EVANS SYSTEMS INC, PRE 14A, 2000-03-02

EVANS SYSTEMS INC
PRE 14A, 2000-03-02
PETROLEUM BULK STATIONS & TERMINALS

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SCHEDULE 14A

Information Required in Proxy Statement

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials By Rule 14A-6(e)(2))
[ ] Soliciting Material Pursuant
[ ] to Rule 14a-11(c) or Rule 14a-12

Evans Systems, Inc.
--------------------------------------------------
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) AND 0-11.

A. Title of each class of securities to which transaction
applied:

B. Aggregate number of securities to which transaction applies:

C. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):

D. Proposed maximum aggregate value of transaction:

E. Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

A. Amount Previously Paid:

B. Form, Schedule or Registration Statement No.:

C. Filing Party:

D. Date Filed:
<PAGE>
EVANS SYSTEMS, INC.

___________, 2000

Dear Shareholders:

You are cordially invited to attend the Annual Meeting (the "Meeting")
of Shareholders of Evans Systems, Inc. (the "Company"), which will be held at
the Best Western Matagorda Hotel located at 407 Seventh Street, Bay City, Texas,
on Monday, April 10, 2000, at 10:00 a.m., local time.

At this important Meeting, shareholders will be asked, among other
things, to consider and vote upon (i) a proposal to approve the sale of
substantially all of the assets of the Company relating to its Texas-based
petroleum marketing and convenience store operations (the "Sale of Assets") to
TSC Services, Inc. ("TSC") and (ii) a proposed transaction whereby I-Net
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the
Company, will be merged with and into I-Net Holdings, Inc., a Delaware
corporation (the "Merger"). Upon consummation of the Merger, the outstanding
shares of the common stock of I-Net will be converted into approximately
15,000,000 shares of the Company's common stock (which is subject to
adjustment), the outstanding options to purchase shares of I-Net common stock
will entitle the holders thereof to purchase approximately 4,000,000 additional
shares of the Company's common stock and the outstanding warrants to purchase
shares of I-Net common stock will entitle the holders thereof to purchase up to
3,000,000 additional shares of the Company's common stock. The number of shares
of the Company's common stock to be issued in connection with the Merger is
subject to adjustment in accordance with the terms of the Merger Agreement. In
connection with the Merger, shareholders will also be asked to vote upon a
proposed increase in the number of authorized shares of the Company's common
stock, a change in the Company's name and a new stock option plan. The
consummation of the Sale of Assets by the Company, and the sale of equity by
I-Net for gross proceeds of at least $15,000,000 are conditions precedent to the
consummation of the Merger.

The transactions to be considered at the Meeting involve a matter of
great significance to the Company's shareholders because if the Sale of Assets
and the Merger are approved and consummated, the Company's historical operations
and its business focus will change. In addition, the exchange of shares with the
stockholders of I-Net and the election of I-Net's nominees to the Company's
Board of Directors will result in a change of control of the Company.
Information about the Meeting, including a listing and discussion of the matters
on which shareholders will act, may be found in the enclosed Notice of Annual
Meeting and Proxy Statement.

The Company's Board of Directors has carefully considered and has
unanimously approved the terms and conditions of the Sale of Assets and the
Merger, believes that these proposals are fair to and in the best interests of
the shareholders and recommends that the shareholders vote for these proposals.

We hope that you will be able to attend the Meeting. However, whether
or not you anticipate attending in person, I urge you to complete, sign and
return the enclosed proxy card promptly to ensure that your shares will be
represented at the Meeting. If you do attend, you will, of course, be entitled
to vote in person, and if you vote in person such vote will nullify your proxy.

Sincerely,

Jerriel L. Evans, Sr.
Chairman of the Board, President and
Chief Executive Officer

<PAGE>

EVANS SYSTEMS, INC.
POST OFFICE BOX 2480
BAY CITY, TEXAS 77404-2480

------------------

Notice of Annual Meeting of Shareholders
To Be Held
April 10, 2000

------------------

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Evans
Systems, Inc., a Texas corporation (the "Company"), will be held at the Best
Western Matagorda Hotel located at 407 Seventh Street, Bay City, Texas, on
Monday, April 10, 2000 at 10:00 a.m., local time, for the following purposes:

(1) To consider and vote upon a proposal to approve the sale of
substantially all of the assets of the Company relating to its
Texas-based petroleum marketing and convenience store assets and
operations (the "Sale of Assets") by the Company and its subsidiaries,
Diamond Mini Mart, Inc., Evans Oil Co., Edco, Inc. and Way Energy
Systems Inc. to TSC Services, Inc. ("TSC"), as contemplated by the
Asset Purchase Agreement (the "Asset Purchase Agreement") dated as of
December 3, 1999 (the "Sale Proposal").

(2) To consider and vote upon a proposal to adopt and approve the Amended
and Restated Agreement and Plan of Merger, dated as of January 31,
2000, as amended by Amendment No. 1 to Amended and Restated Agreement
and Plan of Merger, dated as of March 1, 2000 (the "Merger Agreement"),
by and among the Company, I-Net Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company, I-Net Holdings,
Inc., a Delaware corporation ("I-Net"), and the stockholders of I-Net,
pursuant to which I-Net Acquisition Corp. will be merged with and into
I-Net (the "Merger"). Upon consummation of the Merger, I-Net will
become a wholly-owned subsidiary of the Company, the outstanding shares
of the common stock of I-Net, par value $.001 (the "I-Net Common
Stock"), will be converted into approximately 15,000,000 shares of the
Company's common stock, $.01 par value per share (the "Company Common
Stock"), the outstanding options to purchase shares of I-Net Common
Stock (the "I-Net Options") will entitle the holders thereof to
purchase approximately 4,000,000 shares of Company Common Stock and the
outstanding warrants to purchase shares of I-Net Common Stock (the
"I-Net Warrants") will entitle the holders thereof to purchase up to
3,000,000 additional shares of Company Common Stock. The number of
shares of Company Common Stock to be issued in connection with the
Merger is subject to adjustment in accordance with the terms of the
Merger Agreement. Upon consummation of the Merger, Mr. Jerriel L.
Evans, Sr., Mr. Charles Way, Ms. Darlene Jones and Mr. Richard Goeggel
have agreed to resign from the Board of Directors of the Company and
Mr. Richard Dix, Dr. Nancy Upton, Mr. Jack Tompkins and Mr. Lloyd
Shoppa (the "Director Appointees") will be appointed to the Company
Board.

-2-

<PAGE>

COMPLETE THE MERGER UNLESS THE COMPANY'S SHAREHOLDERS ADOPT AND APPROVE THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY IT. IN ADDITION, THE
MERGER AND THE MERGER PROPOSALS ARE CURRENTLY SUBJECT TO THE CONSUMMATION OF THE
SALE OF ASSETS AS DESCRIBED IN PROPOSAL 1.

(3) To ratify and approve an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Company
Common Stock from 15,000,000 shares to 100,000,000 shares, in the event
the Merger is approved.

(4) To ratify and approve an amendment to the Company's Articles of
Incorporation to change the name of the Company from Evans Systems,
Inc. to I-Net Holdings, Inc., in the event the Merger is approved.

(5) To approve the Company's 2000 Stock Option Plan and, in the event that
the Merger is consummated, an amendment thereto increasing the number
of shares authorized thereby (the "Option Plan Proposal").

(6) In the event the Merger is not consummated, to elect (i) two (2) Class
B directors to the Board of Directors of the Company (the "Company
Board") to serve until the 2002 Annual Meeting of Shareholders or until
their respective successors are duly elected and shall have qualified
and (ii) three (3) Class A directors to the Company Board to serve
until the 2003 Annual Meeting of Shareholders or until their respective
successors are duly elected and shall have qualified (the "Director
Proposal").

(7) To transact such other business as may properly come before the meeting
or any adjournment thereof.

The transactions to be considered at the Meeting involve a matter of
great significance to the Company's shareholders because, if the Sale of Assets
and the Merger are approved and consummated, the Company's business focus will
change and there will be a change of control of the Company. Following the
consummation of the Merger, approximately 76% of the outstanding shares of the
Company will be held by the current stockholders of I-Net (or approximately 85%
of the outstanding shares of Company Common Stock will be held by the
stockholders of I-Net at the time of the Merger if the full 9,000,000 shares
issuable in the I-Net Financing are issued and if all options and warrants
issuable in exchange for I-Net Options and I-Net Warrants are exercised). In
addition, there will be a change in control of the Company Board, and Richard
Dix, the principal stockholder of I-Net, will become the President, Chief
Executive Officer and Chairman of the Company.

The Company Board has adopted and approved the Sale Proposal, each of
the Merger Proposals, the Option Plan Proposal and, if necessary, the Director
Proposal, and recommends that the Company's shareholders vote for each of these
proposals.

All information pertaining to TSC Services, Inc. has been furnished by
TSC Services, Inc., and all information pertaining to I-Net Holdings, Inc. has
been furnished by I-Net Holdings, Inc.

-3-

<PAGE>

Only shareholders of record at the close of business on March 6, 2000
will be entitled to notice of and to vote at the Meeting or at any continuation
or adjournment thereof.

