As filed with the Securities and Exchange Commission
on June 21, 1996
Registration No.33-63637
======================================================
SECURITIES AND EXCHANGE COMMISSION
______________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
EXECUTONE INFORMATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA
(State or other jurisdiction of
incorporation or organization)
86-0449210
(I.R.S. Employer Identification No.)
478 Wheelers Farms Road
Milford, Connecticut 06460
(203) 876-7600
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
_____________________________
BARBARA C. ANDERSON, ESQ.
Vice President, General Counsel
and Secretary
EXECUTONE INFORMATION SYSTEMS, INC.
478 Wheelers Farms Road
Milford, Connecticut 06460
(203) 876-7600
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
_____________________________
Approximate date of commencement of proposed sale to
the public: From time to time after the effective
date of this Registration Statement.
<PAGE>
If the only securities being registered on this
form are being offered pursuant to dividend or
interest reinvestment plans, please check the
following box. [ ]
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, other than securities offered only in connection
with dividend or reinvestment plans, 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 statement
number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed
pursuant to Rule 462 (c) under the Securities Act,
check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be
made pursuant to Rule 434, please check the following
box. [ ]
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to
delay its effective date until the Registrant shall
file a further amendment which specifically states
that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
Preliminary Prospectus dated June 21, 1996
EXECUTONE INFORMATION SYSTEMS, INC.
138,575 SHARES OF COMMON STOCK
This Prospectus relates to 138,575 shares of Common Stock, par
value $.01 per share (the "Common Stock"), of EXECUTONE Information
Systems, Inc., a Virginia corporation (the "Company") (such Shares
being referred to collectively herein as the "Securities"). All of
the Securities being offered hereby are to be offered and sold from
time to time for the account of certain shareholders of the
Company, or by their respective donees, transferees or successors
in interest (such persons being collectively referred to herein as
the "Selling Shareholders"). The Company will not receive any of
the proceeds from the sale of the Securities. See "Selling
Shareholders" for a discussion of the circumstances pursuant to
which the Selling Shareholders have acquired the Securities offered
hereby, and "Plan of Distribution" for a discussion of the plan
of distribution.
Shares of the Company's Common Stock are traded in the over-
the-counter market on the Nasdaq National Market under the symbol
XTON. The last sales price of the Common Stock on June 17, 1996,
as reported on the Nasdaq, was $3.00 per share.
_________________________
THE PURCHASE OF THESE SECURITIES INVOLVES CERTAIN
RISK FACTORS. SEE "RISK FACTORS"; PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
(THE "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.
_________________________
INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT
RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THAT THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
The date of this Prospectus is June 21, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Commission. Reports and definitive proxy or information statements filed
by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at its Regional Offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 75 Park Place, New York, New York 10007. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549.
The Company has filed with the Commission a registration
statement on Form S-3 (together with all amendments and exhibits thereto,
the "Registration Statement") with respect to the Securities 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 as to the Company and the securities offered by this
Prospectus, reference is made to the Registration Statement and the
exhibits relating thereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
(R)
The following documents filed by the Company with the Commission
(File No. 0-11551) are incorporated herein by reference and made a part
hereof: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995; (ii) the Company's Quarterly Report on Form
10-Q for the quarter ended March 31,1996; and (iii) the Company's
definitive proxy material for the Annual Meeting of Shareholders to be
held July 30, 1996, filed with the Commission on June 10, 1996.
(R)
All documents filed by the Company with the Commission pursuant
to Section 13(a) and 13(c) of the Exchange Act and any definitive proxy
statement so filed pursuant to Section 14 of the Exchange Act and any
reports filed pursuant to Section 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering of
the Securities shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which is
incorporated by reference herein modifies or supersedes
such earlier statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
<PAGE>
The Company will furnish, without charge, upon written or oral
request, to each person to whom a copy of this Prospectus is delivered,
including any beneficial owner, copies of any or all documents incorporated
by reference herein, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference therein). Requests
should be directed to Barbara C. Anderson, Vice President, General
Counsel and Secretary, EXECUTONE Information Systems, Inc.,
478 Wheelers Farms Road, Milford, Connecticut 06460
(telephone (203) 876-7600).
THE COMPANY
EXECUTONE designs, manufactures, sells, installs, services and
supports communications systems and services for business locations with
up to 300 desktops, and is a leading supplier of specialized hospital
communications equipment. Products are sold primarily under the
EXECUTONE, INFOSTAR, IDS, LIFESAVER, and INFOSTAR/ILS brand names
through a worldwide network of direct sales and service employees and
independent distributors.
EXECUTONE is a vertically integrated voice processing and
healthcare communications company. The Company controls the major
elements of its business, ranging from product design, manufacturing and
marketing to distribution. The Company is organized into three product
divisions focusing on different products and market segments: computer
telephony, healthcare communication systems, and call center
management.
Revenues are derived from product sales to distributors, direct sales
of healthcare and call center products, and direct sales to national
accounts and federal government customers, as well as installations,
additions, changes, upgrades or relocation of previously installed systems,
maintenance contracts, and service charges to the existing base of
healthcare, call center, national account and federal government
customers.
The objective of the computer telephony division, in addition to sales
of traditional telephone systems, is to offer value-added products and
services. The Company's integrated digital telephone systems emphasize
flexible software applications,such as automated attendant, data switching,
and computer telephone interface, designed to enhance the customer's
ability to communicate, obtain and manage information. The Company's
telephone systems provide the platform for its other voice processing
software applications.
<PAGE>
The healthcare communications systems division provides to its
healthcare facility customers integration of the flow of voice and data
between nurse and patient, increased flexibility and efficiency in hospital
operations, and the means to improve patient care. EXECUTONE has been
a recognized name in this market for many years with its LIFESAVER and
CARE/COM II-E nurse call systems. The Company is also creating
applications software specific to hospital and nursing homes to help
resolve many labor intensive tasks.
The healthcare communications division also markets the
INFOSTAR/ILS locator system, released in 1994. The INFOSTAR/ILS
system can improve productivity, save time and expense for users and
eliminate overhead paging by instantly locating staff and equipment in a
facility. Each person or piece of equipment wears an individually coded
badge that transmits infrared signals to sensors placed throughout the
facility, which forward the location information to a central processing
unit. The location data can be accessed on local display stations. The
ILS system can be integrated with the Company's telephone systems and the
LIFESAVER nurse call system to provide additional productivity
improvements for hospital environments. The ILS system is also marketed
through the computer telephony division for office environments.
The call center management division develops and sells
sophisticated telephony products that integrate a computerized digital
telephone system platform with high-volume inbound, outbound and internal
call processing systems. Such systems include automatic call distribution
systems, predictive dialing systems, scripting software to assist agents
handling calls, and interactive voice response systems. Predictive dialing
systems enable the Company's call center customers to efficiently and
cost-effectively place a large number of outgoing calls using the minimum
number of live agents. Scripting software assists agents in conducting
calls and obtaining and recording desired information. Certain of these
systems also provide data interface with host or mainframe computers. These
systems are sold to call center customers that have a need for systems to
efficiently and cost-effectively receive or place their customer or
prospect calls, distribute those calls to available live operators,
obtain information from callers, record and distribute messages from
callers, and produce management reports on call activity.
The principal office of the Company is located at 478 Wheelers
Farms Road, Milford, Connecticut 06460, and the Company's telephone
number is (203) 876-7600.
<PAGE>
RECENT DEVELOPMENTS
On May 31, 1996, the Company sold the Company's direct sales
and service organization, including its network services division, to
Clarity Telecom Holdings, Inc., a new acquisition company led by Bain
Capital, Inc. (the "Buyer"). The purchase price was $61.5 million in
cash, a $5.9 million junior subordinated note due July 1, 2004, with
interest at 7.5% per year, and warrants to purchase 8% of the equity
issued as of the closing in the new company. The Company and the Buyer
also entered into a five-year exclusive distributor agreement pursuant
to which the Buyer will sell and service EXECUTONE and INFOSTAR
telephone products to business and commercial locations that require
up to 400 telephones.
The sale includes the Company's National Service Center. The sale
does not include any of the healthcare communications division, the call
center management division, the National Accounts or Federal Systems
marketing groups or the recently acquired Unistar business. The sale also
does not include the Pittsburgh direct sales and service office, which the
Company separately sold to one of its existing independent distributors for
approximately $1.3 million in cash and notes in May 1996.
On April 10, 1996, the Company announced that it had given notice
of its intention to terminate its distribution agreement with GPT Video
Systems due to failures by GPT to deliver properly functioning
videoconferencing products on a timely basis. In June 1996, the Company
completed the sale of its videoconferencing division to BT Visual Images
LLC. In April 1996, the Company also sold its inmate calling business.
None of the Pittsburgh direct office, the videoconferencing division or the
inmate calling business constituted a material portion of the Company's
assets, revenues or income.
On December 19, 1995, the Company acquired 100% of the
common stock of Unistar Gaming Corp., a Delaware corporation ("Unistar").
Unistar, through its subsidiary Unistar Entertainment, Inc., has an
exclusive five-year contract to design, develop, finance, and manage the
National Indian Lottery ("NIL"). The NIL will be a national lottery
authorized by federal law and by a compact between the State of Idaho
and the Coeur d'Alene Indian Tribe of Idaho ("Coeur d'Alene Tribe").
