Document:

EXHIBIT 10.42

December 3, 2004

Dear Investor,

The purpose of this letter is to update you on SmartServ's  recent  activity and
to request  your  support for  SmartServ's  acquisition  of KPCCD,  the New York
City-based  distributor  of  international  prepaid  calling  cards.  The  KPCCD
acquisition is an important step for SmartServ and one that affects you directly
as described in detail below.

In our  September  investor  conference  call I updated  you on our  significant
progress towards launching  SmartServ's  UPHONIA(TM) brand mobile phone service.
UPHONIA(TM) will tap into the $6 Billion prepaid wireless market by bundling the
best in low  cost  prepaid  minute  plans  with  discounted  international  long
distance  and the latest in mobile  content.  We are making  excellent  progress
towards this Q1 mobile phone service launch:

o     We have signed an agreement with Sprint for our  UPHONIA(TM)  mobile phone
      service.  We will offer  prepaid  mobile phone service and handsets to the
      U.S.  market  under  the  UPHONIA(TM)  brand  using  the  enhanced  Sprint
      Nationwide PCS Network.

o     Our UPHONIA(TM)  mobile content  superstore  website is now live. The site
      leverages   SmartServ's   technology   infrastructure   and   our   nReach
      acquisition,  allowing  us to deliver  mobile  content to our  UPHONIA(TM)
      customers  and to attract  customers of other  carriers to our brand.  The
      site will be  expanded to sell and  support  our mobile  phone  service at
      launch.

o     We signed a letter of intent to acquire KPCCD, Inc.

o     We retained Jefferies & Co. as our new investment bankers.

o     We signed a letter of intent to acquire the Telco Group. The completion of
      this transaction is expected to add over $300 million in annual revenue.

The KPCCD  acquisition  is an important part of realizing  SmartServ's  business
model.  KPCCD will add as much as $2 million in monthly revenue based on KPCCD's
financial  information.  In addition,  KPCCD's network of hundreds of east coast
retail outlets will expand our UPHONIA(TM)  distribution  base.  KPCCD's prepaid
international  calling  card  business  will also help us realize a  competitive
advantage  by  bundling   international  calling  under  the  UPHONIA(TM)  brand
umbrella.

As I  communicated  in my September  conference  call, the  acquisition  process
requires that we complete an audit of KPCCD.  This affects you directly  because
this audit must be included in the registration  statement before your stock can
be registered.  We filed a registration  statement with the SEC in May, 2004 and
have exerted much time and effort to have this registration  statement  declared
effective by the SEC. Since it will take some time to obtain  audited  financial
statements  of KPCCD  your  stock  was not  registered  within  the time  period
required by your Registration  Rights  Agreement.  As a result we began to incur
penalties  that are payable to you and  accordingly we request that you accept a
one time settlement for these late filing penalties.  To put this situation into
perspective,  your  acceptance  of this  one  time  settlement  will  prevent  a
continued  accumulation of the subject penalty that would become  detrimental to
the financial well being of SmartServ.  This one time  settlement is critical to
the  KPCCD  acquisition.  Without  it  SmartServ  would  have  to  consider  the
abandonment of this acquisition  followed by an immediate  penalty payoff.  This
type of action would risk this quite favorable transaction and would also impair
SmartServ's credibility in the M&A marketplace for future growth transactions.

                                       1
<PAGE>

Negotiations  towards the KPCCD  acquisition  continue and while there can be no
assurance that we will complete the transaction,  the settlement  outlined below
provides this one time settlement for late filing  penalties (both currently and
subsequently incurred) and provides the time needed to complete the KPCCD audit.

THE SETTLEMENT

The Company will provide you with warrants that have an exercise  price of $2.50
and a two year term.  The warrant  that will be  allocated  to you based on your
proportionate  participation in the Offering of February 2004 will be _________.
We will move forward and use our best efforts to register  your stock as soon as
circumstances permit, as well as the shares of stock underlying these additional
warrants.

Please  sign this  letter  below and return it to me in the self  addressed  and
postage paid envelope provided. The extra copy of this letter is for your files.

PLEASE  CHECK THE BOX BELOW  THAT SAYS YOU AGREE  WITH THE  SETTLEMENT  AND YOUR
WARRANTS WILL BE SENT TO YOU WITHIN APPROXIMATELY TWO WEEKS.

If you have any questions  about this  settlement  please contact either Len von
Vital (SmartServ's CFO) at 610-397-0689 ext 203 or me at 610-397-0689 ext 202.

This settlement will be effective on December 15, 2004.

I would like to thank you again for your patience and support and I look forward
to  communicating  with you in the near future as we  continue to drive  towards
successful implementation of our business model.

Sincerely,

/s/ Robert Pons
--------------------------
    Robert Pons
    President & CEO
    SmartServ Online, Inc.

|_| I hereby agree to the settlement:
|_| do not agree to the settlement:

_______________________________ (Signature)

_______________________________ Investor Name (Printed)

_______________________________ Date

                                       2EXHIBIT 10.43

                             SMARTSERV ONLINE, INC.

