As filed with the Securities and Exchange Commission
on June 20, 1997
Registration No.333-7279
======================================================
SECURITIES AND EXCHANGE COMMISSION
______________________
AMENDMENT NO. 3
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.
X 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.
If this Form is filed to register additional
securities for an offering pursuant to Rule 462 (b)
under the Securities Act, please check the following
box and list the Securities Act registration statement
number of the earlier effective registration statement
for the same offering.
If this Form is a post-effective amendment filed
pursuant to Rule 462 (c) under the Securities Act,
check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering.
If delivery of the prospectus is expected to be
made pursuant to Rule 434, please check the following
box.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to
delay its effective date until the Registrant shall
file a further amendment which specifically states
that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
Preliminary Prospectus dated June 20, 1997
EXECUTONE INFORMATION SYSTEMS, INC.
15,938,113 SHARES OF COMMON STOCK
This Prospectus relates to 15,938,113 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 Stock
Market (NMS) under the symbol XTON. The last sales
price of the Common Stock on June 16, 1997, as
reported on the NASDAQ Stock Market, was $ 2.156 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.
<PAGE>
The date of this Prospectus is June 20, 1997
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-K for the fiscal
year ended December 31, 1996, as filed on March 31,
1997; (ii) the Company's Annual Report on Form 10-K/A
for the fiscal year ended December 31, 1996, as filed
on April 30, 1997; (iii) the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1997, as filed on May 14, 1997; (iv) the definitive
proxy material of the Company for the Annual Meeting
of Shareholders to be held July 29, 1997, as filed
with the Commission on June 2, 1997.
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
<PAGE>
pursuant to Section 14 of the Exchange Act and any
reports filed pursuant to Section 15(d) of the
Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the
Securities shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any
statement contained in a document incorporated by
reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any
other subsequently filed document which is
incorporated by reference herein modifies or
supersedes such earlier statement. Any such statement
so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of
this Prospectus.
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 develops, markets and supports voice and
data communications systems. Products and services
include telephone systems, voice mail systems, in-
bound and out-bound call center systems and
specialized hospital communications systems. The
Company, through its UniStar Entertainment subsidiary,
also has the exclusive right to design, develop and
manage the National Indian Lottery (the "NIL" or
"Lottery"). Products are sold primarily under the
EXECUTONEr, INFOSTARr, IDStm, LIFESAVERtm,
INFOSTAR/ILStm and UNISTARtm brand names through a
worldwide network of direct sales and service
employees and independent distributors.
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.
<PAGE>
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,
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 and data software applications.
The healthcare communications business provides to its
healthcare facility customers integration of the flow
of voice and data between nurse and patient
communication systems and hospital information
systems, resulting in 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/COMrII-E nurse call systems. The
Company markets software applications specific to
hospital and nursing homes to help resolve other labor
intensive tasks.
The healthcare communications business also markets
the INFOSTAR/ILStm locator system, which 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 ILS
system can be integrated with the Company's telephone
systems and nurse call systems to provide additional
productivity improvements for hospital environments.
The call center management business 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,
and scripting software to assist agents handling
calls. 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, 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,
1996, and amendments thereto, 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 market are Lucent
Technologies (the former equipment business of
American Telephone and Telegraph Co.), Nortel
(formerly known as Northern Telecom), Toshiba,
InterTel and Mitel. 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 China,
Malaysia, the Dominican Republic, and Korea. 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,
<PAGE>
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.
RECENT DEVELOPMENTS
On May 31, 1996, the Company sold the Company's
direct sales and service organization, including its
network services division and the national service
center, to Clarity Telecom Holdings, Inc., d/b/a
Executone Business Solutions ("Clarity") for
consideration valued at $69.6 million.
The Company and Clarity also entered into a
five-year exclusive distributor agreement pursuant to
which Clarity will sell and service EXECUTONEr and
INFOSTARr telephone products to business and
commercial locations that require up to 400
telephones.
The sale did not include the Pittsburgh direct
sales and service office, which the Company separately
sold to one of its existing independent distributors.
The sale of the direct sales and service group
(including the separate sale of the Pittsburgh office)
related primarily to the retail distribution channel
of the Computer Telephony division and included the
entire network services division. After the sale, the
Computer Telephony business consists of telephony
product sales to independent distributors, of which
Clarity is the largest distributor, along with the
National Accounts and Federal Systems marketing
groups. The Company retains its Healthcare
Communications and Call Center Management businesses
and the UniStar business.
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. The
Company has also commenced a legal action against GPT
to recover its damages. In June 1996, the Company
completed the sale of its videoconferencing division,
including customer service contracts and certain
inventory.
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
<PAGE>
business. This business was part of the computer
telephony division.
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 Gaming"). Unistar
Gaming, through its subsidiary UniStar Entertainment,
Inc. ("UniStar"), 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 Company 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 may not
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 argue that the Lottery is
authorized by the Indian Gaming Regulatory Act
("IGRA") passed in 1988, that IGRA preempts state and
federal statutes, that Section 1084 is inapplicable
and that the states lack authority to issue the
Section 1084 notification letters to any carrier.
On February 28, 1996, the Coeur d'Alene Tribal Court
ruled that all requirements of IGRA have been
satisfied, that Section 1084 is inapplicable and that
the states lack jurisdiction to interfere with the NIL
which will operate in Idaho on the Reservation, and
that the long-distance carrier cannot refuse service
to the NIL based upon Section 1084, an allegation that
the NIL is in violation of IGRA or the federal anti-
lottery statues. This ruling and a related order dated
May 1, 1996 are being appealed to the Tribal Appellate
Court and probably will be appealed ultimately to
United States federal courts as well. The Company has
been advised by its outside counsel, Hunton &
Williams, that based upon such firm's review of the
<PAGE>
applicable statutes, regulations and case law,
it believes that the National Indian Lottery is
authorized under IGRA and that the favorable rulings
issued by Coeur D'Alene Tribal Court on February 28,
and May 1, 1996 should be upheld on appeal.
