EXHIBIT 4.4
SMARTSERV ONLINE, INC.
SPENCER TRASK SECURITIES, INC.
KEVIN KIMBERLIN PARTNERS, L.P.
SETTLEMENT AGREEMENT
JUNE 28, 1999
SmartServ Online Inc. ("SmartServ") has certain obligations to Spencer Trask
Securities Incorporated ("Trask") pursuant to a Letter of Intent dated August
11, 1998, as amended on November 24, 1998, and a Letter of Intent dated
September 3, 1998 (together the "Letters of Intent"), as well as a Securities
Purchase Agreement dated November 19, 1998, an 8% Convertible Note dated
November 25, 1998 in the original principal amount of $30,000, a Warrant
Agreement and a related Warrant Certificate each dated November 19, 1999
evidencing the right to purchase 50,000 shares of SmartServ's Common Stock.
SmartServ also has certain obligations to Kevin Kimberlin Partners, L.P.
("Kimberlin") pursuant to a Securities Purchase Agreement dated November 19,
1998, an 8% Convertible Note dated November 25, 1998 in the original principal
amount of $270,000, a Warrant Agreement and a related Warrant Certificate each
dated November 19, 1999 evidencing the right to purchase 450,000 shares of
SmartServ's Common Stock. In full satisfaction of SmartServ's obligation to
Trask and Kimberlin and the termination of the Letters of Intent, SmartServ,
Trask and Kimberlin agree that upon the closing of SmartServ's licensing
agreement with Data Transmission Network Corporation ("Closing"):
i) SmartServ will redeem the 8% convertible notes issued to
Kimberlin and Trask. SmartServ will deliver checks to Kimberlin
and Trask for the principal amounts of $270,000 and $30,000,
respectively, plus interest through the date of Closing,
ii) SmartServ will issue Trask a check in the amount of $150,000 and
execute and deliver the Warrant Agreement and the related Warrant
Certificate each dated November 19, 1998 evidencing the right to
purchase 166,667 shares of SmartServ's Common Stock and the
Warrant Agreement and related Warrant Certificate each dated
January 27, 1999 evidencing the right to purchase 16,666 shares
of SmartServ's Common Stock (the "Agent's Warrants").
iii) In accordance with Section 9 of the Securities Purchase
Agreements referenced above, SmartServ agrees to file a
registration statement covering the resale of the shares issuable
upon exercise of the Warrants and otherwise comply with the
provisions of such Section 9 except that SmartServ shall not be
required to file such registration statement until October 31,
1999. Until October 31, 1999, the registration rights provisions
of the Agent's Warrants shall not apply. SmartServ further agrees
to include the Agent's Warrants in such registration statement.
Notwithstanding the foregoing, Trask and Kimberlin agree to
lock-up and not sell, assign, exercise, transfer, or exchange the
shares issuable upon exercise of the warrants or the Agent's
Warrants until
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May 15, 2000 except in connection with the merger of SmartServ
with or into another entity in which SmartServ shall not be the
surviving corporation or the sale of all or substantially all of
the assets of SmartServ. SmartServ shall permit Trask to transfer
a portion of the Agent's warrants to officers, directors and
employees of Trask subject to the restrictions set forth in this
Agreement.
iv) SmartServ, Trask and Kimberlin agree that Trask and Kimberlin may
sell, assign, exercise, transfer, or exchange not more than 25%
of the shares issuable on conversion of the warrants or the
Agent's Warrants held by each of them after May 15, 2000, August
15, 2000, November 15, 2000 and February 15, 2001, respectively.
SmartServ agrees that the rights of Trask and Kimberlin to sell,
assign, exercise, transfer, or exchange 25% of the shares issued
on conversion of the warrants or the Agent's Warrants held by
each of them at the above dates shall be cumulative such that
after August 15, 2000 through November 15, 2000, Trask and
Kimberlin will each be able to sell, assign, exercise, transfer,
or exchange up to 50% of the shares issuable upon exercise of the
warrants held by each of them; that after November 15, 2000
through February 15, 2001, Trask and Kimberlin will each be able
to sell, assign, exercise, transfer, or exchange up to 75% of the
shares issuable upon exercise of the warrants held by each of
them; and that after February 15, 2001, Trask and Kimberlin will
each be able to sell, assign, exercise, transfer, or exchange all
of the shares issuable upon exercise of the warrants held by each
of them; in each case subject to applicable federal and state
securities laws.
v) The Letters of Intent will be automatically cancelled upon payment
to Trask and Kimberlin of the amounts enumerated in (i) and (ii)
above and the delivery of the Agent's Warrants.
vi) SmartServ acknowledges that the cancellation of the Letters of
Intent and the determination not to proceed with the offerings
contemplated thereby were initiated by SmartServ. Accordingly,
SmartServ agrees to indemnify and hold harmless Trask and its
directors, officers, employees and agents from and against any
and all liabilities that it may incur arising out of or relating
to the Letters of Intent and the failure to proceed with the
transactions contemplated thereby. In addition, SmartServ, for
itself and its predecessors, successors and assigns does forever
discharge Trask its directors, officers, employees and agents,
from any and all claims, demands, causes and rights of action at
law or in equity which the undersigned had or now has against
Trask, including, but not limited to any and all claims, demands,
causes and rights of action in law or equity that can be asserted
as a result of any acts or omissions of Trask in executing,
operating under or terminating the Letters of Intent or any
transaction contemplated thereunder and all transactions in
anticipation of the private placement.
Promptly after receipt by an indemnified party of notice of the
commencement of any action or claim relating to the Letters of
Intent or the failure to proceed with the transactions
contemplated thereby or as to which
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indemnity may be sought hereunder, such indemnified party shall,
if a claim for indemnification hereunder in respect thereof is to
be made against SmartServ, give written notice to SmartServ of
the commencement of such action or claim, but the omission so to
notify will not relieve SmartServ from any liability that
SmartServ may have to any indemnified party except to the extent
that the omission so to notify results in SmartServ being damaged
solely as a result of the failure to give timely notice. In case
any such action is brought against an indemnified party, and such
party notifies SmartServ of the commencement thereof, SmartServ
shall be entitled (at its own expense) to participate in and, to
the extent that SmartServ may wish to assume the defense, with
counsel satisfactory to such indemnified party, of such action
and/or to settle such action and, after notice from SmartServ to
such indemnified party of its election so to assume the defense
thereof, SmartServ shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other
than the reasonable cost of investigations unless counsel to an
indemnified party reasonably concludes that conflicts of interest
would preclude assumption of such defense; provided, however,
that neither SmartServ nor any indemnified party shall enter into
any settlement agreement that would impose any liability on such
other party or parties without the prior written consent of such
other party or parties, unless such other party or parties are
fully indemnified to such party's satisfaction, as the case may
be, against any such liability.
SMARTSERV ONLINE, INC.
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Sebastian E. Cassetta
Chairman & Chief Executive Officer
SPENCER TRASK SECURITIES, INC.
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A. Emerson Martin, II
Senior Managing Director
KEVIN KIMBERLIN PARTNERS, L.P.
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By: