-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OhefidIu/l/GN2QTHtbzIKuEgUK3o7js2ZuDot4MGBOHLoTc839i1XwOUgPk3IE+ 1GjQPjeYRGe7bGTX14VvZw== 0000927016-01-001419.txt : 20010321 0000927016-01-001419.hdr.sgml : 20010321 ACCESSION NUMBER: 0000927016-01-001419 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHEFFIELD PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000894158 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 133808303 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-54446 FILM NUMBER: 1572972 BUSINESS ADDRESS: STREET 1: 425 WOODSMILL RD CITY: ST LOUIS STATE: MO ZIP: 63017 BUSINESS PHONE: 3145799899 MAIL ADDRESS: STREET 1: 425 WOODSMILL RD CITY: ST LOUIS STATE: MO ZIP: 63017 FORMER COMPANY: FORMER CONFORMED NAME: SHEFFIELD MEDICAL TECHNOLOGIES INC DATE OF NAME CHANGE: 19940606 S-3/A 1 0001.txt FORM S-3 AMENDMENT #1 Registration Statement No. 333-54446 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________ Amendment No. 1 to REGISTRATION STATEMENT ON FORM S-3 UNDER THE SECURITES ACT OF 1933 __________________________ SHEFFIELD PHARMACEUTICALS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 2834 13-3808303 (State or Other Jurisdiction (Primary Standard Industry (I.R.S. Employer of Incorporation or Organization) Classification Code Number) Identification No.)
__________________________ 425 South Woodsmill Road, Suite 270 St. Louis, MO 63017 (314) 579-9899 (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) __________________________ Loren G. Peterson Chief Executive Officer Sheffield Pharmaceuticals, Inc. 425 South Woodsmill Road, Suite 270 St. Louis, MO 63017 (314) 579-9899 (Name, Address, Including Zip Code and Telephone Number, Including Area Code, of Agent For Service) __________________________ Copy to: David A. Cifrino, P.C. William O. Fabbri, Esq. McDermott, Will & Emery 28 State Street Boston, MA 02109-1775 (617) 535-4034 __________________________ Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [x] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ The information in this prospectus is not complete and may be changed. The Selling Stockholders may not sell these securities until registration statement filed the Securities and Exchange commission is effective. The prospectus is not an offer to sell securities, and we are not soliciting offers to buy these securities, in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED MARCH 20, 2001 913,258 Shares SHEFFIELD PHARMACEUTICALS, INC. [LOGO] Common Stock This prospectus relates to the offer and resale from time to time by the selling stockholders of: . 626,950 shares of our common stock issued to The Tail Wind Fund Ltd. in a private placement by the Company completed in December 2000, . 112,500 shares of our common stock issuable upon exercise of a warrant issued to The Tail Wind Fund Ltd. in the December 2000 private placement, . 53,808 shares of our common stock issuable upon exercise of warrants issued to Gruntal & Co., and . 100,000 shares of our common stock issuable upon exercise of a warrant issued to Continental Capital & Equity Corporation. . 20,000 shares of our common stock issuable upon exercise of a warrant issued to The P. L. Thomas Group. The selling stockholders may sell the shares from time to time at fixed prices, market prices or at negotiated prices, and may engage a broker or dealer to sell the shares. For additional information on the selling shareholders' possible methods of sales, you should refer to the section of this prospectus entitled "Plan of Distribution" on page 11. We will not receive any proceeds from the sale of the shares, but will bear the costs relating to the registration of the shares. Selling stockholders identified in this prospectus are offering all of these shares and will receive all of the proceeds of this offering. Our common stock presently trades on the American Stock Exchange, or AMEX, under the symbol "SHM". On March 19, 2001, the closing sale price of common stock on the AMEX was $3.24. _______________ Investing in our common stock involves risks. See "Risk Factors" beginning on page 3. _______________ The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. _______________ The date of this Prospectus is March __, 2001. TABLE OF CONTENTS Page ---- Prospectus Summary..................................................... 1 Risk Factors........................................................... 3 Note on Forward Looking Statements..................................... 9 Use of Proceeds........................................................ 9 Selling Stockholders................................................... 10 Plan of Distribution................................................... 11 Legal Matters.......................................................... 12 Experts................................................................ 12 Where You Can Find More Information.................................... 12 i PROSPECTUS SUMMARY This is only a summary and may not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including the "Risk Factors" section and our financial statements and the notes thereto included elsewhere in this prospectus. SHEFFIELD PHARMACEUTICALS, INC. We are a specialty pharmaceutical company focused on the development and commercialization of later stage pharmaceutical opportunities, utilizing proprietary pulmonary delivery technologies over a range of therapeutic areas. Through our alliances with Elan Corporation plc, Zambon Group SpA, and Siemens AG, we are currently developing nine respiratory and systemic (non-respiratory) therapies to be delivered through our Metered Solution Inhaler, or MSI and Aerosol Drug Delivery System, or ADDS. We believe these pulmonary delivery technologies will allow us to capitalize on the growing drug delivery market by providing both advanced respiratory treatments and patient-friendly alternatives for therapies that can currently be administered only by injection or other inconvenient means. In 1997, we acquired the rights to MSI through a worldwide exclusive license and supply arrangement with Siemens AG. In June 1998, we sublicensed to Zambon Group SpA worldwide marketing and development rights to respiratory products to be delivered by the MSI. During the second half of 1998, we acquired the ADDS from Aeroquip-Vickers, Inc. Additionally, during 1998, we licensed from Elan Corporation, plc, the Ultrasonic Pulmonary Drug Absorption System, a novel disposable unit dose nebulizer system, and Elan's Absorption Enhancing Technology, a therapeutic agent to increase the systemic absorption of drugs. In October 1999, we licensed Elan's NanoCrystal technology to be used in developing certain steroid products. Our lead drug delivery technology, the MSI, is a patented, multi-dose nebulizer delivery system. The pocket-sized inhaled drug delivery system features an ultrasonic nebulizer that emits high-frequency sound waves that turn liquid medication into a fine cloud or soft mist. Our MSI system combines the therapeutic benefits of nebulization with the convenience of pressurized metered dose inhalers, or MDIs, in one patient-friendly device. Our MSI is comprised of a hand-held ultrasonic nebulizer and interchangeable, drug-filled cartridges that are inserted into the inhaler unit. The interchangeable cartridges provide patients who must take multiple respiratory medications with a single, easy-to- use system. We believe the soft mist created by the MSI provides multiple drug administration advantages over the high-velocity MDIs and dry powder inhalers. Furthermore, our MSI system is fast and portable as compared to conventional tabletop nebulizers, which are large, cumbersome and more time consuming to use. The MSI system targets younger and older asthma patients, as well as older chronic obstructive pulmonary disease patients who have difficulty using MDIs and currently depend on tabletop nebulizers for delivery of their medications. Our ADDS is a patented, new generation MDI that we believe has significant efficiency and performance advantages over standard MDIs. Our ADDS technology utilizes a standard aerosol MDI canister, encased in a compact device that provides an aerosol flow-control chamber and a synchronized triggering mechanism. The aerosol flow-control chamber allows the patient to inhale through the device at a normal breathing rate, instead of a forced breath. The inspiratory breath establishes flow fields within the device that mix and uniformly disperse the drug in the breath. At the mouthpiece, nearly all the propellant is evaporated leaving only drug particles to be inspired, allowing a significant increase in the amount of drug delivered to the lungs. Our ADDS system, like our MSI system, is designed to reduce patient coordination problems and enhance compliance with the prescribed treatment. Sheffield Pharmaceuticals, Inc. (formerly Sheffield Medical Technologies Inc.) is a Delaware corporation. Our principal executive offices are located at 425 South Woodsmill Road, Suite 270, St. Louis, Missouri, 63017, and our telephone number is (314) 579-9899. Our common stock trades on the American Stock Exchange under the symbol "SHM". Our web site address is www.sheffieldpharm.com. Information contained on our web site is not intended to be part of this prospectus and is not incorporated by reference herein. Summary of Offering Common stock offered by selling stockholders........... 913,258 shares/(1)/ Shares of common stock outstanding after the offering..................................... 29,115,584 shares/(2)/ Use of proceeds........................................ All proceeds from the sale of the shares of common stock in this offering will be received by the selling stockholders. AMEX Ticker symbol..................................... SHM (1) Consists of 626,950 shares of common stock and 286,308 shares of common stock issuable upon the exercise of outstanding warrants. (2) Based on the number of shares actually outstanding on March 6, 2001. Includes all the shares being offered pursuant to this prospectus and excludes, as of March 6, 2001: . 4,499,100 shares of common stock issuable on the exercise of outstanding options at a weighted average exercise price of $3.19 per share, . 2,146,361 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $2.62 per share, . 1,189,200 shares of common stock available for future issuance under our 1993 Stock Option Plan, 1993 Restricted Stock Plan and 1996 Directors Stock Option Plan, . 15,464,235 shares of common stock issuable upon conversion of outstanding shares of preferred stock, and . 1,362,578 shares of common stock issuable upon conversion of outstanding convertible promissory notes. 2 RISK FACTORS You should carefully consider the risk factors in addition to the remainder of this prospectus before purchasing our common stock. The risks described below are not the only risks we face. Additional risks of which we do not yet know or that we currently think are immaterial may also impair our business operations. If any of the following risks occur, our business, financial condition or operating results could be adversely affected. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. We have experienced significant operating losses throughout our history and expect these losses to continue for the foreseeable future. Our operations to date have consumed substantial amounts of cash and we have generated to date only limited revenues from contract research and licensing activities. We have incurred approximately $80.8 million of operating losses since our inception, including $6.1 million during the year ended December 31, 2000. Our operating losses and negative cash flow from operations are expected to continue in the foreseeable future. We will need additional financing, which if not available, could prevent us from funding or expanding our operations. Cash available for funding our operations as of December 31, 2000 was $3.0 million. As of such date, we had trade payables of $1.2 million and current research obligations of $.2 million. In addition, committed and/or anticipated funding of research and development after December 31, 2000 is estimated at approximately $3.1 million, of which $3.0 million has been committed to be funded by Elan through the issuance of our Series E cumulative convertible preferred stock. Since December 31, 2000 we have received $1.0 million as an interest-free advance against future milestone payments, and anticipate that we have sufficient cash to meet our cash requirements through December 31, 2001, assuming we do not incur unexpected costs. We need to raise substantial additional capital to fund our operations. The development of our technologies and proposed products will require a commitment of substantial funds to conduct costly and time-consuming research, preclinical and clinical testing, and to bring any such products to market. Our future capital requirements will depend on many factors, including continued progress in developing and out-licensing our pulmonary delivery technologies, our ability to establish and maintain collaborative arrangements with others and to comply with the terms thereof, receipt of payments due from partners under research and development agreements, progress with preclinical and clinical trials, the time and costs involved in obtaining regulatory approvals, the cost involved in preparing, filing, prosecuting, maintaining and enforcing patent claims, the need to acquire licenses to new technology and the status of competitive products. We intend to seek such additional funding through collaborative or partnering arrangements, the extension of existing arrangements, or through public or private equity or debt financings. Additional financing may not be available on acceptable terms or at all. If we raise additional funds by issuing equity securities, stockholders may be further diluted and such equity securities might have rights, preferences and privileges senior to those of our current stockholders. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates or products that we would otherwise seek to develop or commercialize. If adequate funds are not available from operations or additional sources of funding, our business will suffer a material adverse effect. Our products are still in development and we may be unable to bring our products to market. We have not yet begun to generate revenues from the sale of products. Our products will require significant additional development, clinical testing and investment prior to their commercialization. We do not expect regulatory approval for commercial sales of any of our products in the immediate future. Potential products that appear to be promising at early stages of development may not reach the market for a number of reasons. Such reasons include the possibility that products will not be proven to be safe and efficacious in clinical trials, that they 3 will not be able to meet applicable regulatory standards or obtain required regulatory approvals, that they cannot be produced in commercial quantities at reasonable costs or that they fail to be successfully commercialized or fail to achieve market acceptance. If our products are not accepted by the medical community, our business will suffer. Commercial sales of our products will substantially depend upon the products' efficacy and on their acceptance by the medical community. Widespread acceptance of our products will require educating the medical community as to the benefits and reliability of the products. Our products may not be accepted and, even if accepted, we are unable to estimate the length of time it would take to gain such acceptance. We will be required to make royalty payments on products we may develop, reducing the amount of revenues with which we could fund ongoing operations. The owners and licensors of the technology rights acquired by us are entitled to receive a certain percentage of all revenues received by us from commercialization, if any, of products in respect of which we hold licenses. Accordingly, in addition to our substantial investment in product development, we will be required to make substantial payments to others in connection with revenues derived from commercialization of products, if any, developed under licenses we hold. Consequently, we will not receive the full amount of any revenues that may be derived from commercialization of products to fund ongoing operations. Our dependence on third parties for rights to technology and the development of our products could harm our business. Under the terms of existing license agreements, we are obligated to make certain payments to our licensors. In the event that we default on the payment of an installment under the terms of an existing licensing agreement, our rights thereunder could be forfeited. As a consequence, we could lose all rights under a license agreement to the related licensed technology, notwithstanding the total investment made through the date of the default. Unforeseen obligations or contingencies may deplete our financial resources and, accordingly, sufficient resources may not be available to fulfill our commitments. If we were to lose our rights to technology, we may be unable to replace the licensed technology or be unable to do so on commercially reasonable terms, which would materially adversely affect our ability to bring products based on that technology to market. In addition, we depend on our licensors for assistance in developing products from licensed technology. If these licensors fail to perform or their performance is not satisfactory, our ability to successfully bring products to market may be delayed or impeded. We face intense competition and rapid technological changes and our failure to successfully compete or adapt to changing technology could make it difficult to successfully bring products to market. The medical field is subject to rapid technological change and innovation. Pharmaceutical and biomedical research and product development are rapidly evolving fields in which developments are expected to continue at a rapid pace. Reports of progress and potential breakthroughs are occurring with increasing frequency. Our success will depend upon our ability to develop and maintain a competitive position in the research, development and commercialization of products and technologies in our areas of focus. Competition from pharmaceutical, chemical, biomedical and medical companies, universities, research and other institutions is intense and is expected to increase. All, or substantially all, of these competitors have substantially greater research and development capabilities, experience, and manufacturing, marketing, financial and managerial resources. Further, acquisitions of competing companies by large pharmaceutical or other companies could enhance such competitors' financial, marketing and other capabilities. Developments by others may render our products or technologies obsolete or not commercially viable and we may not be able to keep pace with technological developments. We have granted anti-dilutions rights to The Tail Wind Fund Ltd. which may require us to issue additional shares to Tail Wind, make cash payments to Tail Wind and may hinder our ability to raise additional funds. Pursuant to our December 2000 private placement with The Tail Wind Fund Ltd., until at least August 29, 2002, if we sell shares of our common stock or securities convertible into or exercisable for common stock for less 4 than $3.5888 per share, we are obligated to issue to Tail Wind additional shares so that the number of shares purchased by Tail Wind in the December 2000 private placement plus the additional shares issued to Tail Wind equals the number of shares that Tail Wind could have purchased for $2,250,000 at the price per share at which the new shares are sold. The presence of these anti-dilution rights may negatively affect our ability to obtain additional financing. In addition, in the event that we are required to issue additional shares to Tail Wind, we may not issue an aggregate of over 5,630,122 shares of our common stock in total to Tail Wind in connection with the December 2000 private placement. If we would otherwise be required to issue more than 5,630,122 shares to Tail Wind, we must instead pay Tail Wind 105% of the cash value of such shares we do not issue. We are subject to significant government regulation and failure to achieve regulatory approval for our products would severely harm our business. Our ongoing research and development projects are subject to rigorous FDA approval procedures. The preclinical and clinical testing requirements to demonstrate safety and efficacy in each clinical indication (the specific condition intended to be treated) and regulatory approval processes of the FDA can take a number of years and will require us to expend substantial resources. We may be unable to obtain FDA approval for our products, and even if we do obtain approval, delays in such approval would adversely affect the marketing of products to which we have rights and our ability to receive product revenues or royalties. Moreover, even if FDA approval is obtained, a marketed product, its manufacturer and its manufacturing facilities are subject to continual review and periodic inspections by the FDA, and a later discovery of previously unknown problems with a product, manufacturer or facility may result in restrictions on such product or manufacturer. Failure to comply with the applicable regulatory requirements can, among other things, result in fines, suspensions of regulatory approvals, product recalls, operating restrictions and criminal prosecution. Additional government regulation may be established which could prevent or delay regulatory approval of our products. Sales of pharmaceutical products outside the United States are subject to foreign regulatory requirements that vary widely from country to country. Even if FDA approval has been obtained, approval of a product by comparable regulatory authorities of foreign countries must be obtained prior to the commencement of marketing the product in those countries. The time required to obtain such approval may be longer or shorter than that required for FDA approval. We have no experience in manufacturing or marketing in foreign countries nor in matters such as currency regulations, import-export controls or other trade laws. To date, we have not received final regulatory approval from the FDA or any other comparable foreign regulatory authority for any of our products or technologies. Our failure to meet product release schedules would make it difficult to predict our quarterly results and may cause our operating results to vary significantly. Delays in the planned release of our products may adversely affect forecasted revenues and create operational inefficiencies resulting from staffing levels designed to support the forecasted revenues. Our failure to introduce new products on a timely basis could delay or hinder market acceptance and allow competitors to gain greater market share. If our intellectual property and proprietary rights are infringed, or infringe upon the rights of others, our business will suffer. Our success will depend in part on our ability to obtain patent protection for our technologies, products and processes and to maintain trade secret protection and operate without infringing the proprietary rights of others. The degree of patent protection to be afforded to pharmaceutical, biomedical or medical inventions is an uncertain area of the law. In addition, the laws of foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States. We may not develop or receive sublicenses or other rights related to proprietary technology that are patentable, patents that are pending may be not issued, and any issued patents may not provide us with any competitive advantages and may be challenged by third parties. Furthermore, others may independently duplicate or develop similar products or technologies to those developed by or licensed to us. If we are required to defend against charges of patent infringement or to protect our own proprietary rights against third parties, substantial costs will be incurred and we could lose rights to certain products and technologies or be required to enter into costly royalty or licensing agreements. 5 We do not have any marketing or manufacturing capabilities and will likely rely on third parties for these capabilities in order to bring products to market. We do not currently have our own sales force or an agreement with another pharmaceutical company to market all of our products that are in development. When appropriate, we may build or otherwise acquire the necessary marketing capabilities to promote our products. However, we may not have the resources available to build or otherwise acquire our own marketing capabilities, and we may be unable to reach agreements with other pharmaceutical companies to market our products on terms acceptable to us, if at all. In addition, we do not intend to manufacture our own products. While we have already entered into two manufacturing and supply agreements related to the MSI system and one related to the ADDS, these manufacturing and supply agreements may not be adequate and we may not be able to enter into future manufacturing and supply agreements on acceptable terms, if at all. Our reliance on independent manufacturers involves a number of risks, including the absence of adequate capacity, the unavailability of, or interruptions in, access to necessary manufacturing processes and reduced control over product quality and delivery schedules. If our manufacturers are unable or unwilling to continue manufacturing our products in required volumes, we will have to identify acceptable alternative manufacturers. The use of a new manufacturer may cause significant interruptions in supply if the new manufacturer has difficulty manufacturing products to our specifications. Further, the introduction of a new manufacturer may increase the variation in the quality of our products. Healthcare reimbursement policies are uncertain and may adversely impact the sale of our products. Our ability to commercialize human therapeutic and diagnostic products may depend in part on the extent to which costs for such products and technologies are reimbursed