SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
SmartServ Online, Inc.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies: Common
Stock, par value $.01 per share
2) Aggregate number of securities to which transaction applies:
_____________.
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): $ _______.
4) Proposed maximum aggregate value of transaction: $____________________
5) Total fee paid: $____________.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
SMARTSERV ONLINE, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held on __________, 2003
To the Stockholders of SmartServ Online, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of SmartServ Online, Inc., a Delaware corporation (the
"Company"), will be held at 9:00 A.M., local time, on ___________, __________,
2003, at the offices of Jenkens & Gilchrist Parker Chapin LLP, The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174 for the following
purpose:
1. To authorize an amendment to the Company's Amended and Restated
Certificate of Incorporation to effect a one-for-six reverse stock split of the
Company's common stock.
The Board of Directors has fixed the close of business on August __,
2003 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof. Only holders of record at the close of
business on the Record Date are entitled to notice of, and to vote at, the
Special Meeting or any adjournments or postponements thereof.
By Order of the Board of Directors
Richard D. Kerschner
Secretary
Stamford, Connecticut
August___, 2003
SPECIAL MEETING OF STOCKHOLDERS
OF
SMARTSERV ONLINE, INC.
----------------------
PROXY STATEMENT
----------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of SmartServ Online, Inc., a Delaware corporation (the
"Company"), of proxies from the holders of the Company's common stock, par value
$.01 per share (the "Common Stock"), for use in voting at a Special Meeting of
Stockholders (the "Special Meeting") of the Company to be held on _________,
________, 2003, at 9:00 A.M., local time, at the offices of Jenkens & Gilchrist
Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, New
York 10174, and at any adjournments or postponements thereof, for the purposes
set forth in the accompanying Notice of Special Meeting.
The approximate mailing date of this Proxy Statement is August_____,
2003.
The cost of preparing, assembling, printing, mailing and distributing
the Notice of Special Meeting, this Proxy Statement and the proxies is to be
borne by the Company. The Company has engaged D.F. King & Co., Inc., 77 Water
Street, New York, New York 10005, to assist in the distribution of proxy
solicitation materials and the solicitation of votes. For its services, D.F.
King & Co., Inc. will receive a fee of $6,000.00, plus reimbursement of certain
out-of-pocket expenses. The Company may reimburse brokers, banks and other
custodians, nominees and fiduciaries who are holders of record of the Company's
Common Stock, for their reasonable out-of-pocket expenses in forwarding proxy
solicitation materials to the beneficial owners of shares of Common Stock. In
addition to the use of the mail, proxies may be solicited without extra
compensation by directors, officers, employees and agents of the Company by
personal interview, telephone, e-mail, telegram or other means of electronic
communication.
The Company does not anticipate that a representative of the Company's
independent auditors will attend the Special Meeting. The Company expects a
representative of its independent auditors to attend the Company's 2003 Annual
Meeting of Stockholders. However, if a representative does attend the Special
Meeting, he or she would be given the opportunity to make a statement, if the
representative desired to do so, and to respond to appropriate questions.
It is extremely important that your shares are represented at the
Special Meeting, and, therefore, all stockholders are cordially invited to
attend the Special Meeting. However, whether or not you plan to attend the
Special Meeting, you are urged to, as promptly as possible, mark, sign and date
the enclosed form of proxy, which requires no postage if mailed in the United
States. If you hold shares directly in your name and attend the Special Meeting,
you may vote your shares in person, even if you previously submitted a proxy
card. Your proxy may be revoked at any time before it is voted by submitting a
written revocation or a proxy bearing a later date to the Secretary of the
Company, or by attending and voting in person at the Special Meeting. If you
hold your shares in "street name" you may revoke or change your vote by
submitting new instructions to your broker or nominee.
The Company's principal executive offices are located at Metro Center,
One Station Place, Stamford, Connecticut 06902, and its telephone number is
(203) 353-5950. The Company's web-site is http://www.smartserv.com.
