SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
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Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
MANGOSOFT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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MANGOSOFT, INC.
1500 West Park Drive, Suite 190
Westborough, Massachusetts 01581
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Holders of Common Stock:
The Annual Meeting of Stockholders of MangoSoft, Inc., a Nevada corporation
(the "Company"), will be held on Thursday, May 24, 2001 at 10:00 A.M., local
time, at the Company's principal executive offices located at Suite 190, 1500
West Park Drive, Westborough, Massachusetts 01581 for the following purposes:
1. To elect six directors to serve one-year terms and until their
successors are duly elected and qualified.
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ended December 31, 2001.
3. To transact any such other business as may properly come before the
Annual Meeting or at any adjournment thereof.
The Board of Directors has fixed the close of business on Tuesday, April
17, 2001 as the record date for determining stockholders entitled to notice of
and to vote at the meeting and any adjournments thereof.
A proxy and return envelope are enclosed for your convenience.
By order of the Board of Directors
Robert E. Parsons
Secretary
Westborough, Massachusetts
April 17, 2001
Your vote is important. Whether or not you expect to attend the Annual
Meeting, please complete, date and sign the enclosed proxy card and mail it
promptly in the enclosed envelope. No postage is necessary if the proxy card
is mailed in the United States.
MANGOSOFT, INC.
1500 West Park Drive, Suite 190
Westborough, Massachusetts 01581
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of MangoSoft, Inc., a
Nevada corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors (the "Board") for use at the Annual Meeting
of Stockholders (the "Annual Meeting") of the Company to be held on May 24,
2001, and at any adjournment thereof.
Only stockholders of record at the close of business on April 17, 2001 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting
and any adjournments thereof. On the Record Date, the Company had outstanding
approximately 26,957,142 shares of common stock, par value $0.001 per share
(the "Common Stock"), which are the only securities of the Company entitled to
vote at the Annual Meeting.
A copy of the notice of meeting accompanies this Proxy Statement. An Annual
Report to Stockholders, containing the audited, consolidated financial
statements for the fiscal year ended December 31, 2000, is being mailed
together with this Proxy Statement to all stockholders entitled to vote. This
Proxy Statement and the form of proxy were first mailed to stockholders on or
about April 18, 2001.
Voting
Each share of Common Stock outstanding on the Record Date is entitled to
one vote. The Board of Directors does not know of any matter that is expected
to be presented for consideration at the Annual Meeting other than the
election of Directors and the ratification of the appointment of the
independent certified public accountants of the Company for the current fiscal
year. However if other matters properly come before the Annual Meeting, the
persons named in the accompanying proxy intend to vote thereon in accordance
with their judgment.
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld and, where a
choice is specified as to the proposal, they will be voted in accordance with
such specification. If no instructions are given, the persons named in the
proxy solicited by the Board of Directors of the Company intend to vote FOR
the nominees for election as Directors of the Company listed herein and FOR
the ratification of the appointment of Deloitte & Touche LLP as the Company's
independent certified public accountants for the fiscal year ending December
31, 2001.
One-third of the outstanding shares of Common Stock entitled to vote on the
Record Date, whether present in person or represented by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting and
any adjournment or postponement thereof. Abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for
the transaction of business, but are not treated as a vote cast on any matter.
As long as a quorum is present in person or by proxy at the Annual Meeting,
the Directors shall be elected by a plurality of the votes cast at the Annual
Meeting, and Director nominees who receive the greatest number of votes at the
Annual Meeting (up to the number of Directors to be elected) will be elected.
The affirmative vote of the holders of at least a majority of the outstanding
shares of Common Stock present and entitled to vote at the Annual Meeting is
required to ratify the appointment of independent public accountants.
Revocability of Proxies
Stockholders who execute proxies may revoke them by giving written notice
to the Chief Financial Officer of the Company at any time before such proxies
are voted. Attendance at the Annual Meeting shall not have the effect of
revoking a proxy unless the stockholder so attending shall, in writing, so
notify the Secretary of the Annual Meeting at any time prior to the voting of
the proxy.
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Solicitation
The Company will bear the costs of the Annual Meeting and the costs of
soliciting proxies, including the costs of mailing the proxy materials. In
addition to solicitation by mail, Directors, officers, regular employees and
agents of the Company (who will not be specifically compensated for such
services) may solicit proxies by telephone or otherwise. Arrangements will be
made with brokerage houses and other custodians, nominees, and fiduciaries to
forward proxies and proxy material to their principals, and the Company will
reimburse them for their expenses.
MATTERS TO COME BEFORE THE ANNUAL MEETING
PROPOSAL ONE: ELECTION OF DIRECTORS
At the Annual Meeting, six directors are to be elected, each to hold office
(subject to the Company's By-Laws) until the next annual meeting and until his
successor has been elected and qualified. The Company's By-laws provide that
the Board of Directors shall consist of not less than one or such other number
as may be determined from time to time by the Board of Directors of the
Company at a duly held meeting thereof. The Board of Directors has currently
fixed the number of directors at eight. Each nominee has consented to being
named as a nominee in this Proxy Statement and to serve if elected. If any
nominee listed in the table below should become unavailable for any reason,
which the Board of Directors does not anticipate, the proxy will be voted for
any substitute nominee or nominees who may be selected by the Board of
Directors prior to or at the Annual Meeting.
