W3 GROUP, INC.
444 MADISON AVENUE, SUITE 1800
NEW YORK, NY 10022
212-750-7878/212-750-2326 FAX
January 19, 2005
Shane Rodgers, CEO
Signal Companies Inc.
9229 West Sunset Blvd
Suite 830
Los Angeles, CA 90069
Re: Proposed Acquisition of Cristina
Acquisition Corp. (hereinafter "CAC", or
"Acquiree") from
Signal Companies, Inc. (hereinafter "Signal") by W3 Group,
Inc. (hereinafter
"W3")
Dear Mr. Rodgers:
It is the understanding of both parties
that the following proposed acquisition
is contingent upon an agreement being
reached between Signal and Ameristar Group
Incorporated (a shareholder and creditor of
"W3 Group") to provide investment
banking services to Signal. It is also
understood and agreed upon by W3, Signal
and CAC that the proposed transaction will
result in the increase the
capitalization of the resulting combined
company and that controlling interest
following the reverse merger will remain in
the hands of Signal shareholders or
their designees.
This Letter sets forth the principal terms
of the understanding between W3 and
Acquiree concerning the exchange of all the
issued and outstanding capital stock
of Acquiree for the issuance of shares of
W3's Common Stock in such amount as
shall equal approximately eighty-three
(83%) percent of the total issued and
outstanding shares of W3 immediately
following completion of such exchange (the
"Exchange Shares"), as set forth herein.
This Letter is not a
binding contract,
except as to provisions that are expressly
stated to be binding upon the parties
hereto, and is subject to execution of a
formal Acquisition Agreement (the
"Agreement"). It is agreed that the
Agreement shall embody the terms and
conditions set forth herein, as well as
such additional terms and provisions as
are usual and customary to agreements of
the nature contemplated hereby.
It is hereby understood and acknowledged
that certain shareholders will, on
behalf of the Company, pay a "finders fee"
of six hundred thousand shares of
their stock, post-reverse split, to the
finders as identified by Signal
Companies.
The parties understand and agree as
follows:
1. Acquiree is a corporation formed under
the laws of Delaware.
CAC has been
formed as wholly owned subsidiary of
Signal. However, it is
agreed that Signal
may designated such other parties as it
deems in its best interest to receive
the Exchange Shares, including shareholders
of Signal or their designees. The
parties who shall at the Closing be
entitled to receive the Exchange Shares,
together with the number of Exchange Shares
to be owned by each, are listed on
Schedule A annexed hereto. Not later than the Closing Date
Signal shall deliver
to W3 and its counsel all required
documentation in connection with any such
distribution or allocation of the Exchange
Shares as shall be required by law or
reasonably requested by W3, its counsel or
its transfer agent in connection with
the issuance of the Exchange Shares.
Except as mutually
agreed, Acquiree shall
have no other class of capital stock issued
or authorized and there shall exist
no other agreements, options, rights or
instruments which would require or
permit Acquiree to issue any additional
securities of any class to any person or
entity. None of Acquiree's securities are
qualified to trade in any public
market either in the United States or
elsewhere.
<PAGE>
January 19, 2005
Shane Rodgers
Page 2.
2. W3 was duly incorporated on February 12,
1988 under the laws of the state of
Colorado and changed its domicile to
Delaware on May 7, 2003. W3 has authorized
capital stock of 40,000,000 shares of
Common Stock, $0.0001 par value, of which
23,264,145 shares are presently issued and
outstanding. W3 also has authorized
10,000,000 shares of Preferred Stock, which
may be issued in series by order of
the Board of Directors. As of the date
hereof, W3 has issued and outstanding the
following securities in addition to its
common stock: 1,499,060 shares of Series
B, non-dividend bearing, Convertible
Preferred Stock. Each
Series B share is
convertible into one-half share of Common
Stock. W3 does not presently have any
other class of capital stock issued or
authorized.
3. The parties desire and intend to enter
into a transaction whereby W3 will
acquire 100% of the issued and outstanding
securities of Acquiree in exchange
for the Exchange Shares. At the Closing of
the transaction contemplated herein,
W3 will cause to be issued to the
designated parties of Acquiree (the
"Shareholders") the Exchange Shares in
exchange for all of the issued and
outstanding shares of Acquiree.
The Exchange Shares
shall be issued to the
Shareholders in conformity to the
provisions of Schedule A, which may be amended
by CAC and Signal at any time up to 72
hours before the Closing Date, provided
that any such amendment thereto shall not
require the registration of the
Exchange Shares under Section 5 of The
Securities Act of 1933, as amended. If
actual certificates are not available W3
shall deliver irrevocable instructions
to its transfer agent to issue the Exchange
Shares.
4. The Exchange Shares will be subject to
satisfaction of the registration
requirements under the Securities Act of
1933, as amended (the "Act") and
confirmation that the transaction does not
otherwise violate the Act or the laws
of any state having jurisdiction over
either Acquiree or W3.
The Exchange
Shares will be "restricted securities" as
that term is defined under the Act and
appropriate legends will be placed upon the
certificates representing the
Exchange Shares and appropriate stop
transfer instructions shall be placed
against them on the transfer books of W3.
Shareholders shall
each execute and
deliver to W3 an Investment Letter for the
Exchange Shares in form and content
satisfactory to Counsel for W3.
5. This exchange is intended to qualify as
a tax-free reorganization under
Section 368 of the Internal Revenue Code.
6. Up
