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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1996
REGISTRATION NO. 333-______________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RESOUND CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0019588
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
220 Saginaw Drive, Seaport Centre
Redwood City, California 94063
(415) 780-7800
(Address of principal executive offices)
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PETER RIEPENHAUSEN
President and Chief Executive Officer
ReSound Corporation.
220 Saginaw Drive, Seaport Centre
Redwood City, California 94063
(415) 780-7800
(Name, address, and telephone number of agent for service)
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COPIES TO:
ELIAS J. BLAWIE
LAURA A. GORDON
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
(415) 854-4488
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE
TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE
DATE OF THIS REGISTRATION STATEMENT.
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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, please check the following box
and list the Securities Act registration 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 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. / /
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CALCULATION OF REGISTRATION FEE
============================================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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Common Stock,
$.01 par value per share............ 3,477,682 $8.50 $29,560,297 $10,193.20
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Common Stock, $.01 par value per
share, issuable upon conversion of 1,019,944 (2)(3) $8.50 $8,669,524 $2,989.49
Convertible Notes.....................
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Common Stock, $.01 par value per
share, issuable upon exercise of 77,794 (3)(4) $8.50 $661,249 $228.01
Warrants..............................
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(1) Estimated solely for the purpose of computing the amount of the
registration fee based on the average of the high and low prices of the
Common Stock as reported on the NASDAQ National Market on August 12, 1996
pursuant to Rule 457(c).
(2) Represents the number of shares of Common Stock issuable upon conversion
of outstanding principal and any accrued, unpaid interest, of the
Promissory Notes, as of June 30, 1996.
(3) Also covers any additional shares that may become issuable as a result of
(i) the accrual of interest from time to time with respect to the
Promissory Notes and (ii) the antidilution provisions of the Promissory
Notes and the Warrants.
(4) Represents the number of shares currently issuable upon the exercise of
Warrants.
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
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RESOUND CORPORATION
4,575,420 SHARES
COMMON STOCK
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
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This Prospectus relates to the public offering, which is not being
underwritten, of 4,575,420 shares of the common stock, par value $.01 per share
(the "Common Stock"), of ReSound Corporation ("ReSound" or the "Company"). All
4,575,420 shares (the "Shares") may be offered by certain shareholders of the
Company (the "Selling Shareholders") who received, or may from time to time
receive, such shares (i) upon conversion of the Company's Convertible Promissory
Notes dated February 21, 1995 (the "February 1995 Notes"), issued pursuant to a
series of identical Note Purchase Agreements of the same date (the "February
1995 Purchase Agreements"), (ii) upon conversion of the Company's Convertible
Promissory Notes dated November 21, 1995 (the "November 1995 Notes"), issued
pursuant to a series of identical Note and Warrant Purchase Agreements of the
same date (the "November 1995 Purchase Agreements"), (iii) upon exercise of the
Company's Warrants dated November 21, 1995 (the "Warrants"), issued pursuant to
the November 1995 Purchase Agreements, and (iv) in a private placement pursuant
to a series of identical Common Stock Purchase Agreements dated June 14, 1996
(the "June 1996 Purchase Agreements" and, together with the February 1995
Purchase Agreements and November 1995 Purchase Agreements, the "Agreements").
The Shares may be offered by the Selling Shareholders from time to time
in transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions). See "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares. Pursuant to the Agreements, the Company has agreed to bear certain
expenses in connection with the registration of the Shares being offered and
sold by the Selling Shareholders.
The Company's Common Stock is quoted on the Nasdaq National Market
under the symbol RSND. On August 13, 1996 the last reported sales price for the
Common Stock was $8.88 per share.
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933, as amended (the "Securities Act"), and any commissions
received by them 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. See "Plan of Distribution" herein for a description of indemnification
arrangements.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is August __, 1996
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Shareholder or by any other person. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any security other than the securities
covered by this Prospectus, nor does it constitute an offer to or solicitation
of any person in any jurisdiction in which such offer or solicitation may not
lawfully be made.
AVAILABLE INFORMATION
ReSound Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at 75 Park Place,
New York, New York 10007 and 230 South Dearborn Street, Chicago, Illinois 60604.
Copies of such material can be obtained by mail from the Public Reference Branch
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. The Common Stock of the Company is quoted on the Nasdaq
National Market, and such material may also be inspected at the offices of
Nasdaq Operations, 1735 K Street, N.W. Washington, D.C. 2006.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information regarding
the Company and the Common Stock offered hereby, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of all or
any part thereof may be obtained from such office upon payment of the prescribed
fees.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 0-20046) pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1995, as amended by the Company's Form 10-K/A filed April 18, 1996.
2. The Company's definitive Proxy Statement dated April 26, 1996, filed
in connection with the June 24, 1996 Annual Meeting of Shareholders of ReSound.
3. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996.
4. The Company's Current Report on Form 8-K filed July 15, 1996.
5. The descriptions of the Company's Common Stock, $0.01 par value per
share, contained in its Registration Statement on Form 8-A dated March 3, 1993,
and July 7, 1994, including any amendment or report filed for the purpose of
updating such descriptions.
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All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference in this Prospectus. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part hereof, except as so modified or superseded.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference, other than exhibits to such documents. Requests should be directed to
ReSound Corporation, 220 Saginaw Drive, Seaport Centre, Redwood City,
California, 94063, Attention Paul A. Busse, Senior Vice President of Finance and
Administration and Chief Financial Officer, telephone: (415) 780-7800.
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THE COMPANY
ReSound is a hearing health care company that designs, manufactures and
sells technologically advanced hearing devices. The Company's hearing devices
incorporate patented sound processing technology and are currently offered in
in-the-canal ("ITC"), in-the-ear ("ITE") and behind-the-ear ("BTE") versions.