Each of the following Directors has been nominated for re-election at the
Annual Meeting:
Name Age Position(s)
---- --- -----------
Dale Vincent............. 56 Director, President and Chief Executive Officer
Paul C. O'Brien (1)...... 61 Director and Non-Executive Chairman
Tony Coelho (1).......... 57 Director
Dr. Ira Goldstein........ 52 Director
Dr. Nick Tredennick...... 54 Director
Selig Zises.............. 58 Director
- --------
(1) Member of the Audit and Compensation Committees
Dale Vincent was appointed President, Chief Executive Officer and elected a
Director following the merger of MangoSoft Corporation with a wholly owned
subsidiary of First American Clock Co. (the predecessor name of the Company)
in September 1999 (the "Merger"). Previously, he served as the Chief Executive
Officer of MangoSoft Corporation since May 1999, as its Chief Financial
Officer from September 1998 to May 1999, and as a Director of MangoSoft
Corporation since July 1995. Mr. Vincent has over 25 years of senior financial
and business management experience, with the last 10 years developing and
funding companies in the software industry. Since April 1990, Mr. Vincent has
served as a Managing Director of ACAP, Inc., a private investment company, the
general partner of Associated Capital L.P., a private investment company, and
consults with Associated Capital L.P with respect to its investment and
marketing activities. He has also served as a Director of MaMaMedia Inc. since
1996.
Paul C. O'Brien was elected a Director and Non-Executive Chairman following
the Merger in September 1999. He previously served MangoSoft Corporation in
the same capacity from June 1999 to September 1999. Mr. O'Brien has over 30
years experience in the telecommunications industry. He has been the President
of Pan-Asia Development, an investment firm concentrating on Asian ventures,
since 1995. In December 1994, Mr. O'Brien founded The O'Brien Group, Inc., a
telecommunications investment and consulting firm that provides pro bono
consulting services for a wide variety of non-profit organizations
concentrating on fund-raising and public policy issues. Prior to founding his
firm, he was employed by New England Telephone
2
where he was appointed President and Chief Executive Officer in 1988 and
Chairman of the Board in 1993. Mr. O'Brien serves as a Director of NETOPTIK
and Renaissance Worldwide, and is non-executive Chairman of the Board of View
Tech and Cambridge Neuroscience. He is also a Director of several private
companies.
Tony Coelho was elected a Director in February 2001. Previously, Mr. Coelho
served as a United States Congressman from 1978 to 1989. He has been the
Chairman of the President's Committee on Employment of People with
Disabilities since his appointment in 1994 by President Clinton and was
appointed as Vice Chair of the National Task Force on Employment of Adults
with Disabilities in 1998. Mr. Coelho currently serves as a Director of the
Epilepsy Foundation of America, the National Organization on Disability, the
National Rehabilitation Hospital and VSA (formerly Very Special Arts).
Dr. Ira Goldstein was elected a Director following the Merger in September
1999. He previously served MangoSoft Corporation in the same capacity from
June 1999 to September 1999. Dr. Goldstein has been the Chief Scientist at the
LaserJet Imaging Division of Hewlett-Packard Company ("HP") for the past two
years. Prior to his current position, he served HP as Chief Technology Officer
for two years. Previously, he managed a research center at HP Laboratories and
various product divisions in the areas of software development, networking,
imaging and security.
Dr. Nick Tredennick was elected a Director in February 2000. He previously
served on the MangoSoft Corporation Board of Advisors since the Merger. Dr.
Tredennick has served as President of Tredennick, Inc., a technical consulting
company, since 1989. He served as Chief Scientist for Altera and currently
serves as Chief Scientist for QucikSilver Technology. Dr. Tredennick holds
nine patents in microprocessor logic design and reconfigurable computing. Dr.
Tredennick was named a Fellow of the IEEE for his contributions in
microprocessor design and recently was nominated as an IEEE representative to
the Engineering Accreditation Commission. Dr. Tredennick is on the Board of
Directors of OpenReach.
Selig Zises was elected a Director following the Merger in September 1999.
He previously served MangoSoft Corporation in the same capacity from July 1995
to September 1999. Mr. Zises has served as a Managing Director and Treasurer
of ACAP, Inc., the general partner of Associated Capital L.P. since April
1990. In this capacity, he consults with Associated Capital L.P. with respect
to its trading and investment activities. He was a co-founder of Integrated
Resources, Inc. and served as its Chairman and Chief Executive Officer from
1969 through early 1989. Mr. Zises is the Chairman of the Board of Associated
Venture Management, a venture capital and merchant-banking firm.
