**PLANOF RECAPITALIZATION**

     Planfor Reverse Stock Split. Upon approval by shareholders in the manner specifiedin the Colorado Business Corporation Act, the Board of Directors(“Board”) of Mercari Communications Group, Ltd. (the“Company”) shall be authorized to effect a reverse stock split of alloutstanding shares of the Company’s $0.00001 par value common stock at thetime of approval. To effect the Plan of Recapitalization (“Plan”)hereby approved, the Board shall be and hereby is authorized to cause thefollowing steps to be taken.

     1.    Reverse Split Ratio. A reverse split of 1 for 900 (i.e., each 900 shares ofcommon stock outstanding before the reverse split would, after the EffectiveDate as defined below, represent one common share), subject to the provisionsset forth in paragraph 2 below (the “Reverse Share Split”).

** **    2.    Reverse Share Split. All shares of $0.00001 par value common stock of theCompany outstanding prior to the Record Date shall, from and after the date ofapproval of this Plan by shareholders (hereafter the “Effective Date”)be combined into a lesser number of shares determined by multiplying theoutstanding shares times a fraction, of which the numerator is one and thedenominator is 900 (for example, the fraction would be: 1/900 and 900 sharesoutstanding before the Effective Date would be reduced to 1 share after theEffective Date), provided, however, that the number of shares of common stock tobe outstanding shall be increased as follows: if, as a result of the ReverseShare Split, any shareholder who was a shareholder of the Company immediatelyprior to the Effective Date would otherwise beneficially own fewer than onehundred (100) shares of common stock of the Company as a result of the ReverseShare Split after the Effective Date, the number of shares to be issued to suchshareholder shall automatically be rounded up and increased so that suchshareholders shall hold one hundred (100) shares of Company common stockfollowing the reverse share split and, provided, further, that any fractionalshare which would otherwise be issued in accordance with the Reverse ShareSplit, shall automatically be rounded up to the next highest whole number ofshares (subject to the further rounding-up provisions set forth in the precedingproviso). Upon surrender of certificates representing shares of common stock ofthe Company outstanding prior to the Effective Date and upon receipt ofinformation confirming the identification of holders of any uncertificated stockof the Company, the Company shall issue, or cause to be issued, certificatesrepresenting the appropriate number of shares of the Company’s common stockto the holders of common stock of the Company.

* *    3.    Exchange of Share Certificates. On or after the Effective Date, each holder of acertificate or certificates, which prior thereto represented outstanding sharesof the Company’s common stock, will be given instructions to surrender thesame to the Company’s transfer agent which shall act as the exchange agentto effect the exchange of certificates and each such shareholder shall beentitled upon surrender to receive (on payment of exchange, handling anddelivery charges) in exchange therefore, a certificate representing one share ofthe Company’s common stock for each nine hundred (900) shares of commonstock previously owned and any additional shares issuable as a result of theupward roundings described in paragraph 2.

* *    4.    Old Certificates to Represent Post-Split Stock Until Exchanged. Until sosurrendered, each outstanding certificate, which, prior to the Effective Daterepresented shares of common stock, shall continue to represent the appropriatenumber of post-reverse split shares until such time as an exchange of sharecertificates shall have been effected.

*** *****    5.    Abandonment. The Board of Directors may abandon the Plan of Recapitalization inits discretion at any time prior to the Effective Date.

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