EXHIBIT 10.5
Spencer Trask Ventures, Inc.
535 Madison Avenue, 18th Floor
New York, NY 10022
Tel. 212-355-5565
May 15, 2003
SmartServ Online, Inc.
One Station Place
Stamford, CT. 06902
Attention: Sebastian E. Cassetta, CEO
Gentlemen:
This is to acknowledge and confirm the terms of our corporate finance
consulting agreement (the "Consulting Agreement") as follows:
(1) SmartServ Online, Inc., a Delaware corporation (the "Company"),
hereby engages Spencer Trask Ventures, Inc. (the "Advisor") and the Advisor
hereby agrees to render services to the Company as its corporate finance
consultant, financial advisor and investment banker.
(2) During the term of this Consulting Agreement, the Advisor shall
provide advice to, and consult with, the Company concerning financial planning,
corporate organization and structure, financial matters in connection with the
operation of the business of the Company, private and public equity and debt
financing, acquisitions, mergers and other similar business combinations and
shall review and advise the Company regarding its overall progress, needs and
financial condition. The Advisor is not obligated to devote any specific amount
of time to providing advice and consultation to the Company. This Consulting
Agreement does not obligate the Company to proceed with any potential
Transaction (as hereinafter defined) or to accept the advice of Advisor in any
way. The Company shall evaluate potential Transactions on a good faith basis and
any decisions to proceed will be made at the sole discretion of the Company,
upon approval by the Board of Directors, and if required, by its shareholders.
(3) The Company shall compensate the Advisor as follows: (a) cash fee
equal to 10% of the gross proceeds received by the Company from investors
introduced by the Advisor upon each closing of the financing described in the
term sheet annexed hereto as Exhibit B (the "Term Sheet") (provided that such
fees will be deferred with respect to the first closing of such financing until
the earlier of (i) the final closing of such financing or (ii) such time as the
aggregate gross proceeds of all closings of such financing is equal to at least
$1.2 million); (b) five-year cashless exercise warrants (each a "Warrant"), as
described in the Term Sheet, and in the form attached hereto as Exhibit A; (c)
500,000 shares of restricted common stock of the Company, to be issued upon
receipt of any required Nasdaq approval for, and consummation of, the second
closing as set forth in the Term Sheet; (d) compensation for any Transaction (as
hereinafter defined) as described in Section 4 below. The shares underlying the
Warrants will be registered for resale with the SEC at the same time as the
shares included in the units sold in the offering described in the Term Sheet
are registered. The Company shall also provide the Advisorwith a non-accountable
expense allowance equal to three percent (3%) of the aggregate purchase price of
all Units sold in the financing described in the Term Sheet. This expense
allowance is intended to cover the legal and other expenses relating to the
Advisor's involvement with the financing described in the Term Sheet. Other
out-of-pocket expenses incurred in connection with its services hereunder will
be reimbursed by the Company up to an aggregate amount of $5,000; any expenses
in excess of said amount must be approved in advance by the Company. In the
event the Company fails to pay the fees as set forth herein, the Company will
pay all costs
and expenses incurred by the Advisor in connection with recovering such fees,
plus interest at ten percent per annum from the date the fees were due to the
date actually paid.
(4) If any Transaction (as hereinafter defined) (other than the
transaction described in the Term Sheet) is consummated during the Term or
within eighteen months after the end of the Term with a party, other than a
party listed in Exhibit C hereto, introduced to the Company or contacted at the
instruction of the Company (in order to provide to the Company the advisory
services contemplated by this Agreement) by the Advisor during the Term (a
"Target"), the Company shall pay the Advisor or cause the Advisor to be paid, at
the closing of each such Transaction, a cash fee equal to the sum of: (a) five
percent (5%) of the first two million dollars of the aggregate consideration of
a Transaction (the "Aggregate Consideration"), (b) four percent (4%) of the
second two million dollars or portion thereof, (c) three percent (3%) of the
third two million dollars or portion thereof, and (d) two and one and one-half
percent (2 1/2%) of the balance of the Aggregate Consideration; provided,
however, that if a Transaction involves an investment in the Company other than
by means of a financing for which the Advisor acts as Agent (an "Agented
Financing"), the cash fee shall be seven percent (7%) of the amount of such
investment and the Advisor will be issued at closing five-year warrants to
purchase shares of the Company's common stock at a price per share equal to the
price per unit paid to the Company in connection with the investment (on an
as-converted basis if the investment is evidenced by convertible securities). A
form of such warrants is attached hereto as Exhibit A. Such warrants will
entitle the Advisor to purchase up to a number of shares of the Company's common
stock as is equal to 15% of the number of shares of the Company's common stock
sold by the Company or purchasable thereafter by investors in such Transaction.
