Exhibit 10.5

                                                                  Execution Copy

                              SEPARATION AGREEMENT

         SmartServ Online, Inc., a Delaware corporation (such entity, along with
its  successors  and assigns,  hereinafter  referred to as the  "Company"),  and
Sebastian  E.  Cassetta   (hereinafter   collectively   with  Employee's  heirs,
executors,  administrators,  successors and assigns, referred to as "Employee"),
mutually desire to enter into this Separation Agreement and agree that:

         Employee understands that this Separation Agreement is executed for the
benefit of the Company and each of its affiliates,  subsidiaries,  predecessors,
successors  and  assigns,  as well as each of the current and former  directors,
officers,  employees and agents of the Company and each such other  entity,  all
both  individually  and in  their  official  capacities  (such  individuals  and
entities collectively referred to in this Agreement as the "Representatives");

         Employee has consulted  with, and has been  represented by, an attorney
of his choice  relative to the  negotiation  and  execution  of this  Separation
Agreement;

         Employee  has  carefully   read  this   Separation   Agreement,   fully
understands  the terms and conditions set out herein and  voluntarily  agrees to
these terms and conditions.

         NOW  THEREFORE,  the  parties  hereto,  for  the  full  and  sufficient
consideration set forth below, hereby agree as follows:

         1.  Employee's  Separation.  The parties  acknowledge  that,  following
discussions  with each other and based upon the  provisions  of this  Agreement,
Employee's  last date of  employment  with the  Company was August 29, 2003 (the
"Separation  Date").  The parties  acknowledge and agree that Employee  resigned
from his  positions  as Chief  Executive  Officer  and a Director of the Company
effective as of the Separation  Date. The parties further  acknowledge and agree
that Employee  resigned from all other positions he held with the Company or any
of its  subsidiaries or other  businesses,  effective as of the Separation Date,
and will promptly take such further  actions as are necessary to accomplish such
resignations.  As of the Separation  Date,  Employee's  salary  ceased,  and any
entitlement  Employee has or might have under a Company  provided  benefit plan,
program or practice has terminated,  except as required by federal or state law,
or as otherwise described below.

         In consideration  for the execution by Employee and the Company of this
Separation  Agreement,  and for such other agreements and covenants  between the
parties as are expressed herein, the Company and Employee agree as follows:




<PAGE>

         2.  Consideration Provided to Employee by Company.
             ---------------------------------------------

             (a) Cancellation of Recourse Debt by Company.
                 ----------------------------------------

                 Employee is the maker of two promissory  notes made in favor of
the Company for which  Employee is personally  liable,  viz., a note dated March
20, 2001 in the original principal amount of $100,000,  and a note dated January
2,  2000  in the  original  principal  amount  of  $400,000  (collectively,  the
"Recourse Notes").

                 The indebtedness to the Company evidenced by the Recourse Notes
shall be  forgiven  by the  Company  in three  equal  annual  installments  such
forgiveness to take place on the  thirty-first  day of December,  2003, 2004 and
2005;  provided that Employee complies,  and continues to comply, with the terms
of this Separation Agreement.  Such forgiveness of debt shall be treated as such
by the Company and Employee shall be issued an IRS Form 1099 reflecting the debt
cancellation  for each of the three years,  such Form 1099 to be provided in the
ordinary course of business and in no event later than February 28th of the year
following the year of the debt  cancellation.  Employee  acknowledges and agrees
that   provided  that  the  Company   complies  with  the   provisions  of  this
subparagraph,  Employee shall be responsible  for any tax that may be imposed on
him by any taxing authority on account of the Company's forgiveness of his debt.

