, and Executive may exercise any such
                vested Stock Incentive Rights during the two year period
                commencing on the date of termination of the Term,
                notwithstanding any provision otherwise in any plan or agreement
                awarding or granting any Stock Incentive Right to Executive; and

                                (iii)   shall be fully vested in any and all
                benefits accrued under any "employee pension benefit plan," as
                defined in Section 3(2)(A) of the Employee Retirement Income
                Security Act of 1947, as amended ("ERISA"), of HEARx
                ("Retirement Plan");

                                (iv)    shall receive credit in the calculation
                of the accrued benefit under HEARx's Pension Plan ("Pension
                Plan") for (A) the compensation to be paid to Executive pursuant
                to Section 4.3(b)(1)(ii) and (B) one (1) year of service in
                addition to the service accrued by Executive through the date
                that the Term is terminated. If the benefits set forth in this
                clause would cause the Pension Plan to lose its qualification
                under Section 401(a) of the Code, then the benefits accrued
                hereunder shall accrue to Executive under HEARx's Supplemental
                Executive Retirement Plan ("SERP"); and

                                (v)     shall receive such individual
                outplacement service as is appropriate for Executive's position
                for the Good Reason Benefits Period.

                (c)     WITHOUT CAUSE BEFORE A CHANGE IN CONTROL. If HEARx
terminates the Term without Cause before the occurrence of a Change in Control
pursuant to Section 4.2(a):

                        (1)     HEARx shall pay the aggregate of the following
        amounts to Executive in one lump sum within thirty (30) days after the
        date of such termination or in a manner and at such later time as
        specified by Executive, provided that all such payments must be made no
        later than the end of the Term as in effect immediately before the date
        of such termination:

                                (i)     to the extent not theretofore paid,
                Executive's Base Salary in effect at the time of such
                termination for the duration of the Term as in effect
                immediately before the date of such termination; and

                                (ii)    if more than three years of the Term
                have elapsed on the date of such termination, an amount equal to
                one (1) times Executive's Base Salary in effect at the time of
                such termination; and

                                (iii)   an amount equal to the sum of (A) one
                (1) times the average of all bonus, profit sharing and other
                incentive payments made by HEARx to Executive in respect of the
                two calendar years immediately preceding such termination, and
                (B) the pro-rata share of Executive's target bonus, profit
                sharing and other incentive payments for the calendar year in
                which such termination occurred

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                based upon the proportion that the number of days that have
                elapsed in such calendar year up to and including the date of
                termination bears to 365; and

                                (iv)    in the case of compensation previously
                deferred by Executive, all amounts previously deferred (together
                with any accrued interest thereon) and not yet paid by HEARx,
                and any accrued vacation pay not yet paid by HEARx; and

                                (v)     all other amounts or benefits owing or
                accrued to, vested in, or earned by Executive through the date
                of termination under the then existing or applicable plans,
                programs, arrangements and policies of HEARx and its affiliates,
                including any such plans, programs, arrangements or policies
                described in Section 2.1(b); and

                                (vi)    any and all other Accrued Obligations
                not otherwise described in clauses (i), (ii), (iii) or (iv) of
                this Section 4.3(b)(1); and

                        (2)     Executive shall receive the following additional
        benefits:

                                 (i)     for a 548-day period commencing on the
                 date of termination of the Term (the "Without Cause Benefits
                 Period"), Executive shall continue to be covered under each of
                 the medical, dental, life insurance, accident benefit and other
                 welfare benefit (exclusive of short- and long-term disability
                 benefit) programs of HEARx in effect and applicable to
                 Executive immediately prior to such termination, and HEARx
                 shall pay the costs therefor except to the extent that
                 Executive already pays all or any portion thereof; provided,
                 however, that if Executive obtains any of the welfare benefits
                 provided for under this sentence from a new employer, HEARx's
                 obligation to provide such welfare benefits will thereupon
                 cease. Executive's coverage under HEARx's medical and dental
                 programs for the Without Cause Benefits Period shall be
                 included in the calculation of the "Period of Coverage" to be
                 provided to Executive pursuant to Section 4980B(f)(2)(B) of the
                 Code, and Executive's right to "Continuation Coverage" under
                 Section 4980B(f)(2) of the Code. The amount of the "Applicable
                 Premium" to be charged Executive under Section 4980B(f)(4) for
                 Continuation Coverage shall never be greater than the monthly
                 amount charged Executive for medical and dental coverage prior
                 to the termination of the Term; and

                                 (ii)    shall be fully vested in any and all
                 Stock Incentive Rights which are outstanding immediately prior
                 to the termination of the Term, and Executive may exercise any
                 such vested Stock Incentive Rights during the two year period
                 commencing on the date of termination of the Term,
                 notwithstanding any provision otherwise in any plan or
                 agreement awarding or granting any Stock Incentive Right to
                 Executive; and

                                 (iii)   shall be fully vested in any and all
                 benefits accrued under any Retirement Plan;

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                        (iv)    shall receive credit in the calculation of the
                accrued benefit under HEARx's Pension Plan for (A) the
                compensation to be paid to Executive pursuant to Section
                4.3(c)(1)(ii) and (B) one (1) year of service in addition to the
                service accrued by Executive through the date that the Term is
                terminated. If the benefits set forth in this clause would cause
                the Pension Plan to lose its qualification under Section 401(a)
                of the Code, then the benefits accrued hereunder shall accrue to
                Executive under HEARx's SERP; and

                        (v)     shall receive such individual outplacement
                service as is appropriate for Executive's position for the
                Without Cause Benefits Period.

                (d)     GOOD REASON-CHANGE IN CONTROL; WITHOUT CAUSE ON OR AFTER
A CHANGE IN CONTROL. If Executive terminates the Term with Good Reason-Change in
Control pursuant to Section 4.2(a), or if HEARx terminates the Term without
Cause on or after the occurrence of a Change in Control pursuant to Section
4.2(a):

                        (1)     HEARx shall pay the aggregate of the following
        amounts to Executive in one lump sum within thirty (30) days after the
        date of such termination or in a manner and at such later time as
        specified by Executive, provided that all such payments must be made no
        later than the end of the Term as in effect immediately before the date
        of such termination:

                                (i)     to the extent not theretofore paid,
                Executive's Base Salary in effect at the time of such
                termination (but prior to giving effect to any reduction of
                Executive's Base Salary which may have precipitated such
                termination) for the duration of the Term as in effect
                immediately before the date of such termination; and

                                (ii)    an amount equal to the sum of (A) the
                greater of (a) Executive's Base Salary times the number of years
                remaining in the original five-year term of this Agreement or
                (b) three (3) times Executive's Base Salary in effect at the
                time of such termination (but prior to giving effect to any
                reduction therein which may have precipitated such termination),
                (B) three (3) times the average of all bonus, profit sharing and
                other incentive payments made by HEARx to Executive in respect
                of the two (2) calendar years immediately preceding such
                termination and (C) the pro-rata share of Executive's target
                bonus, profit sharing and other incentive payments for the
                calendar year in which such termination occurred based upon the
                proportion that the number of days that have elapsed in such
                calendar year up to and including the date of termination bears
                to 365; and

                                (iii)   in the case of compensation previously
                deferred by Executive, all amounts previously deferred (together
                with any accrued interest thereon) and not yet paid by HEARx,
                and any accrued vacation pay not yet paid by HEARx; and

