FINANCIAL ADVISORY SERVICES AGREEMENT

 

                                                                   EXHIBIT 10.47

 

 

[logo] JEFFERIES

                                                       Jefferies & Company, Inc.

                                                  520 Madison Avenue, 12th Floor

                                                        New York, New York 10022

 

      Investment Banking

 

 

                                                                October 28, 2004

 

 

SMARTSERV ONLINE, INC.

2250 Butler Pike, Suite 150

Plymouth Meeting, PA 19462

 

Attention:   Mr. Robert M. Pons

             President / Chief Executive Officer

 

Ladies and Gentlemen:

 

      1. Retention. This letter agreement (the "Agreement") confirms that

SmartServ Online, Inc., a Delaware corporation (the "Company"), has engaged

Jefferies & Company, Inc. ("Jefferies") to act as financial advisor to the

Company in connection with providing general advisory services with respect to

corporate finance and capital raising activities, merger and acquisition

transactions and other related endeavors. These services include, but are not

limited to, Jefferies (a) acting as exclusive financial advisor to the Company

in connection with a potential purchase of Telco Group Inc. (the "Target") or

any of the Target's material assets through any structure or form of transaction

including, but not limited to, a direct or indirect acquisition, purchase of

assets, merger, consolidation, restructuring, transfer of securities or any

similar or related transaction (the "Acquisition"); (b) if requested by the

Company, rendering Jefferies' written opinion to the Board of Directors of the

Company as to whether the consideration to be paid in connection with the

proposed Acquisition is fair to the Company, from a financial point of view (the

"Fairness Opinion"); and (c) acting as exclusive financial advisor to the

Company in connection with the provision of any financing (the "Financing")

associated with any such Acquisition. The transactions contemplated in Sections

1(a), 1(b) and 1(c) above shall each individually and collectively be referred

to herein as the "Transaction." Additionally, Jefferies agrees not to represent

any other parties in regard to an acquisition or financing of the Target (a)

without the consent of the Company, which consent shall not be unreasonably

withheld, or (b) until the later of the termination of this Agreement or nine

months from the date of this Agreement.

 

      2. Information on the Company and the Target. In connection with

Jefferies' activities hereunder, the Company will furnish Jefferies and its

counsel with all materials and information regarding the business and financial

condition of the Company and the Target which the Company believes are relevant

to the Transaction or which Jefferies requests (all such information so

furnished being the "Information") and, if deemed reasonably necessary by

Jefferies and the Company in connection with any Transaction,

 

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SMARTSERV ONLINE, INC.

October 28, 2004

Page 2

 

with an information memorandum with respect to the Company, the Target and such

Transaction, as applicable (such memorandum, including all exhibits, supplements

or amendments thereto, the "Offering Materials"). The Company recognizes and

confirms that Jefferies: (a) will use and rely solely on the Information, the

Offering Materials, information obtained from the Target (the "Target

Information") and on information available from generally recognized public

sources in performing the services contemplated by this Agreement without having

independently verified the same; (b) is authorized as the Company's exclusive

financial advisor, to transmit to any prospective participant in a Transaction a

copy or copies of the Information, Offering Materials, Target Information and

other legal documentation necessary or advisable in connection with the

transactions contemplated hereby and (c) does not assume responsibility for the

accuracy or completeness of the Information, Offering Materials, the Target

Information or such other information.

 

      3. Use of Name and Advice. The Company agrees that any reference to

Jefferies in any release, communication, or other material is subject to

Jefferies' prior written approval, which may be given or withheld in its sole

discretion and which will expire immediately upon Jefferies' resignation or the

termination of this Agreement. No statements made or advice rendered by

Jefferies in connection with the services performed by Jefferies pursuant to

this Agreement will be quoted by, nor will any such statements or advice be

referred to, in any communication, whether written or oral, prepared, issued or

transmitted, directly or indirectly, by the Company without the prior written

authorization of Jefferies, which may be given or withheld in its sole

discretion, except to the extent required by law (in which case the appropriate

party shall so advise Jefferies in writing prior to such use and shall consult

with Jefferies with respect to the form and timing of disclosure).

