REVOLVING CREDIT NOTE
$1,900,000.00 New York, New York
August 31, 2005
FOR VALUE RECEIVED, SmartServ Online, Inc. a Delaware corporation
("Debtor"), HEREBY PROMISES TO PAY to the order of CAMOFI MASTER LDC ("Payee"),
at the offices of Payee, 350 Third Avenue, New York, New York, or at such other
place as Payee may from time to time designate, the principal sum equal to the
lesser of (a) ONE MILLION NINE HUNDRED THOUSAND DOLLARS ($1,900,000.00) or (b)
the aggregate unpaid principal amount of all Advances made by Payee to Debtor,
which amount shall be payable by Debtor in lawful money of the United States of
America and in immediately available funds in accordance with the terms of the
Loan Agreement (as defined below). Debtor hereby further promises to pay
interest (the "Interest") to the order of Payee on the unpaid principal balance
hereof at the rates and in the manner and in accordance with the provisions of
the Loan Agreement, which provisions are hereby incorporated herein by
reference.
1. For the purposes hereof, "Loan Agreement" shall mean that certain Loan
Agreement, dated as of the date hereof, between Payee and Debtor, as the same
now exists or may hereafter be amended, restated, renewed, replaced,
substituted, supplemented, extended, or otherwise modified. All capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to such terms in the Loan Agreement.
2. This Note evidences the aggregate outstanding principal balance, from
time to time, of the Advances made by Payee to Debtor pursuant to the Loan
Agreement. It is contemplated that there may be times when no indebtedness is
owing hereunder; but notwithstanding any such occurrence, this Note shall remain
valid and shall be in full force and effect as to the Advances made subsequent
to each such occurrence.
3. This Note is secured by the Collateral and is entitled to all of the
benefits and rights as set forth in the Loan Agreement and the Transaction
Documents. At the time any payment is due hereunder, Lender, at its option, may
charge the amount thereof to any account of Debtor maintained by Lender.
4. If any Event of Default shall occur, or if the Loan Agreement shall be
terminated, in addition to all rights and remedies of Payee under the Loan
Agreement and the Transaction Documents, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, any or all of the Obligations,
including, without limitation, all amounts owing under this Note, may, as
provided in the Loan Agreement, be declared or shall forthwith become due and
payable, together with all interest accrued thereon and with interest accruing
thereafter at the then applicable interest rate under the Loan Agreement until
the indebtedness evidenced by this Note is paid in full, plus the costs and
expenses of collection hereof, including, but not limited to, reasonable
attorneys' fees and legal expenses.
5. Debtor hereby (i) waives diligence, demand, presentment, protest and
notice of any kind, (ii) agrees that it will not be necessary to first institute
suit in order to enforce payment of this Note and (iii) consents to any one or
more extensions or postponements of time of payment, release, surrender or
substitution of collateral security, or forbearance or other indulgence, without
notice or consent. The pleading of any statute of limitations as a defense to
any demand against Debtor is expressly hereby waived by Debtor. Upon or after
maturity of this Note, or any Event of Default or termination of the Loan
Agreement, Payee shall have the right, subject to the terms of the Loan
Agreement, but not the obligation, to set off against this Note all money owed
by Payee to Debtor.
6. No resort to any Collateral for payment shall be required prior to the
enforcement hereof against Debtor and any guarantors or endorsers hereof. None
of the rights of Payee shall be waived or diminished by any failure or delay in
the exercise thereof.
7. If any provision of this Note conflicts with any provision of the Loan
Agreement, such provision of the Loan Agreement shall control. If any provision
of this Note shall be held invalid, illegal or unenforceable, the validity of
all other provisions hereof shall in no way be affected thereby.
8. This Note shall be binding upon the successors and assigns of Debtor
and shall inure to the benefit of Payee and its successors, endorsees and
assigns. Whenever used herein, the term "Debtor" shall be deemed to include the
undersigned and its respective successors and assigns and the terms "Payee"
shall be deemed to include its respective successors, endorsees and assigns.
9. This Note shall be governed by and construed in accordance with the
laws of the State of New York applied to contracts to be performed wholly within
the State of New York. Any judicial proceeding brought by or against Debtor with
respect to any of the Obligations, this Note or any Transaction Document may be
brought in any court of competent jurisdiction in the State of New York and, by
execution and delivery of this Note, Debtor accepts for itself and in connection
with its properties, generally and unconditionally, the non-exclusive
jurisdiction of such court, and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with this Note. Debtor hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by registered mail (return receipt requested)
directed to Debtor, and service so made shall be deemed completed five (5) days
after the same shall have been so deposited in the mails of the United States of
America. Nothing herein shall affect the right to serve process in any manner
permitted by law or shall limit the right of Payee to bring proceedings against
Debtor in the courts of any other jurisdiction. Debtor waives any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
conveniens. Any judicial proceeding by Debtor against Payee involving, directly
or indirectly, any matter or claim in any way arising out of, related to or
connected with this Note or any related agreement, shall be brought only in a
federal or state court located in The City of New York.
