SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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 material pursuant to Rule 14a-11(c) or Rule 14a-12
K-V Pharmaceutical Company
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than 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)(1) and
0-11.
1) Title to each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
K-V PHARMACEUTICAL COMPANY
2503 South Hanley Road
St. Louis, Missouri 63144
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 31, 2000
St. Louis, Missouri
July 25, 2000
The Annual Meeting of Shareholders of K-V Pharmaceutical Company will
be held on Thursday, August 31, 2000, at 9:00 A.M., Central Daylight Saving
Time, at The St. Louis Club (Louisiana Room, 14th Floor), 7701 Forsyth
Boulevard, Clayton, Missouri 63105, for the following purposes:
1. To elect two Class B directors, 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 July 14, 2000, will
be entitled to vote at the 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 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 2000 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>
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 nominees for
director named in this proxy statement. This proxy statement and form of proxy
were first mailed to shareholders on or about July 25, 2000.
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 July 14, 2000, 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 Victor M. Hermelin and Alan G. Johnson, as
the Class B directors of the Company, to hold office for three
years and until their respective successors have 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.
Victor M. Hermelin and Alan G. Johnson are presently directors. Should
either 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 either nominee to be
unavailable for election or to decline to serve.
2
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
On July 14, 2000, there were 12,257,498 shares of Class A Common Stock
("Class A Stock") outstanding and 6,945,500 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 612,875 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 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 Shareholders 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 a majority of the issued
and outstanding shares of Common Stock present in person or represented by proxy
at a meeting of shareholders and entitled to vote. In all voting, each share of
Class A Stock has one-twentieth of one vote and each share of Class B Stock has
one vote, and votes representing Class A Stock and Class B Stock 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 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.
However, when shareholders are requested to vote on certain other
matters, 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.
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.
3
<PAGE>
The following table lists all shares of Class A Stock and Class B Stock
owned at July 14, 2000, 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- Percent of Ownership- Percent of
Name and Address Class A Stock(a) Class(b) Class B Stock(a) Class(b)
---------------- ---------------- -------- ---------------- --------
<S> <C> <C> <C> <C>
Lawrence Brody, 2,656,968(c) 21.7% 2,877,468(c) 41.4%
Minnette Hermelin and
Marc S. Hermelin Trustees
One Metropolitan Square
St. Louis, Missouri 63101
Minnette Hermelin 13,218(d) * 13,218(d) *
2503 S. Hanley Road
St. Louis, Missouri 63144
Marc S. Hermelin 107,673(e) * 636,340(e) 8.8%
2503 S. Hanley Road
St. Louis, Missouri 63144
Alan G. Johnson 235,750(f) 1.9% 229,750(f) 3.3%
2503 S. Hanley Road
St. Louis, Missouri 63144
Victor M. Hermelin 16,043 * 162,300 2.3%
2503 S. Hanley Road
St. Louis, Missouri 63144
Garnet E. Peck, Ph.D. 45 * 45 *
1336 Robert E. Heine
Pharmacy Building
West Lafayette, Indiana 47907
Norman D. Schellenger - * 3,000 *
2503 S. Hanley Road
St. Louis, Missouri 63144
Raymond F. Chiostri 24,000 * 24,000 *
2503 S. Hanley Road
St. Louis, Missouri 63144
Mitchell I. Kirschner 22,500(g) * 46,500(g) *
2503 S. Hanley Road
St. Louis, Missouri 63144
Gerald R. Mitchell 30,000 * 30,000 *
2503 S. Hanley Road
St. Louis, Missouri 63144
4
<PAGE>
All current directors and executive 3,092,979(h) 25.1% 4,009,403(h) 54.5%
officers as a group
(8 individuals)
----------------
*Less than one percent
<FN>
(a) 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:
</FN>
</TABLE>
Shares of Shares of
Class A Class B
Common Stock Common Stock
------------ ------------
Marc S. Hermelin...................... 50,000 250,000
Victor M. Hermelin.................... -0- 122,500
Alan G. Johnson....................... 13,000 10,000
Mitchell I. Kirschner................. -0- 24,000
Gerald R. Mitchell.................... 3,000 3,000
Norman D. Schellenger................. -0- 3,000
(b) In determining the percentages of shares deemed beneficially owned by
each director and officer, 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.
(c) These shares are held in four irrevocable trusts created by another
party, the beneficiaries of which are Arnold L. Hermelin (as to 885,500
shares of Class A Common Stock and 925,500 shares of Class B Common
Stock), Anne S. Kirschner (as to 792,750 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 404,500 shares of Class A Common Stock and 454,500 shares of Class B
Common Stock).
(d) Does not include 2,656,968 shares each 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.
(e) 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 2,656,968 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.
5
<PAGE>
(f) 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.
(g) Does not include 792,750 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.
(h) All of such shares are owned, or represented by shares purchasable as
set forth in footnote (a), solely by such persons. In determining the
percentage of shares deemed beneficially owned by all directors and
officers as a group, the exercise of all options held by each person
which are currently exercisable or exercisable within 60 days of the
date of this Proxy Statement is assumed. For such purposes, 12,323,498
shares of Class A Common Stock and 7,358,000 shares of Class B Common
Stock are deemed to be outstanding.
Although 12,257,498 shares of the Class A Stock were outstanding as of
July 14, 2000, holders of the 240,000 outstanding shares of the 7% Preferred
Stock have the current right to convert such shares into 900,000 shares of Class
A Common Stock, each of which will entitle the holder thereof to one-twentieth
of one vote on all matters to be voted upon by shareholders. 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 would be equivalent to the voting power of 45,000
shares of Class B Common Stock.
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, 20,102,998 shares of
Class A Common Stock would be outstanding. 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, excluding options
exerciseable currently or within 60 days after the date of this Proxy Statement.
6
<PAGE>
PROPOSAL 1 - ELECTION OF CLASS B DIRECTORS
INFORMATION CONCERNING NOMINEES AND
DIRECTORS CONTINUING IN OFFICE
Directors Victor M. Hermelin and Alan G. Johnson are the nominees for
election as Class B directors for a three-year term expiring at the annual
meeting in 2003.
The following table lists, for the nominees for directors 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, the
directorship class of each person, 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
as a Occupation; Position
Director Director with Company; Age;
Name Class (a) Since Other Directorships
---- --------- -------- --------------------
<S> <C> <C> <C>
Victor M. Hermelin (b) B 1946 Chairman of the Board of the Company since
(nominee) 1972; Treasurer of the Company from 1971 to
2000; Director and Vice President of Particle
Dynamics, Inc. since 1974; Age 86.
Marc S. Hermelin A 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 58.
Alan G. Johnson B 1976 Director and Secretary of the Company; Senior
(nominee) Vice President-Strategic Planning and
Corporate Growth of the Company since
September 27, 1999; Chairman and CEO of
Johnson Research & Capital Inc., an
investment banking firm, from January 1,
1999 to September 30, 1999; Attorney at
Law and prior to January 1, 1999, member
or partner since 1976 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
Ther-Rx Corporation since 1998; Director
of Siboney Corporation; Age 65.
Garnet E. Peck, Ph.D. C 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 70.
Norman D. Schellenger C 1998 Director; Retired since 1997; President of
Whitby Pharmaceuticals 1992 to 1997; Age 68.
<FN>
(a) Term for Class A directors continuing in office expires in 2002; Term
for Class C directors continuing in office expires in 2001.
(b) Victor M. Hermelin is the father of Marc S. Hermelin and the
father-in-law of Mitchell I. Kirschner, Vice President--New Business
Development.
</FN>
</TABLE>
7
<PAGE>
INFORMATION CONCERNING BOARD OF DIRECTORS
During fiscal 2000, the Board of Directors held four 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
Administration is an advisor to this Committee. This Committee took action by
unanimous written consent on various occasions during fiscal 2000 but had no
formal meetings.
The Company has a standing Audit Committee of the Board of Directors
consisting of Directors Norman D. Schellenger 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 2000.
The full Board of Directors acts as a compensation committee, acting
upon the recommendation of a committee consisting of the Vice Chairman, Chief
Financial Officer, Director of Human Resources Administration and Vice President
of Human Resources.
Directors Garnet E. Peck, Ph.D. and Norman Schellenger receive $1,000
each per day for attending each meeting of the Board of Directors, plus
reimbursement of related expenses. No other director received any remuneration
in fiscal 2000 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, the Company believes that
such persons complied with all Section 16(a) filing requirements applicable to
them with respect to transactions during fiscal 2000.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table reflects compensation paid or payable by the
Company and its subsidiary for fiscal years ended March 31, 1998, 1999 and 2000,
to the Company's Chief Executive Officer and the four other most highly
compensated executive officers whose combined salary and bonus earned in fiscal
2000 exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
-------------------
All Other
Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1)
--------------------------- ---- --------- -------- ------
<S> <C> <C> <C> <C>
Marc S. Hermelin 2000 773,508 1,130,120(2) 158,582
Vice Chairman of the Board 1999 705,013 986,429(3) 147,342
and Chief Executive Officer 1998 676,990 610,800(4) 133,169
Raymond F. Chiostri 2000 259,439 - 5,168
President and Chief Executive 1999 255,088 - 7,284
Officer of Particle Dynamics, Inc. 1998 256,727 3,000 4,166
Mitchell I. Kirschner 2000 212,633 30,000 4,829
Vice President, 1999 202,781 30,000 5,457
New Business Development 1998 202,626 - 3,951
Victor M. Hermelin 2000 231,373 60,000 -
Chairman of the Board 1999 187,503 75,000 -
1998 184,804 40,000 -
Gerald R. Mitchell 2000 163,255 25,000 20,233
Vice President, Treasurer 1999 155,359 25,000 5,475
and Chief Financial Officer 1998 146,669 25,000 4,017
---------------
<FN>
(1) Consists of Company contributions to the Company's profit sharing plan
and 401(k) plan, and vacation earned, but not taken, and paid.
(2) $105,800 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.
(3) $57,000 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
9
<PAGE>
(4) $316,000 of this amount was paid in the form of Class B Stock options,
which were elected to be taken in lieu of earned incentive cash
compensation.
</FN>
</TABLE>
INFORMATION AS TO STOCK OPTIONS
The following table lists the options to acquire Class A and Class B
Stock issued during fiscal 2000 to the persons named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
(Class A Stock)
Individual Grants
-----------------------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name Granted (#) Fiscal Year ($/Sh) Date Value (1)
---- ----------- ----------- ------ ---- ---------
<S> <C> <C> <C> <C> <C>
Alan G. Johnson............. 50,000 14% 15.250 10/13/2004 26,650
Option/SAR Grants in Last Fiscal Year
(Class B Stock)
Individual Grants
---------------------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present
Name Granted (#) Fiscal Year ($/Sh) Date Value (1)
---- ----------- ----------- ------ ---- ---------
Marc S. Hermelin.............. 100,000 44% 16.500 8/16/2004 105,800
Marc S. Hermelin.............. 75,000 34% 16.563 4/1/2004 79,700
Alan G. Johnson............... 50,000 22% 15.813 10/13/2004 18,300
<FN>
(1) These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of
the Securities and Exchange Commission and are not intended to predict
future prices of the Company's Common Stock. These estimates were
developed using the Black-Scholes option pricing model (as provided by
Instruction 9 to Rule 402 of Regulation S-K governing disclosures
regarding options) incorporating the following assumptions: Volatility
of .379 and dividend yield of 0%, both based on the actual history
since 1991 for the underlying Common Stock; risk-free rate of return of
5.10% based on a five-year treasury rate and time of exercise of 5 to
10 years, being the term of the option grants. In addition, the model
assumed a 47.5% discount for lack of marketability.
</FN>
</TABLE>
10
<PAGE>
The following tables list the value as of the end of fiscal 2000 of
options held by the persons listed in the Summary Compensation Table to acquire
shares of Class A Stock and Class B Stock:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values (Class A Stock)
Value of
Number of unexercised
unexercised in-the-money
options/SARs at options/SARs at
fiscal year-end fiscal year-end
(#) ($)
----------- ----------------
Shares acquired on Value Realized Exercisable/ Exercisable/
Name exercise (#) ($) unexercisable unexercisable
---- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
Alan G. Johnson.......... - - 13,000/49,000 175,113/641,589
Gerald R. Mitchell....... - - 8,550/5,250 193,729/88,783
</TABLE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values (Class B Stock)
Value of
Number of unexercised
unexercised in-the-money
options/SARs at options/SARs at
fiscal year-end fiscal year-end
(#) ($)
---------------- ----------------
Shares acquired on Value Realized Exercisable/ Exercisable/
Name exercise (#) ($) unexercisable unexercisable
---- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C>
Marc S. Hermelin............ 226,594 5,187,268 250,000/45,000 3,711,150/640,688
Mitchell I. Kirschner....... - - 24,000/6,000 506,580/126,645
Victor M. Hermelin.......... - - 122,500/15,000 2,836,469/213,563
Gerald R. Mitchell.......... - - 8,550/5,250 217,206/103,071
Alan G. Johnson............. - - 10,000/40,000 138,245/552,980
</TABLE>
11
<PAGE>
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, Chief Financial Officer, Director of
Human Resources Administration and Vice President of Human Resources.
