EXHIBIT 10.47
[logo] JEFFERIES
Xxxxxxxxx & Company, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Investment Banking
October 28, 2004
SMARTSERV ONLINE, INC.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxx
President / Chief Executive Officer
Ladies and Gentlemen:
1. Retention. This letter agreement (the "Agreement") confirms that
SmartServ Online, Inc., a Delaware corporation (the "Company"), has engaged
Jefferies & Company, Inc. ("Jefferies") to act as financial advisor to the
Company in connection with providing general advisory services with respect to
corporate finance and capital raising activities, merger and acquisition
transactions and other related endeavors. These services include, but are not
limited to, Jefferies (a) acting as exclusive financial advisor to the Company
in connection with a potential purchase of Telco Group Inc. (the "Target") or
any of the Target's material assets through any structure or form of transaction
including, but not limited to, a direct or indirect acquisition, purchase of
assets, merger, consolidation, restructuring, transfer of securities or any
similar or related transaction (the "Acquisition"); (b) if requested by the
Company, rendering Jefferies' written opinion to the Board of Directors of the
Company as to whether the consideration to be paid in connection with the
proposed Acquisition is fair to the Company, from a financial point of view (the
"Fairness Opinion"); and (c) acting as exclusive financial advisor to the
Company in connection with the provision of any financing (the "Financing")
associated with any such Acquisition. The transactions contemplated in Sections
1(a), 1(b) and 1(c) above shall each individually and collectively be referred
to herein as the "Transaction." Additionally, Jefferies agrees not to represent
any other parties in regard to an acquisition or financing of the Target (a)
without the consent of the Company, which consent shall not be unreasonably
withheld, or (b) until the later of the termination of this Agreement or nine
months from the date of this Agreement.
2. Information on the Company and the Target. In connection with
Jefferies' activities hereunder, the Company will furnish Jefferies and its
counsel with all materials and information regarding the business and financial
condition of the Company and the Target which the Company believes are relevant
to the Transaction or which Jefferies requests (all such information so
furnished being the "Information") and, if deemed reasonably necessary by
Jefferies and the Company in connection with any Transaction,
SMARTSERV ONLINE, INC.
October 28, 2004
Page 2
with an information memorandum with respect to the Company, the Target and such
Transaction, as applicable (such memorandum, including all exhibits, supplements
or amendments thereto, the "Offering Materials"). The Company recognizes and
confirms that Jefferies: (a) will use and rely solely on the Information, the
Offering Materials, information obtained from the Target (the "Target
Information") and on information available from generally recognized public
sources in performing the services contemplated by this Agreement without having
independently verified the same; (b) is authorized as the Company's exclusive
financial advisor, to transmit to any prospective participant in a Transaction a
copy or copies of the Information, Offering Materials, Target Information and
other legal documentation necessary or advisable in connection with the
transactions contemplated hereby and (c) does not assume responsibility for the
accuracy or completeness of the Information, Offering Materials, the Target
Information or such other information.
3. Use of Name and Advice. The Company agrees that any reference to
Jefferies in any release, communication, or other material is subject to
Jefferies' prior written approval, which may be given or withheld in its sole
discretion and which will expire immediately upon Jefferies' resignation or the
termination of this Agreement. No statements made or advice rendered by
Jefferies in connection with the services performed by Jefferies pursuant to
this Agreement will be quoted by, nor will any such statements or advice be
referred to, in any communication, whether written or oral, prepared, issued or
transmitted, directly or indirectly, by the Company without the prior written
authorization of Jefferies, which may be given or withheld in its sole
discretion, except to the extent required by law (in which case the appropriate
party shall so advise Jefferies in writing prior to such use and shall consult
with Jefferies with respect to the form and timing of disclosure).
4. Accuracy of the Information and Offering Materials. The Company agrees
that neither the Information nor the Offering Materials will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company shall advise Jefferies promptly of the
occurrence of any event or any other change prior to the closing of a
Transaction which could reasonably be expected to result in the Information or
the Offering Materials containing any untrue statement of a material fact or
omitting to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
5. Compensation. In payment for services rendered and to be rendered
hereunder by Jefferies with respect to a Transaction, the Company agrees to pay
to Jefferies as follows:
(a) Upon execution of this Agreement, the Company shall pay to
Jefferies a nonrefundable engagement fee of 50,000 shares of the Company's
common stock.
