Executone Information Systems Announces Redemption of Preferred Stock.

MILFORD, Conn.--(BUSINESS WIRE)--April 7, 1999--Executone Information Systems, Inc. (Nasdaq NM:XTON), announced today that it has passed another important milestone in the Company's plan to separate its telephony and healthcare businesses from eLottery, Inc., its developing web-based lottery retailer and supplier of eCommerce solutions for government lotteries. Executone received approval from 100% of its preferred shareholders to terminate the current Share Exchange Agreement and accelerate the redemption of Executone's preferred stock into common stock.

This transaction increases the ownership percentage of the existing common stockholders compared to the previous Share Exchange Agreement and preserves their percentage ownership compared to the original preferred stock agreement. This preferred stock was created when Executone purchased eLottery's predecessor company, Unistar Gaming Corp., in 1995. Under the terminated Share Exchange Agreement, preferred holders had the right to convert their Executone preferred stock into 15% of eLottery with the potential to reach 34% ownership upon the achievement of certain milestones and the right to receive 50% of eLottery's earnings as dividends. With accelerated redemption, the preferred holders will hold 21% of eLottery's common equity following the separation of the core business and no longer be entitled to 50% of eLottery's earnings.

Executone Chairman and Chief Executive Officer, Stanley J. Kabala, said "I am delighted we were able to construct an effective transaction to simplify our capital structure, align the interests of our former preferred and current common shareholders and terminate the previously filed Share Exchange Agreement. The Board of Directors of Executone authorized this transaction as in the best interest of our common shareholders."

Executone previously announced that it will separate its core telephony and healthcare businesses from eLottery and at the conclusion of the transaction Executone Information Systems, Inc. will be renamed eLottery, Inc. Executone's Board of Directors has also announced that it received an offer for the core businesses from a group led by Stanley J. Kabala, Chairman and Chief Executive Officer of Executone, in the range of $70 million. The separation of the businesses would be accomplished through a transfer of all the assets and employees of the telephony and healthcare businesses to a new company to be privately held by management and selected outside investors. The proceeds of any sale will remain in the public company to help it accelerate the achievement of eLottery's business plans.

eLottery, Inc. will provide a wide array of products and services to the domestic and international lottery markets. The Company has developed and operated systems software that enables the electronic distribution of lottery tickets over the Internet, Intranet and via telephony. The Company believes that the electronic distribution of lottery tickets through these systems will increase lottery sales because they make the purchase of tickets more easily accessible and because they make use of technology to enhance and enliven the lottery gaming experience. With its unique and proven ability to offer lottery operators its new Internet and Intranet based lottery products worldwide, the Company believes it is well positioned to capitalize on the growth in non-traditional lottery sales. eLottery, Inc. is on the World Wide Web at http://www.elottery.com with demonstration games at http://www.elotteryworld.com.

Executone Information Systems, Inc. develops, markets and supports voice and data communications systems. Products and services include telephone systems, voice mail systems, inbound and outbound call center systems, and specialized healthcare communications systems. Executone's products and services are sold under the EXECUTONE, INFOSTAR, IDS, LIFESAVER, and INFOSTAR/ILS brand names. Executone is on the World Wide Web at http://www.executone.com.

This news release contains forward-looking statements. Such statements are subject to certain factors, which may cause Executone's plans to differ or results to vary from those expected including the risks associated with the development of new products and the uncertainty of product acceptance, the competitive nature of the Company's industry, rapid technological change, legal uncertainties, the Company's dependence on key personnel, and a variety of risks set forth from time to time in Company filings with the Securities and Exchange Commission.