It is acknowledged that a Transaction with a party who was neither introduced to
the Company nor contacted at the instruction of the Company (in order to provide
to the Company the advisory services contemplated by this Agreement) by the
Advisor, will not entitle Advisor to any compensation under this Agreement.
Aggregate Consideration is defined and computed as follows:
A. The total sale proceeds and other consideration received (which shall
be deemed to include amounts paid into escrow) by the Company and/or
its shareholders or by a Target and/or its shareholders upon the
consummation of the Transaction (including payments made in
installments), inclusive of cash, securities, notes, and the total
value of liabilities assumed.
B. If a portion of such consideration includes contingency or other
deferred, escrowed or installment payments (whether or not related to
future earnings or operations), the applicable fees shall be paid to
Spencer Trask when such contingency or other deferred, escrowed or
installment payments are made.
C. If the Aggregate Consideration for the Transaction consists in whole or
in part of securities, for the purposes of calculating the amount of
Aggregate Consideration, the value of such securities will be the value
thereof as reasonably agreed to on an arm's length basis by the parties
to the Transaction; provided, however, that if the parties have not
established a value: (i) in the case of securities for which there is a
public trading market, the value will be determined by the average last
sales price for such securities for the last twenty trading days prior
to such consummation; or (ii) if there is no public trading market for
such securities or other property received or receivable as a part of
the Aggregate Consideration and the parties are unable to agree, then
each of Spencer Trask and the Company will select an investment banking
firm respected in the merger and acquisition field to determine a value
and the midpoint between the two values established by the two
independent experts will be the fair market value for the purpose
hereof.
For the purposes of this Consulting Agreement, any of the following transactions
shall constitute a "Transaction": (a) the sale, outside of the ordinary course
of business, of the Company or any of its assets,
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securities, or business by means of a merger, consolidation, joint venture,
exchange offer or similar transaction, or any transaction resulting in any
change of control of the Company or its assets or business; (b) the purchase by
the Company, outside of the ordinary course of business, of another company or
any of its assets, securities or business by means of a merger, consolidation,
joint venture, exchange offer or similar transaction; and (c) an investment in
the Company other than an investment pursuant to an Agented Offering, which will
be subject to compensation as per engagement terms separate from this Consulting
Agreement.
(5) The term of this Consulting Agreement shall be until May 31, 2004,
or earlier if terminated by the Company pursuant to this Section (the "Term").
The Company can terminate this Consulting Agreement prior thereto upon thirty
days prior written notice to Advisor; provided, however, that in the event of
such termination (a) all compensation earned but unpaid through the date the
termination is effective, inclusive of cash and warrants, shall be paid on the
date the termination is effective; and (b) the provisions of paragraphs 4, 6, 7,
9 and 10 of this Consulting Agreement shall remain in full force and effect.
(6) The Advisor will not disclose to any other person, firm, or
corporation, nor use for its own benefit, during or after the term of this
Consulting Agreement, any trade secret or other information designated as
confidential by the Company which is acquired by the Advisor in the course of
performing services hereunder. (A trade secret is information not generally
known to the trade which gives the Company an advantage over its competitors.
Trade secrets can include, by way of example, products or services under
development, production methods and processes, sources of supply, customer lists
and marketing plans). Any financial advice rendered by the Advisor pursuant to
this Consulting Agreement may not be disclosed publicly in any manner, nor will
any announcements or press releases be made concerning this Consulting
Agreement, without the prior written approval of the Advisor, unless required by
the Securities and Exchange Commission or Nasdaq rules and regulations.