SMARTSERV ONLINE, INC.
October 28, 2004
Page 3
(b) In addition, (i) upon execution of an exclusivity agreement,
letter of intent or indication of interest relating to an Acquisition, the
Company shall pay to Jefferies 75,000 shares of the Company's common stock; and
(ii) upon execution of a definitive agreement relating to an Acquisition, the
Company shall pay to Jefferies 75,000 shares of the Company's common stock.
(c) In addition, if the Company requests a Fairness Opinion, the
Company shall pay to Jefferies a non-refundable fee of 250,000 shares of the
Company's common stock upon the earlier of the written or oral delivery of the
Fairness Opinion by Jefferies to the Company.
(d) In addition, upon consummation of an Acquisition, the Company
shall pay to Jefferies a cash fee of $1,250,000, against which all fees paid
pursuant to Sections 5(a), 5(b) and 5(c) hereof shall be credited. For purposes
of this Section 5(d), common stock of the Company transferred pursuant to
Sections 5(a), 5(b) and 5(c) shall be valued at $1.00 per share.
(e) In addition, the Company shall pay to Jefferies fees to be
mutually agreed upon by the parties upon the raising of any Financing in
connection with a Transaction, regardless of the source of such Financing and
whether or not such Financing is sourced, negotiated, structured, issued, placed
or sold by Jefferies. If the Company and Jefferies cannot agree on the fees to
be paid pursuant to this Section 5(e), the Company shall pay to Jefferies cash
fees of (x) 5% of the value of any equity provided and (y) 2.25% of the value of
any debt provided, upon the receipt of such Financing and assuming Jefferies is
involved with such Financings. If Jefferies is not involved in the Financing,
the Company shall pay to Jefferies cash fees of 3.0% and 1.5% of any equity and
debt Financing, respectively.
(f) In addition to the fees to be paid to Jefferies as provided in
Sections 5(a), 5(b), 5(c), 5(d) and 5(e) hereof, without regard to whether any
Transaction is consummated or this Agreement is terminated, the Company shall
pay to, or on behalf of, Jefferies, promptly as billed, all reasonable fees,
disbursements and out-of-pocket expenses incurred by Jefferies in connection
with its services to be rendered hereunder (including, without limitation, the
fees and disbursements of Jefferies' counsel, travel and lodging expenses, word
processing charges, messenger and duplicating services, facsimile expenses and
other customary expenditures).
(g) Jefferies may resign and the Company may terminate Jefferies'
services at any time after nine months from the date of this Agreement, each by
giving prior written notice to the other. If Jefferies resigns or the Company
terminates Jefferies' services for any reason, Jefferies and its counsel shall
be entitled to receive all of the amounts due pursuant to Sections 5(a), 5(b),
5(c), 5(d), 5(e) and 5(f) hereof up to and including the effective date of such
termination or resignation, as the case may be. If Jefferies' services hereunder
are terminated by the Company and the Company completes the Acquisition of
Target contemplated herein within nine months of such termination,
SMARTSERV ONLINE, INC.
October 28, 2004
Page 4
then the Company shall pay Jefferies concurrently with the closing of such
transaction in cash the fees as outlined in Sections 5(d) and 5(e).
(h) All fees payable to Jefferies pursuant to this Section 5 shall
be payable via wire transfer of cash or transfer of securities, as the case may
be, to an account designated by Jefferies. Except as set forth in Section 5(d),
no fee paid or payable to Jefferies or any of its affiliates shall be credited
against any other fee paid or payable to Jefferies or any of its affiliates.
