SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
[_] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14a-12
SMARTSERV ONLINE, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(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.
ONE STATION PLACE
STAMFORD, CONNECTICUT 06902
September 17, 1998
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Special Meeting of
Stockholders of SmartServ Online, Inc. (the "Company") to be held at the offices
of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, 18th Floor,
New York, New York on Thursday, October 15, 1998 at 3:00 p.m. local time.
At this Special Meeting of Stockholders you will be asked to
consider and vote upon a proposal to effect a one-for-six reverse stock split.
As described in the attached proxy statement, the reverse stock split is the
next step in our plan to modify the Company's capital structure to enable it to
qualify for relisting on the NASDAQ Small Cap Market. If the reverse stock split
is effected, each outstanding six shares of common stock will become one share;
thus, except for fractional shares, there will be no proportional change in the
ownership of any stockholder. Such ownership will, of course, thereafter be
affected by future issuances of equity securities. In addition, all options and
warrants will likewise be reduced and their respective exercise prices will be
proportionately increased.
The Board of Directors, after careful consideration, has
approved the reverse stock split and recommends that you vote for its approval.
All shares represented by properly executed proxies will be voted in accordance
with the specifications on the enclosed proxy. If no specification is made,
proxies will be voted for approval of the reverse stock split. The affirmative
vote of a majority of the outstanding shares of Common Stock of the Company is
required to effect the proposed reverse stock split. The Company's ability to
implement its plans, including the relisting of its Common Stock on the NASDAQ
Small Cap Market, is conditioned on the approval by you of the reverse stock
split. Detailed information concerning the reverse stock split is set forth in
the attached proxy statement which we urge you to read carefully.
Your vote is important to the Company. Whether or not you plan
to attend the special meeting in person and regardless of the number of shares
you own, please complete, sign, date and return the enclosed proxy card promptly
in the enclosed pre-addressed envelope. No postage is required if mailed in the
United States.
Sincerely,
/s/ Sebastian E. Cassetta
Sebastian E. Cassetta
Chairman of the Board
<PAGE>
SMARTSERV ONLINE, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held on October 15, 1998
To the Stockholders of SmartServ Online, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of SmartServ Online, Inc., a Delaware corporation (the
"Company"), will be held at 3:00 p.m., local time, on Thursday, October 15,
1998, at the offices of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, 18th Floor, New York, New York, for the following purposes:
1. To approve an amendment to the Company's Amended and Restated
Certificate of Incorporation to effect a one-for-six reverse stock split of the
issued and outstanding shares of the Common Stock, par value $.01 per share, of
the Company; and
2. To transact such other business as may properly come before the
Special Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on Monday,
September 14, 1998 as the record date for determining those stockholders
entitled to notice of and to vote at the Special Meeting and any adjournments or
postponements thereof. A complete list of stockholders entitled to vote at the
Special Meeting will be available for inspection by any stockholder during the
Special Meeting. In addition, the list will be open for examination by any
stockholder, for any purpose germane to the Special Meeting, during ordinary
business hours, for a period of at least 10 days prior to the Special Meeting,
at the offices of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, 18th Floor, New York, New York.
All stockholders are cordially invited to attend the Special Meeting.
However, whether or not you expect to attend the Special 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 Special Meeting. In the event you decide to attend the
Special Meeting in person, you may, if you desire, revoke your Proxy and vote
your shares in person.
By Order of the Board of Directors
/s/ Sebastian E. Cassetta
Sebastian E. Cassetta
Chairman of the Board
Stamford, Connecticut
September 17, 1998
<PAGE>
SPECIAL 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 Special Meeting of
Stockholders (the "Special Meeting") of the Company to be held on Thursday,
October 15, 1998, and at any adjournments or postponements thereof, for the
purposes set forth in the accompanying Notice of Special 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 September 17, 1998.
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 Special
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 Special Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Special 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.
