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CERTIFICATE OF DESIGNATION,
POWERS, PREFERENCES AND RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK
PAR VALUE $.001 PER SHARE
OF
MANGOSOFT, INC.
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Pursuant to Section 78.1955 of the
Nevada Revised Statutes
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The undersigned hereby certify that they are the duly appointed President
and Secretary of MangoSoft, Inc., a Nevada corporation (the "Company"), and
pursuant to Nev. Rev. Stat. Sec. 78. 1995, DO HEREBY CERTIFY.
That, pursuant to the authority conferred upon the Board of Directors of
the Company by Article IV of the Company's Articles of Incorporation (the
"Articles"), the Board of Directors of the Company, by unanimous written
consent adopted the following resolution creating a series of Preferred Stock
designated Series A Convertible Preferred Stock.
WHEREAS, the Board of Directors of the Company is authorized, within the
limitations and restrictions stated in the Articles, to fix by resolution or
resolutions the designation of preferred stock and the powers, preferences and
other rights and qualifications as may be fixed by resolution or resolutions of
the Board of Directors and under the General Corporation Law of Nevada; and
WHEREAS, it is the desire of the Board of Directors of the Company,
pursuant to its authority, to authorize and fix the terms of preferred stock to
be designated a Series A Convertible Preferred Stock of the Company and the
number of the shares constituting such preferred stock;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the Series
A Convertible Preferred Stock on the terms and with the provisions herein set
forth:
The relative rights, preferences, powers, qualifications, limitations and
restrictions granted to or imposed upon the Series A Convertible Preferred
Stock or the holders thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall have a
par value of $.001 per share and shall be designated as Series A Convertible
Preferred Stock (the "Series A Preferred Stock") and the number of shares
constituting the Series A Preferred Stock shall be that Two Million Five
Hundred Thousand (2,500,000). The original issue price for any share of Series
A Preferred Stock (the "Original Issue Price") shall be Four Dollars ($4.00)
per shares (as adjusted for any stock splits, stock dividends,
recapitalizations or the like).
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Section 2. Rank. The Series A Preferred Stock shall rank, upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (all such distributions being referred to collectively as
"Distributions"): (i) junior to any other class or series of capital stock of
the Company hereafter created specifically ranking by its terms senior to the
Series A Preferred Stock (the "Senior Securities"), (ii) prior to all of the
Company's common stock $.001 par value per share (the "Common Stock"); (iii)
prior to any class or series of capital stock of the Company hereafter created
not specifically ranking by its terms senior to or on parity with any Series A
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); and (iv) on parity with any class or series of capital
stock of the Company hereafter created specifically ranking by its terms on
parity with the Series A Preferred Stock ("Parity Securities").
Section 3. Dividends. The holders of Series A Preferred Stock shall not be
entitled to receive dividends
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, or a sale or transfer of all or
substantially all of the Company's assets, the holders of shares of Series A
Preferred Stock shall be entitled to receive from the funds and assets (the
"Available Funds and Assets") that may be legally distributed to the Company's
stockholders (the "Liquidation Preference"), immediately after any
distributions to Senior Securities required by the Company's Certificate of
Incorporation or any certificate of designation, and prior in preference to any
distribution to Junior Securities but in parity with any distribution to Parity
Securities, an amount per share equal to the sum of the Original Issue Price.
If upon the occurrence of such event, and after payment in full of the
preferential amounts with respect to the Senior Securities, the Available
Funds, and Assets shall be insufficient to permit the payment of the full
preferential amounts due to the holders of the Series A Preferred Stock and the
Parity Securities, respectively, then the entire Available Funds and Assets
shall be distributed among the holders of the Series A Preferred Stock and the
Parity Securities, pro rata, based on the respective liquidation amounts to
which each such series of stock is entitled by the Company's Certificate of
Incorporation and any certificate(s) of designation relating thereto.
