As filed with the Securities and Exchange Commission
on September 24, 1996
Registration No.333-7279
======================================================
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
<PAGE>
Preliminary Prospectus dated September 24, 1996
EXECUTONE INFORMATION SYSTEMS, INC.
17,788,558 SHARES OF COMMON STOCK
This Prospectus relates to 17,788,558 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 September 20, 1996, as reported on
the Nasdaq, was $ 2.75 per share.
_________________________
THE PURCHASE OF THESE SECURITIES INVOLVES CERTAIN
RISK FACTORS. SEE "RISK FACTORS", PAGE 5.
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 September 24, 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 Commission maintains
a Web site that contains reports, proxy and information
statements and other information regarding registrants
that file electronically with the Commission at
http://www.sec.gov.
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
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-KA for the fiscal
year ended December 31, 1995, as filed on August 29,
1996; (ii) the Company s Quarterly Reports on Form 10-Q
for the quarters ended March 31,1996, and June 30, 1996;
(iii) the definitive proxy material of the Company for
the Annual Meeting of Shareholders held July 30, 1996,
as filed with the Commission on June 10, 1996; and (iv)
Current Reports on Form 8-K dated April 10, 1996, and
May 31, 1996, as amended by Form 8-KA dated May 31,
1996.
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
<PAGE>
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.
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 400 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 and
data 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
<PAGE>
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 communications software applications.
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 LIFESAVERTM 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/ILSTM locator system, released in
early 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 ILSTM system
can be integrated with the Company's telephone systems
and the LIFESAVERTM 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.
<PAGE>
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.
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 400-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, Malaysia 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>
RECENT DEVELOPMENTS
On May 31, 1996, the Company sold its 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 warrants entitle the Company to purchase
28,985 shares of the Class A common stock of Buyer at a
price of $3.73 per share, and 5,797 shares of the Class L
common stock of Buyer at a price of $167.71 per share, the
number and price of shares in each case being subject to
adjustment under certain circumstances. Each warrant is
exercisable for three years, from the date of issuance
until May 30, 1999.
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 videoconferencing 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, including customer service
contracts and certain inventory, to BT Visual Images LLC
for approximately $145,000 and future contingent
consideration, plus the assumption of certain
liabilities relating to the business of the division.
In April 1996, the Company also sold its inmate
calling business, including certain equipment and
customer contracts, for approximately $550,000 plus the
assumption of certain obligations relating to the
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, and that the states lack
authority to issue the Section 1084 notification 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 and network
services divisions were subsequently 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,
<PAGE>
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.
SELLING SHAREHOLDERS
The Securities being offered hereby by the Selling
Shareholders (i) were acquired by the Selling
Shareholders in the Company's acquisition of Unistar in
December 1995, or (ii) are issuable upon exercise of
options or conversion or redemption of Preferred Stock of
the Company issued in connection with the acquisition of
Unistar, or (iii) are issuable upon exercise of warrants
issued to Mr. Stanley Blau, an officer and director of
the Company, in 1987, in connection with his employment
by Vodavi Technology Corporation, a predecessor of the
Company.
Certain of the Selling Shareholders acquired an
aggregate of 3,700,000 shares of the Securities on
December 19, 1995, in exchange for their shares of
Unistar, and can acquire an additional 425,000 shares of
the Securities upon exercise of options granted by the
Company in connection with the Unistar acquisition, up
to an additional 4,925,000 shares of the Securities on
conversion or redemption of the Cumulative Convertible
Preferred Stock, Series A (the "Series A Stock") and up
to 8,375,000 shares upon conversion or redemption of the
Cumulative Contingently Convertible Preferred Stock,
Series B (the "Series B Stock"). Mr. Blau can acquire
up to 300,000 shares upon exercise of his warrant.
Shareholder approval was required before any of
the Series B Stock can be converted or redeemed because
the total number of shares of Common Stock potentially
issuable upon redemption or conversion of all the
Preferred Stock (13,300,000), plus the Securities issued
in the acquisition (3,700,000), or 17,000,000 shares of
Common Stock, exceeded 20% of the outstanding shares of
Common Stock prior to the acquisition. Under the rules
of the National Association of Securities Dealers (NASD)
market on which the Company's shares are traded,
issuance or potential issuance of this amount of shares
required shareholder approval. The Company therefore
submitted the convertibility and redemption features of
the Series B Stock to its shareholders for approval at
the 1996 Annual Meeting, and the shareholders approved
the issuance of the Common Stock upon such conversion
por redemption. No additional authorization of
shareholders is required for issuance of Common Stock or
Preferred Stock or the issuance of Common Stock upon
redemption or conversion of Series A Stock.
<PAGE>
The following table sets forth for each of the
Selling Shareholders, as applicable, (i) the number of
shares of Common Stock, including the Securities,
beneficially owned prior to this offering (as of August 31,
1996), including for the purposes of the table the
maximum number of Securities potentially issuable upon
exercise of outstanding options and conversion or
redemption of outstanding Preferred Stock, (ii) the
amounts of the Securities offered hereby, also including
all such potentially issuable Securities, and (iii) the
amounts of Common Stock to be owned upon completion of
the offering.