The Company's Multiband Full Dynamic Range Compression Sound Processing
technology enables ReSound(R) hearing devices to be individually programmed to
adjust the amplification of sound continuously in response to the acoustic
environment and each user's residual range of hearing. The Company's Sonar
product line incorporates non-proprietary, nonlinear sound processing
technologies into ITC and ITE custom hearing devices. The Company's Viennatone
product line spans all segments of the market, from small BTE products to high
power instruments with numerous options.
In June 1996, the Company acquired certain assets of the worldwide
hearing health care business activity of Minnesota Mining and Manufacturing
Company ("3M") and assigned those assets acquired thereby to its wholly-owned
subsidiary Sonar Hearing Health Corporation. The assets acquired from 3M
included 17 U.S. patents and a number of additional applications. The completion
of the acquisition resulted in the dismissal of a patent infringement lawsuit
brought against the Company by 3M. In December 1994, the Company acquired 100%
of the shares of Viennatone AG, an Austria-based hearing instrument manufacturer
("Viennatone").
The Company currently distributes its products to more than 3,400
authorized dispensers worldwide through wholly-owned subsidiaries in Germany,
the Netherlands, the United Kingdom, France, Austria, Sweden and Australia; an
exclusive distributor in Japan; non-exclusive distribution agreements with
retail outlets in Canada, Spain, Belgium, Denmark and Switzerland; and the joint
venture operation ReSound Asia Ltd. in Hong Kong, China and Taiwan. In addition,
the Company owns and operates a chain of 24 retail hearing devices stores in
Austria that it obtained through the Viennatone acquisition.
The Company's corporate offices are located in Redwood City,
California. The mailing address and telephone number are: 220 Saginaw Drive,
Seaport Centre, Redwood City, California 94063, telephone: (415) 780-7800. The
Company was incorporated in the State of California on February 3, 1984 and is
traded on the Nasdaq National Market under the symbol RSND.
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RISK FACTORS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION
IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THIS PROSPECTUS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE BUT ARE NOT LIMITED TO THOSE DISCUSSED
BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED
IN THIS PROSPECTUS BY REFERENCE. PROSPECTIVE PURCHASERS OF SHARES OF COMMON
STOCK OFFERED HEREBY SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, IN
ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS.
HISTORY OF LOSSES; PROFITABILITY UNCERTAIN
The Company was primarily engaged in research and development from its
inception in February 1984 through December 1989. Although the Company began
shipments of its first hearing device product in December 1989, the Company
continues to expend substantial financial and other resources on the development
of hearing device products. The Company incurred significant net losses since
its inception. At June 30, 1996, the Company's accumulated deficit was
approximately $36.8 million. There can be no assurance that the Company will be
able to achieve or maintain profitability in the future.
MANAGEMENT OF EXPANDING OPERATIONS; INTEGRATION OF RECENT ACQUISITIONS
The Company's operations and number of employees have expanded
significantly in recent years, including the hiring of over 130 employees in
connection with the acquisition of certain assets of 3M's hearing health care
business activity in June 1996. This expansion has placed, and is expected to
continue to place, significant demands on the Company's administrative,
operational and financial personnel and systems. The Company has made
significant acquisitions in the past and may continue to make acquisitions in
the future. Managing acquired business opportunities, such as the 3M hearing
health care assets, and the acquisitions of Viennatone (acquired in December
1994) and Sonar Design & Hortechnik GmbH (acquired in January 1994), entails
numerous operational and financial risks, including difficulties in assimilating
acquired operations, diversion of management's attention to other business
concerns, amortization of acquired intangible assets and potential loss of key
employees or customers of acquired operations. In addition to the general risks
associated with the expansion of corporate operations, managing acquired
operations in new geographic areas, which is part of the Company's expansion
strategy, entails numerous operational and financial risks, including
difficulties in recruiting and integrating employees at remote locations and
difficulties in developing a local market for the Company's services and
products. The Company has in the past experienced and could in the future
experience difficulties and delays in managing operations in new geographic
areas. There can be no assurance that the Company will be able to achieve growth
effectively, or manage any such growth, and failure to do so would have a
material adverse effect on the Company's business, financial condition and
results of operations.
VOLATILITY OF STOCK PRICE AND QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The Company's stock price has been and may continue to be subject to
significant volatility. The trading price of the Common Stock may be affected
significantly by the Company's quarterly forecasts and results of operations
which may vary greatly based on a number of factors, including the introduction
and market acceptance of new products offered by the Company and its
competitors, the receipt and timing of regulatory approvals for new Company
products, changes in the Company's product mix, rates of product returns,
repairs and remakes, the Company's success in expanding its U.S. and
international operations, the costs of expanding the Company's existing
distribution channels and establishing new distribution channels, the Company's
ability to continue to attract qualified engineers for future product
development, changes in U.S. and international health care regulations and
practices, and the costs involved in prosecuting and defending patent claims or
other litigation. Any shortfall in revenues or earnings from levels expected by
securities analysts could have an immediate and significant adverse effect on
the trading price of the Common Stock in any given period. Further, the Company
participates in a highly dynamic industry, which often results in significant
volatility of the Common Stock price irrespective of Company performance.
Fluctuations in the price of the Common Stock may be exacerbated by
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conditions in the medical device and technology industry segments or conditions
in the financial markets generally.
Quarterly revenues and operating results depend primarily on the volume
and timing of orders during the quarter, which can be difficult to forecast. A
significant portion of the Company's operating expenses are relatively fixed in
the short term, and planned expenditures are based on sales forecasts. If
revenue levels are below expectations, net income, if any, may be
disproportionately affected because only a small portion of the Company's
expenses varies with revenue in the short term, which would have a material
adverse effect on the Company's business, financial condition and results of
operations. Although the Company has experienced growth in net revenue in recent
years, there can be no assurance that the Company will sustain such revenue
growth in the future or be profitable on an operating basis in any future
period. For these reasons, the Company believes that period-to-period
comparisons of its results are not necessarily meaningful and should not be
relied upon as indications of future performance.