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 shareholders. 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 received base
compensation of $593,068, increasing annually by the greater of the consumer
price index (CPI) increase or 8%. Mr. Hermelin is insured under life insurance
policies 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.
12
<PAGE>
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 or death after age 55, the
agreement provides for consulting payments of a maximum of 30% of average base
salary/bonus and retirement benefits of a maximum of 30% of base salary,
adjusted annually by the greater of CPI or 8% for a minimum of 10 years or life.
In the event of his death prior to age 65, a portion of the preceding benefits
are paid for a minimum of ten years to his beneficiaries. 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; (c) Raymond F. Chiostri has an employment agreement
(through March 31, 2002, with automatic renewal for successive two year periods)
providing base compensation and an incentive bonus based on performance; and (d)
Alan G. Johnson has an employment agreement (extending from year to year)
establishing base levels of compensation, subject to normal compensation reviews
and an incentive bonus 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
Norman D. Schellenger
13
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Set forth below is a line-graph presentation comparing cumulative
shareholder returns for the last five fiscal years on an indexed basis with the
NYSE Composite Index, 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 NYSE Composite Index, the Amex Market Value Index and the S&P Health Care
(Drugs) Index on March 31, 1995, 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
AMONG KV PHARMACEUTICAL COMPANY,
THE NYSE COMPOSITE INDEX, THE AMEX MARKET VALUE INDEX
AND THE S & P HEALTH CARE (DUGS-MAJOR PHARMACEUTICAL INDEX)
[GRAPH OMITTED]
<TABLE>
<CAPTION>
For Fiscal Year Ended March 31
------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
KV PHARMACEUTICAL COMPANY 212.60 249.02 420.70 325.29 622.98
NYSE COMPOSITE 128.00 147.04 211.33 222.69 238.97
AMEX MARKET VALUE 122.90 120.51 168.00 166.70 239.60
S&P HEALTH CARE 159.01 204.36 362.81 492.53 383.91
(DRUGS-MAJOR
PHARMACEUTICAL)
</TABLE>
14
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
BDO Seidman LLP served as the Company's independent public accountants
for the fiscal year ended March 31, 2000 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, 2001 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 2000 accompanies this
notice.
FUTURE PROPOSALS OF SECURITY HOLDERS
Any shareholder who intends to submit a proposal for consideration at
the 2001 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 27, 2001. 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.
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, 2000, 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
July 25, 2000
<PAGE>
P R O X Y
(Class A Shareholder)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
K-V PHARMACEUTICAL COMPANY
2000 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
(Louisiana Room, 14th Floor), 7701 Forsyth Boulevard, Clayton, Missouri 63105,
on August 31, 2000, 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 DIRECTORS:
|_| FOR both nominees WITHHOLD AUTHORITY |_|
listed below to vote for both nominees
listed below
VICTOR M. HERMELIN
ALAN G. JOHNSON
INSTRUCTION: To withhold authority to vote for either nominee, print that
nominee's name on the line provided below:
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 NOMINEES UNDER PROPOSAL
NO. 1.
The undersigned hereby acknowledges receipt of Notice of Annual Meeting
of Shareholders and accompanying Proxy Statement, each dated July 25, 2000.
Dated: __________________, 2000
--------------------------------------------
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>
P R O X Y
(Class B Shareholder)
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
K-V PHARMACEUTICAL COMPANY
2000 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
(Louisiana Room, 14th Floor), 7701 Forsyth Boulevard, Clayton, Missouri 63105,
on August 31, 2000, 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 DIRECTORS:
|_| FOR both the nominees WITHHOLD AUTHORITY |_|
listed below to vote for both nominees
listed below
VICTOR M. HERMELIN
ALAN G. JOHNSON
INSTRUCTIONS: To withhold authority to vote for either nominee, print that
nominee's name on the line provided below:
_____________________________________________
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 NOMINEES UNDER PROPOSAL NO. 1.
The undersigned hereby acknowledges receipt of Notice of Annual Meeting
of Shareholders and accompanying Proxy Statement, each dated July 25, 2000.
Dated: __________________, 2000
--------------------------------------------
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.
