KV PHARMACEUTICAL CO /DE/, DEF 14A, 1998-06-05

KV PHARMACEUTICAL CO /DE/
DEF 14A, 1998-06-05
PHARMACEUTICAL PREPARATIONS

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<PAGE> 1

SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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 Materials Pursuant to Rule 14a-11(c) or Rule 14a-12

K-V Pharmaceutical Company
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(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No Fee required

/ / 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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(4) Date Filed:

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<PAGE> 2
[KV LOGO]

K-V PHARMACEUTICAL COMPANY

2503 SOUTH HANLEY ROAD
ST. LOUIS, MISSOURI 63144

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 23, 1998

St. Louis, Missouri
June 5, 1998

The Annual Meeting of Shareholders of K-V Pharmaceutical Company will be
held on Tuesday, June 23, 1998, at 8:00 A.M., Central Daylight Saving 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;

2. To vote upon a proposal to amend the Certificate of Incorporation to
increase the number of authorized shares of Class A Common Stock from
60,000,000 to 150,000,000 and the number of authorized shares of Class B
Common Stock from 60,000,000 to 75,000,000;

3. To consider approval of the Fifth Amendment to the K-V Pharmaceutical
Company 1991 Incentive Stock Option Plan; and

4. To transact such other business as may properly come before the meeting.

Shareholders of record at the close of business on April 30, 1998, will be
entitled to vote at the meeting or at any adjournment or adjournments thereof.
All shares shown reflect the 3 for 2 stock split distributed on April 17, 1998
to shareholders of record on April 3, 1998. 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 10 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 1998 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 for director
named in this proxy statement. This proxy statement and form of proxy were first
mailed to shareholders on or about June 1, 1998.

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 April 30, 1998, 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 Class C director of the
Company, to hold office for three years and until his successor has been
duly elected and qualified;

2. FOR the proposed amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Class A Common Stock from
60,000,000 to 150,000,000 and the number of authorized shares of Class B
Common Stock from 60,000,000 to 75,000,000;

3. FOR approval of the Fifth Amendment to the K-V Pharmaceutical Company
1991 Incentive Stock Option Plan; and

<PAGE> 4
4. In their discretion on the transaction of such other business as may
properly come before the meeting or any adjournment thereof.

Garnet E. Peck, Ph.D., is presently a director. Should the nominee become
unavailable or decline to serve for any reason, it is intended that the persons
named in the proxy will vote for the election of such other person as may be
designated by the Board of Directors. The Board of Directors is not aware of any
circumstances likely to cause the nominee to be unavailable for election or to
decline to serve.

SECURITY OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT

On April 30, 1998, there were 11,768,942 shares of Class A Common Stock
("Class A Stock") outstanding and 6,440,496 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 588,447 votes if all outstanding shares of Class A Stock are
voted) in the election of directors, and one vote on all other matters, 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 the provisions of the Company's Certificate
of Incorporation and By-laws: (i) the vote required for the election of a
director is a plurality of the votes of the issued and outstanding shares of
Class A Stock and Class B Stock, as a single class, present in person or
represented by proxy at the annual meeting of stockholders and entitled to vote
on the election of directors, with each share of Class A Stock having
one-twentieth of one vote and each share of Class B Stock having one vote, and
(ii) the vote required for other matters that may come before the meeting is the
affirmative vote of a majority of the issued and outstanding shares of Common
Stock present in person or represented by proxy at a meeting of stockholders and
entitled to vote, with all shares of each class having one 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 or the American Stock
Exchange are permitted to vote proxies of any client in their own discretion as
to the non-contested election of directors if the client has not furnished
voting instructions within 10 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 on matters on which they are not voted are referred
to as "broker non-votes." With respect to most votes by shareholders, shares
represented by broker non-votes will be counted for purposes of determining
whether there is a quorum, but not in determining the number of shares necessary
for approval of a proposal.

