NOTE PURCHASE AGREEMENT
EFFECTIVE AS OF SEPTEMBER 28, 2000
BY AND BETWEEN
SMARTSERV ONLINE, INC.
AND
HEWLETT-PACKARD COMPANY
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TABLE OF CONTENTS
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1. Note......................................................................................1
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2. Representation and Warranties of the Company..............................................1
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3. Representations and Warranties of HP......................................................8
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4. Conditions to Closings....................................................................9
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5. Covenants................................................................................11
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6. Miscellaneous............................................................................12
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Schedule 1 Disclosure Schedule
Exhibit A Form of Legal Opinion of Company Counsel
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NOTE PURCHASE AGREEMENT
This Note Purchase Agreement ("Agreement") is entered into and is
effective as of September 28, 2000 by and between SmartServ Online, Inc., a
Delaware corporation (the "Company"), and Hewlett-Packard Company, a Delaware
corporation ("HP").
RECITALS
WHEREAS, on the terms and subject to the conditions set forth herein,
HP is willing to advance $20,000,000 (Twenty Million) U.S. Dollars to the
Company, and the Company is willing to execute in favor of HP a convertible
secured promissory note in the principal amount of $20,000,000 (Twenty Million)
U.S. Dollars (the "Note").
NOW, THEREFORE, in consideration of the promises and representations,
warranties, covenants and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Note.
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(a) Issuance and Delivery of the Note.
(i) At the Closing (as defined below), the Company shall
issue the Note to HP.
(ii) The issuance of the Note shall take place at a
closing to be held at such place and time and on such
date (the "Closing Date") as the Company and HP may
determine (the "Closing"). At the Closing the Company
will deliver to HP the Note. Any Loans to be made
hereunder by wire transfer shall be made to account
number 031-1177901 in the name of the Company at The
Chase Manhattan Bank, ABA number 021000021, or such
other account of which the Company may advise HP in
writing. The Note shall be registered in HP's name in
the Company's records.
(b) Security. The obligations evidenced by the Note shall be
secured as provided in the Note.
2. Representation and Warranties of the Company. The Company represents and
warrants to HP that, as of the date hereof, except as disclosed in the
Disclosure Schedule in the form of Schedule 1 attached hereto:
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(a) Due Incorporation, Qualification, etc. The Company is (i) a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
and (ii) is duly qualified, licensed to do business and in
good standing as a foreign corporation in each jurisdiction
where the failure to be so qualified or licensed could
reasonably be expected to have a material adverse effect on
the Company and its subsidiaries taken as a whole.
(b) Capitalization. The Company's total authorized and issued
capitalization is as set forth on the Disclosure Schedule. All
of the outstanding equity securities of the Company have been
duly authorized and are validly issued, fully paid and
nonassessable. Except as expressly referenced in the Note or
in the Disclosure Schedule, there are as of the date of this
Agreement, no options, warrants or rights to purchase equity
securities authorized, issued or outstanding, nor is the
Company obligated in any other manner to issue shares of its
equity securities. The Disclosure Schedule sets forth with
respect to such options, warrants and other rights, the
exercise price and maturity date. Except as expressly
referenced in the Disclosure Schedule, there are no
restrictions on the transfer of equity securities of the
Company, other than those imposed by the Company's Certificate
of Incorporation and Bylaws as of the date hereof, or relevant
state and federal securities laws, and no holder of any equity
security of the Company is entitled to preemptive or similar
statutory or contractual rights. All outstanding securities of
the Company were issued in compliance with all applicable
federal and state securities laws. Except as expressly
referenced in the Disclosure Schedule, no person or entity has
the right to demand or other rights to cause the Company to
file any registration statement under the Securities Act of
1933, as amended (the "Securities Act"), relating to any
equity securities of the Company presently outstanding or that
may be subsequently issued, or any right to participate in any
registration statement.
(c) Subsidiaries. The Disclosure Statement sets forth (i) each
corporation, association, partnership, or other business
entity which the Company owns or controls, directly or
indirectly, (ii) the Company's percentage of ownership of such
business entity and (iii) the jurisdiction under which such
business entity is organized.
(d) Authority; Enforceability. The execution, delivery and
performance by the Company of each Transaction Document (as
defined below) and the consummation by the Company of the
transaction contemplated thereby (i) are within the power of
the Company, and (ii) have been duly authorized by all
necessary actions on the part of the Company. Each
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Transaction Document executed, or to be executed, by the
Company has been, or will be, duly executed and delivered by
the Company and constitutes, or will constitute, a legal,
valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, excepts as
limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
The shares of the Company's common stock, issuable upon
conversion of the Note, when issued in compliance with this
Agreement and the Note (the "Underlying Stock"), will be
validly issued, fully paid and nonassessable and will be free
of any liens or encumbrances, other than any liens or
encumbrances created by or imposed upon HP through no action
of the Company; provided, however, that the Underlying Stock
will be subject to restrictions on transfer under federal or
state securities laws. Except as set forth in the Disclosure
Schedule, the Underlying Stock is not subject to any
preemptive rights or rights of first refusal.
(e) Non-Contravention. The execution and delivery by the Company
of the Transaction Documents and the performance and
consummation of the transactions contemplated thereby do not
and will not (i) violate the Certificate of Incorporation or
Bylaws of the Company or any judgment, order, writ, decree,
statute, rule or regulation applicable to the Company; (ii)
violate any provision of, or result in the breach or the
acceleration of, or entitle any other person to accelerate
(whether after the giving of notice or lapse of time or both),
any mortgage, indenture, agreement, instrument or contract to
which the Company is a party or by which it is bound; or (iii)
result in the creation or imposition of any lien upon any
property, asset or revenue of the Company (other than any lien
in favor of HP) or the suspension, revocation, impairment,
forfeiture, or nonrenewal of any material permit, license,
authorization or approval applicable to the Company, its
business or operations, or any of its assets or properties.
(f) Approvals. No consent, approval, order or authorization of, or
registration, declaration or filing with any governmental
authority or other person or entity (including without
limitation the shareholders of any person or entity) is
required in connection with the execution and delivery of the
Transaction Documents executed by the Company and the
performance and consummation of the transactions contemplated
thereby.