                                (iv)    all other amounts or benefits owing or
                accrued to, vested in, or earned by Executive through the date
                of termination under the then existing or

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                applicable plans, programs, arrangements and policies of HEARx
                and its affiliates, including any such plans, programs,
                arrangements or policies described in Section 2.1(b); and

                                (v)     any and all other Accrued Obligations
                not otherwise described in clauses (i), (ii), (iii) or (iv) of
                this Section 4.3(d)(1); and

                        (2)     Executive shall receive the following additional
        benefits:

                                (i)     for the three year period commencing on
                the date of termination of the Term (the "Three Year Period"),
                Executive shall continue to be covered under each of the
                medical, dental, life insurance, accident benefit and other
                welfare benefit (exclusive of short- and long-term disability
                benefit) programs of HEARx in effect and applicable to Executive
                immediately prior to the time of such termination, and HEARx
                shall pay the costs therefor except to the extent that Executive
                already pays all or any portion thereof; provided, however, that
                if Executive obtains any of the welfare benefits provided for
                under this sentence from a new employer, HEARx's obligation to
                provide such welfare benefits shall be secondary to that of such
                new employer. Executive's coverage under HEARx's medical and
                dental programs for the Three Year Period shall not be included
                in the calculation of the "Period of Coverage" to be provided to
                Executive pursuant to Section 4980B(f)(2)(B) of the Code, and
                Executive's right to "Continuation Coverage" under Section
                4980B(f)(2) of the Code for medical and dental benefits under
                HEARx's medical and dental programs shall commence on the first
                day following the end of the Three Year Period. The amount of
                the "Applicable Premium" to be charged Executive under Section
                4980B(f)(4) for Continuation Coverage shall never be greater
                than the monthly amount charged Executive for medical and dental
                coverage during the Three Year Period; and

                                (ii)    shall be fully vested in any and all
                Stock Incentive Rights which are outstanding immediately prior
                to the termination of the Term, and Executive may exercise any
                such vested Stock Incentive Rights during the Three Year Period,
                notwithstanding any provision otherwise in any plan or agreement
                awarding or granting any Stock Incentive Right to Executive; and

                                (iii)   shall be fully vested in any and all
                benefits accrued under any Retirement Plan;

                                (iv)    shall receive credit in the calculation
                of the accrued benefit under the Pension Plan for (A) the
                compensation to be paid to Executive pursuant to Section
                4.3(d)(1)(ii) and (B) three (3) years of service in addition to
                the service accrued by Executive through the date that the Term
                is terminated. If the benefits set forth in this clause would
                cause the Pension Plan to lose its qualification under Section
                401(a) of the Code, then the benefits accrued hereunder shall
                accrue to Executive under the SERP, and if the Executive is not
                a participant in the SERP, the

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                actual lump sum equivalent of the benefit described in this
                clause shall be paid in accordance with Section 4.3(d)(1); and

                                (v)     shall receive such individual
                outplacement service as is appropriate for Executive's position
                for the Three Year Period.

                (e)     DEATH. If Executive's employment is terminated under
Section 4.2(b) by reason of Executive's death, HEARx shall pay to Executive's
legal representatives the full amount of the obligations owing or accrued to,
vested in or earned by Executive through the date of Executive's death,
including the Accrued Obligations in accordance with the plans, programs or
agreements under which the Accrued Obligations were earned. Notwithstanding the
provisions of any agreement pursuant to which Stock Incentive Rights were
granted, any granted but unvested Stock Incentive Rights will automatically vest
on the date of Executive's death. Executive's legal representative may exercise
any Stock Incentive Rights which vest pursuant to this Section 4.3(e) during a
one year period following Executive's death. Anything in this Agreement to the
contrary notwithstanding, Executive's family shall be entitled to receive
benefits provided by HEARx and any of its affiliates to surviving families under
the then existing or applicable plans, programs or arrangements and policies of
HEARx and its affiliates.

                (f)     DISABILITY. If Executive's employment is terminated
under Section 4.2(b) by reason of Executive's becoming Disabled, HEARx shall pay
to Executive or Executive's legal representative the full amount of the
obligations owing or accrued to, vested in or earned by Executive through the
date of termination, including the Accrued Obligations in accordance with the
plans, programs or agreements under which the Accrued Obligations were earned.
Notwithstanding the provisions of any agreement pursuant to which Stock
Incentive Rights were granted, any granted but unvested Stock Incentive Rights
will automatically vest on the date of Executive's termination by reason of
becoming Disabled. Executive or Executive's legal representative may exercise
any Stock Incentive Rights which vest pursuant to this Section 4.3(f) during a
one year period following Executive's termination by reason of becoming
Disabled.

        4.4     CAUSE. As used in this Agreement, the term "Cause" means (a)
willful misconduct by Executive or gross neglect by Executive of his duties as
an employee, officer or director of HEARx which continues for more than thirty
(30) days after Executive's receipt of written notice from the Board to
Executive specifically identifying the willful misconduct or gross negligence of
Executive and directing Executive to discontinue the same, (b) the commission by
Executive of a crime constituting a felony or (c) the commission by Executive of
an act, other than an act taken in good faith within the course and scope of
Executive's employment, which is directly detrimental to HEARx and exposes HEARx
to material liability.

        4.5     GOOD REASON. As used in this Agreement, the term "Good Reason"
means the breach of any material provision of this Agreement by HEARx (including
any removal of Executive, without Cause, from the position of the Office during
the Term) which is not cured within thirty (30) days after written notice from
Executive to HEARx specifically identifying such breach; provided, however, that
the term "Good Reason" shall not include any breach of any provision of this
Agreement that occurs after the occurrence of a Change in Control.

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<PAGE>   12

        4.6     GOOD REASON-CHANGE IN CONTROL.

                (a)     Except as provided in Section 4.6(b), as used in this
Agreement, the term "Good Reason-Change in Control" means after the occurrence
of a Change in Control, a determination by Executive that any one or more of the
following events has occurred:

                        (i)     a material change in the nature of Executive's
        Office, including his authorities, duties, responsibilities or status
        (including offices, titles or reporting requirements), from those in
        effect immediately prior to the Change in Control; or

                        (ii)    the relocation of Executive's place of
        employment to a location in excess of fifty (50) miles from the place of
        Executive's employment immediately prior to the Change in Control,
        except for required travel on HEARx business to an extent substantially
        equivalent to Executive's business travel obligations immediately prior
        to the Change in Control; or

                        (iii)   any reduction by HEARx of Executive's Base
        Salary, or a material reduction in his bonus, profit sharing or other
        incentive benefits, from those in effect immediately prior to the Change
        in Control; or

                        (iv)    the failure by HEARx to increase Executive's
        Base Salary in a manner consistent (both as to frequency and percentage
        increase) with (A) HEARx's practices in effect immediately prior to the
        Change in Control with respect to similarly positioned employees or (B)
        HEARx's practices implemented subsequent to the Change in Control with
        respect to similarly positioned employees, whichever is more favorable
        to Executive; or

                        (v)     the failure of HEARx to continue in effect
        Executive's participation in (A) HEARx's employee benefit plans,
        programs, arrangements and policies, at a level substantially equivalent
        in value to and on a basis consistent with the relative levels of
        participation of other similarly positioned employees, as in effect
        immediately prior to the Change in Control or (B) HEARx's employee
        benefit plans, programs, arrangements and policies implemented
        subsequent to the Change in Control with respect to similarly positioned
        employees, whichever is more favorable to Executive; or

                        (vi)    the failure of HEARx to obtain from a successor
        (including a successor to a material portion of the business or assets
        of HEARx) a satisfactory assumption in writing of HEARx's obligations
        under this Agreement; or

                        (vii)   the failure of HEARx to continue to provide
        Executive with office space, related facilities and support personnel
        (including administrative and secretarial assistance) that are both
        commensurate with the Office and Executive's responsibilities to and
        position with HEARx immediately prior to the Change in Control and not
        materially dissimilar to the office space, related facilities and
        support personnel provided to other key executive officers of HEARx; or

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<PAGE>   13

                        (viii)  HEARx notifies Executive of HEARx's intention
        not to observe or perform one or more of the obligations of HEARx under
        this Agreement; or

                        (ix)    HEARx breaches any provision of this Agreement
        and such breach is not cured within thirty (30) days after HEARx's
        receipt of notice thereof from Executive.