<PAGE> 5
However, when shareholders are requested to vote on certain other matters,
including the Amendment to the Company's Certificate of Incorporation being
proposed at the Annual Meeting, in determining whether such a proposal has
received the requisite number of affirmative votes, abstentions and broker
non-votes will have the same effect as a vote against the proposal.

Based on the above: (a) abstentions from voting and broker non-votes on the
issue of the election of directors will operate as neither a vote for nor a vote
against any 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.
Abstentions from voting and broker non-votes regarding the proposal at the
Annual Meeting to amend the Company's Certificate of Incorporation would operate
as votes against the proposal.

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 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.

The following table lists all shares of Class A Stock and Class B Stock
owned at April 30, 1998, 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 the person's name:

<TABLE>
<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, 2,786,418<Fc> 23.7% 2,877,468<Fc> 42.8%
Minnette Hermelin and
Marc S. Hermelin Trustees
One Metropolitan Square
St. Louis, Missouri 63101

McCullough, Andrews 386,251<Fd> 3.3% -- <F*>
& Cappiello, Inc.
101 California Street
Suite 4250
San Francisco, California 94111

Minnette Hermelin 13,218<Fe> <F*> 13,218<Fe> <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144

<PAGE> 6

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>
---------------- ----------- ---------- ----------- ----------

Marc S. Hermelin 65,591<Ff> <F*> 256,740<Ff> 3.8%
2503 S. Hanley Road
St. Louis, Missouri 63144

Alan G. Johnson 222,750<Fg> 1.9% 219,750<Fg> 3.3%
101 S. Hanley Road
St. Louis, Missouri 63105

Victor M. Hermelin 18,750 <F*> 116,400 1.7%
2503 S. Hanley Road
St. Louis, Missouri 63144

Garnet E. Peck, Ph.D. -- <F*> 6,000 <F*>
1336 Robert E. Heine
Pharmacy Building
West Lafayette, Indiana 47907

Raymond F. Chiostri 20,972 <F*> 20,972 <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144

Mitchell I. Kirschner 22,500<Fh> <F*> 44,759<Fh> <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144

Gerald R. Mitchell 28,199 <F*> 28,248 <F*>
2503 S. Hanley Road
St. Louis, Missouri 63144

All current directors and executive 3,165,180<Fi> 26.9% 3,570,337<Fi> 53.1%
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:

SHARES OF SHARES OF
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------ ------------
<S> <C> <C>
Marc S. Hermelin........................ -0- 159,990
Victor M. Hermelin...................... -0- 97,500
Alan G. Johnson......................... 3,000 -0-
Garnet E. Peck, Ph.D.................... -0- 6,000
Raymond F. Chiostri..................... 2,100 2,100
Mitchell I. Kirschner................... -0- 12,000
Gerald R. Mitchell...................... 6,225 6,225

<PAGE> 7
<FN>
<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
or will become exercisable within 60 days of the date of this Proxy
Statement is assumed. For such purposes, 11,780,267 shares of Class A
Common Stock and 6,724,311 shares of Class B Common 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 895,500 shares of
Class A Common Stock and 925,500 shares of Class B Common Stock), Anne S.
Kirschner (as to 893,250 shares of Class A Common Stock and 923,250 shares
of Class B Common Stock), Marc S. Hermelin (as to 574,218 shares each of
Class A Common Stock and Class B Common Stock), and Minnette Hermelin, the
mother of the other three beneficiaries (as to 423,450 shares of Class A
Common Stock and 454,500 shares of Class B Common Stock).

<Fd> According to the latest report on Schedule 13G received by the Company,
McCullough, Andrews & Cappiello, Inc. is an investment advisor.

<Fe> Does not include 2,786,418 shares of Class A Common Stock and 2,877,468
shares of Class B Common Stock referred to in footnote (c), over which
Minnette Hermelin shares voting and investment power as one of three
trustees.

<Ff> Does not include 176,250 shares each of Class A Common Stock and Class B
Common 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
2,786,418 shares of Class A Common Stock and 2,877,468 shares of Class B
Common Stock held in irrevocable trusts 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.