<PAGE>
PURPOSES OF THE MEETING
At the Special Meeting, the Company's stockholders will consider and
vote upon the following matters:
(1) The approval of an amendment to the Company's Amended and
Restated Certificate of Incorporation (the "Certificate of
Incorporation") to effect a one-for-six reverse stock split of
the issued and outstanding shares of the Common Stock, par
value $.01 per share, of the Company; and
(2) Such other business as may properly come before the Special
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 forth above)
will be voted for approval of the amendment to the Certificate of Incorporation
to effect a one-for-six reverse stock split of the issued and outstanding shares
of the Common Stock of the Company. 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 Monday,
September 14, 1998 as the record date (the "Record Date") for determining
stockholders of the Company entitled to notice of and to vote at the Special
Meeting. As of the Record Date there were 5,787,478 shares of Common Stock
issued and outstanding. Each share of Common Stock outstanding is entitled to
one vote at the Special Meeting on each matter submitted to stockholders for
approval at the Special 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 Special Meeting
is necessary to constitute a quorum. The affirmative vote of a majority of the
outstanding shares of Common Stock will be required to amend the Company's
Certificate of Incorporation to effect the proposed reverse stock split. Proxies
submitted which contain abstentions and broker non-votes will be deemed present
at the Special Meeting in determining the presence of a quorum. Shares
abstaining with respect to any matter will be considered as votes represented,
entitled to vote and cast with respect to that matter. Shares subject to broker
non-votes with respect to any matter are not considered shares entitled to vote
with respect to that matter. However, because an affirmative vote of a majority
of the shares of Common Stock outstanding is required to amend the Company's
Certificate of Incorporation, broker non-votes will have the same effect as a
vote "against" the proposed amendment.
SECURITY OWNERSHIP
The following table sets forth, as of September 3, 1998 certain
information with respect to 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 named executive officer and
director of the Company, and (iii) all executive officers and directors of the
Company as a group. Except as otherwise indicated, each person
-2-
<PAGE>
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>
Percent of
Name and Address of Amount and Nature of Outstanding Shares
Beneficial Owner (1) Beneficial Ownership (2) Owned (3)
- ----------------------------------------- ----------------------------- -------------------------
<S> <C> <C>
Steven T. Francesco
23 Lakeview Avenue
New Canaan, CT 06840..................... 575,445 9.94%
Sebastian E. Cassetta
c/o SmartServ Online, Inc.
Metro Center, One Station Place
Stamford, CT 06902 ...................... 376,520 6.51%
The Optimum Fund
c/o U.S. Milestone Corp.
417 Surf Avenue
Staten Island, NY 10307................. 357,143 6.17%
Claudio Guazzoni......................... 303,962(4) 4.99%
L. Scott Perry........................... 35,000(5) *
Catherine Cassel Talmadge................ 32,500(5) *
Robert H. Steele......................... 25,000(6) *
Mario F. Rossi........................... 4,500 *
All executive officers and directors as a 782,482(7) 12.67%
group (7 persons)........................
</TABLE>
- --------------------
* Less than 1%
(1) Under 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) Under the rules of the SEC, a person is deemed to be the beneficial
owner of a security if such person has or shares the power to vote or
direct the voting of such security or the power to dispose or direct
the disposition of such security. A person is also deemed to be a
beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days of the date hereof. Except
as otherwise indicated the named entities or individuals have sole
voting and investment power with respect to the shares of Common Stock
beneficially owned.
(3) Represents the number of shares of Common Stock beneficially owned as
of September 3, 1998, by each named person or group, expressed as a
percentage of the sum of all of the shares of such class outstanding as
of such date and the number of shares not outstanding but beneficially
owned by such named person or group.
-3-
<PAGE>
(4) Includes 25,000 shares subject to currently exercisable options. Also
includes 278,962 shares subject to currently exercisable warrants owned
by The Zanett Securities Corporation ("ZSC"). Mr. Guazzoni is a
managing director and principal of ZSC. Mr. Guazzoni disclaims
beneficial ownership of these shares to the extent they exceed his
interest in ZSC. ZSC has entered into an agreement with the Company
pursuant to which, among other things, the Company will, on the date of
the commencement of the Private Placement (as defined on page 5),
purchase all of the outstanding warrants owned by it for shares of
Common Stock of the Company. None of such shares will be issued to Mr.
Guazzoni or any of his affiliates.
(5) Includes 30,000 shares subject to currently exercisable options.
(6) Includes 25,000 shares subject to currently exercisable options.
(7) Includes 389,962 shares subject to currently exercisable options and
warrants.
PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO EFFECT A ONE-FOR-SIX REVERSE
STOCK SPLIT OF THE COMPANY'S ISSUED AND OUTSTANDING COMMON STOCK
The Board of Directors has unanimously approved and recommends to
stockholders that they consider and approve a proposal to amend the Company's
Certificate of Incorporation pursuant to which each six shares of the issued and
outstanding shares of Common Stock of the Company, par value $.01 per share (the
"Old Common Stock") shall be combined into one issued and outstanding share of
Common Stock of the Company, par value $.01 per share (the "New Common Stock").
This proposed amendment is referred to herein as the "Reverse Stock Split". If
the proposed amendment is approved by stockholders and following such approval
the Board of Directors still believes the Reverse Stock Split is in the best
interests of the Company and its stockholders, Article FOUR of the Company's
Certificate of Incorporation would be amended as set forth in the Certificate of
Amendment attached to this Proxy Statement as Exhibit A.
The effective date of the Reverse Stock Split shall be the date upon
which said Certificate of Amendment to the Certificate of Incorporation is filed
with the Secretary of State of the State of Delaware (the "Effective Date"). On
the Effective Date, the number of shares of Common Stock issuable upon exercise
of the Company's outstanding options and warrants shall be automatically
adjusted on the same basis as the Common Stock and the respective exercise
prices thereof will be multiplied by six (6).
Background and Reasons for the Reverse Stock Split
On May 20, 1998, the Company was advised in writing that it no longer
met the requirements for maintenance of its listing on the NASDAQ SmallCap
Market. Effective on the close of business on May 20, 1998, the Company's Common
Stock and Public Warrants were delisted from trading on the NASDAQ Small Cap
Market. The Company's Common Stock and Public Warrants currently trade on the
NASD OTC Bulletin Board under the symbols "SSOL" and "SSOLW", respectively.
In order to qualify for relisting on the NASQAQ Stock Market, Inc.
("NASDAQ") or another national securities exchange, the Company must increase
its "Net Tangible Assets" (total assets, excluding goodwill, minus total
liabilities) and increase the price at which its Common Stock trades. To that
end, the Company has
-4-
<PAGE>
entered into a letter of intent (the "Letter of Intent"), dated August 11, 1998,
with Spencer Trask Securities, Incorporated ("Spencer Trask") pursuant to which,
among other things, Spencer Trask has been retained to act as exclusive
placement agent in connection with a proposed private placement of a minimum of
$3,000,000 and a maximum of $6,000,000 of securities of the Company (the
"Private Placement"). The Letter of Intent contemplates that the Company will
offer a minimum of thirty (30) units and a maximum of sixty (60) units, each
unit consisting of shares of convertible voting preferred stock (the "Preferred
Shares") of the Company at a gross purchase price of $100,000 per unit. The
number of Preferred Shares per unit will be determined by dividing the unit
price of $100,000 by the conversion price (the "Conversion Price"). The
Conversion Price per Preferred Share will be equal to seventy-five percent (75%)
of the average closing bid price for the Company's Common Stock for the fifteen
(15) days following the Effective Date. The Preferred Shares will be convertible
by the holder into shares of Common Stock on a one-to-one basis at any time
prior to the expiration of a thirty-day period commencing upon the giving of
notice of redemption by the Company. After two years, the Preferred Shares will
be redeemable at the Company's option at one hundred ten percent (110%) of the
purchase price for Preferred Shares in the event that the average closing price
of the Common Stock for the twenty (20) trading days preceding the notice of
redemption exceeds one hundred fifty percent (150%) of the Conversion Price. The
Preferred Shares will receive an eight percent (8%) annual dividend payable
semi-annually, in-kind or in cash at the Company's option. The Company has
agreed to register the shares of Common Stock into which the Preferred Shares
are convertible under the Securities Act of 1933, as amended, subject to certain
limitations on resale. In addition to customary fees and expenses, Spencer Trask
will receive, for nominal consideration, five (5) year warrants (the "Agent
Warrants") to purchase Common Stock at one hundred twenty percent (120%) of the
offering price per share in an amount equal to ten percent (10%) of the
Preferred Shares contained in the units sold in the Private Placement. The Agent
Warrants shall contain certain demand and piggyback registration rights with
respect to the shares of Common Stock into which the Agent Warrants are
convertible. Commencement of the Private Placement is conditioned upon the
occurrence of the Reverse Stock Split.
