SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14(a)-12
SHEFFIELD PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
- --------------------------------------------------------------------------------
<PAGE>
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
-2-
<PAGE>
SHEFFIELD PHARMACEUTICALS, INC.
425 South Woodsmill Road, Suite 270
St. Louis, Missouri 63017
-----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 9, 2000
-----------------------
To the Stockholders of SHEFFIELD PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
SHEFFIELD PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), will be
held at the American Stock Exchange at 86 Trinity Place, 14th Floor, New York,
New York 10006, on Tuesday, May 9, 2000 at 10:00 a.m., local time, for the
following purposes:
1. To elect six members of the Board of Directors;
2. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December
31, 2000; and
3. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 31, 2000 are
entitled to notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
Scott A. Hoffmann
Secretary
Dated: April 3, 2000
St. Louis, Missouri
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING YOU ARE
URGED TO IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE
THAT IS PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
SHEFFIELD PHARMACEUTICALS, INC.
425 South Woodsmill Road, Suite 270
St. Louis, MO 63017
-------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
May 9, 2000
-------------------------
INTRODUCTION
This Proxy Statement is furnished to the stockholders of SHEFFIELD
PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), in connection
with the solicitation by the Board of Directors of the Company of Proxies for
the Annual Meeting of Stockholders to be held at the American Stock Exchange at
86 Trinity Place, 14th Floor, New York, New York 10006, on May 9, 2000, at 10:00
a.m., local time, or at any adjournments thereof. The approximate date on which
this Proxy Statement and the accompanying Proxy will be first sent or given to
stockholders is April 3, 2000.
RECORD DATE AND VOTING SECURITIES
The voting securities of the Company outstanding on March 31, 2000
consisted of 27,877,267 shares of Common Stock, $.01 par value (the "Common
Stock"), entitling the holders thereof to one vote per share. Only stockholders
of record as of that date are entitled to notice of and to vote at the Annual
Meeting or any adjournments thereof. A majority of the outstanding shares of
Common Stock present in person or by proxy is required for a quorum.
PROXIES AND VOTING RIGHTS
Shares of Common Stock represented by Proxies, in the accompanying form
of Proxy, which are properly executed, duly returned and not revoked, will be
voted in accordance with the instructions contained therein. If no specification
is indicated on the Proxy, the shares represented thereby will be voted (i) for
the election as directors of the persons who have been nominated by the Board of
Directors, (ii) to ratify the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000, and (iii)
for any other matter that may properly come before the Annual Meeting in
accordance with the judgment of the person or persons voting the Proxy.
The execution of a Proxy will in no way affect a stockholder's right to
attend the Annual Meeting and vote in person. Any Proxy executed and returned by
a stockholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Annual Meeting or by execution of a subsequent Proxy which is
presented to the Annual Meeting, or if the stockholder attends the Annual
Meeting and votes by ballot, except as to any matter or matters upon which a
vote shall have been cast pursuant to the authority conferred by such Proxy
prior to such revocation. Broker "non-votes" and the shares of Common Stock as
to which a stockholder abstains are included for purposes of determining the
presence or absence of a quorum at the Annual Meeting. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner. Broker "non-votes" are not included in the tabulation of the voting
results on the election of directors or issues requiring approval of the
majority of the votes present and, therefore, do not have the effect of votes in
opposition in such tabulations. An abstention from voting on a matter or a Proxy
instructing that a vote be withheld has the same effect as a vote against a
matter since it is one less vote for approval.
All expenses in connection with this solicitation will be borne by the
Company. It is expected that solicitations will be made primarily by mail, but
regular employees or representatives of the Company may also solicit Proxies by
telephone, telegraph, facsimile or in person, without additional compensation.
In addition, the Company has engaged MacKenzie Partners, Inc., a proxy
solicitation firm, to assist in the solicitation of Proxies and will pay such
firm a fee, estimated at $3,000, plus reimbursement of reasonable out-of-pocket
expenses. The Company will, upon request, reimburse brokerage houses and persons
holding shares in the names of their nominees for their reasonable expenses in
sending solicitation material to their principals.
2
<PAGE>
SECURITY OWNERSHIP
The voting securities of the Company outstanding on March 20, 2000
consisted of 27,872,802 shares of Common Stock. The following table sets forth
information concerning ownership of the Company's Common Stock, as of March 20,
2000 by (i) each director, (ii) each executive officer, (iii) all directors and
executive officers as a group, and (iv) each person who, to the knowledge of
management, owned beneficially more than 5% of the Common Stock.