<Fg> Includes 176,250 shares each of Class A Common Stock and Class B Common
Stock held as trustee of an irrevocable trust created by another party for
the benefit of Marc S. Hermelin.

<Fh> Does not include 893,250 shares of Class A Common Stock and 923,250 shares
of Class B Common 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.

<Fi> All of such shares are owned, or represented by shares purchasable as set
forth in footnote (a), solely by such persons.
</TABLE>

Although 11,768,942 shares of the Class A Stock were outstanding as of April
30, 1998, holders of the 241,000 outstanding shares of the 7% Preferred Stock
have the current right to convert such shares into 903,750 shares of Class A
Common Stock, each of which will entitle the holder thereof to one-twentieth
(1/20) vote with respect to voting for directors and one vote on all other
matters to be voted upon by stockholders. Each share of 7% Preferred Stock is
convertible into Class A Common Stock at a conversion price of $6.67 per share.
If all such shares of Class A Common Stock were issued, the aggregate voting
power thereof in the election of directors would be equivalent to the voting
power of 45,187 shares of Class B Common Stock.

<PAGE> 8
In addition, all holders of Class B Common Stock have the right, at any
time, to convert their Class B Common Stock into Class A Common Stock on a
share-for-share basis. If all shares of Preferred Stock and all shares of Class
B Common Stock were converted into Class A Common Stock, 19,113,188 shares of
Class A Common Stock would be outstanding and each person included in the
previous table would hold the number of shares of Class A Common Stock equal to
the number of shares of Class B Common Stock listed in the table plus the number
of shares of Class A Common Stock listed in the table.

PROPOSAL 1--ELECTION OF CLASS C DIRECTOR

INFORMATION CONCERNING NOMINEE AND
DIRECTORS CONTINUING IN OFFICE

The following table lists, for the nominee for director for a term expiring
at the annual meeting in 2001, 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:

<TABLE>
<CAPTION>
SERVICE PRINCIPAL
AS A OCCUPATION; POSITION
DIRECTOR WITH COMPANY; AGE;
NAME SINCE OTHER DIRECTORSHIPS
---- -------- --------------------
<S> <C> <C>
CLASS C NOMINEE--
(term expires in 2001)

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 68.

CLASS B DIRECTORS--
(terms expire in 2000)

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
84.

<PAGE> 9
SERVICE PRINCIPAL
AS A OCCUPATION; POSITION
DIRECTOR WITH COMPANY; AGE;
NAME SINCE OTHER DIRECTORSHIPS
---- -------- --------------------

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 Siboney
Corporation and MRL, Inc.; Age 63.

CLASS A DIRECTOR--
(term expires in 1999)

Marc S. Hermelin<Fa>.......... 1973 Vice Chairman of the Board of the Company since 1974;
Chief Executive Officer from 1975 to February 1994 and
since December 1994; Director and Vice President of
Particle Dynamics, Inc. since 1974; Age 56.

<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 1998, the Board of Directors held one formal meeting 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 1998 but had no formal meetings.

The Company has 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. This committee held two formal meetings in
fiscal 1998.

<PAGE> 10
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 Director, Compensation and
Benefits.

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 1998 for service as a
director.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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 1998.

<PAGE> 11
EXECUTIVE COMPENSATION

The following table reflects compensation paid or payable by the Company and
its subsidiary for fiscal years ended March 31, 1996, 1997 and 1998, to the
Company's Chief Executive Officer and the four other most highly compensated
executive officers whose combined salary and bonus earned in fiscal 1998
exceeded $100,000.

