<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
K-V PHARMACEUTICAL COMPANY
----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which
the filing fee is calculated and state how it was determined.)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
K-V PHARMACEUTICAL COMPANY
2503 SOUTH HANLEY ROAD
ST. LOUIS, MISSOURI 63144
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 11, 1995
St. Louis, Missouri
July 14, 1995
The Annual Meeting of Shareholders of K-V Pharmaceutical Company
will be held on Friday, August 11, 1995, at 9:00 A.M., Central
Daylight Savings Time, at The St. Louis Club (Founders Room, 14th
Floor), 7701 Forsyth Boulevard, Clayton, Missouri 63105, for the
following purposes:
1. To elect one Class C director, to hold office for three years;
and
2. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on June 13, 1995
will be entitled to vote at said meeting or at any adjournment or
adjournments thereof. Lists of all holders of Class A Common Stock
and all holders of Class B Common Stock entitled to vote at the
annual meeting will be open to the examination of any shareholder,
for any purpose germane to the annual meeting, for ten days prior to
the date thereof, at the office of the Company at 2503 South Hanley
Road, St. Louis, Missouri 63144.
A copy of the 1995 Annual Report to Shareholders is enclosed.
By Order of the Board of Directors
ALAN G. JOHNSON, Secretary
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE
MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY SO THAT
YOUR SHARES MAY BE REPRESENTED AND VOTED AT THE MEETING. A RETURN
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 3
K-V PHARMACEUTICAL COMPANY
2503 SOUTH HANLEY ROAD
ST. LOUIS, MISSOURI 63144
PROXY STATEMENT
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of K-V
Pharmaceutical Company (the "Company"). Whether or not you expect to
attend the meeting in person, please specify your choice by marking
and returning your executed proxy in the enclosed envelope and the
shares represented thereby will be voted in accordance with your
wish. If no election is made in the proxy the Company receives from
you, your proxy will be voted for the nominee named in this proxy
statement. This proxy statement and form of proxy were first mailed
to shareholders on or about July 14, 1995.
REVOCATION OF PROXY
If, after sending in your proxy, you decide to vote in person or
desire to revoke your proxy for any other reason, you may do so by
notifying the Secretary of the Company in writing, provided that your
notice of revocation is actually received by the Secretary prior to
the voting of the proxy.
RECORD DATE
Shareholders of record at the close of business on June 13, 1995
will be entitled to vote at the meeting.
ACTION TO BE TAKEN UNDER THE PROXY
Unless otherwise directed by the giver of the proxy, the persons
named in the enclosed form of proxy, Victor M. Hermelin and Marc S.
Hermelin, or the one of them who acts, will vote:
1. FOR the election of Garnet E. Peck, Ph.D., as a Class C director
of the Company, to hold office for three years and until his
successor has been duly elected and qualified; and
2. In their discretion on the transaction of such other business as
may properly come before the meeting or any adjournment thereof.
Dr. Garnet E. Peck is presently a director. He was appointed by the
Board of Directors in December 1994 to fill the vacancy created by
the death of director Fred P. Sheridan. Should the nominee become
unavailable or decline to serve for any reason, it is
2
<PAGE> 4
intended that the persons named in the proxy will vote for the
election of such other person in his place as may be designated by
the Board of Directors. The Board of Directors is not aware of any
circumstances likely to cause Dr. Peck to be unavailable for election
or to decline to serve.
SECURITY OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
On June 13, 1995 there were 6,739,151 shares of Class A Common
Stock ("Class A Stock") outstanding and 4,694,964 shares of Class B
Common Stock ("Class B Stock") outstanding, which constitute all of
the outstanding voting shares of the Company. Each share of Class A
Stock is entitled to one-twentieth of one vote (or 336,957 votes if
all outstanding shares of Class A Stock are voted) and each share of
Class B Stock is entitled to one vote on all matters to come before
the Annual Meeting.
Under applicable state law and provisions of the Company's
Certificate of Incorporation and By-laws, (i) the vote required for
the election of directors is a plurality of the votes of the issued
and outstanding shares of Class A Stock and Class B Stock present in
person or represented by proxy at the annual meeting of stockholders
and entitled to vote on the election of directors, and (ii) the vote
required for other matters that may come before the meeting is the
affirmative vote of the majority of the issued and outstanding shares
of Common Stock present in person or represented by proxy at the
annual meeting of stockholders and entitled to vote. In all voting,
votes representing Class A Stock and Class B Stock will vote as a
single class.
