Escrow Agreement

Escrow Agreement

by Fonix
September 16th, 1999



                                ESCROW AGREEMENT


         This ESCROW AGREEMENT (this "Escrow  Agreement")  dated as of September
1, 1999 (the  "Effective  Date") by and among Lernout & Hauspie Speech  Products
N.V.,  a Belgian  corporation  (the  "Buyer"),  Fonix  Corporation,  a  Delaware
corporation  (the "Seller") and State Street Bank and Trust  Company,  as escrow
agent only (along with any and all successor escrow agents, the "Escrow Agent").

         WHEREAS,  pursuant to an Asset  Purchase  Agreement  dated May 19, 1999
(the  "Purchase  Agreement")  by and among the Buyer,  the Seller and  Fonix/ASI
Corporation  ("ASI"),  a former  subsidiary of Seller which has been merged with
and into Seller prior to the date hereof (the "Merger"), the Buyer has purchased
and the Seller has sold certain assets of the Seller;

         WHEREAS,  pursuant to the Merger,  the Seller has succeeded to all
rights and obligations of ASI pursuant to the Purchase Agreement;

         WHEREAS,  the Buyer has  delivered  to the Seller  all of the  Purchase
Price (as defined in the  Purchase  Agreement)  pursuant to the terms of Section
1.3 of the Purchase Agreement, other than the Earnout Payment (as defined in the
Purchase  Agreement)  and the sum of Two Million Five Hundred  Thousand  Dollars
($2,500,000.00) (the "Escrow Amount");

         WHEREAS,  under the terms of the  Purchase  Agreement,  the  Seller has
agreed to indemnify the Buyer against certain matters including, but not limited
to, breaches of  representations,  warranties,  covenants and agreements made by
them thereunder;

         WHEREAS,  the Buyer has  agreed to  deliver  the  Escrow  Amount to the
Escrow Agent to be held,  subject to the terms and  conditions  hereinafter  set
forth, to satisfy any claims for indemnification against the Seller;

         WHEREAS,  the parties have agreed  that,  to the extent that the Escrow
Amount is not required to satisfy any such  indemnification  claims, any balance
of the Escrow  Amount shall be paid to the Seller as part of the Purchase  Price
subject  to and in  accordance  with the terms and  conditions  hereinafter  set
forth; and

         WHEREAS,  the Escrow Agent has agreed to act as Escrow Agent  hereunder
in accordance with the terms and conditions hereinafter set forth.

         NOW, THEREFORE,  in consideration of the mutual promises of the parties
and other good and valuable consideration, the parties agree as follows:

         Section 1. Appointment of Escrow Agent. The Seller and the Buyer hereby
mutually appoint and designate the Escrow Agent as escrow agent to receive, hold
and  disburse  the Escrow  Fund (as such term is defined in Section  2), and the
Escrow Agent hereby accepts such appointment and designation.

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         Section 2.  Establishment  of Escrow Fund. The Buyer shall deposit with
the Escrow Agent and, upon receipt,  the Escrow Agent shall acknowledge  receipt
of the Escrow  Amount (such  amount,  together  with  investment  income  earned
thereon  pursuant to the terms hereof,  collectively,  the "Escrow  Fund").  The
Escrow  Fund shall be  segregated  from other  assets of the Escrow  Agent.  The
Escrow Agent agrees to hold and  administer the Escrow Fund subject to the terms
of this Escrow Agreement.

         Section 3. Investment of Escrow Fund. The Escrow Agent shall invest the
Escrow Fund as directed  in writing by the Seller  received by the Escrow  Agent
from time to time, only in one or more of the following: (a) direct,  short-term
obligations of the United States Government or its instrumentalities; (b) mutual
funds  which  invest  all  or  substantially  all of  their  assets  in  direct,
short-term  obligations of the United States Government (including those offered
by the Escrow Agent); (c) variable rate certificates of deposit (including those
of the Escrow Agent); (d) short-term investments in money market accounts of one
or more United States banks (which may include the Escrow Agent if it is a bank)
having total assets in excess of One Hundred Million Dollars ($100,000,000),  in
each case having  maturities of not more than ninety (90) days; or (e) municipal
or corporate  bonds having a credit rating of A (Moody's or Standard & Poors) or
better;  provided that the maximum  maturity of any single issue will not exceed
ninety  (90) days.  The total  amount of income  which is credited to the Escrow
Fund from the date of the  establishment of the Escrow Fund shall be referred to
as the  "Accumulated  Income." The Escrow Agent shall have no liability  for any
investment  losses on investments  permitted under this Section 3, including any
losses on any investment required to be liquidated prior to maturity in order to
make a payment  required  hereunder.  Investments  pursuant  to such  investment
instructions  described  above shall in all instances be subject to availability
(including any time-of-day requirements).  In no instance shall the Escrow Agent
have any obligation to provide investment advice of any kind. Absent its receipt
of any written  investment  instruction from the Seller,  the Escrow Agent shall
invest the Escrow Fund in the Evergreen  Select  Treasury Money Market Fund. All
Accumulated  Income  shall be credited to, and shall become a part of the Escrow
Fund (and any losses on such investments shall be debited to the Escrow Fund).

