<PAGE>   1
                                                                    Exhibit 2.16


                                ESCROW AGREEMENT

                  THIS ESCROW AGREEMENT ("Escrow Agreement") is dated as of the
13th day of July, 1999 among K.A.U., Inc., an Ohio corporation ("U.S.
Purchaser"), 3031298 Nova Scotia Limited, a Nova Scotia, Canada corporation
("Canadian Purchaser"), KENDLE INTERNATIONAL INC., an Ohio corporation
("Kendle") (the aforesaid three companies being collectively referred to herein
as the "Purchasing Group"), all of the foregoing with a mailing address of 441
Vine Street, Suite 700, Cincinnati, Ohio 45202, Attention: Paul F. Ritter, Esq.,
General Counsel HEALTH CARE COMMUNICATIONS, INC., a New Jersey corporation with
a mailing address at 2 Cedar Lane, Chappaqua, New York 10514 ("U.S. Seller"),
HCC HEALTH CARE COMMUNICATIONS (1991) Ltd., a Canadian corporation with a
mailing address which is the same as that of the U.S. Seller ("Canadian Seller")
(the U.S. Seller and the Canadian Seller being collectively referred to as the
"Sellers"), Geoffrey H. Kalish, M.D., an individual with a mailing address at 2
Cedar Lane, Chappaqua, New York 10514, Bradley D. Kalish, an individual with a
mailing address at 251 West 92nd Street, Apartment 5D, New York, New York 10025
and Jill Kalish, an individual with a mailing address at 320 East 39th Street,
Apartment 24R, New York, New York 10016 (the aforesaid three individuals being
collectively referred to herein as "Stockholders" and the Stockholders and the
Sellers being collectively referred to as the "Selling Group"), and THE FIFTH
THIRD BANK with a mailing address of 38 Fountain Square Plaza, Cincinnati, Ohio
45263, as the escrow agent hereunder ("Escrow Agent").

                                   BACKGROUND

                  A.       Effective as of June 27, 1999 Kendle, U.S. Purchaser,
                           the U.S. Seller and the Stockholders entered into an
                           Asset Purchase Agreement (the "U.S. Purchase
                           Agreement"). Pursuant to the terms of said U.S.
                           Purchase Agreement, U.S. Purchaser is today
                           purchasing from the U.S. Seller substantially all of
                           the assets of the U.S. Seller.

                  B.       Effective as of July 13, 1999, Canadian Purchaser,
                           Canadian Seller and Geoffrey H. Kalish, M.D. entered
                           into an Asset Purchase Agreement (the "Canadian
                           Purchase Agreement"). Pursuant to the terms of said
                           Canadian Purchase Agreement, Canadian Purchaser is
                           today



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<PAGE>   2

                           purchasing from the Canadian Seller substantially all
                           of the assets of the Canadian Seller.

                  C.       The parties desire to enter into this Escrow
                  Agreement to provide for an escrow of certain cash and stock
                  (the "Escrow Property") to provide financial support for
                  Sellers' obligation to indemnify the Purchasing Group for any
                  breaches of warranty or representation by the Selling Group
                  under the U.S. Purchase Agreement and the Canadian Purchase
                  Agreement.

                  NOW, THEREFORE, in consideration of the mutual covenants set
forth below and other good and valuable consideration, the parties hereto agree
as follows:

                  1. DESIGNATION AND DELIVERY. The Purchasing Group and the
Selling Group hereby designate The Fifth Third Bank as "Escrow Agent" under this
Escrow Agreement. The Purchasing Group and the Selling Group hereby deliver to
the Escrow Agent a copy of the U.S. Purchase Agreement and the Canadian Purchase
Agreement, which documents are attached hereto and incorporated herein as
Exhibit "A" and "A-1." The Purchasing Group, in accordance with the U.S.
Purchase Agreement and the Canadian Purchase Agreement, hereby delivers to the
Escrow Agent, and the Escrow Agent hereby acknowledges receipt of, cash in the
amount of $500,000 (the "Deposit") and 31,943 shares of the common stock, no par
value, of Kendle (the "Stock").

                  2. INVESTMENT OF THE DEPOSIT; DIVIDENDS AND DISTRIBUTIONS WITH
RESPECT TO THE DEPOSIT AND STOCK.

                           (a) The Escrow Agent is hereby authorized to invest
the Deposit in money market funds, including the Fountain Square U.S. Treasury
Obligations Fund sponsored by the Escrow Agent's affiliate, Fountain Square
Funds. The Escrow Agent shall cause all stock dividends and stock distributions
(including shares distributed in a stock split) earned on or with respect to the
Stock to be added to the Escrow Property. The U.S. Seller shall be entitled to
exercise all voting rights with respect to any Stock or other Kendle securities
held from time to time as part of the Escrow Property until such time as, if at
all, any such securities are distributed to Kendle in accordance with Section 5
hereof. The parties further acknowledge that the amount of cash and securities
held as part of the Escrow Property may be reduced or (in the case of securities
only) increased from time to time during the term hereof pursuant to the terms
of this Escrow Agreement. Accordingly, the term "Escrow Property" shall refer to
the sum of (i) the Deposit initially placed in escrow hereunder or to such
lesser amount of cash as may be held in escrow pursuant hereto at any point
during the term hereof and (ii) the Stock initially placed into escrow hereunder
or such lesser or greater number of securities as may be held in escrow pursuant
hereto at any point during the term hereof. The parties agree that interest
earned on, and any other



