SCHEDULE 14A |
[ ] | Preliminary Proxy Statement | [ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
[ X ] | Definitive Proxy Statement |
[ ] | Definitive Additional Materials |
[ ] | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 |
K-V PHARMACEUTICAL COMPANY |
[ 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: |
This Amended Proxy Statement is filed to reflect a correction in Proposal 2 regarding the number of options granted under granted under the 2001 Incentive Stock Option Plan and the number of securities remaining available for issuance under all equity compensation plans approved by security holders.
K-V PHARMACEUTICAL COMPANY |
1. | FOR the election of Marc S. Hermelin and Kevin S. Carlie as the Class A directors of the Company, to hold office for three years and until their respective successors have been duly elected and qualified; |
2. | FOR approval of the K-V Pharmaceutical Company 2001 Incentive Stock Option Plan; and |
3. | In their discretion on the transaction of such other business as may properly come before the meeting or any adjournment thereof. |
Marc S. Hermelin and Kevin S. Carlie 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. SECURITY OWNERSHIP OF PRINCIPAL |
Amount of Amount of Beneficial Beneficial Ownership- Percent Ownership- Percent Class A of Class Class B of Class Name and Address Stock (a) (b) Stock (a) (b) ---------------- ------------ -------- -------------- --------- Lawrence Brody, Minnette Hermelin 3,716,202 (c) 18.5% 4,316,202 (c) 40.5% and Marc S. Hermelin Trustees One Metropolitan Square St. Louis, Missouri 63101 The Yosef Trust --- º 675,000 6.3% S. Wilson, Trustee 112 Windler Court St. Louis, Missouri 63376 Provident Investment Counsel 1,192,209 5.9% --- --- 300 North Lake Avenue Pasadena, CA 91101 Minnette Hermelin 19,827 (d) º 19,827 (d) º 2503 S. Hanley Road St. Louis, Missouri 63144 Marc S. Hermelin 265,595 (e) 1.3% 824,160 (e) 7.6% 2503 S. Hanley Road St. Louis, Missouri 63144 Alan G. Johnson 373,125 (f) 1.8% 374,625 (f) 3.5% 2503 S. Hanley Road St. Louis, Missouri 63144 Victor M. Hermelin 8,079 º 243,750 2.3% 2503 S. Hanley Road St. Louis, Missouri 63144 Garnet E. Peck, Ph.D. 67 º 11,317 º 1336 Robert E. Heine Pharmacy Building West Lafayette, Indiana 47907 Norman D. Schellenger --- º 9,000 º 2503 S. Hanley Road St. Louis, Missouri 63144 Kevin S. Carlie --- º 3,000 º 7710 Carondelet St. Louis, Missouri 63105 Raymond F. Chiostri 18,450 º 38,250 º 2503 S. Hanley Road St. Louis, Missouri 63144 Gerald R. Mitchell 41,685 º 46,125 º 2503 S. Hanley Road St. Louis, Missouri 63144 All current directors and 4,423,203 (g) 21.7% 5,866,429 (g) 53.6% executive officers as a group (8 individuals) º Less than one percent
(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 June 10, 2002. |
Shares of Shares of Class A Class B Common Stock Common Stock ------------ ------------ Marc S. Hermelin................ 183,000 189,650 Victor M. Hermelin.............. -0- 30,000 Alan G. Johnson................. 54,000 45,000 Raymond F. Chiostri ............ 200 -0- Gerald R. Mitchell.............. 4,125 4,125 Norman D. Schellenger........... -0- 2,250 Kevin S. Carlie................. -0- 3,000 Garnet E. Peck.................. -0- 11,250
(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 June 10, 2002, 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 1,148,250 shares of Class A Common Stock and 1,388,250 shares of Class B Common Stock), Anne S. Kirschner (as to 1,174,875 shares of Class A Common Stock and 1,384,875 shares of Class B Common Stock), Marc S. Hermelin (as to 861,327 shares each of Class A Common Stock and Class B Common Stock), and Minnette Hermelin, the mother of the other three beneficiaries (as to 531,750 shares of Class A Common Stock and 681,750 shares of Class B Common Stock). |
(d) | Does not include 3,716,202 shares of Class A Common Stock and 4,316,202 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 249,375 shares of Class A Common Stock and 264,375 shares of 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 3,716,202 shares of Class A Common Stock and 4,316,202 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. |
(f) | Includes 249,375 shares of Class A Common Stock and 264,375 shares of Class B Common Stock held as trustee of an irrevocable trust created by another party for the benefit of Marc S. Hermelin. |
(g) | 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 June 10, 2002 is assumed. For such purposes, 20,377,427 shares of Class A Common Stock and 10,943,747 shares of Class B Common Stock are deemed to be outstanding. |
Although 20,136,102 shares of the Class A Stock were outstanding as of June 10, 2002, holders of the 40,000 outstanding shares of the 7% Preferred Stock have the current right to convert such shares into 225,000 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 ratio of 5.625 shares of Class A Common Stock for each share of 7% Preferred Stock. If all such shares of Class A Common Stock were issued, the aggregate voting power thereof would be equivalent to the voting power of 11,250 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, 31,546,174 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 including options exercisable currently or within 60 days after June 10, 2002. PROPOSAL 1 - ELECTION OF TWO CLASS A DIRECTORSINFORMATION CONCERNING NOMINEES AND |
