exv10w1



 


Exhibit 10.1



August 4, 2003


 


ACE*COMM Corporation

704 Quince Orchard Road

Gaithersburg, MD 20878


Ladies and Gentlemen:


Pursuant to our recent discussions, this letter of intent sets forth our mutual
understanding with respect to the terms upon which ACE*COMM Corporation (or a
subsidiary thereof) (“Buyer”) would acquire (the “Transaction”)
100% of the outstanding capital stock of i3 Mobile, Inc., a Delaware
corporation (the “Company”), from the stockholders of the Company.


Certain significant terms and conditions of the proposed Transaction are set
forth below:


1. Structure. The Buyer or a wholly owned subsidiary of Buyer would
acquire the Company through a merger.


2. Purchase Price. The aggregate merger consideration for 100% of the
stock of the Company to be acquired by Buyer pursuant to the Transaction shall
be a number of freely tradable shares of Buyer’s common stock, par value $.01
per share (the “Common Stock”), equal to (x) the Balance Sheet Cash
divided by (y) the Purchase Price Per Share (as defined below), subject
to equitable adjustment for any stock split, stock dividend, recapitalization
or similar event involving the capital stock of Buyer or the Company occurring
after the date hereof, and will be paid by Buyer to the Company’s stockholders
at the closing of the Transaction (the “Closing”).


"Balance Sheet Cash” shall be defined to mean cash on the
balance sheet of the Company as of the closing of the Transaction,
minus (y) the sum of (A) the Lease Amount, (B) the value of
certain stipulated discounted liabilities based upon a mutually
agreeable discount percentage and (C) the value of liabilities not
discounted pursuant to (B) (valued according to generally accepted
accounting principles) which have not been paid prior to the
Closing, in each case as estimated in good faith by the parties
prior to the date of the mailing of the Company’s definitive proxy
statement.


"Lease Amount” shall be defined to mean an amount equal to
$1.5 million with respect to the lease obligations in Stamford,
Connecticut (or such other lesser amount as the parties may agree),
minus the Lease Adjustment Amount.


"Lease Adjustment Amount” shall be defined to mean the
amount equal to (x) the number of shares of Common Stock
outstanding 20 trading days after the date of issuance of the
Company’s press release announcing the execution of this letter of
intent (the “Press Release Date”), multiplied by (y) the
product of (1) the difference obtained by subtracting
(A) the average closing price per share of Common Stock for the
five (5) trading prior to the Press Release Date from (B) the
average closing price per share of Common Stock for the 20 trading
days after the Press Release Date, if a positive number,


6







 



and (2)
0.75; provided that with respect to (y), if the
product of (1) and (2) exceeds 7.5% of the Market Price Per Share,
then such product shall equal the Market Price Per Share
multiplied by 7.5%.


"Market Price Per Share” shall be defined to mean the
average closing stock price per share of Common Stock for the 20
trading days prior to the date that is five days prior to the date
of the mailing of the Company’s definitive proxy statement.


"Purchase Price Per Share” shall be defined to mean the
price per share of Common Stock equal to (x) the Market Price Per
Share multiplied by (y) the Share Discount.


"Share Discount” shall be defined to mean .825.


3. Termination of Merger Agreement. The Merger Agreement (as
hereinafter defined) shall provide that in the event that the Common Stock
establishes a Trading Value (as hereinafter defined) during the period from the
date hereof until the mailing of the Company’s definitive proxy statement
greater to or less than, as the case may be, the amounts set forth below, then
either the Company or Buyer, as applicable, may terminate the Merger Agreement:



	 	 	 
	

	Trading Value	 	 
	

	Greater than $2.25	 	
The Company shall have the right to terminate the
Merger Agreement
	 	 	 
	

	Less than $0.88	 	
Buyer shall have the right to terminate the Merger
Agreement
	 	 	 
	






"Trading Value” shall mean for each day the closing price per share of
Common Stock for a period of 20 consecutive trading days.


4. Due Diligence. Consummation of the Transaction contemplated hereby
is contingent upon each of Buyer and the Company conducting, and being
satisfied in all respects with the results of, a due diligence investigation of
the other party. The purpose of such review is to confirm each party’s current
understandings with regard to the ownership, assets, operations and prospects
of the other, as applicable. Each party will commence its due diligence
investigation promptly following the date hereof. To assist each party in
conducting this review, each party will promptly provide, or cause to be
promptly provided, all information with respect to it as a party may reasonably
request, including all interim operating reports and financial statements when
available. In addition, each party will make available their respective
auditors, counsel, officers and directors and other representatives to discuss
with any aspect of the business of a party or the Transaction which such party
may deem relevant. As part of this review, each party and their respective
independent auditors may review the financial statements of the other party,
including any audit papers relating thereto. Each party acknowledges that
additional or modified terms may be proposed following such due diligence
review.


5. Additional Closing Conditions. Consummation of the Transaction is
also conditional upon satisfaction of each of the following:


(a) The preparation and execution of a merger agreement (the
“Merger Agreement”) by and between the Company and Buyer and
other mutually acceptable definitive


 







 



agreements with regard to the
Transaction, all of which will be drafted by Buyer’s counsel. The
Merger Agreement will include representations, warranties,
covenants, terms and conditions typical for merger transactions of
this nature between publicly traded corporations and as set forth
herein.