<TABLE>
SUMMARY COMPENSATION TABLE

<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)<F1>
- --------------------------- ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
Marc S. Hermelin 1998 676,990 610,800<F2> 133,169
Vice Chairman of the Board 1997 621,158 296,534<F3> 77,626
and Chief Executive Officer 1996 528,486 109,827 164,226<F4>

Raymond F. Chiostri 1998 256,727 3,000 4,166
President and Chief Executive 1997 247,242 7,954 23,582
Officer of Particle Dynamics, Inc. 1996 227,652 -- 15,287<F4>

Mitchell I. Kirschner 1998 202,626 -- 3,951
Vice President, New 1997 193,910 -- 7,319
Business Development 1996 197,666 10,000 11,984<F4>

Victor M. Hermelin 1998 184,804 40,000 --
Chairman of the Board 1997 181,740 -- --
and Treasurer 1996 169,765 -- --

Gerald R. Mitchell 1998 146,669 25,000 4,017
Vice President, Finance 1997 146,715 -- 1,785
1996 141,562 10,000 9,785<F4>

<FN>
- ----------
<F1> Consists of Company contributions to the Company's profit sharing plan and
401(K) plan and earned vacation not taken.

<F2> $316,000 of this amount was paid in the form of Class B Stock options,
which were elected to be taken in lieu of earned incentive cash
compensation.

<F3> $114,300 of this amount was paid in the form of Class B Stock options,
which were elected to be taken in lieu of earned incentive cash
compensation.

<F4> Includes repayment of 10% to 25% voluntary salary deferral, repaid with
the Company's return to profitability in fiscal 1996.
</TABLE>

<PAGE> 12
INFORMATION AS TO STOCK OPTIONS

The following table lists the options to acquire Class A Stock and Class B
Stock issued during fiscal 1998 to the persons named in the Summary Compensation
Table.

<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR

(CLASS A STOCK)

<CAPTION>
INDIVIDUAL GRANTS
--------------------------
PERCENT OF
NUMBER OF TOTAL EXERCISE
SECURITIES OPTIONS/SARs OF
UNDERLYING GRANTED TO BASE
OPTIONS/SARs EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE PRESENT VALUE<F1>
- ---- ------------ ------------ -------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Gerald R. Mitchell.................... 7,500 6% 9.964 8/15/2007 $13,133

<FN>
- ----------
<F1> These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of the
Securities and Exchange Commission and are not intended to predict future
prices of the Corporation's Common Stock. The estimate was developed using
the Black-Scholes option pricing model (as provided by Instruction 9 to
Rule 402 of Regulation S-K governing disclosures regarding options)
incorporating the following assumptions: Volatility of .362 and dividend
yield of 0%, both based on the historical three-year average for the
underlying Common Stock; risk-free rate of return of 6.32% based on a
five-year treasury rate and time of exercise of 10 years, being the term
of the option grants. In addition, the model assumed a 52% discount for
lack of marketability.
</TABLE>

<PAGE> 13
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR

(CLASS B STOCK)

<CAPTION>
INDIVIDUAL GRANTS
--------------------------
PERCENT OF
NUMBER OF TOTAL EXERCISE
SECURITIES OPTIONS/SARs OF
UNDERLYING GRANTED TO BASE
OPTIONS/SARs EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE PRESENT VALUE<F1>
- ---- ------------ ------------ -------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Marc S. Hermelin...................... 300,000<F1> 77% 11.881 5/15/2000 $316,000<F2>
75,000 19% 10.445 5/15/2002 86,794<F3>
Gerald R. Mitchell.................... 7,500 2% 10.005 8/15/2007 13,187<F3>

<FN>
- ----------
<F1> Such options were elected to be taken in lieu of earned incentive cash
compensation and were subsequently gifted.

<F2> These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of the
Securities and Exchange Commission and are not intended to predict future
prices of the Corporation's Common Stock. The estimate was developed using
the Black-Scholes option pricing model (as provided by Instruction 9 to
Rule 402 of Regulation S-K governing disclosures regarding options)
incorporating the following assumptions: Volatility of .362 and dividend
yield of 0%, both based on the historical three-year average for the
underlying Common Stock; risk-free rate of return of 6.32% based on a
five-year treasury rate and time of exercise of 3 years, being the term of
the option grants. In addition, the model assumed a 52% discount for lack
of marketability.