10. DEBTOR EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION ARISING UNDER THIS NOTE OR ANY TRANSACTION DOCUMENT, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. DEBTOR CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT DEBTOR AND PAYEE MAY FILE AN
ORIGINAL COUNTERPART OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF DEBTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
11. (a) Each calendar month by the tenth (10th) Business Day prior to date
that Interest is payable on this Note (the "Notice Date"), Debtor, at its
election, may deliver to Payee a written notice in the form to be provided by
Payee converting the Interest payable on the next Payment Date in either cash or
Common Stock, or a combination of both (each, a "Payment Notice"). If a Payment
Notice is not delivered by Debtor on or before the applicable Notice Date for
such Payment Date, then Debtor shall pay the Interest due on such Payment Date
in cash. If Debtor converts all or a portion of the Interest into shares of
Common Stock as provided herein, the number of such shares to be issued by the
Debtor to Payee on such Payment Date shall be the number determined by dividing
(x) the portion of the Interest to be paid in shares of Common Stock, by (y) the
Interest Conversion Price on such Payment Date. For purposes hereof (a) the
"Interest Conversion Price" means the product of (a) 85% and (b) the price
determined by the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on the primary Trading Market on which the Common Stock is then listed
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or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day from
9:30 a.m. EST to 4:02 p.m. EST) using the VAP function; (b) if the Common Stock
is not then listed or quoted on the Trading Market and if prices for the Common
Stock are then reported in the "Pink Sheets" published by the Pink Sheets, LLC
(or a similar organization or agency succeeding to its functions of reporting
prices) the most recent bid price per share of the Common Stock so reported; or
(c) in all other cases, the fair market value of a share of Common Stock as
determined by a nationally recognized-independent appraiser selected in good
faith by Payee. For the purposes of this Note, "Trading Market" means any of the
NASD OTC Bulletin Board, NASDAQ SmallCap Market, the Nasdaq National Market, the
American Stock Exchange or the New York Stock Exchange.
(b) Notwithstanding anything to the contrary herein, none of Debtor's
obligations to Payee may be converted into Common Stock unless (i) an effective
current Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with satisfaction
of such obligations exists, (ii) no Event of Default exists and (iii) an
exemption from registration of the Common Stock is available to pursuant to Rule
144 of the Securities Act.
(c) Debtor will have the option of prepaying this Note ("Optional
Redemption") by paying to Payee a sum of money equal to one hundred fifteen
percent (115%) of the outstanding principal amount of this Note together with
accrued but unpaid interest thereon and any and all other sums due, accrued or
payable to the Payee arising under this Note, the Loan Agreement, or any
Transaction Document (the "Redemption Amount") outstanding on the day written
notice of redemption (the "Notice of Redemption") is given to the Payee. The
Notice of Redemption shall specify the date for the Optional Redemption (the
"Redemption Payment Date") which date shall be seven (7) business days after the
date of the Notice of Redemption (the "Redemption Period"). A Notice of
Redemption shall not be effective with respect to any portion of this Note for
which Payee has a pending election to convert pursuant to Section 12, or for
conversions made by Payee pursuant to Section 12 during the Redemption Period.
The Redemption Amount shall be determined as if the Payee's conversion elections
had been completed immediately prior to the date of the Notice of Redemption. On
the Redemption Payment Date, the Redemption Amount must be paid in good funds to
Payee. If Debtor fails to pay the Redemption Amount on the Redemption Payment
Date as set forth herein, then such Redemption Notice will be null and void.
(d) Simultaneously with the closing of a Qualified Financing, the
Debtor shall prepay this Note in cash in an amount equal to the product of (a)
fifty percent (50%) and (b) one hundred fifteen percent (115%) of the
outstanding principal amount of this Note together with accrued but unpaid
interest thereon.
12. Payee shall have the right, but not the obligation, to convert all or
any portion of the outstanding principal amount of this Note, together with
interest and fees due thereon, into shares of Common Stock pursuant to the
procedures set forth in Article III of the Senior Secured Convertible Note,
dated the date hereof, from Debtor to Payee and Section 7 of the Securities
Purchase Agreement, dated as of the date hereof, between Debtor and Payee in
each case mutatis mutandis, such Article and Section being incorporated herein
by reference.
[SIGNATURE PAGE FOLLOWS]
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SMARTSERV ONLINE, INC.
By: /s/ Robert Pons
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Name: Robert Pons
Title: Chief Executive Officer
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