Dr. Donald A. Gaubatz was appointed Senior Vice President and Chief
Operating Officer in January 2000. He previously served on the Board of
Advisors since the Merger. Previously, Dr. Gaubatz was an independent investor
and consultant, working with development stage companies in the fields of
video, optical and wireless networking. From 1978 to 1994, Dr. Gaubatz held
numerous positions at Digital Equipment Corporation.
Linda Myers-Tierney was appointed Senior Vice President and Chief Marketing
Officer in December 2000. Previously, Ms. Myers-Tierney served as Chief
Marketing Officer at Eastman Software from December 1999 to December 2000.
From 1996 to 1999, Ms. Myers Tierney founded Myers-Tierney & Associates, an
independent consulting practice market research firm that provided industry
analysis, market research and positioning strategy to a wide range of clients.
Scott H. Davis was appointed Vice President and Chief Technology Officer
following the Merger in September 1999. He previously served MangoSoft
Corporation in the same capacity since October 1998. From September 1995
through September 1998, he served MangoSoft Corporation as the Director of
Software Development. Prior to joining MangoSoft Corporation in September
1995, Mr. Davis was employed at Digital Equipment Corporation where he held a
variety of engineering and management positions over a 16-year period.
Robert E. Parsons was appointed Vice President and Chief Financial Officer
following the Merger in September 1999. He previously served MangoSoft
Corporation in the same capacity since August 1999. From
3
1992 through August 1999, he was employed by Advanced Modular Solutions, Inc.,
a privately held technology company that develops networked client/server
computing systems, high availability/fault tolerant computing systems, network
attached storage systems and fully-integrated streaming video solutions. He
served Advanced Modular Solutions, Inc. as its Chief Financial Officer from
1997 to August 1999, as Director of Manufacturing during 1996 and 1997, and as
Controller from 1992 to 1996.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
Director Compensation
Directors do not receive salaries or cash fees for serving as Directors nor
do they receive any cash compensation for serving on committees. However,
members of the Board of Directors may be compensated for their services in the
form of stock option grants.
Meetings of the Board of Directors
During fiscal year 2000, the Board of Directors held nine (9) meetings and
took action by unanimous written consent on five (5) occasions. The Company
does not have a nominating committee. In fiscal 2000, all of the Company's
Directors attended at least 75% of Board meetings. The Audit Committee of the
Board of Directors held five (5) meetings and the Compensation Committee held
one (1) meeting.
Board Member Resignations
On January 19, 2001, Craig D. Goldman resigned as Director and Non-
Executive Co-Chairman of the Board of Directors. Mr. Goldman served in this
capacity since the Merger. He previously served MangoSoft Corporation in the
same capacity since June 1999.
On March 2, 2001, Joseph Robinson resigned as Director of the Board of
Directors. Mr. Robinson served in this capacity since June 2000.
The Company's 1999 Incentive Compensation Plan, as amended, provides
Directors one (1) year to exercise their vested stock options from the date
their Directorship terminated. Mr. Goldman has the option to purchase 230,000
shares of Common Stock at $1.25 per share and 120,000 shares at $5.00 per
share, which will expire on January 29, 2002. Mr. Robinson had no options to
purchase shares of Common Stock.
Board Committees and Membership
The Board of Directors has an Audit Committee (the "Audit Committee")
consisting entirely of independent Directors within the meaning of Nasdaq
Market Place Rule 4200(a)(15), current members of which are Paul C. O'Brien
and Tony Coelho. In 2000, the Board of Directors adopted the Charter of the
Audit Committee. A copy of the Charter of the Audit Committee is attached to
this Proxy Statement as Appendix A.
The Audit Committee's primary duties and responsibilities under this
Charter are as follows:
. serve as an independent and objective party to monitor the Company's
financial reporting processes and internal control systems;
. review and appraise the audit efforts of the Company's independent
auditors; and
. provide an open avenue of communication among the Company's independent
auditors, financial and senior management and the Board of Directors.
The Board of Directors has a Compensation Committee (the "Compensation
Committee"), current members of which are Paul C. O'Brien and Tony Coelho. The
Compensation Committee has authority to interpret the provisions and supervise
the administration of the 1999 Incentive Compensation Plan and to grant
options outside of such plan and the authority to review all matters relating
to the personnel of the Company.
4
Audit Committee Report
The Audit Committee has reviewed and discussed the audited consolidated
financial statements for the year ended December 31, 2000 with management and
has discussed with the independent auditors the matters required to be
discussed by SAS 61, as amended. The Audit Committee has received the written
disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1, and has discussed with the
independent public accountant the independent accountant's independence.
Based on the review and discussions referenced above, the Audit Committee
recommended to the Board of Directors that the audited consolidated financial
statements be included in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2000 for filing with the Securities and
Exchange Commission.