Brokers who hold shares for the accounts of their clients may vote
such shares either as directed by their clients or in their own
discretion if permitted by the stock exchange or other organization
of which they are members. Brokers who are members of the New York
Stock Exchange and American Stock Exchange are permitted to vote
proxies of any client in their own discretion as to the election of
directors if the client has not furnished voting instructions within
ten days of the meeting. Certain proposals other than the election of
directors are "non-discretionary," and brokers who have received no
instructions from their clients do not have discretion to vote on
those items. When brokers vote proxies on some but not all of the
proposals at a meeting, the missing votes are referred to as "broker
non-votes."
Based on the above: (a) abstentions from voting and broker non-
votes on the issue of the election of a director will operate as
neither a vote for nor a vote against the nominee; and (b)
abstentions from voting and broker non-votes on any other proposal
that may come before the meeting could have either no effect on the
outcome of the vote or could operate as a vote against the proposal,
depending on the nature of the proposal and vote required for its
passage.
Votes will be counted by duly appointed inspectors of election,
whose responsibilities are to ascertain the number of shares
outstanding and the voting power of each, determine
3
<PAGE> 5
the number of shares represented at the meeting and the validity of
proxies and ballots, count all votes and report the results to the
Company.
<TABLE>
The following table lists all shares of Class A Stock and Class B
Stock owned at June 13, 1995 by each person known to the Company to
own beneficially 5% or more of its shares of either Class A Stock or
Class B Stock, by each of the Company's directors who is a
shareholder and by all directors and executive officers as a group.
Except as indicated by the footnotes following the table, each person
listed has sole voting and investment power over the shares listed
opposite their names:
<CAPTION>
AMOUNT OF AMOUNT OF
BENEFICIAL BENEFICIAL
OWNERSHIP- OWNERSHIP-
CLASS A PERCENT OF CLASS B PERCENT OF
NAME AND ADDRESS STOCK<Fa> CLASS<Fb> STOCK<Fa> CLASS<Fb>
---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Lawrence Brody, 1,918,312 shares<Fc> 28.5% 1,918,312 shares<Fc> 40.9%
Minnette Hermelin and
Marc S. Hermelin Trustees
One Metropolitan Square
St. Louis, Missouri 63101
Oppenheimer Management 377,000<Fd> 5.6% 265,000 shares<Fd> 5.6%
Corporation
Two Broadway
New York, New York 10004
McCullough, Andrews 434,000<Fe> 6.4% - <F*>
& Cappiello, Inc.
101 California Street
Suite 4250
San Francisco, California 94111
Minnette Hermelin 8,812 shares<Ff> <F*> 8,812 shares<Ff> <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144
Marc S. Hermelin 70,499 shares<Fg> 1.0% 72,808 shares<Fg> 1.5%
2503 S. Hanley Road
St. Louis, Missouri 63144
Alan G. Johnson 144,500 shares<Fh> 2.1% 144,500 shares<Fh> 3.1%
101 S. Hanley Road
St. Louis, Missouri 63105
Victor M. Hermelin 16,600 shares <F*> 24,600 shares <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144
Garnet E. Peck, Ph.D. - <F*> 1,000 shares <F*>
1336 Robert E. Heine
Pharmacy Building
West Lafayette, Indiana 47907
4
<PAGE> 6
<CAPTION>
AMOUNT OF AMOUNT OF
BENEFICIAL BENEFICIAL
OWNERSHIP- OWNERSHIP-
CLASS A PERCENT OF CLASS B PERCENT OF
NAME AND ADDRESS STOCK<Fa> CLASS<Fb> STOCK<Fa> CLASS<Fb>
---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Raymond F. Chiostri 7,381 shares <F*> 7,381 shares <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144
Mitchell I. Kirschner 15,314 shares<Fi> <F*> 15,314 shares<Fi> <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144
Gerald R. Mitchell 16,224 shares <F*> 16,250 shares <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144
All current directors and 2,168,829 shares<Fj> 31.8% 2,180,160 shares<Fj> 45.7%
executive officers as a group
(7 individuals)
<FN>
-----
<F*> Less than one percent
<Fa> Includes the following shares which were not owned by the persons
listed but which could be purchased from the Company under
options exercisable currently or within 60 days after the date of
this Proxy Statement:
<CAPTION>
SHARES OF SHARES OF
CLASS A CLASS B
STOCK STOCK
--------- ---------
<S> <C> <C>
Marc S. Hermelin........................................... 33,750 33,750
Victor M. Hermelin......................................... 9,000 9,000
Alan G. Johnson............................................ 3,000 3,000
Garnet E. Peck, Ph.D....................................... - 1,000
Raymond F. Chiostri........................................ 7,300 7,300
Mitchell I. Kirschner...................................... 15,000 15,000
Gerald R. Mitchell......................................... 1,800 1,800
<Fb> In determining the percentages of shares deemed beneficially
owned by each director and officer and by all directors and
officers as a group, the exercise of all options held by each
person which are currently exercisable or will become exercisable
within 60 days of the date of this Proxy Statement is assumed.