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER(1) OWNED(2) COMMON STOCK(2)
- ------------------- -------- ---------------
Elan International Services, Ltd. 15,675,878(3) 40.2%
Inpharzam International S.A. 2,646,153(4) 9.5%
Thomas M. Fitzgerald 521,597(5) 1.8%
Loren G. Peterson 496,000(6) 1.8%
David A. Byron 430,500(7) 1.5%
Carl F. Siekmann 432,000(8) 1.5%
Scott A. Hoffmann 56,700(9) *
John M. Bailey 105,000(10) *
Digby W. Barrios 60,000(11) *
Todd C. Davis 15,715,878(12) 40.3%
Roberto Rettani 2,646,153 (13) 9.5%
All Directors and Executive
Officers as a Group 17,817,675 50.6%
- -----------------
* Less than 1%
(1) The persons named in the table, to the Company's 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 and the information contained in the footnotes hereunder.
(2) Calculations assume that all options and warrants held by each
director, director nominee and executive officer and exercisable within
60 days after March 20, 2000 have been exercised.
(3) Based solely upon information in Amendment No. 1 to the Schedule 13D of
Elan International Services, Ltd. dated as of November 4, 1999 and
filed with the Securities and Exchange Commission on November 8, 1999.
Includes 11,104,450 shares of Common Stock issuable upon exercise of
warrants, conversion of Series C Preferred Stock and a Convertible
Promissory Note. The address of Elan International Services, Ltd. set
forth in such amended Schedule 13D is 102 St. James Court, Flatts,
Smiths Parish FL04, Bermuda.
(4) Based solely upon information in the Schedule 13D of Inpharzam
International S.A., an affiliate of Zambon Group, SPA, dated June 15,
1998 and filed with the Securities and Exchange Commission. The address
of Inpharzam International S.A. set forth in such Schedule 13D is Via
Industria 1, 7814 Cadempino, Switzerland.
(5) Includes 505,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days after March 20, 2000. Mr.
Fitzgerald's address is c/o Sheffield Pharmaceuticals, Inc., 425 South
Woodsmill Road, Suite 270, St. Louis, Missouri 63017.
3
<PAGE>
(6) Includes 275,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days after March 20, 2000. 4,000 of these
shares are held by Mr. Peterson as custodian for the benefit of his
children. Mr. Peterson disclaims beneficial ownership of such shares.
Mr. Peterson's address is c/o Sheffield Pharmaceuticals, Inc., 425
South Woodsmill Road, Suite 270, St. Louis, Missouri 63017.
(7) Includes 225,000 shares of Common Stock issuable upon exercise of
option exercisable within 60 days after March 20, 2000. Mr. Byron's
address is c/o Sheffield Pharmaceuticals, Inc., 425 South Woodsmill
Road, Suite 270, St. Louis, Missouri 63017.
(8) Includes 225,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days after March 20, 2000. Mr. Siekmann's
address is c/o Sheffield Pharmaceuticals, Inc., 425 South Woodsmill
Road, Suite 270, St. Louis, Missouri 63017.
(9) Includes 50,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days after March 20, 2000. Mr. Hoffmann's
address is c/o Sheffield Pharmaceuticals, Inc. 425 South Woodsmill
Road, Suite 270, St. Louis, Missouri 63017.
(10) Includes 105,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days after March 20, 2000. Mr. Bailey's
address is c/o Sheffield Pharmaceuticals, Inc., 425 South Woodsmill
Road, Suite 270, St. Louis, Missouri 63017.
(11) Includes 55,000 shares of Common Stock issuable upon exercise of
options exercisable within 60 days after March 20, 2000. Mr. Barrios'
address is c/o Sheffield Pharmaceuticals, Inc., 425 South Woodsmill
Road, Suite 270, St. Louis, Missouri 63017.
(12) Based solely upon information in a Form 4 filed by Mr. Davis with the
Securities and Exchange Commission on November 18, 1999. Includes
40,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days after March 20, 2000. Also includes
4,571,428 shares held by Elan International Services, Ltd., 11,104,450
shares of Common Stock issuable upon exercise of warrants, conversion
of Series C Preferred Stock and a Convertible Promissory Note. Mr.
Davis, an employee of Elan Corporation, plc., an affiliate of Elan
International Services Ltd., a Bermuda company, disclaims any
beneficial ownership interest in such shares. Mr. Davis' address is c/o
Elan Corporation, plc., Lincoln House, Lincoln Place, Dublin 2,
Ireland.
(13) Includes 2,646,153 shares held by Inpharzam International S.A. Mr.
Rettani, an officer of Zambon Group SpA, an affiliate of Inpharzam
International S.A., disclaims any beneficial ownership interest in such
shares. Mr. Rettani's address is c/o Zambon Goup SpA, 20091 Bresso, Via
Lillo del Duca, 10, Milan, Italy.
4
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Directors of the Company hold office until the next annual meeting of
stockholders or until their successors are elected and qualified. Directors
shall be elected by a plurality of the votes cast, in person or by proxy, at the
Annual Meeting. If no contrary instructions are indicated, Proxies will be voted
for the election of Thomas M. Fitzgerald, Loren G. Peterson, John M. Bailey,
Digby W. Barrios, Todd C. Davis, and Roberto Rettani, the six nominees of the
Board of Directors. All of the nominees are currently directors of the Company.
