September 15, 2005
Mr. Charles Hoover
Cashwize, Inc.
1801 Williams St.,
Suite 101
Denver, CO 80218
RE: Merger of Cashwize, Inc.
with LitFunding Corp.
Dear Mr. Hoover:
This letter of intent ("LOI") outlines the proposal by which
LitFunding Corp., a Nevada corporation with a place of business at
3700 Pecos Mcleod, Suite 100, Las Vegas, Nevada 89121 ("LFDG")
desires to merge with Cashwize, Inc., a South Dakota corporation
with a principal place of business at 1801 Williams St., Suite 101,
Denver, Colorado 80218 ("Cashwize"), whereby LFDG will issue shares
of its preferred stock in exchange for 100% of the issued and
outstanding shares of Cashwize. If accepted by Cashwize, this
letter will constitute an expression of the parties mutual
intention to consummate this transaction on the terms and subject
to the conditions described below.
This letter constitutes a legally binding agreement in favor of
the parties, it being understood that any rights and obligations
which the parties may have, to each other, will be superceded by a
definitive merger agreement described below, into which this letter
and all prior discussions shall merge.
LFDG is currently engaged in the non-recourse cash advance
industry, advancing funds to law firms. LFDG's common stock has
been registered under Section 12(g) of the Securities Exchange Act
of 1934 ("Exchange Act") and is listed for trading on the National
Association of Securities Dealers ("NASD") Over-the-Counter
Bulletin Board ("OTC:BB") under the symbol "LFDG".
Parties; Structure . The transaction will take the
form of a statutory tri-party reverse triangular merger (the
"Merger") between LFDG Subsidiary Corp. (LSC) and Cashwize.. At the
Effective Time and upon the terms and subject to the conditions of
the Merger Agreement, Cashwize will be merged with LSC, whereby LSC
will cease to exist and Cashwize shall remain as the surviving
corporation and will operate as a new wholly-owned subsidiary of
LFDG.
Consideration; Stock
Issuance . LFDG will issue approximately Five Million
(5,000,000) shares of convertible preferred stock to Cashwize
shareholders in exchange for 100% of the issued and outstanding
stock of Cashwize. The rights and preferences of the preferred
stock shall be set forth in a Certificate of Designation attached
to the definitive merger agreement.
Management Agreement .
Concurrent with the Closing of the Merger, Cashwize will enter into
a Management Agreement with LFDG whereby Cashwize will pay LFDG a
management fee of $225,000 to assist Cashwize with the business
development of Cashwize and assist Cashwize in the potential
"Spin-Off" of Cashwize to the stockholders of LFDG wherein LFDG
stockholders will receive 15% of the Cashwize shares and the
existing stockholders of Cashwize will receive 85% of the shares of
Cashwize upon conversion of the LFDG preferred stock. Fifty
Thousand Dollars ($50,000) of the management fee is being paid
concurrent with the signing of this letter of intent and shall be
non-refundable pursuant to paragraph 20 below.
Spin-Off . Pursuant to
the terms of the Management Agreement, Cashwize shall make the
election to be spun off from LFDG within 12 months from the Closing
Date, which election shall be made at the decision of a majority of
the holders of the LFDG preferred stock received in the merger.
Cashwize shall provide LFDG 45 days prior notice of its intention
to be spun off from LFDG. If the election to be spun off is not
made by Cashwize during the 12 month period commencing on the
Closing Date, then the shares of LFDG preferred stock shall
automatically convert into shares of LFDG common stock.
Advanced Funds . In the
event the preferred holders make the decision to spin-off Cashwize,
any funds advanced by LFDG to Cashwize shall be repaid pursuant to
the terms of a 12 month promissory note, with interest accruing at
8% per annum, commencing from the date of the actual spin-off.
Cost of the Spin-Off .
In the event the preferred shareholders make the election to
spin-off Cashwize, Cashwize has agreed to bear the costs associated
with the preparation and filing of a registration statement on Form
SB-2 for the registration of the distribution shares, in addition
to the costs associated with obtaining a cusip number for its
certificates, setting up transfer agent, and obtaining a market
maker to sponsor Cashwize for trading on the Over-the-Counter
Bulletin Board.
Merger: Preparation of Merger
Agreement . The parties would proceed in good faith to
negotiate the terms of a mutually acceptable merger agreement (the
"Merger Agreement") containing such covenants, representations,
warranties and conditions as are customary in transactions of this
type, but including the matters described herein. The parties will
use their best efforts to complete the Merger Agreement and have
the Merger Agreement approved by the parties Board of Directors by
October 7, 2005.
Tax Consequences . The
merger will be structured for Federal income tax purposes to
qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1