For such purposes, 6,810,300 shares of Class A Stock and
4,767,114 shares of Class B Stock are deemed to be outstanding.
<Fc> These shares are held in four irrevocable trusts created by
another party, the beneficiaries of which are Arnold L. Hermelin
(as to 617,000 shares of each of Class A and Class B Stock), Anne
S. Kirschner (as to 615,500 shares each of Class A and Class B
Stock), Marc S. Hermelin (as to 382,812 shares each of Class A
and Class B Stock), and Minnette Hermelin, the mother of the
other three beneficiaries (as to 303,000 shares each of Class A
and Class B Stock).
5
<PAGE> 7
<Fd> According to the latest report on Schedule 13G received by the
Company, Oppenheimer Management Corporation is an investment
adviser to registered investment companies that beneficially own
such shares.
<Fe> According to the latest report on Schedule 13G received by the
Company, McCullough, Andrews & Cappiello, Inc. is an investment
adviser.
<Ff> Does not include 1,918,312 shares each of Class A and Class B
Stock referred to in footnote (c), over which Minnette Hermelin
shares voting and investment power as one of three trustees.
<Fg> Does not include 117,500 shares each of Class A and Class B Stock
held by Alan G. Johnson as trustee of an irrevocable trust
created by another party for the benefit of Marc S. Hermelin, who
has no voting or investment power over such shares. Also does not
include 1,918,312 shares each of Class A and Class B Stock
created by another party referred to in footnote (c), over which
Marc S. Hermelin is one of three trustees who shares voting and
investment power.
<Fh> Includes 117,500 shares each of Class A and Class B Stock held as
trustee of an irrevocable trust created by another party for the
benefit of Marc S. Hermelin.
<Fi> Does not include 615,500 shares each of Class A and Class B Stock
referred to in footnote (c), which are held by an irrevocable
trust in favor of Anne S. Kirschner, wife of Mitchell I.
Kirschner. Neither Mitchell I. Kirschner nor Anne S. Kirschner
holds any voting or investment power over such shares.
<Fj> All of such shares are owned, or represented by shares
purchasable as set forth in footnote (a), solely by such
persons.
</TABLE>
Although 6,739,151 shares of the Class A Stock were outstanding as
of June 13, 1995, holders of the 241,000 outstanding shares of the
Company's 7% Cumulative Convertible Preferred Stock (the "Preferred
Stock") have the current right to convert such shares into 301,250
shares of Class A Stock, each of which will entitle the holder
thereof to one-twentieth (1/20) vote with respect to all matters to
be voted upon by shareholders. If all such shares of Class A Stock
were issued, the aggregate voting power thereof would be equivalent
to voting power of 15,062 shares of Class B Stock into Class A Stock.
In addition, all holders of Class B Stock have the right, at any
time, to convert their Class B Stock into Class A stock on a share-
for-share basis. If all shares of Preferred Stock and all shares of
Class B Stock were converted into Class A Stock, 11,735,365 shares of
Class A Stock would be outstanding and each person included in the
previous table would hold the number of shares of Class A Stock equal
to the number of shares of Class B Stock listed in such table plus
the number of shares of Class A Stock listed in such table.