Service as a Occupation; Position Director Director with Company; Age; Name Class (a) Since Other Directorships ---- --------- ------- ------------------- Victor M. Hermelin B 1946 Chairman of the Board of the Company (b) since 1972; Treasurer of the Company from 1971 to 2000; Director and Vice President of Particle Dynamics, Inc. since 1974; Age 88. Marc S. Hermelin A 1973 Vice Chairman of the Board of the (Nominee) 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 60. Alan G. Johnson B 1976 Director and Secretary of the Company; Senior Vice President-Strategic Planning and Corporate Growth of the Company since September 1999; Chairman and CEO of Johnson Research & Capital Inc., an investment banking firm, from January 1999 to September 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 predecessors, 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 67. Garnet E. Peck, C 1994 Director; Professor of Industrial Ph.D. Pharmacy and Director of the Industrial Pharmacy Laboratory of Purdue University since 1975; member of the faculty of Purdue University since 1967; Age 72. Norman D. C 1998 Director; Retired since 1997; President Schellenger of Whitby Pharmaceuticals 1992 to 1994; Age 70. Kevin S. Carlie A 2001 Director; President since 1995 of Stone (Nominee) Carlie & Company, L.C., an integrated management services company; Age 47. ____________
(a) The term of Class B directors continuing in office expires in 2003. The term of Class C directors continuing in office expires in 2004. (b) Victor M. Hermelin is the father of Marc S. Hermelin.INFORMATION CONCERNING THE BOARD OF DIRECTORSDuring fiscal 2002, the Board of Directors held 1 formal meeting and took action by unanimous written consent on various occasions. The Company has a standing Audit Committee of the Board of Directors consisting of Directors Norman D. Schellenger, Garnet E. Peck, Ph.D., and Kevin S. Carlie, each of whom is "independent" in accordance with the listing standards imposed by the New York Stock Exchange. Mr. Carlie serves as the Chairman of the Committee. 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 Audit Committee functions pursuant to a written charter. This committee held four formal meetings in fiscal 2002. 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. The Company has a standing Stock Option Committee of the Board of Directors consisting of Directors Norman D. Schellenger 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 2002 but had no formal meetings. Directors Garnet E. Peck, Ph.D., Norman D. Schellenger and Kevin S. Carlie receive $1,000 each per day for attending each meeting of the Board of Directors, plus reimbursement of related expenses. No other director received any remuneration in fiscal 2002 for service as a director. SECTION 16(a) BENEFICIAL OWNERSHIP |
Summary Compensation Table Annual Compensation Long-Term Compensation ------------------- ---------------------- Securities Securities Underlying Underlying All Other Options (#) Options (#) Name and Compensation (Class A (Class B Principal Position Year Salary($) Bonus($) ($)(1) Stock) Stock) - ------------------ ---- --------- -------- ------------ ----------- ----------- Marc S. Hermelin 2002 894,060 1,416,500 (2) 198,161 (2) (2) Vice Chairman of 2001 847,984 1,103,000 (2) 181,740 (2) (2) the Board and 2000 773,508 1,130,120 (2) 158,582 (2) (2) Chief Executive Officer Raymond F. Chiostri 2002 251,214 -- 9,164 1,000 -- President and Chief 2001 250,834 -- 8,986 -- -- Executive 2000 259,439 -- 5,168 -- -- Officer of Particle Dynamics, Inc. Alan G. Johnson 2002 350,600 -- 11,177 -- -- Senior Vice President 2001 356,138 25,000 10,572 -- -- Strategic Planning and 2000 164,558 25,000 -- 50,000 50,000 Corporate Growth Victor M. Hermelin 2002 235,263 50,000 13,985 -- -- Chairman of the Board 2001 235,085 60,000 -- -- -- 2000 231,373 60,000 -- -- -- Gerald R. Mitchell 2002 170,136 -- 19,162 -- -- Vice President, 2001 166,542 25,000 17,787 -- -- Treasurer and 2000 163,255 25,000 20,233 -- -- Chief Financial Officer
(1) | Consists of Company contributions to the Company's profit sharing plan and 401(k) plan, and vacation earned, but not taken, and paid. For Marc S. Hermelin, vacation earned, but not taken, and paid, was $177,497, $164,227 and $152,062 for fiscal years 2002, 2001 and 2000, respectively. |
(2) | $208,000, $130,000 and $105,800 of the amounts in 2002, 2001 and 2000, respectfully, were paid in the form of stock options for the purchase of 50,000 and 75,000 shares of each of the Class A Stock and Class B Stock in 2002 and 2001, respectfully, and 100,000 shares of Class B Stock in 2000. |
INFORMATION AS TO STOCK OPTIONSThe following table lists the options to acquire Class A and Class B Stock issued during fiscal 2002 to the persons named in the Summary Compensation Table. |
Option/SAR Grants in Last Fiscal Year (Class A Stock) Individual Grants ----------------------------- Number of Percent of Securities Total Options/ Underlying SARs Granted to Exercise or Grant Date Options/SARs Employees in Base Price Expiration Present Name Granted (#) Fiscal Year ($/Sh) Date Value ($)(1) ---- ------------ -------------- ----------- ---------- ------------ Marc S. Hermelin..... 50,000 14% 18.15 4/9/2004 84,500 Raymond F. Chiostri.. 1,000 * 16.50 4/9/2011 4,225 * Less than one percent Option/SAR Grants in Last Fiscal Year (Class B Stock) Individual Grants ----------------------------- Number of Percent of Securities Total Options/ Underlying SARs Granted to Exercise or Grant Date Options/SARs Employees in Base Price Expiration Present Name Granted (#) Fiscal Year ($/Sh) Date Value ($) (1) ---- ------------ --------------- ----------- --------- ------------- Marc S. Hermelin..... 50,000 14% 17.88 4/9/2004 123,500 (1) These estimates of value were developed solely for the purpose of comparative disclosure in accordance with the rules and regulations of the Securities and Exchange Commission and are not intended to predict future prices of the Company's Common Stock. These estimates were developed using the Black-Scholes option pricing model (as provided by Instruction 9 to Rule 402 of Regulation S-K governing disclosures regarding options) incorporating the following assumptions: Volatility of .556 and dividend yield of 0%, both based on the actual history since 1995 for the underlying Common Stock; risk-free rate of return of 4.80% based on a five-year treasury rate and time of exercise of 3 to 10 years, being the term of the option grants and a 35% discount for lack of marketability.