The Company does not expect that any of the nominees will be unavailable for
election, but if that should occur before the Annual Meeting, the Proxies will
be voted in favor of the remaining nominees and may also be voted for a
substitute nominee or nominees selected by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ELECTION OF EACH OF THE NOMINEES
Directors and Executive Officers
The directors and executive officers of the Company and their positions
with the Company are set forth below.
Name Age Director Since Position
Thomas M. Fitzgerald 49 September 1996 Chairman and Director
Loren G. Peterson 43 April 1997 President, Chief Executive
Officer, and Director
John M. Bailey 52 April 1997 Director
Digby W. Barrios 62 April 1997 Director
Todd C. Davis 38 September 1998 Director
Roberto Rettani 47 March 2000 Director
David A. Byron 51 -- Executive Vice President -
Scientific Affairs
Carl F. Siekmann 56 -- Executive Vice President -
Corporate Development
Scott A. Hoffmann 35 -- Vice President - Finance and
Administration,
Treasurer and Secretary, Chief
Financial Officer
Thomas M. Fitzgerald. Mr. Fitzgerald has been a Director of the Company
since September 1996 and has served as Chairman of the Company since December
1997. From June 1996 to December 1997, Mr. Fitzgerald served as Chief Operating
Officer of the Company and, from February 1997 to December 1997, he served as
President of the Company. From 1989 to 1996 Mr. Fitzgerald was the Vice
President and General Counsel of Fisons Corporation, an operating unit of Fisons
Group plc, a U.K.-based ethical pharmaceutical company ("Fisons"). Mr.
Fitzgerald was Assistant General Counsel of SmithKline Beecham prior to joining
Fisons.
Loren G. Peterson. Mr. Peterson has been the Chief Executive Officer
and a Director of the Company since April 1997. Mr. Peterson has served as
President of the Company since December 1997. From January 1997 to April 1997,
Mr. Peterson was a principal of Camelot Pharmacal, LLC, a privately held
pharmaceutical development company he co-founded. From 1993 to 1996, Mr.
Peterson served as Vice President - Finance and Chief Financial Officer of Bock
Pharmacal Company, a privately held pharmaceutical company. From 1989 to 1993,
Mr. Peterson was a partner of the accounting firm of Coopers & Lybrand LLP.
5
<PAGE>
John M. Bailey. Mr. Bailey has been a Director of the Company since
April 1997. Mr. Bailey is the founder and majority shareholder of Bailey
Associates, a consulting firm specializing in providing companies with strategic
advice and support through mergers, collaborations and divestments. From 1978 to
1996, Mr. Bailey was employed by Fisons, where he held a number of senior
positions. In 1993, Mr. Bailey was appointed to the main board of Fisons and, in
1995, he was appointed Corporate Development Director of Fisons. In that role,
he was directly responsible for worldwide strategic and corporate development
and for all merger, divestment, acquisition and business development activities
of Fisons Group worldwide.
Digby W. Barrios. Mr. Barrios has been a Director of the Company since
April 1997. Since 1992, Mr. Barrios has been a private consultant to the
pharmaceutical industry. Mr. Barrios served from 1985 to 1987 as Executive Vice
President, and from 1988 to 1992 as President and Chief Executive Officer, of
Boehringer Ingelheim Corporation. Mr. Barrios is a member of the Board of
Directors of Sepracor Inc., Questcor Pharmaceuticals, Inc., and Drug Royalty
Corporation, Inc.
Todd C. Davis. Mr. Davis has been a Director of the Company since
September 1998. Since February 1999 Mr. Davis has served as Director, Strategic
Planning of Elan Corporation, plc. From May 1997 to January 1999, Mr. Davis
served as Director of Investments and Corporate Development of Elan
Pharmaceutical Research Corporation, an affiliate of Elan Corporation plc, an
Irish pharmaceutical company. From September 1995 to May 1997, Mr. Davis was on
educational leave from Abbott Laboratories, a pharmaceutical company, while
receiving a Masters in Business Administration from Harvard University. From
October 1993 to September 1995, Mr. Davis served as diagnostic systems product
manager, and from October 1992 to September 1993 as product specialist of
laboratory information systems of Abbott Laboratories. Mr. Davis serves as a
director of the Company pursuant to an agreement with Elan International
Services Ltd. that permits Elan International Services Ltd. to designate one
nominee to the Company's Board.
