THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO SMARTSERV ONLINE, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
Right to Purchase up to 3,000,000 Shares of Common Stock of
SmartServ Online, Inc.
----------------------
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 1 Issue Date: August 31, 2005
SmartServ Online, Inc., a corporation organized under the laws of the
State of Delaware (the "Company"), hereby certifies that, for value received
CAMOFI MASTER LDC, or assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company (as defined herein) from and after
the Issue Date of this Warrant and at any time or from time to time before 5:00
p.m., New York time, through the close of business August 31, 2010 (the
"Expiration Date"), up to Three Million (3,000,000) fully paid and nonassessable
shares of Common Stock (as hereinafter defined), $0.01 par value per share, at
the applicable Exercise Price per share (as defined below). The number and
character of such shares of Common Stock and the applicable Exercise Price per
share are subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include the Company and any corporation
which shall succeed, or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes (i) the Company's Common Stock,
par value $0.01 per share; and (ii) any other securities into which or for
which any of the securities described in (a) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of
assets or otherwise.
(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
1
(corporate or otherwise) which the Holder at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu
of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common
Stock or Other Securities pursuant to Section 5 or otherwise.
(d) The "Exercise Price" applicable under this Warrant shall be a
price of $0.50.
(e) "Warrant Shares" shall mean the shares of Common Stock
deliverable upon exercise of the Warrant, as adjusted from time to time.
1. Exercise of Warrant.
1.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled
to receive, upon exercise of this Warrant in whole or in part, by delivery of an
original or fax copy of an exercise notice in the form attached hereto as
Exhibit A (the "Exercise Notice"), shares of Common Stock of the Company,
subject to adjustment pursuant to Section 5.
1.2 Fair Market Value. For purposes hereof, the "Fair Market Value" of a
share of Common Stock as of a particular date (the "Determination Date") shall
mean:
(a) If the Company's Common Stock is traded on the American Stock
Exchange or another national exchange or is quoted on the National or
SmallCap Market of The Nasdaq Stock Market, Inc.("Nasdaq"), then the
closing or last sale price, respectively, reported for the last business
day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the American
Stock Exchange or another national exchange or on the Nasdaq but is traded
on the NASD OTC Bulletin Board, then the mean of the average of the
closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules
then in effect of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all
amounts to be payable per share to holders of the Common Stock pursuant to
the charter in the event of such liquidation, dissolution or winding up,
plus all other amounts to be payable per
2
share in respect of the Common Stock in liquidation under the charter,
assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Warrant are outstanding at
the Determination Date.
1.3 Company Acknowledgment. The Company will, at the time of the exercise
of the Warrant, upon the request of the Holder acknowledge in writing its
continuing obligation to afford to the Holder any rights to which the Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to the Holder any such rights.
1.4 Trustee for Warrant Holders. If a bank or trust company shall have
been appointed as trustee for the holders of the Warrant pursuant to Subsection
3.2, such bank or trust company shall have all the powers and duties of a
warrant agent (as hereinafter described) and shall accept, in its own name for
the account of the Company or such successor person as may be entitled thereto,
all amounts otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section.
2. Procedure for Exercise.
2.1 Delivery of Stock Certificates, Etc., on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares in accordance herewith. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
three (3) business days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder, or as the Holder (upon payment by the Holder of
any applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly and
validly issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) to which the Holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which the Holder would otherwise be entitled,
cash equal to such fraction multiplied by the then Fair Market Value of one full
share, together with any other stock or other securities and property (including
cash, where applicable) to which the Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
2.2 Exercise. Payment may be made either (i) in cash or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price, (ii) by delivery of the Warrant, or shares of Common
Stock and/or Warrant Shares in accordance with the payment of this Section 2.2,
or (iii) by a combination of any of the foregoing methods, for the number of
Common Shares specified in such Exercise Notice (as such number shall be
adjusted to reflect any adjustment in the total number of Warrant Shares) and
the Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.