         Section 4.        Payments from Escrow Fund; Actions on Escrow Assets.

         (a) At any time or times  subsequent to the Closing Date (as defined in
the Purchase Agreement) and prior to the Termination Date (as defined in Section
5 hereof),  the Buyer may make claims against the Escrow Fund for  reimbursement
for claims pursuant to Article 8 of or otherwise  under the Purchase  Agreement.
Such claims  shall be made by the Buyer by giving  written  notice to the Seller
and the Escrow Agent of each such claim,  specifying  in  reasonable  detail the
amount and basis thereof (a "Notice of Claim").

         (b) If the Seller shall  dispute  such claim (or a portion  thereof) (a
"Disputed Claim"),  it shall give written notice of such objection to the Escrow
Agent and the Buyer at any time within ten (10)  business days after the Buyer's
giving of the Notice of Claim (a "Dispute  Notice").  All such notices  shall be
delivered as provided in Section 14 hereof.  Absent the Seller  giving a Dispute
Notice to a Disputed  Claim and the receipt by the Escrow Agent  thereof  within
such time  period,  such claim shall be deemed to have been  approved as a valid
claim in the full amount thereof (an "Accepted Claim").

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         (c) If the Seller  shall  dispute a claim (or  portion  thereof) of the
Buyer as above  provided,  then the Escrow  Agent shall  retain a portion of the
Escrow Fund  sufficient  to pay said Disputed  Claim in full,  together with the
Allocable Income Amount (as that term is hereinafter  defined) and shall make no
distribution  thereof  (except for the amount of any Accepted Claim as set forth
above) unless and until the Escrow Agent  receives  joint  written  instructions
from the Buyer and the Seller or a final court order  indicating  the amount and
recipient  of such  distribution,  at which point such  Disputed  Claim shall be
deemed an "Accepted Claim" for purposes of this Escrow Agreement.

         (d) All Accepted  Claims shall be paid  promptly  from the Escrow Fund;
provided,  however,  that the Escrow  Agent shall not be obligated to release or
distribute  amounts sooner than two (2) business days after the Escrow Agent has
received the requisite  notice or paperwork in good form.  All payments shall be
made by the Escrow  Agent to the Buyer by delivery of an amount equal to the sum
of: (i) the amount of the applicable Accepted Claim (the "Subject Amount"); plus
(ii) the Allocable  Income Amount earned to the last day of the month  preceding
the month in which payment is made.  However, in no event shall the total amount
of payments  (the  aggregate  of the Subject  Amounts and the  Allocable  Income
Amounts)  to the Buyer on all  Accepted  Claims  exceed  the  amount  originally
deposited  in the  Escrow  Fund and the  Accumulated  Income at the date of such
release  or  distribution.  For  purposes  of this  Escrow  Agreement,  the term
"Allocable Income Amount" with respect to a claim, distribution,  or any amounts
to be  retained  in escrow  pursuant  to  Section  4(c) shall mean the amount of
income  (including  reinvestment  income),  if any,  that has been earned on the
amount of any such  payment  (equal to the Subject  Amount) from the date of the
commencement of the Escrow Fund.

         Section 5.        Release and Termination of Escrow Fund.

