Exhibit 10.1
August 4, 2003
ACE*COMM Corporation
000 Xxxxxx Xxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
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 Xxxxx 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, 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:
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Trading Value
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Greater than $2.25 The Company shall have the right to
terminate the Merger Agreement
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Less than $0.88 Buyer shall have the right to terminate the
Merger Agreement
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"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
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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 Xxxxx'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, Xxxxx 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.
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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. Xxxxx and the
Company agree that this letter of intent, the Merger Agreement and all other
definitive
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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.
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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: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
Title: Chief Financial Officer
Confirmed and Agreed:
ACE*COMM CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President and
Chief Financial Officer
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