By Order of the Board of Directors,

MAYBELL H. EVANS
Secretary
Bay City, Texas
___________, 2000

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL
MEETING YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE THAT IS PROVIDED,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

-4-

<PAGE>

EVANS SYSTEMS, INC.
POST OFFICE BOX 2480
720 AVENUE F NORTH
BAY CITY, TEXAS 77404-2480

------------------

PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 10, 2000

------------------

INTRODUCTION

This Proxy Statement is furnished to the shareholders of EVANS SYSTEMS,
INC., a Texas corporation (together with its subsidiaries, collectively, the
"Company"), in connection with the solicitation by the Board of Directors of the
Company (the "Company Board") of proxies ("Proxies") for the Annual Meeting of
Shareholders (the "Meeting") to be held at the Best Western Matagorda Hotel
located at 407 Seventh Street, Bay City, Texas, on Monday, April 10, 2000, at
10:00 a.m., local time, or at any adjournment or postponement thereof. The
approximate date on which this Proxy Statement and the accompanying Proxy will
be first sent or given to shareholders is March __, 2000. The purposes of the
Meeting are as follows:

(2) To consider and vote upon a proposal to adopt and approve the Amended
and Restated Agreement and Plan of Merger, dated as of January 31,
2000, as amended by Amendment No. 1 to Amended and Restated Agreement
and Plan of Merger, dated as of March 1, 2000 (the "Merger Agreement"),
by and among the Company, I-Net Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company, I-Net Holdings,
Inc., a Delaware corporation ("I-Net"), and the stockholders of I-Net,
pursuant to which I-Net Acquisition Corp. will be merged with and into
I-Net (the "Merger"). Upon consummation of the Merger, I-Net will
become a wholly-owned subsidiary of the Company, the outstanding shares
of the common stock of I-Net, par value $.001 (the "I-Net Common
Stock"), will be converted into approximately 15,000,000 shares of the
Company's common stock, $.01 par value per share (the "Company Common
Stock"), the outstanding options to purchase shares of I-Net Common
Stock (the "I-Net Options") will entitle the holders thereof to
purchase approximately 4,000,000 shares of Company Common Stock and the
outstanding warrants to purchase shares of I-Net Common Stock (the
"I-Net Warrants") will entitle the holders thereof to purchase up to
3,000,000 additional shares of Company Common Stock. The number of
shares of Company Common Stock to be issued in connection with the
Merger is subject to adjustment in accordance with the terms of the
Merger Agreement. Upon consummation of the Merger, Mr. Jerriel L.
Evans, Sr., Mr. Charles Way, Ms. Darlene Jones and Mr. Richard Goeggel
have agreed to resign from the Company Board and Mr. Richard Dix, Dr.
Nancy Upton, Mr. Jack Tompkins and Mr. Lloyd Shoppa (the "Director
Appointees") will be appointed to the Company Board.

-5-

<PAGE>

APPROVAL OF THE MERGER PROPOSAL IS CONTINGENT UPON THE APPROVAL OF THE SALE
PROPOSAL, THE OPTION PLAN PROPOSAL AND EACH OF PROPOSALS 2 THROUGH 4
(COLLECTIVELY, THE "MERGER PROPOSALS"). THE COMPANY AND I-NET WILL NOT COMPLETE
THE MERGER UNLESS THE COMPANY'S SHAREHOLDERS ADOPT AND APPROVE THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY IT. IN ADDITION, THE MERGER AND
THE MERGER PROPOSALS ARE CURRENTLY SUBJECT TO THE CONSUMMATION OF THE SALE OF
ASSETS AS DESCRIBED IN PROPOSAL 1.

(6) In the event the Merger is not consummated, to elect (i) two (2) Class
B directors to the Company Board to serve until the 2002 Annual Meeting
of Shareholders or until their respective successors are duly elected
and shall have qualified and (ii) three (3) Class A directors to the
Company Board to serve until the 2003 Annual Meeting of Shareholders or
until their respective successors are duly elected and shall have
qualified (the "Director Proposal").

(7) To transact such other business as may properly come before the meeting
or any adjournment thereof.

The transactions to be considered at the Meeting involve a matter of
great significance to the Company's shareholders because, if the Sale of Assets
and the Merger are approved and consummated, the Company's business focus will
change and there will be a change of control of the Company. Following the
consummation of the Merger, approximately 76%of the outstanding shares of the
Company will be held by the current stockholders of I-Net (or approximately 85%
of the outstanding shares of Company Common Stock will be held by the
stockholders of I-Net at the time of the Merger if the full 9,000,000 shares
issuable in the I-Net Financing are issued and if all options and warrants
issuable in exchange for I-Net Options and I-Net Warrants are exercised). In
addition, there will be a change in control of the Company Board, and Richard
Dix, the principal stockholder of I-Net, will become the President, Chief
Executive Officer and Chairman of the Company.

The Company Board has adopted and approved the Sale Proposal, each of
the Merger Proposals, the Option Plan Proposal, and, if necessary, the Director
Proposal, and recommends that the Company's shareholders vote for each of these
proposals.

All information pertaining to TSC Services, Inc. has been furnished by
TSC Services, Inc., and all information pertaining to I-Net Holdings, Inc. has
been furnished by I-Net Holdings, Inc.

-6-

<PAGE>

TABLE OF CONTENTS

ANNUAL MEETING
Date, Time, Place and Purpose.........................................
Record Date, Voting Securities, and Quorum............................
Recommendation of the Board of Directors..............................
Proxies and Voting Rights.............................................
Vote Required.........................................................
Solicitation of Proxies...............................................

SECURITY OWNERSHIP.............................................................

PROPOSAL NO. 1: THE SALE OF ASSETS.............................................
Background of the Sale of Assets......................................
Use of Proceeds From the Sale of Assets...............................
Recommendation of the Company Board...................................
Reasons for the Sale of Assets; Factors
Considered by the Company Board.....................................
Opinion of Financial Advisor to the Company...........................
Accounting Treatment of the Sale of Assets;
Federal Income Tax Consequences.....................................
Interests of Certain Persons in the Sale of Assets....................
The Asset Purchase Agreement..........................................
Rights of Dissenting Shareholders.....................................

PROPOSAL NO. 2: THE MERGER.....................................................
Business After the Merger.............................................
I-Net Holdings, Inc. Business.........................................
Overview..............................................................
Industry Background...................................................
Opportunities for Emerging Business-to-Business
E-Commerce Companies................................................
Strategy..............................................................
Create or Identify Companies with the
Potential to Become Leaders.........................................
Plan of Operation.....................................................
Acquisitions..........................................................
Services..............................................................
Sharing of Information................................................
International.........................................................
Intellectual Property.................................................
Employees.............................................................
Legal Proceedings.....................................................
Background of the Merger..............................................
Recommendation of the Board...........................................
Reasons for the Merger; Factors Considered by the Company Board.......
Opinion of the Financial Advisor to the Company.......................
Anticipated Accounting Treatment; Federal Income Tax Consequences.....
Dilution..............................................................
Nasdaq Re-listing Requirements........................................
Changes to 2000 Option Plan...........................................

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<PAGE>

Management After the Merger...........................................
Vote Required.........................................................
Interests of Certain Persons in the Merger............................
The Merger Agreement..................................................

PROPOSAL NO. 3: INCREASE IN AUTHORIZED SHARES OF COMMON STOCK..................

PROPOSAL NO. 4: NAME CHANGE....................................................

PROPOSAL NO. 5: ADOPTION OF THE 2000OPTION PLAN................................

PROPOSAL NO. 6: THE DIRECTOR PROPOSAL..........................................
Nominees for Election to the Board ...................................
Required Vote.........................................................
Information Concerning the Board of Directors and its
Committees...................................................
Board of Directors Compensation.......................................
Executive Officers....................................................
Section 16(a) Beneficial Ownership Reporting Compliance...............

COMPENSATION OF THE COMPANY'S EXECUTIVE OFFICERS...............................
Executive Officers....................................................
Executive Compensation................................................
Employment Contracts..................................................

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................

INFORMATION INCORPORATED BY REFERENCE..........................................

SHAREHOLDER PROPOSALS..........................................................

OTHER BUSINESS.................................................................

AVAILABLE INFORMATION .........................................................

ACCOMPANYING DOCUMENTS.........................................................

ANNEX A - Fairness Option relating to Sale of Assets...........................

ANNEX B - Dissenters Statute...................................................

ANNEX C - Fairness Option relating to Merger...................................

ANNEX D - Amendment to Articles of Incorporation to Increase Authorized
Common Stock and to Change Name of Company...........................

ANNEX E - 2000 Option Plan.....................................................

-8-

<PAGE>

ANNEX F - Amendment to 2000 Option Plan........................................

ANNEX G - Unaudited Pro Forma Financial Statements.............................

ANNEX H - Unaudited Balance Sheet of I-Net as of December 31, 1999.............

-9-

<PAGE>

ANNUAL MEETING

DATE, TIME, PLACE AND PURPOSE

The Meeting will be held on Monday, April 10, 2000 at 10:00 a.m. local
time, at the Best Western Matagorda Hotel in Bay City Texas or at any
postponement or adjournment thereof, to consider and vote upon the Sale
Proposal, the Merger Proposals, the Director Proposal and the Option Plan
Proposal.

RECORD DATE, VOTING SECURITIES AND QUORUM

The voting securities of the Company outstanding on March 6, 2000
consisted of [4,782,340] shares of Company Common Stock, entitling the holders
thereof to one vote per share. Only shareholders of record as of that date are
entitled to notice of and to vote at the Meeting or any adjournment or
postponement thereof. A majority of the outstanding shares of Company Common
Stock present in person or by proxy is required for a quorum.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Company Board believes that the Sale of Assets and the Merger are
in the best interest of the Company and the Company's shareholders and
recommends that the Company's shareholders vote FOR the Sale Proposal, the
Merger Proposals and the Option Plan Proposal.

PROXIES AND VOTING RIGHTS

Shares of Company Common Stock represented by Proxies, in the
accompanying form of Proxy, which are properly executed, duly returned and not
revoked, will be voted in accordance with the instructions contained therein. If
no specification is indicated on the Proxy, the shares represented thereby will
be voted FOR Proposals 1 through 5 and Proposal 7, and FOR Proposal 6, if
necessary, and will be voted in the Proxy holders' discretion as to other
matters that may properly come before the Meeting.