by private health insurance or government health programs. The uncertainty regarding reimbursement may be especially significant in the case of newly approved products. Reimbursement price levels may be insufficient to provide a return to us on our investment in new products and technologies. In the United States, government and other third-party payers have sought to contain healthcare costs by limiting both coverage and the level of reimbursement for new pharmaceutical products approved for marketing by the FDA, including some cases refusal to cover such approved products. Healthcare reform may increase these cost containment efforts. We believe that managed care organizations may seek to restrict the use of new products, delay authorization to use new products or limit coverage and the level of reimbursement for new products. Internationally, where national healthcare systems are prevalent, little if any funding may be available for new products, and cost containment and cost reduction efforts can be more pronounced than in the United States. We may become subject to product liability claims and our product liability insurance may be inadequate. The use of our proposed products and processes during testing, and after approval, may entail inherent risks of adverse effects that could expose us to product liability claims and associated adverse publicity. Although we currently maintain general liability insurance, the coverage limits of our insurance policies may not be adequate. We currently maintain clinical trial product liability insurance of $2.0 million per event for certain clinical trials and intend to obtain insurance for future clinical trials of products under development. However, we may be unable to obtain or maintain insurance for any future clinical trials. Such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all. A successful claim brought against us in excess of our insurance coverage would have a material adverse effect upon us and our financial condition. We intend to require our licensees to obtain adequate product liability insurance. However, licensees may be unable to maintain or obtain adequate product liability insurance on acceptable terms and such insurance may not provide adequate coverage against all potential claims. If our common stock is delisted from the American Stock Exchange, the price of our common stock and its liquidity could decline. Our common stock is listed for trading on the American Stock Exchange, or AMEX, under the symbol "SHM". We do not satisfy discretionary AMEX guidelines for continued listing, including a guideline that a listed company that has sustained losses from operations and/or net losses in three of its four most recent fiscal years, have 6 stockholders' equity of at least $4,000,000. We had net capital deficiency of $413,720 at December 31, 2000. We also do not satisfy a guideline against continued losses for each of the issuer's five most recent fiscal years. Our continued failure to meet the listing guidelines has been regularly reviewed by AMEX and may ultimately result in our common stock being delisted from AMEX. If our common stock were delisted from AMEX, trading of our common stock, if any, would thereafter likely be conducted in the over-the-counter market, unless we were able to list our common stock on The Nasdaq Stock Market or another national securities exchange, which cannot be assured. If our common stock were to trade in the over-the-counter market it may be more difficult for investors to dispose of, or to obtain accurate quotations as to the market value of our common stock. In addition, it may become more difficult for us to raise funds through the sale of our securities. In the event of the delisting of our common stock from the AMEX and our inability to list our common stock on The Nasdaq Stock Market or another national securities exchange, the regulations of the SEC under the Securities Exchange Act of 1934, as amended, require additional disclosure relating to the market for penny stocks. SEC regulations generally define a penny stock to be an equity security that has a market price of less than $5.00 per share, subject to certain exceptions. A disclosure schedule explaining the penny stock market and the risks associated therewith is required to be delivered to a purchaser and various sales practice requirements are imposed on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions). In addition, the broker-dealer must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. If our securities become subject to the regulations applicable to penny stocks, the market liquidity for our securities could be severely affected. In such an event, the regulations on penny stocks could limit the ability of broker-dealers to sell our securities. The price of biotechnology/pharmaceutical company stocks has been volatile which could result in substantial losses to our stockholders. The market price of securities of companies in the biotechnology/pharmaceutical industries has tended to be volatile. Announcements of technological innovations by us or our competitors, developments concerning proprietary rights and concerns about safety and other factors may have a material effect on our business or financial condition. The market price of our common stock may be significantly affected by announcements of developments in the medical field generally or our research areas specifically. The stock market has experienced volatility in market prices of companies similar to us that has been unrelated to the operating results of such companies. This volatility may have a material adverse effect on the market price of our common stock. Our ability to issue "blank check" preferred stock may make it more difficult for a change in our control. Our certificate of incorporation authorizes the issuance of "blank check" preferred stock with such designations, rights and preferences as may be determined from time to time by the Board of Directors, without shareholder approval. In the event of issuance, such preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in our control and preventing shareholders from receiving a premium for their shares in connection with a change of control. We issued Series A and Series B cumulative convertible redeemable preferred stock in connection with private placements in February 1997 and April 1998, respectively. All of the Series A preferred stock was converted into common stock during 1998. On July 31, 1998, all of the Series B Preferred stock was redeemed for cash. We also issued shares of our Series C cumulative convertible preferred stock in connection with the consummation of an agreement with Elan International Services, Ltd. ("Elan") in June 1998. In October 1999, in conjunction with a licensing agreement with Elan, we issued shares of our Series D cumulative convertible exchangeable preferred stock and Series F cumulative convertible preferred stock. In addition, we also have a commitment from Elan to purchase shares of Series E cumulative convertible non-exchangeable preferred stock at our option (subject to satisfaction of certain conditions). Except for the previously mentioned purchase commitment for Series E preferred stock, and additional shares of Series C, D and E preferred stock that may be payable as dividends to Elan, as holder of the outstanding Series C, D and E preferred stock, we have no present intention to issue any additional shares of our preferred stock; however, we may issue additional shares of our preferred stock in the future. 7 We are obligated to issue additional securities in the future diluting our stockholders. As of December 31, 2000, we had reserved approximately 6,921,629 shares of our common stock for issuance upon exercise of outstanding options and warrants convertible into shares of our common stock, including by our officers and directors. In addition, as of December 31, 2000, we had $2,000,000 principal amount of a convertible promissory note, 13,712 shares of our Series C preferred stock, 12,870 shares of our Series D preferred stock, 1,004 shares of our Series E preferred stock and 5,000 shares of our Series F preferred stock outstanding. Each of the convertible securities provides for conversion into shares of our common stock at a discount to the market price at December 31, 2000. Our Series C, D, E and F preferred stock are convertible into 9,724,823 shares, 2,648,148 shares, 258,098 shares and 1,470,588 shares, respectively, of common stock. The convertible promissory note is convertible into 1,362,578 shares of common stock. The exercise of options and outstanding warrants, the conversion of such other securities and sales of common stock issuable thereunder could have a significant dilutive effect on the market price of our common stock and could materially impair our ability to raise capital through the future sale of our equity securities. 8 NOTE ON FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically are identified by use of terms such as "may", "should", "plan", "expect", "anticipate", "estimate" and similar words although some forward-looking statements are expressed differently. Forward- looking statements represent our management's judgment regarding future events. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such expectations may prove to be incorrect. All statements other than statements of historical fact included in this prospectus and the exhibits hereto regarding our financial position, business strategy, products, products under development and clinical trials, markets, budgets, plans, or objectives for future operations are forward-looking statements. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including those identified under the heading "Risk Factors" and other sections of this prospectus and in the exhibits hereto. USE OF PROCEEDS All of the proceeds from the sale of the shares of common stock in this offering will be received by the selling stockholders. 9 SELLING STOCKHOLDERS The following table sets forth information regarding beneficial ownership of our common stock by the selling stockholders as of March 6, 2001. For purposes of presentation, we have assumed that the selling stockholders will sell all shares offered hereby including the shares issuable on exercise of warrants and options.
Shares Beneficially Owned Shares to be Shares Beneficially Owned Prior to Offering (1) Offered After Offering --------------------- ------- -------------- Name Number Percent Number Percent - ---- ------ ------- ------ ------- The Tail Wind Fund Ltd. 739,450/(2)/ 2.6% 739,450 - - Gruntal & Co. 53,808/(3)/ * 53,808 - - Continental Capital & 100,000/(4)/ * 100,000 - - Equity Corporation The P. L. Thomas Group 20,000/(5)/ * 20,000 - -
_______________ * Less than 1% (1) The persons named in the table, to our knowledge, have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. (2) Consists of (i) 626,950 shares issued to The Tail Wind Fund Ltd. in a private placement, and (ii) 112,500 shares of common stock issuable upon exercise of an outstanding warrant held by The Tail Wind Fund Ltd. (3) Consists of 53,808 shares of common stock issuable upon exercise of warrants issued to Gruntal & Co. in consideration of services provided to us. (4) Consists of 100,000 shares of common stock issuable upon exercise of a warrant issued to Continental Capital & Equity Corporation in consideration of services provided to us. (5) Consists of 20,000 shares of common stock issuable upon exercise of a warrant issued to The P. L. Thomas Group in consideration of services provided to us. On December 29, 2000 we entered into a purchase agreement with The Tail Wind Fund Ltd. Under that agreement, we issued and sold 626,950 shares of our common stock and a warrant to purchase 112,500 shares of common stock at an exercise price of $4.9844 per share for a total cash consideration of $2.25 million. Pursuant to a registration rights agreement with Tail Wind, we filed a registration statement, of which this prospectus forms a part, in order to permit Tail Wind to resell to the public the shares of common stock that it purchased pursuant to the securities purchase agreement and that it may acquire upon any exercise of the warrant. In the purchase agreement, we granted Tail Wind anti-dilution rights. If we sell common stock or securities exercisable for or convertible into shares of our common stock for less than $3.5888 per share, we must issue additional shares to Tail Wind so that the 626,950 shares purchased by Tail Wind in the December 2000 private placement plus the additional shares issued to Tail Wind equals the number of shares that Tail Wind could have purchased for $2,250,000 at the new per share purchase price. We have agreed to register for resale any additional shares issued pursuant to these anti-dilution rights on a future registration statement. In addition, under the terms of the purchase agreement, we may not issue more than a total of 5,630,122 shares of common stock to Tail Wind in connection with the December 2000 private placement and the anti- dilution provisions. If we would otherwise be required to issue more than 5,630,122 shares to Tail