Members of the Audit Committee
Paul C. O'Brien
Tony Coelho
5
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth information concerning the total
compensation the Company paid to our chief executive officer and the three
other executive officers that were serving as executive officers at the end of
2000 and earned in excess of $100,000 during 2000. These four persons are
hereinafter referred to collectively as the "Named Executive Officers."
Summary Compensation Table
Annual
Compensation Long Term Compensation
-------------- -------------------------------
Restricted Securities All
Name and Principal Salary Bonus Stock Under LTIP Other
Position Year ($) ($) Awards Options/SARS Payouts Comp.
- ------------------ ---- ------ ----- ---------- ------------ ------- -----
Dale Vincent(1)......... 2000 171,635 -- -- 600,000 -- --
President and Chief 1999 150,000 -- -- 400,000 -- --
Executive Officer 1998 201,200 -- -- -- -- --
Dr. Donald A.
Gaubatz(2)(3).......... 2000 140,096 -- -- 225,000 -- --
Senior Vice President
and 1999 -- -- -- 25,000 -- --
Chief Operating Officer 1998 -- -- -- -- -- --
Scott H. Davis.......... 2000 135,200 19,000 -- -- -- --
Vice President and Chief 1999 128,000 19,000 -- 250,000 -- --
Technology Officer 1998 124,462 -- -- -- -- --
Robert E. Parsons....... 2000 119,615 -- -- -- -- --
Vice President and Chief 1999 43,265 25,000 -- 160,000 -- --
Financial Officer 1998 -- -- -- -- -- --
- --------
(1) From March 1998 to September 1998, Mr. Vincent served as the Chief
Financial Officer of MangoSoft Corporation pursuant to an agreement
between MangoSoft Corporation and Associated Venture Management ("AVM").
Selig Zises, a Director and principal stockholder of MangoSoft, Inc., is
the Chairman of the Board of AVM. The cost of Mr. Vincent's services was
$151,200, which was included in the $647,795 administrative fee charged to
MangoSoft Corporation by AVM during 1998. In September 1998, MangoSoft
Corporation negotiated an agreement with Mr. Vincent and his company RCG
Real Estate ("RCG") under which Mr. Vincent continued to serve MangoSoft
Corporation as its Chief Financial Officer, in consideration of which
MangoSoft Corporation paid RCG $12,500 per month. In May 1999, Mr. Vincent
was named the President and Chief Executive Officer of MangoSoft
Corporation. Mr. Vincent continued to be compensated under the terms of
the agreement with RCG through December 1999. On January 1, 2000, Mr.
Vincent became an employee of the Company and the agreement with RCG was
terminated. The Company believes the fees paid to AVM and RCG for Mr.
Vincent's services during the respective periods were on terms as
favorable as those available from non-affiliated persons.
(2) The 2000 salary amount reflects a partial year. Dr. Gaubatz began
employment in January 2000.
(3) Dr. Gaubatz received the option to purchase 25,000 shares of common stock
in his capacity as a member of our Board of Advisors in 1999.
Common Stock Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of February 1, 2001
with respect to beneficial ownership of our common stock by (i) each person
that to the knowledge of the Company owns beneficially more than 5% of our
outstanding common stock; (ii) each Director and named executive officer; and
(iii) all Directors and named executive officers as a group. The percentages
in the last column are based on 26,957,142
6
shares of common stock outstanding on February 1, 2001. In each case, except
as otherwise indicated in the footnotes to the table, the shares shown in the
second column are owned directly by the individuals or entity named in the
first column and such individuals or entity have sole voting and dispositive
power with respect to the shares shown. For the purposes of this table,
beneficial ownership is determined in accordance with the federal securities
laws and regulations; inclusion in the table of shares not owned directly by
the named Director or executive officer does not constitute an admission that
the Director or officer beneficially owns such shares for any other purpose.
Number of Shares of Percent of Outstanding
Beneficial owners: Common Stock Owned Common Stock Owned
- ------------------ ------------------- ----------------------
Palisade Private Partnership(1)..... 5,525,000 20.5%
One Bridge Plaza, Suite 695
Fort Lee, NJ 07024
Jay Zises(2)........................ 3,083,577 11.4%
767 3rd Avenue, 16th Floor
New York, NY 10017
Selig Zises(3)(4)................... 2,878,192 10.7%
Dale Vincent(4)(5).................. 1,027,135 3.8%
Dr. Donald A. Gaubatz(4)(5)......... 123,437 *
Scott H. Davis(4)(5)................ 250,000 *
Paul C. O'Brien(4)(5)............... 225,000 *
Dr. Ira Goldstein(4)(5)............. 150,000 *
Robert E. Parsons(4)(5)............. 160,000 *
Dr. Nick Tredennick(4)(5)........... 104,721 *
All Directors and officers as a
group.............................. 4,918,485 18.2%
- --------
* Less than one percent.
(1) Total shares of common stock beneficially owned by Palisade Private
Partnership, L.P. include: 3,125,000 shares owned by Palisade Private
Partnership, L.P., 1,200,000 shares registered in the name of Clippership
& Co., and 1,200,000 shares registered in the name of Pitt & Co.