In addition, as required by the Letter of Intent, the Company entered
into agreements with certain warrant holders pursuant to which, among other
things, the Company (i) agreed to acquire on the date the Private Placement
commences warrants to purchase 4,807,055 shares of Common Stock from such
holders in exchange for the issuance by the Company of an aggregate of 2,057,055
shares of Common Stock (on a pre-Reverse Stock Split basis), which shares may
not be sold (except privately) for a period of eighteen (18) months following
the final closing of the Private Placement or September 1, 2000, whichever is
earlier, and (ii) has issued 300,000 shares of Common Stock to the holders of
$1,669,000 of Prepaid Warrants in consideration of such holders agreeing to
similar restrictions on the exercise of the Prepaid Warrants and the resale of
the shares of Common Stock issuable upon such exercise. Any such shares sold
privately will remain subject to the above restrictions on resale. One of the
holders of Prepaid Warrants has given Sebastian Cassetta (or his successor as
chief executive officer of the Company) an irrevocable proxy through January 30,
1999 to vote that number of shares of Common Stock to be issued to such holder
as described in this paragraph which exceeds 4.99% of the outstanding Common
Stock. The Company has agreed to register the shares of Common Stock issued or
issuable as described in this paragraph.
In addition, Zanett Capital, Inc. has temporarily waived its rights to
designate a majority of the members of the Board of Directors of the Company and
its right to approve certain corporate expenditures. In the event that the
Private Placement is consummated by January 1, 1999 and the Company's Common
Stock is listed on NASDAQ by March 1, 1999, these waivers will become permanent.
On September __, 1998 the Company entered into a letter of intent (the
"Bridge Letter") with Spencer Trask pursuant to which Spencer Trask has been
retained to act as exclusive placement agent in connection with
-5-
<PAGE>
a proposed bridge financing of $500,000 of securities of the Company (the
"Bridge Financing"). The Bridge Letter contemplates that the Company will offer
five (5) units, each unit consisting of a convertible note in the principal
amount of $100,000 and warrants to purchase Common Stock of the Company. The
notes and the warrants will each be convertible and exercisable, respectively,
at $_____ per share. Upon the closing of the Private Placement, the holders of
the notes will have the right to require the Company to redeem for cash fifty
percent (50%) of the notes they own. The remaining notes will be converted into
units in the Private Placement. The notes will bear interest at eight percent
(8%) per annum, payable semi-annually, in kind or in cash at the Company's
option. The Company has agreed to register the shares of Common Stock issuable
upon exercise of the warrants and conversion of the notes. In addition to
customary fees and expenses, Spencer Trask will receive for nominal
consideration, warrants to purchase ten percent (10%) of the shares of Common
Stock of the Company issued on conversion of the notes and exercise of the
warrants at $___ per share.
Although there can be no assurance that the Private Placement will be
consummated or, if consummated, whether the maximum amount will be raised, if
the maximum amount of $6.0 million is raised, it is anticipated that the Company
will be able to meet the NASDAQ SmallCap Market's Net Tangible Assets listing
requirement of $4.0 million. The closing bid price per share of the Common Stock
as reported on the NASD OTC Bulletin Board on September 14, 1998 was $____.
Although there can be no assurance that the Company will achieve its desired
stock price, or whether that price will be sustained, the Board of Directors
anticipates that as a consequence of the Reverse Stock Split, the market price
of the Company's Common Stock will increase to at least $4.00 per share.
Promptly following the consummation of the Private Placement, the
Company intends to apply for relisting of the Common Stock and Public Warrants
on the NASDAQ SmallCap Market or another national securities exchange. Although
there can be no assurance that such listing will be obtained, or if obtained,
whether the Company can maintain such listing, the Company believes that the
listing will provide greater access to, and visibility in, a nationally
recognized capital market and will increase the liquidity of its Common Stock,
although such liquidity could be adversely affected by the reduced number of
shares outstanding after the Reverse Stock Split.