Wind, we must instead pay 105% of the cash value of the shares we do not issue to Tail Wind. We granted a warrant to Gruntal & Co. to purchase 35,000 shares at $6.125 per share on October 2, 2000, in connection with investment banking services provided to us. We also granted a warrant to Gruntal & Co. to purchase 18,808 shares at $4.9844 per share on December 29, 2000, in connection with investment banking services 10 provided to us. The shares issuable under these warrants have been included in this prospectus in order to permit Gruntal & Co. to resell the shares. We granted a warrant to Continental Capital & Equity Corporation to purchase 100,000 shares at $2.25 per share on September 17, 1998, in connection with investor relation services provided to us. The shares issuable under that warrant have been included in this prospectus in order to permit Continental Capital & Equity Corporation to resell the shares. We granted a warrant to The P. L. Thomas Group to purchase 20,000 shares at $3.00 per share on September 30, 1997. The shares issuable under that warrant have been included in this prospectus in order to permit The P. L. Thomas Group to resell the shares. PLAN OF DISTRIBUTION The selling stockholders and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares: . ordinary brokerage transactions and transactions in which the broker- dealer solicits purchasers; . block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; . purchases by a broker-dealer as principal and resale by the broker- dealer for its account; . an exchange distribution in accordance with the rules of the applicable exchange; . privately negotiated transactions; . broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; . a combination of any such methods of sale; and . any other method permitted pursuant to applicable law. The selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. We have agreed to indemnify The Tail Wind Fund Ltd. against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. 11 LEGAL MATTERS The validity of the issuance of the securities being offered hereby has been passed upon for us by McDermott, Will & Emery. EXPERTS The consolidated financial statements of Sheffield Pharmaceuticals, Inc. and subsidiaries (a development stage enterprise) as of and for the year ended December 31, 2000 appearing in Sheffield Pharmaceuticals, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 2000, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon the report of Ernst & Young LLP pertaining to such financial statements given upon the authority of such firm as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the Public Reference Room. Our SEC filings are also available to the public from the SEC's web site at http://www.sec.gov. The SEC allows us to incorporate by reference the information we file with them into this prospectus, which mean that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede the information already incorporated by reference. We are incorporating by reference the documents listed below, which we have already filed with the SEC, and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, until the selling stockholders sell all of the shares that are being offered in this prospectus. We incorporate by reference the following documents heretofore filed with the Commission pursuant to the Exchange Act: 1. Our Annual Report on Form 10-K for the year ended December 31, 2000. 2. Current Report of the Company on Form 8-K filed with the Commission on November 14, 2000. 3. The description of our common stock set forth in our registration statement on Form 8-B filed with the Commission on July 6, 1995. We hereby undertake to provide without charge to each person to whom a copy of this prospectus has been delivered, on the written or oral request of any such person, a copy of any or all of the documents referred to above which have been or may be incorporated in this prospectus by reference, other than exhibits to such documents. Written requests for such copies should be directed to Sheffield Pharmaceuticals, Inc., 425 South Woodsmill Road, Suite 270, St. Louis, Missouri 63017, Attention: Scott A. Hoffmann, Chief Financial Officer. Oral requests should be directed to Mr. Hoffmann at (314) 579-9899. You should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone to provide you with different information. The selling stockholders are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus or the documents incorporated by reference is accurate as of any date other than the date on the front of this prospectus or those documents. 12 SHEFFIELD PHARMACEUTICALS, INC. PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth an itemized statement of all estimated expenses in connection with the issuance and distribution of the securities being registered: Amount ------ SEC Registration Fees........................ $ 899 AMEX Listing Fees............................ 17,500 Legal Expenses............................... 12,500 Accounting Fees and Expenses................. 5,000 Miscellaneous................................ 10,101 --------- Total................................... $46,000 The amounts set forth above, except for the Securities and Exchange Commission registration and AMEX listing fees, are in each case estimated. Item 15. Indemnification of Directors and Officers. Except as hereinafter set forth, there is no statute, charter provision, by-law, contract or other arrangement under which any controlling person, director or officer of the Corporation is insured or indemnified in any manner against liability which he may incur in his capacity as such. Article TENTH of the Corporation's Certificate of Incorporation provides as follows: The Corporation shall, to the fullest extent permitted by (S)145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 5.1 of the By-laws of the Corporation provides as follows: (a) The Corporation shall indemnify, subject to the requirements of subsection (d) of this Section, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner her reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Corporation shall indemnify, subject to the requirements of subsection (d) of this Section, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in II-1 the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonable incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonable believed to be in or not opposed to the best interest of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability buy in view of all the circumstances of the case, such person is fairly and reasonable entitled to indemnity for such expense which the Court of Chancery of the State of Delaware or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of the Corporation, or a person serving in any other enterprise at the request of the Corporation, has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsection (a) and (b) of this Section, or in defense of any claim, issue or matter therein, the Corporation shall indemnify him against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) and (b) of this Section (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b) of this Section. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors, or (3) by independent legal counsel in a written opinion, or (4) by the stockholders. (e) Expenses incurred by a directors, officer, employee or agent in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suite or proceeding as authorized by the Board of Directors upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Section. (f) The indemnification and advancement of expenses provided by or granted pursuant to, the other subsections of this Section shall not limit the Corporation from providing any other indemnification or advancement of expenses permitted by law nor shall it be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (g) The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section. (h) The indemnification and advancement of expenses provided by, or granted pursuant to this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (i) For the purposes of this Section, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent f such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation of its separate existence had continued. II-2 (j) This Section 5.1 shall be construed to give the Corporation the broadest power permissible by the Delaware General Corporation Law, as it now stands and as heretofore amended. Section 145 of the General Corporation Law of the State of Delaware provides as follows: (a) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) A corporation may indemnify any person who was or is party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonable incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. (e) Expenses (including attorneys' fees) incurred by an officer or director in defending any civil criminal administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director of officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or II-3 advancement of expenses may be entitles under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. (h) For purposes of this section, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (i) For purposes of this section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service s a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "no opposed to the best interests of the corporation" as referred to in this section. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The Company has purchased a Directors and Officer Liability Insurance policy for coverage of up to $5,000,000. Item 16. Exhibits. The following Exhibits are included pursuant to regulation S-K.
No. Description Reference ---- ----------- --------- 4.1 Purchase Agreement dated December 29, 2000 by and between Sheffield * Pharmaceuticals, Inc. and The Tail Wind Fund Ltd. 4.2 Registration Rights Agreement dated December 29, 2000 by and between * Sheffield Pharmaceuticals, Inc. and The Tail Wind Fund, Ltd. 4.3 Warrant dated December 29, 2000 issued to The Tail Wind Fund, Ltd. * 4.4 Warrant dated October 2, 2000 issued to Gruntal & Co. (1) 4.5 Warrant dated December 29, 2000 issued to Gruntal & Co. (1) 4.6 Warrant dated September 17, 1998 issued to Continental Capital & Equity * Corporation 4.7 Warrant dated September 30, 1997 issued to The P.L. Thomas Group * 5.1 Opinion of McDermott, Will & Emery (includes Consent) (1) 23.1 Consent of McDermott, Will & Emery included in Exhibit 5.1 (1) 23.2 Consent of Ernst & Young LLP relating to the use of Financial Statements * 24.1 Power of Attorney, included in Part II of the Registration Statement *
II-4 - --------------- * Previously filed. (1) Filed herewith. Item 17. Undertakings. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri on March 20, 2001. Sheffield Pharmaceuticals, Inc. By: /s/ Loren G. Peterson --------------------------------- Loren G. Peterson President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Thomas M. Fitzgerald Director and Chairman March 20, 2001 - -------------------------------- Thomas M. Fitzgerald /s/ Loren G. Peterson Director, President and Chief March 20, 2001 - -------------------------------- Loren G. Peterson Executive Officer * Director March 20, 2001 - -------------------------------- John M. Bailey * Director March 20, 2001 - -------------------------------- Digby W. Barrios * Director March 20, 2001 - -------------------------------- Todd C. Davis * Director March 20, 2001 - -------------------------------- Roberto Rettani /s/ Scott A. Hoffmann Vice President Finance and March 20, 2001 - -------------------------------- Scott A. Hoffmann Administration Secretary and Treasurer * By /s/ Loren G. Peterson - -------------------------------- Attorney-in-Fact