             (b) Restricted  Stock Rights.  On January 2, 2000, as consideration
for the  purchase  by  Employee of 568,239  restricted  shares of the  Company's
Common Stock (the "Stock"),  Employee gave the Company a Promissory  Note in the
original  principal amount of $457,496.86 (the "Stock Note") and,  pursuant to a
certain  "Security  Agreement"  dated  December 28,  1998,  pledged the Stock as
security for the  repayment  of amounts due under the Stock Note.  By its terms,
the Stock Note  evidences an obligation of Employee that is  non-recourse  as to
principal,   but  carries  an  interest  payment  that  constitutes  a  personal
obligation  of  Employee  currently  equal  to  $139,944.00.   All  indebtedness
evidenced by the Stock Note is due in full on December  29, 2003 (the  "Maturity
Date").  Under the terms of that certain  "Restricted Stock Purchase  Agreement"
between the Company and  Employee  dated  December  28,  1998,  Employee has the
right,  exercisable by not later than sixty (60) days after the Separation  Date
to cause the Company to purchase the Stock at Employee's original purchase price
(such right, the "Put Right"). As of the date hereof, however, Employee believes
he is not  in a  position  to  exercise  his  Put  Right  in a  timely  fashion.
Therefore,  the Company  hereby  agrees to extend both the Maturity  Date of the
Stock Note and Employee's deadline for exercising the Put Right to September 20,
2004.  The Company will  include the Stock in the  registration  statement  that
includes  the holders of  convertible  debentures  issued by the company in May,
June and  September  2003.  The Company  expects  that  statement to be filed by
December  31, 2003.  In the event  Employee  shall  exercise his Put Right on or
before September 20, 2004 as provided  herein,  the Company shall accept receipt
of the Stock in cancellation  of the Stock Note principal,  and will forgive and
discharge  Employee  of his  personal  obligation  for the  payment  of  accrued
interest.  Such  forgiveness of debt shall be treated as such by the Company and
Employee shall be issued an IRS Form 1099 reflecting the debt  cancellation  for
year in which the discharge  takes place.  With respect to this  subsection (b),
Employee acknowledges and agrees that:



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<PAGE>

                 (i) provided that the Company  complies with the  provisions of
this  subsection,  Employee shall be responsible for any tax that may be imposed
on him by any  taxing  authority  on  account of the  Company's  forgiveness  of
accrued interest;

                 (ii) the  restrictive  legend shall remain on Employee's  Stock
certificate  and shall apply to each share of Stock  represented  thereby unless
and until Employee shall pay the Company the sum of $0.75 per share; and

                 (iii) nothing in this  subsection  (b)  constitutes or shall be
construed  as a waiver by the Company of its rights  and/or  remedies  under the
Stock Note, the Security Agreement, or the Restricted Stock Purchase Agreement.

             (c) Unpaid Base Salary, Unreimbursed Expenses- On or before October
31, 2003, the Company will pay Employee the sum of $18,990.30  which  represents
all earned but unpaid base salary  (including unused vacation days), at the rate
of $125,000 per year,  for the period  extending  from July 15, 2003 through the
Separation Date, less applicable  withholding  taxes. The Company will reimburse
the Employee for any  reasonable and necessary  business  expenses for which the
Employee has requested reimbursement within 10 days of the Effective Date.

             (d) Stock Options.  Employee shall be entitled to retain the vested
options to  purchase  Company  Common  Stock  identified  in Schedule A attached
hereto. The options may be exercised by Employee at any time until expiration on
the first  anniversary of the Effective Date, and any stock option  agreement to
the contrary is hereby amended accordingly.

             (e)  Company  Release.  Company  releases  and  forever  discharges
Employee  of and from any and all  actions or causes of action,  suits,  claims,
charges, complaints, damages, liabilities,  obligations,  promises and contracts
(collectively,  "Claims")  whatsoever,  in law or equity, which the Company has,
may have or has, had against  Employee,  including all unknown,  undisclosed and
unanticipated losses, wrongs, injuries, debts, claims or damages to the Company,
or by reason of any matter,  cause or thing  whatsoever,  which Company had, now
has, or shall have as of the date of this Separation Agreement,  EXCEPT that the
release set forth herein specifically  excludes Claims based on, connected with,
arising  out of, or  otherwise  attributable  to (i) fraud,  theft,  intentional
misrepresentation,  or other intentional  misconduct by Employee causing harm to
the Company;  (ii) a breach by Employee of any covenant in or  obligation  under
this  Separation  Agreement;  and (iii) the Stock Note, the Security  Agreement,
and/or the Restricted Stock Purchase  Agreement,  as amended hereby. The Company
represents  that  it is not  currently  aware  of any  Claims  described  in the
foregoing clause 2(d)(i).

         3.  Consideration Provided to Company by Employee.
             ---------------------------------------------

             (a) The Company acknowledges that in consideration of the Company's
agreement  in Section  2(a) above to cancel and  forgive  certain  debts owed by
Employee to the  Company,  Employee  has waived and  released  (in Section  3(b)
below) claims for  compensation  owed to him by the Company  pursuant to Section
5(e) of his Employment  Agreement.  The Company acknowledges that if it breaches
its promises contained in Section 2(a),  Employee's release of such Claims shall
be null and void.