The Board of Directors believes that the decrease in the number of
shares of Common Stock issued and outstanding and the resulting anticipated
increase in the price at which the Company's Common Stock trades, together with
the consummation of the Private Placement, will enhance its application for
relisting on the Nasdaq SmallCap Market. There can, however, be no assurance
that any of the foregoing effects will occur, or that the per share price level
of the Common Stock immediately after the proposed Reverse Stock Split will be
maintained for any period of time.
The Board of Directors also believes that the current low per share
price of the Common Stock as reported on the NASD OTC Bulletin Board, as well as
the penny-stock rules promulgated under the Securities Enforcement and Penny
Stock Reform Act of 1990 (the "Act"), have had and will continue to have a
negative effect on the price and marketability of the existing shares, the
amount and percentage (relative to share price) of transaction costs paid by
individual stockholders and the potential ability of the Company to raise
capital by issuing additional shares. Reasons for these effects include internal
policies of certain institutional investors which prevent the purchase of
low-priced stocks, the fact that many brokerage houses do not permit low-priced
stocks to be used as collateral for margin accounts or to be purchased on
margin, a variety of brokerage house policies and practices which tend to
discourage individual brokers within those firms from dealing in low-priced
stocks and the additional disclosure requirements imposed on brokers by the Act.
-6-
<PAGE>
In addition, since broker's commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on higher
priced stocks, the current share price of the Common Stock can result in
individual stockholders paying transaction costs which are a higher percentage
of the share price than would be the case if the share price were substantially
higher. The Board of Directors believes that this factor limits the willingness
of certain investors to purchase the Common Stock.
Immediately after the Reverse Stock Split and the Warrant Redemption
there will be 1,307,423 shares of Common Stock issued and outstanding and
1,383,912 shares of Common Stock reserved for issuance upon the conversion or
exercise of outstanding warrants and options. The proposed Reverse Stock Split
would not affect any stockholder's proportionate equity interest in the Company,
except for those stockholders who would receive cash in lieu of fractional
shares as described below. However, if the Private Placement is consummated,
there will be newly issued and outstanding Preferred Shares which, upon
conversion into Common Stock, will have a material dilutive effect on the equity
ownership of the Company's current stockholders. The Warrant Redemption will
also have a material dilutive effect on the equity ownership of the Company's
current stockholders. The Board of Directors, however, believes that the Private
Placement and the Warrant Redemption are in the best interests of the Company
and its stockholders and anticipates they will enable the Company to achieve a
listing on NASDAQ or another national securities exchange.
Other than the Private Placement and the Warrant Redemption, the Board
of Directors of the Company has no present plans, proposals, commitments,
undertakings or arrangements which would result in the issuance of any
additional shares of Common Stock.
Exchange of Stock Certificates and Liquidation of Fractional Share Interests
As soon as practicable after the Effective Date, stockholders will be
notified and requested to surrender their Old Common Stock certificates in
exchange for certificates representing the number of whole shares of New Common
Stock. Stockholders should not submit their old certificates to the Exchange
Agent identified below until they receive these instructions. Until so
surrendered, each certificate representing shares of the Old Common Stock will
be deemed for all corporate purposes after such Effective Date to evidence
ownership of shares of the New Common Stock in the appropriately reduced number.
Continental Stock Transfer and Trust Company will be appointed exchange agent
(the "Exchange Agent") to act for stockholders in effecting the exchange of
their Common Stock certificates.
No scrip or fractional share certificates evidencing shares of Common
Stock will be issued in connection with the Reverse Stock Split. If a
stockholder is entitled to a fractional interest of a share, he or she will
receive in lieu thereof, cash (without interest) in an amount equal to six times
such fractional share of Common Stock multiplied by the average of the closing
bid and ask prices of the Common Stock as reported on the NASD OTC Bulletin
Board for the five trading days immediately prior to the Effective Date. The
Company will either deposit sufficient cash with the Exchange Agent or set aside
sufficient cash for the purchase of the fractional interests. Stockholders are
encouraged to surrender their Old Common Stock Certificates to the Exchange
Agent for certificates evidencing whole shares of the New Common Stock and to
claim the sums, if any, due them for fractional interests as promptly as
possible following the Effective Date. No holder shall be entitled to dividends,
voting rights or any other rights as a stockholder with respect to any
fractional shares. No service charge will be payable by stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which costs will be borne and paid by the Company.