 

      4. Accuracy of the Information and Offering Materials. The Company agrees

that neither the Information nor the Offering Materials will contain any untrue

statement of a material fact or omit to state a material fact necessary to make

the statements therein, in light of the circumstances under which they were

made, not misleading. The Company shall advise Jefferies promptly of the

occurrence of any event or any other change prior to the closing of a

Transaction which could reasonably be expected to result in the Information or

the Offering Materials containing any untrue statement of a material fact or

omitting to state any material fact necessary to make the statements contained

therein, in light of the circumstances under which they were made, not

misleading.

 

      5. Compensation. In payment for services rendered and to be rendered

hereunder by Jefferies with respect to a Transaction, the Company agrees to pay

to Jefferies as follows:

 

            (a) Upon execution of this Agreement, the Company shall pay to

Jefferies a nonrefundable engagement fee of 50,000 shares of the Company's

common stock.

 

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SMARTSERV ONLINE, INC.

October 28, 2004

Page 3

 

            (b) In addition, (i) upon execution of an exclusivity agreement,

letter of intent or indication of interest relating to an Acquisition, the

Company shall pay to Jefferies 75,000 shares of the Company's common stock; and

(ii) upon execution of a definitive agreement relating to an Acquisition, the

Company shall pay to Jefferies 75,000 shares of the Company's common stock.

 

            (c) In addition, if the Company requests a Fairness Opinion, the

Company shall pay to Jefferies a non-refundable fee of 250,000 shares of the

Company's common stock upon the earlier of the written or oral delivery of the

Fairness Opinion by Jefferies to the Company.

 

            (d) In addition, upon consummation of an Acquisition, the Company

shall pay to Jefferies a cash fee of $1,250,000, against which all fees paid

pursuant to Sections 5(a), 5(b) and 5(c) hereof shall be credited. For purposes

of this Section 5(d), common stock of the Company transferred pursuant to

Sections 5(a), 5(b) and 5(c) shall be valued at $1.00 per share.

 

            (e) In addition, the Company shall pay to Jefferies fees to be

mutually agreed upon by the parties upon the raising of any Financing in

connection with a Transaction, regardless of the source of such Financing and

whether or not such Financing is sourced, negotiated, structured, issued, placed

or sold by Jefferies. If the Company and Jefferies cannot agree on the fees to

be paid pursuant to this Section 5(e), the Company shall pay to Jefferies cash

fees of (x) 5% of the value of any equity provided and (y) 2.25% of the value of

any debt provided, upon the receipt of such Financing and assuming Jefferies is

involved with such Financings. If Jefferies is not involved in the Financing,

the Company shall pay to Jefferies cash fees of 3.0% and 1.5% of any equity and

debt Financing, respectively.

 

            (f) In addition to the fees to be paid to Jefferies as provided in

Sections 5(a), 5(b), 5(c), 5(d) and 5(e) hereof, without regard to whether any

Transaction is consummated or this Agreement is terminated, the Company shall

pay to, or on behalf of, Jefferies, promptly as billed, all reasonable fees,

disbursements and out-of-pocket expenses incurred by Jefferies in connection

with its services to be rendered hereunder (including, without limitation, the

fees and disbursements of Jefferies' counsel, travel and lodging expenses, word

processing charges, messenger and duplicating services, facsimile expenses and

other customary expenditures).

 

            (g) Jefferies may resign and the Company may terminate Jefferies'

services at any time after nine months from the date of this Agreement, each by

giving prior written notice to the other. If Jefferies resigns or the Company

terminates Jefferies' services for any reason, Jefferies and its counsel shall

be entitled to receive all of the amounts due pursuant to Sections 5(a), 5(b),

5(c), 5(d), 5(e) and 5(f) hereof up to and including the effective date of such

termination or resignation, as the case may be. If Jefferies' services hereunder

are terminated by the Company and the Company completes the Acquisition of

Target contemplated herein within nine months of such termination,

 

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SMARTSERV ONLINE, INC.

October 28, 2004

Page 4

 

then the Company shall pay Jefferies concurrently with the closing of such

transaction in cash the fees as outlined in Sections 5(d) and 5(e).

 

            (h) All fees payable to Jefferies pursuant to this Section 5 shall

be payable via wire transfer of cash or transfer of securities, as the case may

be, to an account designated by Jefferies. Except as set forth in Section 5(d),

no fee paid or payable to Jefferies or any of its affiliates sha