UNCERTAINTY REGARDING MARKET ACCEPTANCE OF NEW PRODUCTS
The Company's products primarily target the high-end segment of the
hearing device market. The future success of the Company will likely depend on
its ability to design, manufacture and effectively market new products that
provide superior performance at acceptable prices within this segment. Any
quality, durability or reliability problems with such new products, regardless
of materiality, or any other actual or perceived problems with future Company
products, could have a material adverse effect on market acceptance of such
products. There can be no assurance that such problems or perceived problems
will not arise or that, even in the absence of such problems, new Company
products will receive market acceptance. Further, there can be no assurance that
the Company will, if necessary, be able to obtain regulatory approvals
permitting the sale and use of new Company products. A failure of future Company
products to receive regulatory approval in the U.S. or any other country or the
failure of such products, if approved, to achieve market acceptance for any
reason would have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the announcement by the
Company or its competitors of new products could cause hearing care
professionals or hearing impaired individuals to defer purchases of existing
Company products or return previously purchased Company products, thereby
adversely affecting the Company's business, financial condition and results of
operations.
HIGHLY COMPETITIVE INDUSTRY; RISK OF OBSOLESCENCE
The hearing device industry is intensely competitive. Hearing device
manufacturers have generally differentiated themselves from the competition on
the basis of price, product quality and reliability, product miniaturization and
cosmetic appeal, technical support and service, and marketing and distribution
channels. The Company's products are generally priced at a premium above
products offered by its competitors. Failure of the Company to distinguish its
products on the basis of performance advantages would have a material adverse
effect on the Company's business, financial condition and results of operations.
Several of the Company's competitors have substantially greater financial,
manufacturing, marketing and technical resources than those of the Company.
Furthermore, there can be no assurance that the Company's competitors do not
have or will not develop products or new technologies that may be more
cost-effective at addressing hearing impairment than the Company's current or
future products or that the Company's technologies and products will not be
rendered obsolete or uncompetitive. The Company's inability to offer competitive
products for any significant period of time in the future would have a material
adverse effect on the business, financial condition and results of operations of
the Company.
RISKS OF INTERNATIONAL SALES
The Company's international revenues accounted for approximately 34%,
51%, 65% and 61% of the Company's net sales in the 1993, 1994, 1995 and the six
months ended June 30, 1996, respectively. The Company expects that international
sales will continue to account for a significant portion of its total revenues.
The Company desires to continue to expand its operations outside of the United
States and to enter additional international markets, which will require
significant management attention and financial resources and subject the Company
further to the risks of operating internationally. These risks include
unexpected changes in regulatory
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requirements, delays resulting from difficulty in obtaining export licenses for
certain technology, tariffs and other barriers and restrictions, the burdens of
complying with a variety of foreign laws and regulations, and the difficulty in
staffing and managing international operations. The Company is also subject to
general political and economic risks in connection with its international
operations, such as political instability, changes in diplomatic and trade
relationships and general economic fluctuations in specific countries or
markets. The Company cannot predict whether quotas, duties, taxes, or other
charges or restrictions will be imposed by the United States, Japan, countries
in the European Community or other countries upon the import or export of the
Company's products in the future, or what effect any such actions would have on
its business, financial condition or results of operations. There can be no
assurance that regulatory, geopolitical and other factors will not adversely
affect the Company's business, financial condition and results of operations in
the future or require the Company to modify its current business practices.
In addition, because most of the Company's international sales, and a
large portion of the associated expenses, are denominated in foreign currencies,
gains and losses on the conversion to U.S. dollars of accounts receivable and
accounts payable arising from international operations may contribute to
fluctuations in the Company's operating results. Further, fluctuations in
currency exchange rates may negatively impact the Company's ability to compete
in terms of price against products denominated in local currencies. For example,
international sales in the first six months of 1996 declined five percent from
the comparable period in 1995, due in part to weaker European currencies. To
date, the Company has not found it appropriate to hedge the risks associated
with fluctuations in exchange rates. However, it is possible that the Company
may undertake such transactions in the future. There can be no assurance that
any hedging techniques implemented by the Company would be successful or that
the Company's business, financial condition and results of operations will not
be materially adversely affected by exchange rate fluctuations.
GOVERNMENT REGULATION
The development, production and marketing of the Company's current
products and products under development are subject to regulation by numerous
governmental authorities in the United States (including the United States Food
and Drug Administration (the "FDA") and the California Department of Health
Services) and other countries. In the United States, medical device products are
subject to rigorous FDA review. The United States Federal Food, Drug, and
Cosmetic Act (the "FDC Act") and other federal statutes and regulations govern
or influence the design, testing, manufacture, labeling, sale, storage, record
keeping, approval, advertising and promotion of such products. Noncompliance
with applicable requirements can result in fines, recall of seizure of products,
total or partial suspension of production, refusal of the government to approve
product license applications or withdrawal of approvals, injunctions, civil
fines and criminal prosecution.
In order to obtain FDA permission to market a new medical device, the
Company must submit proof of substantial equivalence in a 510(k) pre-market
notification submission or proof of safety and efficacy in a Pre-Market Approval
("PMAA"). In many cases, such proof entails extensive clinical tests. The
testing, preparation of necessary applications and processing of those
applications by the FDA is expensive, time-consuming, lengthy and uncertain. The
review of a PMAA generally takes one to two years from the date the application
is accepted for filing, but may take significantly longer. It generally takes
from four to twelve months from submission to obtain clearance of a 510(k)
notification, but may take longer. Recently, the FDA has been requiring more
rigorous demonstration of substantial equivalence in 510(k) notifications than
in the past. There is no assurance that the FDA will act favorably or quickly in
making such reviews, and significant difficulties or costs may be encountered by
the Company in its efforts to obtain FDA approvals that could delay or preclude
the Company from marketing any product it may develop. The FDA may also require
post-marketing testing and surveillance to monitor the effects of products or
place conditions on any approvals that could restrict commercial applications of
such products. Marketing permission may be withdrawn if compliance with
regulatory requirements is not maintained or if problems occur following initial
marketing. In addition, delays imposed by the governmental approval process may
materially reduce the period during which the Company may have the exclusive
right to exploit patented products or technologies unless the Company is
successful in obtaining patent term restoration.