                (b)     If, after the occurrence of a Change in Control,
Executive receives a written description from HEARx of the nature of Executive's
Office thereafter, stating Executive's authorities, duties, responsibilities,
status, salary, bonus and other employee benefits, or job location, and
Executive accepts such new authorities, duties, responsibilities, status,
salary, bonus and other employee benefits, or job location ("New Office") with
HEARx without determining that the New Office causes a Good Reason-Change in
Control as set forth in Section 4.6(a), then for the remaining Term the New
Office shall be the authorities, duties, responsibilities, status, salary, bonus
and other employee benefits, or job location to be used by Executive in
determining whether a Good Reason-Change in Control occurs thereafter pursuant
to Section 4.6(a).

        4.7     CHANGE IN CONTROL. As used herein, the term "Change in Control"
shall mean the occurrence with respect to HEARx of any of the following events:

                (a)     a report on Schedule 13D is filed with the Securities
and Exchange Commission (the "SEC") pursuant to Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any
person, entity or group (within the meaning of Section 13(d) or 14(d) of the
Exchange Act), other than HEARx (or one of its subsidiaries) or any employee
benefit plan sponsored by HEARx (or one of its subsidiaries), is the beneficial
owner (as such term is defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of 30% or more of the outstanding common stock of
HEARx or the combined voting power of the then outstanding securities of HEARx;

                (b)     a report is filed by HEARx disclosing a response to
either Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act, Item 1 of Form 8-K promulgated under the Exchange Act, or any
similar reporting requirement hereafter promulgated by the SEC;

                (c)     any person, entity or group (within the meaning of
Section 13(d) or Section 14(d) of the Exchange Act), other than HEARx (or one of
its subsidiaries) or any employee benefit plan sponsored by HEARx (or one of its
subsidiaries), shall purchase securities pursuant to a tender offer or exchange
offer to acquire any common stock of HEARx (or securities convertible into
common stock) for cash, securities or any other consideration, provided that
after consummation of the offer, the person, entity or group in question is the
beneficial owner (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of 30% or more of the combined voting
power of the then outstanding securities of HEARx (as determined under paragraph
(d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights to
acquire common stock);

                                       13
<PAGE>   14

                (d)     the stockholders of HEARx shall approve:

                        (i)     any merger, consolidation or reorganization of
        HEARx:

                                (A)     in which HEARx is not the continuing or
                surviving corporation,

                                (B)     pursuant to which common stock of HEARx
                would be converted into cash, securities or other property,

                                (C)     with an entity which, prior to such
                merger, consolidation or reorganization, owned 20% or more of
                the combined voting power of the then outstanding securities of
                HEARx, or

                                (D)     in which HEARx will not survive as an
                independent, publicly owned corporation;

                        (ii)    any sale, lease, exchange or other transfer (in
        one transaction or a series of related transactions) of all or
        substantially all the assets of HEARx, or

                        (iii)   any liquidation or dissolution of HEARx;

                (e)     the stockholders of HEARx shall approve a merger,
consolidation, reorganization, recapitalization, exchange offer, purchase of
assets or other transaction after the consummation of which any person, entity
or group (within the meaning of Section 13(d) or Section 14(d) of the Exchange
Act) would own beneficially in excess of 30% of the outstanding common stock of
HEARx or in excess of 30% of the combined voting power of the then outstanding
securities of HEARx;

                (f)     HEARx's common stock is listed on none of the American
Stock Exchange, New York Stock Exchange and NASDAQ National Market System as a
result of a going-private transaction; or

                (g)     during any period of two consecutive years, the
individuals who at the beginning of such period constituted the Board cease for
any reason to constitute a majority of the Board, unless the election or
nomination for election by HEARx's stockholders of each new director during any
such two-year period was approved by the vote of two-thirds of the directors
then still in office who were directors at the beginning of such two-year
period.

        4.8     DISABLED. As used herein, "Disabled" or "Disability" shall mean
a mental or physical impairment which, in the reasonable opinion of a qualified
doctor selected by HEARx, renders Executive unable to perform with reasonable
diligence the ordinary functions and duties of Executive on a full-time basis in
accordance with the terms of this Agreement, which inability continues for a
period of not fewer than 180 consecutive days.

                                       14
<PAGE>   15

        4.9     RETURN OF MATERIALS; CONFIDENTIAL INFORMATION. In the event of
any termination of the Term, Executive shall promptly deliver to HEARx all
lists, books, records, literature, products and any other materials owned or
provided by HEARx in connection with Executive's employment hereunder. Executive
shall not at any time during or after the Term hereof use for himself or others,
or divulge to others, any secret or confidential information, knowledge or data
of HEARx obtained by Executive as a result of his employment unless authorized
by the Board.

        4.10    CERTAIN ADDITIONAL PAYMENTS BY HEARX.

                (a)     Anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment or distribution by
HEARx or any of its affiliates to or for the benefit of Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (any such payments or distributions being individually
referred to herein as a "Payment," and any two or more of such payments or
distributions being referred to herein as "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Code (such excise tax, together with
any interest thereon, any penalties, additions to tax, or additional amounts
with respect to such excise tax, and any interest in respect of such penalties,
additions to tax or additional amounts, being collectively referred herein to as
the "Excise Tax"), then Executive shall be entitled to receive and HEARx shall
make an additional payment or payments (individually referred to herein as a
"Gross-Up Payment," and any two or more of such additional payments being
referred to herein as "Gross-Up Payments") in an amount such that after payment
by Executive of all taxes (as defined in Section 4.10(k)) imposed upon the
Gross-Up Payment, Executive retains an amount of such Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.