Roberto Rettani. Mr. Rettani has been a director of the Company since
March 2000. Since August 1999, Mr. Rettani has served as Managing Director and
Chief Executive Officer of Zambon Group SpA, a private Italian pharmaceutical
company and an affiliate of Inpharzam International S.A. From September 1995 to
July 1999, Mr. Rettani was Managing Director and Chief Executive Officer of
Antibioticos, a member of the Montedison Group, a pharmaceutical company. From
September 1993 to August 1995, Mr. Rettani served as Group Director of Planning
and Strategy at Montedison Group. Mr. Rettani serves as a director of the
Company pursuant to an agreement with Zambon Group SpA that permits Zambon Group
SpA to designate one nominee to the Company's Board.
David A. Byron. Mr. Byron has been Executive Vice President -
Scientific Affairs of the Company since April 1997. From January 1997 to April
1997, Mr. Byron was a principal of Camelot Pharmacal, LLC, a privately held
pharmaceutical development company he co-founded. From 1994 to 1996, Mr. Byron
served as Vice President of Scientific Affairs of Bock Pharmacal Company, a
privately held pharmaceutical company. From 1990 to 1994, Byron served as Senior
Director - New Product Development of Sanofi-Winthrop Pharmaceutical
Corporation.
Carl F. Siekmann. Mr. Siekmann has been Executive Vice President -
Corporate Development of the Company since April 1997. From January 1997 to
April 1997, Mr. Siekmann was a principal of Camelot Pharmacal, LLC, a privately
held pharmaceutical development company he co-founded. From 1992 to 1996, Mr.
Siekmann served as Vice President of Business Development of Bock Pharmacal
Company, a privately held pharmaceutical company.
Scott A. Hoffmann. Mr. Hoffmann has been Chief Financial Officer and
Vice President - Finance and Administration, Treasurer and Secretary of the
Company since November 1998. From March 1995 to November 1998, Mr. Hoffmann was
Assistant Controller of Zeigler Coal Holding Company, a coal mining company.
From 1992 to 1995, Mr. Hoffmann was Vice President - Finance and Secretary of
Zam's, Inc., a publicly traded retailer.
6
<PAGE>
Meetings and Committees
The Board of Directors of the Company held six meetings during the
fiscal year ended December 31, 1999. From time to time during such fiscal year,
the members of the Board acted by unanimous written consent. The Company has
standing Stock Option, Compensation, and Audit Committees. The Stock Option
Committee reviews, analyzes and approves grants of stock options and stock to
eligible persons under the Company's 1993 Stock Option Plan and the Company's
1993 Restricted Stock Plan. The current members of the Stock Option Committee
(appointed in June 1997) are Digby W. Barrios and John M. Bailey. The Stock
Option Committee held two meetings in 1999, and approved certain actions by
written consent. The Compensation Committee reviews, analyses and makes
recommendations to the Board of Directors regarding compensation of Company
directors, employees, consultants and others, including grants of stock options
(other than stock option grants under the Company's 1993 Stock Option Plan and
the Company's 1996 Directors Stock Option Plan). The current members of the
Compensation Committee (appointed in June 1997) are Digby W. Barrios and John M.
Bailey. The Compensation Committee held four meetings in 1999, and approved
certain actions by written consent. The Audit Committee reviews, analyzes and
makes recommendations to the Board of Directors with respect to the Company's
compensation and accounting policies, controls and statements, and coordinates
with the Company's independent public accountants. The current members of the
Audit Committee (appointed in June 1997) are Loren G. Peterson, Digby W. Barrios
and John M. Bailey. The Audit Committee held one meeting in 1999. The Company
does not have a standing nominating committee or a committee that serves
nominating functions. These functions are performed by the Board of Directors of
the Company as a whole. Each person who served as a Director in 1999 attended at
least 75% of the aggregate number of meetings in 1999 of the Board of Directors
and the committees on which he served.
Executive Compensation
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the chief executive officer of the
Company ("CEO") and the executive officers of the Company (other than the CEO)
who were executive officers of the Company during the fiscal year ended December
31, 1999 and whose salary and bonus exceeded $100,000 with respect to the fiscal
year ended December 31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
----------------------------------------------------- Awards
-------------
Other Annual Securities
Name and Compensation Underlying
Principal Position Year Salary($) Bonus($) ($)(1) Options(#)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 $185,000 $ -- $ -- --
Thomas M. Fitzgerald, 1998 175,000 40,000 -- 255,000
Chairman........................... 1997 175,000 -- -- 300,000
1999 $185,000 $ -- $ -- --
Loren G. Peterson, President, 1998 175,000 -- -- 155,000
Chief Executive Officer............. 1997 118,655 -- -- 400,000
1999 $165,000 $ -- $ -- --
David A. Byron, Executive Vice 1998 160,000 -- -- 105,000
President, Scientific Affairs....... 1997 108,485 -- -- 400,000
1999 $165,000 $ -- $ -- --
Carl F. Siekmann, Executive Vice 1998 160,000 -- -- 105,000
President, Corporate Development.... 1997 108,485 -- -- 400,000
Scott A. Hoffmann, Vice President,
Finance & Administration, 1999 $120,000 $ -- $ -- --
Chief Financial Officer(2).......... 1998 5,000 -- -- 120,000
</TABLE>
- ---------------------
(1) Perquisites and other personal benefits, securities or property
delivered to each executive officer did not exceed the lesser of
$50,000 or 10% of such executive's salary and bonus.