(7) The Company agrees to indemnify and hold the Advisor, its
affiliates, control persons, officers, employees and agents (collectively, the
"Indemnified Persons") harmless from and against all losses, claims, damages,
liabilities, costs or expenses (including reasonable attorneys' and accountants'
fees) joint and several, arising out of the performance of this Consulting
Agreement, whether or not the Advisor is a party to such dispute. This indemnity
shall not apply, however, where a court of competent jurisdiction has made a
final determination that the Advisor engaged in gross negligence or willful
misconduct in the performance of its services hereunder which gave rise to the
loss, claim, damage, liability, cost or expense sought to be recovered hereunder
(but pending any such final determination, the indemnification and reimbursement
provision of this Consulting Agreement shall apply and the Company shall perform
its obligations hereunder to reimburse the Advisor for its expenses).
If for any reason the foregoing indemnification is unavailable to the
Advisor or such other Indemnified Person or insufficient to hold it harmless,
then the Company shall contribute to the amount paid or payable by the Advisor
or such other Indemnified Person as a result of such loss, claim, damage, or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by the Company and its shareholders on the one hand and the
Advisor or such other Indemnified Person on the other hand, as well as any
relevant equitable considerations; provided that in no event will the aggregate
contribution by the Advisor and any other Indemnified Person hereunder exceed
the amount of fees actually received by the Advisor pursuant to this Consulting
Agreement. The reimbursement, indemnity and contribution obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and personal representatives of the Company, the
Advisor and any other Indemnified Person.
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The provisions of this paragraph (7) shall survive the termination and
expiration of this Consulting Agreement.
(8) This Consulting Agreement is not assignable and cannot be modified
or changed, nor can any of its provisions be waived, except by written agreement
signed by all parties. This Consulting Agreement constitutes the entire
agreement of the parties pertaining to the subject matter hereof and replaces a
prior Consulting Agreement dated April 25, 2003, and the parties have made no
agreements, representations or warranties relating to the subject matter of this
Consulting Agreement that are not set forth herein. The waiver by either party
of compliance with any provision of this Consulting Agreement by the other party
shall not operate or be construed as a waiver of any other provision of this
Consulting Agreement, or of any other breach by such party of a provision of
this Consulting Agreement. This Consulting Agreement may be executed
simultaneously in any number of counterparts, each of which when so executed and
delivered shall be taken to be an original; but such counterparts shall together
constitute but one and the same document. The provisions of this Consulting
Agreement shall be deemed severable, so that if any provision hereof shall be
declared unlawful or unenforceable, the remaining provisions hereof shall not be
affected thereby and shall remain in full force and effect. A facsimile
signature on this Consulting Agreement shall be considered the same as an
original.
(9) This Consulting Agreement shall be governed by the laws of the
State of New York, without regard to conflicts of law principles.
(10) The Advisor shall at all times act as and be an independent
contractor, and in no event shall either the Advisor or any of its employees,
agents or representatives be deemed to be an employee, agent or representative
of the Company. The Advisor shall have no authority to bind the Company to any
obligation, express or implied. Nothing herein shall be construed to appoint the
Advisor as placement agent or underwriter in connection with any of the
Company's activities, including, without limitation, the transaction
contemplated by the Term Sheet.
Please confirm that the foregoing correctly sets forth our
understanding by signing the enclosed copy of this letter where provided and
returning it to us by May 16, 2003.
Very truly yours, Accepted and Agreed:
SPENCER TRASK VENTURES, INC. SMARTSERV ONLINE, INC.
By: /s/ William P. Dioguardi By: /s/ Sebastian E. Cassetta
------------------------ -------------------------
William P. Dioguardi Sebastian E. Cassetta
President Chief Executive Officer
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EXHIBIT A
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. SMARTSERV ONLINE, INC.