                (b)     Subject to the provisions of Section 4.10(c) through
(i), any determination (individually, a "Determination") required to be made
under this Section 4.10(b), including whether a Gross-Up Payment is required and
the amount of such Gross-Up Payment, shall initially be made, at HEARx's
expense, by nationally recognized tax counsel mutually acceptable to HEARx and
Executive ("Tax Counsel"). Tax Counsel shall provide detailed supporting legal
authorities, calculations and documentation both to HEARx and Executive within
15 business days of the termination of Executive's employment, if applicable, or
such other time or times as is reasonably requested by HEARx or Executive. If
Tax Counsel makes the initial Determination that no Excise Tax is payable by
Executive with respect to a Payment or Payments, it shall furnish Executive with
an opinion reasonably acceptable to Executive that no Excise Tax will be imposed
with respect to any such Payment or Payments. Executive shall have the right to
dispute any Determination (a "Dispute") within 15 business days after delivery
of Tax Counsel's opinion with respect to such Determination. The Gross-Up
Payment, if any, as determined pursuant to such Determination shall, at HEARx's
expense, be paid by HEARx to Executive within five business days of Executive's
receipt of such Determination. The existence of a Dispute shall not in any way
affect Executive's right to receive the Gross-Up Payment in accordance with such
Determination. If there is no Dispute, such Determination shall be binding,
final and conclusive upon HEARx and Executive, subject in all respects, however,
to the provisions of Section 4.10(c) through (i) below. As a result of the
uncertainty in the application of Sections 4999 and 280G of the Code, it is
possible that Gross-Up Payments (or portions thereof) which will not have been
made by HEARx should have been made ("Underpayments"), and if upon any
reasonable written request from Executive or HEARx to Tax Counsel, or upon Tax
Counsel's own initiative, Tax Counsel, at HEARx's expense,

                                       15
<PAGE>   16

thereafter determines that Executive is required to make a payment of any Excise
Tax or any additional Excise Tax, as the case may be, Tax Counsel shall, at
HEARx's expense, determine the amount of the Underpayment that has occurred, and
any such Underpayment shall be promptly paid by HEARx to Executive.

                (c)     HEARx shall defend, hold harmless and indemnify
Executive on a fully grossed-up after tax basis from and against any and all
claims, losses, liabilities, obligations, damages, impositions, assessments,
demands, judgements, settlements, costs and expenses (including reasonable
attorneys', accountants', and experts' fees and expenses) with respect to any
tax liability of Executive resulting from any Final Determination (as defined in
Section 4.10(j)) that any Payment is subject to the Excise Tax.

                (d)     If a party hereto receives any written or oral
communication with respect to any question, adjustment, assessment or pending or
threatened audit, examination, investigation or administrative, court or other
proceeding which, if pursued successfully, could result in or give rise to a
claim by Executive against HEARx under this Section 4.10(d) ("Claim"), including
a claim for indemnification of Executive by HEARx under Section 4.10(c), then
such party shall promptly notify the other party hereto in writing of such Claim
("Tax Claim Notice").

                (e)     If a Claim is asserted against Executive ("Executive
Claim"), Executive shall take or cause to be taken such action in connection
with contesting such Executive Claim as HEARx shall reasonably request in
writing from time to time, including the retention of counsel and experts as are
reasonably designated by HEARx (it being understood and agreed by the parties
hereto that the terms of any such retention shall expressly provide that HEARx
shall be solely responsible for the payment of any and all fees and
disbursements of such counsel and any experts) and the execution of powers of
attorney, provided that:

                        (i)     within 30 calendar days after HEARx receives or
        delivers, as the case may be, the Tax Claim Notice relating to such
        Executive Claim (or such earlier date that any payment of the taxes
        claimed is due from Executive, but in no event sooner than five calendar
        days after HEARx receives or delivers such Tax Claim Notice), HEARx
        shall have notified Executive in writing ("Election Notice") that HEARx
        does not dispute its obligations (including its indemnity obligations)
        under this Agreement and that HEARx elects to contest, and to control
        the defense or prosecution of, such Executive Claim at HEARx's sole risk
        and sole cost and expense; and

                        (ii)    HEARx shall have advanced to Executive on an
        interest-free basis, the total amount of the tax claimed for Executive,
        at HEARx's request, to pay or cause to be paid the tax claimed, file a
        claim for refund of such tax and, subject to the provisions of the last
        sentence of Section 4.10(g), sue for a refund of such tax if such claim
        for refund is disallowed by the appropriate taxing authority (it being
        understood and agreed by the parties hereto that HEARx shall only be
        entitled to sue for a refund and HEARx shall not be entitled to initiate
        any proceeding in, for example, United States Tax Court) and shall
        indemnify and hold Executive harmless, on a fully grossed-up after tax
        basis, from any tax imposed with respect to such advance or with respect
        to any imputed income with respect to such advance; and

                                       16
<PAGE>   17

                        (iii)   HEARx shall reimburse Executive for any and all
        costs and expenses resulting from any such request by HEARx and shall
        indemnify and hold Executive harmless, on fully grossed-up after-tax
        basis, from any tax imposed as a result of such reimbursement.

                (f)     Subject to the provisions of Section 4.10(e), HEARx
shall have the right to defend or prosecute, at the sole cost, expense and risk
of HEARx, such Executive Claim by all appropriate proceedings, which proceedings
shall be defended or prosecuted diligently by HEARx to a Final Determination;
provided, however, that (i) HEARx shall not, without Executive's prior written
consent, enter into any compromise or settlement of such Executive Claim that
would adversely affect Executive, (ii) any request from HEARx to Executive
regarding any extension of the statute of limitations relating to assessment,
payment or collection of taxes for the taxable year of Executive with respect to
which the contested issues involved in, and amount of, the Executive Claim
relate is limited solely to such contested issues with respect to the Executive
Claim and Executive shall be entitled to settle or contest, in his sole and
absolute discretion, any other issue raised by the Internal Revenue Service or
any other taxing authority. So long as HEARx is diligently defending or
prosecuting such Executive Claim, Executive shall provide or cause to be
provided to HEARx any information reasonably requested by HEARx that relates to
such Executive Claim, and shall otherwise cooperate with HEARx and its
representatives in good faith to contest effectively such Executive Claim. HEARx
shall keep Executive informed of all developments and events relating to any
such Executive Claim (including providing to Executive copies of all written
materials pertaining to any such Executive Claim), and Executive or his
authorized representatives shall be entitled, at Executive's expense, to
participate in all conferences, meetings and proceedings relating to any such
Executive Claim.

                (g)     If, after actual receipt by Executive of an amount of a
tax claimed (pursuant to an Executive Claim) that has been advanced by HEARx
pursuant to Section 4.10(e)(ii), the extent of the liability of HEARx hereunder
with respect to such tax claimed has been established by a Final Determination,
Executive shall promptly pay or cause to be paid to HEARx any refund actually
received by, or actually credited to, Executive with respect to such tax
(together with any interest paid or credited thereon by the taxing authority and
any recovery of legal fees from such taxing authority related thereto), except
to the extent that any amounts are then due and payable buy HEARx to Executive,
whether under the provisions of this Agreement or otherwise. If, after the
receipt by Executive of an amount advanced by HEARx pursuant to Section
4.10(e)(ii), a determination is made by the Internal Revenue Service or other
appropriate taxing authority that Executive shall not be entitled to any refund
with respect to such tax claimed and HEARx does not notify Executive in writing
of its intent to contest such denial of refund prior to the expiration of thirty
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of any Gross-Up Payments and other payments required
to be paid hereunder.

                (h)     With respect to any Executive Claim, if HEARx fails to
deliver an Election Notice to Executive within the period provided in Section
4.10(e)(i) or, after delivery of such Election Notice, HEARx fails to comply
with the provisions of Section 4.10(e)(ii) and (iii) and Section 4.10(f), then
Executive shall at any time thereafter have the right (but not the obligation),
at

                                       17
<PAGE>   18

his election and in his sole and absolute discretion, to defend or prosecute, at
the sole cost, expense and risk of HEARx, such Executive Claim. Executive shall
have full control of such defense or prosecution and such proceedings, including
any settlement or compromise thereof. If requested by Executive, HEARx shall
cooperate, and shall cause its affiliates to cooperate, in good faith with
Executive and his authorized representatives in order to contest effectively
such Executive Claim. HEARx may attend, but not participate in or control, any
defense, prosecution, settlement or compromise of any Executive Claim controlled
by Executive pursuant to this Section4.10(h) and shall bear its own costs and
expenses with respect thereto. In the case of any Executive Claim that is
defended or prosecuted by Executive, Executive shall, from time to time, be
entitled to current payment, on a fully grossed-up after tax basis, from HEARx
with respect to costs and expenses incurred by Executive in connection with such
defense or prosecution.