-7-
<PAGE>
No Dissenters' Rights
Under Delaware law, the stockholders of the Company are not entitled to
dissenters' rights of appraisal or similar rights of dissenters with respect to
any matter to be acted on at the Special Meeting.
Certain Effects of the Reverse Stock Split and Warrant Redemption
The principal effect of the Reverse Stock Split and Warrant Redemption
will be to decrease the number of shares of Common Stock outstanding from
5,787,478 to 1,307,423 (before giving effect to the elimination of fractional
interests referred to above) and to decrease the number of shares issuable upon
exercise of warrants from 8,303,470 to 1,383,912. The authorized number of
shares of Common Stock will remain unchanged.
The shares of New Common Stock will be fully paid and nonassessable.
The relative voting and other rights of holders of the New Common Stock will not
be altered by the Reverse Stock Split or the Warrant Redemption. The Company
does not anticipate that the Reverse Stock Split or the Warrant Redemption will
result in any material reduction in the number of holders of Common Stock.
Following the Effective Date, certain holdings of stockholders may include an
"odd-lot" number of shares. In general, it is somewhat more difficult to
purchase or sell an odd-lot number of shares, and transactions in odd-lots are
subject to higher commissions and other transaction costs than are applicable to
so-called round-lots.
If the proposed amendment is adopted, there would be an additional
37,308,666 authorized shares of Common Stock that are not outstanding or
reserved for issuance. Although an increase in the authorized number of shares
of Common Stock could, under certain circumstances, have an anti-takeover effect
(for example, by permitting issuances which would dilute the stock ownership of
a person seeking to effect a change in the composition of the Board of Directors
or contemplating a tender offer or other transaction for the combination of the
Company with another company), the proposed amendment is not being proposed in
response to any effort of which the Company is aware to accumulate the Company's
shares of Common Stock or obtain control of the Company, nor is it part of a
plan by management to recommend a series of similar amendments to the Board of
Directors and stockholders. Other than the amendment to Article FOUR of the
Certificate of Incorporation, the Board does not currently contemplate
recommending the adoption of any other amendments to the Company's Certificate
of Incorporation that could be construed to affect the ability of third parties
to take over or change control of the Company.
Federal Income Tax Consequences of the Reverse Stock Split
The following is a summary of certain material U.S. federal income tax
consequences of the Reverse Stock Split to a U.S. citizen or individual resident
in the U.S. for federal income tax purposes, a corporation or partnership
organized under the laws of the U.S. or a state of the U.S., a trust in which
one or more U.S. persons have the authority to control all substantial decisions
of the trust and a U.S. court is able to exercise primary supervision over the
administration of the trust, or an estate subject to U.S. federal income tax on
all of its income regardless of source (each, a "U.S. Holder"). The discussion
is based on the provisions of the U.S. federal income tax law as of the date
hereof, which is subject to change retroactively as well as prospectively. The
discussion is for general information only and does not purport to address all
relevant concerns to a U.S. Holder. In addition, it does not discuss any state,
local, foreign or minimum income or other U.S. federal tax consequences.
-8-
<PAGE>
THE FOLLOWING DISCUSSION IS NOT TAX ADVICE. EACH STOCKHOLDER SHOULD
CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE CONSEQUENCES
OF THE REVERSE STOCK SPLIT.
No gain or loss should be recognized by a stockholder of the Company
upon his or her exchange of shares of Old Common Stock for shares of New Common
Stock pursuant to the Reverse Stock Split (except to the extent of any cash
received in lieu of fractional shares of New Common Stock). Cash payments in
lieu of fractional shares of New Common Stock should be treated as if the
fractional shares were issued to the stockholder and then redeemed by the
Company for cash. A Company stockholder receiving such payment should recognize
gain or loss equal to the difference, if any, between the amount of cash
received and the stockholder's basis in the fractional share (determined as
provided below).
Such gain or loss will be capital gain or loss if the shares are held
as a capital asset at the time of the Reverse Stock Split, the payment of cash
in lieu of the fractional share is a mere mechanical rounding off of fractions
and not separately bargained for consideration, and the payment is "not
essentially equivalent to a dividend" with respect to the stockholder under the
federal income tax law. For this purpose, a payment is not essentially
equivalent to a dividend if it results in a "meaningful reduction" in the
stockholder's percentage interest in the Company, taking into account the
constructive ownership rules and redemptions of the fractional shares from all
the stockholders. The Internal Revenue Service has ruled publicly that any
reduction in the percentage interest of a small minority stockholder in a
publicly-held corporation who exercises no control over corporate affairs should
constitute a meaningful reduction.