On May 28, 1997, the Attorney General of the
State of Missouri brought an action in the Circuit
Court of Jackson County, Missouri, against the Coeur
d'Alene Tribe and UniStar seeking to enjoin lottery
games offered by the Tribe over the Internet and
managed by UniStar. The complaint alleges that the
Lottery violates Missouri anti-gambling laws and that
the marketing of the games violates the state's
Merchandising Practices Act and also seeks
restitution, a civil penalty, attorney's fees and
court costs. The Company believes, based on the
Tribal Court ruling and the opinion of its outside
counsel referred to above, that the Missouri suit has
no merit and that the lottery activities are legal.
UniStar and Tribe intend to contest the jurisdiction
asserted by the State of Missouri and defend the right
of the Tribe to offer the lottery on the Internet.
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
<PAGE>
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.
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 May
31, 1997), 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>
<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(1) Hereby of Offering(1)
<S> <C> <C> <C>
Louis K. Adler 175,868 21,258 (2) 8,250
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 705,429 300,000 (5) 405,429
Cooper Life Sciences, 5,359,724 1,166,520 (2) -0-
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 Schnell 95,339 95,339 (3) -0-
Lawrence Schaen 1,250 1,250 (3) -0-
Clark Schubach 12,712 12,712 (3) -0-
Jerry M. Seslowe 323,357 56,689 (2) 50,200
12,712 (3)
203,756 (4)
John C. Shaw 260,444 56,688 (2) -0-
203,756 (4)
James W. Spencer 1,416,450 1,416,450 (4) -0-
Robert F. Starzel 6,356 6,356 (3) -0-
10-26 South William 195,343 45,516 (2) -0-
Street Associates 152,827 (4)
Watermark Investments 6,803,930 6,803,930 (4) -0-
Limited
Watertone L.L.C. 500,000 500,000 (2) -0-
_________ ____________ ________
Total 16,401,992 15,938,113 463,879
</TABLE>
<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 49,471,481
shares of Common Stock outstanding as of May 31, 1997, 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 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, and Mr. Jerry M. Seslowe, who has
been a director of the Company since February 1,
1996.
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
<PAGE>
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 May 31, 1997, there were 49,471,481 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
<PAGE>
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 by 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,
<PAGE>
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 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
<PAGE>
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 holders of at
<PAGE>
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
<PAGE>
majority of the voting shares other than shares owned
by any Interested Shareholder, a corporation can adopt
an amendment to its articles of incorporation or
bylaws providing that the Affiliated Transactions
provisions shall not apply to the
corporation. The Company has not opted-out of the
Affiliated Transactions provisions.
Virginia law also provides that shares acquired in a
transaction that would cause the acquiring person's
voting strength to meet or exceed any of three
thresholds (one-fifth, one-third or a majority of the
outstanding voting shares, respectively) have no
voting rights unless granted by a majority vote of
shares not owned by the acquiring person or any
officer or employee-director of the Virginia
corporation. This provision empowers an acquiring
person to require the Virginia corporation to hold a
special meeting of shareholders to consider the matter
within 50 days of its request.
LEGAL OPINION
The legality of the Securities being offered hereby
will be passed upon for the Company by Hunton &
Williams, Riverfront Plaza, East Tower, 951 East Byrd
Street, Richmond, Virginia 23219. Thurston R. Moore,
a member of Hunton & Williams, is a director of the
Company. At May 31, 1997, Mr. Moore beneficially
owned 124,535 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
<PAGE>
affairs of the Company since the date hereof, or that
the information herein is correct as of any time
subsequent to its date.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange
Commission registration fee . . . . . . . . $ 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
<PAGE>
fiduciary capacities.
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 5.1 hereto). Previously filed.
23.3 Consent of Hunton & Williams.*
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 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>
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 19th day of June, 1997.
EXECUTONE Information Systems, Inc.
By: /s/ Alan Kessman
Alan Kessman
Chairman of the Board, President and
Chief Executive Officer
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 19th day of June,
1997.
/s/ Alan Kessman /s/ Richard S. Rosenbloom
Alan Kessman Richard S. Rosenbloom
Chairman of the Board, Director
President and Chief Executive
Offier
(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>
EXHIBIT INDEX
Exhibit
Number
23.1 Consent of Arthur Andersen LLP.
23.3 Consent of Hunton & Williams.
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 31, 1997 included
in EXECUTONE Information Systems, Inc.'s Form 10-K for
the year ended December 31, 1996 and to all references
to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
June 20, 1997
<PAGE>
Exhibit 23.3
June 20, 1997
EXECUTONE Information Systems, Inc.
478 Wheelers Farms Road
Milford, CT 06460
Form S-3/A Registration Statement
(File No. 333-7279)
Gentlemen:
This firm has reviewed the information set forth
in the ninth paragraph under "Recent Developments" of
the preliminary prospectus forming a part of the
Registration Statement on Form S-3/A dated June 20,
1997, covering the proposed offer and sale of up to
15,938,113 shares of common stock of EXECUTONE
Information Systems, Inc. (the "Company"). We
understand that the information set forth therein as
it related to the issue of the authorization of the
National Indian Lottery under 25 U.S.C. 2701 et seg.
is based upon the advice provided to the Company by
this firm.
We consent to the summarization of such advice
and the reference to us in the prospectus.
Very truly yours,
HUNTON & WILLIAMS
<PAGE
June 20, 1997
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.
3to a Registration Statement on Form S-3/A (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