                (i)     In the case of any Executive Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this Section
4.10(i), HEARx shall pay, on a fully grossed-up after tax basis, to Executive in
immediately available funds the full amount of any taxes arising or resulting
from or incurred in connection with such Executive Claim that have not
theretofore been paid by HEARx to Executive, together with the costs and
expenses, on a fully grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by HEARx to Executive, within ten
calendar days after such Final Determination. In the case of any Executive Claim
not covered by the preceding sentence, HEARx shall pay, on a fully grossed-up
after tax basis, to Executive in immediately available funds the full amount of
any taxes arising or resulting from or incurred in connection with such
Executive Claim at least ten calendar days before the date payment of such taxes
is due from Executive, except where payment of such taxes is sooner required
under the provisions of this Section 4.10(i), in which case payment of such
taxes (and payment, on a fully grossed-up after tax basis, of any costs and
expenses required to be paid under this Section 4.10(i)) shall be made within
the time and in the manner otherwise provided in this Section 4.10(i).

                (j)     For purposes of this Agreement, the term "Final
Determination" shall mean (A) a decision, judgment, decree or other order by a
court or other tribunal with appropriate jurisdiction, which has become final
and non-appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited
to, a closing agreement under Section 7121 of the Code; (C) any disallowance of
a claim for refund or credit with respect to an overpayment of tax unless a suit
is filed on a timely basis; or (D) any final disposition by reason of the
expiration of all applicable statutes of limitations.

                (k)     For purposes of this Agreement, the terms "tax" and
"taxes" mean any and all taxes of any kind whatsoever (including any and all
Excise Taxes, income taxes, and employment taxes), together with any interest
thereon, any penalties, additions to tax or additional amounts with respect to
such taxes and any interest in respect of such penalties, additions to tax or
additional amounts.

                (l)     For purposes of this Agreement, the terms "affiliate"
and "affiliates" mean, when used with respect to any entity, individual or other
person, any other entity, individual or other person which, directly or
indirectly, through one or more intermediaries controls, or is controlled by, or
is under common control with, such entity, individual or person. The term
"control" and deviations thereof when used in the immediately preceding sentence
means the

                                       18
<PAGE>   19

ownership, directly or indirectly, of 50% of more of the voting securities of an
entity or other person or possessing the power to direct or cause the direction
of the management and policies of such entity or other person, whether through
the ownership of voting securities, by contract or otherwise.

        4.11    LEGAL FEES AND EXPENSES. HEARx shall defend, hold harmless and
indemnify Executive on a fully grossed-up after tax basis from and against any
and all costs and expenses (including reasonable attorneys', accountants' and
experts' fees and expenses) incurred by Executive acting reasonably from time to
time as a result of any contest (regardless of the outcome) by HEARx or others
contesting the validity or enforcement of, or liability under, any term or
provision of this Agreement, plus in each case interest at the applicable
federal rate provided for in Section 7872(f)(2)(B) of the Code.

        4.12    NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit Executive's continuing or future participation in any benefit,
bonus, incentive or other plan, program, arrangement or policy provided by HEARx
or any of its affiliates (including any plan, program, arrangement or policy
described in Section 2.1(e)) and for which Executive and/or Executive's family
may qualify, nor shall anything herein limit or otherwise affect such rights as
Executive and/or Executive's family may have under any other agreements with
HEARx or any of its affiliates. Amounts which are vested benefits or which
Executive and/or Executive's family is otherwise entitled to receive under any
plan, program, arrangement or policy described in Section 2.1(e)) at or
subsequent to the date of termination of the Term shall be payable in accordance
with such plan, program, arrangement or policy.

        4.13    FULL SETTLEMENT. HEARx's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which HEARx may have against Executive
or others. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement.

                                    ARTICLE V
                                  SHARE OPTIONS

        5.1     SHARE OPTIONS. Concurrent with the execution hereof, HEARx is
granting to Executive, nonqualified, five-year options to purchase 113,246
shares of HEARx's common stock, $0.10 par value per share (the "Common Stock"),
at an option price per share equal to the closing price of the Common Stock as
reported on the American Stock Exchange of the shares on the effective date of
this Agreement, subject to adjustment as provided in the Option Agreement dated
as of the date hereof (the "Options"). Such Options shall vest in and become
exercisable by Executive for all purposes as follows: 25% of such Options as of
each of the first four anniversary dates of the Effective Date, so that all of
such Options shall be fully vested in and exercisable by Executive as of the
fourth anniversary of the Effective Date. Also, if an Acceleration Event occurs,
all outstanding options to purchase HEARx's common stock, including those
options currently held by Executive, those Options granted hereunder and all
additional share options granted to Executive by HEARx after the Effective Date,
shall vest in and be exercisable by Executive (or, as the case may be, his
estate or representative) as of the Acceleration Event. "Acceleration Event"
shall mean

                                       19
<PAGE>   20

for all purposes hereof any of the following events: (a) the Term is terminated
by Executive with Good Reason pursuant to Section 4.2(a) or by HEARx without
Cause, (b) Executive dies or (c) Executive becomes Disabled. The Option
Agreement shall provide that the shares of Common Stock issuable on exercise of
the options shall be treasury shares.

                                   ARTICLE VI
                               GENERAL PROVISIONS

6.1     ARBITRATION OF DISPUTES.

                (a)     SCOPE OF AGREEMENT. HEARx and Executive agree to take
all reasonable steps to resolve any employment-related legal and/or judicial
disputes between them quickly and fairly. Should such matters remain unresolved,
HEARx and Executive agree that final and binding arbitration shall be the
exclusive remedy for any dispute between them relating to all common law,
statutory, legal or judicial claims, including any claims for breach of contract
and for violation of laws forbidding discrimination on the basis of race, color,
religion, gender, age, national origin, disability, or any other legally
protected status.

                (b)     PROCEDURE. Arbitration shall be before a single
arbitrator in Miami, Florida, unless the parties mutually agree to hold the
arbitration in a different location. The arbitration will be administered in
accordance with the employment dispute rules of the American Arbitration
Association (AAA), and its procedures then in effect. If the parties cannot
agree on an arbitrator, then the AAA rules will govern selection. HEARx will pay
the fees of the AAA and the arbitrator. However, if Executive submits a matter
to arbitration, he shall be responsible for contributing to such fees an amount
equivalent to the amount required to file a complaint of the same type in the
state court which is geographically closest to the site of the arbitration if he
does not prevail in the arbitration.

        The arbitrator's award is to be in writing, with reasons given and
evidence cited for the award. The arbitrator shall have the discretion to award
fees (including administrative charges, costs and/or reasonable attorney's fees
actually expended) to the prevailing party, in accordance with controlling law.
Any court of competent jurisdiction may enter judgment upon the award, either
by: (1) confirming the award, or (2) vacating, modifying or correcting the
award: (a) on any ground referred to in the U.S. Arbitration Act, (b) where the
findings of fact are not supported by substantial evidence, or (c) where the
conclusions of law are erroneous.