(2) Mr. Hoffmann began employment with the Company in November 1998.
7
<PAGE>
No stock options were granted to Messrs. Fitzgerald, Peterson, Byron,
Siekmann and Hoffmann during the fiscal year ended December 31, 1999.
The following table sets forth certain information regarding stock
options held by Messrs. Fitzgerald, Peterson, Byron, Siekmann, and Hoffmann as
of December 31, 1999.
AGGREGATED OPTION EXERCISES
DURING THE MOST RECENTLY COMPLETED
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
No. of Securities
Shares Value (1) of
Underlying Unexercised in-
Unexercised the-Money
Options at FY- Options at FY-
Shares End (#) End($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized Unexercisable Unexercisable
---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Thomas M. Fitzgerald, ............................ -- -- 505,000/50,000 $1,240,438/$112,500
Chairman
Loren G. Peterson,
President and Chief Executive .................. -- -- 235,000/320,000 $624,438/$720,000
Officer
David A. Byron,
Executive Vice ................................. -- -- 185,000/320,000 $477,938/$720,000
President,
Scientific Affairs
Carl F. Siekmann,
Executive Vice President,
Corporate Development .......................... -- -- 185,000/320,000 $477,938/$720,000
Scott A. Hoffmann,
Vice President, Finance &
Administration,
Chief Financial Officer ........................ -- -- 50,000/70,000 $165,600/$126,840
</TABLE>
- -------------------
(1) Represents the total gain that would be realized if all in-the-money options
held at December 31, 1999 were exercised, determined by multiplying the number
of shares underlying the options by the difference between the per share option
exercise price and the closing consolidated sale price of Common Stock of $5.00
per share reported by the American Stock Exchange for December 31, 1999. An
option is in-the-money if the fair market value of the underlying shares exceeds
the exercise price of the option.
Board of Directors Compensation
The Company does not currently compensate directors who are also
executive officers of the Company or directors who are employees of the
Company's strategic alliance partners, Elan Corporation and Zambon Group, SpA,
for their service on the Board of Directors. Under current Company policy, each
non-employee Director of the Company receives a fee of $750 for each Board
meeting attended and $400 for each Board committee meeting attended. Directors
are reimbursed for their expenses incurred in attending meetings of the Board of
Directors. Under the terms of the 1996 Directors Stock Option Plan, eligible
Directors receive a grant of an option to purchase 25,000 shares of common stock
upon initial election, as well as additional option grants to purchase 15,000
shares of common stock on January 1 of each year thereafter during eligible
tenure.
8
<PAGE>
Long-Term Incentive and Pension Plans
During the year ended December 31, 1996, the Company adopted a defined
contribution 401(k) plan in accordance with the Internal Revenue Code. Employees
are eligible to participate in the 401(k) plan upon completion of three months
of service provided they are over 21 years of age. Participants may defer up to
15% of eligible compensation. Effective January 1, 2000, the Company began
providing matching contributions of 50% of the first 6% of an employee's
contribution.
Other
No director or executive officer is involved in any material legal
proceeding in which he is a party adverse to the Company or has a material
interest adverse to the Company.
Employment Agreements
In June 1996, the Company entered into a three-year employment
agreement with Thomas M. Fitzgerald pursuant to which Mr. Fitzgerald agreed to
serve as Chief Operating Officer of the Company. The term of the agreement is
automatically extended for an additional one year term from year to year unless
one party notifies the other of its intention to terminate at least six months
prior to the end of the then current term. The employment agreement requires Mr.
Fitzgerald to devote his full business and professional time in furtherance of
the business of the Company. In June 1999, the agreement automatically renewed
for a one-year term. If Mr. Fitzgerald's employment is terminated other than for
cause, he is entitled to receive a severance payment of $97,500, payable in six
equal monthly installments. The employment agreement contains non-compete and
confidentiality provisions. Mr. Fitzgerald's annual base salary under the
agreement is currently $195,000.
In April 1997, the Company entered into a five-year employment
agreement with Loren G. Peterson pursuant to which Mr. Peterson agreed to serve
as Chief Executive Officer of the Company. The term of the agreement is
automatically extended for an additional one year term from year to year unless
one party notifies the other of its intention to terminate at least six months
prior to the end of the then current term. The employment agreement requires Mr.
Peterson to devote his full business and professional time in furtherance of the
business of the Company. If Mr. Peterson's employment is terminated other than
for cause, he is entitled to receive a severance payment of $146,250, payable in
nine equal monthly installments. The employment agreement includes
confidentiality and non-compete provisions. Mr. Peterson's annual base salary
under the employment agreement is currently $195,000.