6. Indemnity; Limitation of Liability. Since Jefferies will be acting on
behalf of the Company as set forth in this Agreement, and as an integral part of
the consideration of the services to be rendered hereunder, the Company shall
indemnify Jefferies and certain other Indemnified Persons (as defined in
Schedule A hereto) in accordance with Schedule A attached hereto. The Company
shall not and shall cause its affiliates and their respective directors,
officers, managers, members, employees, shareholders and agents not to, initiate
any action or proceeding against Jefferies or any other Indemnified Person in
connection with this engagement or the Transaction unless such action or
proceeding is based solely upon the gross negligence or willful misconduct of
Jefferies or any such Indemnified Person. Jefferies and the Indemnified Persons
shall not be deemed agents or fiduciaries of the Company or its stockholders,
and will not have the authority to legally bind the Company. Jefferies will not
make an appraisal or valuation of any assets or liabilities of the Company in
connection with its services hereunder.
7. Conditions of Engagement. It is understood that the execution of this
Agreement shall not be deemed or construed as obligating Jefferies to purchase
any portion of the Target or any securities issued by the Company or the Target
in connection with the Transaction. Without limiting the foregoing, Jefferies'
services to be performed hereunder are subject to certain conditions, including,
among others, (i) approval of Jefferies' Underwriting Assistance Committee, to
be given or withheld in its sole discretion, (ii) satisfactory completion of due
diligence on the Company and Target by Jefferies, (iii) the form and terms of
the Securities being mutually acceptable to the Company, Jefferies and
prospective purchasers of the Securities, (iv) market conditions, and (v) no
adverse change in the condition of the Company and the Target.
8. Survival of Certain Provisions. The indemnity and contribution
agreements contained in Schedule A to this Agreement and Sections 2-6, 11-17 and
this Section 8 of this Agreement shall remain operative and in full force and
effect regardless of (a) any investigation made by or on behalf of Jefferies, or
by or on behalf of any affiliate of Jefferies or any person controlling or
controlled by either, (b) completion of the Transaction, (c) the resignation of
Jefferies or any termination of Jefferies' services or (d) any amendment,
expiration or termination of this Agreement. This Agreement shall be binding
upon, and shall inure to the benefit of, any successors, assigns, heirs and
personal representatives of the Company, Jefferies, and the Indemnified Persons.
SMARTSERV ONLINE, INC.
October 28, 2004
Page 5
9. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and shall be mailed or delivered (a) if to the
Company, at the address set forth above, and (b) if to Jefferies, at the offices
of Jefferies at 000 Xxxxxxx Xxx., 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: General Counsel.
10. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
11. Assignment. This Agreement may not be assigned by either party hereto
without the prior written consent of the other, to be given in the sole
discretion of the party from whom such consent is being requested. Any attempted
assignment of this Agreement made without such consent shall be void and of no
effect, at the option of the non-assigning party.
12. Third Party Beneficiaries. This Agreement has been and is made solely
for the benefit of the Company, Jefferies and the other Indemnified Persons
referred to in Schedule A hereof and their respective successors, permitted
assigns, heirs and personal representatives, and no other person shall acquire
or have any right under or by virtue of this Agreement.
13. Construction and Choice of Law. This Agreement, together with Schedule
A attached hereto, incorporates the entire understanding of the parties and
supersedes all previous agreements relating to the subject matter hereof should
they exist. This Agreement and any issue arising out of or relating to the
parties' relationship hereunder shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to its
principles or rules of conflict of laws to the extent such principles or rules
would require or permit the application of the laws of another jurisdiction.
14. Arbitration. The parties agree that any dispute, claim or controversy
directly or indirectly relating to or arising out of this Agreement, the
termination or validity hereof, any alleged breach of this Agreement or the
engagement contemplated hereby (any of the foregoing, a "Claim") shall be
submitted to JAMS/ENDISPUTE, or its successor, in New York, New York, for
mediation; and if the matter is not resolved through mediation, then it shall be
submitted for final and binding arbitration in front of a panel of three
arbitrators with JAMS/ENDISPUTE in New York, New York under the JAMS/ENDISPUTE
Comprehensive Arbitration Rules and Procedures (with each of Jefferies and the
Company choosing one arbitrator, and the chosen arbitrators choosing the third
arbitrator). The arbitrators shall, in their award, allocate all of the costs of
the arbitration (and the mediation, if applicable), including the fees of the
arbitrators and the reasonable attorneys' fees of the prevailing party, against
the party who did not prevail. The award in the arbitration shall be final and
binding. The arbitration shall be governed by the Federal Arbitration Act, 9
U.S.C. ss.ss.1-16, and judgment upon the award rendered by the arbitrators may
be entered by any court having jurisdiction thereof. The Company
SMARTSERV ONLINE, INC.