II-6 EX-4.4 2 0002.txt COMMON STOCK PURCHASE WARRANT Exhibit 4.4 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK FOR WHICH THIS WARRANT IS EXERCISABLE (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON THE HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR OTHER STATE SECURITIES LAW. COMMON STOCK PURCHASE WARRANT For the Purchase of 35,000 Shares of Common Stock of SHEFFIELD PHARMACEUTICALS, INC. (A Delaware Corporation) 1. Warrant. ------- THIS CERTIFIES THAT, for value received, Gruntal & Co., L.L.C. (together with any of the transferees permitted under Section 3.1, the "Holder" or "Holders"), as registered owner of this Warrant, is entitled during the period commencing October 2, 2001 and ending at 5:00 p.m., St. Louis, Missouri time, on October 1, 2004, but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to Thirty-Five Thousand (35,000) shares (the "Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of Sheffield Pharmaceuticals, Inc., a Delaware corporation (the "Company") in accordance with the terms hereof. The exercise price (the "Exercise Price") per Share of Common Stock shall be $6.125 per share. 2. Exercise. -------- 2.1 Cash Exercise. In order to exercise this Warrant for cash, the ------------- exercise form attached hereto must be duly executed, completed and delivered to the Company, together with this Warrant and payment of the applicable Exercise Price for the shares of the Common Stock being purchased. If the rights represented hereby shall not have been exercised before 5:00 p.m., St. Louis, Missouri time, on October 1, 2004, this Warrant shall become and be void and without further force or effect and all rights represented hereby shall cease and expire. 2.2 Cashless Exercise. ----------------- (a) In lieu of exercising this Warrant for cash, the Holder may elect to receive Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election in which event the Company shall issue to the Holder as of the date specified in such notice a number of shares of the Common Stock computed using the following formula: X= Y(A-B) ------ A Where X = the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Common Stock purchasable under this Warrant. A = the fair market value of one share of the Company's Common Stock. B = the Exercise Price (as adjusted to the date of such calculations as provided in Section 6). (b) For purposes of this Section 2.2, fair market value of one share of the Company's Common Stock shall be based on the average of the closing sales prices of the Company's Common Stock reported on the American Stock Exchange, The Nasdaq Stock Market, the OTC Electronic Bulletin Board, the National Daily Quotation Service, or the closing price quoted on any other exchange on which the Common Stock is listed, whichever is applicable, as published in The Wall -------- Street Journal for the ten trading days prior to the date of determination of - -------------- fair market value. If the Common Stock is not quoted in The Nasdaq Stock Market, the OTC Electronic Bulletin Board, or the National Daily Quotation Service, or traded on an exchange, the fair market value of the Company's Common Stock shall be the price per share which the Company could obtain from a willing buyer for shares sold by the Company from authorized but unissued shares, as such price shall be agreed by the Company and the holder of this Warrant. -2- 3. Transfer. -------- 3.1 General Restrictions; Permitted Transferees. The registered ------------------------------------------- Holder of this Warrant, by his acceptance hereof, agrees that it shall not sell, transfer or assign or hypothecate this Warrant without the prior written consent of the Company except that such a transfer may be made to the bona fide officers, directors and employees of Gruntal & Co., L.L.C. without the prior written consent of the Company. Any transfer will be registered on the books of the Company upon delivery to the Company of notice thereof duly endorsed by the Holder or by its duly authorized attorneys or representatives. Upon any such registration of transfer the Company shall deliver a new warrant or new warrants to the persons entitled thereto. Notwithstanding the foregoing, the Company shall have no obligation to cause a Warrant to be transferred on its books to any person, unless the Holder thereof shall furnish to the Company evidence of compliance with the Securities Act, in accordance with Section 3.2 below. The shares of Common Stock issuable upon exercise of this Warrant shall be subject to the additional transfer restrictions set forth below. 3.2 Restrictions Imposed by the Securities Act. This Warrant and the ------------------------------------------ shares of Common Stock purchased upon exercise of this Warrant shall not be transferred unless and until (i) the Company has received the opinion of counsel for the Holder that this Warrant and such shares may be sold pursuant to an exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), the availability of which is established to the reasonable satisfaction of the Company, or (ii) in the case of a sale of the shares only, a registration statement relating to such shares has been filed by the Company and declared effective by the Securities and Exchange Commission. Each certificate for securities purchased upon exercise of this Warrant shall bear a legend substantially as follows unless such securities have been registered under the Securities Act: "The securities represented by this certificate have not been registered under the Securities Act of 1933 (the "Act"), or any state securities laws. The securities may not be offered for sale, sold or otherwise transferred except (i) pursuant to an effective registration statement under the Act or (ii) pursuant to an exemption from registration under the Act in respect of which the Company has received an opinion of counsel satisfactory to the Company to such effect. Copies of the agreement covering both the purchase of the securities and restricting their transfer may be obtained at no cost by written request made by the holder of record of this certificate to the Secretary of the Company at the principal executive offices of the Company." 4. New Warrants to be Issued. ------------------------- -3- 4.1 Partial Exercise. Subject to the restrictions in Section 3 ---------------- hereof, this Warrant may be exercised in whole or in part. In the event of the exercise hereof in part, upon surrender of this Warrant for cancellation, together with the duly executed exercise form, the Company shall cause to be delivered to the Holder without charge a new warrant or new warrants of like tenor with this Warrant in the name of the Holder evidencing the right to purchase, in the aggregate, the remaining number of underlying shares of Common Stock purchasable hereunder after giving effect to any such partial exercise. 4.2 Lost Certificate. Upon receipt by the Company of evidence ---------------- satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and of an indemnification in favor of the Company, reasonably satisfactory to it, the Company shall execute and deliver a new warrant of like tenor and date. Any such new warrants executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute an additional contractual obligation on the part of the Company. 4.3 Warrant Register; Transfer of the Warrant. Any warrants issued ----------------------------------------- upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a warrant register (the "Warrant Register") as they are issued. The Company shall be entitled to treat the registered holder of any warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such warrant on the part of any other person, and shall not be liable for any registration or transfer of warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by the Holder's duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall delivery a new warrant or warrants to the person entitled thereto. Notwithstanding the foregoing, the Company shall have no obligation to cause warrants to be transferred on its books to any person if, in the opinion of counsel to the Company, such transfer does not comply with the provisions of the Securities Act and the rules and regulations thereunder. 5. Reservation. The Company shall at all times reserve and keep available out ----------- of its authorized shares of Common Stock, solely for the purpose of issuance upon exercise of the Warrant, such number of authorized but unissued shares of Common Stock, free from preemptive rights, as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Warrant and payment of the applicable Exercise Price therefor, all shares of Common Stock shall be duly and validly issued, fully paid and nonassessable and not subject to preemptive rights of any stockholder. If the Common Stock is then listed on a national securities exchange, all shares of Common Stock issued upon exercise of this Warrant shall also be duly listed thereon. -4- 6. Adjustments. The Exercise Price and the number of shares purchasable ----------- hereunder are subject to adjustment from to time as follows. 6.1 Merger, Sale of Assets, Etc. If at any time while this Warrant, ---------------------------- or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of the Company's properties and assets as, or substantially as, an entirety to any other person, then as a part of such reorganization, merger, consolidation, sale or transfer lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 6. The foregoing provisions of this Section 6 shall similarly apply to successive reorganization, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per-share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company's Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. 6.2 Reclassification, Etc. If the Company, at any time while this ---------------------- Warrant, or any portion thereof, remains outstanding and unexpired by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 6. 6.3 Split Subdivision or Combination of Shares. If the Company at ------------------------------------------ any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall split, subdivide -5- or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. 6.4 Certificate as to Adjustments. Upon the occurrence of each ----------------------------- adjustment or readjustment pursuant to this Section 6, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. 7. Certain Notice Requirements. --------------------------- 7.1 Holder's Right to Receive Notice. Nothing herein shall be -------------------------------- construed as conferring upon the Holder the right to vote or consent or to receive notice as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company prior to the exercise hereof (including the right to receive dividends). If, however, at any time prior to the expiration of the Warrant and its exercise, any of the events described in Section 6 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least ten (10) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up, merger, consolidation, reorganization or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. 7.2 Transmittal of Notices. Any notice or other communication or ---------------------- delivery required or permitted hereunder shall be in writing and shall be delivered personally or sent by certified mail, postage prepaid, or by a nationally recognized overnight courier service, and shall be deemed given when so delivered personally or by overnight courier service, or, if mailed, three (3) days after the date of deposit in the United States mails, as follows: (i) if to the Company, to: Sheffield Pharmaceuticals, Inc. 425 South Woodsmill Road, Suite 270 St. Louis, Missouri 63017-3441 Attention: Chief Financial Officer (ii) if to the Holder, to the address of such Holder as shown on the books of the Company. -6- Either of the Holder or the Company may change the foregoing address by notice given pursuant to this Section 7.2. 8. Investment Representations; Registration Rights. ----------------------------------------------- 8.1 Purchase for Investment. By his acceptance of this Warrant, the ----------------------- Holder represents and warrants that the Holder has acquired this Warrant and will acquire the Shares for the Holder's own account for investment and not with the view to the distribution thereof, except in accordance with applicable federal and state securities laws. The Holder represents that he is an "accredited investor" as such term is defined under Rule 501 of Regulation D promulgated under the Securities Act. The Holder confirms that he has been advised that the Warrants have not been, and the Shares of Common Stock issuable upon exercise of this Warrant Shares will not be (except in the event of a registration pursuant to Section 8), registered under the Securities Act and that he has consulted with and been advised by counsel as to the restrictions on resale to which this Warrant and such Shares will be subject. 8.2 Notice of Registration. If at any time or from time to time the ---------------------- Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than in connection with a registration relating to employee benefit plans or a registration relating to a business combination transaction, the Company will: (i) promptly give to the Holders written notice thereof; and (ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Shares specified in written requests, made within 20 days after receipt of such written notice from the Company, by the Holders or any one or more of them. 8.3 Underwriting. If the registration of which the Company gives ------------ notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 8.2. In such event the right of a Holder to registration pursuant to Section 8.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of Shares in the underwriting to the extent provided herein. If a Holder proposes to distribute its securities through such underwriting it shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 8, if the managing underwriter determines that marketing factors require a limitation of the number of securities to be underwritten, the managing underwriter may limit the Shares to be included in such registration. The Company shall so advise the participating Holders and other holders distributing their securities through such underwriting and the number of Shares that may be included in the registration and underwriting shall be allocated among the participating Holders -7- and such other holders in proportion, as nearly as practicable, to the respective amounts of Shares held by the participating Holders and such other holders at the time of filing the registration statement. To facilitate the allocation of securities in accordance with the above provisions, the Company may round the number of securities allocated to the participating Holders or holder to the nearest 1,000 shares. 