The execution of a Proxy will in no way affect a shareholder's right to
attend the Meeting and vote in person. Any Proxy executed and returned by a
shareholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Meeting or by execution of a subsequent Proxy which is presented to
the Meeting, or if the shareholder attends the Meeting and votes by ballot,
except as to any matter or matters upon which a vote shall have been cast
pursuant to the authority conferred by such Proxy prior to such revocation.
Broker "non-votes" and the shares of Company Common Stock as to which a
shareholder abstains are included for purposes of determining the presence or
absence of a quorum for the transaction of business at the Meeting. A broker
"non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that item and has not received instructions from
the beneficial owner. Broker "non-votes" and abstentions are not counted for
purposes of determining whether a proposal has been approved and, therefore,
will count as a vote against the Sale Proposal, proposal 3 and proposal 4.
Broker "non-votes" and abstentions will not have the effect of votes in
opposition in such tabulations relating to the other proposals.

-10-

<PAGE>

VOTE REQUIRED

In accordance with the Texas Business Corporation Act (the "TBCA") and
the Bylaws of the Company, the presence, in person or by proxy, of the holders
of a majority of the outstanding shares of Company Common Stock entitled to vote
is necessary to constitute a quorum to transact business at the Meeting.
Abstentions (and broker non-votes) are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Assuming the
presence of a quorum, the affirmative vote of the holders on the Record Date of
two-thirds of the outstanding shares of Company Common Stock, represented in
person or by proxy, at the Meeting is necessary for the approval of Proposals 1,
3 and 4, the approval of a plurality of the votes cast is required for the
election of directors, and the affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock entitled to vote on, and that
vote for or against or expressly abstain from voting, is required to approve and
ratify Proposals 2 and 5. With regard to the election of directors, votes may be
cast in favor of or withheld from each nominee. Votes that are withheld will be
excluded entirely from the vote and will have no effect. If a quorum is not
present or represented at the meeting, the shareholders entitled to vote
thereat, present in person or represented by proxy, have the power to adjourn
the meeting from time to time, without notice other than the announcement at the
meeting, until a quorum is present or represented. At any such adjournment
meeting at which a quorum is present or represented, any business may be
transacted at the meeting as originally notified.

Approval of the Sale Proposal and each of the Merger Proposals by the
holders of Company Common Stock is a condition to the consummation of the
Merger.

SOLICITATION OF PROXIES

All expenses in connection with this solicitation will be borne by the
Company. It is expected that solicitations will be made primarily by mail, but
officers, directors, employees or representatives of the Company may also
solicit Proxies by telephone, telegraph or in person, without additional
compensation. The Company will, upon request, reimburse brokerage houses and
persons holding shares in the names of their nominees for their reasonable
expenses in sending solicitation material to their principals.

SECURITY OWNERSHIP

The following table sets forth information concerning ownership of
Company Common Stock, as of the Record Date, assuming the consummation of the
Merger, by (i) each person who is known by the Company to be the beneficial
owner of more than five percent of the Company Common Stock, (ii) each of the
Company's directors and nominees for director, (iii) each executive officer
named in the Summary Compensation Table; and (iv) all current directors and
executive officers of the Company as a group. In addition, information regarding
the Director Appointees is being provided to comply with Rule 14f-1 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

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<PAGE>
<TABLE>
<CAPTION>
Pre-Merger
Amount
and Post-
Nature of Pre-Merger Post-Merger Amount Merger
Beneficial Percent of and Nature of Beneficial Percent of
Name and Address(1) Ownership (2) Class(3) Ownership (2) Class (3)
------------------- -------------------- ---------- ---------------- ---------

<S> <C> <C> <C> <C>
J.L. Evans Systems, Ltd.................... 752,000(4) 15.7% 752,000(4) 3.8%
Jerriel L. Evans, Sr....................... 889,460(5) 18.6% 939,460(6) 6.0%
Maybell H. Evans........................... 775,300(7) 16.2% 775,300(7) 3.9%
Charles N. Way............................. 20,342(8) * 20,342(8) *
Darlene E. Jones........................... 15,000(9) * 15,000(9) *
Jerry Evans, Jr............................ 29,420(10) * 29,420(10) *
Richard A. Goeggel......................... 30,000(11) * 50,000(12) *
Carl W. Schafer............................ 15,375(13) * 15,375(13)
c/o The Atlantic Foundation
14 Fairgrounds Rd. Suite A
Hamilton, NJ 08619
Peter J. Losavio, Jr....................... 9,400(14) * 9,400(14) *
8414 Bluebonnett Blvd., Suite 110
Baton Rouge, LA 70810
Julie H. Edwards........................... 7,500(15) * 7,500(15) *
c/o Frontier Oil Corporation
10000 Memorial Drive, Suite 600
Houston, TX 77024
Richard Dix(16)............................ - * 12,250,000(17) 61.9%
3011 East Hickory Park Circle
Sugar Land, Texas 77479
Jack I. Tompkins(16)....................... - * - *
4301 Winfern Dr.
Houston, TX 77041
Nancy Upton(16)............................ - * - *
c/o Baylor University
P.O. Box 98006
Waco, TX 76798
Lloyd Shoppa(16)........................... - * - *
525 Great Southwest Parkway
Arlington, TX 76001
Craig Fleming(18).......................... - * - *
1604 Churchwood Cove
Austin, TX 78746
Tom Jacobs(18)............................. - * _ *
117 West 12th Street
New York, NY 1001
All executive officers and Directors
as a group (9 persons pre-merger, 8
persons post-merger)....................... 1,037,797 21.4% 12,272,875 62.0%

</TABLE>
-12-
<PAGE>

* less than 1%
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
the Company, P.O. Box 2480, Bay City, Texas 77404-2480.
(2) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act ("Rule 13d-3") and, unless otherwise indicated,
represents shares of which the beneficial owner has sole voting and
investment power.
(3) The percentage of class is calculated in accordance with Rule 13d-3 and
assumes that the beneficial owner has exercised any options or other
rights to subscribe which are exercisable within sixty (60) days and
that no other options or rights to subscribe have been exercised by
anyone else.
(4) The general partner of J.L. Systems, Ltd. is J.L. Evans Management,
Inc. (controlled by Jerriel L. Evans, Sr. and Maybell H. Evans) and the
limited partners are Jerriel L. Evans, Sr., Maybell H. Evans, and their
children Darlene E. Jones, Jerry Evans, Jr. and Terry W. Evans.
(5) Includes 752,000 shares held by J.L. Evans Systems, Ltd., of which Mr.
Evans claims beneficial ownership and 25,000 shares issuable upon the
exercise of options.
(6) Includes 752,000 shares held by J.L. Evans Systems, Ltd., of which Mr.
Evans claims beneficial ownership and 75,000 shares issuable upon the
exercise of options.
(7) Includes 752,000 shares held by J.L. Evans Systems, Ltd., of which Ms.
Evans claims beneficial ownership.
(8) Includes 7,000 shares issuable to Mr. Way upon the exercise of options
(subject to approval of the 2000 Plan by shareholders).
(9) Includes 5,000 shares issuable to Ms. Jones upon the exercise of
options (subject to approval of the 2000 Plan by shareholders).
(10) Includes 27,000 shares issuable to Mr. Evans upon the exercise of
options (subject to approval of the 2000 Plan by
shareholders).
(11) Includes 30,000 shares issuable to Mr. Goeggel upon the exercise of
options.
(12) Includes 50,000 shares issuable to Mr. Goeggel upon the exercise of
options.
(13) Includes 10,000 shares issuable to Ms. Schafer upon the exercise of
options.
(14) Includes 2,500 shares issuable to Mr. Losavio upon the exercise of
options.
(15) Includes 7,500 shares issuable to Ms. Edwards upon the exercise of
options.
(16) Messrs. Tompkins, Shoppa and Dix and Dr. Upton are anticipated to be
appointed directors of the Company upon consummation of the Merger.
(17) Assumes consummation of the Merger and the receipt of 12,000,000 shares
of Company Common Stock in exchange for Mr. Dix's shares of common
stock of I-Net. Also assumes the conversion of options to purchase
250,000 shares of I-Net Common Stock, which are exercisable within 60
days of the date of this Proxy Statement, into options to purchase
250,000 shares of Company Common Stock.
(18) Messrs. Fleming and Jacobs are anticipated to be appointed executive
officers of the Company upon consummation of the Merger.

-13-

<PAGE>
PROPOSAL NO. 1

THE SALE OF ASSETS

Background of the Sale of Assets
- --------------------------------

During late 1998 and into 1999, the Company pursued several avenues to
determine the level of interest in a combination with another company engaged in
the business of petroleum marketing and convenience store operations. During
this time, the Company retained Joseph Hale Co. to assist it in making informal
inquiries with a select group of potential purchasers. In addition, on January
19, 1999, the Company announced that it was evaluating potential alternatives
designed to enhance shareholder value. These efforts resulted in the Company
entering into a series of preliminary agreements with a petroleum marketer and
convenience store operator based in Kentucky, which did not result in a business
combination. None of the other companies contacted resulted in any substantive
negotiations. In making these inquiries, the Company believed only another
petroleum marketer and convenience store operator would be likely to offer an
acceptable price for these businesses.

On August 3, 1999, Mr. Karim M. Momin, the Chief Operating Officer of
Star-Tex Distributors, Inc., an affiliate of TSC, and Mr. Gary Kob of Gary Kob
and Associates, called Jerriel L. Evans, Sr. to discuss his potential interest
in a proposed acquisition of the petroleum marketing and convenience store
operations of the Company.

On August 11, 1999, TSC and certain of its affiliates executed a
customary confidentiality agreement with respect to the exchange of non-public
information between the Company and TSC. In August and September, TSC commenced
its due diligence review of the Company.

In early September 1999, representatives of the Company and TSC
discussed the general terms of a possible transaction. On September 14, 1999,
the Company received a letter agreement from Mr. Momin indicating that he would
submit an offer to purchase certain of the Company's assets within five business
days. Mr. Momin also requested a seven day exclusive negotiating period. On
September 27, 1999, the Company sent Mr. K. Momin a letter agreeing to a seven
day exclusive negotiating period regarding the proposed sale of assets.