October 28, 2004
Page 6
agrees and consents to personal jurisdiction, service of process and venue in
any federal or state court within the State of New York in connection with any
action brought to enforce an award in arbitration.
15. Headings. The section headings in this Agreement have been inserted as
a matter of convenience of reference and are not part of this Agreement.
16. Press Announcements. At any time after the consummation or other
public announcement of the Transaction, Jefferies may place an announcement in
such newspapers and publications as it may choose, stating that Jefferies has
acted as set forth herein in connection with the Transaction, and may use, from
time to time, the Company's name and logo and a brief description of the
Transaction in publications and/or marketing materials prepared and/or
distributed by Jefferies.
17. Amendment; Waiver. This Agreement may not be modified or amended
except in a writing duly executed by the parties hereto. No waiver by either
party of any breach of any provision of this Agreement shall be deemed a waiver
of any similar or any other provision of this Agreement at the same or any prior
or subsequent time. To be effective, a waiver must be set forth in writing
signed by the waiving party and must specifically refer to this Agreement and
the provision being waived.
18. Term. Except as provided herein, this Agreement shall run from the
date of this letter until terminated pursuant to Section 5 above (the "Term").
The Company agrees that during the Term it will not, directly or indirectly,
effect a Transaction or otherwise contact or approach any person with respect
thereto other than through Jefferies.
SMARTSERV ONLINE, INC.
October 28, 2004
Page 7
Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein, whereupon
this letter and your acceptance shall constitute a binding agreement between the
Company and Jefferies as of the date first above written.
Sincerely,
XXXXXXXXX & COMPANY, INC.
By /s/ Xxxxx Xxxxxxxxx
-----------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Director
Director of M&A
Accepted and Agreed:
SMARTSERV ONLINE, INC.
By /s/ Xxxxxx X. Xxxx
-----------------------
Name: Xxxxxx X. Xxxx
Title: CEO
EXHIBIT 10.47
SCHEDULE A
Reference is hereby made to the engagement letter attached hereto between
Jefferies & Company, Inc. ("Jefferies") and the Company as defined therein (as
amended from time to time in accordance with the terms thereof, the
"Agreement"). Unless otherwise noted, all capitalized terms used herein shall
have the meanings set forth in the Agreement.
Since Jefferies will be acting on behalf of the Company in connection with
the transactions contemplated by the Agreement, and as part of the consideration
for the agreement of Jefferies to furnish its services pursuant to such
Agreement, the Company agrees to indemnify and hold harmless Jefferies and its
affiliates and their respective officers, directors, managers, members,
partners, counsel, employees and agents, and any other persons controlling
Jefferies or any of its affiliates within the meaning of either Section 15 of
the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934,
and the respective agents, employees, officers, directors, managers, members,
partners, counsel and shareholders of such persons (Jefferies and each such
other person being referred to as an "Indemnified Person"), to the fullest
extent lawful, from and against all claims, liabilities, losses, damages and
expenses (or actions in respect thereof), as incurred, related to or arising out
of or in connection with (i) actions taken or omitted to be taken by the
Company, its affiliates, employees or agents, (ii) actions taken or omitted to
be taken by any Indemnified Person (including acts or omissions constituting
ordinary negligence) pursuant to the terms of, or in connection with services
rendered pursuant to, the Agreement or any Transaction or proposed transaction
contemplated thereby or any Indemnified Person's role in connection therewith,
provided, however, that the Company shall not be responsible for any losses,
claims, damages, liabilities or expenses of any Indemnified Person to the
extent, and only to the extent, that it is finally judicially determined that
they are due solely to such Indemnified Person's gross negligence or willful
misconduct, and/or (iii) any untrue statement or alleged untrue statement of a
material fact contained in any of the Information or the Offering Materials, or
arising out of or based upon any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
The Company shall not settle or compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened action,
claim, suit or proceeding in which any Indemnified Person is or could be a party
and as to which indemnification or contribution could have been sought by such
Indemnified Person hereunder (whether or not such Indemnified Person is a party
thereto), unless such Indemnified Person has given its prior written consent or
the settlement, compromise, consent or termination includes an express
unconditional release of such Indemnified Person, satisfactory in form and
substance to such Indemnified Person, from all losses, claims, damages or
liabilities arising out of such action, claim, suit or proceeding.