In April 1997, the Company entered into a five-year employment
agreement with David A. Byron pursuant to which Mr. Byron agreed to serve as
Executive Vice President - Scientific Affairs of the Company. The term of the
agreement is automatically extended for an additional one year term from year to
year unless one party notifies the other of its intention to terminate at least
six months prior to the end of the then current term. The employment agreement
requires Mr. Byron to devote his full business and professional time in
furtherance of the business of the Company. If Mr. Byron's employment is
terminated other than for cause, he is entitled to receive a severance payment
of $127,500, payable in nine equal monthly installments. The employment
agreement includes confidentiality and non-compete provisions. Mr. Byron's
annual base salary under the employment agreement is currently $170,000.
In April 1997, the Company entered into a five-year employment
agreement with Carl F. Siekmann pursuant to which Mr. Siekmann agreed to serve
as Executive Vice President - Corporate Development of the Company. The term of
the agreement is automatically extended for an additional one year term from
year to year unless one party notifies the other of its intention to terminate
at least six months prior to the end of the then current term. The employment
agreement requires Mr. Siekmann to devote his full business and professional
time in furtherance of the business of the Company. If Mr. Siekmann's employment
is terminated other than for cause, he is entitled to receive a severance
payment of $127,500, payable in nine equal monthly installments. The employment
agreement includes confidentiality and non-compete provisions. Mr. Siekmann's
annual base salary under the employment agreement is currently $170,000.
In November 1998, the Company entered into a three-year employment
agreement with Scott A. Hoffmann pursuant to which Mr. Hoffmann agreed to serve
as Vice President - Finance and Administration, and Chief Financial Officer of
the Company. The term of the agreement is automatically extended for an
additional one year term from year to year unless one party notifies the other
of its intention to terminate at least 90 days prior to the end of the then
current term. The employment agreement requires Mr. Hoffmann to devote his full
business and professional time in furtherance of the business of the Company. If
Mr. Hoffmann's employment is terminated other than for cause, he is entitled to
receive a severance payment of $65,000, payable in six equal monthly
installments. The employment agreement includes confidentiality and non-compete
provisions. Mr. Hoffmann's annual base salary under the employment agreement is
currently $130,000.
9
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
all Section 16(a) forms that were required to be filed during the fiscal year
ended December 31, 1999 were filed in compliance with the applicable
requirements of Section 16(a), except as follows: Form 4 was filed late for Todd
C. Davis and Schedule 13D was filed late for Elan Corporation.
Compensation Committee Interlocks and Insider Participation
The compensation of the Company's senior management is determined by a
Compensation Committee, presently consisting of Digby W. Barrios and John M.
Bailey. None of the members of the Compensation Committee is an executive
officer of the Company.
In April 1997, the Company entered into a consulting agreement with
John M. Bailey, a director of the Company, pursuant to which Mr. Bailey agreed
to provide certain business and financial consulting advise to the Company. Mr.
Bailey is paid a monthly retainer of 2,000 British Pounds Sterling under such
agreement, which monthly retainer is reduced to 1,500 British Pounds Sterling
for any month during which a Board of Directors meeting is held.
Compensation Committee Report on Executive Compensation
General
The Compensation Committee determines the cash and other incentive
compensation, if any, to be paid to the Company's executive officers and key
employees. The Stock Option Committee is responsible for the administration and
awards under the Company's 1993 Stock Option Plan and the 1993 Restricted Stock
Plan. Messrs. Barrios and Bailey are the members of both the Compensation
Committee and the Stock Option Committee. Messrs. Barrios and Bailey are
"non-employee directors" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended. The Compensation Committee met on four
occasions in 1999 and approved certain actions by unanimous written consent
during the fiscal year ended December 31, 1999. The Stock Option Committee met
on two occasions in 1999 and approved certain actions by unanimous written
consent during 1999. The Compensation Committee and the Stock Option Committee
have reviewed and are in accordance with the compensation paid to executive
officers for the fiscal year ended December 31, 1999.
Compensation Policies
The guiding principle of the Company is to establish a compensation program that
aligns executive compensation with Company objectives and business strategies,
as well as financial performance, with the primary objective of creating
shareholder value. In keeping with this principle, the Company seeks to:
(1) Attract and retain qualified executives who will play a significant role in,
and be committed to, the achievement of the Company's long-term goals.
(2) Reward executives for strategic management, and the creation and long-term
maximization of shareholder value.
(3) Create a performance-oriented environment that rewards performance with
respect to the financial goals of the Company.
An executive officer's performance is reviewed in such areas as financial
results, quality of performance, job and professional knowledge, decision making
and business judgment, initiative, analytical skills, communication skills,
interpersonal and organizational skills, creativity and leadership.