The aggregate tax basis of the New Common Stock received in the Reverse
Stock Split (including any fractional shares of New Common Stock) will be the
same as the stockholder's aggregate tax basis in the Old Common Stock exchanged
therefor. The stockholder's holding period for the New Common Stock will include
the period during which the stockholder held the Old Common Stock surrendered in
the exchange, provided that such Old Common Stock is held as a capital asset at
the time of the Reverse Stock Split.
Accounting Effects of the Reverse Stock Split
Following the Effective Date, the par value of the Company's Common
Stock will remain at $.01 per share. As a result, the Company's stated capital
will be reduced and capital in excess of par value (paid-in capital) increased
accordingly. Stockholders' equity will remain unchanged.
Effective Date
If approved by the stockholders and if, following such approval the
Board of Directors still believes that the Reverse Stock Split is in the best
interests of the Company and its stockholders, the Company will file its
Certificate of Amendment of the Certificate of Incorporation with the Secretary
of State of the State of Delaware, which filing date shall be the Effective
Date. While it is currently anticipated that the Effective Date shall be on or
as promptly as practicable after the Special Meeting, the Board of Directors may
abandon or delay the Reverse Stock Split at any time prior to or after the
Special Meeting and prior to the Effective Date if for any reason the Board of
Directors deems it advisable to do so.
-9-
<PAGE>
Required Vote
Approval of the proposal requires the affirmative vote of the holders
of a majority of the shares of Common Stock present, in person or by proxy, at
the Special Meeting and entitled to vote on this Proposal. The Board of
Directors recommends a vote "FOR" approval of the Proposal.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before
the Special Meeting. If, however, any other business should properly come before
the Special 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.
By Order of the Board of Directors
/s/ Sebastian E. Cassetta
Sebastian E. Cassetta
Secretary
-10-
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SMARTSERV ONLINE, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is SMARTSERV ONLINE, INC.
2. The certificate of incorporation of the Corporation is
hereby amended by adding the following paragraph to Article "FOUR" thereof to
follow the first paragraph of said Article "FOUR":
Every six issued and outstanding shares of the Common Stock,
par value $0.01 per share (the "Common Stock"), of the
Corporation shall, upon the filing date of this Certificate of
Amendment (which filing date shall also be the effective
date), automatically be combined into one issued and
outstanding share of Common Stock, par value $.01 per share;
provided, however, that fractional shares of Common Stock will
not be issued in connection with such reclassification, and
each holder of a fractional share of Common Stock shall
receive in lieu thereof a cash payment from the Corporation
determined by multiplying six times such fractional share of
Common Stock by the average of the bid and asked price per
share of Common Stock as quoted on the NASD OTC Bulletin Board
for the five trading days immediately preceding the effective
date of this Certificate of Amendment.
Signed on ______, ___, 1998.
----------------------------------------------
Sebastian E. Cassetta, Chief Executive Officer
Attest:
- -------------------------------
Thomas Haller, Vice President
<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 SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, OCTOBER 15, 1998
The undersigned stockholder of SmartServ Online, Inc., a Delaware
corporation (the "Company"), hereby appoints Sebastian E. Cassetta 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 Special Meeting
of Stockholders (the "Special Meeting") of the Company, to be held on Thursday,
October 15, 1998 at 3:00 p.m., local time, at the offices of Parker Chapin
Flattau & Klimpl, LLP, 1211 Avenue of the Americas, 18th Floor, New York, New
York and at any adjournments or postponements thereof.
The Board of Directors unanimously recommends a vote FOR proposal (1).
(1) Approval of an amendment to the Company's Amended and Restated
Certificate of Incorporation to effect a one-for-six reverse stock split.
FOR [_] AGAINST [_] ABSTAIN [_]
(2) Upon such other matters as may properly come before the Special
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 Special Meeting and any adjournments or postponements thereof.
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 IN FAVOR OF PROPOSAL (1).
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement.
------------------------------------
(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 Special 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 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.
-2-