On September 21, 1999, Mr. Evans, Sr. received and executed a Business
Brokerage Sales Agreement with Mr. Gary Kob, President of Gary Kob and
Associates, relating to the negotiations with TSC and its affiliates.

On September 30, 1999, Mr. Evans, Sr. sent a letter to Mr. Feroz
Momin, the President of TSC Express Inc., an affiliate of TSC, indicating that
the Company was potentially interested in selling certain assets for an
aggregate purchase price of $12.7 million and all inventory at cost and provided
that TSC assume three leases with an unpaid aggregate value of approximately
$907,000. Shortly thereafter, representatives of TSC commenced an environmental
review of the Company's properties and held discussions with members of the
Company's senior management.

-14-

<PAGE>

During the month of October 1999, the Company and TSC continued to
discuss the terms of a possible transaction. During October and November 1999,
drafts of an asset purchase agreement and related documents were circulated and
negotiated among the Company, TSC and their respective advisors.

On December 3, 1999, the Company Board met to review the proposed
terms and conditions of the sale of assets to TSC. Following the Company Board's
review of the proposed Sale of Assets and terms of the Asset Purchase Agreement,
the Company Board unanimously determined that the Asset Purchase Agreement and
the transactions contemplated thereby, including the Sale of Assets, are fair
and in the best interests of the Company's shareholders because it makes the
Company more attractive to strategic partners who may position the Company for
the Internet industry, and approved the Asset Purchase Agreement and the
transactions contemplated thereby. The Company Board also recommended that,
subject to the Company's receipt of a fairness opinion, it would recommend that
the Company's shareholders approve and adopt the Asset Purchase Agreement and
the transactions contemplated thereby. On December 3, 1999, the Asset Purchase
Agreement was executed by each of the parties. Subsequently, on January 4, 2000,
the Company retained Howard Frazier Barker Elliott, Inc. ("HFBE") to provide an
independent evaluation of the fairness of the Sale of Assets from a financial
point of view.

Use of Proceeds From the Sale of Assets
- ---------------------------------------

The Sale of Assets is anticipated to result in the Company's receiving
approximately $15,154,000 in gross proceeds, subject to adjustment. The Company
also anticipates that it will collect outstanding customer accounts of
approximately $2,113,000 in the ordinary course after consummation of the Sale
of Assets. See "The Asset Purchase Agreement - Consideration." From the
proceeds, the Company will pay various transaction related costs, including
estimated legal, advisory and banking costs of $170,000. The Company will also
be required to pay a commission of $480,000 to Gary Kob & Associates upon
consummation of the Sale of Assets.

The Company plans to use the proceeds from the Sale of Assets
primarily to repay substantially all of its bank debt. At the time the Sale of
Assets closes, the Company's bank debt is anticipated to be approximately
$12,195,000, of which TSC has agreed to assume approximately $842,000 in capital
lease obligations. Approximately $717,000 in debt will remain outstanding after
the Sale of Assets. Accrued interest of approximately $981,000 will be repaid
with proceeds from the Sale of Assets and substantially all of the remaining
payables will remain outstanding and be repaid under the Company's customary
terms. The remaining proceeds will be used by the Company for working capital
purposes and to provide capital in restructuring the Company in the businesses
of Internet operations and electronic commerce.

Recommendation of the Company Board
- -----------------------------------

The Company Board has unanimously approved the Asset Purchase
Agreement and the Sale of Assets and has determined that the Sale of Assets is
fair to and in the best interests of the Company's shareholders. THE COMPANY
BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE SALE OF ASSETS AND THE ASSET
PURCHASE AGREEMENT.

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<PAGE>

Reasons for the Sale of Assets; Factors Considered by the Company Board
- -----------------------------------------------------------------------

The petroleum marketing and convenience store industries in the United
States have experienced a significant trend to consolidate over the past five
years. Currently, significant petroleum marketers and convenience store
operators are those with annual sales approaching or exceeding $1.0 billion. At
September 30, 1999, there were 15 of these, three of which had sales of over
$4.5 billion. The Company's sales from its petroleum marketing and convenience
store operations were approximately $90 million and $73 million for fiscal 1998
and 1999, respectively. Currently, based on internal projections of the Company,
annualized sales from the Business Assets (as defined below) are estimated to be
approximately $74 million.

These trends are believed to be the result of forces emanating from
major suppliers and customers of the petroleum marketers and convenience store
operators. This results in further concentration of buying power and causes
declines in gross profit margins for all marketers and operators. The pressure
on gross profit margins affects larger petroleum marketers and convenience store
operators to a lesser extent because they can remain profitable, through greater
sales volume, even though selling at lower gross profit margins. These trends
have exacerbated the Company's ability to obtain and retain significant supplier
franchises and large customers. Furthermore, the Company's position with smaller
customers, historically a strength of its business, is at risk due to the
supplier franchise limitations arising from the adverse trends noted above.
Larger distributors with broader product offerings and resources are able to
support the penetration of the smaller customer base more cost effectively.

In approving the Asset Purchase Agreement and the Sale of Assets, the
Company Board considered a variety of factors, including:

1. The financial condition, results of operations, cash flows,
business opportunities, current strategies, business plans,
competitive position and prospects of the Company, and current
economic and market conditions.

2. The Company Board's belief that because of the consolidation
that has been prevalent in the petroleum marketing and
convenience store industries over the last few years, the
position of the Company could continue to deteriorate with
time due to the loss of suppliers, employees and customers.

3. The fact that the Sale of Assets will enable the Company to
eliminate substantially all of its bank debt and the Company
Board's belief that the added flexibility provided by
repayment of the Company's bank debt would position the
Company as a more attractive vehicle for one or more business
combinations.

4. The Company Board's belief that potential acquisition
candidates involved in the Internet business and electronic
commerce would not be interested in the Company's traditional
lines of business.

5. The fact that on January 14, 1999 the Company announced that
it was evaluating potential strategic alternatives to enhance
shareholder value, and that since such time senior management
of the Company and its representatives have engaged in
discussions with certain parties interested in a possible
transaction involving all or part of the Company. Based on
such discussions and the views of members of senior management
of the

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<PAGE>

Company, the Company Board believed that it was unlikely that
any party would propose an acquisition or strategic business
combination relating to its petroleum marketing and
convenience store operations that would be more favorable to
the Company and its shareholders than the Sale of Assets.

6. The arms-length negotiations between representatives of the
Company and TSC with respect to the consideration and other
terms of the Asset Purchase Agreement, and the Company Board's
belief that the purchase price represents the highest per
share consideration that could be negotiated with TSC.

7. The fact that the Asset Purchase Agreement (i) allowed the
Company to seek to obtain an opinion from its investment
banker that the Sale of Assets is fair from a financial point
of view to the Company and its shareholders, (ii) provided for
TSC to deposit $200,000 into escrow to secure its obligations
under the Asset Purchase Agreement, and (iii) permits the
Company to provide access and furnish information to, and
participate in discussions or negotiations with, third parties
in response to a Superior Proposal (as defined in the Asset
Purchase Agreement) if the Company Board determines in good
faith, after receiving formal advice from its financial
advisor and outside counsel, that taking such action is
reasonably necessary for the Company Board to comply with its
fiduciary duties to the Company's shareholders under
applicable law.

The Company Board also considered a variety of potentially negative
factors relating to the Sale of Assets, including the Company's belief that TSC
must obtain financing in order to complete the transactions contemplated by the
Asset Purchase Agreement. In addition, the Company Board considered the
interests of certain persons. See "-- Interests of Certain Persons."

The foregoing discussion of the information and factors considered by
the Company Board is not intended to be exhaustive, but includes the material
factors considered by the Company Board. In view of the variety of factors
considered in connection with its evaluation of the Sale of Assets, the Company
Board did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination and recommendation. In addition, individual directors may have
given differing weights to different factors.

Opinion of the Financial Advisor to the Company
- -----------------------------------------------

HFBE was retained by the Company to provide an independent evaluation
of the fairness of the Sale of Assets from a financial point of view. HFBE has
advised the Company Board that, in its opinion, the consideration to be paid by
TSC for the Texas based petroleum marketing and convenience store operations of
the Company is fair, from a financial point of view, to the Company's
shareholders. The full text of the HFBE opinion, which describes the procedures
followed, assumptions made and other matters considered in the opinion, is
included in this document as Annex A. Shareholders should read the full opinion.

HFBE'S OPINION ADDRESSES ONLY THE CASH CONSIDERATION. IT DOES NOT ADDRESS THE
UNDERLYING BUSINESS DECISION TO PROCEED WITH THE SALE OF ASSETS AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW THE SHAREHOLDER SHOULD
VOTE WITH RESPECT TO THE SALE OF ASSETS OR ANY OTHER RELATED MATTER.

-17-

<PAGE>

In arriving at its written opinion, HFBE, among other things:

1. reviewed the Company's Annual Report on Form 10-K and related
financial information for the year ended September 30, 1999,
and the Company's Amended Annual Report on Form 10-K/A and
related financial information for the year ended September 30,
1998;

2. reviewed appraisals of certain assets owned by the Company;

3. conducted discussions with members of senior management of the
Company concerning the Company's business and prospects;

4. reviewed the historical market prices and trading activity for
the Company Common Stock;

5. compared the results of operations of the Company with those
of certain companies which HFBE deemed reasonably similar to
the Company;

6. analyzed the nature and financial terms of certain business
combinations involving companies in lines of business HFBE
believes to be generally comparable to those of the Company;

7. considered the pro forma effect of the Sale of Assets on
certain of the Company's balance sheet items;

8. reviewed the proposed Asset Purchase Agreement by and between
the Company and certain of its subsidiaries and TSC;

9. analyzed the tax loss carry forwards that may be available
after the consummation of the Sale of Assets to TSC; and

10. reviewed such other matters as HFBE deemed necessary,
including an assessment of general economic, market and
monetary conditions.

In preparing its opinion, HFBE relied on the accuracy and completeness
of all information supplied or otherwise made available to it by the Company.
HFBE did not independently verify the furnished information, or undertake an
independent appraisal of the assets of the Company.