PURPOSE OF THE MEETING
At the Special Meeting, the Company's stockholders will consider and
vote upon the following proposal (the "Proposal"): The approval of an amendment
to the Company's Amended and Restated Certificate of Incorporation to effect a
one-for-six reverse stock split of the Common Stock.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted in favor of the Proposal. In the event a stockholder specifies a
different choice by means of the enclosed proxy, his shares will be voted in
accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The close of business on August __, 2003 has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders entitled to notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof. As of the Record Date there were
12,297,199 shares of Common Stock of the Company issued and outstanding. Each
share of Common Stock outstanding on the Record Date will be entitled to one
vote on each matter to come before the Special Meeting. The presence, in person
or by proxy, of the holders of a majority of the outstanding shares of the
Company's Common Stock is required to constitute a quorum for the transaction of
business at the Special Meeting. Proxies submitted which contain abstentions or
broker non-votes will be deemed present at the Special Meeting for the purpose
of determining the presence of a quorum.
The affirmative vote of a majority of the issued and outstanding shares
of Common Stock will be required for approval of the Proposal. Shares abstaining
with respect to the Proposal will be considered as votes represented, entitled
to vote, and cast with respect thereto. Shares subject to broker non-votes with
respect to the Proposal are not considered shares entitled to vote with respect
to that matter. However, because an affirmative vote of a majority of the shares
of Common Stock outstanding is required to approve the Proposal, abstentions and
broker non-votes will have the same effect as a vote "against" the Proposal.
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SECURITY OWNERSHIP
The following table sets forth, as of July 31, 2003, certain
information with respect to the beneficial ownership of the Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company and (iv) all executive officers and
directors of the Company as a group. Except as otherwise indicated, each person
listed below has sole voting and investment power with respect to the shares of
Common Stock set forth opposite such person's name.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OUTSTANDING SHARES (3)
------------------------------------------ -------------------------------- --------------------------
Spencer Trask Ventures, Inc. 3,190,083 (4) 20.60%
535 Madison Avenue
New York, New York 10021
Steven Rosner 1,224,354 (5) 9.56%
1220 Mirabeau Lane
Gladwyn, Pennsylvania 19035
TecCapital, Ltd. 845,141 6.87%
Cedar House
41 Cedar Avenue
Hamilton, HM 12, Bermuda
Sebastian E. Cassetta 711,590(6) 5.73%
c/o SmartServ Online, Inc.
Metro Center, One Station Place
Stamford, CT 06902
Mario F. Rossi 343,830(7) 2.78%
c/o SmartServ Online, Inc.
Metro Center, One Station Place
Stamford, CT 06902
Thomas W. Haller 162,460(8) 1.31%
Richard Kerschner 124,444(9) 1.00%
L. Scott Perry 40,833(10) *
Catherine Cassel Talmadge 40,816(11) *
Charles R. Wood 29,000(12) *
Robert H. Steele 25,000(13) *
All executive officers and directors as
a group (8 persons) 1,478,373 (14) 11.45%
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* Less than 1%
(1) Under the rules of the SEC, addresses are only given for holders of 5% or
more of the outstanding common stock of the Company who are not officers
or directors of the Company.
(2) Under the rules of the SEC, a person is deemed to be the beneficial owner
of a security if such person has or shares the power to vote or direct the
voting of such security or the power to dispose or direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
securities if that person has the right to acquire beneficial
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ownership within 60 days of the date hereof. Except as otherwise indicated
the named entities or individuals have sole voting and investment power
with respect to the shares of common stock beneficially owned.
(3) Represents the number of shares of common stock beneficially owned as of
July 10, 2003 by each named person or group, expressed as a percentage of
the sum of all of (i) the shares of such class outstanding as of such
date, and (ii) the number of shares not outstanding, but beneficially
owned by such named person or group as of such date.
(4) Includes 478,522 shares of common stock issuable upon conversion of notes
and 1,711,566 shares of common stock issuable upon exercise of warrants.
(5) Includes 509,849 shares of common stock subject to currently exercisable
warrants.
(6) Includes 127,500 shares of common stock subject to currently exercisable
options. Also includes 2,051 shares held in trust for the benefit of Mr.
Cassetta's wife and 13,800 shares of common stock held by his children.
(7) Includes 83,000 shares of common stock subject to currently exercisable
options.
(8) Includes 162,194 shares of common stock subject to currently exercisable
options.
(9) Consists of 124,444 shares of common stock subject to currently
exercisable options.
(10) Includes 40,000 shares of common stock subject to currently
exercisable options.
(11) Includes 40,000 shares of common stock subject to currently exercisable
options and 300 shares of common stock held for her daughter under the
Uniform Gift to Minors Act.
(12) Includes 15,000 shares of common stock subject to currently exercisable
options.
(13) Consists of 25,000 shares of common stock subject to currently exercisable
options.
(14) Includes 2,051 shares held in trust for the benefit of Mr. Cassetta's
wife, 13,800 shares of common stock held by his children, 300 shares of
common stock held for Ms. Talmadge's daughter under the Uniform Gift to
Minors Act and 617,138 shares of common stock subject to currently
exercisable options issued to all executive officers and directors.
PROPOSAL: TO AUTHORIZE AN AMENDMENT TO THE COMPANY'S AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
The Company's Board of Directors has unanimously adopted resolutions
proposing, declaring advisable and recommending that the stockholders of the
Company approve an amendment to the Company's Amended and Restated Certificate
of Incorporation (the "Amendment") to effect a one-for-six stock split (the
"Reverse Split") and to provide for the payment of cash in lieu of fractional
shares otherwise issuable in connection with the Reverse Split. There will be no
change in the number of the Company's authorized shares of Common Stock and no
change in the par value of the Common Stock.
If the Proposal is approved, the Board of Directors will have the
authority, without further stockholder approval, to effect the Reverse Split,
pursuant to which each of the Company's presently outstanding shares (the "Old
Shares") of Common Stock would be exchanged for new shares (the "New Shares") of
Common Stock at an exchange ratio of one-for-six. All of the Company's
securities convertible into or exercisable for Common Stock will be exercisable
or convertible at six times the price for one-sixth of the number of shares of
Common Stock for or into which such security was previously exercisable or
convertible. The Board of Directors would also have the authority to determine
the exact timing of the Reverse Split, which may occur at any time on or prior
to October 31, 2003, without further stockholder approval. The timing will be
determined in the judgment of the Board of Directors, with the intention of the
Reverse Split occurring prior to the issuance of securities of the Company as
described below. See the information below under the caption "Purpose of the
Reverse Split." The text of the proposed Amendment is set forth on Exhibit A to
this Proxy Statement.
The Board of Directors also reserves the right, notwithstanding
stockholder approval and without further action by stockholders, to not proceed
with the Reverse Split, if, at any time prior to filing the Amendment with the
Secretary of State of the State of Delaware, the Board of Directors, in its sole
discretion, determines that the Reverse Split is no longer in the best interests
of the Company and its stockholders. The Board of Directors may consider a
variety of factors in determining whether or not to
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implement the Reverse Split, including, but not limited to, business,
transactional and financing developments and the Company's actual and projected
financial performance.
Except for changes resulting from the Company's purchase of fractional
shares and the consummation of the contemplated financing described below, the
Reverse Split will not change the proportionate equity interests of the
Company's stockholders, nor will the respective voting rights and other rights
of stockholders be altered. The Common Stock issued pursuant to the Reverse
Split will remain fully paid and non-assessable. The Company will continue to be
subject to the periodic reporting requirements of the Securities Exchange Act of
1934.
PURPOSES OF THE REVERSE SPLIT
The Company's Board of Directors believes that the Company must raise
additional capital in order to continue operations. In May and June, 2003 the
Company raised $1,500,000 by selling securities convertible for or exercisable
into Common Stock. The Board of Directors believes, however, that the Company
needs additional funding to continue its operations.
The Board of Directors believes that it is necessary and desirable to
increase the number of shares of Common Stock available for issuance in order to
give the Company additional flexibility to raise equity capital and to ensure
that the Company has a sufficient number of shares to issue upon the exercise of
all options and warrants.
The Company is in the process of preparing a private placement of its
securities utilizing the services of an investment banking firm (the
"Placement"). The Company and its investment banker have not finalized a
placement agreement or the terms of the proposed Placement. The summaries set
forth below reflect the Company's best estimate of the likely terms of the
Placement.
As currently contemplated by the Company, the Placement will be for the
sale of up to $5,200,000 of units (the "Units"), each Unit consisting of a share
of Series A convertible preferred stock (the "Preferred Stock"), convertible
into shares of Common Stock, and warrants to purchase shares of common stock.
The minimum amount that may be raised in the Placement is $2,500,000. It is
currently contemplated that each holder of Preferred Stock will: (1) be entitled
to an annual dividend of 8% of the Unit purchase price, payable in cash or in
shares of Common Stock at the end of each calendar quarter; (2) be entitled to
receive dividends the Board of Directors declares on the Common Stock on an
as-converted basis; (3) in the event of a liquidation, dissolution or winding up
of the Company, a merger of the Company, or sale of substantially all the assets
of the Company, (a) be entitled to receive an amount equal to the Unit purchase
price and any accrued but unpaid dividends before any payment is made to the
holders of Common Stock (the "Liquidation Preference"); and (b) after the
Liquidation Preference has been paid, participate with the holders of Common
Stock on an as-converted basis with respect to any assets remaining for
distribution; (4) be entitled to convert the shares of Preferred Stock into
shares of Common Stock; (5) be able to vote on an as-converted basis with the
holders of the Common Stock as if they were a single class; (6) be entitled to
vote as a class to elect two persons to serve on the Board of Directors of the
Company, which currently consists of six persons; (7) be entitled to vote
separately from the Common Stock as a class on certain matters affecting the
Preferred Stock; and (8) have the right to participate on a pro-rata basis in
future private offerings of Company securities.
The Board of Directors reserves the right to modify the terms of the
Placement, to not engage in the Placement or to engage in a different financing
arrangement if it deems that it is in the best interests
5
of the Company to do so. In addition, even if the Board of Directors determines
that it is in the best interests of the Company to complete the Placement on the
terms described below, there is no assurance that sufficient persons will invest
in the Placement on such terms.
At July 11, 2003 the Company had available for future issuance
14,882,457 shares of Common Stock. In the event that the Company were to raise
$4,000,000 in the Placement and in the further event that shares of Preferred
Stock were issued in the Placement and would be convertible into Common Stock of
the Company at the current market price of the Common Stock, the Company would
be required to reserve for issuance for such conversion approximately 10 million
shares of Common Stock (on a pre-Reverse Split basis). The Company also
anticipates that it would be required to issue warrants in the Placement. If the
warrant coverage in the Placement were 200%, this could result in an additional
20 million shares of Common Stock (on a pre-Reverse Split basis) issuable if all
the warrants were exercised. If the Company were to raise less money or if the
market price of the Common Stock of the Company were to increase, the number of
shares needed would be less than that indicated above but still in all
likelihood would be in excess of the shares of Common Stock currently available
for future issuance. Thus, existing stockholders should expect significant
dilution if the Company successfully completes any financing. However, as of the
date of this Proxy Statement, no prospective investor has committed to invest in
the Company on any specific terms or at all. Therefore, there can be no
assurance that we will be able to raise money pursuant to the Placement or any
other financing.
This Proxy Statement is neither an offer to sell nor a solicitation of
an offer to buy any securities of the Company. The securities referred to herein
have not been, and prior to their issuance will not be, registered for sale by
the Company under the Securities Act of 1933, as amended, or any state
securities laws and may not be offered or sold absent a registration under the
Securities Act of 1933, as amended, and in accordance with state securities laws
or an exemption from the registration requirements thereof. Only accredited
investors, as defined in the Securities Act of 1933, as amended, may purchase
securities pursuant to the Placement.
Although the Company's Board of Directors could have asked the
stockholders to approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to increase the number of shares of Common Stock
authorized for issuance, such action would result in an increase in franchise
taxes and listing fees, if in the future the Common Stock is listed on Nasdaq or
a securities exchange, payable by the Company. Therefore, the Company's Board of
Directors believes that the Reverse Split is preferable to an increase in the
number of authorized shares of Common Stock.
Although the Company has no present plans to engage in any other
transaction that would involve the issuance of shares of Common Stock or
securities convertible into, or exchangeable for shares of Common Stock, it is
possible that if the Placement were not to be effected or if it yields proceeds
which are insufficient for the Company's expected needs, the Company might
thereafter seek alternative types of transactions which might include a business
combination with a third party.