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<PAGE>

             (b) Release by Employee.  In exchange for the monies,  benefits and
promises  described in Section 2, hereof,  Employee  knowingly  and  voluntarily
releases  and forever  discharges  the  Company and each of its  Representatives
(collectively  referred to as the "Company  Releasees")  of and from any and all
actions  or causes of  action,  suits,  claims,  charges,  complaints,  damages,
liabilities,  obligations,  promises and contracts whatsoever, in law or equity,
which  Employee  now has,  may have or has,  had against the Company  Releasees,
including all unknown,  undisclosed and unanticipated losses, wrongs,  injuries,
debts,  claims or damages to Employee,  for,  upon,  or by reason of any matter,
cause or thing whatsoever, which Employee ever had, now has, or shall have as of
the date of this  Separation  Agreement  (provided  that the  release  set forth
herein  specifically  excludes  Employee's  right to  enforce  the terms of this
Separation Agreement), including, but not limited to:

                 (i) any and all matters arising out of Employee's employment by
the Company and the cessation of said employment, including, but not limited to,
any claims for wages salary, bonuses, commissions, incentive pay, stock or stock
options, benefits, severance pay, vacation pay; or other compensation;

                 (ii) any and all  charges,  claims or  causes  of action  under
federal  law  arising  out of  Employee's  employment  by the  Company  and  the
cessation  of said  employment,  including,  but not  limited  to,  any  alleged
violation of the National Labor Relations Act; any claims for  discrimination of
any kind under Title VII of the Civil Rights Act of 1964,  Sections 1981 through
1988 of Title 42 of the United States Code, and the Americans With  Disabilities
Act of 1990; any alleged  violation of the Employee  Retirement  Income Security
Act of 1974 (ERISA) (except for vested  benefits under any qualified  retirement
plan which are not affected by this Separation Agreement); any alleged violation
of the Fair Labor  Standards  Act;  any alleged  violation  of the  Occupational
Safety and Health Act; any alleged violation of the Consolidated  Omnibus Budget
Reconciliation  Act of 1985  (COBRA);  and any alleged  violation of the Federal
Family and Medical Leave Act;

                 (iii) any and all  charges,  claims  or causes of action  under
Connecticut  state law arising out of  Employee's  employment by the Company and
the  cessation of said  employment,  including,  but not limited to, any alleged
violation of Connecticut's  Equal Pay Law; Fair Employment  Practices Act; Human
Rights and Opportunities Law;  Occupational Safety and Health Laws; AIDS Testing
Law;  Reproductive  Hazards Law; the Smokers  Rights Law; the Family and Medical
Leave Law; the Wage and Hour Laws;  the  Political  Activities  provisions;  the
Voting,  Military Service Leave,  Jury and Witness Duty provisions;  the Smoking
and Drug Testing provisions;  the Whistleblower  Protection provisions;  and the
Workers' Compensation provisions;

                 (iv) any and all charges,  claims,  or causes of action arising
out of Employee's employment by the Company and the cessation of said employment
under the laws of any other state or under the laws of any  municipality  or any
other governmental authority;

                 (v) any and all other charges, claims or causes of action under
any other federal,  state or local  constitution,  law,  regulation,  ordinance,
public policy or common law not heretofore mentioned, including, but not limited
to, all  claims for breach of  contract  (whether  oral or  written,  express or
implied), fraud, negligence,  estoppel,  defamation,  breach of duty of loyalty,
breach of the covenant of good faith and fair  dealing,  infliction of emotional
distress and any other statutory or common law claim; and



                                       4
<PAGE>

             (c) Waiver of Rights and Claims  Under the Age  Discrimination  and
Employment Act of 1967. Since Employee is 40 years of age or older,  Employee is
being informed that Employee has or may have specific rights and/or claims under
the Age Discrimination in Employment Act of 1967 (ADEA) and Employee  represents
and agrees that:

                 (i) in consideration for the amounts and benefits  described in
Section  2 of this  Agreement,  which  Employee  is not  otherwise  entitled  to
receive,  Employee specifically and voluntarily waives any and all rights and/or
claims under the ADEA Employee has or may have against the Company  Releasees to
the  extent  such  rights  and/or  claims  arose  prior to or on the  date  this
Agreement was executed;

                 (ii) Employee  understands that rights or claims under the ADEA
which may arise  after the date this  Agreement  is  executed  are not waived by
Employee;

                 (iii)  Employee  is  advised  to  consider  the  terms  of this
Agreement  carefully  and  consult  with or seek  advice  from  an  attorney  of
Employee's choice or any other person of Employee's  choosing prior to executing
this Agreement;

                 (iv) Employee was informed and understands that Employee had up
to  twenty-one  (21) days,  if Employee  wished,  within which to consider  this
Agreement;

                 (v) Employee has carefully  read and fully  understands  all of
the provisions of this Agreement,  and Employee knowingly and voluntarily agrees
to all of the terms set forth in this Agreement;

                 (vi) in entering into this Agreement Employee is not relying on
any  representation,  promise or inducement made by the Company or its attorneys
with the exception of those promises described in this document.