                                 Date of Grant: December 20, 2004

To:   Robert M. Pons
      439 Williamson Road
      Gladwyne, Pennsylvania  19035

      You are hereby granted an option (the "Option") effective as of the date
hereof, to purchase 400,000 shares of Common Stock, par value $.01 per share
("Common Stock"), of SmartServ Online, Inc. (the "Company") at an exercise price
of $2.07 per share (the "Exercise Price"). This Option shall terminate and is
not exercisable after the expiration of ten years from the date of its grant,
except if terminated earlier as hereinafter provided (the "Expiration Date").

      Your Option shall vest, subject to accelerated vesting as provided below,
at the rate of 1/36 per month on the last day of each month in 36 consecutive
installments commencing December 31, 2004.

      In the event that a "change of control" (as hereinafter defined) of the
Company occurs at any time prior to the Expiration Date (as hereinafter
defined), your Option may, from and after such date, and notwithstanding the
second paragraph of this Option, be exercised for up to 100% of the total number
of shares then subject to the Option minus the number of shares previously
purchased upon exercise of the Option (as adjusted for any changes in the
outstanding Common Stock by reason of a stock dividend, stock split, combination
of shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation Committee deems in its sole
discretion to be similar circumstances, (a "Recapitalization")).

      A "Change of Control" shall be deemed to have occurred upon the happening
of any of the following events:(i) the shareholders of the Company approve a
merger or consolidation of the Company with any other entity, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent more than
fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or consummate the sale or disposition by
the Company of all or substantially all of the Company's assets (other than to a
subsidiary or subsidiaries) or (ii) any other event deemed to constitute a
"Change of Control" by the Board of Directors of the Company. notwithstanding
anything to the contrary herein, a "Change of Control" shall not include (i) the
acquisition of Telco Group and related companies and shares of Common Stock to
be issued with respect thereto, or (ii) any financing of the Telco Group
acquisition and securities to be issued with respect thereto.

<PAGE>

      In lieu of paying the Exercise Price in cash and/or upon exercise of the
Option, you may elect a "cashless exercise," in which event you will receive
upon exercise a reduced number of shares equal to (i) the number of shares that
would be issuable pursuant to this Option upon payment of the Exercise Price
minus (ii) the number of shares that have an aggregate Market Price (as defined
below) equal to the Exercise Price. In addition, you may elect to have the
Company's tax withholding obligations in connection with your exercise of the
option satisfied on a cashless basis, in which event the number of shares that
would otherwise be issuable pursuant to this Option shall be reduced by the
number of shares that have an aggregate Market Price (as defined below) equal to
the amount of tax required to be withheld (but not more than such amount).

      For purposes of this Option "Market Price" per share of Common Stock on
any date shall be: (i) if the Common Stock is listed or admitted for trading on
any national securities exchange, the last reported sales price as reported on
such national securities exchange; (ii) if the Common Stock is not listed or
admitted for trading on any national securities exchange, the last reported
closing bid price for the Common Stock as reported on the Nasdaq Stock Market's
National Market ("NNM") or Nasdaq Stock Market's Small Cap Market ("NSM") or a
similar service if NNM or NSM are not reporting such information; (iii) if the
Common Stock is not listed or admitted for trading on any national securities
exchange, NNM or NSM or a similar service, the last reported bid quotation for
the Common Stock as quoted by a market maker in the Common Stock (or if there is
more than one market maker, the bid quotation shall be obtained from two market
makers and the average of the highest bid quotation shall be the "Market
Price"); or (iv) if the Common Stock is not listed or admitted for trading on
any national securities exchange or NNM or quoted by NSM and there is no market
maker in the Common Stock, the fair market value of such shares as determined in
good faith by the Board of Directors of the Company.

      This Option may be exercised by you, in whole or in part (but not as to
less than a whole share), as to the vested portion of this Option only, at any
time prior to the Expiration Date, by the presentation of this Option, with the
purchase form attached duly executed, at the Company's office (or such office or
agency of the Company as it may designate in writing to you) specifying the
number of shares of Common Stock as to which the Option is being exercised, and
upon payment by you to the Company in cash or by certified check or bank draft,
in an amount equal to the Exercise Price times the number of shares or in lieu
thereof you may elect a cashless exercise as provided herein. No fractional
shares shall be issued or delivered upon exercise of this Option.

      This Option is exchangeable by you at your option at the office of the
Company for other Options of different denominations entitling you to purchase
in the aggregate the same number of shares of Common Stock as are purchasable
hereunder; and this Option may be divided or combined with other Options which
carry the same rights, in either case, upon presentation hereof at the office of
the Company together with a written notice, signed by you, specifying the names
and denominations in which new Options are to be issued, and the payment of any
transfer tax due in connection therewith.