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The FDA regulations and requirements governing the marketing processes
for medical devices require, among other things, the presentation of substantial
evidence, often based upon clinical studies, establishing safety and efficacy of
new medical devices. The two methods for obtaining FDA permission to market are
the submission of a Pre-Market Notification under Section 510(k) of the FDC Act
and a PMAA seeking pre-market approval from the FDA. Applicants seeking a 510(k)
clearance must show that the device is substantially equivalent to another
legally marketed predicate device. The 510(k) process can require clinical
testing of the applicable device under an Investigational Device Exemption
("IDE"), while the pre-market approval process always requires clinical data.
The PMAA procedure is far more complex and time-consuming.
The Company's clinical research programs for uncleared or unapproved
devices are subject to the IDE regulations of the FDA and California State
regulations. These regulations govern many important aspects of the clinical
investigation of medical products, including obtaining informed consent from
clinical subjects, securing the approval of an Institutional Review Board and
maintaining required documentation relating to the conduct of the
investigational study. In addition, for some devices, these regulations may
require the Company to obtain approval from the FDA prior to the commencement of
clinical investigations of new products or of expanded applications for any
commercially available product.
If the PMAA procedure is being utilized, the results of the
pre-clinical and clinical studies and other information such as the device
description, GMP regulation compliance, bio-compatability and labeling materials
regarding the medical device under study are submitted to the FDA in the form of
a PMAA for approval to commence commercial sales. In responding to the PMAA, the
FDA may grant marketing approval, with or without conditions, require additional
testing or information, or deny the application.
Regardless of whether a 510(k) notification or PMAA is required, the
Company also must register as a medical device manufacturer with the FDA and be
licensed by the Food and Drug Branch of the California Department of Health
Services. The Company is subject to inspection on a routine basis by both the
FDA and the State of California for compliance with the FDA's GMP and medical
device reporting ("MDR") regulations and comparable state regulations. Those
regulations impose certain procedural and documentation requirements upon the
Company with respect to manufacturing and quality assurance activities.
Additionally, the Company must comply with various FDA requirements for design,
safety, advertising, labeling, record keeping and reporting of negative
experiences in the use of regulated products. The FDA actively enforces
regulations prohibiting marketing of products for non-indicated uses as well as
products that violate design, safety and the other FDA regulations mentioned
above. Failure to comply with applicable regulatory requirements can result in,
among other things, fines, suspensions or loss of permission to market products,
seizures or recalls of products, operating restrictions, injunctions, civil
fines and criminal prosecution. The FDA has proposed changes to the GMP
regulations and has promulgated new MDR regulations, both of which will likely
increase the cost of compliance with GMP requirements. The Company also is
subject to numerous federal, state and local laws relating to such matters as
safe working conditions, manufacturing practices, environmental protection, fire
hazard control and disposal of hazardous or potentially hazardous substances.
Changes in existing requirements or adoption of new requirements, such as design
control and postmarket surveillance, could have a material adverse effect on the
Company's business, financial condition, and results of operations. Although the
Company believes that it is in compliance with all applicable regulations of the
FDA and the State of California, current regulations depend heavily on
administrative interpretation, and there can be no assurance that the Company
will not incur significant costs to comply with laws and regulations in the
future or that laws and regulations will not have a material adverse effect upon
the Company's business, financial condition or results of operations.
Sales of medical device products outside the United States are subject
to international regulatory requirements that vary widely from country to
country. The time required to obtain approvals required by other countries may
be longer or shorter than that required for FDA approval, and requirements for
licensing may differ from FDA requirements. Some countries have historically
permitted human studies earlier in the product development cycle than the United
States. Other countries, such as Japan, have standards similar to those of the
FDA. This disparity in the regulation of medical devices may result in more
rapid product approvals in certain countries than in the United States, while
approvals in countries such as Japan or France may require longer than in the
United States. The European Union has completed the Medical Device Directive
that provides guidelines for
-8-
10
obtaining CE-Marking for medical devices to be sold within the Union. The
Company has obtained the required certifications of quality systems that are
prerequisite to obtaining CE-Marking. Viennatone, Sonar and the Redwood City
facility have obtained the ISO 9001 and EN 46001 quality system certifications.
ReSound-Ireland has achieved ISO 9002 certification. Once ReSound products have
the CE-Marking, they may be sold throughout the member states without clearance
by individual countries. However, individual country requirements regarding
third party reimbursements, advertising, professional training, language of
labeling materials and others will still apply and may make certain markets more
difficult to penetrate.
Certain of the Company's products also may be subject to U.S. Federal
Communications Commission ("FCC") regulation, which establishes radio frequency
emission standards for certain electronic equipment. Products that fail to
comply with these regulations may not be sold in the United States until
appropriate modifications are made. Various countries in which the Company
markets its products, or in which the Company may do so in the future, also have
regulatory agencies or standards authorities that perform functions comparable
to the FCC, and the Company will need to comply with these requirements to the
extent that it markets covered products in such countries.
PROPRIETARY TECHNOLOGY, UNPREDICTABILITY OF PATENT PROTECTION AND RELATED
LITIGATION
The Company's ability to compete effectively will depend substantially
on its ability to develop new technology and to protect the proprietary aspects
of its current and future technology by securing and maintaining patent and
trade secret protection. There can be no assurance that the Company's issued
patents, any future patents that may be issued as a result of the Company's
patent applications, or any patents that the Company has licensed or may
license, will offer any degree of protection to the Company's products against
competitive products. There can also be no assurance that any additional patents
will be issued from any of the patent applications owned by or licensed to the
Company, that any patents that are or may be issued or licensed to the Company
or any of the Company's patent applications will not be challenged, or
invalidated in the future, or that any patents issued to or licensed by the
Company will not be infringed upon or designed around by others. In addition,
there can be no assurance that the Company's competitors, some of whom have
substantial resources, will not seek to apply for and obtain patents that will
prevent, limit or interfere with the Company's ability to make, use or sell its
products either in the United States or in international markets. In addition,
American Telegraph and Telephone Company ("AT&T") has been granted an exclusive
license to three patents related to the Company's sound processing technology
for use in applications other than hearing assistance. This license will
restrict the Company's ability to use or license its sound processing technology
in such applications. AT&T also has the right to grant sublicenses to these
patents to third parties where required under its pre-existing agreements with
such parties. There can be no assurance that such parties will not develop
competitive products based on these sublicenses.