        6.2     GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the law of the State of Delaware.

        6.3     ASSIGNABILITY. This Agreement is personal to Executive and
without the prior written consent of HEARx shall not be assignable by Executive
other than by will or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by Executive's legal representatives
and heirs. This Agreement shall inure to the benefit of and be binding upon
HEARx and its successors and assigns. HEARx shall require any corporation,
entity, individual or other person who is the successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of HEARx to

                                       20
<PAGE>   21

expressly assume and agree to perform, by a written agreement in form and
substance satisfactory to Executive, all of the obligations of HEARx under this
Agreement. As used in this Agreement, the term "HEARx" shall mean HEARx as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, written agreement or otherwise.

        6.4     WITHHOLDING. HEARx may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

        6.5     ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement and understanding between Executive and HEARx and supersedes
any prior agreements or understandings, whether written or oral, with respect to
the subject matter hereof. Except as may be otherwise provided herein, this
Agreement may not be amended or modified, except by subsequent written agreement
executed by both parties hereto.

        6.6     MULTIPLE COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall constitute an original, but all of
which together shall constitute one Agreement.

        6.7     NOTICES. Any notice provided for in this Agreement shall be
deemed delivered upon deposit in the United States mails, registered or
certified mail, addressed to the party to whom directed at the addresses set
forth below or at such other addresses as may be substituted therefor by notice
given hereunder. Notice given by any other means must be in writing and shall be
deemed delivered only upon actual receipt.

                If to HEARx:

                1250 Northpoint Parkway
                West Palm Beach, FL 33407
                Attn:  President

                If to Executive:

                14245 Caloosa Boulevard
                Palm Beach Gardens, FL 33418
                Attn:  Stephen J. Hansbrough

        6.8     WAIVER. The waiver of any breach of any term or condition of
this Agreement shall not be deemed to constitute the waiver of any breach of the
same or by any other term or condition of this Agreement.

        6.9     SEVERABILITY. In the event any provision of this Agreement is
found to be unenforceable or invalid, such provision shall be severable from
this Agreement and shall not affect the enforceability or validity of any other
provision of this Agreement.

                                       21
<PAGE>   22

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

                                        HEARx LTD.

                                        By:    /s/ Paul A. Brown
                                               ------------------------------
                                        Name:  Paul A. Brown, M.D.
                                               ------------------------------
                                        Title: CEO and Chairman
                                               ------------------------------
                                        /s/ Stephen J. Hansbrough
                                        -------------------------------------
                                        Stephen J. Hansbrough

                                       22<PAGE>   1

                         KENTUCKY NATIONAL BANCORP, INC.

                      2000 STOCK OPTION AND INCENTIVE PLAN

         1.       PURPOSE OF THE PLAN.

         The purpose of this Plan is to advance the interests of the Company
through providing select key Employees, service providers and Directors of the
Bank, the Company, and their Affiliates with the opportunity to acquire Shares.
By encouraging such stock ownership, the Company seeks to attract, retain and
motivate the best available personnel for positions of substantial
responsibility and to provide additional incentives to Directors, service
providers and key Employees of the Company or any Affiliate to promote the
success of the business.

         2.       DEFINITIONS.

         As used herein, the following definitions shall apply.

         (a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.

         (b) "Agreement" shall mean a written agreement entered into in
accordance with Paragraph 5(c).

         (c) "Awards" shall mean, collectively, Options and SARs, unless the
context clearly indicates a different meaning.

         (d) "Bank" shall mean Kentucky National Bank.

         (e) "Board" shall mean the Board of Directors of the Company.

         (f) "Code" shall mean the Internal Revenue Code of 1986, as amended.

         (g) "Committee" shall mean the Stock Option Committee consisting of at
least two Non-Employee Directors appointed by the Board in accordance with
Paragraph 5(a) hereof or the Board.

         (h) "Common Stock" shall mean the common stock of the Company.

         (i) "Company" shall mean Kentucky National Bancorp, Inc.

         (j) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee, service provider or Director of the
Company or an Affiliate. Continuous Service shall not be considered interrupted
in the case of sick leave, military leave or any other leave of absence approved
by the Company, in the case of transfers between payroll locations of the
Company or between the Company, an Affiliate or a successor, or in the case of a
Director's performance of services in an emeritus or advisory capacity.

         (k) "Director" shall mean any member of the Board, and any member of
the board of directors of any Affiliate that the Board has by resolution
designated as being eligible for participation in this Plan.

         (l) "Disability" shall mean a physical or mental condition, which in
the sole and absolute discretion of the Committee, is reasonably expected to be
of indefinite duration and to substantially prevent a Participant from
fulfilling his or her duties or responsibilities to the Company or an Affiliate.

                                       1
<PAGE>   2

         (m) "Effective Date" shall mean the date specified in Paragraph 13
hereof.

         (n) "Employee" shall mean any person employed by the Company, the Bank,
or an Affiliate.

         (o) "Exercise Price" shall mean the price per Optioned Share at which
an Option or SAR may be exercised.

         (p) "ISO" shall mean an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.

         (q) "Market Value" shall mean the fair market value of the Common
Stock, as determined under Paragraph 7(b) hereof.

         (r) "Non-Employee Director" shall have the meaning provided in Rule
16b-3.

         (s) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.

         (t) "Option" means an ISO and/or a Non-ISO.

         (u) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.

         (v) [reserved]

         (w) "Participant" shall mean any person who receives an Award pursuant
to the Plan.

         (x) "Plan" shall mean the Kentucky National Bancorp, Inc. 2000 Stock
Option and Incentive Plan.

         (y) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.

         (z) "Share" shall mean one share of Common Stock.

         (aa) "SAR" (or "Stock Appreciation Right") means a right to receive the
appreciation in value, or a portion of the appreciation in value, of a specified
number of shares of Common Stock.

         (bb) "Year of Service" shall mean a full twelve-month period, measured
from the date of an Award and each annual anniversary of that date, during which
a Participant has not terminated Continuous Service for any reason.

         3.       TERM OF THE PLAN AND AWARDS.

         (a)      TERM OF THE PLAN. The Plan shall continue in effect for a term
of ten years from the Effective Date, unless sooner terminated pursuant to
Paragraph 15 hereof. No Award shall be granted under the Plan after ten years
from the Effective Date.

         (b)      TERM OF AWARDS. The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted, the term of
such ISO shall not exceed five years.

                                       2
<PAGE>   3

         4.       SHARES SUBJECT TO THE PLAN.

         (a)      GENERAL RULE. Except as otherwise required under Paragraph
10, the aggregate number of Shares deliverable pursuant to Awards shall not
exceed 30,000 Shares. Such Shares may either be authorized but unissued Shares,
Shares held in treasury, or Shares held in a grantor trust created by the
Company. If any Awards should expire, become unexercisable, or be forfeited for
any reason without having been exercised, the Optioned Shares shall, unless the
Plan shall have been terminated, be available for the grant of additional Awards
under the Plan.

         (b)      SPECIAL RULE FOR SARS. The number of Shares with respect to
which an SAR is granted shall be charged against the aggregate number of Shares
remaining available under the Plan; provided, however, that in the case of an
SAR granted in conjunction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and vice versa, only
the number of Shares subject to the Option shall be charged against the
aggregate number of Shares remaining available under the Plan. The Shares
involved in an Option as to which option rights have terminated by reason of the
exercise of a related SAR, as provided in Paragraph 9 hereof, shall not be
available for the grant of further Options under the Plan.