10
<PAGE>
Executive compensation consists of both cash and equity-based compensation. Cash
compensation is comprised of base salary and bonus. Base salary is determined
with reference to market norms. Bonus compensation is tied to the Company's
success in achieving financial and non-financial performance. Equity-based
compensation is comprised primarily of stock option grants. In establishing
equity-based compensation, the Company places particular emphasis on the
achievement of the Company's long-term performance goals. The Company believes
that equity-based compensation closely aligns the economic interest of the
Company's executive officers with the economic interests of the Company's
shareholders.
The Company's 1993 Stock Option Plan, as amended, is in compliance with
Section 162(m) of the Internal Revenue Code of 1986, as amended. The Company's
1993 Restricted Stock Plan is "grandfathered" under Section 162(m). The Company
has not and does not currently anticipate paying non-performance based
compensation in excess of $1 million per annum to any employee.
Chief Executive Officer
In establishing Mr. Peterson's compensation, the factors described above are
taken into account. The Compensation Committee and the Stock Option Committee
believe that Mr. Peterson's compensation, including salary and stock options,
fall within the Company's compensation philosophy and are within industry norms.
Submitted by the Compensation Committee and the Stock Option Committee:
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
Digby W. Barrios Digby W. Barrios
John M. Bailey John M. Bailey
11
<PAGE>
Common Stock Performance
Five-Year Shareholder Return Comparison
The Securities and Exchange Commission ("SEC") requires that the
Company include in this Proxy Statement a line-graph presentation comparing
cumulative, five-year shareholder returns on an indexed basis with a broad-based
market index and either a nationally recognized industry standard or an index of
peer companies selected by the Company. This performance comparison assumes $100
was invested on December 31, 1994 in the Company's Common Stock and in each of
the indices shown and assumes reinvestment of dividends. The Company has
selected the S & P Midcap 400 Index and the S & P Midcap Biotechnology Index for
the purposes of this performance comparison.
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
S&P Midcap 400 Index 130.94 156.08 206.43 245.87 282.06
Sheffield Pharmaceuticals, Inc. 100.00 107.14 39.29 67.86 142.86
S&P Midcap Biotechnology Index 177.53 156.95 154.57 278.02 499.41
</TABLE>
On March 31, 2000, the record date for the Annual Meeting of
Stockholders, the last reported sales price of the Company's Common Stock as
reported by the American Stock Exchange was $5.625, which represents a 12.5%
increase over the last reported sales price of the Company's Common Stock as
reported by the American Stock Exchange on December 31, 1999, which was $5.00.
There can be no assurance that the Company's stock performance will
continue with the same or similar trends depicted in the graph above.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1997, the Company entered into a consulting agreement with
John M. Bailey, a director of the Company, pursuant to which Mr. Bailey agreed
to provide certain business and financial consulting advise to the Company. Mr.
Bailey is paid a monthly retainer of 2,000 British Pounds Sterling under such
agreement, which monthly retainer is reduced to 1,500 British Pounds Sterling
for any month during which a Board of Directors meeting is held.
In June 1998, the Company entered into a sublicense and development
agreement with Inpharzam International, S.A., an affiliate of Zambon Group SpA,
for the testing and development of the Company's rights in its Metered Solution
Inhaler technology in respect of therapies for respiratory diseases. The
agreement provides, among other things and subject to the satisfaction of
certain conditions, for the making of loans and the payment of royalties to the
Company. Roberto Rettani, who is a director of the Company, is Managing Director
and Chief Executive Officer of Zambon Group SpA.
In June 1998, the Company consummated a license and financing
transaction with Elan International Services Ltd, an affiliate of Elan
Corporation, plc. In connection with this transaction, the Company formed
Systemic Pulmonary Delivery, Ltd. ("SPD"), a wholly owned subsidiary, and
entered into several agreements with Elan International Services Ltd., including
a Securities Purchase Agreement and a Joint Development and Operating Agreement.
In addition, Elan International Services Ltd. and the Company have licensed
certain of their intellectual property rights relating to pulmonary drug
delivery systems to SPD. In October 1999, the Company consummated a separate
license and financing transaction with Elan International Services Ltd. In
connection with this transaction, the Company formed Respiratory Steroid
Delivery, Ltd. ("RSD"), an 80.1 % owned subsidiary, and entered into several
agreements with Elan International Services Ltd., including a Securities
Purchase Agreement and a Joint Development and Operating Agreement. In addition,
Elan International Services Ltd. and the Company have licensed certain of their
intellectual property rights relating to pulmonary drug delivery systems to RSD.
Todd C. Davis, who is a director of the Company, is Director of Strategic
Planning of Elan Pharmaceutical Research Corporation, an affiliate of Elan
International Services Ltd.