The following tables list the value as of the end of fiscal 2002 of options held by the persons listed in the Summary Compensation Table to acquire shares of Class A Stock and Class B Stock: |
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values (Class A Stock) Value of Number of unexercised unexercised in-the-money options/SARs at options/SARs at fiscal year-end fiscal year-end Shares Value (#) ($) acquired on Realized Exercisable/ Exercisable/ Name exercise (#) ($) unexercisable unexercisable ---- ------------ -------- ------------- ------------- Marc S. Hermelin.... -- -- 83,000/ -- 1,049,529/ -- Alan G. Johnson..... -- -- 54,000/39,000 1,070,361/786,366 Raymond F. Chiostri. -- -- 100/900 1,260/11,340 Gerald R. Mitchell.. 1,500 33,690 4,125/5,625 92,635/126,321 Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values (Class B Stock) Value of Number of unexercised unexercised in-the-money options/SARs at options/SARs at fiscal year-end fiscal year-end Shares Value (#) ($) acquired on Realized Exercisable/ Exercisable/ Name exercise (#) ($) unexercisable unexercisable ---- ------------ ---------- ------------- ------------- Marc S. Hermelin...... -- -- 189,650/-- 3,664,559/-- Victor M. Hermelin.... -- -- 30,000/7,500 672,990/168,248 Alan G. Johnson....... -- -- 45,000/30,000 997,110/664,740 Gerald R. Mitchell.... 1,500 39,045 4,125/5,625 107,374/146,419
REPORT OF BOARD OF DIRECTORS ON |
Submitted by the Board of Directors: |
Marc S. Hermelin Alan G. Johnson Norman D. Schellenger | Victor M. Hermelin Garnet E. Peck Kevin S. Carlie |
AUDIT COMMITTEE REPORTIn connection with the March 31, 2002 financial statements, the Audit Committee has: |
(a) | reviewed and discussed with management the Company's audited financial statements as of and for the fiscal year ended March 31, 2002; |
(b) | discussed with the Company's independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended, by the Auditing Standards Board of the American Institute of Certified Public Accountants; and |
(c) | received and reviewed the written disclosures and the letter from the Company’s independent auditors required by Independence Standards Board Standard No. 1,Independence Discussions with Audit Committees, as amended, by the Independence Standards Board, and have discussed with the auditors the auditors’ independence. |
Based on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited financial statements referred to above be included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2002. |
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF K-V PHARMACEUTICAL COMPANY Kevin S. Carlie, Chairman of the Audit Committee Norman D. Schellenger, Member of the Audit Committee Garnet E. Peck, Ph.D., Member of the Audit Committee |
Fees Billed By Independent Public AccountantsThe following table sets forth the amount of audit fees, financial information systems design and implementation fees, and all other fees billed or expected to be billed by BDO Seidman, LLP, the Company's principal accountant, for the year ended March 31, 2002: |
Amount ------ Audit Fees (1) $163,650 Financial Information Systems (2) -- Design and Implementation Fees (2) -- All Other Fees (3) 16,425 -------- Total Fees $180,075 ========
(1) | Includes annual financial statement audit and limited quarterly review services. |
(2) | No such services were provided by BDO Seidman, LLP for the most recent fiscal year. |
(3) | Primarily represents income tax services other than those directly related to the audit of the income tax accrual, consulting services related to potential acquisitions, 401K Plan audit and other filings with the SEC. |
The Audit Committee of the Board of Directors of the Company has considered whether the provision of other non-audit services is compatible with maintaining BDO Seidman, LLP's independence. COMPARISON OF FIVE YEAR |
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDED MARCH 31.
For Fiscal Year Ended March 31 ------------------------------ 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- K-V PHARMACEUTICAL 168.94 130.63 250.17 268.93 409.51 COMPANY NYSE COMPOSITE 143.72 151.45 162.51 149.46 150.65 S&P PHARMACEUTICALS 168.70 223.02 185.85 216.37 216.92
TRANSACTIONS WITH DIRECTORS |
Equity Compensation Plan Information Regarding Class A Common Stock - --------------------------------------------------------------------------------- Number of Number of securities remaining securities available for future to be issued Weighted-average issuance under upon exercise exercise price equity compensation of outstanding of outstanding plans (excluding options, warrants options, warrants securities reflected and rights and rights in column (a)) ----------------- ------------------- -------------------- Plan category (a) (b) (c) Equity compensation 1,595,368 $12.33 2,298,200 plans approved by security holders Equity compensation 101,000 14.39 N/A plans not approved --------- by security holders (1) Total 1,696,368 $12.45 ========= Equity Compensation Plan Information Regarding Class B Common Stock - --------------------------------------------------------------------------------- Number of Number of securities remaining securities available for future to be issued Weighted-average issuance under upon exercise exercise price equity compensation of outstanding of outstanding plans (excluding options, warrants options, warrants securities reflected and rights and rights in column (a)) ----------------- ------------------- -------------------- Plan category (a) (b) (c) Equity compensation 280,618 $9.69 1,375,000 plans approved by security holders Equity compensation 155,400 13.69 N/A plans not approved ------- by security holders (1) Total 436,018 $11.11 ======= (1) Consists of options that the Vice Chairman elected to take in lieu of earned incentive cash compensation and options granted to non-employee members of the Board of Directors.