<F3> These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of the
Securities and Exchange Commission and are not intended to predict future
prices of the Corporation's Common Stock. The estimate was developed using
the Black-Scholes option pricing model (as provided by Instruction 9 to
Rule 402 of Regulation S-K governing disclosures regarding options)
incorporating the following assumptions: Volatility of .362 and dividend
yield of 0%, both based on the historical three-year average for the
underlying Common Stock; risk-free rate of return of 6.32% based on a
five-year treasury rate and time of exercise of 5-10 years, being the term
of the option grants. In addition, the model assumed a 52% discount for
lack of marketability.
</TABLE>

<PAGE> 14
The following tables list the value as of the end of fiscal 1998 of
options held by the persons listed in the Summary Compensation Table to acquire
shares of Class A Stock and Class B Stock:

<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES (CLASS A STOCK)

<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-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
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Marc S. Hermelin................................. -- -- 149,990/155,010 1,862,726/1,659,889
Raymond F. Chiostri.............................. 14,250 231,667 2,100/900 28,497/12,213
Mitchell I. Kirschner............................ -- -- 12,000/18,000 120,636/180,954
Victor M. Hermelin............................... -- -- 97,500/45,000 1,235,168/580,185
Gerald R. Mitchell............................... -- -- 6,225/7,575 90,409/77,315
</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.

<PAGE> 15
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 Director of Compensation and Benefits.

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 long-term
success with the interests of the Company's stockholders. The size of individual
awards is dependent upon the executive officer's position, 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 1996 and expiring in March 2002, Marc S.
Hermelin, Vice Chairman and Chief Executive Officer until February 1994 and
since December 1994, received base compensation of $593,068, increasing annually
by the greater of the consumer price index (CPI) increase or 8%. 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. In addition, Mr. Hermelin is
entitled to receive an incentive bonus decreasing from 7% to 4% of net income
based on a formula related to the Company exceeding certain net income levels.

In the event of voluntary termination of full-time employment prior to age
65, 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 base salary and/or bonus or additional payments for
services in excess of the minimum. Upon retirement after age 55, the agreement
provides for consulting payments of 30% of average base

<PAGE> 16
salary/bonus and retirement benefits of 30% of base salary, 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.

OTHER 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, 2000, with automatic renewal for successive two year periods) providing base
compensation based on performance.

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 the
chief executive officer and any one of the 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.
Based on regulations issued by the Internal Revenue Service, the Company has
taken the necessary actions to ensure deductibility of performance-based
compensation paid to such officers.

Submitted by the Board of Directors:

Marc S. Hermelin Victor M. Hermelin
Alan G. Johnson Garnet E. Peck

<PAGE> 17
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN

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. The graph assumes the investment
of $100 in K-V Class A and Class B Common Stock, the AMEX Composite Index and
the S&P Health Care (Drugs) Index on March 31, 1993, and reinvestment of all
dividends. There can be no assurance that K-V's stock performance will continue
into the future with the same or similar trends depicted in the graph below.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN<F*>
AMONG KV PHARMACEUTICAL COMPANY, THE AMEX MARKET VALUE INDEX
AND THE S & P HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) INDEX

GRAPH

[FN]
<F*> $100 INVESTED ON 3/31/93 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING MARCH 31.

<TABLE>
<CAPTION>
For Fiscal Year Ended March 31
------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
K-V 100 73 155 182 307
AMEX MARKET VALUE 105 110 135 137 182
S&P DRUGS INDEX 92 140 222 285 507
</TABLE>

<PAGE> 18
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.

PROPOSAL 2--INCREASE IN AUTHORIZED STOCK

On May 15, 1998, the Board of Directors unanimously approved an Amendment to
the Certificate of Incorporation of the Company to increase the number of
authorized shares of Class A Common Stock from 60,000,000 to 150,000,000 and the
number of shares of Class B Common Stock from 60,000,000 to 75,000,000 and
directed that the proposed Amendment be submitted to a vote of shareholders at
the Annual Meeting.

