EXHIBIT 10.42
SMARTSERV ONLINE, INC.
Date of Grant: March 12, 2004
To: Robert Pons
439 Williamson Road
Gladwyne, Pennsylvania 19035
You are hereby granted an option (the "Option") effective as of the date
hereof, to purchase 1,300,000 shares of Common Stock, par value $.01 per share
("Common Stock"), of SmartServ Online, Inc. (the "Company") at an exercise price
of $1.50 per share (the "Exercise Price"). This Option shall terminate and is
not exercisable after the expiration of ten years from the date of its grant,
except if terminated earlier as hereinafter provided (the "Expiration Date").
Your Option shall vest, subject to accelerated vesting as provided below,
over a four (4) year period as follows: (i) 557,141 shares on the date hereof;
and (ii) the balance of 742,859 shares in equal amounts as of the last day of
each calendar quarter beginning with the quarter ending March 31, 2004 and
ending with the quarter ending December 31, 2007.
In the event that a "change of control" (as hereinafter defined) of the
Company occurs at any time prior to the Expiration Date (as hereinafter
defined), your Option may, from and after such date, and notwithstanding the
second paragraph of this Option, be exercised for up to 100% of the total number
of shares then subject to the Option minus the number of shares previously
purchased upon exercise of the Option (as adjusted for any changes in the
outstanding Common Stock by reason of a stock dividend, stock split, combination
of shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation Committee deems in its sole
discretion to be similar circumstances, (a "Recapitalization")).
A "Change of Control" shall be deemed to have occurred upon the happening
of any of the following events:(i) the shareholders of the Company approve a
merger or consolidation of the Company with any other entity, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent more than
fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or consummate the sale or disposition by
the Company of all or substantially all of the Company's assets (other than to a
subsidiary or subsidiaries) or (ii) any other event deemed to constitute a
"Change of Control" by the Board of Directors of the Company.
In addition, notwithstanding the second paragraph of this Option the
vesting schedule of your Option with respect to the balance of 742,859 shares of
Common Stock (the "Remaining Shares") (as adjusted for any changes in the
outstanding Common Stock by reason of a stock dividend, stock split, combination
of shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation committee deems it its sold
discretion to be similar circumstances) shall accelerate as follows:
(i) 33.33% of the Remaining Shares upon the Company's Common Stock
achieving a Market Price of $5.00 per share ten (10) consecutive
trading days;
(ii) 33.33% of the Remaining Shares upon the Company's Common Stock
achieving a Market Price of $10.00 per share ten (10) consecutive
trading days; and
(iii)33.33% of the Remaining Shares upon the Company's Common Stock
achieving a Market Price of $15.00 per share ten (10) consecutive
trading days.
For purposes of (i), (ii) and (iii) above, the Market Price of the
Company's Common Stock is subject to adjustment in the event of a
Recapitalization.
The vesting schedule of your Option shall also accelerate in the event of
the following:
(i) 25% of the Remaining Shares upon the Company becoming "Cash Flow
Positive". For purposes herein, Cash Flow Positive shall be defined as
any quarterly period in which revenues of the Company exceed cash
expenditures for operating expenses.
(ii) 12.5% of the Remaining Shares upon the Company achieving $4.0 million
in revenue in any calendar year based upon the Company's audited
financial statements;
(iii)12.5% of the Remaining Shares upon the Company achieving $8.0 million
in revenue in any calendar year based upon the Company's audited
financial statements;
(iv) 12.5% of the Remaining Shares upon the Company achieving $12.0 in
revenue in any calendar year based upon the Company's audited
financial statements; and
(v) 12.5% of the Remaining Shares upon the Company's shares becoming
listed on Nasdaq (SmallCap or NMS) or the American Stock Exchange.
In lieu of paying the Exercise Price in cash and/or upon exercise of the
Option, you may elect a "cashless exercise," in which event you will receive
upon exercise a reduced number of shares equal to (i) the number of shares that
would be issuable pursuant to this Option upon payment of the Exercise Price
minus (ii) the number of shares that have an aggregate Market Price (as defined
below) equal to the Exercise Price. In addition, you may elect to have the
Company's tax withholding obligations in connection with your exercise of the
option satisfied on a cashless basis, in which event the number of shares that
would otherwise be issuable pursuant to this Option shall be reduced by the
number of shares that have an aggregate Market
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Price (as defined below) equal to the amount of tax required to be withheld (but
not more than such amount).
For purposes of this Option "Market Price" per share of Common Stock on any
date shall be: (i) if the Common Stock is listed or admitted for trading on any
national securities exchange, the last reported sales price as reported on such
national securities exchange; (ii) if the Common Stock is not listed or admitted
for trading on any national securities exchange, the last reported closing bid
price for the Common Stock as reported on the Nasdaq Stock Market's National
Market ("NNM") or Nasdaq Stock Market's Small Cap Market ("NSM") or a similar
service if NNM or NSM are not reporting such information; (iii) if the Common
Stock is not listed or admitted for trading on any national securities exchange,
NNM or NSM or a similar service, the last reported bid quotation for the Common
Stock as quoted by a market maker in the Common Stock (or if there is more than
one market maker, the bid quotation shall be obtained from two market makers and
the average of the highest bid quotation shall be the "Market Price"); or (iv)
if the Common Stock is not listed or admitted for trading on any national
securities exchange or NNM or quoted by NSM and there is no market maker in the
Common Stock, the fair market value of such shares as determined in good faith
by the Board of Directors of the Company.