Pursuant to the terms of HFBE's engagement, the Company has agreed to
pay HFBE a fee of $50,000 for rendering its opinion as to fairness, from a
financial point of view, of the Sale of Assets. The Company has agreed to
reimburse HFBE for all its related expenses and to indemnify HFBE against
certain liabilities, including liabilities under federal securities laws arising
out of HFBE's engagement.

HFBE's opinion is based upon market, economic, financial and other
conditions as they exist and can be evaluated as of the date of the opinion.
HFBE assumed that there had been no material change in the Company's financial
condition, results of operations, business or prospects since the date of the
last financial statements made available to HFBE. HFBE relied on advice of
counsel to the Company as to all legal matters with respect to the Company and
the Asset Purchase Agreement, and upon the Company with respect

-18-

<PAGE>

to the accounting treatment to be accorded the transaction. In addition, HFBE
did not make an independent evaluation, appraisal or physical inspection of the
assets or individual properties of the Company.

The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to particular
circumstances. Therefore, the HFBE opinion is not readily susceptible to partial
analysis or summary description. Furthermore, in arriving at its opinion, HFBE
did not attribute any particular weight to any analysis or factor considered by
it, but rather made qualitative judgments as to the significance and relevance
of each analysis or factor. Accordingly, HFBE believes that its analysis must be
considered as a whole and that considering any portion of its analysis and the
factors considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its opinion. In its
analyses, HFBE made assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond the
control of the Company. Estimates contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values. In addition, analyses relating to the value of the businesses do not
purport to be appraisals or to reflect the prices at which businesses may
actually be sold.

Subject to and based upon the foregoing, HFBE advised the Company of
its opinion that the consideration to be paid by TSC in the proposed transaction
is fair, from a financial point of view, to the Company and its shareholders.

Accounting Treatment of the Sale of Assets; Federal Income Tax Consequences
- ---------------------------------------------------------------------------

The Sale of Assets is expected to result in an accounting gain of
approximately $52,000. The Company expects to recognize a gain of this amount
for federal and state tax purposes, which gain is expected to be offset by the
Company's prior net operating losses. Because the Sale of Assets is solely a
corporate action, it has no tax implications on shareholders of the Company.

This transaction will be accounted for as a sale by the Company and as
a purchase for TSC.

Interests of Certain Persons in the Sale of Assets
- --------------------------------------------------

In considering the recommendations of the Company Board, shareholders
should be aware that certain members of the Company Board and the management of
the Company have certain interests in the Sale of Assets that are different
from, or in addition to, the interests of shareholders generally.

Property Sale. Jerriel L. Evans, Sr. owns a parcel of real property
that is adjacent to the Company's bulk plant. At the request of TSC, Mr. Evans
has agreed to sell such property to TSC for approximately $25,000. The Company
believes that this price is consistent with property values of surrounding
similar parcels of land and that this sale of property is on terms no more
favorable to Mr. Evans than he could have otherwise obtained from an
unaffiliated third party.

Severance Agreements. The Company has employment agreements with each
of Jerriel L. Evans, Sr. and Richard Goeggel. Each of these agreements provides,
in essence, that, should there be a change of

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<PAGE>

control (which would include the Sale of Assets) and the officer's employment is
terminated either (i) involuntarily, without just cause or (ii) voluntarily, if
the officer has determined in good faith that his duties have been altered in a
material respect or there has been a reduction in his compensation or employee
benefits, the officer would be entitled to receive a severance payment. With
respect to the Sale of Assets, each of Messrs. Evans and Goeggel has waived his
right to receive a severance payment as a result of the Sale of Assets.

Rights of Dissenting Shareholders
- ---------------------------------

Holders of Company Common Stock will have the right to exercise
dissenters' rights with respect to the proposed Sale of Assets. Pursuant to
Article 5.12 and 5.13 of the TBCA (the "Dissenters' Statute"), holders of record
of Company Common Stock who object to the proposed Sale of Assets and who follow
the procedures prescribed by the Dissenters' Statute will be entitled to receive
a cash payment equal to the "fair value" of the shares of Company Common Stock
held by them. Set forth below is a summary of the procedures holders of Company
Common Stock must follow in order to exercise dissenters' rights under the TBCA.
This summary does not purport to be complete and is qualified in its entirety by
reference to the Dissenters' Statute (a copy of which, as of the date hereof, is
attached to this Proxy Statement as Annex B) and to any amendments to, or
modifications of, such provisions as may be adopted after the date hereof.

Any holder of Company Common Stock contemplating the possibility of
objecting to the proposed Sale of Assets should carefully review the text of
Annex B (particularly the specified procedural steps required to perfect its
dissenter's rights) and should consult as appropriate with such holder's legal
counsel. These rights will be lost if the procedural requirements of the
Dissenters' Statute are not fully satisfied.

Under the Dissenters' Statute, any holder of Company Common Stock who
files with the Company, prior to the taking of the vote relating to the proposed
Sale of Assets at the Meeting, a written objection to the proposed action and
stating that the shareholder will exercise its right of dissent if the action is
effected and who complies with the other applicable procedural requirements of
the Dissenters' Statute, shall be entitled, if the proposed Sale of Assets is
consummated, to receive a cash payment of the fair value of such shares.
However, a shareholder who votes such holder's Company Common Stock against
approval of the proposed Sale of Assets will not, solely by virtue of such vote,
satisfy the notice requirement referred to above. Further, because an executed
Proxy Card will be voted "FOR" the proposed Sale of Assets unless otherwise
specified, a shareholder returning a signed but unmarked Proxy Card will waive
his or her right to dissent from the proposed Sale of Assets.

Written notice of the intent to exercise dissenters' rights must be
sent to the Company at Post Office Box 2480, 720 Avenue F North, Bay City, Texas
77404-2480, Attn: Maybell H. Evans, prior to the taking of the vote at the
Meeting. A HOLDER OF COMMON STOCK WHO DOES NOT SATISFY EACH OF THE REQUIREMENTS
OF THE DISSENTERS' STATUTE WILL NOT BE ENTITLED TO EXERCISE ANY RIGHTS OF
DISSENT UNDER THE PROVISIONS OF THE TBCA.

No later than 10 days after the proposed Sale of Assets is effected,
the Company must deliver or mail to each dissenting shareholder written notice
that the action has been effected and the shareholder may, within 10 days from
the delivery or mailing of such notice, make written demand on the Company for
the payment of the "fair value" of such shareholder's shares. The demand must
state the number and class of shares owned by the shareholder and the "fair
value" of the shares as estimated by the shareholder. Any shareholder failing to
make demand within the 10-day period shall be bound by the Company's action. Not

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<PAGE>

later than 20 days after making such written demand, each holder of Company
Common Stock who exercises dissenters' rights must submit to the Company the
certificate or certificates representing such holder's shares of Company Common
Stock for notation thereon that such demand has been made. Upon making a demand
for value, a holder of Company Common Stock shall have no rights in the Company
by virtue of holding such shares, other than the right to receive fair value for
such shares.

Within 20 days after receipt by the Company of a demand for payment
made by the dissenting shareholder, the Company shall either accept the amount
claimed in the demand or provide the shareholder with the Company's estimate of
the "fair value" of the shares, in either case, along with an offer to pay
either the agreed or offered amount within 90 days after the date on which the
action was effected (upon the surrender of any certificates representing such
shares, duly endorsed).

If within 60 days after the date on which the corporate action was
effected, the value of the shares is agreed upon between the shareholder and the
Company, payment shall be made within 90 days after the date the action was
effected (upon the surrender of any stock certificates, duly endorsed). If the
Company and the shareholder do not so agree within such 60-day period, then
either party may, within 60 days after the expiration of such 60-day period,
seek a judicial determination of the fair value of the shareholder's shares. The
court shall then determine which shareholders have properly complied with the
provisions of Article 5.12 and shall appoint one or more qualified appraisers to
determine that value. The court shall in its judgment determine the fair value
of the shares of Company Common Stock of the shareholders entitled to payment
based on the report prepared by the appraiser and subject to exceptions to be
heard before the court both upon law and the facts.

The term "fair value" as used in the Dissenters' Statute will be
determined as of the day prior to the day of the Meeting and will exclude any
appreciation or depreciation resulting from the proposed Sale of Assets.

THE ASSET PURCHASE AGREEMENT

On December 10, 1999, the Company filed a report concerning the
proposed Sale of Assets on Form 8-K with the Securities and Exchange Commission,
which report includes the Asset Purchase Agreement as an exhibit thereto. See
"Available Information". The following summary of the Asset Purchase Agreement
is not complete and is qualified in its entirety by references to the provisions
in the Asset Purchase Agreement.

Assets to be Sold
- -----------------

The assets to be sold to TSC (the "Business Assets") consist of all
property, machinery, equipment, intellectual property, inventory and franchise
rights relating solely to the Company's petroleum marketing and convenience
store operations located in Texas and 42 parcels of real property that are owned
or leased by the Company. For fiscal 1999, the businesses being sold accounted
for approximately 84% of the Company's consolidated sales and 95% of the
Company's consolidated operating loss.

The sale excludes assets relating to the Company's petroleum marketing
and convenience store operations in Louisiana, its EDCO Environmental business,
cash and receivables and certain other specified Company assets. The Company's
EDCO Environmental and Louisiana-based petroleum marketing and convenience store
operations (collectively, "Remaining Businesses") accounted for approximately
16% of

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<PAGE>

the Company's consolidated sales and 5% of the Company's consolidated operating
loss during fiscal 1999. Following the consummation of the Sale of Assets, the
Company will continue to explore strategic alternatives with respect to the
Remaining Businesses.