(2) Total shares of common stock beneficially owned by Jay Zises, the brother
of Selig Zises, include the following: 58,928 shares owned by Jay Zises;
2,652,375 shares owned by Delaware Guarantee & Trust TTEE FBO Jay Zises
IRA (a self-directed IRA); 40,478 shares owned by Jay and Nancy Zises
JTWROS; 169,932 shares owned by Guarantee & Trust TTEE FBO Jay Zises IRA
DTD 7-9-92 (a self-directed IRA); 67,458 shares owned by Associated
Capital LP; and 94,406 shares owned by Associated Capital Offshore LP.
Nancy Zises is the wife of Jay Zises. Jay Zises is a limited partner in
Associated Capital LP and Associated Capital Offshore LP, and has voting
and dispositive power in respect of the common stock owned by such
entities. Other than such limited partnerships and the Zises family
relationships referenced in this table and the related footnotes, there
are no affiliations between Jay Zises and any other persons or entities
identified in such table or footnotes.
(3) Total shares of common stock beneficially owned by Selig Zises include the
following: 2,696,106 shares owned by Selig Zises; 113,287 shares owned by
Guarantee & Trust Co. TEE FBO Selig Zises R-IRA DTD 5-20-96 (a self-
directed IRA); and 68,799 shares owned by his daughter Lynn Zises. Selig
Zises is the brother of Jay Zises, both of whom are principal stockholders
of the Company. Other than the Zises family relationships references in
this table and the related footnotes, there are no affiliations between
Selig Zises and any other persons or entities identified in such table or
footnotes.
(4) Address is c/o MangoSoft, Inc., 1500 West Park Drive, Suite 190,
Westborough, Massachusetts 01581.
(5) Includes shares of common stock which the Directors and named executive
officers have the right to acquire through the exercise of stock options
within 60 days of February 1, 2001, as follows: Dale Vincent, 1,000,000;
Craig D. Goldman, 350,000; Dr. Donald A. Gaubatz, 123,437; Scott H. Davis,
243,600; Paul C. O'Brien, 200,000; Dr. Ira Goldstein, 100,000; Robert E.
Parsons, 160,000; and Dr. Nick Tredennick, 100,000.
7
Employment Agreements
The Company does not have employment contracts with any of the Named
Executive Officers.
Stock Options
The following tables set forth information concerning grants of stock
options to, and exercises of stock options by, the Named Executive Officers
during 2000, and the number and value of unexercised options held by each of
them at December 31, 2000. The Value of the Unexercised In-The-Money Options
is based on the average bid and ask price of our common stock on the OTCBB on
December 31, 2000. There is a limited market for our Common Stock and,
accordingly, such valuation may not necessarily reflect the actual market
value of the outstanding options.
Options / SAR Grants in Last Fiscal Year (Individual Grants)
Number of Securities Percent of the Total Option
Underlying Options / Options / SARs Granted Option Exercise Expiration
Name SARs Granted to Employees in 2000 Price per Share Date
- ---- -------------------- ---------------------- --------------- ----------
Dale Vincent............ 600,000 20.6% $4.00 3/14/10
Dr. Donald A. Gaubatz... 225,000 7.7% $4.00 1/31/10
Fiscal Year-End Option / SAR Values
No. of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options In-The-Money Options
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
Dale Vincent............ -- -- 1,000,000 -- $-- $--
Dr. Donald A. Gaubatz... -- -- 81,250 168,750 -- --
Scott H. Davis.......... 6,400 $38,400 243,600 -- -- --
Robert E. Parsons....... -- -- 160,000 -- -- --
Mr. Scott Davis exercised his option to purchase 6,400 shares of Common
Stock at $1.25 when the market value of the Company's Common Stock was $6.00
per share. No other Named Executive Officer exercised any of their stock
options in the year ended December 31, 2000.
With the exception to Dr. Ira Goldstein, who was paid $126,000 for
technical consulting services rendered to us, our outside Directors are
compensated for their services in the form of stock option grants. No cash
compensation is paid to the Directors for their services. The following table
sets forth the options granted to each outside Director in 2000:
Options / SAR Grants in Last Fiscal Year (Individual Grants)
Number
of Securities Option
Underlying Option / Option Exercise Expiration
Name SARs Granted Price per Share Date
---- ------------------- --------------- ----------
Craig D. Goldman................. 120,000 $5.00 5/23/10
Dr. Ira Goldstein ............... 25,000 $5.00 5/23/10
Dr. Nick Tredennick.............. 75,000 $5.00 5/13/10
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act and the rules thereunder require our
Directors and officers and persons who own more than 10% of our outstanding
common stock to file reports of ownership and changes in ownership
8
with the Securities and Exchange Commission (the "Commission"). Our personnel
generally prepare these reports on the basis of information obtained from each
Director and officer, and greater than 10% stockholders are required by the
Commission to furnish the Company with copies of all reports filed. To the
best of our knowledge, all reports required by Section 16(a) of the Exchange
Act to be filed by our Directors, officers and 10% or greater stockholders
during our fiscal year ended December 31, 2000 were filed on time except that
two Form 4's were not timely filed for Selig Zises for November 2000 covering
three purchases of our common stock and December 2000 covering one purchase
and one sale of our common stock.