NON-CALLABLE WARRANT
Warrant No. W-___ Date of Original Issuance: April ___, 2003
SmartServ Online, Inc., a Delaware corporation (the "COMPANY"), hereby
certifies that, for value received, ____________ or his registered assigns (the
"HOLDER"), is entitled to purchase from the Company up to a total of ______
shares of common stock, $.01 par value per share (the "COMMON STOCK"), of the
Company (each such share, a "WARRANT SHARE" and all such shares, the "WARRANT
SHARES") at an exercise price equal to $_________ per share (as adjusted from
time to time as provided in Section 8, the "EXERCISE PRICE"), at any time and
from time to time from and after the date hereof and through and including April
___, 2008 [5 years after the Closing Date] (the "EXPIRATION DATE"), and subject
to the following terms and conditions.
1. [Definitions. In addition to the terms defined elsewhere in
this Warrant, capitalized terms that are not otherwise defined herein shall have
the meanings given to such terms in the Stock Purchase Agreement, dated as of
April ___, 2003 between the Company and the investors signatory thereto (the
"PURCHASE AGREEMENT").]
2. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"WARRANT REGISTER"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, absent actual notice to the contrary.
3. Registration of Transfers. The Company shall register the
transfer of any portion of this Warrant in the Warrant Register, upon surrender
of this Warrant, with the Form of Assignment attached hereto duly completed and
signed, to the Company at its address specified herein. Upon any such
registration of transfer, an exchange Warrant to purchase Common
Stock, in substantially the form of this Warrant (any such exchange Warrant, a
"NEW WARRANT"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion of
this Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance by such transferee of all of the rights and obligations of
a holder of a Warrant. Warrants and Warrant Shares may only be disposed of in
compliance with state and federal securities laws. In connection with any
transfer of Warrant Shares other than pursuant to an effective registration
statement, to the Company or to an Affiliate of a Holder, the Company may
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration under the Securities Act.
4. Exercise and Duration of Warrants. This Warrant shall be
exercisable by the registered Holder, in whole or in part, at any time and from
time to time on or after the date hereof to and including 5:30 p.m., New York
City time, on the Expiration Date. The Exercise Price is payable in immediately
available funds or as otherwise provided in Section 13. At 5:30 p.m., New York
City time on the Expiration Date, the portion of this Warrant available for
exercise and not exercised prior thereto shall be and become void and of no
value.
5. Delivery of Warrant Shares and Exercise of Warrant. Upon
delivery of the Form of Election to Purchase, which Form shall specify the
number of shares of Common Stock to be purchased, and this Warrant to the
Company at its address for notice set forth in Section 11 and upon payment of
the Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, the Company shall, within three business days,
issue and deliver to the Holder, a certificate for the Warrant Shares issuable
upon such exercise with the appropriate legend, if required. As used in this
Agreement, a "DATE OF EXERCISE" means the date on which the Holder shall have
delivered to the Company (i) the Form of Election to Purchase attached hereto,
appropriately completed and duly signed, (ii) payment of the Exercise Price for
the number of Warrant Shares so indicated by the Holder to be purchased and
(iii) this Warrant. If the Warrant has not been fully exercised, the Company
will deliver a replacement Warrant to the Holder for the number of Warrant
Shares remaining subject to the Warrant, which replacement Warrant shall in all
other respects be identical to this Warrant or, at the election of the Company,
an appropriate notation shall be made on this Warrant, which shall then be
returned to the Holder.
6. Charges, Taxes and Expenses. Issuance and delivery of New
Warrants, replacement Warrants issued upon a partial exercise, and certificates
for shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
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7. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft, destruction, or
mutilation and customary and reasonable indemnity, if requested. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable third-party
costs as the Company may prescribe. If a New Warrant is requested as a result of
a mutilation of this Warrant, then the Holder shall also deliver such mutilated
Warrant to the Company as a condition precedent to the Company's obligation to
issue the New Warrant.
8. Reservation of Warrant Shares. The Company covenants that it
has and will at all times reserve and keep available out of the aggregate of its
authorized but unissued and otherwise unreserved Common Stock, solely for the
purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as
herein provided, the number of Warrant Shares which are then issuable and
deliverable upon the exercise of all Warrants issued pursuant to the Purchase
Agreement. All shares of Common Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid, and non-assessable and free from all
preemptive rights of any stockholder of the Company and from all taxes, liens,
and charges with respect to the issue thereof (other than transfer taxes), and
if the Common Stock of the Company is then listed on any national securities
exchange (as defined in the Exchange Act) or eligible for trading on The Nasdaq
Stock Market or the Nasdaq OTC Bulletin Board, shall be duly listed or eligible
thereon, as the case may be.
9. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9.
(a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock
or otherwise makes a distribution on any class of capital stock that is payable
in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, or (iii) combines outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this paragraph occurs
during the period that an Exercise Price is calculated hereunder, then the
calculation of such Exercise Price shall be adjusted appropriately to reflect
such event.
(b) Pro Rata Distributions. If the Company, at any time while
this Warrant is outstanding, distributes to all holders of Common Stock (i)
evidence of its indebtedness, (ii) any security (other than a distribution of
Common Stock covered by the preceding paragraph),
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(iii) rights or warrants to subscribe for or purchase any security, or (iv) any
other asset (in each case, "DISTRIBUTED PROPERTY"), then, at the request of any
Holder delivered before the 30th day after the record date fixed for
determination of stockholders entitled to receive such distribution, the Company
will deliver to such Holder, within seven days after such request (or, if later,
on the effective date of such distribution), the Distributed Property that such
Holder would have been entitled to receive in respect of the Warrant Shares for
which such Holder's Warrant could have been exercised immediately prior to such
record date. If such Distributed Property is not delivered to a Holder pursuant
to the preceding sentence, then upon any exercise of the Warrant that occurs
after such record date, such Holder shall be entitled to receive, in addition to
the Warrant Shares otherwise issuable upon such conversion, the Distributed
Property that such Holder would have been entitled to receive in respect of such
number of Warrant Shares had the Holder been the record holder of such Warrant
Shares immediately prior to such record date.
(c) Fundamental Transactions. If, at any time while this
Warrant is outstanding, (1) the Company effects any merger or consolidation of
the Company with or into another Person, (2) the Company effects any sale of all
or substantially all of its assets in one or a series of related transactions,
(3) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (4)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
"FUNDAMENTAL TRANSACTION"), then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, in lieu of any other consideration, the
same amount and kind of securities, cash or property as he would have been
entitled to receive upon the occurrence of such Fundamental Transaction if he
had been, immediately prior to such Fundamental Transaction, the holder of the
number of Warrant Shares then issuable upon exercise in full of this Warrant
(the "ALTERNATE CONSIDERATION"). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company or its successor or the surviving entity following
such Fundamental Transaction shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as
to the Alternate Consideration he receives upon any exercise of this Warrant
following such Fundamental Transaction. At the Holder's option and request, any
successor to the Company or surviving entity in such Fundamental Transaction
shall, either (1) issue to the Holder a New Warrant substantially in the form of
this Warrant and consistent with the foregoing provisions and evidencing the
Holder's right to purchase the Alternate Consideration for the aggregate
Exercise Price upon exercise thereof, or (2) purchase the Warrant from the
Holder for a purchase price, payable in cash within seven days after such
request (or, if later, on the effective date of the Fundamental Transaction),
equal to the Black Scholes value of the remaining unexercised portion of this
Warrant on the date of such request. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this
paragraph (c) and ensuring that the Warrant (or any such replacement security)
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will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction.
(d) Number of Warrant Shares. Simultaneously with any
adjustment to the Exercise Price pursuant this Section 9, the number of Warrant
Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, so that after such adjustment the aggregate Exercise
Price payable hereunder for the increased number of Warrant Shares shall be the
same as the aggregate Exercise Price in effect immediately prior to such
adjustment.
(e) Calculations. All calculations under this Section 9 shall
be made to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.
(f) Notice of Adjustments. Upon the occurrence of each
adjustment pursuant to this Section 9, the Company at its expense will promptly
compute such adjustment in accordance with the terms of this Warrant and prepare
a certificate setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Warrant Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing
the transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent.
(g) Notice of Corporate Events. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or solicits stockholder approval for any Fundamental Transaction or (iii)
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material terms and conditions of such transaction at least 20 days prior to
the applicable record or effective date on which a Person would need to hold
Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to ensure that the Holder is given the practical opportunity to exercise this
Warrant prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action required to
be described in such notice.