                                       2
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accretions to, the Escrow Property (other than stock dividends and other stock
distributions) (collectively, "Seller's Accretions") shall not be deemed to be a
part of the Escrow Property and shall be treated in accordance with Section 2(b)
hereof.

                           (b) All Seller's Accretions earned on or distributed
with respect to the Escrow Property shall be the property of, and fully taxable
to, the U.S. Seller. On each date on which any portion of the Escrow Property is
released to the U.S. Seller pursuant to this Escrow Agreement (and, in any
event, on the date of the final release of the Escrow Property hereunder), the
Escrow Agent shall pay to the U.S. Seller, all Seller's Accretions which have
accrued on or been received with respect to the Escrow Property through such
date.

                           (c) The parties acknowledge that, based upon the
Market Value of Kendle common stock as of the Closing Date, 50% of the initial
Escrow Property consists of the Stock and 50% of the initial Escrow Property
consists of cash.

                  3. ESCROW AGENT AS CUSTODIAN; EXPENSES. The Escrow Agent
shall, for all purposes of this Escrow Agreement, be treated as and considered
legally a custodian. The Escrow Agent shall be entitled to rely conclusively
upon the written notice provided in Section 5 and may assume the genuineness of
all signatures and documents and the authority of all signatories. The Escrow
Agent shall have no liability except for gross negligence or willful misconduct
in the performance of its duties under this Escrow Agreement. Kendle and the
Selling Group, collectively, shall each assume and pay one half (1/2) of all
costs and expenses of the Escrow Agent incurred in its capacity as the Escrow
Agent under this Escrow Agreement. The fees of the Escrow Agent are set forth on
Exhibit "B" attached hereto and incorporated herein.

                  4.       RESIGNATION; DISAGREEMENTS.

                           (a) Escrow Agent (and any successor Escrow Agent) may
at any time resign as such by delivering the Escrow Property to any successor
Escrow Agent designated by the other parties hereto in writing, or to any court
of competent jurisdiction as provided below. The resignation of Escrow Agent
will take effect on the earlier of (i) the appointment of a successor (including
a court of competent jurisdiction), or (ii) the day which is thirty (30) days
after the date of delivery of its written notice of resignation to the other
parties hereto. If at that time Escrow Agent has not received a designation of a
successor Escrow Agent, Escrow Agent's sole responsibility after that time shall
be to retain and safeguard the Escrow Property until receipt of a designation of
successor Escrow Agent or a joint written disposition instruction by the other
parties hereto or a final order of a court of competent jurisdiction.



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<PAGE>   4

                           (b) In the event of any disagreement between the
other parties hereto resulting in adverse claims or demands being made in
connection with the Escrow Property or in the event that Escrow Agent is in
doubt as to what action it should take hereunder, Escrow Agent shall be entitled
to retain the Escrow Property until Escrow Agent shall have received (i) a final
order of a court of competent jurisdiction directing delivery of the Escrow
Property, or (ii) a written agreement executed by the other parties hereto
directing delivery of the Escrow Property, in which event Escrow Agent shall
disburse the Escrow Property in accordance with such order or agreement. Escrow
Agent shall act on such court order without further question.

                  5.       TERMINATION AND DISTRIBUTION OF ESCROW.

                           (a) TERMINATION. This Escrow Agreement shall
terminate on the date upon which the Escrow Agent shall have fully distributed
the Escrow Property as provided herein.

                           (b) CLAIM NOTICES. If, at any time on or prior to the
date falling two (2) years after the date hereof (the "Second Anniversary
Date"), the Escrow Agent shall receive a notice from any of the Purchasing Group
which (i) affirms that the Purchasing Group believes that the members of the
Selling Group are liable to the U.S. or Canadian Purchaser under the U.S.
Purchase Agreement or the Canadian Purchase Agreement, as the case may be, for
breaches of representations or warranties and (ii) states a specific amount (the
"Claimed Amount") which, as a result of the factual basis underlying such
notice, the Purchasing Group, in good faith, believes it is owed, by the Selling
Group (any such notice being herein referred to as a "Claim Notice"), the Escrow
Agent shall continue to hold in escrow the Claimed Amount stated in such notice
until (A) it shall receive further instructions as to the disposition of such
sum in a writing signed by Kendle and either of the Sellers or (B) it shall be
otherwise ordered by a court of competent jurisdiction. The parties acknowledge
that there may be multiple Claim Notices given by the Purchasing Group during
the term hereof. The Escrow Agent shall deliver a copy of each Claim Notice
received by it to the appropriate Seller.