Certain Relationships and Related Transactions
In February 1999, MangoSoft Corporation encountered difficulty with the
issuance of its 12% convertible notes (the "12% Notes") due to MangoSoft
Corporation's continuing losses and lack of significant revenue. Given the
difficult market conditions at that time for this type of security issuance,
the 12% Notes contained a beneficial conversion feature to make the investment
more attractive to new investors. The beneficial conversion feature allowed
for conversion of the 12% Notes into shares of common stock at 75% of the
lowest cash price paid for any equity offering during the period from the date
of the issuance of the 12% Notes to their conversion, subject to additional
discounts for each month following the initial six-month period that the 12%
Notes remained unpaid, with a maximum discount of 50%.
At the time of the Merger, the conversion rate was 65% of the lowest cash
price paid for common stock. However, to facilitate completion of the Merger
in September 1999, an agreement was negotiated with Selig and Jay Zises and
Palisade to convert the 12% Notes at 58% of the lowest price paid for the
common stock, or $0.71 per share. The Company believes the terms of our
borrowing arrangements with Selig and Jay Zises and Palisade were on terms as
favorable as those available from non-affiliated persons.
In December 1999, the Company issued to Selig Zises an 8% unsecured demand
note for $200,000 principal amount, which was senior to all our obligations.
On March 28, 2000, the Company repaid the $232,500 principal, including
$32,500 outstanding from earlier in the year, plus related accrued interest
owed to Selig and Jay Zises. The Company believes the terms of our borrowing
arrangements with Selig and Jay Zises were on terms as favorable as those
available from non-affiliated persons.
The Company had an agreement with Craig D. Goldman, a former Director,
pursuant to which Mr. Goldman received grants of stock options based on a
percentage of shares outstanding on a fully diluted basis. This agreement was
granted to Mr. Goldman in connection with his joining the Board of Directors
and was in recognition of his knowledge, experience and extensive business
relationships within the computer software and e-business fields. As of
December 31, 2000, Mr. Goldman was granted options to purchase 350,000 shares
of common stock at exercise prices ranging from $1.25 to $4.00 per share. On
January 29, 2001, Mr. Goldman resigned from our Board of Directors. His
outstanding options will expire on January 29, 2002.
On May 27, 1999, MangoSoft Corporation and Steve Frank, MangoSoft
Corporation's former Chief Executive Officer, reached a settlement agreement
and general release of claims brought by both parties over the termination of
Mr. Frank. As part of the settlement agreement, MangoSoft Corporation agreed
to repurchase 200,000 shares of its common stock for the sum of $100,000 upon
the completion of financing in the aggregate amount of $3,000,000. In
connection with the Merger, the Company repurchased the 200,000 shares from
Mr. Frank as agreed.
During 2000, Dr. Ira Goldstein, a Director, provided us with part-time
technical consulting. For these services, the Company reimburses Dr. Goldstein
on a per-diem basis. In 2000, the Company paid Dr. Goldstein $126,000 for the
technical consulting services he provided. The Company believes that the fees
paid to Dr. Goldstein for his technical consulting services during 2000 were
on terms as favorable as those available from non-affiliated persons.
9
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board recommends that you vote FOR its proposal to elect each of the
nominees for Director.
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP, independent
certified public accountants, to audit the books and records of the Company
for the fiscal year ended December 31, 2001. The affirmative vote of at least
a majority of the outstanding shares of Common Stock present and entitled to
vote at the Annual Meeting is required for the ratification of the selection
of Deloitte & Touche LLP as the Company's independent auditors for the fiscal
year ending December 31, 2001. As a result of Deloitte & Touche's knowledge of
the Company's operations, and reputation in the auditing field, the Board is
convinced that Deloitte & Touche has the necessary personnel, professional
qualifications and independence to act as the Company's auditors. A
representative of Deloitte & Touche is expected to be present at the Annual
Meeting and will be given an opportunity to make a statement if he or she so
desires. The representative will be available to respond to appropriate
questions.
Audit Fees
The audit fees billed by Deloitte and Touche for its audit of the Company's
2000 consolidated financial statements and its reviews of the Company's 2000
unaudited condensed consolidated quarterly financial statements were
approximately $63,000.
All Other Fees
In 2000, Deloitte & Touche billed the Company approximately $133,000 in
connection with the registration of its Common Stock on Forms 10-SB and SB-2.
An additional $7,000 in miscellaneous professional services, principally in
the area of tax and employee benefits, was billed in 2000. The Audit Committee
does not believe that the other fees billed by Deloitte & Touche in 2000
impair its independence.