6
<PAGE> 8
INFORMATION CONCERNING NOMINEE AND
DIRECTORS CONTINUING IN OFFICE
<TABLE>
The following table lists, for the nominee for director for a term
expiring at the annual meeting in 1998, and for present directors
continuing in office, each such person's principal occupation for at
least the past five years, each person's present position with the
Company, the year in which each was first elected as a director, each
person's age and each person's directorships with other companies
whose securities are registered with the Securities and Exchange
Commission:
<CAPTION>
SERVICE PRINCIPAL
AS A OCCUPATION; POSITION
DIRECTOR WITH COMPANY; AGE;
NAME SINCE OTHER DIRECTORSHIPS
---- -------- --------------------
<C> <C> <S>
CLASS C NOMINEE-
(for term expiring in 1998)
Garnet E. Peck, Ph.D.................. 1994 Director; Professor of Industrial Pharmacy and Director of the
Industrial Pharmacy Laboratory of Purdue University since 1975;
member of the faculty of Purdue University since 1967; Age 65.
CLASS B DIRECTORS-
(terms expire in 1997)
Victor M. Hermelin<Fa>................ 1946 Chairman of the Board of the Company since 1972; Treasurer of the
Company since 1971; Director and Vice President of Particle Dynamics,
Inc. since 1974; Age 81.
Alan G. Johnson<Fb>................... 1976 Director and Secretary of the Company; Attorney at Law and member for
more than the past five years in the law firm of Gallop, Johnson &
Neuman, L.C. and its predecessor, St. Louis, Missouri; Director of
Particle Dynamics, Inc. since 1977; Director of ETHEX Corporation
since 1990; Director of MRL, Inc.; Director of Siboney Corporation;
Director of NationsMart Corporation; Director of Triax Communications
Corporation; Age 60.
CLASS A DIRECTOR-
(term expires in 1996)
Marc S. Hermelin<Fa>.................. 1973 Vice Chairman of the Board of the Company since 1974; Chief Executive
Officer from 1975 to February 1994 and Interim Chief Executive
Officer since December 1994; Director and Vice President of Particle
Dynamics, Inc. since 1974; Age 53.
7
<PAGE> 9
<FN>
-----
<Fa> Victor M. Hermelin is the father of Marc S. Hermelin and the
father-in-law of Mitchell I. Kirschner, Vice President-New
Business Development.
<Fb> Alan G. Johnson is a member of the law firm serving as corporate
counsel to the Company. See "TRANSACTIONS WITH ISSUER" for
further information.
</TABLE>
INFORMATION CONCERNING BOARD OF DIRECTORS
During fiscal 1995, the Board of Directors held five formal
meetings and took action by unanimous written consent on various
occasions.
The Company has a standing Stock Option Committee of the Board of
Directors consisting of Directors Alan G. Johnson and Garnet E. Peck,
Ph.D. The duties of the Stock Option Committee are to determine the
individuals to whom options are to be granted and the terms and
provisions of such options under all stock option plans of the
Company. The Company's Director of Human Resources is an advisor to
this Committee. This Committee took action by unanimous written
consent on various occasions during fiscal 1994 but had no formal
meetings.
In April 1995, the Company established a standing Audit Committee
of the Board of Directors consisting of Directors Alan G. Johnson and
Garnet E. Peck, Ph.D. The duties of the Audit Committee include
assisting the Board of Directors in fulfilling its responsibility for
the Company's accounting and financial reporting practices and
facilitating communications between the Board of Directors and the
Company's independent public accountants.
The full Board of Directors acts as a compensation committee,
acting upon the recommendation of a committee consisting of the Vice
Chairman, Vice President-Finance, Director of Human Resources and
Corporate Controller.
Director Garnet E. Peck, Ph.D. receives $1,000 per day for
attending each meeting of the Board of Directors, plus reimbursement
of related expenses. No other director received any remuneration in
fiscal 1995 for service as a director.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and Directors, and persons
who own more than 10% of a registered class of the Company's equity
securities, to file periodic reports of ownership and changes in
ownership with the Securities and Exchange Commission. Such
individuals are required by SEC regulation to furnish the Company
with copies of all such forms they file. Based solely on a review of
the copies of all such forms furnished to the Company or written
representations that no Form 5 reports were required to be filed, the
Company believes that such persons complied with all Section 16(a)
filing requirements applicable to them with respect to transactions
during fiscal 1995.