         4. Employee Representations.  Employee acknowledges and represents that
Employee  does not have any current  charge  against the Company  Releasees  (as
defined  above)  pending  before any local,  state or federal  agency  regarding
Employee's  employment  or  otherwise.  Employee  acknowledges  and agrees that,
pursuant to Section 4 above,  Employee has waived any right to recovery  against
the Company Releasees in any agency proceedings.  Employee further  acknowledges
and  represents  that  Employee  does not have any  lawsuit  against the Company
Releasees  pending  before any local,  state or federal  court and that any such
proceedings are barred by Sections 3(b) and (c) above.

         5. Non-Disparagement Provisions. Employee and Company agree not to make
disparaging,  critical or otherwise detrimental comments to any person or entity
concerning,  or disclose  any  negative  information  about,  (i) the Company or
Employee or any of their Representatives or any of their past, present or future
activities;  (ii) the products,  services or programs provided or to be provided
by the Company;  (iii) the business  affairs or the  financial  condition of the
Company;  or (iv) the  circumstances  surrounding  Employee's  employment and/or
separation of employment from the Company.



                                       5
<PAGE>

         6. Cooperation on Litigation  Matters.  Employee shall, upon request by
the  Company  following  reasonable  notice,  appear  to  testify,  and  testify
truthfully,  at any deposition,  trial, mediation,  arbitration or other similar
proceeding in which the Company or any of its  Representatives  is a party.  The
Company shall use its reasonable efforts to schedule any such testimony so as to
minimize the  disruption  to  Employee's  other  responsibilities.  In addition,
Employee  shall  cooperate with the Company and each of its  Representatives  in
regard to any claims  made or  litigation  brought  against  any such  person or
entity, as well as in regard to  investigations  by any governmental  agency. As
part of this  cooperation,  Employee  will make himself  available on reasonable
notice to be interviewed by counsel for any such person or entity and to respond
in a reasonably prompt manner to all reasonable inquiries (including  telephonic
and written  inquiries)  for  information  or records in Employee's  possession,
custody  or  control  pertaining  to any such  matters.  Employee  will  provide
truthful  information  to counsel  for the  Company  and/or  its  representative
pursuant to this  paragraph.  Any  reasonable  travel,  lodging,  food and other
similar  out-of-pocket  expenses  incurred by Employee  in  connection  with the
provisions  of  this  Section  10  shall  be  reimbursed,  within  a  reasonable
time-frame, by the Company.

         7. Governing Law; Severability of Provisions. This Separation Agreement
shall be interpreted  under the laws of the State of Connecticut  without giving
effect to the  principles of conflicts of law of such state.  Its language shall
be construed as a whole,  according to its fair meaning, and not strictly for or
against  either  party.  Should any  provision of this  Separation  Agreement be
declared  illegal or  unenforceable  by any court of competent  jurisdiction and
cannot be modified to be  enforceable,  such provision shall be stricken and the
remaining  terms of this Agreement shall be enforced so as to give effect to the
intention of the parties to the maximum extent possible. However, if as a result
of any action  initiated  by  Employee,  any  portion of the  release and waiver
language  contained in Sections 4 through 6 is ruled to be unenforceable for any
reason, Employee shall return the consideration paid hereunder to the Company.

         8. Further Assurances. At any time and from time to time after the date
hereof, as and when requested by a party hereto and at such party's expense, the
other party shall  promptly  execute and  deliver,  or cause to be executed  and
delivered,  all such  documents and  instruments  and shall take, or cause to be
taken, all such further or other actions as such other party may reasonably deem
necessary or desirable to evidence and effectuate the transactions  contemplated
by this Agreement.

         9. No Admission  of  Liability.  Each party hereto  agrees that neither
this Separation Agreement nor the furnishing of the consideration relating to it
shall be deemed or  construed at any time for any purpose as an admission by any
of them or any of their respective  representatives of any liability or unlawful
or improper conduct of any kind.

         10. No Oral Amendments of Agreement.  This Separation Agreement may not
be  modified,  altered or changed  except upon express  written  consent of both
parties wherein specific reference is made to this Separation Agreement.



