<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(c)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SmartServ Online, Inc.
-----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other that Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 6-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid: $
-----------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
___________________________________________________________________________
1) Amount previously paid:
___________________________________________________________________________
2) Form Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
SMARTSERV ONLINE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 4, 1996
To the Stockholders of SmartServ Online, Inc.:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders (the
"Annual Meeting") of SmartServ Online, Inc., a Delaware corporation (the
"Company"), will be held at 3:00 p.m., local time, on Monday, November 4,
1996, at the Hotel Inter-Continental, 111 East 48th Street, New York, New
York, for the following purposes:
1. To elect two (2) Class I directors to the Company's Board of Directors
to serve until the Company's 1999 Annual Meeting of Stockholders or until
their successors are duly elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending June 30, 1997;
3. To approve the Company's 1996 Stock Option Plan; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on September 5,
1996 as the record date for determining those stockholders entitled to notice
of and to vote at the Annual Meeting and any adjournments or postponements
thereof. A complete list of stockholders entitled to vote at the Annual
Meeting will be available for inspection by any stockholder during the Annual
Meeting. In addition, the list will be open for examination by any
stockholder, for any purpose germane to the Annual Meeting, during ordinary
business hours, for a period of at least 10 days prior to the Annual Meeting,
at the offices of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, 18th Floor, New York, New York 10036.
All stockholders are cordially invited to attend the Annual Meeting.
However, whether or not you expect to attend the Annual Meeting, please
promptly mark, sign and date the enclosed proxy and return it in the
postage-prepaid envelope provided to ensure your representation and the
presence of a quorum at the Annual Meeting. In the event you decide to attend
the Annual Meeting in person, you may, if you desire, revoke your Proxy and
vote your shares in person.
By Order of the Board of Directors
Sebastian E. Cassetta
Secretary
Stamford, Connecticut
October 10, 1996
<PAGE>
1996 ANNUAL MEETING OF STOCKHOLDERS
OF
SMARTSERV ONLINE, INC.
------------------
PROXY STATEMENT
------------------
The Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of SmartServ Online, Inc., a Delaware corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), for use in voting at the Annual
Meeting of Stockholders (the "Annual Meeting") of the Company to be held on
Monday, November 4, 1996, and at any adjournments or postponements thereof,
for the purposes set forth in the accompanying Notice of Annual Meeting and
in this Proxy Statement.
The approximate date on which this Proxy Statement and the accompanying
proxy will first be sent or given to stockholders is October 10, 1996.
Stockholders should review the information provided herein in conjunction
with the Company's Annual Report to Stockholders for the year ended June 30,
1996 which accompanies this Proxy Statement.
The Company's principal executive offices are located at Metro Center, One
Station Place, Stamford, Connecticut 06902, and its telephone number is (203)
353-5950. The Company can also be reached on the Internet at
http://www.smartserv.com.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in
person should you so desire. Stockholders have an unconditional right to
revoke their proxy at any time prior to the exercise thereof, either in
person at the Annual Meeting or by filing a written revocation or duly
executed proxy bearing a later date with the Company's Secretary at the
Company's headquarters; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to
the Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Stockholders and the enclosed proxy is to be
borne by the Company. The Company may request banks, brokers and other
custodians, nominees and fiduciaries to forward copies of the proxy material
to their principals and to request authority for the execution of proxies.
The Company may reimburse such persons for their expenses in so doing. The
Company has retained D. F. King & Co., Inc., 77 Water Street, New York, New
York 10005, a proxy solicitation firm, to solicit proxies. The fee to be paid
to such firm is not expected to exceed $2,500. Employees of the Company may
also solicit proxies in person, by telephone or otherwise. The Company's
employees will receive no compensation for soliciting proxies other than
their regular salaries.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will consider and vote
upon the following matters:
(1) The election of two (2) Class I directors to the Company's Board of
Directors to serve until the Company's 1999 Annual Meeting of
Stockholders or until their successors are duly elected and qualified;
(2) The ratification of the appointment of Ernst & Young LLP as the
independent auditors of the Company for the fiscal year ending June
30, 1997;
(3) The approval of the Company's 1996 Stock Option Plan (the "Plan"); and
(4) Such other business as may properly come before the Annual Meeting,
including any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation
(and which have not been revoked in accordance with the procedures set
<PAGE>
forth above) will be voted in favor of the election of the nominees for
director named below, in favor of ratification of the appointment of auditors
and for the approval of the Plan. In the event a stockholder specifies a
different choice by means of the enclosed proxy, his shares will be voted in
accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on September 5, 1996
as the record date (the "Record Date") for determining those stockholders of
the Company entitled to notice of and to vote at the Annual Meeting. As of
the Record Date there were 3,695,000 shares of Common Stock issued and
outstanding. Each such share of Common Stock is entitled to one vote at the
Annual Meeting on each matter submitted to stockholders for approval at the
Annual Meeting.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors are elected by a plurality of
votes of the shares of Common Stock represented in person or by proxy at the
Annual Meeting. The affirmative vote of the majority of shares of Common
Stock represented in person or by proxy at the Annual Meeting will be
required for approval of any other matter that is being submitted to a vote
of the stockholders. Under applicable Delaware law, abstentions and broker
non-votes will not have the effect of votes in opposition to the election of
a director, but abstentions will be treated as votes against all other
proposals.
SECURITY OWNERSHIP
The following table sets forth, as of August 31, 1996, certain information
regarding the beneficial ownership of the Common Stock by (i) each person
known by the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) each of the
Named Executive Officers (as such term is herein defined) and (iv) all
directors and executive officers of the Company as a group. Except as
otherwise indicated, each person listed below has sole voting and investment
power with respect to the shares of Common Stock set forth opposite such
person's name.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of Outstanding
Beneficial Owner (1) Beneficial Ownership (2) Shares (2)
-------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Steven T. Francesco
c/o SmartServ Online, Inc.
Metro Center, One Station Place
Stamford, CT 06902 ................... 842,775 22.8%
Sebastian E. Cassetta
c/o SmartServ Online, Inc.
Metro Center, One Station Place
Stamford, CT 06902 ................... 361,190 9.8%
InterBank Communications, Inc.
1733 Connecticut Avenue, N.W.
Washington, DC 20009 ................. 204,250(3)(4) 5.5%
Simon A. Hershon, Ph.D.
c/o InterBank Communications, Inc.
1733 Connecticut Avenue, N.W.
Washington, DC 20009 ................. 204,250(3)(4) 5.5%
Bernard Baum ......................... 0 *
Beth Bronner ......................... 0 *
Catherine Cassell Talmadge ........... 0 *
Hiro R. Hiranandani .................. 0 *
All executive officers and directors
as a group (10 persons) ............. 1,411,515(3)(4) 38.2%
</TABLE>
2
<PAGE>
- ------
*Less than 1%
(1) Pursuant to the rules of the Securities and Exchange Commission (the
"SEC"), addresses are only given for holders of 5% or more of the
outstanding Common Stock of the Company.
(2) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares which such person or group has
the right to acquire within 60 days of August 31, 1996. For purposes of
computing the percent of outstanding shares held by each person or group
named above as of a given date, any shares which such person or group has
the right to so acquire are deemed to be outstanding, but are not deemed
to be outstanding for the purpose of computing the percentage owned by
any other person or group.
(3) Includes 10,000 shares subject to currently exercisable warrants.
(4) Simon A. Hershon, Ph.D., a director of the Company and President of
InterBank Communications, Inc. ("InterBank"), exercises voting control
and dispositive power over any shares beneficially owned by InterBank and
may therefore be deemed to be a controlling person of InterBank.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), officers, directors and holders of more than 10% of the
outstanding shares of the Company's Common Stock ("Reporting Persons") are
required to file periodic reports of their ownership of, and transactions
involving, the Company's Common Stock with the SEC. The Company believes that
its Reporting Persons complied with all Section 16 filing requirements
applicable to them with respect to the Company's fiscal year ended June 30,
1996, except that each such person filed an Initial Statement of Beneficial
Ownership of Securities several days after its due date.