(g) Financial Statements; Operating Plan.
(i) The balance sheet of the Company as at the end of the
last fiscal
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year, and statements of income and cash flows of the
Company for such year (the "Financial Statements"),
which have been delivered to HP, (A) were prepared in
accordance with generally accepted accounting
principles ("GAAP"); (B) are in accordance with the
books and records of the Company, which have been
maintained in accordance with good business
practices; and (C) fairly present the financial
position of the Company as of the dates presented
therein and the income for the periods presented
therein. The Financial Statements set forth in
reasonable detail the Company's accounting policies,
principles and methods, and there has been no change
thereof since June 30, 2000, except as may be
required by GAAP. Except as set forth in the
Financial Statements, the Company has no contingent
obligations, liability for taxes or other outstanding
obligations which should have been reflected in such
financial statements, which are material in the
aggregate and of which the Company is aware, except
as incurred in the ordinary course of business after
June 30, 2000. Except as disclosed in the Financial
Statements, the Company has not capitalized any
software development costs.
(ii) The Company has delivered to HP true and correct
information regarding its operating plan as of August
15, 2000. The projections and forward-looking
statements made by the Company in such operating plan
(the "Projections") were prepared in good faith based
on estimates and assumptions believed by the Company
to be reasonable based on current circumstances.
Actual results during the period covered by the
Projections may differ materially and adversely from
the projected results and such Projections should not
be regarded as a representation or warranty by the
Company that the projected results will be achieved.
(h) Absence of Changes. Since the date of the Financial
Statements, there has not been to the Company's knowledge:
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(i) Any change in the assets, liabilities, financial
condition or operations of the Company from that
reflected in the Financial Statements, other than
changes in the ordinary course of business, none of
which individually or in the aggregate has had or is
expected to have a material adverse effect on such
assets, liabilities, financial condition or
operations of the Company;
(ii) Any material change in the contingent obligations of
the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(iii) Any damage, destruction or loss, whether or not
covered by insurance, materially and adversely
affecting the properties, business or financial
condition of the Company;
(iv) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(v) Any direct or indirect loans made by the Company to
any shareholder, employee, officer or director of the
Company, other than advances made in the ordinary
course of business;
(vi) Any material change in any compensation arrangement
or agreement with any employee, officer, director or
shareholder;
(vii) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(viii) Any debt, obligation or liability incurred, assumed
or guaranteed by the Company, except those for
immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(ix) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other
intangible assets; or
(x) Any change in any material agreement to which the
Company is a party or by which it is bound which
materially and adversely affects the business,
assets, liabilities, financial condition or
operations of the Company, including compensation
agreements with the Company's employees.
(i) Title. The Company owns and has good and marketable title in
fee
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simple absolute to, or a valid leasehold interest in, all of
its real properties and good title to all personal property
included in its other assets and properties as reflected in
the Financial Statements (except those assets and properties
disposed of in the ordinary course of business since the date
of such Financial Statements) and all respective assets and
properties acquired by the Company and the Company's
subsidiaries since such date (except those disposed of in the
ordinary course of business). Such assets and properties are
subject to no lien, except for Permitted Liens (as defined in
the Note).
(j) Resignation/Termination of Key Officers. There has been no
resignation or termination of employment of any key officer,
consultant or employee of the Company since June 30, 2000
other than the resignation of Evan Sohn, Vice President -
Business Development, and the Company does not know of the
impending resignation or termination of employment of any such
key officer, consultant or employee that if consummated would
have a materially adverse affect on its business.
(k) Material Liabilities. The Company has no material liabilities
or obligations, absolute or contingent (individually or in the
aggregate), except (i) the liabilities and obligations set
forth in the Financial Statements, and (ii) liabilities and
obligations which have been incurred in the ordinary course of
business since June 30, 2000.
(l) Patents and Other Intangible Assets.
(i) The Company owns or has the right to use, all
patents, trademarks, service marks, trade names,
copyrights (and licenses with respect to the
foregoing) used in the conduct of its business. There
are no pending or threatened claims against the
Company alleging that the conduct of the Company's
business infringes upon or otherwise conflicts with
the right or claimed right of any person under or
with respect to any of the foregoing. The Company is
not obligated or under any liability whatsoever to
make any payments by way of royalties, fees or
otherwise to any owner of, licensor of or other
claimant to any patent, trademark, trade name,
copyright or other intangible asset, with respect to
the use thereof in connection with the conduct of its
business or otherwise except with respect to licenses
undertaken by the Company in the ordinary course of
business. Except in the ordinary course of business,
the Company has not granted any licenses with respect
to its business as now conducted or as now proposed
to conduct.
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(ii) The Company owns or has the right to use all trade
secrets, including know-how, inventions, designs,
processes and technical data required for the
development, operation and sale of all products and
services sold and now proposed to be sold by the
Company, free and clear of any rights of liens or
claims of others.
(iii) The Company has not received any communication
alleging that the Company has violated or, by
conducting its business as currently conducted or as
proposed in its business plan, a copy of which has
been provided to HP, would violate or infringe in any
way any of the patents, trademarks, service marks,
trade names, copyrights, trade secrets or other
proprietary rights or processes of any other person
or entity.
(iv) The Company has obtained confidentiality and
non-disclosure agreements from its key employees
regarding its intellectual property and trade secrets
(the "Non-Disclosure Agreement") pursuant to the
terms of a form Non-Disclosure Agreement which has
previously been provided to HP. There are no
Non-Disclosure Agreements which differ substantially
from the form Non-Disclosure Agreement.
(m) Securities Law Compliance. Subject to the accuracy of HP's
representations and warranties in Section 3 below, the offer,
sale and issuance of the Note to be issued in conformity with
this Agreement and the issuance of the Underlying Stock upon
conversion of the Note constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act
and all applicable state securities laws.
(n) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the Company's knowledge,
threatened against the Company or its properties before any
court or governmental agency.
(o) No Brokers or Finders. The Company has not incurred, and will
not incur, directly or indirectly, as a result of any action
taken or permitted to be taken by the Company, any liability
for brokerage or finders' fees or agents' commissions or
similar charges in connection with the execution and
performance of this Agreement or any other Transaction
Document.