Changes in Accountants
On January 11, 2000, the Company dismissed its then current independent
accountant, David T. Thompson P.C. ("Thompson") and appointed Deloitte &
Touche LLP as our independent accountant. The decision to change independent
accountants was recommended by the Audit Committee and approved by the Board
of Directors on October 14, 1999.
Our change in independent accountants was a result of the Merger. Since the
Merger, the Company has been conducting the business previously conducted by
MangoSoft Corporation and appointed Deloitte & Touche LLP as its independent
accountants in order to ensure continuity.
Thompson's report on the financial statements of First American for the
fiscal years ended December 31, 1998 and 1997 did not contain an adverse
opinion or disclaimer of opinion. Furthermore, such reports were not qualified
or modified as to uncertainty, audit scope or accounting principles, and there
were no disagreements with Thompson on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope procedure or
procedure. However, Thompson's reports for the fiscal years ended December 31,
1998 and 1997 contained doubt about First American's ability to continue as a
going concern.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote FOR the adoption of
this proposal.
10
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the next annual
meeting of stockholders must be received by the Company at its principal
executive offices by December 17, 2001 for inclusion in the proxy statement
and form of proxy relating to that meeting and must comply with the applicable
requirements of the federal securities laws. Stockholder proposals intended to
be presented at the next annual meeting of stockholders but submitted outside
the processes of Rule 14a-8 under Securities Exchange Act of 1934 (i.e., a
proposal which is not submitted for inclusion in the Company's proxy
statement) must be received by the Company at its principal executive offices
by March 2, 2002 to be considered timely under the Securities and Exchange
Commission's proxy rules.
OTHER MATTERS
The Board does not know of any matters to be brought before the Annual
Meeting other than the matters set forth in the Notice of Annual Meeting of
Stockholders and matters incident to the conduct of the Annual Meeting.
However, if any other matters should properly come before the Annual Meeting,
the persons named in the enclosed proxy card will have discretionary authority
to vote all proxies with respect thereto in accordance with their best
judgment.
11
APPENDIX A
CHARTER
of the
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
of
MANGOSOFT, INC.
I. STATEMENT OF POLICY
The function of the Audit Committee (the "Committee") of MangoSoft, Inc.
(the "Corporation") is to assist the Board of Directors (the "Board") of the
Corporation in fulfilling its oversight responsibilities by reviewing the
following: the financial reports provided by the Corporation to the Securities
and Exchange Commission (the "Commission"); the Corporation's systems of
internal controls regarding financial reporting that management and the Board
have established; and the Corporation's auditing, accounting and financial
reporting processes generally. Consistent with these functions, the Committee
should encourage continuous improvement of, and should foster adherence to,
the Corporation's financial reporting policies, procedures and practices at
all levels. The Committee's primary duties and responsibilities under this
Charter are as follows:
(a) Serve as an independent and objective party to monitor the
Corporation's financial reporting processes and internal control
systems.
(b) Review and appraise the audit efforts of the Corporation's independent
auditors.
(c) Provide an open avenue of communication among the independent auditors,
financial and senior management and the Board.
The Committee will fulfill these responsibilities by carrying out the
activities enumerated in Sections III and IV hereof.
II. COMPOSITION
So long as the Corporation is eligible to file its periodic reports with
the Commission under Commission Regulation S-B, the Committee shall be
comprised of two or more directors, as determined by the Board, the majority
of whom shall be Independent Directors (as defined below) and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. In
the event that the Corporation shall no longer be eligible to file its
periodic reports under Commission Regulation S-B, then (a) the Committee shall
be comprised of three or more directors, each of whom shall be (i) Independent
Directors and (ii) able to read and understand fundamental financial
statements, including balance sheets, income statements and cash flow
statements or will become able to do so within a reasonable period of time
after his or her appointment to the Committee; and (b) at least one member of
the Committee shall have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in the director's financial
sophistication, including being or having been a chief executive officer,
chief financial officer or officer or other senior officer with financial
oversight responsibilities. Notwithstanding the preceding sentence, one
director who is not an Independent Director and is not a current employee of
the Corporation or an immediate family member of such employee, may be
appointed to the Committee, if the membership on the Committee by the director
is required by the best interests of the Corporation and its stockholders, and
the Board discloses, in the next annual proxy statement subsequent to such
determination, the nature of the relationship and the reasons for that
determination. The Board, in its business judgment, shall determine that the
members of the Committee satisfy the criteria described in this Section II.
The members of the Committee shall be elected by the Board and shall serve
until their successors shall be duly elected and qualified. Unless a Chair of
the Committee is elected by the full Board, the members of the Committee may
designate a Chair by majority vote of the full Committee.
A-1
As used herein, "Independent Director" means a person other than an officer
or employee of the Corporation or its subsidiaries or any other individual
having a relationship, which, in the opinion of the Board, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director.