The medical device industry has been characterized by extensive
litigation regarding patents and other intellectual property rights, and
companies in this industry have employed intellectual property litigation to
gain a competitive advantage. Between 1992 and 1996, the Company was involved in
three separate actions claiming that the Company's products and technologies
infringed outstanding patents owned by others. All of these actions have been
settled or withdrawn. There can be no assurance that the Company will not in the
future become subject to patent infringement claims and litigation or
interference proceedings declared by the United States Patent and Trademark
Office ("USPTO") to determine the priority of inventions. The defense and
prosecution of intellectual property suits, USPTO interference proceedings and
related legal and administrative proceedings are both costly and time consuming.
Litigation may be necessary to enforce patents issued or licensed to the
Company, to protect the Company's trade secrets or know-how or to determine the
enforceability, scope and validity of the proprietary rights of others.
The Company has been contacted periodically by parties asserting that
certain of the Company's products infringe on patent rights or violate other
proprietary rights held by such parties. Any litigation or interference
proceedings involving the Company will result in substantial expense to the
Company and significant diversion of effort by the Company's technical and
management personnel. An adverse determination in litigation or interference
proceedings to which the Company may become a party could subject the Company to
significant
-9-
11
liabilities to third parties, require the Company to seek licenses from third
parties, prevent the Company from manufacturing and selling its products, or
require the Company to redesign its products, all of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company also relies on trade secrets and proprietary know-how that
it seeks to protect, in part, by confidentiality agreements with its customers,
employees, consultants, collaborators and potential collaborators. There can be
no assurance that these agreements will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently developed by competitors.
DEPENDENCE ON KEY SUPPLIERS
Certain key components used in the Company's products are currently
available only from single or limited sources. These include ReSound's
proprietary sound processing integrated circuit manufactured exclusively for the
Company by AT&T and used in all of the hearing devices sold under the ReSound
brand name and the cases and remote control units for the Company's BTE hearing
devices. In addition, the Company subcontracts for the manufacture of its
Portable Prescriptive Programming ("P3") System(TM) from a single supplier. The
ReSound sound processing circuit manufactured by AT&T, the BTE cases and the P3
System are purchased under written agreements, while other components are
purchased pursuant to purchase orders on an as-needed basis. The Company's
primary source of supply for BTE cases is a competing manufacturer of hearing
devices. Although the Company has a written agreement for the supply of BTE
cases and is currently designing its own case, there can be no assurance that
this supplier will continue to sell BTE cases to the Company or that the Company
will successfully manufacture and market its own case. The Company also
subcontracts the manufacture of the remote control and subcontracts the assembly
of the hybrid circuit used for sound processing. Although the Company believes
that with adequate notice it can secure, if necessary, alternate sources for the
BTE cases, remote control and P3 System, there can be no assurance that such
alternate sources, if necessary, would be obtained or that the Company's sole or
limited source suppliers will continue to provide sufficient quantities of
suitable-quality components at acceptable prices. The loss of sole or limited
source suppliers or the inability of such suppliers to meet the Company's price,
quality, quantity and delivery requirements would have a material adverse effect
on the Company's business, financial condition and results of operations.
EFFECT OF PRODUCT RETURNS, REPAIRS AND REMAKES
The Company believes that the hearing device industry is characterized
by a relatively high rate of product returns (approximately 17 to 25%). Many
states have laws that require hearing device dispensers to allow purchasers a
minimum period of time for return of their hearing devices, typically 30 days.
In addition, as patients are often unable to judge the performance of a new
hearing device at the dispenser's office, many dispensers allow hearing device
purchasers to purchase the product on a trial basis. The Company believes that
many dispensers encourage potential purchasers to try a variety of hearing
devices on a trial basis, in part because of the industry's liberal return
policy. The Company's hearing devices sold in the U.S. and Canada may be
returned without charge, for a period of 90 days following delivery to the
dispenser. In Europe and Asia, the Company sells primarily to chains of hearing
device dispensers, and all returns from the end-customer are the responsibility
of these chains. In addition, in the U.S. and Canada, the Company currently
offers a one or three-year warranty to the dispenser on the electronic
components of its hearing devices and a 12-month warranty against defects in the
manufacture of the custom shell. The Company offers a 12-month warranty to the
distributor on the P3 System in the U.S. Internationally, the Company offers a
12-month warranty to the distributor on the components of its hearing devices.
In Austria, the retail business is characterized by an average trial period of
up to 60 days to return the already-fitted device. Austrian dealers typically
offer a 12-month warranty commencing on the date of invoice. However, Viennatone
does not typically issue an invoice for a hearing device until the patient is
fully satisfied and has accepted the device. If the Company were to experience
high rates of return on its products due to imperfections in product design or
manufacture or for reasons unrelated to product quality due to the industry's
liberal return policy, the Company's business, financial condition and results
of operations would be materially adversely affected.
-10-
12
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon a limited number of key management and
technical personnel. The Company's future success will depend in part upon its
ability to attract and retain highly qualified personnel. The Company competes
for such personnel with other companies, academic institutions, government
entities and other organizations. There can be no assurance that the Company
will be successful in retaining or hiring qualified personnel. The loss of key
personnel or the inability to hire qualified personnel would have a material
adverse effect on the Company's business, financial condition and results of
operations.