ANNUAL REPORTThe Annual Report of the Company for fiscal 2002 accompanies this notice. FUTURE PROPOSALS OF SECURITY HOLDERSAny shareholder who intends to submit a proposal for consideration at the 2003 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 18, 2003. All proposals should be addressed to the Secretary, K-V Pharmaceutical Company, 2503 South Hanley Road, St. Louis, Missouri 63144. OTHER BUSINESSThe 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. MISCELLANEOUSThe 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, 2002, 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 |
P R O X Y (Class A Shareholder) THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS K-V PHARMACEUTICAL COMPANY 2002 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 (Lewis and Clark Room, 16th Floor), 7701 Forsyth Boulevard, Clayton, Missouri 63105, on August 30, 2002, 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 MARC S. HERMELIN KEVIN S. CARLIE INSTRUCTION: To withhold authority to vote for either nominee, print that nominee's name on the line provided below: 2. Approval of the K-V Pharmaceutical Corporation 2001 Incentive Stock Option Plan |_| FOR |_| AGAINST |_| ABSTAIN 3. 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 AND FOR THE APPROVAL OF THE 2001 INCENTIVE STOCK OPTION PLAN AS SET FORTH UNDER PROPOSAL NO. 2. The undersigned hereby acknowledges receipt of Notice of Annual Meeting of Shareholders and accompanying Proxy Statement, each dated July 15, 2002. Dated: __________________, 2002 -------------------------------------------- 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. P R O X Y (Class B Shareholder) THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS K-V PHARMACEUTICAL COMPANY 2002 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 (Lewis and Clark Room, 16th Floor), 7701 Forsyth Boulevard, Clayton, Missouri 63105, on August 30, 2002, 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 MARC S. HERMELIN KEVIN S. CARLIE INSTRUCTION: To withhold authority to vote for either nominee, print that nominee's name on the line provided below: 2. Approval of the K-V Pharmaceutical Corporation 2001 Incentive Stock Option Plan |_| FOR |_| AGAINST |_| ABSTAIN 3. 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 AND FOR THE APPROVAL OF THE 2001 INCENTIVE STOCK OPTION PLAN AS SET FORTH UNDER PROPOSAL NO. 2. The undersigned hereby acknowledges receipt of Notice of Annual Meeting of Shareholders and accompanying Proxy Statement, each dated July 15, 2002. Dated: __________________, 2002 -------------------------------------------- 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.
APPENDIX A TO 2002 PROXY STATEMENTThis appendix is being filed pursuant to Instruction No. 3 of Item 11 of Schedule 14A. In accordance with such instruction, this appendix is not part of the 2002 proxy statement and has not been sent to the Company's stockholders. |
K-V PHARMACEUTICAL COMPANY 2001 INCENTIVE STOCK OPTION PLAN 1. Purpose of the Plan The K-V Pharmaceutical Company 2001 Stock Option Plan ("Plan") is intended to provide additional incentive to certain valued and trusted employees of K-V Pharmaceutical Company, a Delaware corporation, and its subsidiaries (the "Company"), by encouraging them to acquire shares of the $.01 par value Class A common stock of the Company and the $.01 par value Class B common stock of the Company (collectively, the "Stock") through options to purchase Stock granted pursuant to the Plan ("Options"), thereby increasing such employees' proprietary interest in the business of the Company and providing them with an increased personal interest in the continued success and progress of the Company, the result of which will promote both the interests of the Company and its shareholders. Options may be either options ("Incentive Stock Options") which are intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or nonqualified stock options ("Nonqualified Options"). Each employee or other person granted an Option shall enter into an agreement with the Company (the "Option Agreement") setting forth the terms and conditions of the Option, as determined in accordance with this Plan. 2. Administration of Plan The Plan shall be administered by a committee of the Board of Directors of the Company (the "Board") consisting of not less than two members of the Board as the Board may appoint (the "Board Committee"); provided that so long as the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended ("1934 Act"), the members of the Board Committee shall be "Non-Employee Directors" within the meaning of Rule 16b-3 promulgated under the 1934 Act, as such Rule or its equivalent is then in effect ("Rule 16b-3") and "outside directors" as defined under Section 162(m) of the Code. Board Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Board Committee, however caused, shall be filled by the Board. The Board Committee shall act by a majority of its members in office and the Board Committee may act either by vote at a telephonic or other meeting or by a consent or other written instrument signed by all of the members of the Board Committee. The Board Committee shall have the sole power: (a) subject to the provisions of the Plan, to grant Options; to determine whether the Option shall be an Incentive Stock Option or a Nonqualified Option; to determine the terms and conditions of all Options; to construe and interpret the Plan and Options granted under it; to determine the time or times an Option may be exercised, the number of shares as to which an Option may be exercised at any one time, and when an Option may terminate; to establish, amend and revoke rules and regulations relating to the Plan and its administration; and to correct any defect, supply any omission, or reconcile any inconsistency in the Plan, or in any Option Agreement, in a manner and to the extent it shall deem necessary, all of which determinations and interpretations made by the Board Committee shall be conclusive and binding on all Optionees and on their legal representatives and beneficiaries; and (b) to determine all questions of policy and expediency that may arise in the administration of the Plan and generally exercise such powers and perform such acts as are deemed necessary or expedient to promote the best interests of the Company. The Board, by resolution duly adopted, may authorize one or more officers or employees of the Company to serve on a committee (the "Management Option Committee") to do one or both of the following: (1) recommend to the Board Committee recipients of Options and (2) recommend the number, types and terms of Options. In the exercise of its powers and responsibilities under paragraphs 7, 8 and 13 hereunder, the Management Option Committee, or any member thereof acting individually, may request that the Board Committee review any action which the Management Option Committee proposes to take under the authority granted to it said paragraphs and assume responsibility with respect to such matter. In addition, at any time, the Board Committee may assume and take over, on a prospective basis, any one or more, or all of the powers and responsibilities granted to the Management Option Committee under paragraphs 7, 8 and 13 hereunder, subject to later relinquishment of such powers and responsibilities to the Management Option Committee at the pleasure of the Board Committee. Any action which either the Board Committee or the Management Option Committee is authorized