The following persons shall not be considered independent:
(a) A director who is employed by the Corporation or any of its affiliates
for the current year or any of the past three years;
(b) a director who accepts any compensation from the Corporation or any of
its affiliates in excess of $60,000 during the previous fiscal year,
other than compensation for board service, benefits under a tax-
qualified retirement plan or non-discretionary compensation;
(c) a director who is a member of the immediate family of an individual who
is, or has been in any of the past three years, employed by the
Corporation or any of its affiliates as an executive officer. Immediate
family includes a person's spouse, parents, children, siblings, mother-
in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, and
anyone who resides in such person's home;
(d) a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
Corporation made, or from which the Corporation received, payments
(other than those arising solely from investments in the Corporation's
securities) that exceed 5% of the Corporation's consolidated gross
revenues for that year, or $200,000, whichever is more, in any of the
past three years; or
(e) a director who is employed as an executive of another entity where any
of the Corporation's executives serve on that entity's compensation
committee.
III. MEETINGS
The Committee shall meet at least four times annually or more frequently as
circumstances dictate. As part of its responsibility to foster open
communication, the Committee should meet at least annually with the management
of the Corporation, the Corporation's Chief Financial Officer and the
independent auditors in separate executive sessions to discuss any matters
that the Committee or the other participants believe should be discussed
privately. In addition, the Committee or its Chair should meet with the
independent auditors and management quarterly to review the Corporation's
financial statements. The Committee shall maintain minutes or other records of
meetings and activities of the Committee, which shall be submitted to the
Board.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties hereunder, the Committee shall:
Review of Documents and Reports
(a) Review this Charter periodically, at least annually, as conditions
dictate, and report the results of its review to the Board.
(b) Review the Corporation's annual financial statements, including any
certification, report, opinion or review rendered by the independent
auditors.
(c) Review with financial management and the independent auditors drafts of
quarterly earnings press releases or Quarterly Reports on Form 10-Q (or
Form 10-QSB) in substantially final form prior to release or filing.
The Chair or one or more other members of the Committee may represent
the entire Committee for purposes of reviewing earnings press releases.
A-2
Independent Auditors
(a) Recommend to the Board the selection, termination or replacement of the
independent auditors.
(b) Receive from the auditors the report relating to the auditors'
independence including a representation that such report is consistent
with Independence Standards Board Standard No. 1, and discuss such
report with the independent auditors.
Financial Reporting Processes
(a) Consult with the independent auditors concerning their review of the
Corporation's financial reporting processes.
(b) Discuss with the Corporation's independent auditors their views about
the quality of the Corporation's accounting principles as applied to
its financial reporting.
(c) Consider, if appropriate, changes to the Corporation's auditing and
accounting principles and practices as suggested by the independent
auditors or management.
(d) Report to the Board such recommendations as the Committee deems
appropriate including whether the audited financial statements should
be included in the Corporation's Annual Report on Form 10-K (or Form
10-KSB).
The Audit Committee shall have the power to conduct or authorize
investigation into any matters within the Committee's scope and
responsibilities.
V. ADOPTION AND AMENDMENT
This Charter of the Audit Committee of MangoSoft, Inc. was duly adopted by
resolution of the Board on August 17, 2000 and may be amended from time to
time by resolution of the Board.
A-3
MANGOSOFT, INC.
PROXY
The undersigned hereby appoints Dale Vincent and Robert E. Parsons, and
each of them, with power of substitution, to represent and to vote on behalf of
the undersigned all of the shares of Common Stock of MangoSoft, Inc. (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held at the Company's offices at 1500 West Park Drive, Suite
190, Westborough, Massachusetts 01581 on Thursday, May 24, 2001, at 10:00 a.m.
local time, and at any adjournment or adjournments thereof, hereby revoking all
proxies heretofore given with respect to such stock, upon the following
proposals more fully described in the notice of and proxy statement for the
meeting (receipt of which is hereby acknowledged).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 and 2
1. ELECTION OF DIRECTORS
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nomineeslisted
Dale Vincent, Paul C. O'Brien, Tony Coelho
Dr. Ira Goldstein, Selig Zises, and Dr. Nick Tredinnick
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME ON THE SPACE PROVIDED BELOW:
- -------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2001
[_] FOR [_] AGAINST [_] ABSTAIN
- -------------------------------------------------------
3. In their discretion, upon such other matters as may properly come before
the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ELECTION OF ALL NOMINEES FOR DIRECTOR LISTED IN PROPOSAL 1 AND FOR
PROPOSALS 2.
[_] I will attend the meeting [_] I will not attend the meeting
Note: Please sign exactly as names appear on this proxy. Where shares are held
by joint tenants, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized person. If a partnership, please sign in partnership name by
an authorized person.
Dated:
MangoSoft, Inc. Individual
By:
- --------------------------- ---------------------------
Print name:
By:/s/ Dale Vincent By:
------------------------- ---------------------------
Print name: Dale Vincent Print name:
Title: President and Chief Executive Officer
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.