                           (c) PARTIAL RELEASE. Within 15 days after the date
falling one year after the date hereof (the "First Anniversary Date"), the
Escrow Agent shall release to the U.S. Seller, an amount equal to the excess, if
any, of (i) the Escrow Property as of the First Anniversary Date over (ii) the
sum of (A) $500,000 and (B) any portions of the Escrow Property required, as of
the First Anniversary Date, to be held in escrow pursuant to Section 2(b).

                           (d) FINAL RELEASE. Within 15 days after the Second
Anniversary Date, the Escrow Agent shall release to the U.S. Seller an amount
equal to the excess, if any, of the Escrow Property as of the Second Anniversary



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<PAGE>   5

Date over the aggregate sum required as of the Second Anniversary Date to be
held in escrow pursuant to Section 5(b).

                           (e) JOINT WRITTEN DIRECTION. Notwithstanding any
provision in this Section 5 to the contrary, the Escrow Agent may make payments
from the Escrow Property, or from any Seller's Accretions, at any time upon
receipt of a joint written direction from Kendle and either of the Sellers (a
"Joint Written Direction").

                           (f) NO DISPUTE. If, on or prior to the Second
Anniversary Date, Kendle shall have delivered a Notice of Claim to the Escrow
Agent and appropriate Seller and such Seller shall not have disputed the Notice
of Claim within ten (10) business days after their receipt of the Notice of
Claim, the Claim Amount shall promptly be released to Kendle by the Escrow
Agent.

                           (g) VALUATION; ALLOCATIONS. For purposes of
determining that portion of the Escrow Property which is to be withheld or
released, as the case may be, under this Section 5 (and except as may be
otherwise provided in a Joint Written Direction), the Market Value of the Stock
shall be used, except that the relevant date used for counting back 20 trading
days shall be (i) the date on which a Claim Notice shall have been given to the
Escrow Agent, (ii) the First Anniversary Date or (iii) the Second Anniversary
Date, as the case may be. In addition, to the extent that any withholding or
release of the Escrow Property by the Escrow Agent is to be effectuated
hereunder, such withholding or release shall be comprised of Stock and cash in
the same percentages referred to in Section 2(c) hereof.

                  6. DUTIES OF ESCROW AGENT. The duties of the Escrow Agent
under this Escrow Agreement shall be entirely administrative and the Escrow
Agent shall not be liable to any third party as a result of any action or
omission taken or made by it, if taken in good faith, except for gross
negligence or willful misconduct in performing its duties. In the event of
disagreement or dispute between Kendle and the Selling Group with respect to
disposition of the Escrow Property, the Escrow Agent shall have the right to
initiate an appropriate legal proceeding to obtain a judicial determination of
the respective parties' rights to the Escrow Property. No rights are intended to
be granted to any third party hereunder. Kendle and the Selling Group shall
severally (each being responsible for a maximum of fifty percent (50%) of the
indemnity account) indemnify and hold harmless the Escrow Agent and reimburse
the Escrow Agent from and for any and all liability, costs and expenses,
including reasonable attorneys' fees, the Escrow Agent may suffer or incur by
reason of its execution and performance of this Escrow Agreement except for any
such liability, costs or expenses (including attorneys fees) which is a result
of Escrow Agent's own gross negligence or willful misconduct. The Escrow Agent
shall have no duties except those which are expressly set forth herein, and it
shall not be bound by any notice of a claim,



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or demand with respect thereto, or any waiver, modification, amendment,
termination or recission of this Escrow Agreement, unless in writing received by
it and signed by Kendle and either Seller.

                  In the event that the Escrow Agent shall find it necessary to
consult with counsel of its own choosing in connection with this Escrow
Agreement, the Escrow Agent shall not incur any liability for any action taken
in good faith in accordance with such advice. Kendle and the Selling Group,
jointly and severally, shall indemnify and hold harmless the Escrow Agent for
any liability, loss, claim or damage incurred by the Escrow Agent in connection
with this Escrow except for any such liability, costs, expenses (including
reasonable attorneys' fees), loss, claims or damage which is a result of Escrow
Agent's own gross negligence or willful misconduct. This indemnification shall
survive termination of this Escrow Agreement. Kendle and the Selling Group agree
that Kendle, on the one hand, and the Selling Group, collectively, on the other
hand, shall each assume and pay fifty percent (50%) of all amounts due to Escrow
Agent as a result of this indemnification.

