Exhibit 10.2
ESCROW AGREEMENT
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This ESCROW AGREEMENT, dated as of March 12, 1998, is among (i) KFI Holding
Corporation, a Delaware corporation ("Holding"), (ii) Xxxxxxx Xxxxxx, in his
capacity as attorney-in-fact under various Powers of Attorney for certain
stockholders of AGI Incorporated, a corporation organized under the laws of the
State of Illinois ("AGI"), party to such Power of Attorney (collectively, the
"Individual Xxxxx Stockholders"), (iii) the Stockholders of AGI referred to on
the signature pages hereto as the "Other Escrowed Stockholders", and together
with the Individual Xxxxx Stockholders, being referred to herein as the
"Escrowed Stockholders", and (iv) First Trust National Association, as the
escrow agent (the "Escrow Agent"). All capitalized terms not otherwise defined
herein shall have the meanings assigned to them in the Merger Agreement (as
defined below).
WHEREAS, Holding, AGI and certain other parties have entered into an
Agreement and Plan of Merger, dated as of February 19, 1998 (the "Merger
Agreement"), pursuant to which Holding has agreed to purchase the Converted
Shares of AGI for the purchase price specified in Section 1.3(a) of the Merger
Agreement (the "Purchase Price");
WHEREAS, pursuant to the Merger Agreement, Holding has agreed to deposit
the $812,622 in escrow with the Escrow Agent to be held and distributed by the
Escrow Agent on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth in this Agreement, the parties hereto hereby agree as follows:
1. DEPOSIT OF ESCROWED FUNDS. Holding hereby deposits with the Escrow
Agent, and the Escrow Agent hereby acknowledges receipt of, the sum of $812,622
(the "Escrow Amount") as security for the payment of claims of indemnification,
if any, made against the Escrowed Stockholders, subject to the terms,
conditions, limitations and qualifications set forth in Article 8 of the Merger
Agreement. The Escrow Amount, together with any interest earned thereon from
any investment thereof hereunder, is hereinafter referred to as the "Escrowed
Funds".
2. INVESTMENT OF ESCROWED FUNDS. Until the release of the Escrowed Funds
pursuant to Section 3 hereof, the Escrow Agent shall, at the written direction
of Holding and the Escrowed Stockholders, invest and reinvest the Escrowed Funds
solely in (a) marketable obligations of, or obligations guaranteed by, the
United States of America, (b) U.S. Money Market Funds (as defined below), (c)
deposits in any interest-bearing account with a commercial bank or trust company
having capital surplus of at least $100,000,000 and having at least an "A"
rating or better from Standard & Poor's, and/or (d) other investments mutually
agreed upon by Holding and the Escrowed Stockholders. The initial written
direction of the Escrowed Stockholders and Holding is
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attached hereto as Schedule 1. In the event that Holding and the Escrowed
Stockholders do not give written directions to the Escrow Agent in a timely
manner, the Escrow Agent shall invest and reinvest the Escrowed Funds in U.S.
Money Market Funds offered by the Escrow Agent or its affiliates. The Escrow
Agent shall not have any liability to the Escrowed Stockholders or Holding
arising, directly or indirectly, from any investment made pursuant to this
Section 2. As used herein, the term "U.S. Money Market Funds" means interests
in any open-end or closed-end management type investment company or investment
trust registered under the Investment Company Act of 1940 (as from time to time
amended, the "Investment Company Act"), the portfolio of which is limited to
obligations of, or obligations guaranteed by, the United States or any agency
thereof ("Federal Obligations") and to agreements to repurchase Federal
Obligations that are at least 100% collateralized by Federal Obligations marked
to market on a daily basis, including those offered by the Escrow Agent or its
affiliates.
3. RELEASE OF ESCROWED FUNDS.
(a) Subject to paragraphs (b) and (c) below, on the first anniversary of
the Closing (the "Distribution Date"), the Escrow Agent shall distribute the
remaining Escrowed Funds to each of the Escrowed Stockholders, pro rata in
accordance with the percentage set forth opposite such Escrowed Stockholder's
name on Exhibit A hereto, unless on the Distribution Date there is outstanding
any unresolved AGI Indemnified Claim (sometimes called a "Claim" or "Claims")
asserted pursuant to Article 8 of the Merger Agreement which has been previously
notified to the Escrow Agent in accordance with paragraph (b) below, in which
case the Escrow Agent shall retain in the Escrow Account, and subject to all of
the terms and provisions of this Agreement, an amount of the Escrowed Funds
equal to the amount of all such unresolved Claims.