8
<PAGE> 10
EXECUTIVE COMPENSATION
The following table reflects compensation paid or payable by the
Company and its subsidiaries for fiscal years ended March 31, 1993,
1994 and 1995 to the Company's Chief Executive Officer and the four
other most highly compensated executive officers whose salaries and
bonuses combined that were earned in fiscal 1995 exceeded $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPEN-
ANNUAL COMPENSATION SATION
---------------------------------------------- ----------
AWARDS
----------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPENSA- OPTIONS/ COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY ($)<F1> BONUS ($) TION ($) SARS (#) TION ($)<F2>
--------------------------- ---- -------------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Marc S. Hermelin 1995 474,049 - - - -
Vice Chairman of the 1994 550,964 - - - 2,347
Board (Chief Executive 1993 476,334 58,900 - - 3,988
Officer until February
1994 and Interim Chief
Executive Officer since
December 1994)
Raymond F. Chiostri 1995 208,296 - - - 1,054
President, 1994 222,277 - - - 2,223
Pharmaceutical Division 1993 209,808 - - - 3,047
Mitchell I. Kirschner 1995 182,535 9,450 - - -
Vice President, New 1994 195,096 12,450 - - -
Business Development 1993 149,807 24,495 - - 1,245
Victor M. Hermelin 1995 166,345 - - - -
Chairman of the Board 1994 164,352 - - - -
and Treasurer 1993 159,832 - - - -
Gerald R. Mitchell 1995 126,560 - - - 950
Vice President, Finance 1994 132,669 - - - 1,327
1993 126,461 - - - 2,255
Ted G. Wood 1995 224,331 - - - -
(Former President and 1994 34,615 - - 75,000 -
Chief Executive Officer)
<FN>
-----
<F1> Executive management agreed, for any month commencing July 1994
that the Company operated at a loss, to a voluntary 10% deferral
in salary until the Company returned to profitability. See the
Report of the Board of Directors on Executive Compensation.
<F2> Consists of Company contributions to the Company's profit sharing
plan and 401(k) plan.
</TABLE>
9
<PAGE> 11
INFORMATION AS TO STOCK OPTIONS
No options to acquire either Class A Stock or Class B Stock were
issued to any of the persons named in the Summary Compensation Table
during fiscal 1995.
The following table lists the value as of the end of fiscal 1995 of
options held by the persons listed in the Summary Compensation Table
to acquire shares of Class A Stock.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES (CLASS A STOCK)
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END
(#) ($)
--------------- ---------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------ ------------- -------------
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C>
Marc S. Hermelin...................... - - 26,500/1,000 175,563/6,625
Raymond F. Chiostri................... - - 7,300/8,700 48,363/57,638
Mitchell I. Kirschner................. - - 15,000/0 99,375/0
Victor M. Hermelin.................... - - 9,000/1,000 59,625/6,625
Gerald R. Mitchell.................... - - 1,800/2,625 11,925/17,391
Ted G. Wood........................... - - -/- -/-
</TABLE>
The following table lists all options to acquire Class B Stock that
were exercised during fiscal 1994 and the value as of the end of
fiscal 1995 of options held by the persons listed in the Summary
Compensation Table to acquire shares of Class B Stock.
10
<PAGE> 12
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES (CLASS B STOCK)
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END FISCAL YEAR-END
(#) ($)
--------------- ---------------
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------- ------------ ------------- -------------
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C>
Marc S. Hermelin...................... - - 26,500/1,000 175,563/6,625
Raymond F. Chiostri................... - - 7,300/8,700 48,363/57,638
Mitchell I. Kirschner................. - - 15,000/0 99,375/0
Victor M. Hermelin.................... - - 17,000/13,000 112,625/86,125
Gerald R. Mitchell.................... - - 1,800/2,625 11,925/17,391
Ted G. Wood........................... - - -/- -/-
</TABLE>
REPORT OF BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
OVERVIEW
The Company's executive compensation policy is to provide
compensation and benefit programs to enable it to attract and retain
talented key employees, and to encourage the enhancement of
shareholder value by providing incentives for corporate performance
and individual performance, in terms of current achievements as well
as significant initiatives with long-term implications.
Decisions on compensation of the Company's executive officers are
made by the Board of Directors, with any member who is an executive
officer abstaining from the discussion and vote relating to his own
compensation. The full Board serves as a compensation committee,
acting upon recommendations of a committee consisting of the Vice
Chairman, Vice President-Finance, Director of Human Resources and
Corporate Controller.