         5.       ADMINISTRATION OF THE PLAN.

         (a)      APPOINTMENT OF THE COMMITTEE. The Plan shall be administered
by the Committee. Members of the Committee shall serve at the pleasure of the
Board. In the absence at any time of a duly appointed Committee, the Plan shall
be administered by the Board.

         (b)      POWERS OF THE COMMITTEE. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select Participants
and grant Awards, (ii) to determine the form and content of Awards to be issued
in the form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.

         (c)      AGREEMENT. Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the Committee. Each
such Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The terms
of each such Agreement shall be in accordance with the Plan, but each Agreement
may include such additional provisions and restrictions determined by the
Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise Price of an Option
or SAR, (ii) the number of Shares subject to the Award, and its expiration date,
(iii) the manner, time, and rate (cumulative or otherwise) of exercise or
vesting of such Award, and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such Award. The
Chairman of the Committee and such other Directors and officers as shall be
designated by the Committee are hereby authorized to execute Agreements on
behalf of the Company and to cause them to be delivered to the recipients of
Awards.

         (d)      EFFECT OF THE COMMITTEE'S DECISIONS. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.

                                       3
<PAGE>   4

         (e)      INDEMNIFICATION. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in connection
with the Plan or any Award, granted hereunder to the full extent provided for
under the company's governing instruments with respect to the indemnification of
Directors.

         6.       GRANT OF OPTIONS.

         (a)      GENERAL RULE. Employees, service providers and Directors shall
be eligible to receive Awards. In selecting those Employees and Directors to
whom Awards will be granted and the number of shares covered by such Awards, the
Committee shall consider the position, duties and responsibilities of the
eligible Employees, service providers and Directors, the value of their services
to the Company and its Affiliates, and any other factors the Committee may deem
relevant. Awards shall be made at the discretion of the Committee.

         (b)      AUTOMATIC GRANTS. The automatic grants specified in
"Exhibit A" attached hereto shall be effective on the Plan's Effective Date, and
be subject to such conditions on exercise such as the attainment of specified
performance goals or standards as the Committee shall determine. The Exercise
Price of each such Option shall equal the Fair Market Value of the Optioned
Shares on such date.

         (c)      SPECIAL RULES FOR ISOS. Options granted pursuant to the Plan
shall not be ISOs unless the Plan is approved by the Company's stockholders
within 12 months after the Effective Date. The aggregate Market Value, as of the
date the Option is granted, of the Shares with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all incentive stock option plans, as defined in Section 422 of the Code, of the
Company or any present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may grant Options in
excess of the foregoing limitations, in which case Options granted in excess of
such limitation shall be Non-ISOs.

         7.       EXERCISE PRICE FOR OPTIONS.

         (a)      LIMITS ON COMMITTEE DISCRETION. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns Shares
representing more than 10% of the Company's outstanding Shares of Common Stock
at the time an ISO is granted, the Exercise Price shall not be less than 110% of
the Market Value of the Optioned Shares at the time the ISO is granted.

         (b)      STANDARDS FOR DETERMINING EXERCISE PRICE. If the Common Stock
is listed on a national securities exchange (including the NASDAQ National
Market System) on the date in question, then the Market Value per Share shall be
the average of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise Price shall be
the mean between the bid and asked price on such date. If the Common Stock is
traded otherwise than on a national securities exchange on the date in question,
then the Market Value per Share shall be the mean between the bid and asked
price on such date, or, if there is no bid and asked price on such date, then on
the next prior business day on which there was a bid and asked price. If no such
bid and asked price is available, then the Market Value per Share shall be its
fair market value as determined by the Committee, in its sole and absolute
discretion.

         8.       EXERCISE OF OPTIONS.

         (a)      GENERALLY. Except as otherwise provided by the Committee in
an Agreement, each Option shall be fully exercisable upon its date of grant.

                                       4
<PAGE>   5

         (b)      PROCEDURE FOR EXERCISE. A Participant may exercise Options,
subject to provisions relative to its termination and limitations on its
exercise, only by (1) written notice of intent to exercise the Option with
respect to a specified number of Shares, and (2) payment to the Company
(contemporaneously with delivery of such notice) in cash, in Common Stock owned
for more than six months, or a combination of cash and Common Stock owned for
more than six months, of the amount of the Exercise Price for the number of
Shares with respect to which the Option is then being exercised. Each such
notice (and payment where required) shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the Company at its
executive offices. Common Stock owned for more than six months utilized in full
or partial payment of the Exercise Price for Options shall be valued at its
Market Value at the date of exercise. An Option may not be exercised for a
fractional Share.

         (c)      PERIOD OF EXERCISABILITY. Except to the extent otherwise
provided in the terms of an Agreement, an Option may be exercised by a
Participant only while he is an Employee and has maintained Continuous Service
from the date of the grant of the Option, or within one year after termination
of such Continuous Service or Disability (but not later than the date on which
the Option would otherwise expire), except if the Employee's Continuous Service
terminates by reason of --

                  (1) "Just Cause" which for purposes hereof shall have the
         meaning set forth in any unexpired employment or severance agreement
         between the Participant and the Bank and/or the Company (and, in the
         absence of any such agreement, shall mean termination because of the
         Employee's personal dishonesty, incompetence, willful misconduct,
         breach of fiduciary duty involving personal profit, intentional failure
         to perform stated duties, willful violation of any law, rule or
         regulation (other than traffic violations or similar offenses) or final
         cease-and-desist order), then the Participant's rights to exercise such
         Option shall expire on the date of such termination; or

                  (2) death, then to the extent that the Participant would have
         been entitled to exercise the Option immediately prior to his death,
         such Option of the deceased Participant may be exercised within two
         years from the date of his death (but not later than the date on which
         the Option would otherwise expire) by the personal representatives of
         his estate or person or persons to whom his rights under such Option
         shall have passed by will or by laws of descent and distribution.

         (d)      EFFECT OF THE COMMITTEE'S DECISIONS. The Committee's
determination whether a Participant's Continuous Service has ceased, and the
effective date thereof, shall be final and conclusive on all persons affected
thereby.

         (e)      MANDATORY SIX-MONTH HOLDING PERIOD. Notwithstanding any other
provision of this Plan to the contrary, common stock of the Company that is
purchased upon exercise of an Option or SAR may not be sold within the six-month
period following the grant of that Option or SAR except as expressly approved by
the Committee.

         9.       SARS (STOCK APPRECIATION RIGHTS)

         (a)      GRANTING OF SARS. In its sole discretion, the Committee may
from time to time grant SARs to Employees either in conjunction with, or
independently of, any Options granted under the Plan. An SAR granted in
conjunction with an Option may be an alternative right wherein the exercise of
the Option terminates the SAR to the extent of the number of shares purchased
upon exercise of the Option and, correspondingly, the exercise of the SAR
terminates the Option to the extent of the number of Shares with respect to
which the SAR is exercised. Alternatively, an SAR granted in conjunction with an
Option may be an additional right wherein both the SAR and the Option may be
exercised. An SAR may not be granted in conjunction with an ISO under
circumstances in which the exercise of the SAR affects the right to exercise the
ISO or vice versa, unless the SAR, by its terms, meets all of the following
requirements:

                  (1)      The SAR will expire no later than the ISO;

                                       5
<PAGE>   6

                  (2)      The SAR may be for no more than the difference
                           between the Exercise Price of the ISO and the Market
                           Value of the Shares subject to the ISO at the time
                           the SAR is exercised;

                  (3)      The SAR is transferable only when the ISO is
                           transferable, and under the same conditions;

                  (4)      The SAR may be exercised only when the ISO may be
                           exercised; and

                  (5)      The SAR may be exercised only when the Market Value
                           of the Shares subject to the ISO exceeds the Exercise
                           Price of the ISO.