Consideration

The purchase price (the "Purchase Price") to be paid by TSC to the
Company for the Business Assets is currently approximated at $15,175,000, based
on the current estimated cost of the inventory to be sold. The Purchase Price
includes approximately $2,500,000 for inventory relating to the Business Assets
and shall be adjusted upon completion of a joint inventory count by TSC and the
Company (the "Joint Inventory") on or before the Closing Date. In the event the
cost of inventory as determined by the Joint Inventory is greater than
$2,500,000, the Purchase Price will be increased by the amount exceeding
$2,500,000. In the event such amount is less than $2,500,000, the Purchase Price
will be reduced by the amount the cost of inventory falls below $2,500,000.

The Purchase Price will also be adjusted in the event that (i) the
real property located at 2041 Avenue F and 1709 7th Street in Bay City, Texas
(the "Bay City Properties") and/or (ii) the real property located at 1218
Brazosport Blvd., Freeport, Texas (the "Freeport Property") is sold to a third
party. In the event that the Bay City Properties are sold to a third party
(other than TSC), the Purchase Price will be decreased by $145,000. In the event
that the Freeport Property is sold to a third party (other than TSC), the
Purchase Price will be decreased by $105,000. In the event that both the Bay
City Properties and the Freeport Properties are sold to a third party (other
than TSC), the Purchase Price will be decreased by $250,000. The Company
currently has executed contracts to sell the Bay City Properties and the
Freeport Property to third parties for $145,000 and $105,000, respectively.

Closing Date
- ------------

Unless the Company and TSC agree otherwise, the Sale of Assets will be
consummated no later than April 17, 2000 (the "Closing Date"), provided that the
Company's shareholders have approved the matters submitted to them for approval
in connection with the Asset Purchase Agreement, and all other conditions to the
consummation of the Sale of Assets have been satisfied or waived. It is
currently expected that the Sale of Assets will be consummated no later than
April 17, 2000.

Representations and Warranties
- ------------------------------

In the Asset Purchase Agreement, TSC has made various customary
representations and warranties (subject in some cases to materiality and
knowledge qualifiers) relating to, among other things, its business, the
requisite corporate authority to enter into and perform its obligations under
the Asset Purchase Agreement and the absence of a breach or violation of or
default under its charter or bylaws or internal rules or regulations governing
conduct of corporate actions as a result of the consummation of the Sale of
Assets.

The Company has made various customary representations and warranties
(subject in some cases to materiality and knowledge qualifiers) relating to,
among other things, its business, its requisite corporate authority to enter
into and perform its obligations under the Asset Purchase Agreement, the absence
of a breach or violation of or default under its charter or bylaws or internal
rules or regulations governing conduct of corporate actions as a result of the
consummation of the Sale of Assets, the accuracy of tax returns and other
filings with applicable taxing authorities, compliance with certain legal
requirements relating to the

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<PAGE>

Business Assets, possession of good and marketable title to the Business Assets,
the accuracy of financial statements and the condition of the Business Assets.
All representations, warranties, covenants and agreements of the Company and TSC
shall survive for one year after the Closing.

Indemnification
- ---------------

Each party has agreed to indemnify the other party against any losses
relating to (i) any misrepresentation or breach of warranty by it; (ii) the
breach of its representations or warranties for a period of one year; and (iii)
its failure to perform or otherwise fulfill any covenant or agreement made in
the Asset Purchase Agreement. The Company has also agreed to indemnify TSC for
certain environmental liabilities for a period of one year from the Closing
Date. The parties agreed that no indemnification claim would be made until the
sum of such losses exceeds $100,000.

Escrow Agreement
- ----------------

TSC has placed in escrow $200,000 in earnest money to secure its
obligation to close the transactions contemplated by the Asset Purchase
Agreement (the "Earnest Money"). Should TSC fail to perform its obligations in
accordance with the terms of the Asset Purchase Agreement for any reason other
than the failure of the Company to satisfy a condition of closing or the
Company's default or failure to perform its obligations under the Asset Purchase
Agreement, the Company shall be entitled, as its sole remedy, to terminate the
Asset Purchase Agreement and recover the Earnest Money held in escrow pursuant
to the escrow agreement, in full satisfaction of claims against TSC.

Non-Competition Agreement
- -------------------------

The Company and Jerriel L. Evans, Sr., individually, have agreed to
execute on the Closing Date a Non-competition Agreement with TSC, the terms of
which shall provide, among other things, that the Company and Mr. Evans, jointly
and severally, agree not to sell gasoline, diesel or food products to any
convenience store and/or own, build, or have any investment in any convenience
store within a ten (10) mile radius of each location being transferred to TSC
for a period of five years from the Closing Date.

Conduct of Business Prior to Closing
- ------------------------------------

Beginning on the date of the Asset Purchase Agreement and continuing
through the Closing Date, the Company has agreed (1) that the businesses being
sold shall be carried on only in the ordinary course, consistent in all material
respects with past practices; (2) except as permitted by the Asset Purchase
Agreement, that none of the Business Assets shall be sold, transferred or
otherwise disposed of or encumbered or otherwise have any lien placed thereon
other than dispositions of inventory made in the ordinary course of business;
(3) that TSC will be advised of any material change in the Business Assets; and
(4) that the Company will not take any action which would (i) constitute a
default under the leases or the contracts being conveyed by the Company, (ii)
impair any licenses or permits or (iii) otherwise be inconsistent with the
provisions of the Asset Purchase Agreement.

Conditions to the Consummation of the Sale of Assets
- ----------------------------------------------------

The respective obligations of the Company and TSC to consummate the
Sale of Assets are subject to customary closing conditions, including among
other things, the approval of the Sale Proposal by the

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<PAGE>

Company's shareholders. TSC's obligation to consummate the Sale of Assets is
also subject to there being no material adverse change in the Business Assets,
all landlord consents having been obtained, and all encumberances on the
Business Assets having been released. As of the date of this Proxy Statement,
the Company's lenders have indicated that they will consent to the Sale of
Assets provided that, as contemplated, the indebtedness owed to such lenders is
repaid at the Closing of the Sale of Assets. In addition, although it is not a
requirement to the consummation of the Sale of Assets, the Company believes that
TSC must obtain financing in order to complete the transaction. If TSC is unable
to obtain financing, it is unlikely that TSC would be able to pay the Purchase
Price, and the Company's sole recourse would be to keep the Earnest Money.

Termination
- -----------

The Asset Purchase Agreement may be terminated and cancelled at any
time prior to the Closing Date by mutual written consent of TSC and the Company.
The Asset Purchase Agreement may be terminated by either party if (i) the
Initial Closing Date shall not have occurred on or before April 28, 2000, unless
further extended as may be agreed upon by the parties, provided that such
failure of occurrence shall not have resulted from the default or breach of such
party or (ii) a court of competent jurisdiction shall have issued an order,
decree or ruling permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Asset Purchase Agreement, and such order,
decree, ruling or other action shall have become final and non-appealable.

The Company shall have the right to terminate and cancel the Asset
Purchase Agreement if (a) the required approval of the Company's shareholders
shall not have been obtained at a meeting duly held prior to the Closing Date,
or (b) if the Company receives a bona-fide offer to enter into an agreement
providing for any merger, consolidation, tender offer, exchange offer or sale
involving the Business Assets, providing for terms better, in good faith
determination of the Company Board, than those provided by the transactions
contemplated hereunder (a "Bona-fide Offer").

Expense Reimbursement; Break-up Fee
- -----------------------------------

The Company and TSC will pay all of their own expenses (including
attorneys' and accountants' fees) in connection with the negotiation of the
Asset Purchase Agreement, the performance of their respective obligations
thereunder and the consummation of the transactions contemplated thereby. The
Company and TSC will each pay one-half of the cost of title policies, surveys
and title company closing costs, provided that in relation thereto the Company
shall not be required to pay more than $40,000 in the aggregate.

If the Company terminates and cancels the Asset Purchase Agreement
because the Company's shareholders do not consent to the Sale of Assets, the
Company will cause the release of the Earnest Money to TSC and will reimburse
TSC for any and all reasonable fees and expenses relating to or arising out of
the transactions contemplated by the Asset Purchase Agreement, in an amount not
to exceed $100,000 in the aggregate. If the Company terminates and cancels the
Asset Purchase Agreement because it receives a Bona- fide Offer, the Company
shall pay to TSC a termination fee of $200,000, and reimburse TSC for any and
all reasonable fees and expenses relating to or arising out of the transactions
contemplated by the Asset Purchase Agreement, in an amount not to exceed
$100,000 in the aggregate.

-24-

<PAGE>

PROPOSAL NO. 2

THE MERGER

Following the Merger, the business and operations of the reorganized
Company will be significantly different from those of the Company presently as a
result of the Sale of Assets, the acquisition of I-Net and the change of control
of the Company. The reorganized Company and its subsidiaries intend to adopt
I-Net's business plan and enter the Internet and electronic commerce industry.
However, the reorganized Company's ability to implement its operating and growth
strategies is subject to a number of factors, many of which are beyond its
control, and there can be no assurance that the reorganized Company will be able
to successfully implement this strategy.

I-Net Holdings, Inc. Business

Overview
- --------

I-Net is a Delaware corporation which was created in December 1999 for
the purpose of acquiring, developing and operating existing Internet businesses
that engage primarily in business-to-business electronic commerce. I-Net's goal
is to become a leading e-commerce company by acquiring companies in major
segments of the Internet industry. I-Net's strategy includes the internal
development and operation of e- commerce businesses as well as the acquisition
of other Internet companies that provide strategic opportunities for I-Net. This
strategy contemplates and encourages the development of opportunities for
synergistic business relationships among the Internet companies within I-Net's
portfolio.

Acting as a long-term partner, I-Net believes that it will be able to
use its collective resources to actively develop the business strategies,
operations and management teams of the e-commerce companies it acquires. Through
its collaborative model, I-Net hopes to broaden its support capabilities,
explore acquisition opportunities and alliances with other companies and
facilitate business arrangements among its e-commerce companies. I-Net believes
that its resources will include the experience, relationships and specific
expertise of its management team, its Board of Directors and its Advisory Board.