The Company's executive compensation program is based upon
experience, tenure and a pay-for-performance philosophy. The key
components of executive officer compensation are (1) salary, which is
based on the individual's overall experience, Company tenure, level
of responsibility, and the general and industry-specific business
environment; (2) cash bonus awards, which are based on individual
performance and the performance of the Company, measured in terms of
the attainment of both defined and general objectives, and (3) stock
option grants, intended to align management's interest in the
Company's
11
<PAGE> 13
long-term success with the interests of the Company's stockholders.
The size of individual awards is dependent upon the executive
officer's salary, number of vested options, and both past and
expected future contributions to the Company. The Board applies the
above-described criteria to each executive officer subjectively based
upon the Board's perception of each executive officer's performance
and value to the Company.
EXECUTIVE BENEFITS
In order to provide a competitively attractive package to secure
and retain executive officers, the Company supplements standard
benefits packages offered to all employees with appropriate executive
benefits, sometimes including car allowances, additional insurance
coverage and appropriate expense reimbursements.
CHIEF EXECUTIVE OFFICER
Under an agreement commencing in 1993 and expiring in March 1997,
Marc S. Hermelin, Vice Chairman and Chief Executive Officer until
February 1994 and Interim Chief Executive Officer since December
1994, received base compensation of $470,797, increasing annually by
the greater of the consumer price index (CPI) increase or 8%, and an
incentive bonus, based on a formula related to the Company exceeding
certain net income levels, of from 5% to 7 1/2% of net income. No
incentive bonus was paid to Mr. Hermelin for fiscal 1995. The
agreement provides life insurance with an annual premium of $24,000.
Mr Hermelin is insured under an additional policy for which the
premium is loaned by the Company, to be repaid out of policy
proceeds.
For fiscal 1995, Mr. Hermelin voluntarily agreed to a 10% deferral
of salary for any month that the Company operated at a loss and until
the Company returned to profitability, commencing July 1994 through
the end of fiscal 1995, which deferral was increased to 25% for the
last three months of the year. For fiscal 1996, Mr. Hermelin has
voluntarily agreed to (a) defer the base salary increase due him
until the Company has two profitable quarters, and (b) cap the amount
of any incentive compensation payable to him at up to 20% of his base
salary. In consideration for the above, Mr. Hermelin was provided an
incentive stock option to purchase 50,000 shares of Class A Common
Stock and 50,000 shares of Class B Common Stock of the Company,
exercisable in installments over the five year period commencing June
1, 1995, at 110% of the market price thereof on the date of grant.
In the event of voluntary termination of full-time employment prior
to age 55, Mr. Hermelin's agreement provides for a consulting
arrangement, whereby he would provide a minimum number of hours of
consulting services to the Company in return for 50% of his previous
base salary and additional payments for services in excess of the
minimum. Upon retirement after age 55, the agreement provides for
consulting payments of 30% of base salary and retirement benefits of
15% to 30% of base salary. In each case such payments are
12
<PAGE> 14
adjusted annually by the greater of CPI or 8%. In the event of his
termination, other than by death or disability, the agreement
provides for payment of an amount equal to his then base salary and
36 monthly payments equal to 75% of his last monthly base salary. In
the event of a change of control, Mr. Hermelin could receive the
above payment or elect a lump sum cash payment of 2 1/2 times his
base salary, acceleration of stock options, and employee benefits for
30 months. The Company has secured its obligations to Mr. Hermelin as
required by the agreement.
Mr. Wood served as President and Chief Executive Officer from
February 1994 until his retirement in December 1994. An employment
agreement provided for employment at a base salary of $300,000 per
year plus an annual bonus in a guaranteed minimum amount of $90,000,
plus reimbursement for relocation to St. Louis and a loan in the
amount of $30,000, which was repaid to the Company at the time of his
retirement.
OTHER EXECUTIVE OFFICERS
Consistent with the Board's executive compensation program: (a)
Mitchell I. Kirschner receives a base salary and an incentive bonus
based upon performance; (b) Gerald R. Mitchell has an employment
agreement (extending from year to year) establishing base levels of
compensation, and subject to normal compensation reviews; and (c)
Raymond F. Chiostri has an employment agreement (through March 31,
1996, with automatic renewal for successive two years periods)
providing base compensation based on performance. Messrs. Kirschner
and Mitchell also have termination provisions following a change of
control, which provide a lump sum payment equal to 1 1/2 times base
salary, acceleration of stock options and an 18 month continuation of
benefits.
COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally disallows a
tax deduction to public companies for compensation of over $1 million
paid to any one of the chief executive officer and four other most
highly compensated executive officers for any fiscal year. Qualifying
performance-based compensation is not subject to the limitation if
certain requirements are met. Given current compensation levels of
the Company's executive officers, it has been unnecessary for the
Board to determine whether to structure the performance-based portion
of their compensation in a manner that meets the requirements of
Section 162(m).
Submitted by the Board of Directors:
Marc S. Hermelin Victor M. Hermelin
Alan G. Johnson Garnet E. Peck
13
<PAGE> 15
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG KV, THE S&P DRUGS INDEX AND THE AMEX COMPOSITE
Set forth below is a line-graph presentation comparing cumulative
stockholder returns for the last five fiscal years on an indexed
basis with the AMEX Market Value Index and the S&P Health Care
(Drugs) Index, which is a nationally recognized industry standard
index that includes Eli Lilly, Merck, Pfizer, Schering-Plough. The
graph assumes the investment of $100 in KV Class A and Class B Common
Stock, the AMEX Composite Index and the S&P Drugs Index on March 31,
1990, and reinvestment of all dividends. There can be no assurance
that KV's stock performance will continue into the future with the
same or similar trends depicted in the graph below.
<TABLE>
TOTAL RETURN TO STOCKHOLDERS
<CAPTION>
Measurement Period K-V Amex Composite S&P Drugs Index
- ------------------ --- -------------- ---------------
(Fiscal Year Covered)
- ---------------------
<S> <C> <C> <C>
Measurement Pt-03/31/90 $100 $100 $100
FYE 03/31/91 $117 $ 99 $145
FYE 03/31/92 $273 $109 $176
FYE 03/31/93 $161 $117 $137
FYE 03/31/94 $161 $122 $126
FYE 03/31/95 $117<F*> $128 $191
<FN>
<F*> Based on a fiscal year-end closing price of $6.625 per share for both Class A Stock and
Class B Stock, which compared to a closing price for the Class A Stock of $8.375 per
share and Class B Stock of $8.50 per share as of June 23, 1995.
</TABLE>
14
<PAGE> 16
TRANSACTIONS WITH ISSUER
Alan G. Johnson, Secretary and a Director of the Company, is a
member of the law firm of Gallop, Johnson & Neuman, L.C., which has
been the Company's general counsel for more than the past five years.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand served as the Company's independent public
accountants for the fiscal year ended March 31, 1995 and has served
in such capacity since February 1974. As of the date of this Proxy
Statement, the process of selection by the Board of Directors of the
Company's independent public accountants for the current fiscal year
ending March 31, 1996 has not been completed. Representatives of
Coopers & Lybrand are expected to be present at the annual meeting of
shareholders and to be available to respond to appropriate questions.
Such representives will have the opportunity to make a statement if
they desire to do so.
ANNUAL REPORT
The Annual Report of the Company for fiscal 1995 accompanies this
notice.
FUTURE PROPOSALS OF SECURITY HOLDERS
Any shareholder who intends to submit a proposal for consideration
at the 1996 annual meeting of shareholders under the applicable rules
of the Securities and Exchange Commission must send the proposal so
that it reaches the Company's Secretary not later than March 17,
1996. All proposals should be addressed to the Secretary, KV
Pharmaceutical Company, 2503 South Hanley Road, St. Louis, Missouri
63144.
OTHER BUSINESS
The Board of Directors knows of no business to be brought before
the annual meeting other than as set out above. If other matters
properly come before the meeting, it is the intention of the persons
named in the solicited proxy to vote the proxy thereon in accordance
with the judgment of such persons.
MISCELLANEOUS
The Company will bear the cost of the solicitation of proxies. In
addition to solicitation by use of the mails, certain officers and
regular employees of the Company may solicit the return of proxies by
telephone or personal contact and may request brokerage houses,
custodians, nominees and fiduciaries to forward soliciting material
to their principals and will reimburse them for their reasonable out-
of-pocket expenses.
15
<PAGE> 17
Shareholders are urged to mark, sign, date and send in their
proxies without delay.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED MARCH 31, 1995 FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (INCLUDING RELATED FINANCIAL STATEMENTS AND SCHEDULES)
WILL BE AVAILABLE TO SHAREHOLDERS, WITHOUT CHARGE, UPON WRITTEN
REQUEST TO THE SECRETARY, KV PHARMACEUTICAL COMPANY, 2503 SOUTH
HANLEY ROAD, ST. LOUIS, MISSOURI 63144.