(b) From time to time prior to the Distribution Date, in accordance with
Article 8 of the Merger Agreement, Holding may deliver to the Escrow Agent a
written notice (a "Claim Notice") requesting distribution to Holding of a
specified amount of the Escrowed Funds in full or partial payment of the
indemnification obligations of the Escrowed Stockholders to the Holding
Indemnitees related to or arising directly or indirectly out of or in connection
with any AGI Indemnified Claims which have been asserted pursuant to the terms
of Article 8 of the Merger Agreement, along with (a) a delivery receipt or other
appropriate proof of actual delivery to the Escrowed Stockholder Representative
of a copy of such Claim Notice and (b) a certificate, in the form of Exhibit B
attached hereto and made a part hereof, signed by Holding evidencing that
Holding has asserted a demand against the Non-Escrowed Stockholders relating to
such AGI Indemnified Claim as required in accordance with Article 8 of the
Merger Agreement (it being agreed that the Escrowed Stockholder Representative
shall receive a copy of such certificate and proof of delivery). If the Escrow
Agent is not in actual receipt of a written objection from the Escrowed
Stockholder Representative to such Claim Notice within 35 days following the
date of the Escrow Agent's actual receipt of such Claim Notice (or if the 35th
day is not a business day,
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then on the first business day after the 35th day (such later date being called
the "Final Receipt Date")), then on the first business day following the Final
Receipt Date, the Escrow Agent shall pay to Holding the amount of the Escrowed
Funds specified in the Claim Notice.
(c) If the Escrow Agent is in actual receipt of a written objection from
the Escrowed Stockholder Representative to a Claim Notice on or prior to the
Final Receipt Date, the Escrow Agent shall not distribute to Holding any amount
which Holding has requested for distribution pursuant to its Claim Notice
(unless the Escrowed Stockholder Representative's objection specifically
authorizes distribution of a portion of such amount, in which case the Escrow
Agent may distribute to Holding such authorized portion), and the Escrow Agent
shall be prohibited from making any distributions of the amount requested by
Holding until the Escrow Agent shall have received either (i) non-conflicting
written instructions from the Escrowed Stockholder Representative and Holding as
to the disposition of the portion of the Escrowed Funds in question, or (ii) an
order of an arbitrator or court having jurisdiction over the matter which is
final and not subject to further court proceedings or appeal along with a
certificate from either counsel to the Escrowed Stockholders or counsel to
Holding that such order is final. Upon receipt of any such written instructions
or order, the Escrow Agent shall distribute such Escrowed Funds in accordance
therewith. If the Escrowed Stockholder Representative's objection to payment of
a Claim shall prevent timely payment to Holding of any amount which is
ultimately determined to be distributable to Holding in satisfaction of such
Claim, Holding shall be entitled to all interest which shall have accrued on
such amount by its investment hereunder from and after the Final Receipt Date
until distribution of such amount to Holding in payment thereof, and the
determination by the Escrow Agent of such interest amount to which Holding is
entitled shall be binding upon both the Escrowed Stockholders and Holding.
(d) If necessary to satisfy any distributions under this Agreement or the
Escrow Agent's fees and expenses, the Escrow Agent may sell or liquidate, in its
sole discretion, any one or more investments prior to maturity and the Escrow
Agent shall not be liable to Holding or to the Escrowed Stockholders for any
loss or penalties resulting from or relating to such sale or liquidation,
however, Holding and the Escrowed Stockholders may extend any payment period in
this Section 3 in order to avoid any loss of income or principal from a
premature liquidation of an escrow investment.
(e) All releases of Escrowed Funds shall be made by wire transfer, or by
delivery to the appropriate party at the address and in the manner set forth for
such party in Section 7 hereof of a bank check in the amount of such release, or
in such other manner as may be agreed to between the appropriate party and the
Escrow Agent.
4. RESPONSIBILITY OF ESCROW AGENT. The Escrow Agent shall not be
responsible for the genuineness of any signature or document presented to it
pursuant to this Agreement and may rely conclusively upon and shall be protected
in acting upon any judicial order or decree, certificate, notice, request,
consent, statement, instruction or other
instrument believed by it in good faith to be genuine or to be signed or
presented by the
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proper person hereunder, or duly authorized by such person or properly made.