RISK OF PRODUCT LIABILITY CLAIMS; INSURANCE
Medical device companies are subject to inherent risks of product
liability claims. The use of the Company's products or technology, the sale of
such products, and medical procedures associated with prescribing and fitting
these products may expose the Company to product liability claims. Although the
Company has not experienced any material product liability claims to date, there
can be no assurance that the Company will not experience losses due to product
liability claims in the future. The Company currently maintains liability
insurance with coverage of $21 million per occurrence and an annual aggregate
maximum of $21 million. However, there can be no assurance that product
liability or other claims will not exceed such insurance coverage limits or that
such insurance will continue to be available on commercially acceptable terms,
or at all. Any product liability claims or series of claims against the Company,
regardless of their merit or eventual outcome, would have a material adverse
effect on the Company's business, financial condition and results of operations.
THIRD-PARTY REIMBURSEMENT
In the United States, third-party reimbursement generally is not
available for the purchase of hearing devices. As a result, the price of a
hearing device may be a key factor in the patient's decision to purchase such a
device. In international markets, reimbursement is generally provided, although
the levels of reimbursement vary. In Denmark, the Netherlands and Switzerland,
full or almost full reimbursement is generally provided. Partial reimbursement
is commonly provided in Austria, Belgium, France and Germany. Any change or
anticipated change in the reimbursement levels available to purchasers of the
Company's products in other countries could affect the Company's sales in the
relevant geographic markets, which could materially adversely affect the
Company's business, financial condition and results of operations.
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company has taken a number of actions that could have the effect of
discouraging a takeover attempt that might be beneficial to shareholders who
wish to receive a premium for their shares from a potential bidder. The Company
has adopted a shareholder rights plan that would cause substantial dilution to a
person who attempts to acquire the Company on terms not approved by the
Company's Board of Directors. The shareholder rights plan may therefore have the
effect of delaying or preventing any change in control and deterring any
prospective acquisition of the Company. In addition, the Company's Articles of
Incorporation grant the Board of Directors the authority to issue up to
2,000,000 shares of Preferred Stock, of which 54,055 shares have been issued to
date, and to determine the price, rights, preferences and privileges of those
shares without any further vote or action by the Company's shareholders. The
rights of the holders of Common stock will be subject to, and may be adversely
affected by, the rights of the holders of any shares of Preferred Stock that may
be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult or less
attractive for a third party to acquire a majority of the outstanding voting
stock of the Company. Such Preferred Stock may also have other rights, including
economic rights senior to the Common Stock, and, as a result, the issuance
thereof would have a material adverse effect on the market value of the Common
Stock.
-11-
13
SALE OF COMMON STOCK, CONVERTIBLE NOTES AND
WARRANTS TO SELLING SHAREHOLDERS
In February 1995, the Company entered into the February 1995 Purchase
Agreements with each of Cagen Holdings Limited ("Cagen"), Charter Ventures II,
L.P. ("Charter") and The Mingly Corporation Limited ("Mingly," and collectively
with Cagen and Charter, the "1995 Purchasers"), pursuant to which the 1995
Purchasers purchased the February 1995 Notes in the aggregate principal amount
of $10,000,000 from the Company. The February 1995 Notes bear interest at a rate
of 8% per annum, and principal and interest due thereunder were convertible into
1,019,944 shares of Common Stock as of June 30, 1996.
In November 1995, the Company entered into the November 1995 Purchase
Agreements with Cagen and Charter, pursuant to which Cagen and Charter purchased
from the Company (i) the November 1995 Notes in the aggregate principal amount
of $2,000,000, and (ii) the Warrants initially exercisable for an aggregate of
up to 77,794 shares (the "Warrant Shares") of Common Stock at an initial
exercise price of $7.7125 per share, subject to adjustment. In June 1996, Cagen
and Charter elected to convert the November 1995 Notes into an aggregate of
265,506 shares (the "November 1995 Note Shares," and collectively with the
February 1995 Note Shares, the "Note Shares") of Common Stock.
On June 14, 1996, the Company entered into the June 1996 Purchase
Agreements with the parties set forth under "Selling Shareholders," excluding
Cagen, Charter and Mingly, (collectively, the "1996 Purchasers" and, together
with the 1995 Purchasers, the "Purchasers"), pursuant to which the Company sold
an aggregate of 3,212,176 shares of Common Stock to the 1996 Purchasers at a
price of $10.75 per share. The sale of the Common Stock was completed on June
28, 1996.
This prospectus covers the sale of 4,575,420 shares of Common Stock by
the Purchasers.
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares
offered hereby may be sold by the Selling Shareholders from time to time in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they sell as
principals, or both (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Shareholders and any broker-dealers or agents that
participate with the Selling Shareholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them 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.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to the Common Stock of the Company for
a period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Shareholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Shareholders.
-12-
14
The Company agreed to register the Shares under the Securities Act and
to indemnify and hold the Selling Shareholders harmless against certain
liabilities under the Securities Act that could arise in connection with the
sale by the Selling Shareholders of the Shares. The Company has agreed to pay
all fees and expenses incident to the filing of this Registration Statement,
other than broker's commissions or discounts, transfer taxes, and fees and
expenses, if any, of counsel or other advisors to the Selling Shareholders.
The Company has agreed to maintain the effectiveness of this
Registration Statement until the earlier of the sale of all the Shares
registered pursuant to this Prospectus or the earliest date as of which each
holder of Shares can sell all of the Shares it holds in any three-month period
under Rule 144 under the Securities Act. No sales may be made pursuant to this
Prospectus after such date unless the Company amends or supplements this
Prospectus to indicate that it has agreed to extend such period of
effectiveness.
