UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 20, 2004
SmartServ Online, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-28008 13-3750708
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
2250 Butler Pike, Suite 150, Plymouth Meeting, Pennsylvania 19462
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (610) 397-0689
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Compensation Actions Taken on February 11, 2005
CEO and COO
On February 11, 2005, the Compensation Committee of the Board of Directors
("Committee") and the Board of Directors ("Board') of SmartServ Online, Inc.
(the "Company") approved the following compensation decisions with regard to
Robert M. Pons, the Company's Chief Executive Officer and President, and Timothy
Wenhold, the Company's Chief Operating Officer:
o The Committee set the 2005 maximum bonus for Messrs. Pons and Wenhold
at 65% of their base salary, which bonus comprises of 3 components:
a. Successful integration of recently acquired KPCCD -- 15% of base
salary.
b. Successful introduction of the Company's Uphonia brand -- 15% of
base salary.
c. Attain cash flow break even or better in 2005 -- 35% of base
salary.
The specific parameters to measure if the first two components have
been met will be determined by the Committee, and their respective
employment agreements will be amended accordingly.
o The Committee approved an increase in the base salary of Messrs. Pons
and Wenhold to $241,500 and $195,500 per annum, respectively. For
2005, the Committee also intends to issue additional stock options to
Messrs. Pons and Wenhold from time to time as determined by the
Committee in its discretion.
o The Committee also approved further amendments to the base salary and
bonus package of Messrs. Pons and Wenhold, which amendments are
conditional upon the closing of the proposed acquisition of Telco
Group, Inc. and related companies ("Telco Group"). The proposed
acquisition of Telco Group was previously announced by press release
on November 17, 2004. In particular, in the event the Telco Group
closing occurs, then the base salary of Messrs. Pons and Wenhold would
increase to $350,000 and $283,000 per annum, respectively. Also, the
total compensation targets (including base salary and bonus) for
Messrs. Pons and Wenhold for 2005 are $550,000 and $450,000,
respectively, with the specific criteria to be determined by the
Committee and incorporated into their employment agreements.
Non-Employee Directors
Also on February 11, 2005, the Board approved amendments to the compensation
paid to the non-employee members of the Board.
o The non-employee directors will be paid the following annual rates for
service on the Board, which will be paid on a quarterly basis:
Non-employee board member -- $10,000
Non-employee Chairman of the Board -- $60,000
Committee Chairman -- $3,000
Committee Member -- $2,000
The directors will be reimbursed for out-of-pocket expenses incurred
in attending meetings. The Board also intends to issue additional
stock options to non-employee directors from time to time as
determined by the Board in its discretion.
o The Board also approved further amendments to the compensation paid to
non-employee directors to become effective upon (and conditioned upon)
the closing of the proposed acquisition of Telco Group. In particular,
in the event the Telco Group closing occurs then the non-employee
directors will be paid the following annual rates for service on the
Board, which will be paid on a quarterly basis:
Non-employee board member -- $30,000
Non-employee Chairman of the Board -- $150,000
Committee Chairman -- $7,500
Committee Member -- $5,000
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The directors would be reimbursed for out-of-pocket expenses incurred in
attending meetings, and the Board intends to issue additional stock options
to non-employee directors from time to time.
Option Grant to Chairman of Board
On January 10, 2005, the Board granted an option to purchase 250,000 shares of
the Company's common stock to Paul J. Keeler, the Company's Chairman of the
Board. This option was exercisable immediately and will expire on January 10,
2010. The exercise price for the option is $2.10 per share.
2004 Bonuses and Option Grants
On December 20, 2004, the Committee approved the following bonuses to Messrs.
Pons and Wenhold with regard to their performance in 2004. Messrs. Pons and
Wenhold were awarded a bonus of 100% of their respective base salary for 2004;
provided however, that 50% of this bonus will be deferred until the successful
closing of the proposed acquisition of Telco Group and/or financing to increase
working capital. These bonuses amounted to $210,000 for Mr. Pons and $170,000
for Mr. Wenhold in total (i.e., before the deferral of $105,000 and $85,000,
respectively). These bonuses were paid based on factors other than the bonus
criteria set forth in their employment agreements, which were deemed by the
Committee to be incomplete and not relevant to the current operating environment
of the Company. Also on December 20, 2004, the Committee granted an option to
purchase 400,000 and 250,000 shares of the Company's common stock to Messrs.
Pons and Wenhold, respectively. Both options will become exercisable in
thirty-six (36) equal monthly installments (on the last calendar day of each
month) beginning December 31, 2004 and ending on November 30, 2007. Both options
will expire on December 19, 2014 and have an exercise price of $2.07 per share.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SMARTSERV ONLINE, INC.
Dated: February 17, 2005 By: /s/ Robert M. Pons
Robert M. Pons,
Chief Executive Officer