(p) Security Interest. The security interests created under the
Note create a valid and enforceable security interest in the
Collateral (as defined in
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the Note), and upon the filing of UCC-1 financing statements
in Connecticut and New York HP will have a perfected, first
priority security interest in the Collateral that may be
perfected by filing a financing statement.
(q) Conversion of the Note. The principal and interest under the
Note are convertible into the capital stock of the Company as
provided under the terms of the Note.
(r) Disclosure. This Agreement with the Disclosure Schedule, the
Note, the Registration Rights Agreement dated September 28,
2000 by and between HP and the Company, the UCC-1 financing
statements and other documents executed in connection with the
Note (collectively, the "Transaction Documents"), when taken
as a whole, do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to
make the statements contained herein or therein not misleading
in light of the circumstances under which they were made.
3. Representations and Warranties of HP. HP represents and warrants to the
Company that:
(a) Authority. The execution, delivery and performance by HP of
each Transaction Document and the consummation by HP of the
transactions contemplated thereby are within the power of HP
and have been duly authorized by all necessary actions on the
part of HP. Each Transaction Document executed, or to be
executed, by HP has been or will be, duly executed and
delivered by HP and constitutes, or will constitute, a legal,
valid and binding obligation of HP, enforceable against HP in
accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally and
general principles of equity.
(b) Securities Law Investment Representations. HP acknowledges
that the Note and the Underlying Stock have not been and will
not be registered under the Securities Act, or the securities
laws of any state of the United States or any other
jurisdiction, and except, with respect to the Underlying
Stock, as provided in the Registration Rights Agreement, HP
has no right to require such registration. HP is purchasing
the Note and the Underlying Stock for HP's own account for
investment and not for the interest of any other person and
not for resale to others or with a view to or for sale in
connection with any distribution thereof. HP has such
knowledge and experience in financial and business matters so
as
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to be capable of evaluating the merits and risks of its
investment and to bear the economic risk of such investment
for an indefinite period of time. HP is an Accredited Investor
(as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act). HP will not resell or
otherwise dispose of the Note or any interest therein or the
Underlying Stock at any time unless (i) such securities are
subsequently registered under the Securities Act and
appropriate state securities laws, or (ii) an exemption from
registration is available and, if the Company requests, the
Company receives an opinion of counsel reasonably satisfactory
to it that such exemption is available, and the written
approval of the Company to any transfer has first been
obtained.
4. Conditions to Closings.
(a) Conditions of HP to Closing. HP's obligation hereunder to
advance funds to the Company is subject to the satisfaction,
on or prior to the Closing Date, of all the following
conditions, any of which may be waived in whole or in part by
HP:
(i) Representations and Warranties; Covenants; Officer's
Certificate; Opinion of Counsel.
(A) The representations and warranties made by
the Company herein or in any other
Transaction Document shall be true and
correct as of the Closing Date.
(B) The Company shall have performed all
covenants set forth in the Transaction
Documents required to be performed prior to
the Closing.
(C) A duly authorized officer of the Company
shall have executed and delivered to HP a
certificate, dated the Closing Date, with
respect to the satisfaction of the
conditions set forth herein.
(D) HP shall have received an opinion of counsel
to the Company regarding the enforceability
and due authorization of the transactions
contemplated by the Transaction Documents in
substantially the form attached hereto as
Exhibit A.
(ii) Transaction Documents. The Company shall have duly
executed and delivered to HP the following documents:
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(A) This Agreement;
(B) The Note;
(C) The Registration Rights Agreement;
(D) UCC-1 financing statements and other
documents and instruments which HP may
reasonably request to perfect its security
interest in the collateral described in the
Note; and
(E) Such landlord waivers and similar waivers
from owners and lessees of properties where
Collateral is located, as may be required by
HP.
(iii) Corporate Documents. The Company shall have delivered
to HP each of the following:
(A) The Certificate of Incorporation of the
Company, certified as of a recent date prior
to the Closing Date by the Secretary of the
State of Delaware;
(B) A Certificate of Good Standing with respect
to the Company, certified as of a recent
date prior to the Closing Date by the
Secretary of the State of Delaware;
(C) A certificate of the Secretary of the
Company, dated the Closing Date, certifying
that (1) the Certificate of Incorporation of
the Company, delivered to HP pursuant to the
terms hereof, is in full force and effect
and has not been amended, supplemented,
revoked or repealed since the date of such
certification; (2) attached thereto is a
true and correct copy of the Bylaws of the
Company as in effect on the Closing Date;
(3) attached thereto is a true and correct
copy of resolutions duly adopted by the
Board of Directors of the Company
authorizing the execution, delivery, and
performance by the Company of this Agreement
and the other Transaction Documents and the
consummation of the transactions
contemplated hereby and thereby; and (4)
there are no proceedings for the dissolution
or liquidation of the Company that have
commenced or, to the knowledge of the
Company, been threatened.
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(b) The Company Conditions to Closing. The Company's obligation
hereunder to accept the advance of the funds from HP is
subject to satisfaction, on or prior to the Closing Date, of
all of the following conditions, any of which may be waived in
whole or part by the Company:
(i) Representations and Warranties; Covenants; Documents.
(A) The representations and warranties made by
HP herein and in the Registration Rights
Agreement shall be true and correct as of
the Closing Date.
(B) HP shall have performed all covenants set
forth in this Agreement required to be
performed prior to the Closing.
(C) HP shall have duly executed and delivered to
the Company this Agreement.
5. Covenants.
(a) Financial Statements. The Company will furnish the following
reports to HP for so long as any amounts are outstanding under
the Note and until conversion of the Note by HP:
(i) Annual. As soon as practicable after the end of each
fiscal year of the Company, and in any event within
ninety (90) days thereafter or at such later date as
financial statements such are filed with the
Securities and Exchange Commission pursuant to
appropriate extensions,a consolidated balance sheet
of the Company and its subsidiaries, if any, as of
the end of such fiscal year and statements of income
and cash flows of the Company for such period,
prepared in accordance with GAAP consistently applied
and setting forth in each case in comparative form
the figures for the previous fiscal year, all in
reasonable detail and certified by the Company's
independent public accountants, currently Ernst &
Young LLP, and reasonably acceptable to HP; and as
soon as practicable after the end of each fiscal year
of the Company, and in any event within sixty (60)
days thereafter a financial plan, including and
operating budget and business plan for the fiscal
year which just began.