-13-
15
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
owned by each of the Selling Shareholders as of June 30, 1996. Except as
indicated, none of the Selling Shareholders has had a material relationship with
the Company within the past three years other than as a result of the ownership
of the Shares or other securities of the Company. Because the Selling
Shareholders may offer all or some of the Shares which they hold pursuant to the
offering contemplated by this Prospectus, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the Shares, no estimate can be given as to the number of Shares that will be
held by the Selling Shareholders after completion of this offering. The Shares
offered by this Prospectus may be offered from time to time by the Selling
Shareholders named below:
Number of Shares Percent of Number of Shares
Beneficially Outstanding Registered for
Name of Selling Shareholder Owned (1) Shares Sale Hereby
- --------------------------- ---------------- ----------- ----------------
Cagen Holdings Limited (2)(3)............... 783,617 3.93% 783,617
Charter Ventures II, L.P (3)(4)............. 273,644 1.41 273,644
The Mingly Corporation Limited (3)(5)....... 305,983 1.56 305,983
T. Rowe Price Associates, Inc. (6).......... 1,488,372 7.71 1,488,372
Rockefeller & Co., Inc. (7)................. 558,140 2.89 558,140
von Rautenkranz Nachfolger Gbr.............. 465,116 2.41 465,116
Benaroya Capital Company, L.L.C............. 186,047 * 186,047
Strong Capital Management, Inc. (8)......... 186,000 * 186,000
Furman Selz LLC (9)......................... 133,954 * 133,954
Prolific Asset Management Limited (10)...... 71,512 * 46,512
Bank of England Pension Fund................ 46,511 * 46,511
Walden Management Pension
Corporation............................ 45,000 * 45,000
Professional Edge Fund L.P.................. 36,524 * 36,524
Tonga Partners L.P.......................... 20,000 * 20,000
---------
Total.................................. 4,575,420
=========
- ------------------------------
* Less than 1%
(1) Information with respect to beneficial ownership is based upon
information contained in filings made with the Securities and Exchange
Commission, as modified by information obtained from the Selling
Shareholders.
(2) Includes (i) 611,967 shares issuable upon conversion of the February
1995 Notes, (ii) 38,897 shares issuable upon exercise of Warrants and
(iii) 132,753 shares issued upon conversion of the November 1995 Notes.
(3) C.M. Cha, Chairman of The Mingly Corporation Limited, is also a
director of Cagen Holdings Limited. Johnson M.D. Cha, who is a son of
C.M. Cha and a director of Cagen Holdings Limited, and Payson M.S. Cha,
who is a son of C.M. Cha and a Joint Managing Director of The Mingly
Corporation Limited, are directors of a general partner of Charter
Ventures II, L.P. Cagen Holdings Limited, The Mingly Corporation
Limited and Charter Ventures II, L.P. each disclaim beneficial
ownership of shares owned by the others. Johnson M.D. Cha and Payson
M.S. Cha are directors of an entity that is party to a joint venture
with the Company that has exclusive distribution rights to the
Company's hearing health care products in Hong Kong, Taiwan and the
People's Republic of China.
(4) Includes (i) 101,994 shares issuable upon conversion of the February
1995 Notes, (ii) 38,897 shares issuable upon exercise of Warrants and
(iii) 132,753 shares issued upon conversion of the November 1995 Notes.
(5) These shares are issuable upon conversion of the February 1995 Notes.
-14-
16
(6) Includes (i) 223,256 shares held by Lobstercrew & Co., nominee for T.
Rowe Price Health Sciences Fund, Inc., (ii) and 893,023 shares held by
Bridge & Co., nominee for T. Rowe Price New Horizons Fund, Inc. (iii)
372,093 shares held by Orchid & Co., nominee for T. Rowe Price
Threshold Fund III, L.P. T. Rowe Price Associates, Inc., a registered
investment advisory firm, is the investment manager of all three funds.
The general partner of the T. Rowe Price Threshold Fund III, L.P. is a
wholly-owned subsidiary of T. Rowe Price Associates, Inc.
(7) Includes (i) 224,930 shares held by Rockefeller & Co. U.S. Small
Capitalization Fund, L.P., (ii) 226,047 shares held by Pocantico Fund
and (iii) 107,163 shares held by 5500 Fund. Rockefeller & Co., Inc., a
registered investment advisory firm, is a general partner and the
investment manager of all three partnerships. Additionally, Jane A.
Freeman, an investment manager at and employee of Rockefeller & Co.,
Inc., is a general partner of Pocantico Fund and 5500 Fund.
(8) Includes (i) 22,326 shares held by Crestwood Capital International
Ltd., (ii) 55,814 shares held by Crestwood Capital Partners L.P. and
(iii) 55,814 shares held by a proprietary account of Furman Selz LLC.
Furman Selz Management BVI, Ltd., the investment advisor of Crestwood
Capital International Ltd., has appointed Furman Selz LLC as its
sub-advisor. Furman Selz LLC is the general partner of Crestwood
Capital Partners L.P. Michael R. Weissberg, an Executive Vice
President of Furman Selz LLC, is the individual at Furman Selz
primarily responsible for managing all three funds.
(9) Includes (i) 102,000 shares held by Harbour Investments Ltd., (ii)
40,000 shares held by Strong Special Investment Limited Partnership,
(iii) 7,000 shares held by Strong Quest Limited Partnership and (iv)
37,000 shares held by Strong Small Cap Fund. Strong Capital Management,
Inc. is the investment advisor of all four funds, and the general
partner of Strong Special Investment Limited Partnership and Strong
Quest Limited Partnership.
(10) Includes (i) 27,907 shares held by Midland Bank Trust Company for and
on behalf of Prolific Technology and (ii) 43,605 shares held by Midland
Bank Trust Company for an on behalf of Prolific American Opportunities.
Prolific Asset Management Limited is the investment advisor of both
funds.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Venture Law Group, A
Professional Corporation, 2800 Sand Hill Road, Menlo Park, California 94025.