CONSEQUENCES OF NON-APPROVAL OF THE PROPOSAL
If the Proposal is not approved, the Company believes that it would be
unable to raise capital through equity financings. Given the Company's current
financial condition, any delay in the raising of money would be materially
detrimental to the Company's prospects and is likely to cause the Company to
cease operations and either declare bankruptcy or dissolve.
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CERTAIN EFFECTS OF THE REVERSE SPLIT
The following table illustrates the principal effects of the Reverse
Split on the Company's Common Stock:
PRIOR TO THE SUBSEQUENT TO THE
NUMBER OF SHARES REVERSE SPLIT(1) REVERSE SPLIT (2)
Authorized 40,000,000 40,000,000
Outstanding 12,297,199 1,537,149
Reserved for Issuance Pursuant to
Options, Warrants and other
Convertible Securities 12,880,344 1,610,043
Available for Future Issuance 14,882,457 36,852,808
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(1) At July 11, 2003.
(2) Gives effect to the Reverse Split as if it occurred on the Record Date,
subject to adjustment resulting from the repurchase by the Company of fractional
shares.
Stockholders should recognize that if the Reverse Split is effectuated
they will own a number of shares of Common Stock equal to the number of shares
owned immediately prior to the filing of the Amendment divided by six (before
adjustment for fractional shares, as described below). Since the number of
authorized shares of the Company's Common Stock will not change but the number
of outstanding shares of Common Stock would be decreased by virtue of the
Reverse Split, the number of shares of Common Stock remaining available for
issuance by the Company would increase. If all of such authorized but unissued
shares of Common Stock would be issued, holders of outstanding shares of Common
Stock would experience a dilution which would result in their owning
approximately 3.8% of the outstanding Common Stock. Since the Board of
Directors, however, has no present intention to issue all of the shares of
Common Stock available for issuance, the effective rate of dilution would be
less. See "Purposes of the Reverse Split" above. While the Company expects that
the Reverse Split will result in an increase in the market price of the Common
Stock, there can be no assurance that it will result in the permanent increase
in the market price. Also, should the market price of the Common Stock decline,
the percentage decline may be greater than would occur in the absence of a
Reverse Split. Furthermore, the possibility exists that liquidity of the Common
Stock could be adversely affected by the reduced number of shares that would be
outstanding after the Reverse Split. The Reverse Split will also increase the
number of stockholders of the Company who own odd-lots (less than 100 shares is
considered an odd-lot). Stockholders who hold odd-lots typically will experience
an increase in the cost of selling their shares, as well as greater difficulty
in effecting such sales.
PROCEDURE FOR EFFECTING REVERSE SPLIT AND EXCHANGE OF STOCK CERTIFICATES
If the Proposal is approved by the Company's stockholders, and if the
Board of Directors still believes that the Reverse Split is in the best
interests of the Company and its stockholders, the Company will file the
Amendment with the Secretary of State of the State of Delaware at such time as
the Board has determined the appropriate effective time for the Reverse Split.
The Board may delay effecting the Reverse Split until October 31, 2003 without
resoliciting stockholder approval. The Reverse Split will become effective on
the date of filing the Amendment (the "Effective Date"). Beginning on the
Effective Date, each certificate representing Old Shares will be deemed for all
corporate purposes to evidence ownership of New Shares.
Promptly after the Effective Date, stockholders will be notified that
the Reverse Split has been effected. The Company's transfer agent, Continental
Stock Transfer and Trust Company, will act as
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exchange agent (the "Exchange Agent") for purposes of implementing the exchange
of stock certificates. Holders of Old Shares will be asked to surrender to the
Exchange Agent certificates representing Old Shares in exchange for certificates
representing New Shares in accordance with the procedures to be set forth in a
letter of transmittal to be sent by the Company. No new certificates will be
issued to a stockholder until such stockholder has surrendered such
stockholder's outstanding certificate(s) together with the properly completed
and executed letter of transmittal to the Exchange Agent. STOCKHOLDERS SHOULD
NOT DESTROY ANY STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL
REQUESTED TO DO SO.