Notwithstanding anything to the contrary in this Agreement, prior to taking any
action hereunder, the Escrow Agent may, if in doubt regarding its duties and
obligations, seek instructions from Holding and the Escrowed Stockholders, and
if such instructions are in conflict, the Escrow Agent may seek instructions or
other relief (including but not limited to interpleader) from a court of
competent jurisdiction, and further may request such evidence, documents,
certificates or opinions as it may deem appropriate. The Escrow Agent shall be
entitled to retain counsel both to advise it and in connection with any court
action, and such counsel's reasonable attorneys' fees shall be charged to
Holding. The Escrow Agent shall be entitled to act in reliance upon the advice
of counsel in all matters pertaining to this Agreement, and shall not be liable
for any action taken or omitted by it in good faith in accordance with such
advice. The Escrow Agent shall not be responsible for any of the agreements
contained herein or in the Merger Agreement except the performance of its duties
as expressly set forth herein. The duties and obligations of the Escrow Agent
hereunder shall be governed solely by the provisions of this Agreement, and the
Escrow Agent shall have no duties other than the duties expressly imposed herein
and shall not be required to take any action other than in accordance with the
terms hereof. The Escrow Agent shall not be bound by any notice of, or demand
with respect to, any waiver, modification, amendment, termination, cancellation,
rescission or supercession of this Agreement, unless in writing and signed by
Holding, the Escrowed Stockholders, and the Escrow Agent. In the event of any
controversy or dispute hereunder or with respect to any question as to the
construction of this Agreement, or any action to be taken by the Escrow Agent
hereunder, the Escrow Agent shall not incur any liability for any action taken
or suffered in good faith, its liability hereunder to be limited solely to gross
negligence or willful misconduct on its part. Holding and the Escrowed
Stockholders jointly and severally agree to indemnify and hold the Escrow Agent
harmless, and further to protect and defend the Escrow Agent (with counsel
selected by the Escrow Agent) against any losses, liabilities and damages
incurred by the Escrow Agent as a consequence of any action taken or omitted to
be taken by it in the performance of its obligations hereunder (including,
without limitation, the reasonable fees and disbursements of counsel), with the
exception of any losses, liabilities and damages arising from the Escrow Agent's
gross negligence or willful misconduct. The representations and obligations of
the Escrowed Stockholders and Holding to the Escrow Agent in this Agreement
shall survive the termination of this Agreement and shall be applicable whether
or not First Trust National Association is serving as Escrow Agent.
5. EXPENSES OF ESCROW AGENT. The escrow fees set forth on Schedule 2 to
this Agreement and to the other reasonable costs and expenses of the Escrow
Agent incurred in connection with the administration of this Escrow Agreement
(including reasonable attorneys' fees and disbursements) shall be paid by
Holding on demand made by the Escrow Agent.
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6. ESCROWED STOCKHOLDER REPRESENTATIVE. By the execution and delivery of
this Agreement, the Escrowed Stockholders hereby irrevocably constitute and
appoint Xxxxxxx Xxxxxx as the true and lawful agent and attorney-in-fact (the
"Escrowed Stockholder Representative") of the Escrowed Stockholders with full
power of substitution to act in the name, place and stead of the Escrowed
Stockholders with respect to the escrow arrangements contemplated by this
Agreement, and to act on behalf of the Escrowed Stockholders in any dispute,
claim, litigation or arbitration involving this Agreement, to do or refrain from
doing all such further acts and things, and to execute all such documents as the
Escrowed Stockholder Representative shall deem necessary or appropriate in
connection with the transactions contemplated by this Agreement, including,
without limitation, the power:
(i) to act for the Escrowed Stockholders with regard to matters
pertaining to indemnification claims against the Escrowed Stockholders
referred to in this Agreement and Article 8 of the Merger Agreement,
including the power to compromise any claim on behalf of the Escrowed
Stockholders and to transact matters of litigation or arbitration;
(ii) to execute and deliver all ancillary agreements, certificates
and documents that the Escrowed Stockholder Representative deems necessary
or appropriate in connection with the transactions contemplated by this
Agreement;
(iii) to receive funds on behalf and give receipts for funds, in each
case on behalf of the Escrowed Stockholders;
(iv) to do or refrain from doing any further act or deed on behalf
of the Escrowed Stockholders that the Escrowed Stockholder Representative
deems necessary or appropriate in his sole discretion relating to the
subject matter of this Agreement, as fully and completely as the Escrowed
Stockholders could do if personally present; and
(v) to receive service of process on behalf of the Escrowed
Stockholders in connection with any claims under this Agreement;
and Xxxxxxx Xxxxxx hereby accepts appointment as the Escrowed Stockholder
Representative hereunder.