                  Escrow Agent is not a party to, and is not bound by, any
agreement which may be evidenced by, or arise out, the foregoing instruction,
other than as expressly set forth herein. In the event that any of the terms and
provisions of any other agreement (excluding any amendment to this Escrow
Agreement) between any of the parties hereto, conflict or are inconsistent with
any of the provisions of this Escrow Agreement, the terms and provisions of this
Escrow Agreement shall govern and control in all respects.

                  7. NOTICES. All notices, consents or other communications
required or permitted to be given under this Escrow Agreement shall be in
writing and shall be deemed to have been duly given:

                           (a) when delivered personally (including via
recognized courier service, such as Fed Ex)

                           (b) five (5) business day after being sent by
certified U.S. mail, postage charges prepaid, or

                           (c) on the date on which a telegram or facsimile is
transmitted to the parties at their respective addresses stated above.

                  Any party may change its address for notice and the address to
which copies must be sent by giving notice of the new addresses to the other
parties in accordance with this Section 7, except that any such change of
address notice shall not be effective unless and until received.



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                  8. AMENDMENT. No amendment or modification of this Escrow
Agreement shall be effective unless in writing and signed by the parties.

                  9.       SUPPLEMENTAL ESCROW AGREEMENT.

                           (a) The parties acknowledge that, pursuant to Section
11(b)(v) of the U.S. Purchase Agreement, in the event, and to the extent, that
any given claim or claims being asserted in good faith by the Purchaser could
not be satisfied out of the assets being held under this Agreement, Purchaser
may seek recourse by depositing earned, but not yet paid, Earnout Amounts with
the Escrow Agent under this Agreement. The parties have now agreed, however,
that any such sums should, contrary to the U.S. Purchase Agreement, be deposited
with the Escrow Agent not under this Agreement but rather under a similar Escrow
Agreement attached hereto as Exhibit C (the "Secondary Escrow Agreement").
Consequently, in the event of any such deposit by the Purchasing Group (which
deposit must be accompanied by a Claim Notice under the Secondary Escrow
Agreement alleging a Claimed Amount at least equal in amount to the amount being
deposited), the attached Secondary Escrow Agreement shall be deemed
automatically, on the date of the first such deposit (regardless whether the
same shall occur prior to or after the termination of this Agreement), to have
been executed and delivered by the parties hereto, and any sums then or
thereafter deposited pursuant to the aforesaid Section 11(b)(v) shall be deemed
to have been deposited thereunder.

                           (b) The Purchasing Group agrees that any Earnout
Amounts that are deposited with the Escrow Agent in accordance with Section 9(a)
above shall be allocated between cash and Kendle shares in the same percentages
referred to in Section 2(c) above; provided, however, that in the event that
(due to the fact that Earnout Amounts will be composed 67% of cash and 33 % of
Kendle shares) any given Earnout Amount shall not contain a sufficient number of
Kendle shares to comply with the preceding clause of this sentence, Kendle
shall, to the extent of any such deficiency, have the right to deposit with the
Escrow Agent cash instead of Kendle shares. The parties further agree that for
purposes of (i) determining the aggregate number of shares of Kendle stock
which, based upon the related Claim Notice, may be withheld from the U.S. Seller
and deposited in escrow under the Secondary Escrow Agreement and (ii)
implementing the terms of the preceding sentence, all Kendle shares shall be
valued at Market Value, using the 20 trading days preceding [the date on which
the EBIT for the then most recent fiscal year of the U.S. Purchaser shall have
been finally determined under Section 2.2 of the U.S. Purchase Agreement]

                           (c) The terms of this Section 9 shall survive
termination of this Agreement.



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<PAGE>   8

                  10. PARTIES IN INTEREST. This Escrow Agreement shall bind,
benefit, and be enforceable by and against each party hereto and their
successors, assigns, heirs and personal representatives. No party shall in any
manner assign any of its rights or obligations under this Escrow Agreement
without the express prior written consent of the other parties.

                  11. NO WAIVERS. No waiver with respect to this Escrow
Agreement shall be enforceable unless in writing and signed by the party against
whom enforcement is sought. Except as otherwise expressly provided herein, no
failure to exercise, delay in exercising, or single or partial exercise of any
right, power or remedy by any party, and no course of dealing between or among
any of the parties, shall constitute a waiver of, or shall preclude any other or
further exercise of the same or any other right, power or remedy.

                  12. SEVERABILITY. If any provision of this Escrow Agreement is
construed to be invalid, illegal or unenforceable, then the remaining provisions
hereof shall not be affected thereby and shall be enforceable without regard
thereto.

                  13. COUNTERPARTS. This Escrow Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall
constitute an original hereof, and it shall not be necessary in making proof of
this Escrow Agreement to produce or account for more than one original
counterpart hereof.