<PAGE>
<PAGE>
Total Total Number of
Number of Number of shares to
Shares Securities be Owned
Owned to upon
Prior to be Offered Completion
Offering(1) Hereby of Offering(1)
[S] [C] [C] [C]
Louis K. Adler 170,118 21,258 (2) 2,500
69,915 (3)
76,445 (4)
Richard Bartlett 260,444 56,688 (2) - 0 -
203,756 (4)
Robert A. Berman 6,356 6,356 (3) - 0 -
Stanley M. Blau 753,846 300,000 (5) 453,846
Cooper Life 5,359,724 1,166,520 (2) - 0 -
Sciences, Inc. 4,193,204 (4)
Glenn Goord 25,000 25,000 (3) - 0 -
Robert Korngold 23,750 23,750 (3) - 0 -
Momar Corporation 95,339 95,339 (3) - 0 -
Donald Press 12,712 12,712 (3) - 0 -
Resource Holdings 122,189 12,755 (2) - 0 -
Associates 63,559 (3)
45,875 (4)
Estate of Mel 95,339 95,339 (3) - 0 -
Schnell
Lawrence Schaen 1,250 1,250 (3) - 0 -
Clark Schubach 12,712 12,712 (3) - 0 -
Jerry M. Seslowe 310,457 56,689 (2) 37,300
12,712 (3)
203,756 (4)
John C. Shaw 260,444 56,688 (2) - 0 -
203,756 (4)
James W. Spencer 1,810,503 394,053 (2) - 0 -
1,416,450 (4)
Robert F. Starzel 6,356 6,356 (3) - 0 -
10-26 South William 195,343 42,516 (2) - 0 -
Street Associates 152,827 (4)
Watermark Investments 8,696,763 1,892,833 (2) - 0 -
Limited 6,803,930 (4)
Total 18,282,204 17,788,558 493,646
<PAGE>
_______________
(1) Total Shares owed prior to the offering includes all shares
issued and issuable upon exercise of options or warrants and coversion
or redemption of Preferred Stock. Based upon 51,574,385 shares of
Common Stock outstanding as of August 31, 1996, plus the shares to be
acquired by the Selling Shareholder, the percentage of the outstanding
shares to be owned by each Selling Shareholder upon completion of the
offering is less than 1%.
(2) Shares were acquired in the acquisition of Unistar in exchange
for Unistar common stock owned by the Selling Shareholders.
(3) Shares are issuable upon exercise of stock options granted in
connection with the Company's acquisition of Unistar, primarily in
substitution for options to purchase Unistar common stock.
(4) Up to this number of maximum shares are contingently issuable
upon conversion or redemption of Series A Stock and, if conversion and
redemption is approved by the Company's shareholders, the Series B
Stock.
(5) Shares are issuable upon exercise of a warrant issued to Mr.
Blau in 1987 by Vodavi Technology Corporation, a predecessor of the
Company.
None of the Selling Shareholders are employees or otherwise
have a relationship with the Company except Mr. Stanley M.
Blau, who has been a director of the Company since 1983, Mr.
Jerry M. Seslowe, who has been a director of the Company
since February 1, 1996, and Mr. James Spencer, who is the
former President and an employee of Unistar Entertainment,
Inc. a subsidiary of Unistar.
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 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.
<PAGE>
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.
Common Stock
At August 31, 1996, there were 51,574,385 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.
<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, except as
described below as required to the terms of the Preferred
Stock.
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 Entertainment, 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 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) five 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.
<PAGE>
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
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 was required before any of the Series
B Preferred Stock can be converted or redeemed. The Company
therefore submitted the convertibility and redemption
features of the Series B Stock to its shareholders for
approval at the 1996 Annual Meeting, and the shareholders
approved the issuance of the Common Stock upon such
conversion or redemption.
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.
<PAGE>
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.
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
<PAGE>
or that the transaction satisfy the fair-price requirements
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.
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 August
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,
<PAGE>
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>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission
registration fee . . . . . . . . . . $ 18,500
State securities laws qualification
and registration fees. . . . . . . . .$ 2,000
Printing fees. . . . . . . . . . . . . . . $ 1,000
Legal fees . . . . . . . . . . . . . . . . $ 2,000
Accounting fees. . . . . . . . . . . . . . $ 1,000
Miscellaneous expenses. . . . . . . . . . . $ 500
Total $ 25,000
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-KA 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 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 5.1hereto). 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.
(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
<PAGE>
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 any 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
<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 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
September, 1996.
EXECUTONE Information Systems, Inc.
By: /s/ Alan Kessman
Alan Kessman
Chairman of the Board, President and
Chief Executive Officer
POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration
Statement has been signed by the following persons in the
capacities indicated as of the 20th day of September, 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/ A.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)
/s/ Stanley M. Blau /s/ Jerry M. Seslowe
Stanley M. Blau Jerry M. Seslowe
Vice-Chairman of the Board Director
<PAGE>
<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" as
to which the date is April 10, 1996 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. I
ARTHUR ANDERSEN LLP
Stamford, Connecticut
September 20, 1996
<PAGE>
<PAGE>
September 24, 1996
Securities & Exchange Commission
1933 Act Filing Desk
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
Re: EXECUTONE Information Systems, Inc.
Gentlemen:
Enclosed herewith for filing pursuant to the Securities Act
of 1933, as amended, is Amendment No. 1 to a Registration
Statement on Form S-3 (File No. 333-7279) of EXECUTONE
Information Systems, Inc. The registration fee has been
paid with the initial filing.
Very truly yours,
Barbara C. Anderson
Vice President, General Counsel