         (a) This Escrow Agreement shall terminate eighteen months following the
Closing  Date (as defined in the  Purchase  Agreement)  with such  Closing  Date
certified  in  writing  to the  Escrow  Agent by the Buyer and the  Seller  (the
"Termination Date"); provided,  however, that if there are otherwise outstanding
claims on the  Termination  Date  made  pursuant  to the  terms of the  Purchase
Agreement  and as to which the  Escrow  Agent has  before  such date  received a
Notice of Claim  pursuant  to Section 4 of this  Escrow  Agreement,  this Escrow
Agreement  shall  continue  in effect  until  all such  claims  shall  have been
resolved.  As of the  Termination  Date, an amount  adequate to cover the sum of
amounts  specified in all Notices of Claim received by the Escrow Agent prior to
the Termination  Date and which remain  outstanding  without having been paid or
otherwise  resolved will be held by the Escrow Agent together with the Allocable
Income Amount with respect  thereto (the  "Holdback")  to the extent such amount
remains  available,  and, the Escrow Agent shall  distribute  the balance of the
Escrow  Fund,  if any,  to the  Seller,  as the Seller  shall  direct in writing
promptly  following the  Termination  Date.  At such time as all such  remaining
claims  hereunder  have been paid or  otherwise  resolved  pursuant to Section 4
(unless  the  Aggregate  Amount of such  pending  claims  not paid or  otherwise
resolved exceeds the Holdback),  the Escrow Agent shall distribute the remaining
Escrow Fund, if any, (or such excess  portion of the  Holdback,  as the case may
be) to the Seller, as provided above.

         (b) Notwithstanding  anything herein to the contrary,  the Escrow Agent
shall  promptly  dispose of all or any part of the Escrow  Fund as directed by a
writing  signed  jointly by the Seller and the Buyer.  The Escrow Agent shall be


                                       3


entitled  to rely on the  instructions  received  from the Seller and the Buyer,
jointly,  and shall have no liability to the Seller or the Buyer for any and all
payments made in accordance with such instructions.

         Section 6.        Duties and Responsibilities of Escrow Agent.

         (a) Seller and Buyer  acknowledge and agree that the Escrow Agent:  (i)
shall not be responsible for any of the agreements  (other than those agreements
made by Escrow  Agent)  referred to herein  (including  without  limitation  the
Purchase  Agreement)  but shall be obligated  only for the  performance  of such
duties as are  specifically set forth in this Escrow Agreement on its part to be
performed,  each of which are  ministerial  (and  shall not be  construed  to be
fiduciary) in nature,  and no implied duties or  obligations  shall be read into
this  Agreement  against or on the part of the Escrow  Agent;  (ii) shall not be
obligated  to take any  legal  or  other  action  hereunder  which  might in its
judgment  involve any expense or liability  unless it shall have been  furnished
with indemnification acceptable to it in its sole discretion;  (iii) may rely on
and shall be  protected  in acting or  refraining  from  acting upon any written
notice, instruction (including,  without limitation, wire transfer instructions,
whether  incorporated  herein or  provided in a separate  written  instruction),
instrument,  statement,  request  or  document  furnished  to it  hereunder  and
believed by it to be genuine and to have been signed or  presented by the proper
person,  and shall have no responsibility  for determining the accuracy thereof;
and (iv) may consult counsel  satisfactory to it, including in-house counsel, if
it reasonably  determines that such consultation is necessary and the opinion or
advice  of  such  counsel  in any  instance  shall  be  full  authorization  and
protection  in respect of any action  taken,  suffered  or omitted by the Escrow
Agent in good  faith  and in  accordance  with the  opinion  or  advice  of such
counsel.

         (b)  Neither  the Escrow  Agent nor any of its  directors,  officers or
employees  shall be liable to anyone for any action taken or omitted to be taken
by it or any of its directors,  officers,  or employees  hereunder except in the
case of gross  negligence,  bad faith or willful  misconduct.  Seller and Buyer,
jointly and severally, covenant and agree to indemnify the Escrow Agent (and its
directors,  officers and employees) and hold it (and its directors, officers and
employees)  harmless  without  limitation  from and  against  any  claim,  loss,
liability or expense of any nature  incurred by the Escrow Agent  arising out of
or in connection  with this Agreement or with the  administration  of its duties
hereunder,  including but not limited to  reasonable  legal fees and other costs
and expenses of defending or preparing to defend  against any claim or liability
hereunder,  and  payment of any legal fees and  expenses  incurred by the Escrow
Agent in connection with resolution of any claim by any party hereunder,  unless
such loss,  liability  or expense  shall be caused by the Escrow  Agent's  gross
negligence, bad faith, or willful misconduct. In no event shall the Escrow Agent
be liable for indirect, punitive, special or consequential damages.