                  14. CONTROLLING LAW. This Escrow Agreement is made under, and
shall be construed and enforced in accordance with, the laws of the State of
Ohio applicable to agreements made and to be performed solely therein, without
giving effect to principles of conflicts of law.

                  15. DEFINITIONS. To the extent not specifically defined
herein, all terms used herein shall have the meanings ascribed to them in the
U.S. Purchase Agreement.



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<PAGE>   9

                  IN WITNESS WHEREOF, the parties have executed, or caused their
duly authorized representatives to execute, this Escrow Agreement on the date
first written above.
                                       KENDLE INTERNATIONAL INC.
                                       -------------------------

                                       By:    /S/ RAFAEL MANCERA
                                              ------------------
                                       Name:  RAFAEL MANCERA
                                              --------------
                                       Title: DIRECTOR, M&A
                                              -------------

                                       K.A.U. Inc.,

                                       By:    /S/ RAFAEL MANCERA
                                              ------------------
                                       Name:  RAFAEL MANCERA
                                              --------------
                                       Title: ASSISTANT SECRETARY
                                              -------------------

                                       3031298 NOVA SCOTIA LIMITED

                                       By:    /S/ RAFAEL MANCERA
                                              ------------------
                                       Name:  RAFAEL MANCERA
                                              --------------
                                       Title: ASSISTANT SECRETARY
                                              -------------------


                                       SELLING GROUP


                                       /S/ GEOFFREY H. KALISH, M.D.
                                       ----------------------------
                                       Geoffrey H. Kalish, M.D.


                                       /S/ BRADLEY D. KALISH
                                       ----------------------------
                                       Bradley D. Kalish


                                       /S/ JILL KALISH
                                       ----------------------------
                                       Jill Kalish


                                       HCC HEALTH CARE
                                       COMMUNICATIONS (1991), LTD.

                                       By:    /S/ GEOFFREY H KALISH, M.D.
                                              ---------------------------
                                       Name:  GEOFFREY H. KALISH, M.D.
                                              --------------------------
                                       Title: PRESIDENT
                                              ---------



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<PAGE>   10

                                       HEALTH CARE
                                       COMMUNICATIONS, INC.

                                       By:    /S/ GEOFFREY H. KALISH, M.D.
                                              -----------------------------
                                       Name:  GEOFFREY H. KALISH , M.D.
                                              -------------------------
                                       Title: PRESIDENT
                                              ---------






Received and accepted:

THE FIFTH THIRD BANK
Escrow Agent

By:    /S/ GREG HAHN
       -----------------------
Name:  GREG HAHN
       -----------------------
Title: ASSISTANT VICE PRESIDENT
       ------------------------



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                                   EXHIBIT "A"
                                   -----------

                               PURCHASE AGREEMENT
                               ------------------



                                       11
<PAGE>   12

                                   EXHIBIT "B"
                                   -----------

                                ESCROW AGENT FEES
                                -----------------



Closing and Acceptance Fees.........................................$4,000.00

Annual Administrative Fee...........................................$3,000.00




The fees listed above relate specifically to duties described in the Escrow
Agreement dated July 13, 1999 between Fifth Third Bank, Kendle International
Inc. and Health Care Communications, Inc. Extraordinary services or services not
specifically contemplated therein may be additional. All out of pocket expenses
including and not limited to postage, insurance, stationary, travel expenses,
wire fees, legal fees, etc. will be passed along over and above the fees stated.



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<PAGE>   13


                                   EXHIBIT "C"
                                   -----------


                           SECONDARY ESCROW AGREEMENT

                  THIS SECONDARY ESCROW AGREEMENT ("Escrow Agreement") is among
K.A.U., Inc., an Ohio corporation ("U.S. Purchaser"), 3031298 Nova Scotia
Limited, a Nova Scotia, Canada corporation ("Canadian Purchaser"), KENDLE
INTERNATIONAL INC., an Ohio corporation ("Kendle") (the aforesaid three
companies being collectively referred to herein as the "Purchasing Group"), all
of the foregoing with a mailing address of 441 Vine Street, Suite 700,
Cincinnati, Ohio 45202, Attention: Paul F. Ritter, Esq., General Counsel HEALTH
CARE COMMUNICATIONS, INC., a New Jersey corporation with a mailing address at 2
Cedar Lane, Chappaqua, New York 10514 ("U.S. Seller"), HCC HEALTH CARE
COMMUNICATIONS (1991) Ltd., a Canadian corporation with a mailing address which
is the same as that of the U.S. Seller ("Canadian Seller") (the U.S. Seller and
the Canadian Seller being collectively referred to as the "Sellers"), Geoffrey
H. Kalish, M.D., an individual with a mailing address at 2 Cedar Lane,
Chappaqua, New York 10514, Bradley D. Kalish, an individual with a mailing
address at 251 West 92nd Street, Apartment 5D, New York, New York 10025 and Jill
Kalish, an individual with a mailing address at 320 East 39th Street, Apartment
24R, New York, New York 10016 (the aforesaid three individuals being
collectively referred to herein as "Stockholders" and the Stockholders and the
Sellers being collectively referred to as the "Selling Group"), and THE FIFTH
THIRD BANK with a mailing address of 38 Fountain Square Plaza, Cincinnati, Ohio
45263, as the escrow agent hereunder ("Escrow Agent").