3
Notwithstanding any provisions herein to the contrary, if the Fair Market Value
of one share of Common Stock is greater than the Exercise Price (at the date of
calculation as set forth below), in lieu of paying the Exercise price in cash,
the Holder may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being exercised) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Exercise Notice in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:
X=Y (A-B)
-----
A
Where X = the number of shares of Common Stock to be issued to
the Holder
Y = the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being exercised (at the date of such
calculation)
A = the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
3. Effect of Reorganization, Etc.; Adjustment of Exercise Price.
3.1 Reorganization, Consolidation, Merger, Etc. In case at any time or
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which the Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if the Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 5.
3.2 Dissolution. In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, concurrently with any distributions made to holders of its Common
Stock, shall at its expense deliver or cause to be delivered to the Holder the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrant pursuant to Section 3.1, or, if the
Holder shall so instruct the Company, to a bank or trust
4
company specified by the Holder and having its principal office in New York, NY
as trustee for the Holder of the Warrant (the "Trustee").
3.3 Continuation of Terms. Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 5. In the
event this Warrant does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holders of the Warrant will be delivered to Holder or the Trustee as
contemplated by Section 3.2.
3.4 Purchase Price Reset Provision. If prior to the expiration of this
Warrant the Company sells publicly (i) shares of its Common Stock, (ii)
securities convertible into shares of its Common Stock, or (iii) options or
warrants to purchase shares of its Common Stock or securities convertible into
shares of its Common Stock at a sale, conversion or exercise price per share
(the "Issue Price"), as the case may be, less than the Exercise Price then in
effect, the Exercise Price shall be reset to the Issue Price and the number of
shares purchasable pursuant to this Warrant shall be increased pro rata to the
percentage reduction in the Exercise Price, provided, however, that the reset
provision shall not apply to (i) any shares issued upon the exercise or
conversion of any currently outstanding options, warrants, or convertible
securities, or (ii) any Common Stock options or warrants issuable pursuant to an
existing employee stock option plan or other existing compensation arrangement
or any underlying Common Stock issued on the exercise thereof, but not pursuant
to any amendment relating thereto to the extent such amendment increase the
number of shares issuable under such plan or arrangement. The Issue Price shall
be calculated taking into account the amount paid for the issuance of such
Common Stock, option or warrant or convertible security and the amount, if any,
payable upon the exercise or conversion thereof.
4. Intentionally Omitted.
5. Extraordinary Events Regarding Common Stock. If the Company shall (a)
issue additional shares of the Common Stock as a dividend or other distribution
on outstanding Common Stock, (b) subdivide its outstanding shares of Common
Stock, or (c) combine its outstanding shares of the Common Stock into a smaller
number of shares of the Common Stock, then, in each such event, the Exercise
Price shall, simultaneously with the happening of such event, be adjusted by
multiplying the then Exercise Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the
5
product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 5.
The number of shares of Common Stock that the holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be increased to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 5) be issuable on such exercise by a fraction of which (a) the numerator
is the Exercise Price that would otherwise (but for the provisions of this
Section 5) be in effect, and (b) the denominator is the Exercise Price in effect
on the date of such exercise.
6. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrant, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 12 hereof).
7. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, shares of Common Stock (or Other Securities)
from time to time issuable on the exercise of the Warrant; provided, however,
that as of the date hereof the Company is reserving 7,492,748 shares of Common
Stock for issuance upon exercise of this Warrant and conversion of the Senior
Secured Convertible Note and Revolving Credit Note issued by the Company in
favor of the Holder (the "Notes"), and within 60 days of the date hereof the
Company shall reserve the balance of the shares of Common Stock issuable on the
exercise of the Warrant and conversion of the Notes.