         (c) The Escrow  Agent  shall have no  responsibility  or  liability  on
account of any action or  omission of any  book-entry  depository  or  subescrow
agent  employed  by the Escrow  Agent,  except to the extent that such action or
omission  of any  book-entry  depository  or  subescrow  agent was caused by the
Escrow Agent's own gross negligence, bad faith or willful misconduct.

         (d) The Buyer and the Seller each agree, jointly and severally,  to pay
or reimburse  the Escrow Agent for legal fees  incurred in  connection  with the
preparation of this Escrow  Agreement and to pay the Escrow  Agent's  reasonable
compensation  for its  normal  services  hereunder  in  accordance  with the fee
schedule attached hereto as Schedule 6, except that the Seller shall pay any per
trade fees  related to the Escrow  Fund.  The Escrow  Agent shall be entitled to
reimbursement  by the Buyer and the Seller (and the Buyer and the Seller  hereby
agree,  jointly and  severally  to pay) on demand for all  reasonable  costs and
expenses incurred in connection with the administration of this Escrow Agreement
or the Escrow Fund created  hereby which are in excess of its  compensation  for


                                       4


normal services. Without altering or limiting the joint and several liability of
the Buyer and the Seller to the Escrow Agent hereunder, the Buyer and the Seller
each agree that any fees,  expenses or  reimbursements  to be paid to the Escrow
Agent, shall be shared equally by the Buyer and the Seller.

         (e) The provisions of this Section 6 shall survive  termination of this
Escrow Agreement as well as resignation or removal of the Escrow Agent.

         Section 7.  Resignation of Escrow Agent. The Escrow Agent may resign at
any time upon giving sixty (60) days written notice to the other parties hereto.
The Buyer and the Seller agree that they will jointly appoint a successor escrow
agent within thirty (30) days after receipt of such notice, and the Escrow Agent
hereby agrees that, upon receiving joint written instructions from the Buyer and
the Seller,  it shall turn over and deliver to such  successor  Escrow Agent the
Escrow Fund and other  amounts  held by it pursuant to this Escrow  Agreement in
accordance  with  the  terms  of  such  written  instructions  (as  well  as all
applicable  records and a list of  disbursements)  and render an  accounting  as
required by Section 10 hereof.  If a successor  Escrow Agent is not appointed by
the Buyer and the Seller  within such thirty (30) day period,  the Escrow  Agent
may tender the Escrow Fund to the Buyer and the Seller a check or checks payable
jointly in an amount  equal to the  balance of the Escrow  Fund,  as a result of
which the Escrow Agent herein shall be fully relieved of any  liabilities  under
this Escrow Agreement to any and all parties.


         Section 8. Removal of Escrow Agent.  The Buyer and the Seller  together
shall have the right to remove the Escrow Agent  hereunder  by giving  notice in
writing to the Escrow Agent,  specifying  the date upon which such removal shall
take effect and executed by both the Buyer and the Seller.  In the event of such
removal,  the Buyer and the  Seller  agree  that  they  will  jointly  appoint a
successor  Escrow Agent within thirty (30) days after the giving of such notice,
and  the  Escrow  Agent  hereby  agrees  that,   upon  receiving  joint  written
instructions  from the Buyer and the  Seller it shall  turn over and  deliver to
such  successor  Escrow  Agent  the  Escrow  Fund and other  amounts  held by it
pursuant to this Escrow  Agreement in accordance  with the terms of such written
instructions (as well as all applicable records and a list of disbursements) and
render an accounting as required by Section 10 hereof.

         Section 9.  Successor  Escrow  Agent.  Upon  receipt of the Escrow Fund
pursuant to this Escrow Agreement, the successor Escrow Agent shall thereupon be
bound by all of the provisions hereof and the term "Escrow Agent" as used herein
shall mean such a successor Escrow Agent.

         Section 10.  Accounting.  In the event of the resignation or removal of
the Escrow Agent,  upon the termination of the Escrow Fund or the termination of
this Escrow  Agreement or upon written request by either the Buyer or the Seller


                                       5


under reasonable  circumstances,  the Escrow Agent shall render to the Buyer and
the Seller and to the successor  Escrow Agent,  if any, a written  accounting of
its management of the Escrow Fund and all distributions thereof.

