BALANCED LIVING, INC.
6375 South Highland Drive, Suite D
Salt Lake City, Utah 84121
May 30, 2000
Wizzard Software Corporation
424 Gold Way
Pittsburgh, Pennsylvania 15213
Attention: Christopher J. Spencer, President
Re: Letter of Intent for the acquisition by Balanced
Living, Inc., a Nevada corporation ("Balanced
Living"), of 100% of the outstanding securities of
Wizzard Software Corporation, a Delaware corporation
("Wizzard")
Dear Mr. Spencer:
This letter will confirm the following general terms upon which
the Board of Directors of Balanced Living will adopt an Agreement and Plan of
Reorganization (the "Reorganization ") whereby Balanced Living will exchange
shares of its one mill ($0.001) par value common voting stock for up to 100%
of the outstanding stock of Wizzard.
We propose that a Reorganization approved by our respective Boards
of Directors be negotiated and executed and which will set forth in detail our
intent, upon the following general terms and conditions:
A. The Reorganization
At or prior to the closing of the Reorganization (the "Closing"),
Balanced Living will:
(i) Acquire and/or cancel all outstanding warrants, stock
options or other contractual commitments granting the
holders thereof the right to acquire any authorized but
unissued securities of Balanced Living.
(ii) Satisfy and pay all liabilities of any type or nature
whatsoever, and shall have no liabilities, material assets
or subsidiaries, and all of its expenses incident to the
Reorganization or otherwise shall have been paid or
satisfied.
(iii) Issue an aggregate of 100,000 pre-split shares of its common
stock to an attorney (Leonard W. Burningham, Esq. and
certain of his employees) for non-capital raising services
rendered and to be rendered to Balanced Living prior to the
completion of the Reorganization, and the preparation and
filing of an S-8 Registration Statement with the Commission
registering these shares. These shares shall be valued at
$10,000, which is the approximate value of the services to
be rendered, without taking into consideration any value for
the Reorganization, because of the substantial conditions
precedent to its completion and the uncertainty of its
Closing; and issue an aggregate of 2,500,000 shares of its
common stock to Jenson Services, Inc., a Utah corporation
and financial consulting firm ("Jenson Services") in
consideration of $25,000.
(iv) Effect a 1.65 for one forward split of its outstanding
common stock, increasing the pre-Reorganization Balanced
Living outstanding shares from 3,467,849 to 5,721,950
shares, more or less (depending upon rounding resulting
from the forward split), and taking into account the shares
and rights to shares to be canceled in A(v) and the shares
to be issued as provided in A(iii).
(v) Cancel 4,025,000 shares of its outstanding stock
representing a portion of the shares of Balanced Living's
common stock that are owned by its principal stockholder in
consideration of the Agreement.
(vi) Balanced Living shall conduct a private placement (the
"Private Offering") of post-split shares of its restricted
securities (common stock) at a price of between $2.50 and
$4.00 per share, to raise a minimum of $5,000,000 (the
"Minimum Offering") and a maximum of $9,000,000 (the
"Maximum Offering"), with a condition precedent to the
Reorganization being the completion of the Minimum Offering.
The Private Offering shall be offered and sold by a
registered broker/dealer, to be selected by Balanced Living
and Wizzard, that will be paid a sales commission of
approximately 8% of the offering proceeds and other related
expenses, subject to receipt of the Minimum Offering. The
confidential private offering memorandum (the "Offering
Memorandum") describing the Private Offering shall be
prepared by Balanced Living's counsel, Leonard W.
Burningham, Esq.,with the assistance of Wizzard's counsel,
and shall primarily describe an investment opportunity in
Wizzard, as adjusted to take into account the
Reorganization. Wizzard will cooperate with Balanced Living
in connection with the Private Offering. Wizzard and
Balanced Living shall each indemnify and hold the other,
their agents and counsel, harmless from and against any
liability of any type or nature whatsoever relating to any
misstatements of material information or omissions thereof
regarding the other that are contained in the Offering
Memorandum. The securities sold in the Private Offering
shall be sold, subject to lock-up/leak-out provisions, and
shall be subsequently registered with the Securities and
Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"),
for public resale, as shall be described in the Offering
Memorandum. If the Minimum Offering is completed, but the
Reorganization is not consummated, then the proceeds of the
Private Offering shall be returned to investors, without any
deduction therefrom or interest thereon. The reorganized
Balanced Living agrees to use its "best efforts" to (i)
register all of the securities purchased in the Private
Offering by filing a registration statement within forty-
five (45) days after the Closing, and (ii) cause such
registration statement to be declared effective within one
hundred fifty (150) days after Closing. The shares
registered hereby shall be subject to lock-up/leak-out
provisions which shall allow the investors in the Private
Offering to sell or otherwise transfer ten (10%) percent of
their shares purchased in each three-month period after the
registration statement is declared effective, such amounts
to be cumulative. All lock-up/leak-out restrictions shall
expire upon the later of eighteen (18) months after the
Closing or one year after the registration statement is
declared effective.