                                       6
<PAGE>

         11. Entire Agreement.  This Separation  Agreement sets forth the entire
agreement between the parties hereto,  and fully supersedes any prior agreements
or understandings entered into with Employee prior to the date hereof (which are
hereby  terminated  and of no further  force or effect).  In deciding to execute
this  Separation  Agreement,  Employee  has  not  relied  on  any  statement  or
representation  by  any of  the  parties  hereto  or  any  of  their  respective
representatives  that is not  set  forth  in  this  document.  In the  event  of
Employee's  death  during  the  period  of  this  Agreement's  performance,  all
obligations  of the  parties'  set  forth in  Section  2 and 3  above,  shall be
accelerated to the date of death.

         12.  Effective  Date of the  Separation  Agreement.  After signing this
Separation  Agreement,  Employee  may  revoke  it for a  period  of  seven  days
following  said  execution.   The  Agreement  shall  not  become   effective  or
enforceable  until this revocation  period has expired.  Such revocation must be
personally  delivered  to the  Company or mailed to the  Company and post marked
within seven days of execution of this Separation Agreement.

         13.  Notices.  Any Notices or other papers required to be sent pursuant
to the terms of this Agreement shall be sent by certified  mail,  return receipt
requested, to

        EMPLOYEE                            COMPANY:

Sebastian E. Cassetta                   SmartServ Online, Inc. (Att'n:  CEO)
415 Mine Hill Road                      2250 Butler Turnpike
Fairfield, CT  06824                    Suite 150
                                        Plymouth Meeting, PA 19462

with a copy to:                         with a copy to:

Robert B. Mitchell, Esq.                Martin L. McCann, Esq.
Pullman & Comley                        Zeldes, Needle & Cooper
850 Main Street                         1000 Lafayette Boulevard
Bridgeport, CT  06601-7006              Bridgeport, CT  06601-1740

         14. Counterparts;  Facsimile Signatures. This Agreement may be executed
in two or more  counterparts,  each of which shall be deemed an original but all
of which together shall constitute one and the same  instrument.  This Agreement
may be executed and delivered by facsimile.

                             [intentionally omitted]



                                       7
<PAGE>


THE PARTIES HAVE READ AND FULLY  CONSIDERED  THIS  SEPARATION  AGREEMENT AND ARE
MUTUALLY  DESIROUS  OF  ENTERING  INTO  SUCH  SEPARATION   AGREEMENT.   EMPLOYEE
UNDERSTANDS  THAT THIS  DOCUMENT  SETTLES,  BARS AND  WAIVES  ANY AND ALL CLAIMS
EMPLOYEE HAD OR MIGHT HAVE AGAINST THE COMPANY AND ITS REPRESENTATIVES. EMPLOYEE
AND COMPANY  ACKNOWLEDGE  THAT NEITHER IS RELYING ON ANY OTHER  REPRESENTATIONS,
WRITTEN OR ORAL, NOT SET FORTH IN THIS DOCUMENT.  HAVING ELECTED TO EXECUTE THIS
SEPARATION  AGREEMENT,  TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE
THEREBY THE SUMS AND BENEFITS SET FORTH ABOVE,  THE COMPANY AND EMPLOYEE  FREELY
AND  KNOWINGLY,  AND  AFTER  DUE  CONSIDERATION,   ENTER  INTO  THIS  SEPARATION
AGREEMENT.

         THEREFORE, the parties to this Separation Agreement now voluntarily and
knowingly execute this Agreement.

Date ________________________           ________________________________________
                                        Sebastian E. Cassetta



                                        SMARTSERV ONLINE, INC.

Date ________________________           By:_____________________________________
                                           Name:
                                           Title:





                                       8
<PAGE>


IF YOU DO NOT WISH TO USE THE 21-DAY PERIOD,
--------------------------------------------
PLEASE CAREFULLY REVIEW AND SIGN THIS DOCUMENT
----------------------------------------------

         The  undersigned   employee   acknowledges  that  I  was  informed  and
understand  that  I have  21  days  within  which  to  consider  the  Separation
Agreement,  have been advised of my right to consult with an attorney  regarding
such agreement and have considered  carefully every provision of such agreement,
and that after having engaged in those  actions,  I prefer to and have requested
that I enter into the Separation Agreement prior to the expiration of the 21-day
period.

Dated: _________________________             ______________________________
                                             (EMPLOYEE)

Dated: _________________________             ______________________________
                                             Witness:




                                       9
<PAGE>

                                   Schedule A
                         Employee's Vested Stock Options


                                             NO. OF
DATE/REFERENCE                               OPTIONS
--------------                               -------

10/8/98                                      33,333
                                              4,167
11/20/98                                     17,000
1999 Plan                                    15,000
5/30/00 - 2000 Plan                           8,000
11/03/00 - 2000 Plan                         50,000
                                        --------------
                                            127,500
                                        ==============



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