                                   BACKGROUND
                                   ----------

         C.       Effective as of June 27, 1999 Kendle, U.S. Purchaser, the U.S.
                  Seller and the Stockholders entered into an Asset Purchase
                  Agreement (the "U.S. Purchase Agreement"). Pursuant to the
                  terms of said U.S. Purchase Agreement, U.S. Purchaser
                  purchased from the U.S. Seller substantially all of the assets
                  of the U.S. Seller.

         D.       Effective as of July 13, 1999, Canadian Purchaser, Canadian
                  Seller and Geoffrey H. Kalish, M.D. entered into an Asset
                  Purchase Agreement (the "Canadian Purchase Agreement").
                  Pursuant to the terms of said Canadian



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<PAGE>   14

                  Purchase Agreement, Canadian Purchaser purchased from the
                  Canadian Seller substantially all of the assets of the
                  Canadian Seller.

                  C. The parties have previously agreed to enter into this
Escrow Agreement to provide for an escrow of certain cash and stock (the "Escrow
Property") to provide financial support for Sellers' obligation to indemnify the
Purchasing Group for any breaches of warranty or representation by the Selling
Group under the U.S. Purchase Agreement and the Canadian Purchase Agreement.

                  D. The agreement providing for the creation of this Agreement
was the Escrow Agreement, dated the Closing Date, entered into by the parties
hereto in connection with the U.S. and Canadian Purchase Agreements (the
"Primary Escrow Agreement").

                  NOW, THEREFORE, in consideration of the mutual covenants set
forth below and other good and valuable consideration, the parties hereto agree
as follows:

                  1. DESIGNATION AND DELIVERY. The Purchasing Group and the
Selling Group hereby designate The Fifth Third Bank as "Escrow Agent" under this
Escrow Agreement. The Purchasing Group and the Selling Group have previously
delivered to the Escrow Agent a copy of the U.S. Purchase Agreement and the
Canadian Purchase Agreement, which documents are incorporated herein by
reference. The Purchasing Group, in accordance with the U.S. Purchase Agreement,
the Canadian Purchase Agreement, and the Primary Escrow Agreement, hereby
delivers to the Escrow Agent, and the Escrow Agent hereby acknowledges receipt
of, certain cash (the "Deposit") and shares of the common stock, no par value,
of Kendle (the "Stock"). The Escrow Agent shall, promptly after its receipt of
the Deposit and the Stock (the date of occurrence of which shall be deemed for
all purposes to be the "Effective Date" of this Agreement), confirm to the U.S.
Seller the amount of the Deposit and the number of Kendle shares constituting
the Stock.

                  2. INVESTMENT OF THE DEPOSIT; DIVIDENDS AND DISTRIBUTIONS WITH
RESPECT TO THE DEPOSIT AND STOCK.


                           (a) The Escrow Agent is hereby authorized to invest
the Deposit in money market funds, including the Fountain Square U.S. Treasury
Obligations Fund sponsored by the Escrow Agent's affiliate, Fountain Square
Funds. The Escrow Agent shall cause all stock dividends and stock distributions
(including shares distributed in a stock split) earned on or with respect to the
Stock to be added to the Escrow Property. The U.S. Seller shall be entitled to
exercise all voting rights with respect to any Stock or other Kendle securities
held



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<PAGE>   15

from time to time as part of the Escrow Property until such time as, if at all,
any such securities are distributed to Kendle in accordance with Section 5
hereof. The parties further acknowledge that the amount of cash and securities
held as part of the Escrow Property may be reduced or increased from time to
time during the term hereof pursuant to the terms of this Escrow Agreement and
the U.S. Purchase Agreement. Accordingly, the term "Escrow Property" shall refer
to the sum of (i) the Deposit initially placed in escrow hereunder or to such
greater or lesser amount of cash as may be held in escrow pursuant hereto at any
point during the term hereof and (ii) the Stock initially placed into escrow
hereunder or such lesser or greater number of securities as may be held in
escrow pursuant hereto at any point during the term hereof. The parties agree
that interest earned on, and any other accretions to, the Escrow Property (other
than stock dividends and other stock distributions) (collectively, "Seller's
Accretions") shall not be deemed to be a part of the Escrow Property and shall
be treated in accordance with Section 2(b) hereof.