(vii) Acquire all of the outstanding shares of common stock of
Wizzard that are owned by its current principal stockholders
(the "Principal Stockholders"), amounting to approximately
13,090,000 shares of Wizzard's total outstanding shares of
13,635,938 or approximately 96% of Wizzard's outstanding
securities (not including shares issued upon conversion of a
certain Convertible Promissory Note dated May 2, 2000 [if
converted pursuant to its terms at the Closing]), by the
exchange for 13,446,950 shares of restricted common stock of
Balanced Living or 1.027268907 shares of Balanced Living for
each share of Wizard.
(viii) Use its best efforts to acquire the remaining
outstanding securities of Wizzard on similar terms and
conditions, and to the extent required or necessary by
applicable law, and subject to lock-up/leak-out
provisions accompanying the offer: (1) file a
registration statement with the Commission under the
Securities Act covering the share exchange proposal
with the remaining Wizzard stockholders on or before
one year from the date of the initial Closing of the
Reorganization; (2) seek a "no action" letter from the
Commission to allow the reorganized Balanced Living to
file such a registration statement earlier than one
year, and within approximately six months; or (3) seek
a "no action" letter from the Commission allowing the
reorganized Balanced Living to effect the exchange
with Wizzard's remaining stockholders in a transaction
exempt from the registration provisions of Section 5
of the Securities Act, whichever can assist in
accomplishing the exchange with Wizzard's remaining
stockholders as soon as is practicable.
(ix) Designate and elect the present directors and executive
officers of Wizzard to the same positions with Balanced
Living, at which time the current directors and executive
officers of Balanced Living will resign.
(x) Following the Reorganization, and assuming the sale of an
aggregate of 2,800,000 shares at a price of $2.50 in the
Private Offering for an aggregate of $7,000,000 (1,750,000
shares, if the Private Offering is at $4.00 per share),
there would then be 17,943,900 outstanding shares of
Balanced Living's common stock (16,893,900 shares, if the
Private Offering is at $4.00 per share), approximately 9% of
which would then be owned by the former stockholders of
Balanced Living (and approximately 10%, if the Private
Offering is at $4.00 per share); approximately 16% of which
would then be owned by the Private Offering participants
(approximately 10%, if the Private Offering is at $4.00 per
share); and approximately 75% of which would then be owned
by the Principal Stockholders of Wizzard (approximately 80%,
if the Private Offering is at $4.00 per share). Wizzard
would then be a 96% subsidiary of Balanced Living, with 3%
of the outstanding shares of Wizzard remaining in the hands
of Wizzard's prior stockholders. These computations do not
include any shares that may be issued in connection with the
Convertible Promissory Note dated May 2, 2000.
(xi) On Closing, Balanced Living's name will be changed to
"Wizzard Software Corporation."
(xii) To the extent applicable, the acquisition is intended to be
a tax-free reorganization under Section 368(a)(1)(B) of the
Internal Revenue Code. No opinion in this respect is given
by Balanced Living or its legal counsel.
B. The Reorganization.
The Reorganization shall include, contain or provide:
(i) Representations and Warranties. Customary and usual
representations and warranties by the parties.
(ii) Opinions of Counsel. For the delivery at Closing of
favorable opinions of counsel for the corporate parties with
respect to customary and usual matters of law covered under
similar agreements and parties.
(iii) Financial and Other Information.
(a) The examination and inspection of the books and
records of each of the parties prior to Closing; the
delivery no later than at Closing of customary
schedules listing each party's material contracts,
real and personal properties, pending, threatened and
contemplated legal proceedings and employees; assets
and liabilities, including contingencies and
commitments, and such other information as is
customarily provided or as may be reasonably
requested;
(b) Each of the parties will provide audited financial
statements, consisting of a balance sheet and a
related statement of income for the period then ended
which fairly present the financial condition of each
as of their respective dates and for the periods
involved, and such statements shall be prepared in
accordance with generally accepted accounting
principles consistently applied, on Closing, for such
period or periods as shall be set forth in the
Reorganization; and
(c) The financial statements of Balanced Living shall
reflect no liabilities and no assets prior to the
Closing, with all expenses related to the
Reorganization having been paid.
(iv) Expenses. It is understood and agreed that the completion
of the Reorganization will require the joint efforts of many
parties, including those of Jenson Services, Inc. ("Jenson
Services") and Corporate Capital Management, LLC ("CCM"),
two financial consulting firms. In the event of the
termination of the Reorganization or the failure to satisfy
the conditions precedent to the completion of the
Reorganization, Balanced Living, Wizzard, Jenson Services
and CCM will each bear and pay their respective costs and,
except as herein provided, no party shall have any liability
to any other for any such expenses. Generally, it is
anticipated that all Reorganization related expenses of
Balanced Living shall be paid by Jenson Services, with the
exception of those related to the legal services to be
rendered in relation to the securities matters as outlined
in A(vi) above; Wizzard will be responsible for all services
and costs of its counsel, Nischwitz, Pembridge & Chriszt
Co., LPA, respecting the Reorganization, the Offering
Memorandum information respecting Wizzard or otherwise;
Wizzard will be responsible for payment of $50,000 and CCM
shall be responsible for all other costs billed by the firm
of Robson Ferber Frost Chan & Essner, LLP, which will
involve the preparation of the Reorganization documents and
exhibits and the review of all documents related to the
Reorganization. All expenses for matters to occur following
the Closing shall be the responsibility of the reorganized
Balanced Living, including the costs and expenses related to
any required registration statements to be filed with the
Commission. In consideration of the expenses of Jenson
Services and CCM, and other payments to be made, Jenson
Services and CCM intend to negotiate with a small number of
current stockholders of Balanced Living, to obtain options
to acquire a portion of the Balanced Living shares presently
held by such Balanced Living stockholders or to participate
in the proceeds from the sale of certain Balanced Living
shares so owned.