If Xxxxxxx Xxxxxx dies or otherwise becomes incapacitated and unable to
serve as Escrowed Stockholder Representative, Xxxxxxx Xxxxx shall serve as the
new Escrowed Stockholder Representative. The appointment of the Escrowed
Stockholder Representative shall be deemed coupled with an interest and shall be
irrevocable, and Holding, the Escrow Agent, and any other person may
conclusively and absolutely rely, without inquiry, upon any action of the
Escrowed Stockholder Representative in all matters referred to herein.
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All payments and notices made or delivered by Holding to the Escrowed
Stockholder Representative for the benefit of the Escrowed Stockholders shall
discharge in full all liabilities and obligations of Holding to the Escrowed
Stockholders with respect thereto. The Escrowed Stockholders hereby confirm all
that the Escrowed Stockholder Representative shall do or cause to be done by
virtue of his appointment as the Escrowed Stockholder Representative of the
Escrowed Stockholders. The Escrowed Stockholder Representative shall act for
the Escrowed Stockholders on all of the matters set forth in this Agreement in
the manner the Escrowed Stockholder Representative believes to be in the best
interest of the Escrowed Stockholders and consistent with the obligations under
this Agreement, but the Escrowed Stockholder Representative shall not be
responsible to the Escrowed Stockholders for any loss or damages the Escrowed
Stockholders may suffer by the performance of his duties under this Agreement,
other than loss or damage arising from willful violation of the law or gross
negligence in the performance of his or her duties under this Agreement. It is
expressly agreed that the Escrowed Stockholder Representative shall not have any
liability whatsoever for declining to take any action with respect to any actual
or threatened claim for indemnification pursuant to the Merger Agreement.
7. NOTICES AND COMMUNICATIONS. All notices, demands and other
communications hereunder shall be in writing or by written telecommunication,
and shall be deemed to have been duly given if delivered personally or if mailed
by certified mail, return receipt requested, postage prepaid, or if sent by
overnight courier, or if sent by written telecommunication, as follows:
If to the Escrowed Stockholders:
Xxxxxxx Xxxxxx
Escrowed Stockholders' Representative
Xxxxxxx Xxxxx & Company, L.L.C.
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopier No. (000) 000-0000
with copies sent at the same time and by the same means to:
Xxxxx Xxxxxxx Xxxxxx, Esq.
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
Suite 8000 Sears Tower
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopier No. (000) 000-0000
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If to Holding, to:
KFI Holding Corporation
0000 Xxxxx Xxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000-00000
Attention: Xxxxxxx Xxxxx and Xxxxx Xxxxxxxxx
Telecopier No. (000) 000-0000
with copies sent at the same time and by the same means to:
Heritage Partners Management Company, Inc.
00 Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx, Managing Director
Telecopier No. (000) 000-0000
and to:
Xxxxx X. Xxxxx, Esq.
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopier No. (000) 000-0000
If to the Escrow Agent, to:
First Trust National Association
000 X. Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Escrow Area
Telecopier No. (000) 000-0000
or to such other address as such party shall designate by written notice to the
other parties hereto. Any such notice shall be effective (a) if delivered
personally, when received, (b) if sent by overnight courier, on the next
business day, (c) if mailed, five (5) days after being mailed as described
above, and (d) if sent by written telecommunication and later confirmed, when
dispatched.
8. TERM; AMENDMENTS; SUCCESSORS. Except as otherwise provided herein,
this Agreement shall continue until the date on which all of the Escrowed Funds
have been distributed as provided in Section 3 hereof, may be amended only as
provided in Section 4 hereof and shall be binding upon and shall inure to the
benefit of the parties hereto and its respective successors and assigns.
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9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same instrument. In making proof of this Agreement
it shall be necessary to produce or account for only one such counterpart signed
by or on behalf of the party sought to be charged herewith.
10. SUCCESSOR ESCROW AGENT. The Escrow Agent may resign on thirty (30)
days prior written notice to Holding and the Escrowed Stockholder
Representative. Upon receipt of notice of the resignation of the Escrow Agent
or upon any vacancy created by the death or incapacity of the Escrow Agent or
for any other reason, Holding and the Escrowed Stockholder Representative shall
appoint a successor escrow agent(s) or otherwise provide for the disposition of
funds held by the Escrow Agent by notice in writing to the Escrow Agent. The
Escrow Agent shall pay over the Escrowed Funds as provided in said notice.
11. ENTIRE AGREEMENT. This Agreement, except with respect to Holding and
the Escrowed Stockholders, contains the entire agreement and understanding of
the parties with respect to the transactions contemplated hereby. No prior
agreement, either written or oral, shall be construed to change, amend, alter,
repeal or invalidate this Agreement.