I-Net intends to concentrate on companies that address transaction and
information needs for the establishment of Internet web sites where buyers and
sellers interact. I-Net hopes to identify such companies that have targeted
specific niche markets and have begun implementing a business plan to exploit
perceived market opportunities. I-Net's business development model will focus on
the acquisition of e-commerce companies that would allow I-Net to establish a
diverse network. The network of companies should provide I-Net with the
opportunity for collaboration and innovation among the various businesses.

Industry Background
- -------------------

The Internet is rapidly changing from primarily an information
delivery medium to an interactive platform through which companies market,
operate and manage their businesses and conduct transactions. As a result of its
widespread adoption, the Internet has led to the development of
business-to-business, business-to-consumer and employer-to-employee
relationships and communications. This is leading to the growth of, and demand
for, professional services and the creation of innovative business models
relating to the Internet and e-commerce.

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<PAGE>

Companies are using the Internet to restructure the way they conduct
their businesses. The Internet provides new ways for companies to market their
products and services, manage their operations and employees and improve their
financial results. Through the Internet, companies have the ability to improve
their competitive positions, reduce operating, transaction and overhead costs,
shorten product and marketing cycle times, create and strengthen business
alliances and improve and accelerate the flow of information both internally and
externally. Through e-commerce and the Internet, organizations are identifying,
developing and expanding product and service offerings and creating new
innovative strategies and operating models.

The emergence of the Internet and e-commerce creates challenges for
virtually all companies regardless of industry or location. In many industries,
traditional barriers to entry, such as physical or capital assets, are becoming
less important, and the traditional competitive advantages and business models
that companies relied on to sustain their profitability are diminishing. The
Internet and other technologies reduce the effect of geographic barriers, price
discrimination and other factors and are changing the way many businesses have
historically competed.

In order to successfully develop Internet businesses and conduct
e-commerce, companies need to understand how the Internet will address their
overall long and short term business plans, and how business over the Internet
differs from conventional business operations. Internet sites must be
functional, distinctive, attractive, engaging and easy to use.

Opportunities for Emerging Business-to-Business E-Commerce Companies
- --------------------------------------------------------------------

I-Net believes that there are significant opportunities for companies
using the Internet to create more efficient markets and enable e-commerce. I-Net
intends to focus its acquisition efforts on three types of business-to-business
Internet companies:

Services Companies. Services companies utilize the Internet as their
primary form of distribution for the services they provide. They may
sell information or services to businesses or consumers or provide the
services for free. Services companies may create a forum for people to
interact. They typically provide information, solutions or an
environment that allows businesses or consumers to gain knowledge
regarding a subject or problem. Services companies allow buyers and
sellers to interact in an electronic environment that leads to a more
efficient exchange of services.

Product Distribution Companies. Product distribution companies utilize
the Internet as their primary form of distribution for their goods.
They sell to buyers by creating more efficient Internet- based markets
for the exchange of goods, services and information. Through the
utilization of the Internet, product distribution companies enable
more effective and lower cost commerce for consumers and businesses
by, among other things, providing access to a broader range of buyers.
These exchange models allow buyers and sellers to interact on a global
basis. Product distribution companies typically operate in a specific
industry and tailor their business models to match a target market's
distinct characteristics.

Technology Companies. Technology companies develop or create
innovative technologies that enhance the efficiency of Internet
products, services or users. Technology companies' products can be
used by portfolio companies and add value to their existing models.
The technology deployed

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<PAGE>

may create a unique business model or enhance an existing model.
Technology companies utilize new technologies to provide creative
solutions and develop new markets and models.

Strategy
- --------

I-Net intends to become a leading business-to-business e-commerce
company by establishing an e-commerce presence in major segments of the economy.
I-Net's operating strategy is to integrate its portfolio companies into a
collaborative network that leverages I-Net's collective knowledge and resources.
Acting as a long-term partner, I-Net intends to use these collective resources
to actively develop the business strategies, operations and management teams of
its portfolio companies.

I-Net's strategy is to:

o create or identify companies with the potential to become
industry leaders;

o acquire portfolio companies and incorporate them into its
collaborative network;

o provide strategic guidance and operational support to its
portfolio companies; and

o promote collaboration among its portfolio companies.

In implementing this strategy, I-Net intends to leverage the collective
knowledge and experience of its portfolio companies, Board of Directors and
Advisory Board members. I-Net's Advisory Board will consist of executives from
various backgrounds who I-Net believes will provide its network with strategic
guidance, sales and marketing and information technology expertise, and industry
contacts. Typically, I-Net intends to acquire the entire equity interest in
portfolio companies; however, in certain situations, I-Net may acquire minority
interests in e-commerce companies.

Create or Identify Companies With the Potential to Become Leaders
- -----------------------------------------------------------------

I-Net intends to apply a disciplined analysis to identify companies
that are positioned to succeed and have the ability to become leaders. In
evaluating whether to enter a market by building a company or acquiring an
existing company, I-Net will weigh the following industry and company factors:

Industry Criteria

Inefficiency. I-Net will consider whether the industry suffers
from inefficiencies that may be alleviated through e-commerce.
I-Net will also consider the relative level of inefficiency,
as more inefficient industries present greater profit
potential.

Competition. I-Net intends to evaluate the amount of
competition that a potential acquisition candidate faces from
e-commerce and traditional businesses.

Profit Potential. When evaluating companies, I-Net will
consider the number and dollar value of transactions in the
industry. In the industries that I-Net intends to target,
offering even moderate incremental efficiency improvements
presents profit potential.

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<PAGE>

Centralized Information Sources. When evaluating companies,
I-Net intends to consider whether the industry has product
standards, catalogs, trade journals and other centralized
sources of information regarding products, prices, customers
and other factors. The availability of this information makes
it easier for a market leader to facilitate communication and
transactions. I-Net intends to avoid industries where
standards are not available.

Company Criteria

Industry Leader. I-Net intends to partner with a company only
if it believes that it has the products and ability to become
a leader in its industry.

Management Quality. I-Net intends to assess the overall
quality, experience and industry expertise of a potential
company's management team.

Technology. I-Net intends to evaluate the uniqueness of the
company's proprietary technology and its scalability.

Significant Ownership. I-Net will consider whether it will be
able to obtain all of the equity of the company or exert
influence over the company.

Network Synergy. I-Net intends to consider the degree to which
a potential company may contribute to its network, and benefit
from its network and resources.

Plan of Operation
- -----------------

I-Net was formed to acquire, develop and operate Internet companies
that engage in business-to- business e-commerce. Following the consummation of
the Merger, I-Net anticipates that it will have approximately $15 million in
cash to use along with equity of the Company to consummate these acquisitions.

I-Net has no operating history upon which investors can evaluate its
business and prospects. It will combine the operations of the businesses it
acquires into the operations of the Company, and it may not be able to achieve
or maintain profitability of any of its businesses or overall. I-Net has no
historical results of operations, and its pro forma financial information will
not give an accurate indication of its future results of operations or
prospects. In addition, companies like I-Net in an early stage of development
frequently encounter risks, expenses and difficulties associated with starting a
new business, many of which may be unexpected or beyond its control.

I-Net's future profitability will depend heavily on its ability to
integrate the operations and management of the companies it acquires. Failure to
successfully integrate any of the companies I-Net acquires may cause significant
operating inefficiencies and adversely affect its profitability. I-Net's
professional services providers will not have worked together before and in some
cases may have previously served the same clients and provided duplicative
services and may have competed against each other. To the extent I-Net's
companies have competed with each other in the past, I-Net will need to, but may
not be able to, redeploy its resources. To the extent I-Net cannot effectively
redeploy its resources, its revenues may suffer. I-Net plans to spend
substantial resources to integrate the businesses it acquires. In particular, to
successfully integrate newly acquired companies, I-Net must:

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<PAGE>

o install and standardize adequate operational, financial and
control systems;

o deploy common equipment and telecommunications facilities;

o implement and integrate new and existing marketing and sales
efforts; and

o create a unified brand identity.

In addition, during I-Net's beginning stage of development and operation, it may
encounter expenses and difficulties that it may not expect or that are beyond
its control. I-Net may not be able to achieve or maintain profitability for any
of the companies it is acquiring or for itself as a whole.

Acquisitions
- ------------

I-Net intends to pursue and evaluate acquisition opportunities
(including opportunities to acquire the assets and properties of Internet
companies or entities owning Internet properties or related assets and
opportunities to engage in mergers, consolidations or other business
combinations with entities owning or operating Internet assets or related
properties). At any given time, I-Net may be in various stages of evaluating
these opportunities. These stages may take the form of internal financial
analysis, preliminary due diligence, the submission of an indication of
interest, preliminary negotiations or negotiation of a letter of intent, term
sheet or definitive agreement. While I-Net is currently evaluating a number of
potential acquisition opportunities (some of which would be material in size to
I-Net), it has not signed a letter of intent with respect to any material
acquisition and currently has no assurance of completing any particular material
acquisition or of entering into negotiations with respect to any particular
acquisition.

Services
- --------

I-Net intends to offer a wide range of Internet and e-commerce
professional services to traditional businesses as well as new Internet-based
businesses. These services will fall into a number of categories, including
strategic guidance and operational support, which involve the following
activities:

Strategic Guidance. I-Net intends to provide strategic guidance to its
e-commerce companies regarding market positioning, business model
development and market trends. Strategic guidance services include
services that help I-Net's clients understand how to use the Internet
and e- commerce to achieve operating efficiencies, open new and more
effective ways to communicate with customers and suppliers, enhance
competitive advantages and otherwise incorporate the Internet and
e-commerce into their businesses.

Operational Support. E-commerce companies often have difficulty
obtaining senior executive level guidance companies need. I-Net
intends to assist its e-commerce companies by providing access to
skilled managers who will assist the companies in the following areas:

Cross-selling products and services. I-Net hopes to foster the
cross-selling of products and services among the businesses in its
portfolio companies.