(b) In the event of a consolidation or merger of the Company, holders of
shares of Series A Preferred Stock may elect to either (i) receive the
Liquidation Preference before any payment is made to the holders of the Common
Stock or any other Junior Securities, and then share ratably with the holders
of Common Stock or any other Junior Securities in the distribution of the
remaining Available Funds and Assets of the Company, if any; or (ii) receive
the kind and amount of consideration which would have been received had such
shares of Series A Preferred Stock been converted immediately prior to such
consolidation or merger of the Company.
(c) Upon the completion of the distributions required by Section 4(a), if
Available Funds, and Assets remain in the Company, they shall be distributed to
holders of Junior Securities in accordance with the Company's Certificate of
Incorporation including any duly adopted certificate(s) of designation.
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Section 5. Conversion of Series A Preferred Stock. The record holders of
the Series A Preferred Stock shall have conversion rights as follow:
(a) Voluntary Conversion. Each share of Series A Preferred Stock shall be
convertible in whole or in part, at the option of the holder thereof, at any
time after issuance of the Series A Preferred Stock, into shares of Common
Stock (the "Conversion Shares"). The initial conversion price will be $4.00 and
will be subject to adjustments as set forth in Section 5(d) (the "Conversion
Price"). The number of shares of Common Stock into which each share of Series A
Preferred Stock is convertible is hereinafter collectively referred to as the
"Conversion Rate." For purposes of this Paragraph 5, such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A Preferred Stock to be converted,
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock as of such date.
(b) Automatic Conversion. The then-outstanding Series A Preferred Stock
shall be automatically converted, by virtue of such conditions and without any
action on the part of the holder thereof, into that number of shares of Common
Stock into which the Series A Preferred Stock would then be converted at the
then-effective Conversion Rate if (i) the Company completes an offering of its
securities within six months from the consummation of the Company's sale of
Series A Preferred Stock, resulting in gross proceeds to the Company of not
less than ten million ($10,000,000) dollars (a "Qualified Offering").
(c) Mechanics of Conversion. Before any holder of Series A Preferred Stock
shall be entitled to convert the same into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Company or of any transfer agent for the Series A Preferred
Stock, or if there is none, then at the office of the transfer agent for the
Common Stock, or if there is no such transfer agent at the principal executive
office of the Company, and shall give written notice to the Company at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares
of Common Stock are to be issued. The Company shall, as soon as practicable
thereafter, issue and deliver to such holder of Series A Preferred Stock, or to
the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Series
A Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date.
(i) Lost or Stolen Certificates. Upon receipt by the Company of evidence
of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates, or (in the case of loss, theft or destruction) of indemnity or
security reasonably satisfactory to the Company, and upon surrender and
cancellation of the Preferred Stock Certificates, if mutilated, the Company
shall execute and deliver new Preferred Stock Certificates of like tenor and
date. However, the
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Company shall not be obligated to ro-issue any lost or stolen Preferred Stock
Certificates if the holder contemporaneously requests the Company to convert
such Series A Preferred Stock into Common Stock.
(ii) Date of Conversion. The date on which conversion occurs (the "Date of
Conversion") shall be deemed to be the date a notice of conversion (the "Notice
of Conversion") is faxed with evidence of receipt of the transmission to the
Company or its transfer agent as the case may be, provided that if the Notice
of Conversion is received by the Company after 6:00 pm., New York City time,
the Date of Conversion shall be the next business day. The original Series A
Preferred Stock certificates representing the shares of Series A Preferred
Stock to be converted shall be surrendered by depositing such certificates with
a common courier for either overnight or (if delivery is outside the United
States) two (2) day delivery, as soon as practicable following the Date of
Conversion. The person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Date of
Conversion.
(d) Adjustment to Conversion Rate and Conversion Price
(i) Adjustment to the Conversion Rate due to Stock Split, Stock Dividend
or Other Similar Event. If prior to the conversion of all the Series A
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock divided or other similar event, the Conversion Rate and
Conversion Price shall be proportionately adjusted, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Conversion Rate and
Conversion Price shall be proportionately adjusted.