12. REPRESENTATIONS OF HOLDING AND THE ESCROWED STOCKHOLDER
REPRESENTATIVE. Each of Holding and the Escrowed Stockholder Representative
represents and warrants to the Escrow Agent that it has the power and authority
to enter into this Agreement and to carry out its obligations hereunder, that it
has duly authorized, executed and delivered this Agreement, and this Agreement
is its valid and binding obligation.
13. GOVERNING LAW. The validity, enforceability and construction of this
Agreement shall be governed by the laws of the State of Illinois (without giving
effect to principles of conflicts of laws).
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as an
instrument under seal as of the day and year first written above.
KFI HOLDING CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
Title:
ESCROW AGENT:
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FIRST TRUST NATIONAL ASSOCIATION,
as Escrow Agent
By: /s/ Xxxxx X. Garaglino
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Name: Xxxxx X. Garaglino
Title: Vice President
ESCROWED STOCKHOLDER
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REPRESENTATIVE:
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/s/ Xxxxxxxx X. Xxxxxx
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Xxxxxxx Xxxxxx, attorney-in-fact under
power of attorney dated _______ ___, 1998
OTHER ESCROWED
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STOCKHOLDERS:
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/s/ Zenas Block
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Zenas Block
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/s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx, Trustee
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Xxxxxx X. Xxxxxxx, under Declaration of
Trust dated 5/17/91
/s/ W. Xxxxx Xxxxxxxxx, Xx., Trustee
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W. Xxxxx Xxxxxxxxx, Xx.
under Trust Agreement, dated 10/25/85
and restated 2/15/89
/s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
Exhibit A
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Escrowed Stockholders
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Xxxxx X. Xxxxx
Xxxxxx X. Xxxxxxx Declaration of Trust dated 5/17/91
Zenas Block
Xxxxx Xxxxx
Xxxxxxx X. Xxxxx, III
E. Xxxxx Xxxxxxxx, III
Xxxxx De Vogue
F. Xxxxxx Xxxxxxx
Xxxxxx X. Fix
Xxxxxxx X. Xxxxxxxx
Xxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Xxxxx Xxxxxxxx
Xxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxx X. Xxxxx
Xxxx Xxxxxxx
Xxxxx X. XxXxxxxx
Xxxxx X. XxXxxxxx
Xxxxxxx Xxxxxx
Xxxxxx X. Xxxx
Xxxxxx X. Xxxxxxx
W. Xxxxx Xxxxxxxxx, Xx. Trust Agreement dated 10/21/85 and restated 2/15/89
Xxxxx X. Xxxx
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Exhibit B
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HOLDING CERTIFICATE
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The undersigned, the duly elected and qualified __________ [officer] of KFI
Holding Corporation ("Holding"), hereby certifies as follows:
1. Holding, or a Holding Indemnified Party, is entitled to indemnity
pursuant to Article 8 of the Merger Agreement. The basis of such AGI
Indemnified Claim is as follows:
[Describe Claim]
The amount of such Claim is $____________. The Escrowed Stockholders' aggregate
pro rata share of such Claim is ____% of $____________, or $____________.
2. Holding has complied with all of the terms of Article 8 of the Merger
Agreement in asserting such Claim. Without limiting the foregoing:
(a) Holding has provided actual notice of such Claim to the Escrowed
Stockholder Representative in the following manner [specify], all
pursuant to Section 7 of the Escrow Agreement referred to below.
[Proof of delivery is enclosed] or [Delivery of notice was made
personally.]
(b) Holding has made demand for such Claim to each of the Non-Escrowed
Stockholders as required by Article 8 of the Merger Agreement, and the
Non-Escrowed Stockholders have received effective notice thereof
pursuant to and within the meaning of Section 12.5 of the Merger
Agreement. Proof of delivery of such notice (other than in the case of
personal delivery) has been sent to the Escrowed Stockholder
Representative.
3. All capitalized terms used and not defined herein have the meanings
ascribed to them in that certain Escrow Agreement, dated ____________, 1998, to
which Holding and Xxxxxxx Xxxxxx, as Escrowed Stockholder Representative, among
others, are parties.
KFI HOLDING CORPORATION
By:
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Its
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Schedule 1 to Escrow Agreement
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INITIAL INVESTMENT INSTRUCTIONS
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Schedule 2 to Escrow Agreement
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ESCROW AGENT'S FEES
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