The proposed Amendment will amend the first two unnumbered paragraphs of
Article 4 of the Certificate of Incorporation, which would read as follows in
their entirety after Amendment:

4. The aggregate number, class and par value of shares which the corporation
shall have authority to issue shall be Two Hundred and Thirty Million
(230,000,000), which shall be divided among the following classes:

<TABLE>
<CAPTION>
PAR VALUE NUMBER
CLASS OF STOCK PER SHARE OF SHARES
- -------------- --------- ---------
<S> <C> <C>
Preferred Stock............................. $.01 5,000,000
Class A Common Stock........................ $.01 150,000,000
Class B Common Stock........................ $.01 75,000,000
</TABLE>

The number of authorized shares of Preferred Stock or any class of Common
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative majority vote of the stock of the
corporation entitled to vote, without the separate vote of holders of any class
of Common Stock or any class or series of Preferred Stock, unless a vote of any
such holders of a class or series of Preferred Stock is required pursuant to the
certificate or certificates establishing such class or series.

Article 4 of the Certificate of Incorporation as currently in effect
authorizes the issuance of up to 60,000,000 shares of Class A Common Stock and
60,000,000 shares of Class B Common Stock. As of the record date for the 1998
Annual Meeting, there were 11,768,942 shares of Class A Common Stock and
6,440,496 shares of Class B Common Stock outstanding. In addition, if all
holders of preferred stock of the Company converted their preferred stock into
Class A Common Stock and if holders of all Class B Common Stock exercised their
right to convert such stock into the same number of shares of Class A Common
Stock, 19,113,188 shares of Class A Common Stock would be outstanding. In
addition, the Company has issued employee stock options which, if fully
exercised, would result in 148,522 additional shares of Class A Common Stock and
763,304 additional shares of Class B Common Stock (which in turn would be
convertible into

<PAGE> 19
Class A Common Stock on a share-for-share basis). The Board believes it would be
desirable to increase the number of shares of authorized Common Stock in order
to make available additional shares for possible stock splits, acquisitions,
employee benefit plan issuances and for such other corporate purposes as may
arise. The Board of Directors believes that stock splits and stock dividends
enhance the liquidity and marketability of the Company's Common Stock by
increasing the number of shares outstanding.

The Company has no specific plans currently calling for the issuance of any
additional shares of Common Stock. The rules of the American Stock Exchange
currently require stockholder approval of issuances of Common Stock under
certain circumstances, including those in which the number of shares to be
issued is equal to or exceeds 20% of then outstanding Common Stock. All newly
authorized shares of Common Stock would have the same rights as the presently
authorized shares of the same class. Under the Company's Certificate of
Incorporation, shareholders do not have preemptive rights. The Board does not
intend or view the increase in authorized Common Stock as an anti-takeover
measure, nor is the Company aware of any proposed or contemplated transactions
of this type, although the issuance of shares in certain instances could have
the effect of forestalling such a transaction.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION.

Assuming the presence of a quorum, the affirmative vote of the holders of
the majority of all outstanding shares of Common Stock, voting as a single
class, is required for adoption of the proposed Amendment. Under applicable
Delaware law, in determining whether this matter has received the requisite
number of affirmative votes, abstentions and broker non-votes will be counted
and will have the same effect as a vote against this proposal.

PROPOSAL 3--APPROVAL OF FIFTH AMENDMENT
TO K-V PHARMACEUTICAL COMPANY 1991 INCENTIVE STOCK OPTION PLAN
AND ITS RESTATEMENT, AS AMENDED

In 1991, the Board of Directors adopted and the Company's shareholders
subsequently approved the K-V Pharmaceutical Company 1991 Incentive Stock Option
Plan ("Plan"), which was designed to provide for the grant of incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended ("Code"). Under the Plan, as originally approved, the number
of shares of Class A Common Stock of the Company that could be issued under the
Plan was limited to 125,000 shares, and the number of shares of Class B Common
Stock that could be issued under the Plan was also limited to 125,000 shares,
subject to certain adjustments in either case. Currently, the number of shares
of Class A Common Stock issuable under the Plan is 1,125,000 shares and the
number of shares of Class B Common Stock issuable under the Plan is 1,012,500
shares.