(ii) Quarterly. As soon as practicable after the end of
the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in
any event within thirty (45) days thereafter, a
consolidated balance sheet of the Company and its
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subsidiaries, if any, as of the end of each quarterly
period, and consolidated statements of income and
cash flows of the Company and its subsidiaries, if
any, for such period and for the current fiscal year
to date, prepared in accordance with GAAP (except
that such financial statements need not contain
footnotes required by GAAP or normal year-end closing
adjustments), all in reasonable detail and certified
by the chief financial officer of the Company.
(iii) Information Provided to Shareholders. Promptly upon
the mailing thereof to the shareholders of the
Company, copies of all financial statements, reports
and proxy statements so mailed.
(iv) Securities Filings. Promptly upon the filing thereof,
copies of all reports on Forms 10-KSB, 10-QSB and 8-K
(or their equivalents) which the Company shall have
filed with the Securities and Exchange Commission.
(v) Other Information. Such other information as HP
reasonably requests.
6. Miscellaneous.
(a) Confidentiality. From and after the date hereof, each of HP
and the Company shall receive confidential information of the
other party. For purposes hereof, the party, disclosing
confidential information shall be designated "Discloser" and
the party receiving such information shall be designated
"Recipient". Except with Discloser's prior written approval,
and except as HP reasonably determines to be necessary with
any foreclosure of its security interests under the Note,
Recipient shall keep all of Discloser's confidential
information confidential and shall use such information only
for the furtherance of business relationships between the
parties. Recipient shall protect Discloser's confidential
information by using the same degree of care, but no less than
a reasonable degree of care, to prevent the unauthorized use,
dissemination, or publication of Discloser's confidential
information as Recipient uses to protect its own confidential
information of a like nature. Information shall not be deemed
confidential if it (i) is or becomes a matter of public
knowledge through no fault of Recipient; (ii) is rightfully
received by Recipient from a third party without a duty of
confidentiality; (iii) is disclosed under operation of law; or
(iv) is independently developed by Recipient. Recipient agrees
that Discloser is entitled, in addition to any other remedies
available to it either at law or in equity, to injunctive
relief restraining Recipient from violation of
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the foregoing restrictions.
(b) Waivers and Amendments. No provision of this Agreement may be
amended or modified without the written consent of the Company
and HP. No provision of this Agreement may be waived unless
such waiver is in writing and then only to the extent
specifically set forth in such writing. A waiver with
reference to one event shall not be construed as continuing or
as a bar to or waiver of any right or remedy as to a
subsequent event.
(c) Governing Law. This Agreement and all actions arising out of
or in connection with this Agreement shall be governed by and
construed in accordance with the laws of the State of
Delaware, without regard to the conflicts of law provisions of
the State of Delaware or of any other state.
(d) Waiver of Jury Trial. HP and the Company each hereby
irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby, whether the claims
raised in such proceeding are based on contract, tort, or
otherwise.
(e) Survival. The representations and warranties made herein shall
survive the execution and delivery of this Agreement.
(f) Successors and Assigns. Subject to the restriction on transfer
described in Section 8(g) below, the rights and obligations of
the Company and HP shall be binding upon and benefit their
respective successors, assigned, heirs, administrators, and
transferees.
(g) Assignment by HP and the Company. Neither the Note nor any of
the rights, interests or obligations thereunder or hereunder
or under any other Transaction Document may be assigned, by
operation of law or otherwise, in whole or in part, by the
Company without the prior written consent of HP (except in the
case of the Company to a successor entity pursuant to a
migratory merger to another state).
(h) Entire Agreement. This Agreement, together with the Note and
the other Transaction Documents, constitute the full and
entire understanding and agreement between the parties with
regard to the subjects hereof and thereof.
(i) Notices. Any notice, request, or other communication required
or permitted hereunder shall be in writing and shall be deemed
to have
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been duly given on the date of delivery if personally
delivered, on the date of being faxed if sent by confirmed
fax, on the first business day after being sent if sent by
recognized overnight courier, and on the third business day
after being mailed if sent by registered or certified mail,
postage prepaid, addressed (i) if to HP to: Hewlett-Packard
Company, 333 Logue Avenue, MS32, Mountain View, CA 94043,
Attention: General Manager, fax number, (650)919-8013; with a
copy to Hewlett-Packard Company, 3000 Hanover Street, MS20BQ,
Palo Alto, CA 94304, Attention General Counsel, fax number
(650)857-4392, or (ii) if to the Company to: SmartServ Online,
Inc., One Station Place, Stamford, CT 06902, Attention: Chief
financial Officer and General Counsel, facsimile
(203)353-5962.
(j) Expenses. Each party shall bear and pay its own legal fees in
connection with the negotiation and execution of this
Agreement and the other Transaction Documents.
(k) Severability of this Agreement. If any provision of this
agreement shall be judicially determined to be invalid,
illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
(l) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of
which together shall be deemed to constitute one instrument.
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IN WITNESS WHEREOF, each of the parties has caused this Note Purchase
Agreement to be duly executed and delivered by its duly authorized
representative as of the date first written above.
HEWLETT-PACKARD COMPANY SMARTSERV ONLINE, INC.
By: /s/ Craig A. White
---------------------------
Name: Craig A. White By: /s/ Thomas W. Haller
--------------------------- ---------------------------
Title: Vice President & GM Name: Thomas W. Haller
--------------------------- ---------------------------
Title: Vice President, Chief
Accounting Officer
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SCHEDULE 1
Disclosure Schedule
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EXHIBIT A
OPINION OF COUNSEL
The Chrysler Building
405 Lexington Avenue, New York, NY 10174
(212) 704-6000 Fax (212) 704-6288
September 28, 2000
Hewlett-Packard Company
Financing & Complements Group
333 Logue Avenue
Mountain View, CA 94043
RE: SMARTSERV ONLINE, INC.