ALAN G. JOHNSON
Secretary
St. Louis, Missouri
July 14, 1995
16
<PAGE> 18
P R O X Y
(CLASS A SHAREHOLDER)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
K-V PHARMACEUTICAL COMPANY
1995 ANNUAL SHAREHOLDERS' MEETING
The undersigned shareholder of CLASS A COMMON STOCK of K-V
PHARMACEUTICAL COMPANY, a Delaware corporation, hereby appoints
VICTOR M. HERMELIN and MARC S. HERMELIN, and each of them, with full
power of substitution, the true and lawful attorneys-in-fact, agents
and proxies of the undersigned, to represent the undersigned at the
annual meeting of the shareholders of K-V PHARMACEUTICAL COMPANY, to
be held at The St. Louis Club (Founders Room, 14th Floor), 7701
Forsyth Boulevard, Clayton, Missouri 63105, on Friday, August 11,
1995, commencing at 9:00 A.M. Central Daylight Savings Time, and at
any adjournments thereof, and to vote, according to the number of
votes the undersigned would be entitled to vote if personally
present, upon the following matters:
1. ELECTION OF DIRECTOR WITHHOLD AUTHORITY / /
/ / FOR the nominee listed below to vote for the nominee listed below
GARNET E. PECK
2. In their discretion with respect to the transaction of such other
business as may properly come before the meeting or any
adjournment thereof.
(Continued on Reverse Side)
<PAGE> 19
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE ABOVE LISTED
---
NOMINEE UNDER PROPOSAL NO. 1.
The undersigned hereby acknowledges receipt of Notice of Annual
Meeting of Shareholders and accompanying Proxy Statement, each dated
July 14, 1995.
Dated: -----------------, 1995
...................................
Signature
...................................
Signature
...................................
Signature
Please sign name(s) exactly as it
appears on this proxy. In the case
of joint holders all should sign.
If executed by a corporation, the
proxy should be signed by a duly
authorized officer. If executed by
a partnership, this proxy should be
signed by an authorized partner.
Executors, administrators and
trustees should so indicate when
signing.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY. A
POSTAGE-PREPAID RETURN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE.
<PAGE> 20
P R O X Y
(CLASS B SHAREHOLDER)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
K-V PHARMACEUTICAL COMPANY
1995 ANNUAL SHAREHOLDERS' MEETING
The undersigned shareholder of CLASS B COMMON STOCK of K-V
PHARMACEUTICAL COMPANY, a Delaware corporation, hereby appoints
VICTOR M. HERMELIN and MARC S. HERMELIN, and each of them, with full
power of substitution, the true and lawful attorneys-in-fact, agents
and proxies of the undersigned, to represent the undersigned at the
annual meeting of the shareholders of K-V PHARMACEUTICAL COMPANY, to
be held at The St. Louis Club (Founders Room, 14th Floor), 7701
Forsyth Boulevard, Clayton, Missouri 63105, on Friday, August 11,
1995, commencing at 9:00 A.M. Central Daylight Savings Time, and at
any adjournments thereof, and to vote, according to the number of
votes the undersigned would be entitled to vote if personally
present, upon the following matters:
1. ELECTION OF DIRECTOR WITHHOLD AUTHORITY / /
/ / FOR the nominee listed below to vote for the nominee listed below
GARNET E. PECK
2. In their discretion with respect to the transaction of such other
business as may properly come before the meeting or any
adjournment thereof.
(Continued on Reverse Side)
<PAGE> 21
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE ABOVE LISTED
---
NOMINEE UNDER PROPOSAL NO. 1.
The undersigned hereby acknowledges receipt of Notice of Annual
Meeting of Shareholders and accompanying Proxy Statement, each dated
July 14, 1995.
Dated: -----------------, 1995
...................................
Signature
...................................
Signature
...................................
Signature
Please sign name(s) exactly as it
appears on this proxy. In the case
of joint holders all should sign.
If executed by a corporation, the
proxy should be signed by a duly
authorized officer. If executed by
a partnership, this proxy should be
signed by an authorized partner.
Executors, administrators and
trustees should so indicate when
signing.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY. A
POSTAGE-PREPAID RETURN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE.