-----------------
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed Ernst & Young LLP to be the
independent auditors of the Company for the fiscal year ending December 31,
2000. Although the selection of auditors does not require ratification, the
Board of Directors has directed that the appointment of Ernst & Young LLP be
submitted to stockholders for ratification. If stockholders do not ratify the
appointment of Ernst & Young LLP, the Board of Directors will consider the
appointment of other certified public accountants. A representative of Ernst &
Young LLP is expected to be available at the Annual Meeting to make a statement
if such representative desires to do so and to respond to appropriate questions.
The affirmative vote of the holders of a majority of the Common Stock
present, in person or by proxy, is required for ratification of the appointment
of Ernst & Young LLP as independent auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS
-----------------
13
<PAGE>
STOCKHOLDER PROPOSALS
To the extent required by law, any stockholder proposal intended for
presentation at next year's annual stockholders' meeting must be received at the
Company's principal executive offices prior to December 4, 2000.
OTHER MATTERS
So far as it is known, there is no business other than that described
above to be presented for action by the stockholders at the forthcoming Annual
Meeting, but it is intended that Proxies will be voted upon any other matters
and proposals that may legally come before the Annual Meeting, or any
adjustments thereof, in accordance with the discretion of the persons named
therein.
ANNUAL REPORT
All stockholders of record as of the Record Date have been sent, or are
concurrently herewith being sent, a copy of the Company's 1999 Annual Report on
Form 10-K for the year ended December 31, 1999, which contains certified
financial statements of the Company for the year ended December 31, 1999. The
Company's Annual Report on Form 10-K for the year ended December 31, 1999,
including the certified financial statements of the Company, is hereby
incorporated by reference to this Proxy Statement for Annual Meeting of
Stockholders.
ANY STOCKHOLDER OF THE COMPANY MAY OBTAIN WITHOUT CHARGE A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999
(WITHOUT EXHIBITS), AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY
WRITING TO SCOTT HOFFMANN, CHIEF FINANCIAL OFFICER AND SECRETARY AT SHEFFIELD
PHARMACEUTICALS, INC., 425 SOUTH WOODSMILL ROAD, SUITE 270, ST. LOUIS, MISSOURI
63017.
By Order of the Board of Directors
Scott A. Hoffmann
Secretary
Dated: April 3, 2000
St. Louis, Missouri
14
<PAGE>
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SHEFFIELD PHARMACEUTICALS, INC.
Proxy - Annual Meeting of Stockholders
May 9, 2000
The undersigned, a stockholder of Sheffield Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), does hereby appoint Thomas M. Fitzgerald
and Loren G. Peterson, and each of them, the true and lawful attorneys and
proxies with full power of substitution, for and in the name, place and stead of
the undersigned, to vote all of the shares of Common Stock of the Company which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the American Stock Exchange
at 86 Trinity Place, 14th Floor, New York, New York, 10006, on May 9, 2000, at
10:00 a.m., local time, or at any adjournment or adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE
GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED (i) FOR THE ELECTION
AS DIRECTORS OF THE PERSONS WHO HAVE BEEN NOMINATED BY THE BOARD OF DIRECTORS,
(ii) TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000 AND (iii) IN ACCORDANCE
WITH THE DISCRETION OF THE PROXIES OR PROXY WITH RESPECT TO ANY OTHER BUSINESS
TRANSACTED AT THE ANNUAL MEETING.
(Continued and to be signed on reverse side.)
<PAGE>
SHEFFIELD PHARMACEUTICALS, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
FOLD AND DETACH HERE
1. ELECTION OF DIRECTORS:
To vote for the election of the following directors:
01 Thomas M. Fitzgerald 02 Loren G. Peterson
03 John M. Bailey 04 Digby W. Barrios
05 Todd C. Davis 06 Roberto Rettani
The undersigned hereby instructs said proxies or their substitutes:
TO WITHHOLD TO WITHHOLD AUTHORITY
AUTHORITY TO VOTE FOR ANY INDIVIDUAL
TO VOTE FOR NOMINEE(S) PRINT NAME(S)
FOR _____ ALL NOMINEES ____ BELOW*
______________________________
______________________________
______________________________
2. To ratify the Appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 2000.
FOR ___________ AGAINST _____________ ABSTAIN _____________
3. To vote with discretionary authority with respect to all other matters which
may come before the Meeting. The undersigned hereby revokes any proxy or
proxies hereinfore given and ratifies and confirms that all the proxies
appointed hereby, or any of them, or their substitutes, may lawfully do or
cause to be done by virtue hereof.
FOR ___________ AGAINST _____________ ABSTAIN _____________
The undersigned hereby acknowledges receipt of a copy of the Notice of Annual
Meeting and Proxy Statement, both dated April 3, 2000.
Dated: _________________,2000 (L.S.)
_____________________________ (L.S.)
Signature(s)
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. WHEN
SIGNING ON BEHALF OF A CORPORATION, YOU SHOULD BE
AN AUTHORIZED OFFICER OF SUCH CORPORATION, AND
PLEASE GIVE YOUR TITLE AS SUCH.