In return for providing these management services to the NIL, Unistar
will be paid a fee equal to 30% of the profits of the NIL.
The Registrant acquired 100% of Unistar for 3.7 million shares of
Common Stock, 250,000 shares of Cumulative Convertible Preferred Stock,
Series A ("Series A Preferred Stock") and 100,000 shares of Cumulative
Contingently Convertible Preferred Stock, Series B ("Series B Preferred
Stock"). See "Description of Capital Stock".
<PAGE>
The telephone operations of the NIL cannot begin until the
resolution of a pending legal proceeding. Certain states have attempted to
block the NIL by filing letters under 18 U.S.C. Section 1084 preventing
long-distance carriers from providing telephone service to the NIL based on
allegations that the NIL is not legal. In September 1995, the Coeur
d'Alene Tribe initiated legal action in the Coeur d'Alene Tribal Court
to obtain a ruling allowing the telephone lottery to proceed. On
February 28, 1996, the Tribal Court held that the lottery is authorized
by the Indian Gaming Regulatory Act ("IGRA") passed in 1988, that IGRA
preempts state and federal statutes, and that the states lack authority
to issue the Section 1084 notifications letters to any carrier.
Although this ruling is being appealed to the Tribal appellate court and
will probably be appealed to the U.S. Federal courts, the Company
believes the Coeur d'Alene Tribe's position will be upheld on appeal.
In July 1995, the Company reorganized its then existing other
businesses into five divisions: Computer Telephony, Healthcare
Communication Systems, Call Center Management ("CCM"), Videoconferencing
Products, and Network Services. The videoconferencing division and
network services division have since been sold as described above. The
business of Executone, Inc. that was acquired in 1988 was a telephone
equipment business that focused its direct selling efforts on office
sites with fewer than 20 phones. The average system size in the customer
base at that time was in the 8-10 phone range. It was originally
believed in 1988 that the MAC and service business generated by the
customer base would be increasingly profitable as the base of customers
grew. Since 1988, the Company has expanded its product line to the
high-end user, with larger customers and more sophisticated products to
serve customers' total communications needs. The strategy the Company
is now pursuing is to focus on software solutions versus the hardware
orientation of the business purchased in the 1988 acquisition. With
the IDS product, a digital platform for various communications functions
which was developed after the acquisition, the Company's product lines
now provide sophisticated software applications, including integrated
voice mail, call center applications (ACD, IVR's and predictive
dialers), infrared locator systems, nurse call systems
and computer telephony interfaces that drive its telephony products.
The change in the nature and complexity of its product lines has
changed the way the Company has to market its products. Unlike many
companies in its industry that focus on one particular product to one
market, the Company provides multiple products and applications to its
particular market niche. This requires the Company to have expertise in
each particular market segment in which it competes because the Company's
competitors are primarily one-product companies or divisions who are
experts in their particular market niche.The divisionalization consolidated
the sales, marketing and product development functions under a divisional
management structure for each division, headed by a division president.
The sales force was restructured such that each sales person is assigned
to a specific division and will sell only within that division's market
segment. The specialization of the sales force included the addition of
sales representatives with the necessary product and market expertise, as
well as substantial retraining for the remaining sales representatives.
<PAGE>
RISK FACTORS
Investment in the Company involves various risks. In addition to
general investment risks, investors may wish to consider the following
factors before purchasing the Securities. Additional information with
respect to the matters discussed below, and with respect to the Company's
business and industry in general, is set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, which
is incorporated herein by reference.
Competition
The telephony markets are intensely competitive. The Company
believes that its principal competitors in the under 300-desktop
telephony/voice processing market are Lucent Technologies (the former
equipment business of American Telephone and Telegraph Co.) and Nortel
(formerly known as Northern Telecom).While the Company believes that Lucent
and Nortel are dominant in this market, there is insufficient data to
make a meaningful estimate of the Company's competitive position relative
to other competitors. Competition will become even more intense with the
passage of the telecommunications deregulation legislation in February
1996, and with the anticipated entry into telephony of computer telephony
companies, many of whom have significantly greater financial and
development resources than the Company. Because of this intense
competition, the Company may not be able to reflect fully in product prices
any increased operating costs, if such increases should occur.
Reliance on Foreign Suppliers
The Company imports certain of its products and components from
manufacturers located in Hong Kong, China, Thailand and the Dominican
Republic. While the Company believes that utilizing foreign suppliers
generally maximizes efficiency because of the expertise of such
manufacturers and suppliers and the relative cost savings over pricing
offered by domestic suppliers, there are certain risks attendant to
utilizing such foreign suppliers. Foreign countries may be prone to
political and labor unrest.