8.4 Right to Terminate Registration. The Company shall have the ------------------------------- right to terminate or withdraw any registration initiated by it under this Section 8 prior to the effectiveness of such registration whether or not any Holder has elected to include Shares in such registration. 8.5 Expenses of Registration. The Company shall pay all expenses incurred ------------------------ by the Company in connection with the registration, qualification and/or exemption of the Shares, registered pursuant to Sections 8.2 and 8.3 above, including any Securities and Exchange Commission ("SEC") and state securities law registration and filing fees, printing expenses, fees and disbursements of the Company's counsel and accountants, transfer agents' and registrars' fees, fees and disbursements of experts used by the Company in connection with such registration, qualification and/or exemption, and expenses incidental to any amendment or supplement to the registration statement or prospectuses contained therein. The Company shall not, however, be liable for any sales, broker's or underwriting discount or commissions upon sale by any Holder of any of the Shares. 8.6 Amendments and Supplements; Restrictions on Use. The Company shall ----------------------------------------------- prepare and promptly file with the SEC and promptly notify the Holders of the filing of such amendments or supplements to the registration statement or prospectuses contained therein as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to the Shares is required to be delivered under the Securities Act, any event shall have occurred as a result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided, however, that the Company shall be entitled to delay any such filing and the use of the prospectus if the Company determines that such filing or use would impede, delay, or interfere with any significant financing, acquisition, or other transaction involving the Company, or require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential. The Company shall also advise the Holders promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of the registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued. 8.7 Further Information. If Shares owned by a Holder are included in any ------------------- registration, such Holder shall furnish the Company such information regarding itself as the Company may reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this Warrant. -8- 8.8 Duration. Notwithstanding anything to the contrary in this Section 8, -------- the Company shall have no obligation to register or maintain a registration statement with respect to Shares after the second anniversary of their issuance date. 9. Indemnification. (a) The Company agrees to indemnify, defend and --------------- hold harmless, to the full extent permitted by law, the Holder and each of the Holder's affiliates, each of their respective officers, directors, employees, agents, representatives, successors and assigns and each person who controls the Holder or such affiliate (within the meaning of the Securities Act) against any and all actions, causes of action, suits, losses, liabilities, obligations, damages, judgments and expenses, including, without limitation, reasonable attorneys' fees and disbursements (collectively, "Losses") incurred by any such person in any capacity and caused by any untrue statement of a material fact contained in the registration statement or in any prospectus or prospectus supplement, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or prospectus supplement, in light of the circumstances in which they were made) not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by or on behalf of any Holder or its representative expressly for use therein. (b) In connection with the performance by the Company of its obligations under Section 8, the Holder shall promptly furnish to the Company in writing such information and affidavits with respect to the Holder and with respect to the planned distribution of the Shares issuable upon exercise of this Warrant that the Company may reasonably request for use in connection with the registration statement or any prospectus and agrees to indemnify, defend and hold harmless, to the full extent permitted by law, the Company, the Company's directors, officers, employees, agents, representatives, successors and assigns and each person who controls the Company (within the meaning of the Securities Act) against any and all Losses incurred by any such person in any capacity and caused by any untrue statement of a material fact contained in the registration statement or in any prospectus or prospectus supplement, in light of the circumstances in which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information with respect to the Holder furnished in writing by or on behalf of the Holder or its representatives to the Company specifically for inclusion in such registration statement or any prospectus. (c) Any person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Notwithstanding the foregoing, any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the reasonable fees and expenses of such counsel shall be at the expense of such person unless (x) the indemnifying party has agreed in writing to pay such fees or expenses, or (y) the indemnifying party declines to assume the defense of such claim (it being understood that in the case of each of (x) and (y) above, the reasonable fees and expenses of such -9- notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Notwithstanding the foregoing, any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the reasonable fees and expenses of such counsel shall be at the expense of such person unless (x) the indemnifying party has agreed in writing to pay such fees or expenses, or (y) the indemnifying party declines to assume the defense of such claim (it being understood that in the case of each of (x) and (y) above, the reasonable fees and expenses of such separate counsel to such person shall be paid by the indemnifying party). If such defense is not assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent (but such consent may not be unreasonably withheld or delayed). No indemnifying party shall consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the indemnified party of a release from all liability with respect to such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the reasonable fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim. (d) If the indemnification provided for in this Section 9 from the indemnifying party is unavailable to an indemnified party in respect of any Losses by reason of such indemnification being unenforceable as a matter of law or public policy, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the actions that resulted in such Losses, as well as any other equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by any method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 10. Representations and Warranties of the Company. The Company hereby ---------------------------------------------- represents and warrants that: -10- (iii) the execution and delivery of this Warrant are not, and the issuance of the shares of Common Stock upon exercise of this Warrant in accordance with terms hereof will not be, inconsistent with the Company's certificate of incorporation or by-laws, do not and will not contravene any law, government rule or regulation, judgment or order applicable to the Company, and, except for consents that already have been obtained by the Company, do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person. 11. Miscellaneous. ------------- 11.1 Amendments. All modifications or amendments to this Warrant ---------- shall require the written consent of each party. 11.2 Headings. The headings contained herein are for the sole purpose -------- of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Warrant. 11.3 Entire Agreement. This Warrant constitutes the entire agreement ---------------- of the parties hereto with respect to the subject matter hereof, and supersede all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. 11.4 Binding Effect. This Warrant shall inure solely to the benefit -------------- of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Warrant or any provisions herein contained. -11- 11.5 Governing Law. This Warrant shall be governed by and construed ------------- and enforced in accordance with the laws of the State of New York, without giving effect to conflict of law principles thereof. 11.6 Waiver, Etc. The failure of the Company or the Holder to at any ----------- time enforce any of the provisions of this Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Warrant. No waiver of any breach, noncompliance or nonfulfillment of any of the provisions of this Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, noncompliance or nonfulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, noncompliance or nonfulfillment. ***** -12- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the 2nd day of October, 2000. SHEFFIELD PHARMACEUTICALS, INC. By: ______________________________ Loren G. Peterson President and CEO AGREED AND ACCEPTED: Gruntal & Co., L.L.C. By__________________________ -13- Form to be used to exercise Warrant: Sheffield Pharmaceuticals, Inc. 425 South Woodsmill Road, Suite 270 St. Louis, Missouri 63017-3441 Attention: Chief Financial Officer Date: ________________, 20__ The Undersigned hereby elects irrevocably to exercise the within Warrant and to purchase __________ shares of Common Stock of Sheffield Pharmaceuticals, Inc. and hereby makes payment of $_____________ (at the rate of $______________ per share) in payment of the Exercise Price pursuant thereto. Please issue the shares as to which this Warrant is exercised in accordance with the instructions given below. ___________________________________ Signature ___________________________________ Signature Guaranteed INSTRUCTIONS FOR REGISTRATION OF SECURITIES Name____________________________________________________________________________ (Print in Block Letters) Address_________________________________________________________________________ NOTICE: The signature to this form must correspond with the name as written upon the face of the within Warrant in every particular without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange. -14- EX-4.5 3 0003.txt COMMON STOCK PURCHASE WARRANT EXHIBIT 4.5 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK FOR WHICH THIS WARRANT IS EXERCISABLE (THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON THE HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR OTHER STATE SECURITIES LAW. COMMON STOCK PURCHASE WARRANT For the Purchase of 18,808 Shares of Common Stock of SHEFFIELD PHARMACEUTICALS, INC. (A Delaware Corporation) 1. Warrant. ------- THIS CERTIFIES THAT, for value received, Gruntal & Co., L.L.C. (together with any of the transferees permitted under Section 3.1, the "Holder" or "Holders"), as registered owner of this Warrant, is entitled during the period commencing December 29, 2000 and ending at 5:00 p.m., St. Louis, Missouri time, on December 29, 2004, but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to Eighteen Thousand Eight Hundred Eight (18,808) shares (the "Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of Sheffield Pharmaceuticals, Inc., a Delaware corporation (the "Company") in accordance with the terms hereof. The exercise price (the "Exercise Price") per Share of Common Stock shall be $4.9844 per share. 2. Exercise. -------- 2.1 Cash Exercise. In order to exercise this Warrant for cash, the ------------- exercise form attached hereto must be duly executed, completed and delivered to the Company, together with this Warrant and payment of the applicable Exercise Price for the shares of the Common Stock being purchased. If the rights represented hereby shall not have been exercised before 5:00 p.m., St. Louis, Missouri time, on December 29, 2004, this Warrant shall become and be void and without further force or effect and all rights represented hereby shall cease and expire. 