to take under this Plan may be taken by the full Board at any time. 3. Shares Subject to the Plan (a) Subject to the provisions of paragraph 13 below, the Stock which may be issued pursuant to Options granted under the Plan shall not exceed in the aggregate two million (2,000,000) shares of Class A Common Stock of the Company and one million (1,000,000) shares of Class B Common Stock of the Company; provided, however, in no event may more than three million (3,000,000) shares of the Common Stock of the Company in the aggregate be issued as an original grant hereunder. If any Options granted under the Plan terminate, expire or are surrendered without having been exercised in full, the number of shares of Stock not purchased under such Options shall be available again for the purpose of the Plan. (b) At any time that the Board Committee determines that there exists a public market for Class A Common Stock of the Company, it may designate that an Option to purchase shares of Class B Common Stock of the Company shall be exercisable to purchase shares of Class A Common Stock of the Company instead of Class B Common Stock. Such redesignation of an Option shall not affect the purchase price under such Option or the number of shares with respect to which such Option has been granted. Notwithstanding the foregoing, no redesignation of an Option shall be effective if such redesignation constitutes a modification of such Option within the meaning of Section 424(h) of the Code. 4. Persons Eligible for Options All employees of the Company and other persons, including but not limited to, directors, consultants and contractors of the Company shall be eligible to receive the grant of Options under the Plan; provided, however, persons who are members of the Board Committee shall not be eligible to receive a grant of Options hereunder unless granted by the Board as a whole. Only employees shall be eligible to receive a grant of Incentive Stock Options. The Board Committee shall determine the persons to whom Options shall be granted, the time or times such Options shall be granted, the number of shares to be subject to each Option and the times when each Option may be exercised. The Board Committee shall seek information, advice and recommendations from the Management Option Committee to assist the Board Committee in its independent determination as to the employees to whom Options shall be granted. A person who has been granted an Option (an "Optionee"), if he or she is otherwise eligible, may be granted additional Options. 5. Purchase Price and Limitations on Grants The purchase price of each share of Stock covered by each Option ("Purchase Price") shall not be less than one hundred percent (100%) of the Fair Market Value Per Share (as defined below) of the Stock on the date the Option is granted; provided, however, if when an Incentive Stock Option is granted the Optionee receiving the Incentive Stock Option owns or will be considered to own by reason of Section 424(d) of the Code more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, the purchase price of the Stock covered by such Incentive Stock Option shall not be less than one hundred and ten percent (110%) of the Fair Market Value Per Share of the Stock on the date the Incentive Stock Option is granted. "Fair Market Value Per Share" of the Stock shall mean: (i) if the Stock is not publicly traded, the amount determined by the Board Committee on the date of the grant of the Option; (ii) if the Stock is traded only otherwise than on a securities exchange and is not quoted on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), the closing quoted selling price of the Stock on the date of grant of the Option as quoted in "pink sheets" published by the National Daily Quotation Bureau; (iii) if the Stock is traded only otherwise than on a securities exchange and is quoted on NASDAQ, the closing quoted selling price of the Stock on the date of grant of the Option, as reported by the Wall Street Journal; or (iv) if the Stock is admitted to trading on a securities exchange, the closing quoted selling price of the Stock on the date of grant of the Option, as reported in the Wall Street Journal. For purposes of Items (i) through (iv) of this paragraph, if there were no sales on the date of the grant of an Option, the Fair Market Value Per Share shall be determined by the Board Committee in accordance with Section 20.2031-2 of the Federal Estate Tax Regulations. To the extent that the aggregate fair market value (determined at the Grant Date) of Stock with respect to which Incentive Stock Options (determined without regard to this sentence) are exercisable for the first time by any individual during any calendar year (under all plans of the Company and its subsidiaries) exceeds One Hundred Thousand Dollars, such Options shall be treated as Nonqualified Options (this sentence shall be applied by taking Incentive Stock Options into account in the order in which they were granted). Notwithstanding the foregoing, the maximum number of shares underlying Options that may be granted to any Optionee during any calendar year shall be 250,000, subject to adjustment as provided in paragraph 13. 6. Duration of Options Any outstanding Option and all unexercised rights thereunder shall expire and terminate automatically upon the earliest of: (i) the cessation of the employment or engagement of the Optionee by the Company for any reason other than retirement (as provided by contract between the Company any such person or otherwise under normal Company policies), death or disability; (ii) the date which is three months following the effective date of the Optionee's retirement from the Company's service; (iii) the date which is one year following the date on which the Optionee's service with the Company ceases due to disability (or due to the death with respect to Options issued prior to the date of this amendment); (iv) the date of expiration of the Option determined by the Board Committee at the time the Option is granted and specified in such Option; and (v) in any event, the tenth annual anniversary date of the granting of the Option, or, if when an Incentive Stock Option is granted the Optionee owns (or would be considered to own by reason of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, then on the fifth such anniversary; provided, however, that the Board Committee shall have the right, but not the obligation, to extend the expiry of the Options held by an Optionee whose service with the Company has ceased for any reason to the end of their original terms (either upon issuance of the Option or at such time as the Option would otherwise terminate), notwithstanding that such Options may no longer qualify as an Incentive Stock Option under the Code. 7. Exercise of Options (a) An Option may be exercisable in installments or otherwise upon such terms as the Management Option Committee shall determine when the Option is granted. In the event that an Option is exercisable only in installments and the Optionee has been employed by the Company for five or more years as of the date such Option was granted, such Option shall become fully exercisable upon the termination of employment of the Optionee by reason of death or disability (as defined in Section 22(e)(3) of the Code), if and to the extent that such acceleration would not cause a violation of the limitations contained in section 422(b)(7) of the Code. If acceleration by reason of termination because of