In addition, it is possible that the U.S. Government could impose
limitations on imports from certain countries in addition to those
currently in place, including importations from countries in which the
Company's foreign suppliers are located. If any such limitations cause
a reduction in shipments to the Company, or if regulations are imposed
that increase materially the cost of the Company's foreign-made products
or components, the Company could be affected adversely unless and until
satisfactory alternatives are in place.
<PAGE>
Dividends
It is the present policy of the Company's Board of Directors to retain
earnings for use in the Company's business. The Company does not
anticipate paying any cash dividends in the foreseeable future.
SELLING SHAREHOLDERS
The Securities being offered hereby by the Selling Shareholders
were acquired by officers and employees of the Company pursuant to the
Company's Executive Stock Incentive Plan approved by the Company's
shareholders in 1994. Such Selling Shareholders acquired an aggregate of
2,065,000 shares of the Securities on October 3, 1994. Pursuant to the
terms of the Plan, the Selling Shareholders are permitted to sell
portions of the acquired shares each year commencing October 4, 1995,
and upon termination of their employment subject to the repayment of
all principal borrowed to pay the purchase price and accrued and unpaid
interest.
The following table sets forth for each of the Selling Shareholders,
as applicable, the number of shares of Common Stock, including the
Securities, beneficially owned prior to this offering (as of
May 31, 1996), the amounts of the Securities that may be currently
offered hereby under the terms of the Plan and the amounts to be owned
upon completion of the offering.
<PAGE>
<TABLE>
<CAPTION>
Total Total Number of
Number of Number of Shares to
Shares Securities be Owned
Owned to upon
Prior to be Offered Completion
Offering Hereby of Offering*
<S> <C> <C> <C>
Richard A. Alderson 61,090 3,106 57,984
Barbara C. Anderson 143,842 12,425 131,417
Harry E. Bruner 100,000 12,425 87,575
James E. Cooke III 135,983 12,425 123,558
Anthony R. Guarascio 201,435 17,430 184,005
Israel J. Hersh 61,370 3,728 57,642
Robert W. Hopwood Sr. 112,791 12,425 100,366
Alan Kessman 1,688,770 - 0 - 1,688,770
Andrew Kontomerkos 677,886 21,744 656,142
David H. Krietzberg 63,836 3,106 60,730
Vic Northrup 111,370 8,698 102,672
Danny Ramot 72,338 1,864 70,474
Frank J. Rotatori 234,655 7,455 227,200
Shlomo Shur 755,893 21,744 734,149
Michael W. Yacenda 975,051 - 0 - 975,051
Total 5,396,310 138,575 5,257,735
</TABLE>
_______________
* The percentage of the outstanding shares to be owned by each selling
shareholder upon completion of the offering is less than 1%, except in
the cases of Mr. Kessman (2.1%), Mr. Shur (1.1%), and Mr. Yacenda (1.2%).
The Selling Shareholders are all employees of the Company and during the
past three years have held the positions and offices described below.
Richard A. Alderson has been employed by the Company as general
manager of Federal Systems sales for more than the past three years.
<PAGE>
Barbara C. Anderson has been Vice President, General Counsel and
Secretary of the Company since 1990.
Harry E. Bruner has been employed by the Company as Division President
of the Call Center Management Division since July 1995, and prior thereto
was Regional President for the western sales region.
James E. Cooke III has served as Vice President, National Accounts of the
Company since February 1995. From 1992 until 1995, Mr. Cooke served
as Division Manager of Operations for the Company, and from 1988 through
1991, Mr. Cooke was a District Manager for the Company.
Anthony R. Guarascio has been Vice President, Finance and Chief Financial
Officer of the Company since January 1994, and prior thereto was Vice
President and Corporate Controller since January 1990.
Israel J. Hersh has been Vice President, Software Engineering of the
Company since February 1995. Mr. Hersh joined the Company as Director
of Software Development in 1984, and was promoted to Senior Director of
Software Engineering in January 1994.
Robert W. Hopwood has served as Vice President, Customer Care of the
Company since January 1990.
Andrew Kontomerkos has been Senior Vice President, Hardware
Engineering and Production of the Company since January 1994, and prior
thereto was Vice President, Hardware Engineering since 1988.
David H. Krietzberg has been employed by the Company as Treasurer and
Director of Investor Relations for more than three years.
Vic Northrup has been employed by the Company as Senior Director of
Sales and Operations since December 1994, and prior thereto was a district
general manager of the Company.
Danny Ramot has been employed by the Company as a director of software
development for more than the past three years.