FRACTIONAL SHARES
No scrip or certificates for fractional shares of Common Stock will be
issued in connection with the Reverse Split. Stockholders who otherwise would be
entitled to receive fractional shares will be entitled, upon surrender to the
Exchange Agent of certificates representing such shares, to a cash payment in
lieu thereof at a price equal to the fraction to which the stockholder would
otherwise be entitled multiplied by the closing price of the Common Stock as
reported in The Wall Street Journal on the last trading day prior to the
Effective Date (or if such price is not available, the average of the last bid
and ask prices of the Common Stock on such day or other price determined by the
Board of Directors). The ownership of a fractional interest will not give the
holder thereof any voting, dividend or other rights except to receive payment
therefor as described herein.
Stockholders should be aware that, under the escheat laws of the
various jurisdictions where stockholders reside, where the Company is domiciled
and where the funds will be deposited, sums due for fractional interests that
are not timely claimed after the Effective Date may be required to be paid to
the designated agent for each such jurisdiction, unless correspondence has been
received by the Company or the Exchange Agent concerning ownership of such funds
within the time permitted in such jurisdiction. Thereafter, stockholders
otherwise entitled to receive such funds will have to seek to obtain them
directly from the state to which they were paid.
NO DISSENTER'S RIGHTS
Under Delaware law, stockholders are not entitled to dissenter's rights
with respect to the proposed Amendment or the Reverse Split.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The following is a summary of certain material federal income tax
consequences of the Reverse Split, and does not purport to be complete. It does
not discuss any state, local, foreign or minimum income or certain other U.S.
federal tax consequences. Also, it does not address the tax consequences to
holders that are subject to special tax rules, such as banks, insurance
companies, regulated investment companies, personal holding companies, foreign
entities, nonresident alien individuals, broker-dealers and tax-exempt entities.
The discussion is based on the provisions of the United States federal income
tax law as of the date hereof, which is subject to change retroactively as well
as prospectively. This summary also assumes that the Old Shares were, and the
New Shares will be, held as a "capital asset," as defined in the Internal
Revenue Code of 1986, as amended (generally, property held for investment). The
tax treatment of a stockholder may vary depending upon the particular facts and
circumstances of such stockholder. EACH STOCKHOLDER SHOULD CONSULT WITH SUCH
STOCKHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE CONSEQUENCES OF THE REVERSE
SPLIT.
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No gain or loss should be recognized by a stockholder of the Company
upon such stockholder's exchange of Old Shares for New Shares pursuant to the
Reverse Split (except to the extent of any cash received in lieu of a fraction
of a New Share). Cash payments in lieu of a fractional New Share should be
treated as if the fractional share were issued to the stockholder and then
redeemed by the Company for cash pursuant to Section 302 of the Internal Revenue
Code of 1986, as amended. A Company stockholder receiving such payment should
recognize gain or loss equal to the difference, if any, between the amount of
cash received and the stockholder's basis in the fractional share (determined as
provided below). Such gain or loss will be capital gain or loss if the payment
of cash in lieu of the fractional share is undertaken solely for the purpose of
saving the Company the expense and inconvenience of issuing and transferring
fractional shares, is not separately bargained for consideration and the payment
is "not essentially equivalent to a dividend" with respect to the stockholder
under the federal income tax law. For this purpose, a payment is not essentially
equivalent to a dividend if it results in a "meaningful reduction" in the
stockholder's percentage interest in the Company, taking into account the
constructive ownership rules and redemptions of fractional shares from all the
stockholders. The Internal Revenue Service has ruled publicly that any reduction
in the percentage interest of a small minority stockholder in a publicly-held
corporation who exercises no control over corporate affairs should constitute a
meaningful reduction.
The aggregate tax basis of the New Shares received in the Reverse Split
(including any fraction of a New Share deemed to have been received) will be the
same as the stockholder's aggregate tax basis in the Old Shares exchanged
therefor. The stockholder's holding period for the New Shares will include the
period during which the stockholder held the Old Shares surrendered in the
Reverse Split.
Required Vote
Approval of the Amendment to the Company's Amended and Restated
Certificate of Incorporation to effect a one-for-six reverse stock split
requires the affirmative vote of the holders of the majority of the shares of
Common Stock issued, outstanding and entitled to vote on the Proposal. The Board
of Directors recommends a vote "FOR" approval of the Proposal.