                           (b) All Seller's Accretions earned on or distributed
with respect to the Escrow Property shall be the property of, and fully taxable
to, the U.S. Seller. On each date on which any portion of the Escrow Property is
released to the U.S. Seller pursuant to this Escrow Agreement (and, in any
event, on the date of the final release of the Escrow Property hereunder), the
Escrow Agent shall pay to the U.S. Seller, all Seller's Accretions which have
accrued on or been received with respect to the Escrow Property through such
date.

                  3. ESCROW AGENT AS CUSTODIAN; EXPENSES. The Escrow Agent
shall, for all purposes of this Escrow Agreement, be treated as and considered
legally a custodian. The Escrow Agent shall be entitled to rely conclusively
upon the written notice provided in Section 5 and may assume the genuineness of
all signatures and documents and the authority of all signatories. The Escrow
Agent shall have no liability except for gross negligence or willful misconduct
in the performance of its duties under this Escrow Agreement. Kendle and the
Selling Group, collectively, shall each assume and pay one half (1/2) of all
costs and expenses of the Escrow Agent incurred in its capacity as the Escrow
Agent under this Escrow Agreement. The fees of the Escrow Agent are set forth on
Exhibit "B" attached to the Primary Escrow Agreement and incorporated herein.

                  4.       RESIGNATION; DISAGREEMENTS.

                           (a) Escrow Agent (and any successor Escrow Agent) may
at any time resign as such by delivering the Escrow Property to any successor
Escrow Agent designated by the other parties hereto in writing, or to any court
of competent jurisdiction as provided below. The resignation of Escrow Agent
will take effect on the earlier of (i) the appointment of a successor (including
a court of competent jurisdiction), or (ii) the day which is thirty (30) days
after the date of delivery of its written notice of resignation to the other
parties hereto. If at that



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time Escrow Agent has not received a designation of a successor Escrow Agent,
Escrow Agent's sole responsibility after that time shall be to retain and
safeguard the Escrow Property until receipt of a designation of successor Escrow
Agent or a joint written disposition instruction by the other parties hereto or
a final order of a court of competent jurisdiction.

                           (b) In the event of any disagreement between the
other parties hereto resulting in adverse claims or demands being made in
connection with the Escrow Property or in the event that Escrow Agent is in
doubt as to what action it should take hereunder, Escrow Agent shall be entitled
to retain the Escrow Property until Escrow Agent shall have received (i) a final
order of a court of competent jurisdiction directing delivery of the Escrow
Property, or (ii) a written agreement executed by the other parties hereto
directing delivery of the Escrow Property, in which event Escrow Agent shall
disburse the Escrow Property in accordance with such order or agreement. Escrow
Agent shall act on such court order without further question.

                  5.       TERMINATION AND DISTRIBUTION OF ESCROW.

                           (a) TERMINATION. This Escrow Agreement shall
terminate on the date upon which the Escrow Agent shall have fully distributed
the Escrow Property as provided herein.

                           (b) CLAIM NOTICES. Simultaneously with any deposit of
any cash or Kendle shares hereunder in accordance with the U.S. Purchase
Agreement and the Primary Escrow Agreement, U.S. Purchaser shall give to the
Escrow Agent a notice which (i) affirms that the Purchasing Group believes that
the members of the Selling Group are liable to the U.S. or Canadian Purchaser
under the U.S. Purchase Agreement or the Canadian Purchase Agreement for
breaches of representations or warranties and (ii) states a specific amount (at
least equal to the value of the Escrow Property than being deposited) (the
"Claimed Amount") which, as a result of the factual basis underlying such
notice, the Purchasing Group, in good faith, believes it is owed, by the Selling
Group (any such notice being herein referred to as a "Claim Notice"), the Escrow
Agent shall continue to hold in escrow the Claimed Amount stated in such notice
(or, if less, the Escrow Property then being deposited) until (A) it shall
receive further instructions as to the disposition of such property in a writing
signed by Kendle and either of the Sellers or (B) it shall be otherwise ordered
by a court of competent jurisdiction. The parties acknowledge that there may be
multiple Claim Notices given by the Purchasing Group during the term hereof. The
Escrow Agent shall deliver a copy of each Claim Notice received by it to the
appropriate Seller. The U.S. Purchaser represents that it has tendered to the
Escrow Agent a Claim Notice, conforming to the above, with respect to the
initial Escrow Property deposited with the Escrow Agent hereunder.



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<PAGE>   17

                           (c) JOINT WRITTEN DIRECTION. Notwithstanding any
provision in this Section 5 to the contrary, the Escrow Agent may make payments
from the Escrow Property, or from any Seller's Accretions, at any time upon
receipt of a joint written direction from Kendle and either of the Sellers (a
"Joint Written Direction").