Frank J. Rotatori has been Vice President, Healthcare Sales of the
Company since February 1995. Prior thereto he was Vice President,
European Operations in 1994, and prior thereto was Director of Call Center
Management Products during 1992 and 1993, Vice President-Direct Sales
from 1990 through 1991 and Vice President-Customer Service from 1988
to 1990.
Shlomo Shur has been Senior Vice President, Advanced Technology of the
Company since January 1994, and prior thereto was Vice President,
Software Engineering since 1988.
Alan Kessman has been Chairman and Chief Executive Officer of the
Company since 1988.
<PAGE>
Michael W. Yacenda has been Executive Vice President of the Company
since January 1990.
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Shareholders that all or a
portion of the Securities may be disposed of hereunder from time to time in
one or a combination of the following transactions: (a) to or through
brokers, acting as principal or agent, who may themselves dispose of the
Securities in transactions (which may involve block transactions) in the
over-the-counter market or otherwise, at market prices prevailing at the
time of the sale or at prices related to such prevailing market prices;
or (b) directly by gift or directly or through brokers or agents in
privately negotiated transactions at negotiated prices. Any commissions
or discounts paid or allowed to brokers, dealers or agents may be
changed from time to time. The Selling Shareholders and any brokers,
dealers or agents who participate in a sale of the Securities 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 the
commissions paid or discounts allowed to any of such brokers, dealers or
agents, in addition to any profits received on resale of the Securities,
if any of such brokers, dealers or agents should purchase any Securities
as a principal, may be deemed to be underwriting discounts or commissions
under the Securities Act. In the event of a transaction hereunder in
which a broker or dealer acts as principal, this Prospectus will be
supplemented to provide material facts with respect to such transaction.
Securities offered hereby also may be sold in transactions under Rule 144
promulgated by the Commission under the Securities Act.
DESCRIPTION OF CAPITAL STOCK
The following is a brief description of the material terms of the
Company's capital stock. This description does not purport to be complete
and is subject in all respects to applicable Virginia law and to the
provisions of the Company's Articles of Incorporation and Bylaws, copies
of which are filed as exhibits to the Registration Statement and are
incorporated by reference herein. See "Available Information", above.
General
The Company's authorized equity capitalization consists of 80
million shares of Common Stock, par value $.01 per share, and one million
shares of preferred stock, par value $.01 per share. Neither the holders of
the Common Stock nor of any preferred stock, now or hereafter authorized,
will be entitled to any preemptive or other subscription rights.
<PAGE>
Common Stock
At May 31, 1996, there were 51,906,168 outstanding shares of
Common Stock held by approximately 2,100 holders of record.
Holders of Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors, out of funds legally available
therefor. Dividends on any outstanding shares of preferred stock must be
paid in full before payment of any dividends on the Common Stock. Upon
liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to share ratably in assets available for distribution
after payment of all debts and other liabilities and subject to the
prior rights of any holders of any preferred stock then outstanding.
Holders of Common Stock are entitled to one vote per share with
respect to all matters submitted to a vote of shareholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the Common
Stock entitled to vote in any election of directors may elect all of the
directors standing for election, subject to the voting rights (if any) of
series of preferred stock that may be outstanding from time to time. See
"Preferred Stock". The Company's Articles of Incorporation and Bylaws
contain no restrictions on the repurchase or redemption of the Common
Stock, although certain of the Company's loan agreements prohibit such
repurchases or redemptions. All the outstanding shares of Common Stock
are fully paid, legally issued and nonassessable. The transfer agent
for the Common Stock is American Stock Transfer Company.
Preferred Stock
The Registrant has two series of Preferred Stock currently issued
and outstanding: (1) the Cumulative Convertible Preferred Stock, Series A
("Series A Preferred Stock"), of which 250,000 shares are issued and
outstanding and (2) the Cumulative Contingently Convertible Preferred
Stock, Series B ("Series B Preferred Stock"), of which 100,000 shares are
issued and outstanding.
Each share of the Series A Preferred Stock has voting rights equal
to one share of Common Stock. The Series A Preferred Stock will earn
dividends equal to 18.5% of the consolidated Retained Earnings of the
Company's subsidiaries, Unistar Gaming Corporation and Unistar Enter-
tainment, Inc. (collectively, "Unistar"), since the date of issuance of the
Series A Preferred Stock, as of the end of a fiscal period, less any
dividends paid to the holders of the Series A Preferred Stock prior to
such date. All dividends on Series A Preferred Stock are payable only
(i) when and as declared by the
<PAGE>
Board of Directors, (ii) upon conversion or redemption of the Series A
Preferred Stock or (iii) upon liquidation, and only if at the time of a
proposed payment (A) there are no outstanding loans from the Company to
Unistar for start-up costs, (B) the cumulative retained earnings of
Unistar is positive, and (C) the net income of Unistar in the preceding
fiscal year exceeded $1,000,000.