disability would cause a violation of the limitations contained in section 422(b)(7) of the Code, acceleration shall occur only in an amount such that such acceleration does not cause a violation of section 422(b)(7) of the Code and the acceleration of the exercisability of any portion of the Option which would be in violation of such limitation shall be deferred until January 1 of the year following that in which termination of employment occurs. In the event termination of employment occurs by reason of death, acceleration of the exercisability of any portion of the Option shall occur only as and to the extent that such acceleration will not cause a violation of the limitations contained in Section 422(b)(7) of the Code. (b) The Management Option Committee at any time: (i) may accelerate the time at which any Option granted hereunder is exercisable or otherwise vary the terms of an Option, notwithstanding the fact that such variance may cause the Option to be treated as a Nonqualified Option; (ii) in the case of a Non-Qualified Stock Option, may permit the transferability of such Option and may remove any restrictions or conditions to which a Non-Qualified Stock Option is subject; and (iii) subject to the consent of the Optionee, may convert an outstanding Incentive Stock Option to a Non-Qualified Stock Option it deems such conversion to be in the best interest of the Optionee. (c) No Option will be exercisable (and any attempted exercise will be deemed null and void) if such exercise would create a right of recovery for "short-swing profits" under Section 16(b) of the Securities Exchange Act of 1934, unless the Optionee pays the Company the amount of such "short-swing profits" at the time of the exercise of the Option. (d) In the event that a portion of an Incentive Stock Option which first becomes exercisable exceeds the limitations contained in Section 422(b)(7) of the Code, the shares purchased pursuant to Options in excess of such limitation shall be deemed to be non-qualified stock options and shall be identified accordingly on the certificates representing such shares and in the stock transfer records of the Company. 8. Method of Exercise (a) When the right to purchase shares accrues, Options may be exercised by giving written notice to the Company stating the number of shares for which the Option is being exercised, accompanied by payment in full by cash, or its equivalent, acceptable to the Company, of the purchase price for the shares being purchased. The Company shall issue a separate certificate or certificates of Stock for each Option exercised by an Optionee. (b) The Management Option Committee's shall determined at the time the Option is granted, whether payment of the purchase price for the shares may be made in whole or in part with other shares of Stock of the Company which are free and clear of all liens and encumbrances. The value of the shares of Stock tendered in payment for the shares being purchased shall be the Fair Market Value Per Share on the date of the Optionee's notice of exercise. (c) Notwithstanding the foregoing, the Company shall have the right to postpone the time of delivery of the shares for such period as may be required for the Company, with reasonable diligence, to comply with any applicable listing requirements of any national securities exchange or the National Association of Securities Dealers, Inc. or any Federal, state or local law. If the Optionee, or other person entitled to exercise the Option, fails to timely accept delivery of and pay for the shares specified in such notice, the Management Option Committee shall have the right to terminate the Option with respect to such shares. 9. Nontransferability of Options No Incentive Stock Option granted under the Plan shall be assignable or transferable by the Optionee, either voluntarily or by operation of law, other than by will or the laws of descent and distribution, and, during the lifetime of the Optionee, shall be exercisable only by the Optionee. 10. Continuance of Employment Nothing contained in the Plan or in any Option granted under the Plan shall confer upon any Optionee any rights with respect to the continuation of employment by the Company or interfere in any way with the right of the Company at any time (a) to terminate such employment, (b) to increase or decrease the compensation of the Optionee from the rate in existence at the time of the granting of any Option, or (c) to alter the title, duties or responsibilities of an Optionee. 11. Restrictions on Shares If the Company shall be advised by counsel that certain requirements under the Federal or state securities laws must be met before Stock may be issued under this Plan, the Company shall notify all persons who have been issued Options, and the Company shall have no liability for failure to issue Stock under any exercise of Options because of delay while such requirements are being met or the inability of the Company to comply with such requirements. 12. Privilege of Stock Ownership No person entitled to exercise any Option granted under the Plan shall have the rights or privileges of a stockholder of the Company for any shares of Stock issuable upon exercise of such Option until such person has become the holder of record of such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date on which such person becomes the holder of record, except as provided in paragraph 13 below. 13. Adjustment (a) If the number of outstanding shares of Stock are increased or decreased, or such shares are exchanged for a different number or kind of shares or securities of the Company through reorganization, merger, recapitalization, reclassification, stock dividend, stock split, combination of shares, or other similar transaction, the aggregate number of shares of Stock subject to the Plan as provided in paragraph 3 above, and the shares of Stock subject to issued and outstanding Options under the Plan shall be appropriately and proportionately adjusted by the Management Option Committee. Any such adjustment in an outstanding Option shall be made without change in the aggregate purchase price applicable to the unexercised portion of the Option but with an appropriate adjustment in the price for each share or other unit of any security covered by the Option. (b) Notwithstanding paragraph (a), upon: (i) the dissolution or liquidation of the Company, (ii) a reorganization, merger or consolidation of the Company with one or more corporations in which the Company is not the surviving corporation, (iii) a sale of substantially all of the assets of the Company or (iv) the transfer of more than 80% of the then outstanding Stock of the Company to another entity or person in a single transaction or series of transactions, the Plan shall terminate, and any outstanding Options granted under the Plan shall terminate on the day before the consummation of the transaction; provided that the Board shall have the right, but shall not be obligated, to accelerate the time in which any Options may be exercised prior to such a termination. However, the termination of such Options shall not occur if provision is made in writing in connection with the transaction, in a manner acceptable to the Board, for: (A) the continuance of the Plan and assumption of outstanding Options, or (B) the substitution for such Options of new options to purchase the stock of a successor corporation (or parent or subsidiary thereof), with appropriate adjustments as to number and kind of shares and option price. The Board shall have the authority to amend this paragraph to provide for a requirement that a successor corporation assume any outstanding Options. (c) Adjustments under this paragraph 13 shall be made by the Management Option Committee whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan or in connection with any such adjustment. 