2.2 Cashless Exercise. ----------------- (a) In lieu of exercising this Warrant for cash, the Holder may elect to receive Shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election in which event the Company shall issue to the Holder as of the date specified in such notice a number of shares of the Common Stock computed using the following formula: X= Y(A-B) ------ A Where X = the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Common Stock purchasable under this Warrant. A = the fair market value of one share of the Company's Common Stock. B = the Exercise Price (as adjusted to the date of such calculations as provided in Section 6). (b) For purposes of this Section 2.2, fair market value of one share of the Company's Common Stock shall be based on the average of the closing sales prices of the Company's Common Stock reported on the American Stock Exchange, The Nasdaq Stock Market, the OTC Electronic Bulletin Board, the National Daily Quotation Service, or the closing price quoted on any other exchange on which the Common Stock is listed, whichever is applicable, as published in The Wall -------- Street Journal for the ten trading days prior to the date of determination of - -------------- fair market value. If the Common Stock is not quoted in The Nasdaq Stock Market, the OTC Electronic Bulletin Board, or the National Daily Quotation Service, or traded on an exchange, the fair market value of the Company's Common Stock shall be the price per share which the Company could obtain from a willing buyer for shares sold by the Company from authorized but -2- unissued shares, as such price shall be agreed by the Company and the holder of this Warrant. 3. Transfer. -------- 3.1 General Restrictions; Permitted Transferees. The registered ------------------------------------------- Holder of this Warrant, by his acceptance hereof, agrees that it shall not sell, transfer or assign or hypothecate this Warrant without the prior written consent of the Company except that such a transfer may be made to the bona fide officers, directors and employees of Gruntal & Co., L.L.C. without the prior written consent of the Company. Any transfer will be registered on the books of the Company upon delivery to the Company of notice thereof duly endorsed by the Holder or by its duly authorized attorneys or representatives. Upon any such registration of transfer the Company shall deliver a new warrant or new warrants to the persons entitled thereto. Notwithstanding the foregoing, the Company shall have no obligation to cause a Warrant to be transferred on its books to any person, unless the Holder thereof shall furnish to the Company evidence of compliance with the Securities Act, in accordance with Section 3.2 below. The shares of Common Stock issuable upon exercise of this Warrant shall be subject to the additional transfer restrictions set forth below. 3.2 Restrictions Imposed by the Securities Act. This Warrant and the ------------------------------------------ shares of Common Stock purchased upon exercise of this Warrant shall not be transferred unless and until (i) the Company has received the opinion of counsel for the Holder that this Warrant and such shares may be sold pursuant to an exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), the availability of which is established to the reasonable satisfaction of the Company, or (ii) in the case of a sale of the shares only, a registration statement relating to such shares has been filed by the Company and declared effective by the Securities and Exchange Commission. Each certificate for securities purchased upon exercise of this Warrant shall bear a legend substantially as follows unless such securities have been registered under the Securities Act: "The securities represented by this certificate have not been registered under the Securities Act of 1933 (the "Act"), or any state securities laws. The securities may not be offered for sale, sold or otherwise transferred except (i) pursuant to an effective registration statement under the Act or (ii) pursuant to an exemption from registration under the Act in respect of which the Company has received an opinion of counsel satisfactory to the Company to such effect. Copies of the agreement covering both the purchase of the securities and restricting their transfer may be obtained at no cost by written request made by the holder of record of this certificate to the Secretary of the Company at the principal executive offices of the Company." 4. New Warrants to be Issued. ------------------------- -3- 4.1 Partial Exercise. Subject to the restrictions in Section 3 ---------------- hereof, this Warrant may be exercised in whole or in part. In the event of the exercise hereof in part, upon surrender of this Warrant for cancellation, together with the duly executed exercise form, the Company shall cause to be delivered to the Holder without charge a new warrant or new warrants of like tenor with this Warrant in the name of the Holder evidencing the right to purchase, in the aggregate, the remaining number of underlying shares of Common Stock purchasable hereunder after giving effect to any such partial exercise. 4.2 Lost Certificate. Upon receipt by the Company of evidence ---------------- satisfactory to it of the loss, theft, destruction or mutilation of this Warrant and of an indemnification in favor of the Company, reasonably satisfactory to it, the Company shall execute and deliver a new warrant of like tenor and date. Any such new warrants executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute an additional contractual obligation on the part of the Company. 4.3 Warrant Register; Transfer of the Warrant. Any warrants issued ----------------------------------------- upon the transfer or exercise in part of this Warrant shall be numbered and shall be registered in a warrant register (the "Warrant Register") as they are issued. The Company shall be entitled to treat the registered holder of any warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such warrant on the part of any other person, and shall not be liable for any registration or transfer of warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by the Holder's duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall delivery a new warrant or warrants to the person entitled thereto. Notwithstanding the foregoing, the Company shall have no obligation to cause warrants to be transferred on its books to any person if, in the opinion of counsel to the Company, such transfer does not comply with the provisions of the Securities Act and the rules and regulations thereunder. 5. Reservation. The Company shall at all times reserve and keep available out ----------- of its authorized shares of Common Stock, solely for the purpose of issuance upon exercise of the Warrant, such number of authorized but unissued shares of Common Stock, free from preemptive rights, as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Warrant and payment of the applicable Exercise Price therefor, all shares of Common Stock shall be duly and validly issued, fully paid and nonassessable and not subject to preemptive rights of any stockholder. If the Common Stock is then listed on a national securities exchange, all shares of Common Stock issued upon exercise of this Warrant shall also be duly listed thereon. -4- 6. Adjustments. The Exercise Price and the number of shares purchasable ----------- hereunder are subject to adjustment from to time as follows. 6.1 Merger, Sale of Assets, Etc. If at any time while this Warrant, ---------------------------- or any portion thereof, is outstanding and unexpired there shall be (i) a reorganization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (ii) a merger or consolidation of the Company with or into another corporation in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of the Company's properties and assets as, or substantially as, an entirety to any other person, then as a part of such reorganization, merger, consolidation, sale or transfer lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and payment of the Exercise Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 6. The foregoing provisions of this Section 6 shall similarly apply to successive reorganization, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per-share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company's Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. 6.2 Reclassification, Etc. If the Company, at any time while this ---------------------- Warrant, or any portion thereof, remains outstanding and unexpired by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 6. 6.3 Split Subdivision or Combination of Shares. If the Company at ------------------------------------------ any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall split, subdivide -5- or combine the securities as to which purchase rights under this Warrant exist, into a different number of securities of the same class, the Exercise Price for such securities shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination. 6.4 Certificate as to Adjustments. Upon the occurrence of each ----------------------------- adjustment or readjustment pursuant to this Section 6, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. 7. Certain Notice Requirements. --------------------------- 7.1 Holder's Right to Receive Notice. Nothing herein shall be -------------------------------- construed as conferring upon the Holder the right to vote or consent or to receive notice as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company prior to the exercise hereof (including the right to receive dividends). If, however, at any time prior to the expiration of the Warrant and its exercise, any of the events described in Section 6 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least ten (10) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up, merger, consolidation, reorganization or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. 7.2 Transmittal of Notices. Any notice or other communication or ---------------------- delivery required or permitted hereunder shall be in writing and shall be delivered personally or sent by certified mail, postage prepaid, or by a nationally recognized overnight courier service, and shall be deemed given when so delivered personally or by overnight courier service, or, if mailed, three (3) days after the date of deposit in the United States mails, as follows: (i) if to the Company, to: Sheffield Pharmaceuticals, Inc. 425 South Woodsmill Road, Suite 270 St. Louis, Missouri 63017-3441 Attention: Chief Financial Officer (ii) if to the Holder, to the address of such Holder as shown on the books of the Company. -6- Either of the Holder or the Company may change the foregoing address by notice given pursuant to this Section 7.2. 8. Investment Representations; Registration Rights. ----------------------------------------------- 8.1 Purchase for Investment. By his acceptance of this Warrant, the ----------------------- Holder represents and warrants that the Holder has acquired this Warrant and will acquire the Shares for the Holder's own account for investment and not with the view to the distribution thereof, except in accordance with applicable federal and state securities laws. The Holder represents that he is an "accredited investor" as such term is defined under Rule 501 of Regulation D promulgated under the Securities Act. The Holder confirms that he has been advised that the Warrants have not been, and the Shares of Common Stock issuable upon exercise of this Warrant Shares will not be (except in the event of a registration pursuant to Section 8), registered under the Securities Act and that he has consulted with and been advised by counsel as to the restrictions on resale to which this Warrant and such Shares will be subject. 8.2 Notice of Registration. If at any time or from time to time the ---------------------- Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than in connection with a registration relating to employee benefit plans or a registration relating to a business combination transaction, the Company will: (i) promptly give to the Holders written notice thereof; and (ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Shares specified in written requests, made within 20 days after receipt of such written notice from the Company, by the Holders or any one or more of them. 8.3 Underwriting. If the registration of which the Company gives ------------ notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 8.2. In such event the right of a Holder to registration pursuant to Section 8.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of Shares in the underwriting to the extent provided herein. If a Holder proposes to distribute its securities through such underwriting it shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 8, if the managing underwriter determines that marketing factors require a limitation of the number of securities to be underwritten, the managing underwriter may limit the Shares to be included in such registration. The Company shall so advise the participating Holders and other holders distributing their securities through such underwriting and the number of Shares that may be included in the registration and underwriting shall be allocated among the participating Holders -7- and such other holders in proportion, as nearly as practicable, to the respective amounts of Shares held by the participating Holders and such other holders at the time of filing the registration statement. To facilitate the allocation of securities in accordance with the above provisions, the Company may round the number of securities allocated to the participating Holders or holder to the nearest 1,000 shares. 