8. Assignment; Exchange of Warrant. Subject to compliance with applicable
securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or in
part. On the surrender for exchange of this Warrant, with the Transferor's
endorsement in the form of Exhibit B attached hereto (the "Transferor
Endorsement Form") and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall
include, without limitation, the provision of a legal opinion from the
Transferor's counsel (at the Company's expense) that such transfer is exempt
from the registration requirements of applicable securities laws, and with
payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the
6
Transferor thereof a new Warrant of like tenor, in the name of the Transferor
and/or the transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.
9. Replacement of Warrant. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of any such loss, theft or destruction of this Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. Registration Rights. The Holder has been granted certain registration
rights by the Company. These registration rights are set forth in a Registration
Rights Agreement entered into by the Company and Purchaser dated as of even date
of this Warrant.
11. Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this proviso is being made on
an exercise date, which would result in beneficial ownership by the Holder and
its affiliates of more than 9.99% of the outstanding shares of Common Stock of
the Company on such date. For the purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder. Notwithstanding the foregoing, the restriction described in
this paragraph may be revoked upon 75 days prior notice from the Holder to the
Company and is automatically null and void upon an Event of Default under the
Note.
12. Warrant Agent. The Company may, by written notice to the the Holder of
the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 8, and replacing this Warrant pursuant to
Section 9, or any of the foregoing, and thereafter any such issuance, exchange
or replacement, as the case may be, shall be made at such office by such agent.
13. Transfer on the Company's Books. Until this Warrant is transferred on the
books of the Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
14. Notices, Etc. All notices and other communications from the Company to
the Holder shall be mailed by first class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company in writing by
the Holder or,
7
until the Holder furnishes to the Company an address, then to, and at the
address of, the last Holder of this Warrant who has so furnished an address to
the Company.
15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be governed by and construed in accordance with the
laws of State of New York without regard to principles of conflicts of laws
other than Section 5-1401 of the New York General Obligations Law. Any action
brought concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York; provided, however, that the Holder may choose to waive
this provision and bring an action outside the state of New York. The
individuals executing this Warrant on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury. The prevailing party
shall be entitled to recover from the other party its reasonable attorney's fees
and costs. If any provision of this Warrant is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Warrant. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof. The Company acknowledges that legal counsel participated
in the preparation of this Warrant and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Warrant to favor any party
against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
8
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
SMARTSERV ONLINE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
CAMOFI MASTER LDC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name:
Title:
9
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Warrant)
TO: SmartServ Online, Inc.
_____________________
_____________________
Attention: Chief Executive Officer
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):
________ _______ shares of the Common Stock covered by such Warrant; or
________ the maximum number of shares of Common Stock covered by such
Warrant pursuant to the cashless exercise procedure set forth
in Section 2.
The undersigned herewith makes payment of the full Exercise Price for
such shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
________ $______ in lawful money of the United States; and/or
________ the cancellation of such portion of the attached Warrant as is
exercisable for a total of _______ shares of Common Stock
(using a Fair Market Value of $_______ per share for purposes
of this calculation); and/or
________ the cancellation of such number of shares of Common Stock as
is necessary, in accordance with the formula set forth in
Section 2.2, to exercise this Warrant with respect to the
maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in
Section 2.
The undersigned requests that the certificates for such shares be issued
in the name of, and delivered to _________________________________ whose address
is______________________________________.
10
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, (the "Securities Act") or pursuant to an exemption from registration under
the Securities Act.
Dated:
---------------------------- -----------------------------------------
(Signature must conform to name of holder
as specified on the face of the Warrant)
Address:
--------------------------------
--------------------------------
11
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of SmartServ Online, Inc. into which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
SmartServ Online, Inc. with full power of substitution in the premises.
Percentage Number
Transferees Address Transferred Transferred
----------- ------- ----------- -----------
--------------- ------------------ ------------------ -----------------
--------------- ------------------ ------------------ -----------------
--------------- ------------------ ------------------ -----------------
--------------- ------------------ ------------------ -----------------
Dated
------------------- --------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
Address:
-----------------------------------
-----------------------------------
SIGNED IN THE PRESENCE OF:
--------------------------------------------
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
----------------------------------
(Name)
12
