SECURITY AGREEMENT
This Security Agreement is made as of January 31, 2000 between
SmartServ Online, Inc., a Delaware corporation ("Pledgee"), and Robert W. Pearl
("Pledgor").
Recitals
Pursuant to Pledgor's purchase of Stock under the Restricted Stock
Purchase Agreement dated October 13, 1999 between Pledgor and Pledgee (the
"Purchase Agreement"), and Pledgor's election to pay for such Stock with his
promissory note (the "Note"), Pledgor has purchased 76,818 shares of Pledgee's
Common Stock (the "Shares") at a price of $0.75per share, for a total purchase
price of $57,613.50. The Note and the obligations thereunder are as set forth in
Exhibit B to the Purchase Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
the issuance of the Shares to Pledgor under the Purchase Agreement, Pledgor,
pursuant to the Connecticut Uniform Commercial Code, hereby pledges all of such
Shares (herein sometimes referred to as the "Collateral") represented by
certificate number ______, duly endorsed in blank or with executed stock powers,
and herewith delivers said certificate to the Pledgee, who shall hold said
certificate subject to the terms and conditions of this Security Agreement.
The pledged stock shall be held by the Pledgee as security for the
repayment of the Note, and the Pledgee shall not encumber or dispose of such
Shares except in accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities the Pledgor and the Pledgee shall cooperate and
execute such documents as are reasonable so as to provide for the substitution
of such Collateral and, upon such substitution, references to "Shares" in this
Security Agreement shall include the substituted shares of capital stock issued
to Pledgor as a result thereof.
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5. Options and Rights. In the event that, during the term of this
pledge, subscription options or other rights or options shall be issued in
connection with the pledged Shares, such rights and options shall be the
property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgee shall be immediately delivered to Pledgee, to be held under the terms
of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Restricted Stock Purchase Agreement or contained in this Security
Agreement for a period of 10 days after written notice thereof
from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have the
right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the Connecticut
Uniform Commercial Code.
7. Release of Collateral. There shall be released from this pledge a
portion of the pledged Shares held by Pledgee hereunder upon payment of the
principal of the Note. The number of the pledged Shares which shall be released
shall be that number of full Shares which bears the same proportion to the
initial number of Shares pledged hereunder as the payment of principal bears to
the initial full principal amount (or in the event that the initial principal
amount on the Note has been adjusted pursuant to Section 1 of that certain
Restricted Stock Purchase Agreement by and between the Company and Robert W.
Pearl, dated as of October 13, 1999 (the "Purchase Agreement"), the Adjusted
Principal Amount) of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment
of all indebtedness secured hereby, at which time the remaining pledged stock
shall be promptly delivered to Pledgor, subject to the provisions for prior
release of a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against him, or if a receiver is appointed for
the property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
12. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
13. Governing Law. This Security Agreement shall be interpreted and
governed under the laws of the State of Connecticut without regard to its
conflict of laws provisions.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR"
/s/ Robert W. Pearl
--------------------------
Robert W. Pearl
57 Vista Drive
Nanuet, New York 10954
"PLEDGEE"
SMARTSERV ONLINE, INC.,
a Delaware corporation
/s/ Sebastian E. Cassetta
--------------------------
Sebastian E. Cassetta
Chief Executive Officer
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