Ladies and Gentlemen:
We have acted as counsel to SmartServ Online, Inc., a Delaware
corporation (the "COMPANY"), in connection with (i) its issuance and sale to you
of that certain Convertible Secured U.S. $20,000,000 Promissory Note dated
September 28, 2000 (the "NOTE"), pursuant to that certain Note Purchase
Agreement between the Company and you dated as of September 28, 2000 (the
"PURCHASE AGREEMENT"), and that certain Registration Rights Agreement between
the Company and you dated as of September 28, 2000 (the "REGISTRATION RIGHTS
AGREEMENT"), all of which collectively are referred to herein as the
("TRANSACTION DOCUMENTS") and (ii) the transactions contemplated therein.
This opinion is being rendered to you in satisfaction of the
closing conditions set forth in Section 4(a)(i) of the Purchase Agreement.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings assigned to such terms in the Purchase Agreement or the
NYUCC (as hereinafter defined), as applicable. This opinion is intended solely
for the information of the addressee and no one else is entitled to rely upon
it. In any event, no part of this opinion may be incorporated, quoted or
otherwise referred to in any other document or communication or filed with or
otherwise furnished to any governmental authority or other person without our
prior written consent, except that our prior written consent is not needed to
furnish a copy of this opinion: (a) in connection with any proceedings relating
to the Transaction Documents or the enforcement thereof, (b) to your accountants
and counsel, (c) pursuant to judicial process or government order or
requirement, or (d) in the closing binders and other appropriate collections of
closing documents for the transaction.
In rendering the opinions expressed below, we have examined
originals or copies of (i) the Purchase Agreement and the other Transaction
Documents, (ii) the UCC financing statements and attachments executed and
delivered for filing with the Secretary of State of the State of Connecticut,
the Secretary of State of the State of New York and the County Clerk of New York
County (the "FINANCING STATEMENTS"), (iii) the Company's Amended and Restated
Certificate of Incorporation, as amended to date (the "CERTIFICATE OF
Incorporation"), as certified by the Secretary of State of the State of Delaware
on September 25, , 2000, (iv) the Company's By-laws, as amended (the "BY-LAWS"),
as certified by the Secretary of the Company on the date hereof (the Certificate
of Incorporation and the By-Laws, collectively, the ("GOVERNING DOCUMENTS"), (v)
resolutions adopted by the Company's Board of Directors in a Unanimous Written
Consent of the Board of Directors of the Company dated as of September 15, 2000,
authorizing execution and delivery of the Purchase Agreement, the Note and the
Registration Rights Agreement and consummation of the transactions contemplated
thereby, as certified by the Secretary of the Company on the date hereof (items
(iii), (iv) and (v) may be referred to collectively as the
<PAGE>
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September 28, 2000
"CORPORATE DOCUMENTS"), (vi) a certificate from Thomas W. Haller, Chief
Accounting Officer and Richard D. Kerschner, Secretary, to us (the "OFFICERS'
CERTIFICATE"), (vii) the agreements, indentures and other instruments to which
the Company is a party or by which it is bound, identified to us in the
Officers' Certificate as a material agreement (the "MATERIAL AGREEMENTS"), and
(viii) Court and governmental orders, writs, judgments and decrees specifically
directed to the Company and identified to us in the Officers' Certificate as
applicable to the Company (the "COURT ORDERS"). In rendering the opinion
regarding the valid existence and good standing of the Company in the State of
Delaware and the good standing of the Company in the State of Connecticut, each
contained in paragraph (1) below, we have relied solely upon good standing
certificates issued by the Secretary of State of the State of Delaware and the
Secretary of State of the State of Connecticut on September 18, 2000 and
September 25, 2000, respectively. In rendering the opinion in paragraph (2)
below, in addition to the representations of the Company in the Purchase
Agreement and telephone conversations with the transfer agent for the Common
Stock of the Company, we have relied solely upon resolutions of the Board of
Directors of the Company or excerpts from the minutes of meetings of the Board
of Directors of the Company furnished to us by officers of the Company and the
representations of such officers that the authorizations reflected therein
remained in full force and effect on the date of issuance of the shares
authorized for issuance therein, that the full purchase price or other
consideration payable as provided for in such resolutions and excerpts was
received by the Company, that anti-dilution adjustments made to determine the
number of shares of Common Stock issued upon the exercise or conversion of
warrants, options and the like were properly made and that no shares of Common
Stock have been issued since the Company's initial public offering as to which
we have not rendered an opinion to the Company's transfer agent.
We have also made such examination of applicable statutes and
regulations currently in effect as we deemed necessary under customary practice
to enable us to render this Opinion Letter. In such examination we have assumed
the genuineness of all signatures, the legal capacity of all individual
signatories, the factual accuracy of all documents submitted to us as originals
and the conformity with the original documents of all documents submitted to us
as copies whether or not certified. Except as expressly set forth in this
opinion, we have not undertaken any independent investigation, examination or
inquiry to confirm or determine the existence or absence of any facts, searched
any of the books, records or files of the Company, searched any internal file,
court file, public record or other information collection, or examined or
reviewed any communication, instrument, agreement, document, file, financial
statement, tax return, minute, record, lien, or other item. The Transaction
Documents, Financing Statements, Corporate Documents, Material Agreements, Court
Orders and UCC Searches (as hereinafter defined) are the only items of their
respective types reviewed by us in connection with or covered by this opinion.
Where reference is made in this opinion to matters within or
to our knowledge, or to facts or circumstances known to us or which have come to
our attention, such reference means the actual knowledge, without independent
review or verification, of those attorneys currently in our firm who have given
substantive attention to the preparation and negotiation of the Transaction
Documents. By actual knowledge, we mean the conscious awareness of information
about either fact or law (depending upon usage) of any such attorney without
undertaking any investigation to determine the existence or absence of any
facts, either within our firm or otherwise, recognizing that what is "known" at
one time may not be in the mind or may be forgotten altogether at another time.