(v) Conduct of Business of Balanced Living and Wizzard Pending
Closing. Until consummation or termination of the
Reorganization, and except as outlined herein, Balanced
Living and Wizzard will conduct business only in the
ordinary course and none of the assets of Balanced Living or
Wizzard shall be sold or disposed of except in the ordinary
course of business or with the written consent of the other
party. Balanced Living consent to the recission offer
currently being made by Wizzard.
(vi) Balanced Living and Wizzard will use their respective "best
efforts" to complete the Reorganization in a timely manner,
but not later than 120 days from the date of execution of
this letter.
(vii) Other.
(a) Balanced Living and Wizzard shall have received all
permits, authorizations, regulatory approvals and
third party consents necessary for the consummation of
the Reorganization, and all applicable legal
requirements shall have been satisfied;
(b) The Reorganization shall be executed as soon as
practicable;
(c) The Boards of Directors of Balanced Living and Wizzard
shall have approved, and persons owning not less than
80% of the outstanding voting securities of Wizzard
shall have accepted the Reorganization;
(d) To the extent required by applicable law, the approval
of the Balanced Living and Wizzard stockholders shall
have been obtained;
(e) All notices or other information deemed required or
necessary to be given to any party shall be deemed
given when actually received if sent by mail or
courier or when received by facsimile transmission
provided that a confirmation copy is sent by mail at
the following addresses:
Balanced Living: 6375 South Highland Drive, Suite D
Salt Lake City, Utah 84121
With a copy
to: Leonard W. Burningham, Esq
Suite 205, 455 E. 500 S.
Salt Lake City, Utah 84111
Facsimile: 801-355-7126
Wizzard: 424 Gold Way
Pittsburgh, Pennsylvania 15213
Facsimile: 412-621-2625
With a copy
to: James R. Chriszt, Esq.
Timothy Pembridge, Esq.
Cort Shoe Building, Fourth Floor
1265 West 6th Street
Cleveland, Ohio 44113-1326
Facsimile: 216-861-8180
and in all cases with copies to:
Corporate Capital Management
2000 South Plymouth Road, Suite 210
Minnetonka, Minnesota 55305
Attn: Mark Savage
Facsimile: (612) 512-9958
Robson Ferber Frost Chan & Essner, LLP.
530 Fifth Avenue
New York, New York 10036-5101
Attn: David I. Ferber, Esq.
Facsimile No. (212) 944-7630
(f) Any finder's fee or similar payments with respect to
the Reorganization shall be paid by the party agreeing
to such fees or payments.
(g) The Reorganization shall contain customary and usual
indemnification and hold harmless provisions;
(h) The transactions which are contemplated herein, to the
extent permitted, shall be governed by and construed
in accordance with the laws of the State of Delaware.
(i) Each party and its agents, attorneys and
representatives shall have full and free access to the
properties, books and records of the other party (the
confidentiality of which the investigating party
agrees to retain) for purposes of conducting due
diligence investigations;
(j) The substance of any public announcement with respect
to this Letter of Intent or the Reorganization, other
than notices required by law, shall be approved in
advance by all parties or their duly authorized
representatives;
(k) The current Board of Directors and officers of
Balanced Living shall resign at closing, and be
replaced by those persons designated by Wizzard; and
(l) Balanced Living will change its name to "Wizzard
Software Corporation."
Except as provided in paragraphs B(iv), B(v) and B(vii)(i) and
(j), this letter merely evidences the intention of the parties hereto and is
not intended to be legally binding; it may be terminated by either party
without qualification.
C. Counterparts. This Letter of Intent may be executed in any
number of counterparts each of which shall be deemed to be an original
instrument, and all of such counterparts together shall constitute but one
agreement.
If the foregoing correctly sets forth the substance of the
understanding of the parties, please execute this letter in duplicate, retain
one copy for your records, and return one to Leonard W. Burningham, at his
address, which is Suite 405 Hermes Building, 455 East 500 South, Salt Lake
City, Utah 84111; or by facsimile to 801-355-7126.
Very truly yours,
BALANCED LIVING, INC.
By/S/Jeannene Barham
President
Accepted this 30th day of May,
2000.
WIZZARD SOFTWARE CORPORATION
By/s/Christopher J. Spencer
Christopher J. Spencer, President
JENSON SERVICES, INC.
By/s/Duane S. Jenson
Duane S. Jenson, President
CORPORATE CAPITAL MANAGEMENT, LLC
By/s/Mark Savage
Mark Savage, President