(ii) Adjustment Due to Consolidation, Merger, Exchange of
Recapitalization, or Other Similar Event. If prior to the conversion of all the
Series A Preferred Stock, them shall be any merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event, as a result of
which shares of Common Stock of the Company shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Company or another entity or there is a sale of all or
substantially all of the Company's assets, then the holders of Series A
Preferred Stock thereafter shall have the right to receive upon conversion of
Series A Preferred Stock, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities and/or other
assets which the holders of the Series A Preferred Stock would have been
entitled to receive in such transaction had the Series A Preferred Stock been
converted immediately prior to such transaction, and in any such case
appropriate provisions shall be made with respect to the rights and interests
of the holders of the Series A Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for the adjustment of the
Conversion Rate and Conversion Price and of the number of shares issuable upon
conversion of the Series A Preferred Stock) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
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(iii) Adjustment Due to Qualified Offering. If, prior to the conversion of
all the Series A Preferred Stock, the Company shall issue or sell securities of
the Company in a Qualified Offering, then the Conversion Price shall be reduced
to an amount equal to Eighty Percent (80%) of the sale price of the Common
Stock sold in such Qualified Offering (or Eighty Percent (80%) of the
conversion price of securities convertible into Common Stock sold in such
Qualified Offering), but in no event shall the Conversion Price be reduced
below Three ($3.00) Dollars.
(iv) No Fractional Shares. If any adjustment under this Section 5(d) would
create a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon conversion shall be the next higher
number of shares.
Section 6. Voting Rights.
(a) In addition to any other rights provided for herein or by law, the
holders of Series A Preferred Stock shall be entitled to vote, together with
the holders of Common Stock as one class, on an matters as to which holders of
Common Stock shall be entitled to vote, in the same manner and with the same
effect as such Common Stock holders. In any such vote, each share of Series A
Preferred Stock shall entitle the holder thereof to the number of votes per
share that equals the number of whole shares of Common Stock into which each
such share of Series A Preferred Stock is then convertible, calculated to the
nearest whole share.
Section 7. Protective Provisions.
(a) So long as shares of Series A Preferred Stock are outstanding, the
Company shall not, without first obtaining the approval (by vote or written
consent as provided by Nevada Law) of the holders of at least a majority of the
then outstanding shares of Series A Preferred Stock:
(i) alter or change the rights, preferences or privileges of the Series A
Preferred Stock or any Senior Securities or Parity Securities so as to affect
adversely the Series A Preferred Stock; or
(ii) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the Holders of
shares of the Series A Preferred Stock under Section 305 of the Internal
Revenue Code of 1986, as amended (or any comparable provision of the Internal
Revenue Code as hereafter from time to time amended).
(b) The Company shall at all times reserve, and keep available for
issuance upon the conversion of the Series A Preferred Stock such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if necessary to permit the conversion of all
outstanding shares of Series A Preferred Stock.
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Section 8. Status of Converted Stock. In the event any shares of Series A
Preferred Stock shall be converted pursuant to Section 5 hereof, the shares so
converted shall be canceled, shall return to the status of authorized but
unissued Preferred Stock of no designated series and shall not be issuable, by
the Company as Series A Preferred Stock.
Section 9. Miscellaneous.
(a) There is no sinking fund with respect to the Series A Preferred Stock.
(b) The shares of the Series A Preferred Stock shall not have any
preferences, voting power or relative, participating, optional, preemptive or
other special rights except as set forth in this designation and in the
Articles of Incorporation of the Corporation, as amended.
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IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed on its behalf by its President and Secretary this 6th day of March,
2000.
MANGOSOFT, INC.
By: /s/ Dale Vincent
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Name: Dale Vincent
Title: President
By: /s/ Selig Zises
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Name: Selig Zises
Title: Secretary
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