         Section 11.       Tax Matters.

        (a) The parties agree that, for tax reporting purposes,  all Accumulated
Income earned from the investment of the Escrow Fund in any Tax Year shall:  (i)
to the extent such interest or other income is  distributed  by the Escrow Agent
to any person or entity  pursuant to the terms of this Escrow  Agreement  during
such Tax Year, be allocated to the person or entity  receiving  such interest or
other income; and (ii) otherwise be allocated to the Seller.

        (b) The  parties  hereto  agree  to  provide  the  Escrow  Agent  with a
certified tax identification number by signing and returning a Form W-9 (or Form
W-8, in case of non-U.S.  persons) to the Escrow  Agent  within 30 days from the
date hereof.  The parties understand that, in the event their tax identification
numbers are not  certified to the Escrow  Agent,  the Internal  Revenue Code, as
amended  from  time  to  time,  may  require  withholding  of a  portion  of any
Accumulated Income earned on the investment of the Escrow Fund.

         (c) Tax  Indemnification.  Each of the  Seller  and the  Buyer  agrees,
jointly  and  severally:  (i) to assume any and all  obligations  imposed now or
hereafter by any applicable tax law with respect to any payment or  distribution
of the  Escrow  Funds or  performance  of other  activities  under  this  Escrow
Agreement;  (ii) to instruct  the Escrow  Agent in writing  with  respect to the
Escrow Agent's  responsibility  for withholding and other taxes,  assessments or
other governmental charges, and to instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as Escrow Agent
under this Escrow  Agreement;  and (iii) to indemnify  and hold the Escrow Agent
harmless  for and  from  any  liability  or  obligation  on  account  of  taxes,
assessments,   additions  for  late  payment,  interest,  penalties,  and  other
governmental  charges  that may be or become  due,  or that may be  assessed  or
asserted  against the Escrow Agent (other than in respect of its own income from
compensation  paid to it  hereunder,  and  other  than  arising  from its  gross
negligence or willful misconduct), in connection with or relating to any payment
made or other  activities  performed  under the terms of this Escrow  Agreement,
including without  limitation any liability for the withholding or deduction (or
the failure to withhold or deduct) of the same, and any liability for failure to
obtain proper  certifications or to report properly to governmental  authorities
in  connection  with this Escrow  Agreement,  including  costs and expenses (and
including  reasonable  legal fees and  expenses),  interest and  penalties.  The
foregoing  indemnification  and  agreement to hold  harmless  shall  survive the
termination of this Agreement.

         Section 12.  Assignability.  This Escrow  Agreement may not be assigned
other than by  operation  of law:  (i) by the Buyer  without  the prior  written
consent of the Seller;  or (ii) by the Seller without the prior written  consent
of the  Buyer,  except  that any  successor  to the  Escrow  Agent on  merger or
consolidation or any corporation  which acquires all or substantially all of the
corporate  assets or business  of the Escrow  Agent shall  become  Escrow  Agent
hereunder.  This Escrow  Agreement  shall inure to the benefit of and be binding


                                       6


upon the  parties  hereto and their  respective  heirs,  legal  representatives,
successors and permitted assigns.  Nothwithstanding the foregoing, the Buyer may
assign any or all of its rights hereunder as provided for in Section 11.7 of the
Purchase Agreement.

         Section 13.       Law Governing.  This Escrow  Agreement  shall be
governed by and construed in  accordance  with the laws of the  Commonwealth  of
Massachusetts (other than choice of law provisions thereof).

         Section 14.       Notices.

        (a) Any notice or other  communication  in  connection  with this Escrow
Agreement  shall be deemed to be  delivered  if in writing  (or in the form of a
telegram  or  facsimile  transmission,   receipt  telephonically   communicated)
addressed as provided below and if either: (i) actually delivered electronically
or  physically  at said  address  (provided  that if said address is a business,
delivery is made during normal business hours); or (ii) in the case of a letter,
three (3)  business  days  shall  have  elapsed  after the same  shall have been
deposited  in  the  United  States  mail,  postage  prepaid  and  registered  or
certified,  return receipt requested; or (iii) forty eight (48) hours shall have
elapsed after the same shall have been sent by nationally  recognized  overnight
receipted courier:


