As filed with the Securities and Exchange Commission
on September 24, 1996
Registration No.33-63637
======================================================
SECURITIES AND EXCHANGE COMMISSION
______________________
AMENDMENT NO. 2
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>
<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.
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 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>
<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
(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-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 contained in a
document incorporated by reference herein shall be
deemed
<PAGE>
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
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
<PAGE>
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
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.
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>
<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, 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>
<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 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 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.
<PAGE>
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 .
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 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.
<PAGE>
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.
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 August
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
<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.
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.
<PAGE>
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.
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 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.
Common Stock
At August 31, 1996, there were 51,574,385
outstanding shares of Common Stock held by approximately
2,100 holders of record.
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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, 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 . . . . . . . . . . . . . . . $ 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 of 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 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:
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.
Alan Kessman Richard S. Rosenbloom
Chairman of the Board, Director
President and Chief Executive Officer
(Principal Executive Officer)
Anthony R. Guarascio Thurston R. Moore
Vice-President, Finance and Director
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Stanley M. Blau Jerry M. Seslowe
Vice-Chairman of the Board 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 27, 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.
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.2 to the
Registration Statement on Form S-3 of EXECUTONE
Information Systems, Inc. (File No. 33-63637).
The registration fee was paid with the original filing.
Very truly yours,
Barbara C. Anderson
Vice President, General Counsel