<PAGE> 20
In May 1998, the Board of Directors again determined that the number of
shares available under the Plan was insufficient to provide a continuing means
of fulfilling the purpose of the Plan--to increase employees' proprietary
interest in the business of the Company and provide them with an increased
personal interest in the continued success and progress of the Company. At that
time, the Board of Directors adopted a Fifth Amendment to the Plan, increasing
the number of shares of Class A Common Stock and Class B Common Stock issuable
under the Plan to 1,500,000 shares in each case. The Board directed that such
amendment be submitted to the shareholders of the Company for their approval. No
options have been granted subject to approval of this Proposal 3.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE FIFTH
AMENDMENT TO THE 1991 INCENTIVE STOCK OPTION PLAN.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

BDO Seidman LLP served as the Company's independent public accountants for
the fiscal year ended March 31, 1998 and has served in such capacity since May
1996. As of the date of this Proxy Statement, the process of selection of the
Company's independent public accountants for the current fiscal year ending
March 31, 1999 has not been completed.

Representatives of BDO Seidman LLP are expected to be present at the Annual
Meeting of Shareholders and to be available to respond to appropriate questions.
Such representatives will have the opportunity to make a statement if they
desire to do so.

ANNUAL REPORT

The Annual Report of the Company for fiscal 1998 accompanies this notice.

FUTURE PROPOSALS OF SECURITY HOLDERS

Any shareholder who intends to submit a proposal for consideration at the
1999 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 February 1, 1999. All proposals should be addressed to
the Secretary, K-V 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.

<PAGE> 21
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.

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, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING
RELATED FINANCIAL STATEMENTS AND SCHEDULES) IS AVAILABLE TO SHAREHOLDERS,
WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE SECRETARY, K-V PHARMACEUTICAL
COMPANY, 2503 SOUTH HANLEY ROAD, ST. LOUIS, MISSOURI 63144.

ALAN G. JOHNSON
Secretary

St. Louis, Missouri
June 5, 1998

20
<PAGE> 22

P R O X Y
(Class A Shareholder)

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
K-V PHARMACEUTICAL COMPANY
1998 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 Tuesday, June 23, 1998, commencing at 8:00 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:

/ / FOR the nominee WITHHOLD AUTHORITY / /
listed below to vote for nominee
listed below

GARNET E. PECK, Ph.D.

2. In their discretion with respect to the transaction of such other
business as may properly come before the meeting or any adjournment
thereof.

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.

<PAGE> 23

The undersigned hereby acknowledges receipt of Notice of Annual Meeting
of Shareholders and accompanying Proxy Statement, each dated June 1, 1998.

Dated: ------------------, 1998

-------------------------------------------
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> 24

P R O X Y
(Class B Shareholder)

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
K-V PHARMACEUTICAL COMPANY
1998 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 Tuesday, June 23, 1998, commencing at 8:00 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:

/ / FOR the nominee WITHHOLD AUTHORITY / /
listed below to vote for nominee
listed below

GARNET E. PECK, Ph.D.

2. Proposal to amend the Certificate of Incorporation to increase the
number of authorized shares of Class A Common stock from 60,000,000 to
150,000,00 and the number of authorized shares of Class B Common Stock
from 60,000,000 to 75,000,000.

/ / FOR / / AGAINST / / ABSTAIN

3. Approval of the Fifth Amendment to K-V Pharmaceutical Company 1991
Incentive Stock Option Plan.

/ / FOR / / AGAINST / / ABSTAIN

<PAGE> 25

4. In their discretion with respect to the transaction of such other
business as may properly come before the meeting or any adjournment
thereof.

The undersigned hereby acknowledges receipt of Notice of Annual Meeting
of Shareholders and accompanying Proxy Statement, each dated June 1, 1998.

Dated: -------------------, 1998

-------------------------------------------
Signature

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY. A
POSTAGE-PREPAID RETURN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.

<PAGE> 26
APPENDIX

Page 16 of the printed proxy contains a stock performance graph.
The information contained in the graph is represented in the table
that immediately follows the graph.