10. No Fractional Shares. No fractional shares of Warrant Shares
will be issued in connection with any exercise of this Warrant. In lieu of any
fractional shares which would otherwise be issuable, the Company shall issue the
next highest number of whole Warrant Shares.
11. Notices. Any and all notices or other communications or
deliveries hereunder (including without limitation any Exercise Notice) shall be
in writing and shall be deemed given
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and effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section 11 prior to 5:30 p.m. (New York City time) on a day on which banks
in the State of Delaware are not required or permitted to close (a "BUSINESS
DAY"), (ii) the next Business Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified in
this Section 11 on a day that is not a Business Day or later than 5:30 p.m. (New
York City time) on any Business Day, (iii) the Business Day following the date
of mailing, if sent for next day delivery by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (i) if to
the Company, SmartServ Online, Inc., One Station Place, Stamford, CT 06902,
Facsimile No.: (203) 353-5984, Attn: Chief Financial Officer, or (ii) if to the
Holder, to the address or facsimile number appearing on the Warrant Register or
such other address or facsimile number as the Holder may provide to the Company
in accordance with this Section 11.
12. Warrant Agent. The Company shall serve as warrant agent under
this Warrant. Upon 20 days' notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
13. Cashless Exercise. In addition to the method of payment set
forth in Section 4 and in lieu of any cash payment required thereunder, at any
time, the Holder(s) of this Warrant shall have the right at any time and from
time to time, to convert this Warrant into shares of Common Stock in full or in
part by a "cashless exercise" by surrendering this Warrant in exchange for the
number of shares of Common Stock equal to the product of (x) the number of
shares subject to the Warrant being surrendered, multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) of the Common
Stock less the Exercise Price, and the denominator of which is such Market
Price.
Solely for the purposes of this Section, the "Market Price" at any date
shall be calculated as the average of the last reported sale prices for the
Common Stock for the three (3) trading days preceding the date on which the
annexed Form of Election is delivered to the Company, as officially reported by
the Nasdaq OTC Bulletin Board or the Nasdaq Stock Market (or, if the Common
Stock is not traded thereon, such other exchange or trading system on which the
Common Stock is then listed or admitted to trading).
14. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. Subject to
the preceding sentence, nothing in this Warrant shall be construed to give to
any Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant. This Warrant may be
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amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by this Warrant
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) (each, a "PROCEEDING") shall be
exclusively commenced in the state and federal courts sitting in the State of
New York in New York County (the "COURTS"). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the Courts for any Proceeding, and
hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or such
Courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any Proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Warrant and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each of the Company and the
Holder hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any Proceeding. If any party shall
commence an action or proceeding to enforce any provisions of this Warrant, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its attorneys fees and other costs and expenses incurred with such
Proceeding.
(c) The Company shall not by any action avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company will (i) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock upon the exercise of this Warrant and
(b) use its best efforts to obtain all such authorizations, exemptions, or
consents from any public or regulatory body having jurisdiction thereof as may
be necessary to enable the Company to perform its obligations under this
Warrant.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
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(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Warrant.
(f) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings when used herein in their plural or singular forms,
respectively.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
SMARTSERV ONLINE, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
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FORM OF ELECTION TO PURCHASE
To SMARTSERV ONLINE, INC.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock ("COMMON STOCK"), $.01 par value per share, of SMARTSERV
ONLINE, INC. and encloses herewith $________ in cash, certified or official bank
check or checks or other immediately available funds, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares of
Common Stock to which this Form of Election to Purchase relates, together with
any applicable taxes payable by the undersigned pursuant to the Warrant.
The Holder hereby represents, warrants and covenants that he is an
accredited investor within the meaning of Regulation D under the Securities Act
of 1933, as amended, and has sold or will sell the shares of Common Stock
issuable upon this exercise pursuant to the Company's registration statement
covering the resale by the Holder of such shares and, in connection therewith,
has complied or will comply with the prospectus delivery requirements under
Federal securities laws.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
(Please print name and address)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of SMARTSERV ONLINE,
INC. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of SMARTSERV ONLINE, INC. with full power of
substitution in the premises.
Dated: _______________, ____
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
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