                  6. DUTIES OF ESCROW AGENT. The duties of the Escrow Agent
under this Escrow Agreement shall be entirely administrative and the Escrow
Agent shall not be liable to any third party as a result of any action or
omission taken or made by it, if taken in good faith, except for gross
negligence or willful misconduct in performing its duties. In the event of
disagreement or dispute between Kendle and the Selling Group with respect to
disposition of the Escrow Property, the Escrow Agent shall have the right to
initiate an appropriate legal proceeding to obtain a judicial determination of
the respective parties' rights to the Escrow Property. No rights are intended to
be granted to any third party hereunder. Kendle and the Selling Group shall
severally (each being responsible for a maximum of fifty percent (50%) of the
indemnity account) indemnify and hold harmless the Escrow Agent and reimburse
the Escrow Agent from and for any and all liability, costs and expenses,
including reasonable attorneys' fees, the Escrow Agent may suffer or incur by
reason of its execution and performance of this Escrow Agreement except for any
such liability, costs or expenses (including attorneys fees) which is a result
of Escrow Agent's own gross negligence or willful misconduct. The Escrow Agent
shall have no duties except those which are expressly set forth herein, and it
shall not be bound by any notice of a claim, or demand with respect thereto, or
any waiver, modification, amendment, termination or recission of this Escrow
Agreement, unless in writing received by it and signed by Kendle and either
Seller.

                  In the event that the Escrow Agent shall find it necessary to
consult with counsel of its own choosing in connection with this Escrow
Agreement, the Escrow Agent shall not incur any liability for any action taken
in good faith in accordance with such advice. Kendle and the Selling Group,
jointly and severally, shall indemnify and hold harmless the Escrow Agent for
any liability, loss, claim or damage incurred by the Escrow Agent in connection
with this Escrow except for any such liability, costs, expenses (including
reasonable attorneys' fees), loss, claims or damage which is a result of Escrow
Agent's own gross negligence or willful misconduct. This indemnification shall
survive termination of this Escrow Agreement. Kendle and the Selling Group agree
that Kendle, on the one hand, and the Selling Group, collectively, on the other
hand, shall each assume and pay fifty percent (50%) of all amounts due to Escrow
Agent as a result of this indemnification.

                  Escrow Agent is not a party to, and is not bound by, any
agreement which may be evidenced by, or arise out, the foregoing instruction,
other than as expressly set forth herein. In the event that any of the terms and
provisions of any



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<PAGE>   18

other agreement (excluding any amendment to this Escrow Agreement) between any
of the parties hereto, conflict or are inconsistent with any of the provisions
of this Escrow Agreement, the terms and provisions of this Escrow Agreement
shall govern and control in all respects.

                  7. NOTICES. All notices, consents or other communications
required or permitted to be given under this Escrow Agreement shall be in
writing and shall be deemed to have been duly given:

                           (a) when delivered personally (including via
recognized courier service, such as Fed Ex)

                           (b) five (5) business day after being sent by
certified U.S. mail, postage charges prepaid, or

                           (c) on the date on which a telegram or facsimile is
transmitted to the parties at their respective addresses stated above.

                  Any party may change its address for notice and the address to
which copies must be sent by giving notice of the new addresses to the other
parties in accordance with this Section 7, except that any such change of
address notice shall not be effective unless and until received.

                  8. AMENDMENT. No amendment or modification of this Escrow
Agreement shall be effective unless in writing and signed by the parties.

                  9. PARTIES IN INTEREST. This Escrow Agreement shall bind,
benefit, and be enforceable by and against each party hereto and their
successors, assigns, heirs and personal representatives. No party shall in any
manner assign any of its rights or obligations under this Escrow Agreement
without the express prior written consent of the other parties.

                  10. NO WAIVERS. No waiver with respect to this Escrow
Agreement shall be enforceable unless in writing and signed by the party against
whom enforcement is sought. Except as otherwise expressly provided herein, no
failure to exercise, delay in exercising, or single or partial exercise of any
right, power or remedy by any party, and no course of dealing between or among
any of the parties, shall constitute a waiver of, or shall preclude any other or
further exercise of the same or any other right, power or remedy.

                  11. SEVERABILITY. If any provision of this Escrow Agreement is
construed to be invalid, illegal or unenforceable, then the remaining provisions
hereof shall not be affected thereby and shall be enforceable without regard
thereto.



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                  12. COUNTERPARTS. This Escrow Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall
constitute an original hereof, and it shall not be necessary in making proof of
this Escrow Agreement to produce or account for more than one original
counterpart hereof.

                  13. CONTROLLING LAW. This Escrow Agreement is made under, and
shall be construed and enforced in accordance with, the laws of the State of
Ohio applicable to agreements made and to be performed solely therein, without
giving effect to principles of conflicts of law.

                  14. DEFINITIONS. To the extent not specifically defined
herein, all terms used herein shall have the meanings ascribed to them in the
U.S. Purchase Agreement.




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