14. Holding Period and Forfeiture of Stock (a) All Stock purchased pursuant to the exercise of an Option shall be held by the Company for a period of two (2) years from the date of exercise (the "Holding Period"). Notwithstanding anything contained herein to the contrary, if an Optionee leaves the employ of the Company during the Holding Period for any reason other than the retirement (under normal Company policies), death or disability of such Optionee, the Optionee's purchase of such Stock shall be voidable by the Board Committee upon the recommendation of the Management Option Committee. If any purchase of Stock is voided by reason of the provisions of this paragraph 14, an amount determined as provided in paragraph 14(d) shall thereupon be returned in full to the Optionee. Notwithstanding the foregoing, upon the recommendation of the Management Option Committee, the Board Committee at any time may modify any requirement set forth herein with respect to any outstanding options or with respect to stock acquired pursuant to any Option. (b) At any time within the Holding Period that there exists a public market for Class A Common Stock of the Company, the Optionee and the Management Option Committee may agree to the cancellation of an Optionee's Class B Common Stock of the Company then being held, and the issuance in lieu thereof an equivalent number of Class A Common Stock of the Company. (c) In the event that an Optionee incurs a financial hardship within the Holding Period, which is determined by the Management Option Committee in its sole discretion upon written application by the Optionee and after review of the facts and circumstances to be of an immediate and heavy nature, the Management Option Committee may authorize the repurchase of the Optionee's Stock by the Company at a price as determined under paragraph 14(d) and payment of the proceeds of such repurchase to the Optionee. (d) In the event that a purchase of Stock is voided by reason of the provisions of this paragraph 14(a) or repurchased by the Company by reason of the financial hardship of an Optionee, the amount paid to such Optionee by reason of the voided transaction or the repurchase of such stock shall be the least of: (i) the funds paid by the Optionee in connection with the voided transaction; (ii) the value in cash of Stock used to purchase such Stock, determined as of the date of such purchase, less any amount which would have been forfeited by reason of this paragraph 14 relative to Stock used to purchase the forfeited stock if such Stock had not been so used and the Holding Period relative to such stock had not expired; or (iii) the Fair Market Value Per Share, as determined in accordance with the provisions of paragraph 5 hereof, on the termination date of the Optionee's employment with the Company or the date of the repurchase made pursuant to paragraph 14(b), as the case may be. (e) In order to facilitate the repurchase of Stock by the Company in accordance with the terms of paragraph 14(a) hereof, if an Optionee leaves the employ of the Company during the Holding Period and the Company rescinds the purchase of Stock by such Optionee, each Optionee who exercises any Option or portion thereof shall, at the time of payment thereof, as provided in paragraph 7(a) hereof, deliver to the Company a form of stock power and assignment signed by such Optionee in form and substance satisfactory to the Company, rendering the certificate representing the shares purchased negotiable to the Company. 15. Optionee's Right to Pledge (a) Notwithstanding the provisions of Paragraph 14(a) hereof, if any Optionee who exercises an Option demonstrates to the Management Option Committee a need to obtain financing for the purchase of Stock pursuant to such exercise and indicates his good faith intention to remain in the employ of the Company during the Holding Period, the Management Option Committee, in its sole discretion, may permit delivery of any Stock purchased pursuant to the exercise of any Option to a financial institution for use by such Optionee as collateral security for the purchase of the Stock, subject to any necessary or appropriate restrictions with respect thereto as may be required to comply with applicable Federal and state securities laws and/or the listing requirements of any national securities exchange and the terms of any agreement that may be required by the Management Option Committee as a condition of delivery of any Stock. (b) If Stock is delivered to an Optionee in order to facilitate a pledge described in paragraph 15(a), the Company shall have the right to cancel said Stock upon the exercise of the Company's election to void the purchase of such Stock pursuant to the provisions of paragraph 14(a). Upon the cancellation of such Stock and application by the holder thereof, the Company shall pay to the holder the amount payable for such Stock as calculated under the provisions of paragraph 14(c) hereof. (c) Any Stock delivered to an Optionee pursuant to the provisions of this paragraph 15 shall contain a legend stating that the Stock is subject to cancellation pursuant to the terms of this Plan and that upon cancellation the amount payable to the holder thereof shall be limited as provided in the Plan. 16. Delivery of Certificates If the Optionee remains in the employ of the Company throughout the Holding Period, or leaves the employ of the Company by reason of retirement (under normal Company policies), death or disability, the Company shall deliver to the Optionee or his personal representative (as the case may be), as soon as practicable thereafter, certificates representing the Stock purchased by the Optionee under the Option free and clear of restriction except for the restrictions which are necessary to assure compliance by the Company and the Optionee with applicable Federal and state securities laws and/or the listing requirements of any national securities exchange (the "Certificates"). If the Company fails or declines to exercise its right to void any purchase pursuant to the terms of paragraph 14 hereof, the Company shall deliver the Certificates to those Optionees as soon as practicable after the expiration of two (2) years from the date of exercise of the applicable Option. In the event an Option is exercised using Stock as consideration for the Purchase Price, the Company shall issue separate certificates for each block of shares delivered in payment of the Option Price and for the balance of shares purchased at such exercise. 