ELECTION OF DIRECTORS; NOMINEES
The Company's Certificate of Incorporation provides that the number of
directors constituting the Company's Board of Directors shall be not less
than three nor more than 15 as fixed from time to time by the Board of
Directors. The Board of Directors has fixed at six the number of directors
that will constitute the Board for the ensuing year.
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
Board of Directors is divided into three classes. The term of office of Class
II and III directors expire at the Company's 1997 and 1998 Annual Meetings of
Stockholders, respectively. Directors elected to succeed those whose terms
expire at the Annual Meeting shall be elected to a term of office expiring at
the Company's 1999 Annual Meeting of Stockholders or until their successors
are duly elected and qualified, or until any such director's earlier
resignation or removal. The current directors of the Company and their
respective classes and terms of office are as follows:
<TABLE>
<CAPTION>
Term
Director Class Expires At
----------------------------- --------- -----------------------
<S> <C> <C>
Sebastian E. Cassetta III 1998 Annual Meeting
Steven T. Francesco III 1998 Annual Meeting
Bernard Baum II 1997 Annual Meeting
Beth Bronner I 1996 Annual Meeting
Catherine Cassel Talmadge I 1996 Annual Meeting
Simon A. Hershon, Ph.D I 1996 Annual Meeting
Hiro R. Hiranandani II 1997 Annual Meeting
</TABLE>
Two Class I directors are to be elected at the Annual Meeting for a term
expiring at the Company's 1999 Annual Meeting of Stockholders. Two of the
Company's current Class I directors, Ms. Bronner and Ms. Talmadge, have been
nominated to be reelected as Class I directors at the Annual Meeting.
3
<PAGE>
The Board of Directors has no reason to believe that either of its
nominees will be unable or unwilling to serve if elected to the Board and, to
the knowledge of the Board of Directors, each nominee intends to serve the
entire term for which election is sought. However, should either nominee
become unable or unwilling to accept nomination or election as a director of
the Company, the proxies solicited by the Board of Directors will be voted
for such other persons as the Board may determine.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Name Age Position
------------------------- ----- --------------------------------------------------------
<S> <C> <C>
Sebastian E. Cassetta 48 Chief Executive Officer, Chairman of the Board, Secretary
and Director
Steven T. Francesco 40 President, Chief Operating Officer and Director
Thomas W. Haller, CPA 42 Vice President, Treasurer and Chief Financial Officer
Alexander G. Wolfson 39 Vice President of Software Engineering
Mario F. Rossi 58 Vice President of Operations
Bernard Baum 47 Director
Beth Bronner 45 Director
Catherine Cassel Talmadge 44 Director
Simon A. Hershon, Ph.D. 49 Director
Hiro R. Hiranandani 58 Director
</TABLE>
SEBASTIAN E. CASSETTA has been Chief Executive Officer, Chairman of the
Board, Secretary and a director of the Company since its inception. Mr.
Cassetta was also the Company's Treasurer from its inception until March
1996. From June 1987 to August 1992, Mr. Cassetta was the President of Burns
and Roe Securacom Inc., an engineering and large-scale systems integration
firm. From August 1992 to January 1994, Mr. Cassetta was a consultant to
Smart Phone Services, Inc.
STEVEN T. FRANCESCO has been President and Chief Operating Officer of the
Company since its inception and a director of the Company since January 1994.
From May 1990 to October 1992, Mr. Francesco was a Senior Vice President of
Darien Development Corporation, a technology consulting firm. Mr. Francesco
was also President of Smart Phone Services, Inc. from November 1992 to
December 1993.
THOMAS W. HALLER, CPA, joined the Company as Vice President, Treasurer and
Chief Financial Officer in March 1996. From December 1992 to February 1996,
Mr. Haller was a Senior Manager at Kaufman Greenhut Forman, LLP, a public
accounting firm in New York City where he was responsible for technical
advisory services and the firm's quality assurance program. From June 1991 to
December 1992, Mr. Haller was engaged in the practice of public accounting as
a consultant to certain entrepreneurial companies. From December 1982 to May
1991, he was a Senior Manager at Ernst & Young LLP, an international public
accounting and consulting firm, where he had responsibility for client
services and new business development in the firm's financial services
practice. Mr. Haller received a Bachelor of Science in Accounting degree from
Fordham University and has been a member of the American Institute of
Certified Public Accountants since 1979.
ALEXANDER G. WOLFSON has been Vice President of Software Engineering of
the Company since March 1994. From August 1991 to February 1994, Mr. Wolfson
was the President of Howlin Wolf Software, Inc., a computer software
consulting firm. From July 1989 to August 1991, Mr. Wolfson was a freelance
consultant to various financial services companies.
MARIO F. ROSSI has been Vice President of Operations of the Company since
December 1994. From January 1989 to December 1994, Mr. Rossi was Vice
President of Operations of MVS Inc., a fiber optic systems company.
BERNARD BAUM has been a director of the Company since March 1996. Since
March 1996 Mr. Baum has been Executive Vice President and Chief Operating
Officer of Southeast Switch Inc., engaged in the ATM/POS/ debit card switch
and settlement business. From January 1995 to March 1996, Mr. Baum had been
4
<PAGE>
Executive Vice President and Chief Information and Operations Officer of Bank
South Corporation, a bank holding company. From January 1978 to January 1995,
Mr. Baum held various positions with Citibank N.A., including Vice President,
Senior Business Manager-Consumer Bank, Chief Technology Officer-The Citicorp
Private Bank and Executive Director-Global Finance. Mr. Baum received a
Bachelor of Science degree in Mathematics and Computer Science from the City
University of New York.
BETH BRONNER has been a director of the Company since March 1996. Since
September 1996 Ms. Bronner has been Vice President and Director of Marketing
- -- United States and Europe of Citibank, engaged in the global banking
business. From July 1994 to September 1996, Ms. Bronner had been Vice
President-Emerging Markets with AT&T Domestic Communications Services, the
consumer service division of AT&T Corp. From February 1992 to June 1994, she
held various executive positions with Revlon, Inc., including President of
the Revlon Professional (Salon Products) division and Executive Vice
President of the Beauty Care and Professional Products division. From October
1990 to January 1992, Ms. Bronner was President of the Sweet Goods & Dairy
division of the Slim-Fast Foods Co. She is also director of The Hain Food
Group, Inc. Ms. Bronner received a Bachelor of Arts degree from Vassar
College and a Master of Business Administration degree from the University of
Chicago.
CATHERINE CASSEL TALMADGE has been a director of the Company since March
1996. Since January 1994 Ms. Talmadge has been Vice President, Time Warner
Cable Programming of Time Warner Cable, a division of Time Warner
Entertainment Company, L.P. ("Time Warner"). From September 1984 to January
1994, she held various positions with Time Warner, including Director,
Programming Development; Operations Director, Financial Analyses; and
Manager, Budget Department. Ms. Talmadge received a Master of Business
Administration degree from the University of Denver.
SIMON A. HERSHON, Ph.D. has been a director of the Company since March
1995. Dr. Hershon has been President and Chief Executive Officer of The
InterBank Companies since December 1990. The InterBank Companies are
principally involved in consulting corporations, financial institutions, real
estate development and hospitality companies. Dr. Hershon received both a
Masters and Doctorate in Business Administration from Harvard University.
HIRO R. HIRANANDANI has been a director of the Company since March 1996.
Since June 1996 Mr. Hiranandani has been the President and Chief Executive
Officer and a director of Computer Power Inc., a public company which
provides back-up power for the lighting industry. From January 1977 to
December 1994, Mr. Hiranandani held various positions with Pitney Bowes,
Inc., including President, Business Systems-International from July 1987 to
May 1990 and President of Mailing Systems from May 1990 to October 1994. Mr.
Hiranandani received a Bachelor of Science degree in Electrical Engineering
from the University of Missouri, a Master of Science degree in Electrical
Engineering from Purdue University and a Master of Business Administration --
Finance degree from the University of Bridgeport.
The Company's officers are elected annually and serve at the discretion of
the Board of Directors for one year subject to any rights provided by the
employment agreements described below under "Executive Compensation --
Employment Agreements".
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended June 30, 1996, the Board of Directors held one
meeting and took action on five other occasions by written consent. During
such year, each director attended at least 75 percent of the aggregate of (i)
the number of meetings of the Board of Directors held during the period he or
she served on the Board, and (ii) the number of meetings of the Compensation
Committee (the only committee established by the Board of Directors) held
during the period he or she served on such committee.
The Compensation Committee, composed of Messrs. Baum and Hiranandani, has
authority over officer compensation and administers the Company's stock
option plan. This Committee met once during fiscal 1996.
DIRECTORS' COMPENSATION
Each director who is not an officer or employee of the Company is
reimbursed for his or her out-of-pocket expenses incurred in connection with
attendance at meetings or other Company business. No person receives a fee
for serving as a director or for attendance at Committee meetings.
5
<PAGE>
In April 1996 the Board of Directors adopted the Plan pursuant to which
each person who is not a salaried employee of the Company on the date the
Plan is approved by stockholders and is then a director shall be granted on
such date an option to purchase 5,000 shares of Common Stock. Thereafter, on
the date on which an individual who is not a salaried employee of the Company
first becomes a director, he or she shall be granted an option to purchase
5,000 shares of Common Stock. In addition, immediately following each annual
meeting of stockholders at which directors are elected, each person who is
not a salaried employee of the Company and is then a director shall be
granted an option to purchase an additional 5,000 shares of Common Stock. The
exercise price of each share of Common Stock under any option granted to a
director under the Plan shall be equal to the fair market value of a share of
Common Stock on the date the option is granted. See "Proposal to Approve the
Company's 1996 Stock Option Plan".
EXECUTIVE COMPENSATION
The following table sets forth information concerning annual and long-term
compensation, paid or accrued, for the Chief Executive Officer and for each
other executive officer of the Company whose compensation exceeded $100,000
in fiscal 1996 (the "Named Executive Officers") for services in all
capacities to the Company during the last three fiscal years:
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Annual Compensation Long-Term
----------------------------------------------- Compensation
Awards
--------------
Other
Annual Securities
Name and Fiscal Compen- Underlying All Other
Principal Position Year Salary Bonus sation(2)(3) Options Compensation
----------------------- -------- ---------- --------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Sebastian E. Cassetta 1996 $125,000 -- $ 9,750 100,000 --
Chief Executive Officer 1995 $125,000 -- $ 9,750 -- --
1994 $ 48,000 -- $ 3,400 -- --
Steven T. Francesco 1996 $125,000 $22,000 $11,750 100,000 $20,000(4)
President and Chief 1995 $125,000 -- $ 9,750 -- --
Operating Officer 1994 $ 48,000 -- $ 3,400 -- --
</TABLE>
- ------
(1) None of the Named Executive Officers received any Restricted Stock Awards
or LTIP Payouts in 1994, 1995 or 1996.
(2) As to each Named Executive Officer, the aggregate amount of personal
benefits not included in the Summary Compensation Table does not exceed
the lesser of either $50,000 or 10% of the total annual salary and bonus
paid to such Named Executive Officer.
(3) Amounts shown consist of a non-accountable expense allowance.
(4) Represents a payment by the Company to Mr. Francesco of an aggregate
amount equal to the additional income taxes and penalties resulting from
the early withdrawal by him from an IRA of $35,000 which he loaned to the
Company.
6
<PAGE>
STOCK OPTIONS
The following table sets forth information with respect to stock options
granted to the Named Executive Officers during fiscal 1996:
OPTION GRANTS IN FISCAL 1996
(INDIVIDUAL GRANTS)(1)
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted in Fiscal 1996 Price Date (2)
--------------------- ------------ -------------- ---------- --------------
<S> <C> <C> <C> <C>
Sebastian E. Cassetta 100,000 32.1% $6.44 April 15, 2006
Steven T. Francesco 15,527 5.0% 7.08 April 15, 2001
84,473 27.1% 6.44 April 15, 2006
</TABLE>
- ------
(1) These grants are subject to the approval of the Plan by the stockholders
of the Company. See "Proposal to Approve the Company's 1996 Stock Option
Plan". No stock appreciation rights ("SARs") were granted to any of the
Named Executive Officers during fiscal 1996. On July 16, 1996 the
Conpensation Committee granted new stock options to employees conditional
upon cancellation of all of their existing stock options. As a
consequence of this action and upon cancellation of the options described
above, Mr. Cassetta received an option to purchase 100,000 shares at
$5.0625 per share expiring on July 15, 2006 and Mr. Francesco received an
option to purchase 80,247 shares at $5.0625 per share expiring on July
15, 2006 and an option to purchase 19,753 shares at $5.56875 per share
expiring on July 15, 2001.
(2) The options become exercisable in full on the first anniversary of the
grant date.
The following table sets forth information as to the number of unexercised
shares of Common Stock underlying stock options at fiscal year end and the
value of unexercised in-the-money stock options at fiscal year end:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUE (1)
<TABLE>
<CAPTION>
Number of
Unexercised Value of
Securities Unexercised In-The-
Shares Underlying Options Money Options at
Acquired at Fiscal Year End Fiscal Year End
On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable (2)
--------------------- ---------- ---------- ------------------ -------------------
<S> <C> <C> <C> <C>
Sebastian E. Cassetta -- -- 0/100,000 $0/$56,000
Steven T. Francesco . -- -- 0/100,000 $0/$47,305
</TABLE>
- ------
(1) No SARs were granted to, or exercised by, any of the Named Executive
Officers during fiscal 1996.
(2) Value is based on the closing price of the Company's Common Stock as
reported by the National Association of Securities Dealers' Automated
Quotation System ("NASDAQ") on June 30, 1996 ($7.00) less the exercise
price of the option.
7
<PAGE>
EMPLOYMENT AGREEMENTS
The Company and Samuel E. Cassetta are parties to an Employment Agreement
(the "Cassetta Agreement") effective January 31, 1994 which expires on
January 31, 1999. The Cassetta Agreement provides for (i) an annual base
salary of $125,000, (ii) a performance bonus for each fiscal year between
June 30, 1995 and June 30, 1998, payable in cash and Common Stock of the
Company, in the event the Company achieves the levels of earnings before
interest, income taxes, depreciation and amortization ("EBITDA") provided
therein and (iii) any additional amount as determined by the Board or an
outside compensation board. The EBITDA goals are $4,700,000, $7,000,000 and
$10,500,000 for 1996, 1997 and 1998, respectively. If any goal is achieved,
Mr. Cassetta will receive a cash bonus of one-half of one percent of the goal
and approximately 22,000 shares of Common Stock. Pursuant to the Cassetta
Agreement, Mr. Cassetta is also entitled to participate in any present or
future insurance, pension, retirement, profit sharing or bonus plan or other
compensation or incentive plan adopted by the Company for the general and
overall benefit of full-time principal executives of the Company, such
participation to be upon the same terms and conditions as generally relate to
such full-time principal executives. Pursuant to the Cassetta Agreement, in
the event that Mr. Cassetta's employment is terminated without cause, the
Company is obligated to make a severance payment to Mr. Cassetta in the
amount of $250,000 within 30 days following the date of such termination.
The Company and Steven T. Francesco are parties to an Employment Agreement
(the "Francesco Agreement") effective January 31, 1994 which expires on
January 31, 1999. The Francesco Agreement provides for (i) an annual base
salary of $125,000, (ii) a performance bonus for each fiscal year between
June 30, 1995 and June 30, 1998, payable in cash and Common Stock of the
Company, in the event the Company achieves the levels of EBITDA provided
therein and (iii) any additional amount as determined by the Board or an
outside compensation board. The EBITDA goals and bonuses are the same as
those in the Cassetta Agreement. Pursuant to the Francesco Agreement, Mr.
Francesco is also entitled to participate in any present or future insurance,
pension, retirement, profit sharing or bonus plan or other compensation or
incentive plan adopted by the Company for the general and overall benefit of
full-time principal executives of the Company, such participation to be upon
the same terms and conditions as generally relate to such full-time principal
executives. Pursuant to the Francesco Agreement, in the event that Mr.
Francesco's employment is terminated without cause, the Company is obligated
to make a severance payment to Mr. Francesco in the amount of $250,000 within
30 days following the date of such termination.
CERTAIN TRANSACTIONS
On June 1, 1995 the Company and InterBank entered into a Consulting
Agreement pursuant to which the Company agreed to pay InterBank a consulting
fee of $2,500 per month commencing January 1, 1995, $5,000 per month
commencing October 1, 1995 and $7,500 per month commencing March 1, 1996. The
Consulting Agreement was to be for a term of five years ending January 1,
2000. On the date of the execution and delivery of the Consulting Agreement,
InterBank beneficially owned more than 5% of the Company's Common Stock and
Simon A. Hershon, Ph.D., President of InterBank, was a director of the
Company. In March 1996, upon the consummation of the Company's initial public
offering, the Consulting Agreement was terminated and, in consideration
therefor, the Company issued 10,000 warrants to InterBank and paid InterBank
$50,000. The Company also paid InterBank $36,000 in full settlement of all
amounts past due under the Consulting Agreement.
Upon the consummation of the Company's initial public offering, the
Company repaid $707,780 principal amount of certain convertible subordinated
notes (and accrued interest thereon) and the balance of the notes and accrued
interest thereon was converted into 427,735 shares of Common Stock or more
than 5% of the then outstanding shares of Common Stock. Holders of such notes
were present or former investment advisory clients of Laifer Capital
Management, Inc.
In connection with a private placement of securities made by the Company
in 1995, Sebastian E. Cassetta and Steven T. Francesco, each an officer,
director and beneficial owner of more than 5% of the Common Stock of the
Company, entered into a Non-Recourse Guaranty and Pledge Agreement, dated
October 2, 1995, with the placement agent for such securities as agent for
the subscribers named therein, pursuant to which Messrs. Cassetta and
Francesco each pledged 250,000 shares of Common Stock, which shares secured
the repayment of the $1,200,000 principal amount of promissory notes sold by
the Company to such subscribers. The notes were repaid in March 1996 upon the
consummation of the Company's initial public offering.
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The Company believes that the terms of the transactions described above
between the Company and its officers, directors or other affiliates were no
less favorable to the Company than would have been obtained from a
non-affiliated third party for similar transactions at the time of entering
into such transactions. In addition, the Company has adopted a policy whereby
all future transactions and/or loans between the Company and its officers or
directors will be on terms that the Company believes are no less favorable
than could be obtained from unaffiliated third parties (at the time such
transactions and/or loans are entered into) and will be approved by a
majority of the independent disinterested directors of the Company.
PROPOSAL TO
RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP has served as the independent auditors of
the Company since June 1994. The Board of Directors has appointed Ernst &
Young LLP to continue as the independent auditors of the Company for the
fiscal year ending June 30, 1997, subject to ratification by the Company's
stockholders. A representative of Ernst & Young LLP is expected to be present
at the Annual Meeting to respond to appropriate questions from stockholders
and to make a statement if such representative desires to do so.
Ratification of the appointment of independent auditors requires the
affirmative vote of the holders of the majority of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting and entitled to vote on
this proposal. The Board of Directors recommends a vote "FOR" ratification of
the appointment of Ernst & Young LLP as the independent auditors of the
Company for the fiscal year ending June 30, 1997.
PROPOSAL TO
APPROVE THE COMPANY'S 1996 STOCK OPTION PLAN
On April 16, 1996, the Board of Directors adopted, subject to stockholder
approval at the Annual Meeting, the Company's 1996 Stock Option Plan. On
September 30, 1996 the Board of Directors approved amendments to such plan
designed to enable it to comply with recent amendments to SEC Rule 16b-3. The
1996 Stock Option Plan, as amended to date, is herein referred to as the
"Plan". The Plan is designed to provide an incentive to key employees and
non-employee directors of, and consultants to, the Company and to offer an
additional inducement in obtaining the services of such persons. The proceeds
derived from the sale of shares subject to options will be used for general
corporate purposes of the Company.
The following summary of certain material features of the Plan does not
purport to be complete and is qualified in its entirety by reference to the
text of the Plan, a copy of which is set forth as Exhibit A to this Proxy
Statement.
SHARES SUBJECT TO THE OPTION PLAN AND ELIGIBILITY
The Plan authorizes the grant of options to purchase a maximum of 400,000
shares of the Company's Common Stock (subject to adjustment as described
below) to employees (including officers and directors who are employees) and
non-employee directors of, and consultants to, the Company. Upon expiration,
cancellation or termination of unexercised options, the shares of the
Company's Common Stock subject to such options will again be available for
the grant of options under the Plan. Approximately 17 employees of the
Company are currently eligible to receive grants of options under the Plan.
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Set forth in the table below is information as to the number of shares as
to which options have been granted to the Named Executive Officers, to each
other person who has received 5% of such options, to all current executive
officers as a group, to all current directors who are not executive officers
as a group and to all current employees, including all current officers who
are not executive officers, as a group.
Number of
Name Options
----- -----------
Sebastian E. Cassetta .................... 100,000
Steven T. Francesco ...................... 100,000
Alexander G. Wolfson ..................... 75,000
Mario F. Rossi ........................... 26,500
William Logar ............................ 26,500
All current executive officers as a group 311,500
All current directors who are not
executive officers as a group ........... 20,000*
All employees, including all current
officers who are not executive officers,
as a group .............................. 63,475
- ------
*Options to be granted upon approval of the Plan by the stockholders of the
Company.
On October 2, 1996, the high and low sales prices of the Company's Common
Stock as reported by NASDAQ were $5.625 and $5.50 per share, respectively.
TYPE OF OPTIONS
Options granted under the Plan may either be incentive stock options
("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonqualified stock options which do not
qualify as ISOs ("NQSOs").
ADMINISTRATION
The Plan will be administered by a committee of the Board of Directors
(the "Committee") consisting of at least two members of the Board, each of
whom is a "non-employee director" within the meaning of Rule 16b-3
promulgated under the Exchange Act. It is also intended that each member of
the Committee will be an "outside director" within the meaning of Section
162(m) of the Code. The current members of the Committee are Bernard Baum and
Hiro R. Hiranandani.
Among other things, the Committee is empowered to determine, within the
express limits contained in the Plan: the employees and consultants to be
granted options, the times when options shall be granted, whether an option
is to be an ISO or a NQSO, the number of shares of Common Stock to be subject
to each option, the exercise price of each option, the term of each option,
the date each option shall become exercisable as well as any terms,
conditions or installments relating to the exercisability of each option,
whether and under what conditions to accelerate the date of exercise of any
option or installment, the form of payment of the exercise price, the amount,
if any, required to be withheld with respect to an option and, with the
consent of the optionee, to modify an option. The Committee is also
authorized to prescribe, amend and rescind rules and regulations relating to
the Plan and to make all other determinations necessary or advisable for
administering the Plan and to construe the Plan.
TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan will be subject to, among other things, the
following terms and conditions:
(a) The exercise price of each option will be determined by the
Committee; provided, however, that the exercise price of an ISO may
not be less than the fair market value of the Company's Common Stock
on the date of grant (110% of such fair market value if the optionee
owns (or is deemed to own) more than 10% of the voting power of the
Company).
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(b) Options may be granted for terms determined by the Committee;
provided, however, that the term of an ISO may not exceed 10 years (5
years if the optionee owns (or is deemed to own) more than 10% of the
voting power of the Company).
(c) The maximum number of shares of the Company's Common Stock for which
options may be granted to an employee in any calendar year is
125,000. In addition, the aggregate fair market value of shares with
respect to which ISOs may be granted to an employee which are
exercisable for the first time during any calendar year may not
exceed $100,000.
(d) The exercise price of each option is payable in full upon exercise
or, if the applicable stock option contract ("Contract") entered into
by the Company with an optionee permits, in installments. Payment of
the exercise price of an option may be made in cash, certified check
or, if the applicable Contract permits, in shares of the Company's
Common Stock or any combination thereof.
(e) Options may not be transferred other than by will or by the laws of
descent and distribution, and may be exercised during the optionee's
lifetime only by the optionee or his or her legal representatives.
(f) Except as may otherwise be provided in the applicable Contract, if
the optionee's relationship with the Company as an employee or
consultant is terminated for any reason (other than the death or
disability of the optionee), the option may be exercised, to the
extent exercisable at the time of termination of such relationship,
within three months thereafter, but in no event after the expiration
of the term of the option. However, if the relationship was
terminated either for cause or without the consent of the Company,
the option will terminate immediately. In the case of the death of an
optionee while an employee or consultant (or, generally, within three
months after termination of such relationship, or within one year
after termination of such relationship by reason of disability),
except as otherwise provided in the Contract, his or her legal
representative or beneficiary may exercise the option, to the extent
exercisable on the date of death, within one year after such date,
but in no event after the expiration of the term of the option.
Except as otherwise provided in the Contract, an optionee whose
relationship with the Company was terminated by reason of his or her
disability may exercise the option, to the extent exercisable at the
time of such termination, within one year thereafter, but not after
the expiration of the term of the option. Options are not affected by
a change in the status of an optionee so long as he or she continues
to be an employee of, or a consultant to, the Company.
(g) The Company may withhold cash and/or shares of the Company's Common
Stock having an aggregate value equal to the amount which the Company
determines is necessary to meet its obligations to withhold any
federal, state and/or local taxes or other amounts incurred by reason
of the grant or exercise of an option, its disposition or the
disposition of shares acquired upon the exercise of the option.
Alternatively, the Company may require the optionee to pay the
Company such amount, in cash, promptly upon demand.
(h) Notwithstanding the foregoing, each director who is not a salaried
employee of the Company on the date the Plan is approved by
stockholders shall be granted on such date an option to purchase
5,000 shares of Common Stock. Thereafter, on the date on which an
individual who is not a salaried employee of the Company first
becomes a director he or she shall be granted an option to purchase
5,000 shares of Common Stock. In addition, immediately following each
annual meeting of stockholders at which directors are elected, each
person who is not a salaried employee of the Company and is then a
director shall be granted an option to purchase an additional 5,000
shares of Common Stock. The exercise price of each share of Common
Stock under any option granted to a non-employee director under the
Plan shall be equal to the fair market value of a share of Common
Stock on the date the option is granted. Each non-employee director
option is for a term of five years and may be exercised at any time
during such term; provided, however, that such option shall terminate
immediately if such director is terminated for cause or is not
nominated by the Board for reelection.
ADJUSTMENT IN EVENT OF CAPITAL CHANGES
Appropriate adjustments will be made in the number and kind of shares
available under the Plan, in the number and kind of shares subject to each
outstanding option and the exercise prices of such options, as well
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as the number of shares subject to future grants to non-employee directors
and limitation on the number of shares that may be granted to any employee in
any calendar year, in the event of any change in the Company's Common Stock
by reason of any stock dividend, split-up, spin off, combination,
reclassification, recapitalization, merger in which the Company is not the
surviving corporation, exchange of shares or the like. In the event of (a)
the liquidation or dissolution of the Company, or (b) a merger in which the
Company is not the surviving corporation or a consolidation, any outstanding
options shall terminate upon the earliest of any such event, unless other
provision is made therefor as part of the transaction.
DURATION AND AMENDMENT OF THE PLAN
No option may be granted under the Plan after April 15, 2006. The Board of
Directors may at any time terminate or amend the Plan; provided, however,
that, without the approval of the Company's stockholders, no amendment may be
made which would (a) except as a result of the anti-dilution adjustments
described above, increase the maximum number of shares available for the
grant of options or increase the maximum number of options that may be
granted to an employee in any calendar year, (b) change the eligibility
requirements for persons who may receive options or (c) make any change for
which applicable law or regulatory authority requires stockholder approval.
No termination or amendment may adversely affect the rights of an optionee
with respect to an outstanding option without the optionee's consent.
FEDERAL INCOME TAX TREATMENT
The following is a general summary of the federal income tax consequences
under current tax law of NQSOs and ISOs. It does not purport to cover all of
the special rules, including the exercise of an option with
previously-acquired shares, or the state or local income or other tax
consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying shares.
An optionee will not recognize taxable income for federal income tax
purposes upon the grant of a NQSO or an ISO.
Upon the exercise of a NQSO, the optionee will recognize ordinary income
in an amount equal to the excess, if any, of the fair market value of the
shares acquired on the date of exercise over the exercise price thereof, and
the Company will generally be entitled to a deduction for such amount at that
time. If the optionee later sells shares acquired pursuant to the exercise of
a NQSO, he or she will recognize long-term or short-term capital gain or
loss, depending on the period for which the shares were held, in an amount
equal to the difference between the selling price of such shares and the
exercise price of such option. Long-term capital gain is generally subject to
more favorable tax treatment than ordinary income or short-term capital gain.
Upon the exercise of an ISO, the optionee will not recognize taxable
income. If the optionee disposes of the shares acquired pursuant to the
exercise of an ISO more than two years after the date of grant and more than
one year after the transfer of the shares to him or her, the optionee will
recognize long-term capital gain or loss and the Company will not be entitled
to a deduction. However, if the optionee disposes of such shares within the
required holding period, all or a portion of the gain will be treated as
ordinary income and the Company will generally be entitled to deduct such
amount.
In addition to the federal income tax consequences described above, an
optionee may be subject to the alternative minimum tax, which is payable to
the extent it exceeds the optionee's regular tax. For this purpose, upon the
exercise of an ISO, the excess of the fair market value of the shares over
the exercise price therefor is an adjustment which increases alternative
minimum taxable income. In addition, the optionee's basis in such shares is
increased by such excess for purposes of computing the gain or loss on the
disposition of the shares for alternative minimum tax purposes. If an
optionee is required to pay an alternative minimum tax, the amount of such
tax which is attributable to deferral preferences (including the ISO
adjustment) is allowed as a credit against the optionee's regular tax
liability in subsequent years. To the extent the credit is not used, it is
carried forward.
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REQUIRED VOTE
Approval of the Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock present, in person or by proxy, at the
Annual Meeting and entitled to vote on this proposal. If the Plan is not
approved by stockholders, the Plan and the options granted thereunder will
terminate. The Board of Directors recommends a vote "FOR" approval of the
Plan.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote proxies
as in their discretion they may deem appropriate, unless they are directed by
a proxy to do otherwise.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Under the rules of the SEC, stockholder proposals intended for inclusion
in the proxy statement for the Company's 1997 Annual Meeting of Stockholders
must be received by the Company's Secretary no later than June 12, 1997.
FORM 10-KSB EXHIBITS
The Company will furnish, upon payment of a reasonable fee to cover
reproduction and mailing expenses, a copy of any exhibit to the Company's
Annual Report on Form 10-KSB requested by any person solicited hereunder.
By Order Of The Board of Directors
Sebastian E. Cassetta
Secretary
Stamford, Connecticut
October 10, 1996
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EXHIBIT A
1996 STOCK OPTION PLAN
OF
SMARTSERV ONLINE, INC.
1. PURPOSES OF THE PLAN. This stock option plan (as amended, the "Plan")
is designed to provide an incentive to key employees (including directors and
officers who are key employees) and to consultants and directors who are not
employees of SmartServ Online, Inc., a Delaware corporation (the "Company"),
or any of its Subsidiaries (as defined in Paragraph 19), and to offer an
additional inducement in obtaining the services of such persons. The Plan
provides for the grant of "incentive stock options" ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and nonqualified stock options which do not qualify as ISOs
("NQSOs"), but the Company makes no representation or warranty, express or
implied, as to the qualification of any option as an "incentive stock option"
under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12,
the aggregate number of shares of common stock, $.01 par value per share, of
the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 400,000. Such shares of Common Stock may, in the discretion
of the Board of Directors of the Company (the "Board of Directors"), consist
either in whole or in part of authorized but unissued shares of Common Stock
or shares of Common Stock held in the treasury of the Company. Subject to the
provisions of Paragraph 13, any shares of Common Stock subject to an option
which for any reason expires, is canceled or is terminated unexercised or
which ceases for any reason to be exercisable shall again become available
for the granting of options under the Plan. The Company shall at all times
during the term of the Plan reserve and keep available such number of shares
of Common Stock as will be sufficient to satisfy the requirements of the
Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee of the Board of Directors (the "Committee") consisting of not less
than two directors. During such time as the Company has a class of equity
securities registered under Section 12 of the Securities Exchange Act of
1934, as amended, each member of the Committee shall be (a) a "disinterested
person" within the meaning of Rule 16b-3 promulgated under such act until
September 30, 1996 and (b) from and after September 30, 1996 a "non-employee
director" within the meaning of Rule 16b-3 (as the same may be in effect and
interpreted from time to time, "Rule 16b-3"). A majority of the members of
the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of
the Committee.
Subject to the express provisions of the Plan, the Committee shall have
the authority, in its sole discretion, with respect to Employee Options and
Consultant Options (as defined in Paragraph 19): to determine the key
employees who shall be granted Employee Options and the consultants who shall
be granted Consultant Options; the times when options shall be granted;
whether an Employee Option shall be an ISO or a NQSO; the number of shares of
Common Stock to be subject to each option; the term of each option; the date
each option shall become exercisable; whether an option shall be exercisable
in whole, in part or in installments and, if in installments, the number of
shares of Common Stock to be subject to each installment, whether the
installments shall be cumulative, the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date
of exercise of any option or installment; whether shares of Common Stock may
be issued upon the exercise of an option as partly paid and, if so, the dates
when future installments of the exercise price shall become due and the
amounts of such installments; the exercise price of each option; the form of
payment of the exercise price; whether to restrict the sale or other
disposition of the shares of Common Stock acquired upon the exercise of an
option and, if so, whether to waive any such restriction; whether to subject
the exercise of all or any portion of an option to the fulfillment of
contingencies as specified in the contract referred to in Paragraph 11 (the
"Contract"), including without limitation, contingencies relating to entering
into a covenant not to compete with the Company, any of its Subsidiaries or a
Parent (as defined in Paragraph 19), to financial objectives for the Company,
any of its Subsidiaries or a Parent, a division of any of the foregoing, a
product line or other category, and/or the period of continued employment of
the optionee with the Company, any of its Sub-
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sidiaries or a Parent, and to determine whether such contingencies have been
met; whether an optionee is Disabled (as defined in Paragraph 19); and with
respect to Employee Options, Consultant Options and Non-Employee Director
Options (as defined in Paragraph 19): the amount, if any, necessary to
satisfy the Company's obligation to withhold taxes or other amounts; the fair
market value of a share of Common Stock; to construe the respective Contracts
and the Plan; with the consent of the optionee, to cancel or modify an
option, provided, that the modified provision is permitted to be included in
an option granted under the Plan on the date of the modification, and
further, provided, that in the case of a modification (within the meaning of
Section 424(h) of the Code) of an ISO, such option as modified would be
permitted to be granted on the date of such modification under the terms of
the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; from and after September 30, 1996 to approve any provision which
under Rule 16b-3 requires approval by the Board of Directors of the Company,
a committee of non-employee directors or the stockholders of the Company in
order to be exempt under Rule 16b-3 (unless otherwise specifically provided
herein); and to make all other determinations necessary or advisable for
administering the Plan. Any controversy or claim arising out of or relating
to the Plan, any option granted under the Plan or any Contract shall be
determined unilaterally by the Committee in its sole discretion. The
determinations of the Committee on the matters referred to in this Paragraph
3 shall be conclusive and binding on the parties. No member or former member
of the Committee shall be liable for any action, failure to act or
determination made in good faith with respect to the Plan or any option
hereunder.
4. ELIGIBILITY; GRANTS. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant Employee Options
to key employees (including officers and directors who are key employees) of,
and Consultant Options to consultants to, the Company or any of its
Subsidiaries. Such options granted shall cover such number of shares of
Common Stock as the Committee may determine, in its sole discretion;
provided, however, that the maximum number of shares subject to Employee
Options that may be granted to any individual during any calendar year under
the Plan (the "162(m) Maximum") shall not exceed 125,000 shares; and further,
provided, that the aggregate market value (determined at the time the option
is granted in accordance with Paragraph 5) of the shares of Common Stock for
which any eligible employee may be granted ISOs under the Plan or any other
plan of the Company, or of a Parent or a Subsidiary of the Company, which are
exercisable for the first time by such optionee during any calendar year
shall not exceed $100,000. Such ISO limitation shall be applied by taking
ISOs into account in the order in which they were granted. Any option (or the
portion thereof) granted in excess of such ISO limitation amount shall be
treated as a NQSO.
Every individual who, on the date the Plan is approved by the stockholders
of the Company, is a Non-Employee Director (as defined in Paragraph 19) shall
be granted on such date a Non-Employee Director Option to purchase 5,000
shares of Common Stock. Thereafter, on the date an individual first becomes a
Non-Employee Director, he shall be granted an option to purchase 5,000 shares
of Common Stock. In addition, immediately following each annual meeting of
stockholders at which directors are elected, every individual who, at such
time, is a Non-Employee Director (whether or not elected at such meeting)
shall be granted at such time a Non-Employee Director Option to purchase
5,000 shares of Common Stock. In the event the remaining shares available for
grant under the Plan are not sufficient to grant the Non-Employee Director
Options to each such Non-Employee Director at any time, the number of shares
subject to the Non-Employee Director Options to be granted at such time
shall be reduced proportionately. The Committee shall not have any discretion
with respect to the selection of directors to receive Non-Employee Director
Options or the amount, the price or the timing with respect thereto.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock under
each Employee Option and Consultant Option shall be determined by the
Committee in its sole discretion; provided, however, that the exercise price
of an ISO shall not be less than the fair market value of the Common Stock
subject to such option on the date of grant; and further, provided, that if,
at the time an ISO is granted, the optionee owns (or is deemed to own under
Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than 110% of the fair market value of the Common Stock subject to such ISO on
the date of grant. The exercise price of the shares of Common Stock under
each Non-Employee Director Option shall be equal to the fair market value of
the Common Stock subject to such option on the date of grant.
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The fair market value of a share of Common Stock on any day shall be (a)
if the principal market for the Common Stock is a national securities
exchange, the average of the highest and lowest sales prices per share of
Common Stock on such day as reported by such exchange or on a composite tape
reflecting transactions on such exchange, (b) if the principal market for the
Common Stock is not a national securities exchange and the Common Stock is
quoted on The Nasdaq Stock Market ("Nasdaq"), and (i) if actual sales price
information is available with respect to the Common Stock, the average of the
highest and lowest sales prices per share of Common Stock on such day on
Nasdaq, or (ii) if such information is not available, the average of the
highest bid and lowest asked prices per share of Common Stock on such day on
Nasdaq, or (c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the average
of the highest bid and lowest asked prices per share of Common Stock on such
day as reported on the OTC Bulletin Board Service or by National Quotation
Bureau, Incorporated or a comparable service; provided, however, that if
clauses (a), (b) and (c) of this Paragraph are all inapplicable, or if no
trades have been made or no quotes are available for such day, the fair
market value of the Common Stock shall be determined by the Board by any
method consistent with applicable regulations adopted by the Treasury
Department relating to stock options.
6. TERM. The term of each Employee Option and Consultant Option granted
pursuant to the Plan shall be such term as is established by the Committee,
in its sole discretion; provided, however, that the term of each ISO granted
pursuant to the Plan shall be for a period not exceeding 10 years from the
date of grant thereof; and further, provided, that if, at the time an ISO is
granted, the optionee owns (or is deemed to own under Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company, of any of its Subsidiaries or of a
Parent, the term of the ISO shall be for a period not exceeding five years
from the date of grant. Employee Options and Consultant Options shall be
subject to earlier termination as hereinafter provided. Subject to earlier
termination as hereinafter provided, each Non-Employee Director Option shall
be exercisable for a term of five years commencing on the date of grant.
7. EXERCISE. An option (or any part or installment thereof), to the extent
then exercisable, shall be exercised by giving written notice to the Company
at its principal office stating which option is being exercised, specifying
the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the Contract with respect to an
Employee Option permits installment payments) (a) in cash or by certified
check or (b) if the applicable Contract permits, with previously acquired
shares of Common Stock having an aggregate fair market value on the date of
exercise (determined in accordance with Paragraph 5) equal to the aggregate
exercise price of all options being exercised, or with any combination of
cash, certified check or shares of Common Stock. The Company shall not be
required to issue any shares of Common Stock pursuant to any such option
until all required payments, including any required withholding, have been
made.
The Committee may, in its sole discretion, permit payment of the exercise
price of an option by delivery by the optionee of a properly executed notice,
together with a copy of his irrevocable instructions to a broker acceptable
to the Committee to deliver promptly to the Company the amount of sale or
loan proceeds sufficient to pay such exercise price. In connection therewith,
the Company may enter into agreements for coordinated procedures with one or
more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an option
shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate to him for
such shares; provided, however, that until such stock certificate is issued,
any optionee using previously acquired shares of Common Stock in payment of
an option exercise price shall continue to have the rights of a stockholder
with respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an Employee Option or
Consultant Option whose relationship with the Company, its Parent and
Subsidiaries as an employee or a consultant has terminated for any reason
(other than as a result of the death or Disability of the optionee) may
exercise such option, to the extent exercisable on the date of such
termination, at any time within three months after the date of termination,
but not thereafter and in no event after the date the option would otherwise
have expired; provided, however, that if such relationship is terminated
either (a) for cause, or (b) without the consent of the Company, such option
shall terminate immediately.
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<PAGE>
For the purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for
purposes of Section 422(a) of the Code. As a result, an individual on
military, sick leave or other bona fide leave of absence shall continue to be
considered an employee for purposes of the Plan during such leave if the
period of the leave does not exceed 90 days, or, if longer, so long as the
individual's right to reemployment with the Company (or a related
corporation) is guaranteed either by statute or by contract. If the period of
leave exceeds 90 days and the individual's right to reemployment is not
guaranteed by statute or by contract, the employment relationship shall be
deemed to have terminated on the 91st day of such leave.
Except as may otherwise be expressly provided in the applicable Contract,
Employee Options and Consultant Options granted under the Plan shall not be
affected by any change in the status of the optionee so long as the optionee
continues to be an employee of, or a consultant to, the Company, or any of
the Subsidiaries or a Parent (regardless of having changed from one to the
other or having been transferred from one corporation to another).
Except as provided below, a Non-Employee Director Option may be exercised
at any time during its five year term. The Non-Employee Director Option shall
not be affected by the optionee ceasing to be a director of the Company or
becoming an employee of, or consultant to, the Company, any of its
Subsidiaries or a Parent; provided, however, that if (a) he is terminated as
a director of the Company for cause, such option shall terminate immediately,
or (b) he ceases to be a director of the Company because he is not nominated
by the Board of Directors for reelection as a director, such option may be
exercised at any time within one year after he ceases to be a director of the
Company, but not thereafter and in no event after the date the option
otherwise would have expired.
Nothing in the Plan or in any option granted under the Plan shall confer
on any optionee any right to continue in the employ of, or as a consultant
to, the Company, any of its Subsidiaries or a Parent, or as a director of the
Company, or interfere in any way with any right of the Company, any of its
Subsidiaries or a Parent or the stockholders of the Company to terminate the
optionee's relationship at any time for any reason whatsoever without
liability to the Company, any of its Subsidiaries or a Parent.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while
he is an employee of, or consultant to, the Company, any of its Subsidiaries
or a Parent, (b) within three months after the termination of such
relationship (unless such termination was for cause or without the consent of
the Company) or (c) within one year following the termination of such
relationship by reason of his Disability, his Employee Option or Consultant
Option may be exercised, to the extent exercisable on the date of his death,
by his Legal Representative (as defined in Paragraph 19) at any time within
one year after death, but not thereafter and in no event after the date the
option would otherwise have expired.
Except as may otherwise be expressly provided in the applicable Contract,
any optionee whose relationship as an employee of, or consultant to, the
Company, its Parent and Subsidiaries has terminated by reason of such
optionee's Disability may exercise his Employee Option or Consultant Option,
to the extent exercisable upon the effective date of such termination, at any
time within one year after such date, but not thereafter and in no event
after the date the option would otherwise have expired.
The term of a Non-Employee Director Option shall not be affected by the
death or Disability of the optionee. If an optionee holding a Non-Employee
Director Option dies during the term of such option, the option may be
exercised at any time during its term by his Legal Representative.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its
sole discretion, as a condition to the exercise of any option that either (a)
a Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued
upon such exercise shall be effective and current at the time of exercise, or
(b) there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein
shall be construed as requiring the Company to register shares subject to any
option under the Securities Act or to keep any Registration Statement
effective or current.
A-4
<PAGE>
The Committee may require, in its sole discretion, as a condition to the
exercise of any option that the optionee execute and deliver to the Company
his representations and warranties, in form, substance and scope satisfactory
to the Committee, which the Committee determines are necessary or convenient
to facilitate the perfection of an exemption from the registration
requirements of the Securities Act, applicable state securities laws or other
legal requirement, including without limitation that (a) the shares of Common
Stock to be issued upon the exercise of the option are being acquired by the
optionee for his own account, for investment only and not with a view to the
resale or distribution thereof, and (b) any subsequent resale or distribution
of shares of Common Stock by such optionee will be made only pursuant to (i)
a Registration Statement under the Securities Act which is effective and
current with respect to the shares of Common Stock being sold, or (ii) a
specific exemption from the registration requirements of the Securities Act,
but in claiming such exemption, the optionee shall prior to any offer of sale
or sale of such shares of Common Stock provide the Company with a favorable
written opinion of counsel satisfactory to the Company, in form, substance
and scope satisfactory to the Company, as to the applicability of such
exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition to, or in connection with, the
granting of an option or the issue of shares of Common Stock thereunder, such
option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free
of any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provision of the Plan, in the event of a stock dividend, recapitalization,
merger in which the Company is the surviving corporation, spin-off, split-up,
combination or exchange of shares or the like which results in a change in
the number or kind of shares of Common Stock which is outstanding immediately
prior to such event, the aggregate number and kind of shares subject to the
Plan, the aggregate number and kind of shares subject to each outstanding
option and the exercise price thereof, and the number and kind of shares
subject to future Non-Employee Director Options and the 162(m) Maximum shall
be appropriately adjusted by the Board of Directors, whose determination
shall be conclusive and binding on all parties. Such adjustment may provide
for the elimination of fractional shares which might otherwise be subject to
options without payment therefor.