8.4 Right to Terminate Registration. The Company shall have the right to ------------------------------- terminate or withdraw any registration initiated by it under this Section 8 prior to the effectiveness of such registration whether or not any Holder has elected to include Shares in such registration. 8.5 Expenses of Registration. The Company shall pay all expenses incurred ------------------------ by the Company in connection with the registration, qualification and/or exemption of the Shares, registered pursuant to Sections 8.2 and 8.3 above, including any Securities and Exchange Commission ("SEC") and state securities law registration and filing fees, printing expenses, fees and disbursements of the Company's counsel and accountants, transfer agents' and registrars' fees, fees and disbursements of experts used by the Company in connection with such registration, qualification and/or exemption, and expenses incidental to any amendment or supplement to the registration statement or prospectuses contained therein. The Company shall not, however, be liable for any sales, broker's or underwriting discount or commissions upon sale by any Holder of any of the Shares. 8.6 Amendments and Supplements; Restrictions on Use. The Company shall ----------------------------------------------- prepare and promptly file with the SEC and promptly notify the Holders of the filing of such amendments or supplements to the registration statement or prospectuses contained therein as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to the Shares is required to be delivered under the Securities Act, any event shall have occurred as a result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided, however, that the Company shall be entitled to delay any such filing and the use of the prospectus if the Company determines that such filing or use would impede, delay, or interfere with any significant financing, acquisition, or other transaction involving the Company, or require disclosure of material information which the Company has a bona fide business purpose for preserving as confidential. The Company shall also advise the Holders promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of the registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued. 8.7 Further Information. If Shares owned by a Holder are included in any ------------------- registration, such Holder shall furnish the Company such information regarding itself as the Company may reasonably request and as shall be required in connection with any registration, qualification or compliance referred to in this Warrant. -8- 8.8 Duration. Notwithstanding anything to the contrary in this Section 8, -------- the Company shall have no obligation to register or maintain a registration statement with respect to Shares after the second anniversary of their issuance date. 9. Indemnification. (a) The Company agrees to indemnify, defend and --------------- hold harmless, to the full extent permitted by law, the Holder and each of the Holder's affiliates, each of their respective officers, directors, employees, agents, representatives, successors and assigns and each person who controls the Holder or such affiliate (within the meaning of the Securities Act) against any and all actions, causes of action, suits, losses, liabilities, obligations, damages, judgments and expenses, including, without limitation, reasonable attorneys' fees and disbursements (collectively, "Losses") incurred by any such person in any capacity and caused by any untrue statement of a material fact contained in the registration statement or in any prospectus or prospectus supplement, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or prospectus supplement, in light of the circumstances in which they were made) not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by or on behalf of any Holder or its representative expressly for use therein. (b) In connection with the performance by the Company of its obligations under Section 8, the Holder shall promptly furnish to the Company in writing such information and affidavits with respect to the Holder and with respect to the planned distribution of the Shares issuable upon exercise of this Warrant that the Company may reasonably request for use in connection with the registration statement or any prospectus and agrees to indemnify, defend and hold harmless, to the full extent permitted by law, the Company, the Company's directors, officers, employees, agents, representatives, successors and assigns and each person who controls the Company (within the meaning of the Securities Act) against any and all Losses incurred by any such person in any capacity and caused by any untrue statement of a material fact contained in the registration statement or in any prospectus or prospectus supplement, in light of the circumstances in which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information with respect to the Holder furnished in writing by or on behalf of the Holder or its representatives to the Company specifically for inclusion in such registration statement or any prospectus. (c) Any person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. Notwithstanding the foregoing, any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the reasonable fees and expenses of such counsel shall be at the expense of such person unless (x) the indemnifying party has agreed in writing to pay such fees or expenses, or (y) the indemnifying party declines to assume the defense of such claim (it being understood that in the case of each of (x) and (y) above, the reasonable fees and expenses of such -9- separate counsel to such person shall be paid by the indemnifying party). If such defense is not assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent (but such consent may not be unreasonably withheld or delayed). No indemnifying party shall consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the indemnified party of a release from all liability with respect to such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the reasonable fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim. (d) If the indemnification provided for in this Section 9 from the indemnifying party is unavailable to an indemnified party in respect of any Losses by reason of such indemnification being unenforceable as a matter of law or public policy, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the actions that resulted in such Losses, as well as any other equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by any method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 10. Representations and Warranties of the Company. The Company hereby ---------------------------------------------- represents and warrants that: (i) this Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms; (ii) the shares of Common Stock issuable upon exercise of this Warrant have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable; and -10- (iii) the execution and delivery of this Warrant are not, and the issuance of the shares of Common Stock upon exercise of this Warrant in accordance with terms hereof will not be, inconsistent with the Company's certificate of incorporation or by-laws, do not and will not contravene any law, government rule or regulation, judgment or order applicable to the Company, and, except for consents that already have been obtained by the Company, do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person. 11. Miscellaneous. ------------- 11.1 Amendments. All modifications or amendments to this Warrant ---------- shall require the written consent of each party. 11.2 Headings. The headings contained herein are for the sole -------- purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Warrant. 11.3 Entire Agreement. This Warrant constitutes the entire agreement ---------------- of the parties hereto with respect to the subject matter hereof, and supersede all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. 11.4 Binding Effect. This Warrant shall inure solely to the benefit -------------- of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Warrant or any provisions herein contained. -11- 11.5 Governing Law. This Warrant shall be governed by and construed ------------- and enforced in accordance with the laws of the State of New York, without giving effect to conflict of law principles thereof. 11.6 Waiver, Etc. The failure of the Company or the Holder to at any ----------- time enforce any of the provisions of this Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Warrant. No waiver of any breach, noncompliance or nonfulfillment of any of the provisions of this Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, noncompliance or nonfulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, noncompliance or nonfulfillment. ***** -12- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the 29th day of December, 2000. SHEFFIELD PHARMACEUTICALS, INC. By: ______________________________ Loren G. Peterson President and CEO AGREED AND ACCEPTED: Gruntal & Co., L.L.C. By__________________________ -13- Form to be used to exercise Warrant: Sheffield Pharmaceuticals, Inc. 425 South Woodsmill Road, Suite 270 St. Louis, Missouri 63017-3441 Attention: Chief Financial Officer Date: ________________, 20__ The Undersigned hereby elects irrevocably to exercise the within Warrant and to purchase __________ shares of Common Stock of Sheffield Pharmaceuticals, Inc. and hereby makes payment of $_____________ (at the rate of $______________ per share) in payment of the Exercise Price pursuant thereto. Please issue the shares as to which this Warrant is exercised in accordance with the instructions given below. ___________________________________ Signature ___________________________________ Signature Guaranteed INSTRUCTIONS FOR REGISTRATION OF SECURITIES Name____________________________________________________________________________ (Print in Block Letters) Address_________________________________________________________________________ NOTICE: The signature to this form must correspond with the name as written upon the face of the within Warrant in every particular without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange. -14- EX-5.1 4 0004.txt CONSENT OF MCDERMOTT, WILL & EMERY Exhibit 5.1 A Partnership Including Boston Professional Corporations Chicago 28 State Street London Boston, MA 02109-1775 Los Angeles 617-535-4000 Miami Facsimile 617-535-3800 Moscow http://www.mwe.com Orange County New York St. Petersburg Silicon Valley Vilnius Washington, D.C. McDermott, Will & Emery March 15, 2001 Sheffield Pharmaceuticals, Inc. 425 South Woodsmill Road, Suite 270 St. Louis, MO 63017 Re: Registration Statement on Form S-3 ---------------------------------- Dear Ladies & Gentlemen: At your request, we have examined the form of Registration Statement on Form S-3 (the "Registration Statement"), to be filed by Sheffield Pharmaceuticals, Inc., a Delaware corporation (the "Company"), with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933 for resale of an aggregate of up to 913,258 shares of common stock, par value $.01 per share, of the Company (the "Common Stock") representing: (i) 626,950 shares of Common Stock issued to The Tail Wind Fund Ltd. in a private placement by the Company completed in December 2000, (ii) 112,500 shares of Common Stock issuable upon exercise of a warrant issued to The Tail Wind Fund Ltd. in the December 2000 private placement, (iii) 53,808 shares of Common Stock issuable upon exercise of warrants issued to Gruntal & Co., (iv) 100,000 shares of Common Stock issuable upon exercise of a warrant issued to Continental Capital & Equity Corporation, and (v) 20,000 shares of Common Stock issuable upon exercise of a warrant issued to The P.L. Thomas Group (collectively, the "Shares"). The Shares may be sold from time to time for the account of the foregoing stockholders of the Company. We have examined the proceedings heretofore taken by the Company in connection with the authorization, issuance and sale of the securities referred to above. Based on the foregoing, and assuming that the full consideration for each Share issuable upon exercise of the warrants is received by the Company in accordance with the terms of the warrants, it is our opinion that the Shares covered by the Registration Statement will, when issued, be validly issued and outstanding, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus which is part of the Registration Statement. Very truly yours, /s/ Mcdermott, Will & Emery McDermott, Will & Emery EX-23.2 5 0005.txt CONSENT OF ERNST & YOUNG LLP Exhibit 23.2 Consent of Independent Auditors ------------------------------- We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3, No. 333-54446) and related Prospectus of Sheffield Pharmaceuticals, Inc. for the registration of 913,258 shares of its common stock and to the incorporation by reference therein of our report dated February 28, 2001, with respect to the consolidated financial statements of Sheffield Pharmaceuticals, Inc. and subsidiaries as of and for the year ended December 31, 2000 included in its annual Report (Form 10-K) for the year ended December 31, 2000, filed with the Securities and Exchange Commission. ERNST & YOUNG LLP St. Louis, Missouri March 16, 2001 -----END PRIVACY-ENHANCED MESSAGE-----