SmartServ Announces Commencement of Equity Private Placement.

Business Editors/High-Tech Writers

PLYMOUTH MEETING, Pa.--(BUSINESS WIRE)--Jan. 30, 2004

SmartServ Online, Inc. (OTC:SSRV) announced today that it has commenced a private offering of between $3 million and $6 million of investment units consisting of shares of SmartServ Series A Convertible Preferred Stock and warrants to purchase Common Stock. The Units will be privately placed with accredited investors pursuant to Regulation D under the Securities Act of 1933, as amended. SmartServ expects to use the net proceeds of this offering for repayment of outstanding obligations, completion of strategic acquisitions and general working capital.

The purchase price per Unit will be equal to the lesser of (A) ten times the lesser of (i) 80% of the average of the closing bid prices of the Common Stock over the ten trading days immediately preceding the date of each closing of the offering or (ii) 80% of the closing bid price of the Common Stock on the day immediately prior to the date of each closing or (B) with respect to closings after the first closing, the purchase price per Unit at the first closing. The exercise price of the shares underlying the Warrants will be 150% of the lesser of (i) the average of the closing bid prices of the Common Stock over the ten trading days preceding the date of each closing, or (ii) the closing bid price of the Common Stock on the day prior the date of each closing. SmartServ has agreed to register the shares underlying the components of the units.

The Series A Convertible Preferred Stock issued as part of the Units will be entitled to certain dividends payable in cash or stock. Holders of Series A Preferred are entitled to preemptive rights to participate in future private offerings of SmartServ's securities, subject to customary exceptions.

In addition to the Units sold in the offering, a further $3 million of Units will be issued to current holders of SmartServ's convertible debentures totaling $3 million, in order to convert such amount of debentures into Units.

When issued, the Units and underlying securities issued in this offering and conversion of debentures will not be registered under the Securities Act of 1933, as amended, or state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an applicable exemption from the registration requirements of the ...