For purposes of this opinion: (a) "NYUCC" shall mean Article 9
of the Uniform Commercial Code of the State of New York (excluding any other
statutes referenced therein and the effect thereof), as currently in effect
(which does not include the currently proposed Revised UCC Article 9); and (b)
"UCC" shall mean the Uniform Commercial Code (excluding any other statutes
referenced and the effect thereof), as currently in effect in any state or
district of the United States of America (which in the case of the UCC of any
state or district other than New Yorkwe have assumed (with your consent) is the
same as the NYUCC (aside from our Limited CNUCC Review as hereinafter defined),
as more fully described below).
<PAGE>
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September 28, 2000
We express no opinion respecting any Transaction Document, or
any right, power, privilege, remedy or interest intended or purported to be
created thereunder, insofar as any term or provision thereof (a) may be limited
(i) by applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other laws or judicial decisions affecting any rights, powers,
privileges, remedies and interests of creditors generally, (ii) by rules or
principles of equity or public policy affecting the enforcement of obligations
generally, whether at law, in equity or otherwise including (without limitation)
those pertaining to materiality, good faith, fair dealing, diligence,
reasonableness, unconscionability, impossibility of performance, redemption or
other cure, suretyship rights or defenses, waiver, laches, estoppel or judicial
deference, or (iii) by the exercise of the discretionary powers of any court or
other authority before which may be brought any proceeding seeking equitable or
other remedies, including, without limitation, specific performance, injunctive
relief, indemnification, subrogation and contribution, (b) conflicts or is
inconsistent with any term or provision of any other Transaction Document or any
UCC financing statement, or (c) purportedly grants to a party, or permits a
party to exercise or otherwise enforce or pursue, specific rights, powers,
privileges, remedies or interests in a manner impermissible under or otherwise
inconsistent with applicable laws or public policy from time to time in effect,
including (without limitation) agreements to agree, reformation, severability,
exculpations and indemnifications, penalties, waivers, releases, powers of
attorney and collateral disposition, election of remedies, non-judicial
remedies, "time is of the essence" clauses, and statutes of limitation waivers
or limit. Without limiting the foregoing, with respect to the opinion expressed
in paragraph no. (4) of this Opinion Letter, we express no opinion insofar as
the enforceability of the indemnification and contribution provisions in the
Registration Rights Agreement may be limited by federal and state securities
laws and the policies underlying such laws.
We have not examined title to any asset or property or any of
the books, records and files of the Company pertaining thereto, which may
include invoices, bills of sale and other documents that may evidence the
purchase, ownership or disposition of such assets or properties, nor have we
examined any item of inventory, equipment or other tangible assets or property
of the Company. We have assumed (with your consent) that each of the assets and
properties of the Company (i) exists, (ii) is owned and (except as otherwise
noted below where the relevant security interest may be perfected only by
possession of the item or corresponding document of title) possessed by the
Company, and to or in which it has good and sufficient title and has "rights"
within the meaning of Section 9-203 of the NYUCC (or any provision of any other
relevant UCC to the same effect) and (iii) is located where represented and
conforms to the descriptions in the Purchase Agreement.
We have commissioned searches respecting UCC financing
statement filings with the officials in the jurisdictions of Connecticut and New
York listed in Schedule A hereto through the indicated search dates respecting
the Company (collectively, the "UCC SEARCHES"). Each of the UCC Searches was
conducted by an independent firm not under our control or supervision. Our
opinion (if any) with respect to, or to the extent affected by, the existence or
absence of any financing statement, mortgage, security interest, lease, license,
lien, encumbrance, adverse claim, interest or other condition, defect or
impairment of title or ownership (each an "ADVERSE CONDITION") is based solely
upon the UCC Searches and the factual information contained in the Purchase
Agreement and the schedules thereto or the Officers' Certificate and the
schedules thereto. We have assumed (with your consent) that the names and
addresses of the parties used in the UCC Searches and the jurisdictions searched
were complete and correct, the UCC Searches are sufficient and would disclose no
additional Adverse Condition if updated through the date of this opinion, and
neither party to the Purchase Agreement has any knowledge (actual or
constructive) of any Adverse Condition, any other claim, counterclaim, defense
or other condition, defect or impairment of rights, or any action, suit,
litigation, arbitration, investigation or other proceeding not specifically
disclosed in the UCC Searches, the Purchase Agreement or the schedules thereto
or this opinion.
To the extent our opinions below relate to the creation,
existence, legality, validity, binding effect, enforceability, perfection or
priority of any security interest or other lien, or to any
<PAGE>
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September 28, 2000
Transaction Document insofar as it pertains to any security interest or other
lien, our opinions are limited to: (a) the security interests granted by the
Company under the Note (excluding (i) fixtures, (ii) general intangibles
consisting of the Company's equipment and real estate leases, and (iii)
copyrights, patents, trademarks and rights and interests therein) in which
security interests are governed by and perfectible under the NYUCC or any other
relevant UCC (subject to our assumptions respecting the UCCs of other states
below) by the filing of financing statements or by possession (collectively, the
"UCC COLLATERAL"); and (b) the UCC Proceeds (as hereinafter defined). We have
assumed (with your consent) that the Note reasonably identifies the intended UCC
Collateral. To the extent the UCC Collateral may be perfected under the NYUCC or
other relevant UCC by the filing of financing statements, we have assumed that
the Financing Statements (including attachments) (i) properly name the secured
party and give an address from which information concerning the security
interest may be obtained from such secured party, (ii) properly indicate the
type, or describe each of the items, of the intended UCC Collateral, (iii) are
sufficient in form and content and satisfy all formal requirements for filing
under the applicable UCC (other than the NYUCC and based solely on the Limited
CNUCC Review (as hereinafter defined) the Connecticut UCC), and (iv) as of the
date of this opinion will have been duly and timely filed with the Secretaries
of State of the States of Connecticut and New York and the County Clerk of New
York County of the State of New York in the form executed and delivered.