9
OTHER BUSINESS
The Board of Directors has no other business to be brought before the
Special Meeting. No other business may properly come before the Special Meeting.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
The Company intends to hold its 2003 Annual Meeting on or about
December 15, 2003. Therefore, stockholder proposals intended to be presented at
the Company's Annual Meeting to be held in 2003 must be received by the Company
for inclusion in the Company's proxy statement relating to that meeting not
later than August 29, 2003 (based on an approximate mailing date of November 14,
2003). Such proposals should be addressed to Corporate Secretary, SmartServ
Online, Inc., Metro Center, One Station Place, Stamford, Connecticut 06902.
Notices of stockholder proposals submitted outside the processes of Rule 14a-8
of the Exchange Act (relating to proposals to be presented at the meeting but
not included in the Company's proxy statement and form of proxy), will be
considered untimely, and thus the Company's proxy may confer discretionary
voting authority on the persons named in the proxy with regard to such
proposals, if received after September 30, 2003 (based on an approximate mailing
date of November 14, 2003). The Company will inform the Company's stockholders
if the date of the 2003 Annual Meeting varies significantly from the date
indicated above.
By Order Of the Board of Directors
Richard D. Kerschner
Secretary
Stamford, Connecticut
August ___, 2003
10
Exhibit A
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The amended and restated certificate of incorporation of the Company, as amended
to date, is to be further amended by adding the following paragraph immediately
after the second paragraph of ARTICLE FOUR thereof:
"Effective upon the filing of this Certificate of Amendment of
the Amended and Restated Certificate of Incorporation of the
Corporation, every six (6) shares of Common Stock, $.01
par value per share, of the Corporation issued and outstanding
or held in the treasury of the Corporation automatically shall
be combined into one (1) share of Common Stock of the
Corporation. There shall be no fractional shares issued. Each
holder of shares of Common Stock who otherwise would be
entitled to receive a fractional share shall be entitled to
receive a cash payment in lieu thereof at a price equal to the
fraction to which such holder would otherwise be entitled to
receive multiplied by the closing price of Common Stock as
reported in The Wall Street Journal on the last trading day
prior to the filing of this Certificate of Amendment of the
Amended and Restated Certificate of Incorporation of the
Corporation, or, if such price is not available, the average
of the last bid and asked prices of the Common Stock on such
day, or such other price as may be determined by the Board of
Directors of the Corporation."
PROXY CARD
PROXY PROXY
SMARTSERV ONLINE, INC.
(Solicited on behalf of the Board of Directors)
The undersigned holder of Common Stock of SMARTSERV ONLINE, INC.,
revoking all proxies heretofore given, hereby constitutes and appoints Thomas W.
Haller, Chief Financial Officer of the Company, and Richard D. Kerschner,
General Counsel of the Company, and each of them, Proxies, with full power of
substitution for the undersigned and in the name, place and stead of the
undersigned, to vote all of the undersigned's shares of said stock, according to
the number of votes and with all the powers the undersigned would possess if
personally present at the 2003 Special Meeting of Stockholders of SMARTSERV
ONLINE, INC., to be held at the at the offices of Jenkens & Gilchrist Parker
Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York,
10174 on _______, _____________, 2003 at 9:00 A.M., Eastern Standard Time, and
at any adjournments or postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement relating to the meeting and hereby revokes any proxy or
proxies heretofore given.
Each properly executed Proxy will be voted in accordance with the
specifications made below. Where no choice is specified, this Proxy will be
voted FOR approval of the amendment to the Company's Amended and Restated
Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
1. Approval of the amendment to the [ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY
Company's Amended and Restated
Certificate of Incorporation to
effect a one-for-six reverse stock
split.
PLEASE MARK, DATE AND
SIGN THIS PROXY ON THE REVERSE SIDE.
The shares represented by this Proxy will be voted in the manner
directed. In the absence of any direction, the shares will be
voted FOR approval of the amendment to the Company's Amended and
Restated Certificate of Incorporation.
Dated: _______________________________________, 2003
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Signature(s)
(Signature(s) should conform to names as registered. For jointly
owned shares, each owner should sign. When signing as attorney,
executor, administrator, trustee, guardian or officer of a
corporation, please give full title).
PLEASE MARK AND SIGN ABOVE AND
RETURN PROMPTLY.
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