      Your Option will, to the extent not previously exercised by you, terminate
one (1) year after the date on which your employment by the Company or Affiliate
of the Company is terminated, whether such termination is voluntary or not,
whether by reason of disability as

                                     - 2 -
<PAGE>

defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder, or death; provided, that, in the
event your employment with the Company is terminated due to a "Termination For
Cause" by the Company (as such term is defined in Section 9 of your Employment
Agreement, dated March 12, 2004) your option will expire immediately; and
provided further, that, in the event your employment with the Company is
terminated without "Good Reason" by you (as such term is defined in Section 10
of your Employment Agreement, dated March 12, 2004) your Option will terminate
thirty (30) days from the date of such termination and you may only exercise
this Option for the number of shares you had a right to purchase on the date
your employment terminated. In the event of termination of your employment upon
a "Termination Other Than For Cause" or "For Good Reason" (as such terms are
defined in Sections 9 and 10 of your Employment Agreement), after the date of
such termination you may exercise this Option for 100% of the number of shares
then subject to the Option minus the number of shares previously purchased upon
exercise of the Option as adjusted for a Recapitalization. If you are employed
by an Affiliate of the Company, your employment shall be deemed to have
terminated on the date your employer ceases to be an Affiliate of the Company,
unless you are on that date transferred to the Company or another Affiliate of
the Company. Your employment shall not be deemed to have terminated if you are
transferred from the Company to an Affiliate, or vice versa, or from one
Affiliate to another Affiliate. For purposes herein, an Affiliate of the Company
shall be defined as an entity controlled by or under common control with the
Company.

      If you die while employed by the Company or an Affiliate of the Company,
your legatee(s), distributee(s), executor(s) or administrator(s), as the case
may be, may, at any time within one (1) year after the date of your death,
exercise the Option as to any shares which you had a right to purchase and did
not purchase during your lifetime plus those shares that would have vested
within one (1) year thereafter. If your employment with the Company, or an
Affiliate is terminated by reason of your becoming disabled (within the meaning
of Section 22(e)(3) of the Code and the regulations thereunder), you or your
legal guardian or custodian may at any time within one (1) year after the date
of such termination, exercise the Option as to any shares which you had a right
to purchase and did not purchase prior to such termination plus those shares
that would have vested within one (1) year thereafter. Your legatee,
distributee, executor, administrator, guardian or custodian must present proof
of his authority satisfactory to the Company prior to being allowed to exercise
this Option.

      This Option is not transferable otherwise than by will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the Option Price has been paid in full pursuant to due
exercise of this Option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of the Company. The Company reserves the
right not to deliver to you the shares purchased by virtue of the exercise of
this Option during any period of time in which the Company deems, in its sole
discretion, that such delivery would violate a federal, state, local or
securities exchange rule, regulation or law.

      This Option constitutes the entire understanding between the Company and
you with respect to the subject matter hereof and no amendment, modification or
waiver of this Option, in whole or in part, shall be binding upon the Company
unless in writing and signed by an appropriate officer of the Company. This
Option and the performances of the parties hereunder

                                     - 3 -
<PAGE>

shall be construed in accordance with and governed by the laws of the State of
Pennsylvania without regard to principles of conflict of law.

      Please sign the copy of this Option and return it to the Company, thereby
indicating your understanding of and agreement with its terms and conditions.

                                             SMARTSERV ONLINE, INC.

                                             By: /s/ Paul J. Keeler
                                                --------------------------
                                                     Paul J. Keeler
                                                     Chairman of the Board

      I hereby acknowledge receipt of a copy of the foregoing Stock Option to
purchase 400,000 shares at an Exercise Price of $2.07 per share, and having read
such documents, hereby signify my understanding of, and my agreement with, their
terms and conditions.

/s/ Robert M. Pons                                   December 20, 2004
------------------                                   -----------------
    Robert M. Pons                                   (Date)

                                     - 4 -
<PAGE>

                                  PURCHASE FORM
                                 To Be Executed
                             Upon Exercise of Option

      The undersigned record holder of the within Option hereby irrevocably
elects to exercise the right to purchase _______ share of Common Stock evidenced
by the within Option, according to the terms and conditions thereof, and
herewith makes payment of the purchase price in full or, alternatively, elects a
cashless exercise in accordance with the terms of the Option as designated by
holder in writing to the Company.

      The undersigned requests that certificates for such shares shall be issued
in the name set forth below.

Dated:
                                ----------------------------------------
                                             Signature

                                ----------------------------------------
                                       Print Name of Signatory

                                ----------------------------------------
                                Name to whom certificates are to be issued if
                                different from above

                                Address ________________________________
                                        ________________________________

                                Social Security No. or other identifying
                                number _________________________________

If said number of shares shall not be all the shares purchasable under the
within Option, the undersigned requests that a new Option for the unexercised
portion shall be registered in the name of:

                                ----------------------------------------
                                          (Please Print)

                                Address ________________________________
                                        ________________________________

                                Social Security No. or other identifying
                                number _________________________________

                                Signature ______________________________

                                          ------------------------------
                                          Print Name of Signatory

                                     - 5 -

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