17. Investment Purpose Each Option granted hereunder may be issued on the condition that any purchase of Stock pursuant to the exercise of an Option which shall not be the subject of a registration statement permitting the sale or other distribution thereof shall be for investment purposes and not with a view to resale or distribution (the "Restricted Stock"). If requested by the Company, each Optionee must agree, at the time of the purchase of any Restricted Stock, to execute an "investment letter" setting forth such investment intent in the form acceptable to the Company and must consent to any stock certificate issued to him thereunder bearing a restrictive legend setting forth the restrictions applicable to the further resale, transfer or other conveyance thereof without registration under the Securities Act of 1933, as amended, and under the applicable securities or blue sky laws of any other jurisdiction (together, the "Securities Laws"), or the availability of exemptions from registration thereunder and to the placing of transfer restrictions on the records of the transfer agent for such stock. No Restricted Stock may thereafter be resold, transferred or otherwise conveyed unless: (1) an opinion of the Optionee's counsel is received, in form and substance satisfactory to counsel for the Company, that registration under the applicable Securities Laws is not required; or (2) such Stock is registered under the applicable Securities Laws; or (3) "no action" letters are received from the staff of the Securities and Exchange Commission and from the administrative agencies administering all other applicable securities or blue sky laws, based on the option of counsel for Optionee in form and substance reasonably satisfactory to counsel for the Company, advising that registrations under the Securities Laws are not required. 18. Amendment and Termination of Plan (a) The Board may, from time to time, with respect to any shares at the time not subject to Options, suspend or terminate the Plan or amend or revise the terms of the Plan; provided that any amendment to the Plan shall be approved by a majority of the shareholders of the Company if the amendment would (i) materially increase or decrease the benefits accruing to participants under the Plan; (ii) increase or decrease the number of shares of Stock which may be issued under the Plan, except as permitted under the provisions of paragraph 13 above; or (iii) materially modify the requirements as to eligibility for participation in the Plan. (b) Subject to the provisions in paragraph 13 above, the Plan shall terminate ten (10) years from the earlier of the adoption of the Plan by the Board or its approval by the shareholders. Notwithstanding the foregoing, if a longer term is permitted with respect to the duration of an incentive stock option plan under law, the Board may extend the term of this Plan to a term not to exceed the longest term permitted with respect to an incentive stock option plan. (c) Subject to the provisions in paragraph 13 above, no amendment, suspension or termination of this Plan shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option granted to such Optionee under the Plan. 19. Effective Date of Plan The Plan shall become effective upon adoption by the Board and approval by the Company's shareholders; provided, however, that prior to approval of the Plan by the Company's shareholders but after adoption by the Board, Options may be granted under the Plan subject to obtaining such approval. 20. Term of Plan No Option shall be granted pursuant to the Plan after ten (10) years from the earlier of the date of adoption of the Plan by the Board of the Company or the date of approval by the Company's shareholders. Notwithstanding the foregoing, if a longer term is permitted with respect to the duration of an incentive stock option plan under law, the Board may extend the term of this Plan to a term not to exceed the longest term permitted with respect to an incentive stock option plan 21. Miscellaneous (a) All distributions under the Plan are subject to withholding of all applicable taxes, and the Management Option Committee may condition the delivery of any shares or other benefits under the Plan on satisfaction of the applicable withholding obligations. The Management Option Committee, in its discretion, and subject to such requirements as the Management Option Committee may impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the Optionee, through the surrender of shares of Stock that the Optionee already owns, or through the surrender of shares of Stock to which the Optionee is otherwise entitled under the Plan. (b) Nothing contained in the Plan shall be construed as conferring upon any employee the right to continue in the employ of the Company or any of its subsidiaries. (c) Employment by the Company for the purpose of this Plan shall be deemed to include employment by, and to continue during any period in which an employee is in the employment of, any subsidiary. (d) An employee shall have no rights as a shareholder with respect to shares covered by such employee's Option until the date of the issuance of shares to the employee pursuant thereto. No adjustment will be made for dividends or other distributions or rights for which the record date is prior to the date of such issuance. (e) Nothing contained in the Plan shall be construed as giving any employee, such employee's beneficiaries or any other person any equity or other interest of any kind in any assets of the Company or any subsidiary or creating a trust of any kind or a fiduciary relationship of any kind between the Company or any subsidiary and any such person. Any Optionee shall have only a contractual right to shares of Stock as set forth in the Agreement, unsecured by any assets of the Company or any subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any subsidiary shall be sufficient to pay any benefits to any person. (f) Nothing contained in the Plan shall be construed to prevent the Company or any subsidiary from taking any corporate action that is deemed by the Company or such subsidiary to be appropriate or in its best interests, whether or not such action would have an adverse effect on the Plan or any Option made under the Plan. No employee, beneficiary or other person shall have any claim against the Company or any subsidiary as a result of any such action. (g) Neither an employee nor an employee's beneficiary shall have the power or right to sell, exchange, pledge, transfer, assign or otherwise encumber or dispose of such employee's or beneficiary's interest arising under the Plan or any Option received under the Plan; nor shall such interest be subject to seizure for the payment of an employee's or beneficiary's debts, judgments, alimony, or separate maintenance or be transferable by operation of law in the event of an employee's or beneficiary's bankruptcy or insolvency and to the extent any such interest arising under the Plan or an Option received under the Plan is awarded to a spouse pursuant to any divorce proceeding, such interest shall be deemed to be terminated and forfeited notwithstanding any vesting provisions or other terms herein or in the agreement evidencing such option. (h) The proceeds received by the Company from the sale of shares of Stock pursuant to the Plan shall be used for general corporate purposes. (i) Unless otherwise specified herein, each election required or permitted to be made by any Optionee or other person entitled to benefits under the Plan, and any permitted modification, or revocation thereof, shall be in writing at such times, in such form, and subject to such restrictions and limitations, not inconsistent with the terms of the Plan, as the Board Committee shall require. (j) All rights and obligations under the Plan shall be governed by, and the Plan shall be construed in accordance with, the laws of the State of Missouri without regard to the principles of conflicts of laws. Titles and headings to Sections herein are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of any provisions of the Plan.