The Series A Preferred Stock is convertible during the Conversion Period
for up to a maximum of 4,925,000 shares of Common Stock if Unistar meets
certain revenue and profit parameters. The Conversion Period is defined
as the period commencing on the date of issuance and ending on the later
of (i) four years after the first lottery ticket for the NIL is sold, and
(ii) 5 years after the date of issuance of the Series A Preferred Stock.
Each share of the Series A Preferred Stock is convertible, provided Unistar
had net income for the immediately preceding fiscal year of at least
$1,000,000, into the product of the excess of such net income over
$1,000,000, multiplied by .46, divided by 250,000, up to a maximum number
of shares of Common Stock per share of Preferred Stock of 19.7. The
Series A Preferred Stock is also convertible during the Conversion Period
for the maximum of 4,925,000 shares of Common Stock (or 19.7 shares of
Common Stock per share of Preferred Stock), at any time that the sum of
100% of the cumulative net revenues of Unistar plus 25% of the cumulative
other lottery revenues of the Company exceeds $50 million. The Series A
Preferred Stock is also convertible during the Conversion Period for the
maximum number of shares of Common Stock if a controlling interest in
Unistar is sold or assigned to a third party who is not a wholly owned
subsidiary of the Company. The Series A Preferred Stock is redeemable for
a total of 4,925,000 shares of Common Stock at the Company's option.
Each share of the Series B Preferred Stock has voting rights equal
to one share of Common Stock. The Series B Preferred Stock will earn
dividends equal to 31.5% of the consolidated Retained Earnings of Unistar
since the date of issuance of the Series B Preferred Stock, as of the
end of any fiscal period, less any dividends paid to the holders of the
Series B Preferred Stock prior to such date. All dividends on Series B
Preferred Stock are payable only (i) when and as declared by the Board
of Directors, (ii) upon conversion or redemption of the Series B
Preferred Stock or (iii) upon liquidation, and only if at the time of a
proposed payment (A) there are no outstanding loans from the Company to
Unistar for start-up costs, (B) the cumulative retained earnings of
Unistar is positive, and (C) the net income of Unistar in the preceding
fiscal year exceeded $1,000,000.
The Series B Preferred Stock is convertible, during the same Conversion
Period as applies to the Series A Preferred Stock, for up to a maximum of
8,375,000 shares of Common Stock if Unistar meets certain revenue and
profit parameters. Each share of the Series B Preferred Stock is
<PAGE>
convertible, provided Unistar had net income for the immediately preceding
fiscal year of at least $1,000,000, into the product of the excess of such
net income over $1,000,000, multiplied by .79, divided by 100,000, up to a
maximum number of shares of Common Stock per share of Preferred Stock
of 83.75. The Series B Preferred Stock is also convertible during the
Conversion Period for the maximum of 8,375,000 shares of Common Stock
(or 83.75 shares of Common Stock per share of Preferred Stock), at any
time that the sum of 100% of the cumulative net revenues of Unistar plus
25% of the cumulative other lottery revenues of the Company exceeds $50
million. The Series B Preferred Stock is also convertible during the
Conversion Period for the maximum number of 8,375,000 shares of
Common Stock, if a controlling interest in Unistar is sold or assigned to a
third party who is not a wholly owned subsidiary of the Company. The
Series B Preferred Stock is redeemable for a total of 8,375,000 shares of
Common Stock at the Company's option.
Shareholder approval is required before any of the Series B
Preferred Stock can be converted or redeemed. The Company has
submitted the convertibility and redemption terms of the Series B Preferred
Stock to its shareholders for approval at the 1996 Annual Meeting of
Shareholders to be held July 30, 1996.
Both the Series A Preferred Stock and the Series B Preferred Stock
are entitled to a preference on any voluntary or involuntary dissolution,
liquidation or winding up, equal to the fair market value of the stock on
the date of its issuance, as determined by an investment banking firm
engaged by the Company, plus any accrued and unpaid dividends. The
aggregate fair market value of all the issued Preferred Stock at the
time of its issuance was determined to be approximately $7.3 million.
The Board of Directors is authorized to designate with respect to each
series of preferred stock the number of shares in each such series, the
dividend rates and dates of payment, voluntary and involuntary liquidation
preferences, redemption prices, whether or not dividends shall be
cumulative, and if cumulative, the date or dates from which the same shall
be cumulative, the sinking fund provisions, if any, for redemption or
purchase of shares,the rights,if any, and the terms and conditions on which
shares can be converted into or exchanged for or the rights to purchase,
shares of any other class or series, and the voting rights, if any. Any
preferred shares issued will rank prior to the Common Stock as to dividends
and as to distributions in the event of liquidation, dissolution or
winding up of the Company. The ability of the Board of Directors to
issue preferred stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could among other
things, adversely affect the voting powers of holders of Common Stock
and, under certain circumstances, may discourage an attempt by others to
gain control of the Company.