This Option may be exercised by you, in whole or in part (but not as to
less than a whole share), as to the vested portion of this Option only, at any
time prior to the Expiration Date, by the presentation of this Option, with the
purchase form attached duly executed, at the Company's office (or such office or
agency of the Company as it may designate in writing to you) specifying the
number of shares of Common Stock as to which the Option is being exercised, and
upon payment by you to the Company in cash or by certified check or bank draft,
in an amount equal to the Exercise Price times the number of shares or in lieu
thereof you may elect a cashless exercise as provided herein. No fractional
shares shall be issued or delivered upon exercise of this Option.
This Option is exchangeable by you at your option at the office of the
Company for other Options of different denominations entitling you to purchase
in the aggregate the same number of shares of Common Stock as are purchasable
hereunder; and this Option may be divided or combined with other Options which
carry the same rights, in either case, upon presentation hereof at the office of
the Company together with a written notice, signed by you, specifying the names
and denominations in which new Options are to be issued, and the payment of any
transfer tax due in connection therewith.
Your Option will, to the extent not previously exercised by you, terminate
one (1) year after the date on which your employment by the Company or Affiliate
of the Company is terminated, whether such termination is voluntary or not,
whether by reason of disability as defined in Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder,
or death; provided, that, in the event your employment with the Company is
terminated due to a "Termination For Cause" by the Company (as such term is
defined in Section 9 of your Employment Agreement, dated March 12, 2004) your
option will expire immediately; and provided further, that, in the event your
employment with the Company is terminated without "Good Reason" by you (as such
term is defined in Section 10 of your Employment Agreement, dated March 12,
2004) your Option will terminate thirty (30) days from the date of such
termination and you may only exercise this Option for the number of
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shares you had a right to purchase on the date your employment terminated. In
the event of termination of your employment upon a "Termination Other Than For
Cause" or "For Good Reason" (as such terms are defined in Sections 9 and 10 of
your Employment Agreement), after the date of such termination you may exercise
this Option for 100% of the number of shares then subject to the Option minus
the number of shares previously purchased upon exercise of the Option as
adjusted for a Recapitalization. If you are employed by an Affiliate of the
Company, your employment shall be deemed to have terminated on the date your
employer ceases to be an Affiliate of the Company, unless you are on that date
transferred to the Company or another Affiliate of the Company. Your employment
shall not be deemed to have terminated if you are transferred from the Company
to an Affiliate, or vice versa, or from one Affiliate to another Affiliate. For
purposes herein, an Affiliate of the Company shall be defined as an entity
controlled by or under common control with the Company.
If you die while employed by the Company or an Affiliate of the Company,
your legatee(s), distributee(s), executor(s) or administrator(s), as the case
may be, may, at any time within one (1) year after the date of your death,
exercise the Option as to any shares which you had a right to purchase and did
not purchase during your lifetime plus those shares that would have vested
within one (1) year thereafter. If your employment with the Company, or an
Affiliate is terminated by reason of your becoming disabled (within the meaning
of Section 22(e)(3) of the Code and the regulations thereunder), you or your
legal guardian or custodian may at any time within one (1) year after the date
of such termination, exercise the Option as to any shares which you had a right
to purchase and did not purchase prior to such termination plus those shares
that would have vested within one (1) year thereafter. Your legatee,
distributee, executor, administrator, guardian or custodian must present proof
of his authority satisfactory to the Company prior to being allowed to exercise
this Option.
This Option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the Option Price has been paid in full pursuant to due
exercise of this Option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this Option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.
This Option constitutes the entire understanding between the Company and
you with respect to the subject matter hereof and no amendment, modification or
waiver of this Option, in whole or in part, shall be binding upon the Company
unless in writing and signed by an appropriate officer of the Company. This
Option and the performances of the parties hereunder shall be construed in
accordance with and governed by the laws of the State of Pennsylvania without
regard to principles of conflict of law.
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Please sign the copy of this Option and return it to the Company, thereby
indicating your understanding of and agreement with its terms and conditions.
SMARTSERV ONLINE, INC.
By: /s/ L. Scott Perry
-------------------------------------
L. Scott Perry
Chairman of the Board
I hereby acknowledge receipt of a copy of the foregoing Stock Option to
purchase 1,300,000 shares at an Exercise Price of $1.50 per share, and having
read such documents, hereby signify my understanding of, and my agreement with,
their terms and conditions.
/s/ Robert Pons
- -------------------------------- --------------------------------
Robert Pons (Date) March 12, 2004
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PURCHASE FORM
To Be Executed
Upon Exercise of Option
The undersigned record holder of the within Option hereby irrevocably
elects to exercise the right to purchase _______ share of Common Stock evidenced
by the within Option, according to the terms and conditions thereof, and
herewith makes payment of the purchase price in full or, alternatively, elects a
cashless exercise in accordance with the terms of the Option as designated by
holder in writing to the Company.
The undersigned requests that certificates for such shares shall be issued
in the name set forth below.
Dated:
_________________________________
Signature
_________________________________
Print Name of Signatory
_________________________________
Name to whom certificates are to
be issued if different from above
Address _________________________
_________________________
Social Security No. or other
identifying number ______________
If said number of shares shall not be all the shares purchasable under the
within Option, the undersigned requests that a new Option for the unexercised
portion shall be registered in the name of:
_________________________________
(Please Print)
Address _________________________
_________________________
Social Security No. or other
identifying number ______________
Signature _______________________
_________________________________
Print Name of Signatory
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