                  If to the Escrow Agent:

                           Mailing Address:

                           State Street Bank and Trust Company
                           Global Investor Services Group
                           Corporate Trust Division
                           P.O. Box 778
                           Boston, Massachusetts 02102-0778
                           Attention: Lernout/Seller Escrow
                           Fax: (617) 662-1463

                           Courier Address:

                           2 Avenue de Lafayette -6th Floor
                           Boston, Massachusetts 02110

                  If to the Buyer:

                           Lernout & Hauspie Speech Products N.V.
                           Flanders Language Valley 50
                           B-8900 Ieper, Belgium
                           Telephone: 011-32-57-228-888
                           Facsimile: 011-32-57-219-661
                           Attn:  Legal Department

                                       7


                  with a copy to:

                           Brown, Rudnick, Freed & Gesmer
                           One Financial Center
                           Boston, MA 02111
                           Telephone: (617) 856-8200
                           Facsimile: (617) 856-8201
                           Attn: Philip J. Flink, Esquire

                  If to the Seller:

                           Fonix Corporation
                           1225 Eagle Gate Tower
                           60 East South Temple Street
                           Salt Lake City, Utah 84111
                           Telephone: (801) 328-8700
                           Facsimile: (801) 328-8778
                           Attn: Thomas A. Murdock, President

                  with a copy to:

                           Durham, Jones & Pinegar
                           50 South Main Street
                           Suite 800
                           Salt Lake City, Utah  84111
                           Telephone: (801) 538-2424
                           Facsimile: (801) 538-2425
                           Attn: Jeffrey Jones, Esquire

or to such other  address  which any party may be certified or  registered  mail
notify the other.

(b)  Wiring  Instructions.  Any  funds  to be  paid  to or by the  Escrow  Agent
hereunder shall be sent by wire transfer pursuant to the following  instructions
(or by such method of payment and pursuant to such  instruction as may have been
given in advance and in writing to or by the Escrow  Agent,  as the case may be,
in accordance with Section 14(a) above):

                  If to the Buyer:

                           Bank:  Artesia Bank Belgie NV
                                      Zuidstratt 14
                                      B-8800 Roeselare, BELGIUM
                           A/C #:  551-3865100-10
                           Swift Code: PARBBEBB
                           Ref:  Lernout & Hauspie Speech Products N.V.



                                       8


                  If to Seller:

                           Bank:  Key Bank of Utah
                           ABA #:  124000737
                           A/C #:  4450-1000-1292
                           Account:  Durham, Jones & Pinegar

                  If to the Escrow Agent:

                           Bank: State Street Bank and Trust Company
                           ABA #: 0110 0002 8
                           A/C #: 9903-990-1
                           Ref: Lernout/Seller Escrow

         Section 15.       Counterparts.  This  Agreement  may be  executed in
multiple  counterparts,  each  which  shall  be an  original,  but all of  which
together shall constitute one and the same agreement.

         Section 16. Dispute Resolution. It is understood and agreed that should
any dispute arise with respect to the delivery,  ownership, right of possession,
and/or  disposition  of the  Escrow  Fund,  or should any claim be made upon the
Escrow Agent or the Escrow Fund by a third party,  the Escrow Agent upon receipt
of notice of such dispute or claim is  authorized  and shall be entitled (at its
sole option and  election)  to retain in its  possession,  without  liability to
anyone,  all or any of said  Escrow  Fund  until  such  dispute  shall have been
settled either by the mutual written  agreement of the parties  involved or by a
final order, decree or judgment of a court in the United States of America,  the
time for  perfection  of an appeal of such  order,  decree  or  judgment  having
expired.  The  Escrow  Agent  may,  but  shall be under no duty  whatsoever  to,
institute or defend any legal  proceedings  which relate to the Escrow Fund.  To
the extent that the Buyer and the Seller  shall be engaged in a dispute  between
themselves with respect to the delivery,  ownership, right of possession, and/or
distribution  of the Escrow Fund:  (a) any such dispute shall be  adjudicated in
the Superior Court of the  Commonwealth  of  Massachusetts  or the United States
District Court, District of Massachusetts located in said Commonwealth;  and (b)
the losing  party to the dispute  shall pay all  reasonable  costs and  expenses
(including, but limited to, attorneys' fees) of the prevailing party.

         Section 17. Consent to Jurisdiction and Service.  Each of the Buyer and
the  Seller  hereby  absolutely  and  irrevocably  consent  and  submit  to  the
jurisdiction of the Superior Court of the Commonwealth of Massachusetts  and the
United  States  District  Court,  District  of  Massachusetts  located  in  said
Commonwealth in connection  with any actions or proceedings  brought against any
of the parties  hereto (or each of them) by the Escrow  Agent  arising out of or
relating to this Escrow Agreement.  In any such action or proceeding,  the Buyer
and the Seller each hereby absolutely and irrevocably:  (i) waives any objection
to  jurisdiction  or  venue;  (ii)  waives  personal  service  of  any  summons,
complaint,  declaration  or other  process;  and (iii)  agrees  that the service
thereof may be made by certified or registered first-class mail directed to such
party,  as the case may be, at their  respective  addresses in  accordance  with
Section 14 hereof.

         Section  18.  Force  Majeure.  Neither the Seller nor the Buyer nor the
Escrow  Agent  shall be  responsible  for  delays  or  failures  in  performance


                                       9


resulting  from acts  beyond its  control.  Such acts shall  include  but not be
limited  to acts of  God,  strikes,  lockouts,  riots,  acts of war,  epidemics,
governmental  regulations  superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.

         Section  19.  Modifications.  This  Agreement  may  not be  altered  or
modified without the express written consent of the parties hereto. No course of
conduct  shall  constitute a waiver of any of the terms and  conditions  of this
Escrow Agreement,  unless such waiver is specified in writing,  and then only to
the extent so  specified.  A waiver of any of the terms and  conditions  of this
Escrow  Agreement  on one  occasion  shall not  constitute a waiver of the other
terms of this Escrow  Agreement,  or of such terms and  conditions  on any other
occasion.

         Section 20. Reproduction of Documents. This Agreement and all documents
relating  thereto,  including,  without  limitation:  (a) consents,  waivers and
modifications  which may hereafter be executed;  and (b)  certificates and other
information  previously  or  hereafter  furnished,  may  be  reproduced  by  any
photographic,   photostatic,  microfilm,  optical  disk,  micro-card,  miniature
photographic  or  other  similar  process.  The  parties  agree  that  any  such
reproduction  shall be  admissible  in  evidence as the  original  itself in any
judicial  or  administrative  proceeding,  whether  or not  the  original  is in
existence  and  whether  or not  such  reproduction  was  made by a party in the
regular  course of  business,  and that any  enlargement,  facsimile  or further
reproduction of such reproduction shall likewise be admissible in evidence.

         Section 21. Entire Agreement, Severability and Further Assurances. This
Escrow  Agreement  together with all  schedules  hereto  constitutes  the entire
agreement among the parties,  and all promises,  representations,  undertakings,
warranties  and  agreements  with  reference  to the subject  matter  hereof and
inducements  to the making of this  Escrow  Agreement  relied  upon by any party
hereto,  have been expressed herein or in the documents  incorporated  herein by
reference.  The invalidity or  unenforceability  of any provision of this Escrow
Agreement shall not affect the validity or enforceability of any other provision
hereof.  Each of the parties shall, at the reasonable  request of another party,
deliver to the requesting party all further documents or other assurances as may
reasonably be necessary or desirable in connection with this Escrow Agreement.

                            [Signature Page Follows]


                                       10



         IN WITNESS WHEREOF,  the parties have executed this Escrow Agreement or
caused the same to be executed by their duly authorized  representatives,  as of
the date first stated hereinabove.

                                  ESCROW AGENT:

                                       STATE STREET BANK & TRUST COMPANY


                                       By:/s/
                                          --------------------------------------
                                         Name:Chi C. Me
                                         Title:Vice President
                                             hereunder duly authorized
                                             officer of the Escrow Agent


                                       SELLER:

                                         FONIX CORPORATION


                                         By:/s/
                                            ------------------------------------
                                           Thomas A. Murdock
                                           President and Chief Executive Officer


                                                            BUYER:

                                         LERNOUT & HAUSPIE SPEECH PRODUCTS N.V.

                                         By:/s/
                                            ------------------------------------
                                            Carl Dammekens
                                            Chief Financial Officer and Senior
                                            Vice President of Finance