<PAGE>
Virginia Stock Corporation Act
The Virginia Stock Corporation Act contains provisions governing
"Affiliated Transactions". These provisions, with several exceptions
discussed below, require approval of material acquisition transactions
between a Virginia corporation and any holder of more than 10% of any
class of its outstanding voting shares (an "Interested Shareholder") by the
holders of at least two-thirds of the remaining voting shares. Affiliated
Transactions subject to this approval requirement include, among other
things, mergers, share exchanges, material dispositions of corporate assets
not in the ordinary course of business, any dissolution of the corporation
proposed by or on behalf of an Interested Shareholder, and any
reclassification, including reverse stock split, recapitalization or
merger of the corporation with its subsidiaries, that increases the
percentage of voting shares owned beneficially by an Interested
Shareholder by more than 5%.
For three years following the time that an Interested Shareholder
becomes an owner of 10% of the outstanding voting shares, a Virginia
corporation cannot engage in an Affiliated Transaction with such Interested
Shareholder without approval of two-thirds of the voting shares other than
those shares beneficially owned by the Interested Shareholder, and majority
approval of the "Disinterested Directors". A Disinterested Director means,
with respect to a particular Interested Shareholder, a member of the
corporation's Board of Directors who was (1) a member on the date on
which an Interested Shareholder became an Interested Shareholder and (2)
recommended for election by, or was elected to fill a vacancy and received
the affirmative vote of, a majority of the Disinterested Directors then on
the Board. After the expiration of the three-year period, the statute
requires approval of the Affiliated Transactions by two-thirds of the
voting shares other than those beneficially owned by the Interested
Shareholder.
The principal exceptions to the special voting requirement apply to
transactions proposed after the three-year period has expired and require
either that the transaction be approved by a majority of the corporation's
Disinterested Directors or that the transaction satisfy the fair-price re-
quirements of the statute. In general, the fair-price requirement provides
that in a two-step acquisition transaction, the Interested Shareholder must
pay the shareholders in the second step either the same amount of cash or
the same amount and type of consideration paid to acquire the Virginia
corporation's shares in the first step.
None of the foregoing limitations and special voting requirements
applies to a transaction with an Interested Shareholder whose acquisition
of shares making such person an Interested Shareholder was approved by
a majority of the Virginia corporation's Disinterested Directors.
<PAGE>
These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the statute provides that, by affirmative
vote of a majority of the voting shares other than shares owned by any
Interested Shareholder, a corporation can adopt an amendment to its
articles of incorporation or bylaws providing that the Affiliated
Transactions provisions shall not apply to the corporation. The
Company has not opted-out of the Affiliated Transactions provisions.
Virginia law also provides that shares acquired in a transaction that
would cause the acquiring person's voting strength to meet or exceed any
of three thresholds (one-fifth, one-third or a majority of the outstanding
voting shares, respectively) have no voting rights unless granted by a
majority vote of shares not owned by the acquiring person or any officer or
employee-director of the Virginia corporation. This provision empowers an
acquiring person to require the Virginia corporation to hold a special
meeting of shareholders to consider the matter within 50 days of its
request.
LEGAL OPINION
The legality of the Securities being offered hereby will be passed
upon for the Company by Hunton & Williams, Riverfront Plaza, East Tower,
951 East Byrd Street, Richmond, Virginia 23219. Thurston R. Moore, a
member of Hunton & Williams, is a director of the Company. At May 31,
1996, Mr. Moore beneficially owned 108,635 shares of the Common Stock
of the Company.
EXPERTS
The financial statements and schedules incorporated by reference
in this Prospectus and elsewhere in the Registration Statement have been
audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving such reports.
No person is authorized to give any information or to make any
representations other than those contained or incorporated by reference in
this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or the
Selling Shareholders. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any securities other than the
registered securities to which it relates or an offer to sell or a
solicitation of an offer to buy such securities in any jurisdiction and
to any person to whom it is unlawful to make such an offer or
solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof, or that the information herein is
correct as of any time subsequent to its date.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission registration fee . . . $ 237
State securities laws qualification and registration fees . . . 0
Printing fees. . . . . . . . . . . . . . . . . . . . . . . 1,000
Legal fees. . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Accounting fees . . . . . . . . . . . . . . . . . . . . . . 1,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . 500
Total $ 3,737
All of the above items except the registration fee are estimated. State
securities laws qualification and registration fees and expenses, selling
commissions, and fees and expenses of counsel to the Selling Shareholders
shall be borne by the Selling Shareholders. Selling commissions and
expenses of sellers' counsel will vary depending on the individual, the
method of sale and the amount sold and cannot be estimated. All other
expenses shall be borne by the Company.