To the extent the security interests described in the Note
consist of proceeds, our opinions are limited to proceeds as defined in NYUCC
Section 9-306(1) from other UCC Collateral perfected as described above that are
either (i) identifiable cash proceeds in which you have permanently perfected
your security interests by possession within the applicable period of temporary
perfection, if any, and (ii) non-cash proceeds if perfectable solely by filing
in the jurisdictions in which the UCC financing statements have been filed and
such proceeds are sufficiently described in such statements (collectively, "UCC
PROCEEDS"). Please note, however, that "software" is not a recognized UCC type
of collateral under the current NYUCC, and interest and similar payments may not
be "proceeds" under the NYUCC or any other relevant UCC. Please also note there
are various provisions of applicable law under which security interests in the
UCC Collateral or UCC Proceeds (collectively, the "COLLATERAL") in the future
may lapse or otherwise become or be held unenforceable or junior to other
security interests (through the action of a pledgor, the operation of applicable
law or otherwise).
We express no opinion whatsoever with respect to: title to or
use of any asset or property; the applicable laws of any county, town,
municipality or other local or special political subdivision; or the absence of
any security interests or other liens or encumbrances (whether as part of our
opinions respecting the general enforceability of any Transaction Document, the
absence of required approvals or filings, conflicting agreements, indentures and
other instruments to which the Company is a party or by which the Company is
bound or otherwise), other than insofar as such liens may be subsumed within
Material Agreements and subject to our express opinion in paragraph no. 7(iii)
below. We express no opinion as to the legality, validity, binding effect or
enforceability of any provision of any Transaction Document that purports to
select or create any governing law, any jurisdiction or venue other than New
York or any U.S. Federal court jurisdiction or venue in any jurisdiction where
the requisite federal requirements have not been met. Except for our express
opinions in paragraph no. (9) of this Opinion Letter, we express no opinion
whatsoever with respect to the creation, existence, permissibility, legality,
validity, binding effect, enforceability, perfection or priority of any security
interest or other lien or encumbrance purported to be created or assumed under
any Transaction Document or the absence of any security interests or other liens
or encumbrances (whether as part of our opinions respecting the general
enforceability of the Transaction Documents, the absence of required approvals
or filings, conflicting Material Agreements or Court Orders, or otherwise). We
express no opinion whatsoever as to any matter assumed by us, any factual
information provided to us or any other matter except as expressly set forth
herein. We express no opinion whatsoever as to "Revised Article 9" of the UCC,
as approved by the American Law Institute and the National Conference of
Commissioners on Uniform State Laws, which has yet to be adopted as part of the
NYUCC. We note, however, that Revised Article
<PAGE>
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September 28, 2000
9 has been adopted in Delaware (among other places) and introduced this year in
the New York legislature. We express no opinion with regard to any applicable
Blue Sky laws.
We have assumed that: (i) Hewlett-Packard Company ("HP") (a)
is duly organized, validly existing and in good standing in its jurisdiction of
organization and is qualified to do business and licensed in each jurisdiction
necessary to its performance or enforcement of the Transaction Documents, (b)
has full corporate power and authority and has been duly authorized to execute,
deliver and perform its obligations under the Transaction Documents, (c) has
satisfied all legal requirements applicable to it to the extent necessary to
make the Transaction Documents enforceable by or against it, (d) is acting on
behalf of itself as principal and (e) is properly identified with its true,
complete and correct legal name, jurisdiction of organization and principal
place of business; (ii) the Transaction Documents have been duly executed and
delivered by HP and are the legal, valid and binding obligations of HP,
enforceable as written against HP in accordance with their respective terms and
provisions; (iii) each certificate, report or other document issued by any
governmental official, office or agency concerning any person, asset, property
or status is, and all public records (including their proper indexing and
filing) are, accurate, complete, authentic and current and remain so as of the
date hereof; (iv) there has not been any mutual mistake of fact,
misunderstanding, fraud, duress or undue influence, and the conduct of the
parties to the Transaction Documents has complied with any requirement of good
faith, fair dealing and conscionability; (v) there are no written or oral
agreements or understandings not known to us that would define, supplement or
qualify any term or provision of the Transaction Documents; (vi) no party will
in the future take any action (including a decision not to act) that would
result in any violation of applicable law or constitute any violation or default
under any other Transaction Document, Corporate Document, Material Agreement or
Court Order (1) if such action is not specifically required (including, without
limitation, any action that is prohibited or permissible) under any Transaction
Document, or (2) if more than one action can accomplish the same specific
requirement or result under a Transaction Document and at least one of them
would not result in any such violation or default; and (vii) the conditions
precedent to the effectiveness of the Transaction Documents have been duly
satisfied or waived. The assumptions and qualifications expressly stated in this
Opinion Letter are in addition to (and not in lieu or limitation of) any others
presumed by customary usage.
As to any facts relevant to the opinions expressed below, we
have relied upon certificates and written and/or oral representations of
officers of the Company (including the representations of the Company set forth
in the Transaction Documents) and public officials as well as the
representations made by HP in the Transaction Documents and the Disclosure
Schedule to the Note Purchase Agreement (the "DISCLOSURE SCHEDULE"). We have not
conducted any independent inquiry or investigation of any matter except as
otherwise expressly set forth herein.
Our opinions are limited to the date hereof, and we do not in
any event undertake to advise you of any facts or circumstances occurring or
coming to our attention or any changes in applicable law subsequent to the date
hereof. Whenever any opinion of ours refers to or includes the performance of
any obligation or the issuance of any instrument or certificate after the date
hereof, it is based on our assumption that: (i) all relevant facts and
circumstances will be the same at such future time as we believe them to be on
the date hereof (except as noted in the next clause (ii); (ii) each party will
have taken all future or further actions necessary or appropriate thereto; (iii)
no relevant liens, filings, approvals, permits or similar items will have
expired or otherwise adversely changed and (iv) no changes will have occurred in
the Purchase Agreement, any other Transaction Document, any Corporate Document,
Material Agreement or Court Order, or any other relevant documents, applicable
law, trade usage or course of dealings.