If for any reason (other than the gross negligence or willful misconduct
of an Indemnified Person as provided above) the foregoing indemnity is
unavailable to an Indemnified Person or insufficient to hold an Indemnified
Person harmless, then the Company, to the fullest extent permitted by law, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such claims, liabilities, losses, damages or expenses in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and by Jefferies on the other, from the Transaction or proposed
transaction under the Agreement or, if allocation on that basis is not permitted
under applicable law, in such proportion as is appropriate to reflect not only
the relative benefits received by the Company on the one hand and Jefferies on
the other, but also the relative fault of the Company and Jefferies, as well as
any relevant equitable considerations. Notwithstanding the provisions hereof,
the aggregate contribution of all Indemnified Persons to all claims,
liabilities, losses, damages and expenses shall not exceed the amount of fees
actually received by Jefferies pursuant to the Agreement with respect to the
Transaction. It is hereby further agreed that the relative benefits to the
Company on the one hand and Jefferies on the other with respect to any
Transaction or proposed transaction contemplated by the Agreement shall be
deemed to be in the same proportion as (i) the total value paid or contemplated
to be paid or received or contemplated to be received by the Company or the
Company's shareholders, as the case may be, in the transaction or transactions
that are within the scope of the Agreement, whether or not any such transaction
is consummated, bears to (ii) the fees actually paid to Jefferies with respect
to such Transaction. The relative fault of the Company on the one hand and
Jefferies on the
SCHEDULE A
other with respect to the Transaction shall be determined by reference to, among
other things, whether any untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by Jefferies and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
No Indemnified Person shall have any liability to the Company or any
officer, director, employee or affiliate thereof in connection with the services
rendered pursuant to the Agreement except for any liability for claims,
liabilities, losses or damages finally judicially determined to have resulted
solely as a result of such Indemnified Person's gross negligence or willful
misconduct. In no event shall any Indemnified Person be responsible for any
special, indirect, punitive or consequential damages.
In addition, the Company agrees to reimburse the Indemnified Persons for
all expenses (including, without limitation, fees and expenses of counsel) as
they are incurred in connection with investigating, preparing, defending or
settling any action or claim for which indemnification or contribution may be
sought by the Indemnified Person, whether or not in connection with litigation
in which any Indemnified Person is a named party. If any of Jefferies' personnel
appears as witnesses, are deposed or are otherwise involved in the defense of
any action against Jefferies, the Company or the Company officers, managers or
directors, the Company will pay Jefferies (i) with respect to each day that one
of Jefferies' professional personnel appears as a witness or is deposed and/or
(ii) with respect to each day that one of Jefferies' professional personnel is
involved in the preparation therefor, (a) a fee of $4,000 per day for each such
person with respect to each appearance as a witness or for a deposition and (b)
at a rate of $400 per hour with respect to each hour of preparation for any such
appearance and the Company will reimburse Jefferies for all reasonable expenses
incurred by Jefferies by reason of any of its personnel being involved in any
such action.
The indemnity, contribution and expense reimbursement obligations set
forth herein (i) shall be in addition to any liability the Company may have to
any Indemnified Person at common law or otherwise, (ii) shall survive the
expiration of the Term, (iii) shall apply to any modification of Jefferies'
engagement and shall remain in full force and effect following the completion or
termination of the Agreement, (iv) shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of Jefferies or any
other Indemnified Person and (v) shall be binding on any successor or assign of
the Company and successors or assigns to the Company's business and assets.
If the Company enters into any agreement or arrangement with respect to,
or effects, any proposed sale, exchange, dividend or other distribution or
liquidation of all or a significant portion of its assets in one or a series of
transactions or any significant recapitalization or reclassification of its
outstanding securities, the Company shall provide for the assumption of its
obligations under this Agreement by another party satisfactory to Jefferies.