Item 15. Indemnification of Directors and Officers.
Article 10 of the Virginia Stock Corporation Act and the Company's
Articles of Incorporation provide for indemnification of officers and
directors of the Company under certain circumstances. No director or
officer of the Company shall be liable to the Company or its
shareholders for monetary damages in respect of proceedings brought by
or on behalf of the Company or its shareholders, unless such person
engaged in willful misconduct or a knowing violation of the criminal
law or any federal or state securities law. The Company shall indemnify
any person who is or was a party to a proceeding as a result of serving
as a director or officer of the Company against any liability incurred
in connection with such proceeding unless the person engaged in willful
misconduct or a knowing violation of criminal law.
Insurance carried by the Company provides (within limits and
subject to certain exclusions) for reimbursement of amounts which (a) the
Company may be required or permitted to pay as indemnities to the
Company's directors or officers for claims made against them, and (b)
individual directors, officers and certain employees of the Company may
become legally obligated to pay as the result of acts committed by them
while acting in their corporate or fiduciary capacities.
<PAGE>
Item 16. Exhibits.
4.1 Articles of Incorporation, as amended, consisting of
Certificate of Merger, including Articles of Incorporation,
incorporated by reference to the registrant's Current Report
on Form 8-K filed on January 3, 1996, and the registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
4.2 Bylaws, as amended, incorporated by reference to Exhibit
4.2 to the registrant's Registration Statement on Form S-3
(File No. 33-62257) filed on August 30, 1995.
5.1 Opinion of Hunton & Williams, counsel to the Company.
Previously filed.
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Hunton & Williams (included in Exhibit 5.1
hereto). Previously filed.
25 Powers of Attorney. Previously filed.
* Filed herewith
Item 17. Undertakings.
(a) The Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment
to this Registration Statement: to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; (2) that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes 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 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
<PAGE>
(c) 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
described under Item 15 or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of such Registrant in the successful defense of action,
suit or proceeding is asserted by such director, officer or controlling
person in connection with the securities being registered, such 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 of whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of
such issue.
<PAGE>
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 Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Milford, State of Connecticut, as of the 20th day of June, 1996.
EXECUTONE Information Systems, Inc.
By: /s/ Alan Kessman
Alan Kessman
Chairman of the Board, President and
Chief Executive Officer
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints Alan Kessman, Michael W. Yacenda and Barbara C.
Anderson, or any one or more of them, his true and lawful attorney-in-fact,
for him and in his name, place and stead, to sign any and all amendments
(including post-effective amendments) to this Amendment No. 1 to the
Registration Statement and to cause the same to be filed with the
Securities and Exchange Commission, hereby granting to said
attorneys-in-fact full power and authority to do and perform all and
every act and thing whatsoever requisite or desirable to be done in and
about the premises as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming
all acts and things that said attorneys-in-fact may do or cause to be
done by virtue of these presents.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to the Registration Statement has been
signed by the following persons in the capacities indicated as of the
2oth day of June, 1996.
/s/ Alan Kessman /s/ Richard S. Rosenbloom
Alan Kessman Richard S. Rosenbloom
Chairman of the Board, Director
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Anthony R. Guarascio /s/ Thurston R. Moore
Anthony R. Guarascio Thurston R. Moore
Vice-President, Finance and Director
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
/s/ Stanley M. Blau /s/ William R. Smart
Stanley M. Blau William R. Smart
Vice-Chairman of the Board Director
/s/ Jerry M. Seslowe
Jerry M. Seslowe
Director
<PAGE>
EXHIBIT INDEX
Exhibit
Number
23.1 Consent of Arthur Andersen LLP
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated
January 26, 1996, except with respect to the matter discussed in the
footnote to the consolidated financial statements labeled "Note N-
Subsequent Events" in EXECUTONE Information Systems, Inc.'s Form 10-K
for the year ended December 31, 1995, and to all references to our
Firm included in this registration statement. It should be noted
that we have performed no audit procedures subsequent to January 26,
1996, the date of our report, except with respect to the footnote as
to which the date is April 10, 1996. Furthermore, we have not audited
any financial statements of EXECUTONE Information Systems, Inc. as of
any date or for any period subsequent to December 31, 1995 (date of
audited financial statements included in Form 10-K).
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 21, 1996
<PAGE>