(b) The receipt of all necessary governmental, corporate and
third-party consents and approvals to the Transaction upon terms
and in a form satisfactory to each party.


(c) The absence of any material adverse change with respect to the
Company or the Buyer.


6. D&O Insurance. The Company shall purchase “tail coverage”
directors’ and officers’ insurance prior to the Closing. Buyer shall agree to
maintain from and after the Closing (i) appropriate customary indemnification
provisions in its charter and bylaws and (ii) directors’ and officers’
insurance.


7. Board of Directors. At Closing, Buyer shall appoint two additional
designees of the Company to the existing four-member Board of Directors of
Buyer on terms to be mutually agreed upon.


8. Expenses. Buyer and the Company will each separately bear their own
expenses incurred in connection with this letter of intent and the Transaction
contemplated hereby, whether or not the Transaction is consummated.


9. Registration Rights. Buyer shall file a registration statement for
resale on Form S-3 (or such other registration form that Buyer is eligible to
use if the Buyer is not eligible to use Form S-3) the shares of Common Stock
received by affiliates (and their respective transferees, successors and
assigns) of the Company within 30 days of the Closing and use its reasonable
best efforts to cause such registration statement to become effective as soon
as practicable thereafter. Such registration shall remain continuously
effective until the earlier of the (x) date on which the selling stockholders
may sell the shares of Common Stock received in the Transaction pursuant to
Rule 144(k) or (y) date on which all such shares of Common Stock have been sold
by the selling stockholders.


10. Public Announcements. Except as required by applicable law or
listing requirements, Buyer and the Company each agree that they will make no
public announcements relating to this letter of intent or the Transaction
contemplated hereby without the prior consent of the other as to both the
timing and the text of any such announcement (such consent not to be
unreasonably withheld or delayed). Notwithstanding the foregoing, each party
agrees that upon execution of this letter of intent a party hereto may issue a
press release publicly announcing the execution of this letter of intent (an
"Execution Announcement”). Prior to issuing an Execution Announcement,
the issuing party shall provide the other party a draft of the Execution
Announcement a reasonable time prior to the release of such Execution
Announcement for the other party’s review and comment.


11. Confidentiality. The parties hereto acknowledge that the
Confidentiality Agreement, dated May 30, 2003, is still in effect as it relates
to this letter of intent and the Transaction contemplated hereby.


12. Exclusivity. Immediately following the execution of this letter of
intent, the Company will (and will cause its representatives to) terminate any
existing discussions with third parties relating to any merger, sale of assets
or shares of capital stock, joint venture or other business combination
involving the Company. For a period of 21 days following the date hereof, the
Company will not and will not permit any stockholder, director, officer,
employee, investment banker or other representative of the Company to, directly
or indirectly, solicit or engage in discussions or negotiations with, or
provide any information to, or otherwise cooperate with, encourage or assist,
any third party regarding any such transaction. The


 







 


Company will immediately
advise Buyer of any inquiries or proposals received from third parties
regarding any such transaction.


13. Non-Binding Nature of Letter of Intent; Governing Law. This letter
of intent merely constitutes a statement of our mutual intention with respect
to the Transaction described herein. It does not contain all matters upon
which agreement must be reached in order for such Transaction to be consummated
and, therefore, does not constitute a binding commitment on the part of any
party hereto, and will not be construed to bind the Company or Buyer.
Notwithstanding the foregoing, the agreements and obligations of the parties
set forth in Sections 8, 10, 11, 12, 13 and 14 hereof represent legally binding
commitments of the parties in accordance with the terms of said Sections.
Buyer and the Company agree that this letter of intent, the Merger Agreement
and all other definitive agreements to be entered into in connection with the
Transaction will be governed by the laws of the State of Delaware.


14. Termination. Further discussions with respect to the Transaction
may be terminated (a) by any party if the Merger Agreement is not executed
within 21 days following the date hereof or (b) by agreement between the
Company and Buyer. No party will incur any liability for such termination;
provided, that any obligations under Sections 8, 10, 11, 12, 13 and 14 hereof
will survive such termination. To the extent any party hereto intends to
abandon negotiations, such party will immediately notify the other parties
hereto in writing.


 







 


This letter of intent will remain open for acceptance by the method set forth
in the next sentence until August 5, 2003, after which, if not accepted, it
will automatically and without any further action by the Company, be deemed
withdrawn. If the foregoing correctly sets forth our intentions, kindly so
indicate by signing in the space indicated below and returning a copy to the
undersigned on or before August 5, 2003, whereupon we will promptly continue
our due diligence investigation and the negotiation of a definitive Merger
Agreement.



	 	 	 
	 	Very truly yours,
	 
	 	i3 MOBILE, INC
	 
	 	By:


Name

Title:	
/s/  Edward S. Fletcher



Edward S. Fletcher

CFO





Confirmed and Agreed:

ACE*COMM CORPORATION



	 	 	 	 	 
	By:	 	 	 	/s/ Steven R. Delmar
	 	 	 	 	


	 	 	
Name:
	 	Steven R. Delmar
	 	 	
Title:
	 	Sr. Vice President and

Chief Financial Officer