Exhibit 99.1
Xxxxxxx Xxxxx Ventures, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Tel. 000-000-0000
May 8, 2003
SmartServ Online, Inc.
Xxx Xxxxxxx Xxxxx
Xxxxxxxx, XX. 00000
Attention: Xxxxxxxxx X. Xxxxxxxx, 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 Xxxxxxx Xxxxx 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 the closing of the financing described in the
term sheet annexed hereto as EXHIBIT B (the "Term Sheet"); (b) five-year
cashless exercise warrants (each a "Warrant"), issuable at closing of the
financing described in the Term Sheet, to purchase shares of the Company's
common stock, at an exercise price per share equal to the lower of a) the
average closing bid price during the five days prior to closing or b) the
closing bid price the day prior to the closing of the offering described in the
Term Sheet, and in the form attached hereto as EXHIBIT A, which warrants will
have an aggregate exercise price equal to 20% of the gross proceeds received by
the Company from investors in the financing described in the Term Sheet that are
introduced by the Advisor; (c) 500,000 shares of restricted common stock of the
Company, to be issued upon signing of this Consulting Agreement; (d) consulting
fee payments in the amount $7,500 on the 30th day of each month of the term of
this Consulting Agreement commencing with the month of July, 2003; and (e)
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 monthly fees may be
deferred, at the Company's option, until such date as, and will only be earned
and payable if, the Company has received an aggregate of $1,500,000 or more of
new equity financing subsequent to the closing of the financing described in the
Term Sheet, on which date the deferred amounts will be paid to the Advisor and
the Company's fee deferral option shall end. The Company shall also reimburse
the Advisor, promptly upon receipt of invoices therefor, for (a) up to $20,000
of legal fees relating to the Advisor's involvement with the financing described
in the Term Sheet, and (b) other out-of-pocket expenses incurred in connection
with its services hereunder 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 by
Xxxxxxx Xxxxx or the Company during the Term (a "Target"), the Company shall pay
Xxxxxxx Xxxxx or cause Xxxxxxx Xxxxx 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, 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. 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
Xxxxxxx Xxxxx 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
Xxxxxxx Xxxxx 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.
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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, securities, or business by
means of a merger, consolidation, joint venture, or exchange offer, 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, or exchange offer; 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
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Advisor and any other Indemnified Person.
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 April 29, 2003.
Very truly yours, Accepted and Agreed:
XXXXXXX XXXXX VENTURES, INC. SMARTSERV ONLINE, INC.
By:____________________________ By:__________________________
Xxxxxxxxx X. Xxxxxxxx
Chief Executive Officer
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