We call to your attention the fact that we are counsel
admitted to practice only in the State of New York, and we do not express any
opinion with respect to the applicable laws, or the effect or applicability of
the laws, of any jurisdiction other than those of the State of New York, the
General Corporation Law of the State of Delaware and the Federal laws of the
United States of
<PAGE>
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September 28, 2000
America. We note that the Transaction Documents purport to be governed by the
applicable laws of the State of Delaware and that UCC financing statements are
to be filed in jurisdictions other than New York. For the purposes of this
opinion, however, we have (i) briefly reviewed the text of Sections 9-401 and
9-402 of the Connecticut UCC as published in the online version of Westlaw as
posted on September 25, 2000, but we have not reviewed the annotations or
statutory history thereof or any regulatory, case law or other interpretation
thereof, or any description, section or other cross reference or other reference
thereon (the "LIMITED CNUCC REVIEW"), and (ii) we have assumed with your consent
(and without independent investigation, even though we have reason to believe it
may not be the case, except for the provisions reviewed in our Limited CNUCC
Review) that the applicable law of the State of Delaware (other than the DGCL)
and State of Connecticut is the same as the applicable laws of the State of New
York, including the NYUCC (other than the express UCC provisions subject to our
Limited CNUCC Review.
Based upon the foregoing and subject to the assumptions,
limitations, qualifications and exceptions stated herein, we are of the opinion
that as of the date hereof:
(1) The Company is a corporation incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own or lease its
properties (as such properties are known to us, based solely on the Officers'
Certificate) and to conduct its business as, to our knowledge (based solely on
the Officers' Certificate), it is presently conducted. The Company is duly
qualified or registered to transact business and is in good standing as a
foreign corporation in the State of Connecticut.
(2) The authorized capital stock of the Company is as set
forth in the Disclosure Schedule. Except as provided in the Disclosure Schedule,
there are (i) no outstanding warrants, options, conversion privileges,
preemptive rights or other rights or agreements known to us to purchase or
otherwise acquire or issue any equity securities of the Company from it pursuant
to any of the Governing Documents or any Material Agreement other than the
Transaction Documents, and (ii) to our knowledge no restrictions upon the voting
or transfer of any shares of capital stock of the Company pursuant to any of the
Governing Documents or any Material Agreement other than the Transaction
Documents.
(3) The Company has the requisite corporate power and
authority to execute, deliver and perform its obligations under the Transaction
Documents, to issue and sell the Note pursuant to the Purchase Agreement and to
perform its obligations thereunder, including the issuance and delivery of the
shares of capital stock of the Company that may be issued upon conversion of the
Note, in whole or in part (the "CONVERSION SHARES").
(4) Each of the Transaction Documents has been duly
authorized, executed and delivered by the Company, and is the legally valid and
binding obligation of the Company, enforceable against the Company in accordance
with its respective terms and provisions.
(5) The Board of Directors of the Company has duly authorized
the issuance of the Conversion Shares upon conversion of the Note, in whole or
in part, in accordance with the respective terms thereof, and such number of
Conversion Shares as may be required to be issued upon conversion of the Note
has been duly reserved for issuance by the Company. The Conversion Shares, when
issued, sold and delivered in accordance with the terms and fully paid for by
delivery to the Company of the consideration expressed in the Note, will be duly
and validly issued, fully paid and nonassessable, and not subject to any
preemptive rights under the Corporate Documents.
(6) Based upon the representations contained in Section 3 of
the Purchase Agreement, (i) the offer, sale, issuance and delivery to you of the
Note in accordance with the terms and provisions of the Note and Purchase
Agreement, constitute transactions exempt from the registration requirements of
the Securities Act of 1933, as amended, and (ii) assuming the conversion of the
Notes in accordance with their terms and provisions and no commission or other
<PAGE>
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September 28, 2000
remuneration is paid or given directly or indirectly for soliciting such
exchange, the Conversion Shares will have been issued and delivered to you in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended.
(7) The execution and delivery of each of the Transaction
Documents by the Company, the issuance and sale of the Note pursuant to the
Purchase Agreement and the performance by the Company of its obligations under
the Transaction Documents (including the issuance of the Conversion Shares upon
the conversion thereof), will not result in (i) the violation by the Company of
its Governing Documents, (ii) the violation by the Company of any law, rule or
regulation of the United States or the State of New York or the Delaware General
Corporation Law (other than federal securities laws, which are specifically
addressed elsewhere herein) or (iii) the breach by the Company of any of the
Material Agreements or Court Orders provided that we express no opinion with
respect to any real estate lease of the Company or statutory or common law
landlord's lien.
(8) Except for the filing of the Financing Statements, to our
knowledge, no consent, approval, authorization or order of, or filing with, any
governmental or public authority is required as a condition precedent to, or in
connection with, the due and valid execution and delivery of each of the
Transaction Documents by the Company, the issuance and sale of the Note pursuant
to the Purchase Agreement or the performance by the Company of the Transaction
Documents, except such consents, approvals, authorizations, orders or filings as
have been obtained or made or as are required under federal and state securities
laws; provided, that the opinion contained in this paragraph does not apply to
the applicability of the federal securities laws to the issuance of the
Conversion Securities (which is covered solely by paragraph no. (6) above).
The Financing Statements are in an appropriate form for filing
in the office of the Secretary of State of the State of New York and the County
Clerk of New York County, and based solely on our Limited CNUCC Review, the
Secretary of State of the State of Connecticut. Valid security interests have
been granted in the UCC Collateral pursuant to the Note, enforceable against the
Company in accordance with their respective terms and provisions; to the extent
such Collateral may be perfected under the NYUCC or other relevant UCC by the
filing of financing statements, then upon the due and timely filing of the
Financing Statements respecting the Company with the Secretary of State of the
State of New York and the County Clerk of New York County, and based solely on
our Limited CNUCC Review, the Secretary of State of the State of Connecticut,
those security interests will be perfected in such Collateral to the extent
described in those statements and located or deemed located in such
jurisdictions.
This opinion letter is limited to the matters expressly stated
herein, and no opinion is inferred or may be implied beyond the matters
expressly stated herein.
Very truly yours,
/s/PARKER CHAPIN LLP
PARKER CHAPIN LLP
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September 28, 2000
SCHEDULE A
Secretary of State of the State of Connecticut, through 9/21/2000
Secretary of State of the State of New York, through 9/26/2000
County Clerk of New York County, through 8/29/2000