EXPERTS
The consolidated financial statements and schedule of ReSound included
in ReSound's Annual Report as amended (Form 10K/A) for the year ended December
31, 1995, have been audited by Ernst & Young LLP, Independent Auditors, as set
forth in their report included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
-15-
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale and distribution of the Common Stock
being registered. Normal commission expenses and brokerage fees and any
applicable transfer taxes are payable individually by the Selling Shareholders.
All amounts are estimates except the registration fee.
Amount
To be Paid
----------
Registration Fee................................................................... $13,410.70
Legal Fees and Expenses............................................................ 50,000.00
Accounting Fees and Expenses....................................................... 5,000.00
Miscellaneous...................................................................... 6,589.30
----------
Total..................................................................... $75,000.00
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code authorizes a
corporation's Board of Directors to grant indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities (including reimbursement for expenses incurred)
arising under the Securities Act of 1933. Article IV of the Registrant's Amended
and Restated Articles of Incorporation and Article VI of the Registrant's Bylaws
provide for indemnification of its directors, officers, employees and other
agents to the maximum extent permitted by law. In addition, the Registrant has
entered into Indemnification Agreements with its officers and directors and
maintains director and officer liability insurance.
ITEM 16. EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
4.1 Note Purchase Agreement dated February 21, 1995, by
and between the Company and Cagen Holdings Limited
4.2 Note Purchase Agreement dated February 21, 1995, by
and between the Company and Charter Ventures II,
L.P.
4.3 Note Purchase Agreement dated February 21, 1995, by
and between the Company and The Mingly Corporation
Limited
4.4(1) Note and Warrant Purchase Agreement dated November
21, 1995, by and between the Company and Cagen
Holdings Limited
4.5(2) Note and Warrant Purchase Agreement dated November
21, 1995, by and between the Company and Charter
Ventures II, L.P.
- ------------
(1) Incorporated by reference to Exhibit 10.21 filed with the Registrant's Form
10-K for the year ended December 31, 1995.
(2) Incorporated by reference to Exhibit 10.22 filed with the Registrant's Form
10-K for the year ended December 31, 1995.
II-1
18
4.6 Common Stock Purchase Agreement dated June 14, 1996,
by and between the Company and the Selling
Shareholders listed on page 12 of this Prospectus,
excluding Charter Ventures II, L.P., The Mingly
Corporation Limited and Cagen Holdings Limited.
5.1 Opinion of Venture Law Group, A Professional
Corporation
23.1 Consent of Ernst & Young LLP, Independent Auditors
(see page II-5)
23.2 Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
- --------------------
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 this Registration Statement or any material change to such
information in this 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 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.
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 provisions referred to in Item 15 above 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 Securities Act of 1933 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 against the Registrant by such director, officer
or controlling person in connection with the securities being registered
hereunder, 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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.
II-2
19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Redwood City, State of California, on the 14th
day of August, 1996.
RESOUND CORPORATION
By: /s/ Peter Riepenhausen
--------------------------------------------
Peter Riepenhausen
President and Chief Executive Officer
II-3
20
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Peter
Riepenhausen and Paul Busse, and each of them acting individually, as his
attorney-in-fact, each with full power of substitution, for him in any and all
capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorney to any and all amendments to said Registration
Statement. Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 14th day of August, 1996.
SIGNATURE TITLE
- -------------------------------------------- ------------------------------------------------------------------
/s/ Peter Riepenhausen President, Chief Executive Officer and Director
---------------------------
(Peter Riepenhausen)
/s/ Paul A. Busse Senior Vice President of Finance and Administration and Chief
--------------------------- Financial Officer (Principal Financial and Accounting Officer)
(Paul A. Busse) and Assistant Secretary
/s/ Rodney Perkins Chairman of the Board of Directors
---------------------------V
(Rodney Perkins, M.D.)
/s/ Robert K. Anderson Director
---------------------------
(Robert K. Anderson)
/s/ Richard L. Goode Director
---------------------------
(Richard L. Goode)
Director
---------------------------
(Donald M. Kendell)
/s/ Eugene Kleiner Director
---------------------------
(Eugene Kleiner)
/s/ Philip S. Schlein Director
---------------------------
(Philip S. Schlein)
/s/ Robert C. Wilson Director
---------------------------
(Robert C. Wilson)
II-4
21
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related prospectus of ReSound
Corporation for the registration of 4,575,420 shares of its common stock and to
the incorporation by reference therein of our report dated January 26, 1996,
except for Note 12, as to which the date is April 8, 1996, with respect to the
consolidated financial statements and schedule of ReSound Corporation included
in its Annual Report as amended (Form 10-K/A) for the year ended December 31,
1995, filed with the Securities and Exchange Commission.
Palo Alto, California ERNST & YOUNG LLP
August 14, 1996
II-5
22
RESOUND CORPORATION
INDEX TO EXHIBITS
EXHIBIT
NUMBER
- -------
4.1 Note Purchase Agreement dated February 21, 1995 by and between the
Company and Cagen Holdings Limited
4.2 Note Purchase Agreement dated February 21, 1995 by and between the
Company and Charter Ventures II, L.P.
4.3 Note Purchase Agreement dated February 21, 1995 by and between the
Company and The Mingly Corporation Limited
4.4(1) Note and Warrant Purchase Agreement dated November 21, 1995, by and
between the Company and Cagen Holdings Limited.
4.5(2) Note and Warrant Purchase Agreement dated November 21, 1995, by and
between the Company and Charter Ventures II, L.P.
4.6 Common Stock Purchase Agreement dated June 14, 1996, by and between the
Company and the Selling Shareholders listed on page 14 of this
Prospectus, excluding Charter Ventures II, L.P., The Mingly Corporation
Limited and Cagen Holdings Limited.
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of Ernst & Young, LLP, Independent Auditors (see Page II-5)
23.2 Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see Page II-4)
- ---------
(1) Incorporated by reference to Exhibit 10.21 filed with the Registrant's Form
10-K for the year ended December 31, 1995.
(2) Incorporated by reference to Exhibit 10.22 filed with the Registrant's Form
10-K for the year ended December 31, 1995.