         (b)      TERMS OF SAR AWARDS. The provisions of Paragraphs 7 and 8 are
incorporated by reference herein, and shall determine the terms of SARs (to the
extent not inconsistent herewith).

         (c)      EXERCISE OF SARS. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall be permissible
under the terms of the Plan and of the Agreement granted to a Participant,
provided that an SAR may not be exercised for a fractional Share. Upon exercise
of an SAR, the Participant shall be entitled to receive, without payment to the
Company except for applicable withholding taxes, an amount equal to the excess
of (or, in the discretion of the Committee if provided in the Agreement, a
portion of) the excess of the then aggregate Market Value of the number of
Optioned Shares with respect to which the Participant exercises the SAR, over
the aggregate Exercise Price of such number of Optioned Shares. This amount
shall be payable by the Company, in the discretion of the Committee, in cash or
in Shares valued at the then Market Value thereof, or any combination thereof.

         10.      EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.

         (a)      RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and kind of
shares reserved for issuance under the Plan, and the number and kind of shares
subject to outstanding Awards, and the Exercise Price thereof, shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.

         (b)      TRANSACTIONS IN WHICH THE COMPANY IS NOT THE SURVIVING ENTITY.
In the event of (i) the liquidation or dissolution of the Company, (ii) a merger
or consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Awards, together with the Exercise Prices thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.

         (c)      SPECIAL RULE FOR ISOS. Any adjustment made pursuant to
subparagraphs (a) or (b) hereof shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.

         (d)      CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR DIFFERENT
SHARES OR SECURITIES. If, by reason of any adjustment made pursuant to this
Paragraph, a Participant becomes entitled to new, additional, or different
shares of stock or securities, such new, additional, or different shares of
stock or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.

                                       6
<PAGE>   7

         (e)      OTHER ISSUANCES. Except as expressly provided in this
Paragraph, the issuance by the Company or an Affiliate of shares of stock of any
class, or of securities convertible into Shares or stock of another class, for
cash or property or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with respect to, the number, class, or Exercise Price
of Shares then subject to Awards or reserved for issuance under the Plan.

         (f)      CERTAIN SPECIAL DIVIDENDS. The Exercise Price and number of
shares subject to outstanding Awards shall be proportionately adjusted upon the
payment of a special large and nonrecurring dividend that has the effect of a
return of capital to the shareholders.

         11.      NON-TRANSFERABILITY OF AWARDS.

         Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds Awards may transfer such Awards (but not Incentive
Stock Options) to his or her spouse, lineal ascendants, lineal descendants, or
to a duly established trust for the benefit of one or more of these individuals.
Awards so transferred may thereafter be transferred only to the Participant who
originally received the grant or to an individual or trust to whom the
Participant could have initially transferred the Awards pursuant to this
Paragraph 11. Awards which are transferred pursuant to this Paragraph 11 shall
be exercisable by the transferee according to the same terms and conditions as
applied to the Participant.

         12.      TIME OF GRANTING AWARDS.

         The date of grant of an Award shall, for all purposes, be the later of
the date on which the Committee makes the determination of granting such Award,
and the Effective Date. Notice of the determination shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
date of such grant.

         13.      EFFECTIVE DATE.

         The Plan shall become effective immediately upon its approval by the
Board.

         14.      MODIFICATION OF AWARDS.

         At any time, and from time to time, the Board may authorize the
Committee to direct execution of an instrument providing for the modification of
any outstanding Award, provided no such modification shall confer on the holder
of said Award any right or benefit which could not be conferred on him by the
grant of a new Award at such time, or impair the Award without the consent of
the holder of the Award.

         15.      AMENDMENT AND TERMINATION OF THE PLAN.

         The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without the
consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.

         16.      CONDITIONS UPON ISSUANCE OF SHARES.

         (a)      COMPLIANCE WITH SECURITIES LAWS. Shares of Common Stock shall
not be issued with respect to any Award unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.

                                       7
<PAGE>   8

         (b)      SPECIAL CIRCUMSTANCES. The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder shall
relieve the Company of any liability in respect of the non-issuance or sale of
such Shares. As a condition to the exercise of an Option or SAR, the Company may
require the person exercising the Option or SAR to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.

         (c)      COMMITTEE DISCRETION. The Committee shall have the
discretionary authority to impose in Agreements such restrictions on Shares as
it may deem appropriate or desirable, including but not limited to the authority
to impose a right of first refusal or to establish repurchase rights or both of
these restrictions.

         17.      RESERVATION OF SHARES.

         The Company, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of the Plan.

         18.      WITHHOLDING TAX.

         The Company's obligation to deliver Shares upon exercise of Options
and/or SARs shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations. The
Committee, in its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have the Company
withhold Shares, or to deliver to the Company Shares that he already owns,
having a value equal to the amount required to be withheld. The value of the
Shares to be withheld, or delivered to the Company, shall be based on the Market
Value of the Shares on the date the amount of tax to be withheld is to be
determined. The amount of the withholding requirement shall be the applicable
statutory minimum federal, state or local income tax with respect to the award
on the date that the amount of tax is to be held. As an alternative, the Company
may retain, or sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld.

         19.      NO EMPLOYMENT OR OTHER RIGHTS.

         In no event shall an Employee's, service provider's or Director's
eligibility to participate or participation in the Plan create or be deemed to
create any legal or equitable right of the Employee, Director, or any other
party to continue service with the Company, the Bank, or any Affiliate of such
corporations. No Employee, service provider or Director shall have a right to be
granted an Award or, having received an Award, the right to again be granted an
Award. However, an Employee, service provider or Director who has been granted
an Award may, if otherwise eligible, be granted an additional Award or Awards.

         20.      GOVERNING LAW.

         The Plan shall be governed by and construed in accordance with the laws
of the Commonwealth of Kentucky, except to the extent that the Indiana Business
Corporation Act or federal law shall be deemed to apply.

                                       8
<PAGE>   9

                                                                     EXHIBIT "A"

          AUTOMATIC GRANTS TO EMPLOYEES, SERVICE PROVIDERS & DIRECTORS

<TABLE>
<CAPTION>

                           NAME                                         NUMBER OF OPTION SHARES GRANTED
                           ----                                         -------------------------------

<S>                                                                                  <C>
                   Lawrence P. Calvert                                               4,500

                     Ronald J. Pence                                                 4,500

                     Larry R. Witten                                                 4,500

                 Robert E. Robbins, M.D.                                             1,000

                    Kevin D. Addington                                               1,000

                    Henry Lee Chitwood                                               1,000

                    Lois Watkins Gray                                                1,000

                    William R. Hawkins                                               1,000

               Christopher G. Knight, M.D.                                           1,000

                   Leonard Allen McNutt                                              1,000

                        John Scott                                                   1,000

                      Jenean Cooper                                                  1,250

                      Paula Croston                                                  1,250
</TABLE>

                                       9

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