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Exhibit 10.1
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
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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
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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
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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
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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 o