In the event of (a) the liquidation or dissolution of the Company or (b) a
merger in which the Company is not the surviving corporation or a
consolidation, all outstanding options shall terminate upon the earliest of
any such event, unless other provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on April 16, 1996 and amended on September 30, 1996. No
option may be granted under the Plan after April 15, 2006. The Board of
Directors, without further approval of the Company's stockholders, may at any
time suspend or terminate the Plan, in whole or in part, or amend it from
time to time in such respects as it may deem advisable, including, without
limitation, in order that ISOs granted hereunder meet the requirements for
"incentive stock options" under the Code, to comply with the provisions of
Rule 16b-3, Section 162(m) of the Code, or any change in applicable law,
regulations, rulings or interpretations of administrative agencies; provided,
however, that no amendment shall be effective without the requisite prior or
subsequent stockholder approval which would (a) except as contemplated in
Paragraph 12, increase the maximum number of shares of Common Stock for which
options may be granted under the Plan or the 162(m) Maximum, (b) prior to
September 30, 1996 materially increase the benefits accruing to participants
under the Plan, (c) change the eligibility requirements to receive options
hereunder or (d) make any change for which applicable law or regulatory
authority requires stockholder approval. Notwithstanding the foregoing, prior
to September 30, 1996 the provisions regarding the selection of directors for
participation in, and the amount, the price or the timing of, Non-Employee
Director Options shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act or the rules thereunder. No termination, suspension or amendment
of the Plan shall, without the consent of the holder of an existing and
outstanding option affected thereby, adversely affect his rights under such
option. The power of the Committee to construe and administer any options
granted under the Plan prior to the termination or suspension of the Plan
nevertheless shall continue after such termination or during such suspension.
A-5
<PAGE>
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall
be transferable otherwise than by will or the laws of descent and
distribution, and options may be exercised, during the lifetime of the
optionee, only by the optionee or his Legal Representatives. Except to the
extent provided above, options may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar
process, and any such attempted assignment, transfer, pledge, hypothecation
or disposition shall be null and void ab initio and of no force or effect.
15. WITHHOLDING TAXES. The Company may withhold (a) cash, (b) subject to
any limitations under Rule 16b-3, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value on the exercise date
(determined in accordance with Paragraph 5), or (c) any combination thereof,
in an amount equal to the amount which the Committee determines is necessary
to satisfy the Company's obligation to withhold Federal, state and local
income taxes or other amounts incurred by reason of the grant or exercise of
an option, its disposition, or the disposition of the underlying shares of
Common Stock. Alternatively, the Company may require the holder to pay to the
Company such amount, in cash, promptly upon demand.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon exercise
of an option under the Plan and may issue such "stop transfer" instructions
to its transfer agent in respect of such shares as it determines, in its
discretion, to be necessary or appropriate to (a) prevent a violation of, or
to perfect an exemption from, the registration requirements of the Securities
Act and any applicable state securities laws, (b) implement the provisions of
the Plan or any agreement between the Company and the optionee with respect
to such shares of Common Stock, or (c) permit the Company to determine the
occurrence of a "disqualifying disposition," as described in Section 421(b)
of the Code, of the shares of Common Stock issued or transferred upon the
exercise of an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance of
shares of Common Stock upon the exercise of an option granted under the Plan,
as well as all fees and expenses incurred by the Company in connection with
such issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of Common
Stock pursuant to the exercise of options under the Plan shall be added to
the general funds of the Company and used for such corporate purposes as the
Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the
Board of Directors may, without further approval by the stockholders,
substitute new options for prior options of a Constituent Corporation (as
defined in Paragraph 19) or assume the prior options of such Constituent
Corporation.
19. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) Constituent Corporation. The term "Constituent Corporation" shall
mean any corporation which engages with the Company, any of its
Subsidiaries or a Parent in a transaction to which Section 424(a) of the
Code applies (or would apply if the option assumed or substituted were an
ISO), or any Parent or any Subsidiary of such corporation.
(b) Consultant Option. The term "Consultant Option" shall mean a NQSO
granted pursuant to the Plan to a person who, at the time of grant, is a
consultant to the Company or a Subsidiary of the Company, and at such time
is not a salaried employee of the Company or any of its Subsidiaries.
(c) Disability. The term "Disability" shall mean a permanent and total
disability within the meaning of Section 22(e)(3) of the Code.
(d) Employee Option. The term "Employee Option" shall mean an option
granted pursuant to the Plan to an individual who, at the time of grant,
is a key employee of the Company or any of its Subsidiaries.
(e) Legal Representative. The term "Legal Representative" shall mean
the executor, administrator or other person who at the time is entitled by
law to exercise the rights of a deceased or incapacitated optionee with
respect to an option granted under the Plan.
A-6
<PAGE>
(f) Non-Employee Director. The term "Non-Employee Director" shall mean
a person who is a director of the Company but who is not a salaried
employee of the Company or any of its Subsidiaries.
(g) Non-Employee Director Option. The term "Non-Employee Director
Option" shall mean a NQSO granted pursuant to the Plan to a person who, at
the time of the grant, is a Non-Employee Director.
(h) Parent. The term "Parent" shall have the same definition as "parent
corporation" in Section 424(e) of the Code.
(i) Subsidiary. The term "Subsidiary" shall have the same definition as
"subsidiary corporation" in Section 424(f) of the Code.
20. GOVERNING LAW; CONSTRUCTION. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to
conflict of law provisions.
Neither the Plan nor any Contract shall be construed or interpreted with
any presumption against the Company by reason of the Company causing the Plan
or Contract to be drafted. Whenever from the context it appears appropriate,
any term stated in either the singular or plural shall include the singular
and plural, and any term stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or unenforceability of
any provision in the Plan or any Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be
valid, legal and enforceable to the fullest extent permitted by applicable
law.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes present in person or by proxy at the next duly held
meeting of the Company's stockholders at which a quorum is present. No
options granted hereunder may be exercised prior to such approval; provided,
however, that the date of grant of any option shall be determined as if the
Plan had not been subject to such approval. Notwithstanding the foregoing, if
the Plan is not approved by a vote of the stockholders of the Company on or
before April 15, 1997, the Plan and any options granted hereunder shall
terminate.
A-7
<PAGE>
SMARTSERV ONLINE, INC.
Metro Center
One Station Place
Stamford, Connecticut 06902
THIS PROXY IS SOLICITED BY THE
COMPANY'S BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, NOVEMBER 4, 1996
The undersigned stockholder of SmartServ Online, Inc., a Delaware
corporation (the "Company"), hereby appoints Sebastian E. Cassetta, Steven T.
Francesco and Thomas W. Haller, and each of them, as proxies for the
undersigned, each with full power of substitution, for and in the name of the
undersigned to act for the undersigned and to vote, as designated below, all
of the shares of Common Stock of the Company that the undersigned is entitled
to vote at the 1996 Annual Meeting of Stockholders (the "Annual Meeting") of
the Company, to be held on Monday, November 4, 1996, at 3:00 p.m., local
time, at the Hotel Inter-Continental, 111 East 48th Street, New York, New
York and at any adjournments or postponements thereof.
The Board of Directors unanimously recommends a vote FOR the election of
all the nominees for election as Class I directors listed below and FOR
proposals (2) and (3).
1. Election of Beth Bronner and Catherine Cassel Talmadge as
Class I directors.
/ / FOR all nominees listed above, / / WITHHOLD AUTHORITY to vote
except vote withheld from the for all nominees.
following nominees (if any).
(INSTRUCTIONS: to withhold authority to vote for an individual nominee,
strike that nominee's name from the list above.)
2. Ratification of the appointment of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending June 30, 1997.
FOR / / AGAINST / / ABSTAIN / /
3. Approval of the Company's 1996 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
4. Upon such other matters as may properly come before the Annual Meeting and
any adjournments or postponements thereof. In their discretion, the
proxies are authorized to vote upon such other business as may properly
come before the Annual Meeting and any adjournments or postponements
thereof.
(see reverse side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF ALL CLASS I DIRECTOR NOMINEES LISTED
ABOVE AND IN FAVOR OF PROPOSALS (2) AND (3).
The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement and (iii) the Company's 1996 Annual Report.
----------------------------
(Date)
----------------------------
(Signature)
----------------------------
(Signature, if held jointly)
IMPORTANT: Please sign
exactly as your name appears
hereon and mail it promptly
even though you now plan to
attend the Annual Meeting.
When shares are held by
joint tenants, both should
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
president or other
authorized officer. If a
partnership, please sign in
partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY IN THE POSTAGE-PREPAID REPLY ENVELOPE PROVIDED.