Sales and Marketing. I-Net intends to assist its companies with
improving the sales and marketing model and by providing leverage in
key advertising segments.

-29-

<PAGE>

Advertising solutions. I-Net intends to seek to develop innovative
ways for its companies to reach their target audiences effectively
through the Internet and other mediums. Internet companies spend a
significant amount of capital trying to establish market share and
reach new customers. I-Net hopes to leverage the buying power and
synergies of its companies to efficiently and effectively to market
their goods and services.

Executive Recruiting and Human Resources. I-Net intends to hire
several executives to provide dedicated recruiting and other human
resource support to its companies. I-Net believes that this is one of
the most important functions that it can perform on behalf of its
e-commerce companies.

Information Technology. I-Net intends to hire a Chief Technology
Officer who will be dedicated to helping I-Net's e-commerce companies
with their information systems strategies and solving problems
relating to their current information technology.

Finance. I-Net will focus on providing financial guidance to its
companies in areas such as corporate finance, financial reporting,
accounting and treasury operations.

Continued Development of Applications. I-Net intends to assist
companies in their continued development of infrastructure and web
based products through the utilization of I-Net's team.

Business Development. Business-to-business e-commerce companies may be
involved in evaluating, structuring and negotiating joint ventures,
strategic alliances, joint marketing agreements, acquisitions or other
transactions. I-Net will provide assistance to its companies in these
areas.

Sharing of Information
- ----------------------

One of the principal goals of I-Net's network of companies is to
promote innovation and collaboration among its companies, which results in
shared knowledge and business contacts, as well as the formation of numerous
strategic alliances. I-Net intends to promote collaboration formally by hosting
regularly scheduled seminars relating to operational and business issues. At
these seminars, I-Net anticipates that the executives of its portfolio companies
will share their experiences with each other. On an informal basis, I-Net
intends to promote collaboration by making introductions and recommending
companies to each other.

International
- -------------

I-Net intends to focus on opportunities that utilize the Internet to
unite buyers and sellers around the world. I-Net believes the greatest
opportunities are to create conduits for business to interact in a global
environment and that these opportunities would provide efficiencies and economic
gain for market leaders. I-Net intends to open offices in selected international
markets to enhance I-Net's strategic opportunities.

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<PAGE>

Intellectual Property
- ---------------------

I-Net intends to utilize intellectual property in its business, some
of which it believes will be proprietary. I-Net intends to rely generally on
trade secret law to protect its proprietary interests. It cannot guarantee that
the steps it takes to protect its proprietary rights will be adequate to deter
misappropriation of its intellectual property, and I-Net may not be able to
detect unauthorized use and take appropriate steps to enforce its intellectual
property rights. If third parties infringe or misappropriate I-Net's trade
secrets, copyrights, trademarks or other proprietary information, its business
could be seriously harmed. In addition, although I-Net believes that its
proprietary rights will not infringe on the intellectual property rights of
others, other parties may assert infringement claims against I-Net or claim that
it has violated their intellectual property rights. These claims, even if not
true, could result in significant legal and other costs and may be a distraction
to management. Protection of intellectual property in many foreign countries is
weaker and less reliable than in the United States, so if I-Net's business
expands into foreign countries, risks associated with protecting its
intellectual property will increase.

Employees
- ---------

As of March 1, 2000, I-Net had three employees, all of whom were in
management I-Net's success will depend in part on its ability to attract, retain
and motivate highly qualified technical and management personnel, for whom
competition is intense.

Legal Proceedings
- -----------------

I-Net is not a party to any pending material legal proceedings.

Background of the Merger
- ------------------------

In early April 1999, the Company announced that it intended to
reposition itself as an Internet operator and e-commerce company. As part of
this strategy, the Company began to solicit a potential acquisition target
involved in these businesses. On June 4, 1999, the Company executed an agreement
to acquire AfreeGift.com. This Agreement was terminated on October 8, 1999.

On October 22, 1999, Jerry Evans, Jr., Vice President of Corporate and
Investor Relations of the Company, met with Richard Dix, the current President
of I-Net, to discuss Mr. Dix's activities relating to the Internet and
e-commerce industries since his resignation as Executive Vice President of the
Company.

On November 9, 1999, Messrs. Evans and Dix met again to discuss Mr.
Dix's business model relating to I-Net and to discuss opportunities available to
Internet and e-commerce companies. On such date, the Company and Mr. Dix
executed a customary confidentiality agreement with respect to the mutual
exchange of non-public information.

During November and December 1999, the Company and Mr. Dix conducted
their due diligence reviews and continued to negotiate regarding the general
terms of a proposed transaction. During this period, the Company continued to
solicit interest from other prospective acquisition targets and held discussions
with two such acquisition candidates. The Company eventually decided not to
pursue a transaction with such parties for various reasons. On December 13,
1999, I-Net was incorporated in the State of Delaware

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<PAGE>

On December 27, 1999, legal counsel for I-Net delivered a form of
merger agreement to the Company and its counsel.

On January 3, 2000, the Company Board commenced a meeting whereby it
had a discussion of the terms of the proposed transaction with I-Net. The
Company's management reviewed with the Board the discussions held with another
acquisition candidate. The meeting of the Company Board was adjourned until
January 4, 2000, at which time the Company Board formally authorized the
retention of HFBE as its financial advisor relating to the merger with I-Net.

On January 13, 2000, the Company Board held a meeting whereby it held
detailed discussions relating to the terms of the proposed Merger Agreement. At
such meeting, HFBE presented its financial analysis of the Company's valuation
(assuming the consummation of the proposed Sale of Assets to TSC) and the
proposed transaction with I-Net. The Company Board authorized the Company's
officers to negotiate and finalize the definitive merger agreement with I-Net.

On January 21, 2000, the Company Board met to discuss the terms of the
definitive merger agreement with I-Net. At such meeting, HBFE rendered an oral
fairness opinion to the Company Board, which was subsequently confirmed in
writing. Following the Company Board's review of the terms of the transaction,
the Company Board unanimously determined (with Mr. Jerriel L. Evans, Sr.
abstaining from the vote), that the Merger Agreement and the transactions
contemplated thereby are in the best interests of the Company's shareholders,
approved the Merger Agreement and the transactions contemplated thereby and
recommended that the Company's shareholders approve and adopt the Merger
Agreement and the transactions contemplated thereby.

On January 23, 2000, the Company and I-Net executed and delivered the
definitive Agreement and Plan of Merger. On January 24, 2000, the Company issued
a press release announcing the execution of the Merger Agreement. On January 28,
2000, the Company Board approved changes to the Merger Agreement. On January 31,
2000, an amended and restated Agreement and Plan of Merger was executed in order
to clarify and confirm the agreement of the parties relating to the proposed
transaction to eliminate certain closing conditions and to grant I-Net
additional termination rights.

By a letter dated February 17, 2000, Nasdaq notified the Company that
it was being delisted from Nasdaq National Market as of the close of business on
February 17, 2000. The Company issued a press release announcing its delisting
on February 18, 2000. After the delisting notification, the parties renegotiated
certain terms of the Merger Agreement. On February 22, 2000, the Company Board
reviewed the renegotiated terms and unanimously determined (with Mr. Jerriel L.
Evans, Sr. abstaining from the vote), that the new terms and the transactions
contemplated thereby are in the best interests of the Company's shareholders,
approved a further amendment to the Merger Agreement and recommended that the
Company's shareholders approve and adopt the Merger Agreement as amended and the
transactions contemplated thereby. On February 24, 2000, I-Net's legal counsel
delivered a draft of Amendment No. 1 to Amended and Restated Agreement and Plan
of Merger ("Amendment No. 1"). On March 1, 2000, the parties executed Amendment
No. 1 to remove the listing of the Company Common Stock on Nasdaq as a condition
to closing and to permit I-Net to issue warrants to purchase up to 3,000,000
shares of I-Net Common Stock at no less than $1.00 per share in order to
consummate the I-Net Financing (as defined below), among other things.

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<PAGE>

Recommendation of the Company Board
- -----------------------------------

The Company Board (with Mr. Jerriel L. Evans, Sr. abstaining) has
unanimously approved the Merger Agreement and the transactions contemplated
thereby, and has determined that the Merger is fair to and in the best interests
of the Company and the Company's shareholders.

THE COMPANY BOARD RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE "FOR" THE ADOPTION AND APPROVAL OF THE MERGER AGREEMENT AND THE
MERGER.

Reasons for the Merger; Factors Considered by the Company Board
- ---------------------------------------------------------------

In approving the Merger Agreement and the Merger, the Company Board
considered a variety of factors, including:

1. The financial condition, results of operations, cash flows,
business opportunities, current strategies, business plans,
competitive position, and prospects of each of the Remaining
Businesses and I-Net, and current economic and market
conditions in the Internet and e- commerce industries.

2. The presentations of HFBE at the meetings of the Company Board
with respect to, among other things, the Merger, and the
opinion of HFBE delivered to the Company Board to the effect
that as of such date, the Merger was fair from a financial
point of view to the Company's shareholders.

3. The Company's strategic plan and the Company Board's belief
that the Company's ability to pursue the plan would be
enhanced by the Merger.

4. The Company Board's belief that the experience of Richard Dix,
I-Net's Board of Directors, I-Net's officers and its Board of
Advisors would provide the Company with the needed expertise
to compete in the Internet and e-commerce industries.

5. The fact that it is a requirement of the Merger that I-Net
raise approximately $15 million in cash, which will be used to
fund the combined company's Internet and e-commerce
operations.

6. The fact that management of the Company and its
representatives had engaged in discussions with certain
parties interested in a possible transaction involving all or
part of the Company. Based on such discussions and the views
of members of senior management of the Company, the Company
Board believed that it was unlikely that any party would
propose an acquisition or strategic business combination that
would be more favorable to the Company and its shareholders
than the Merger.

7. The arms-length negotiations between representatives of the
Company and I-Net with respect to the consideration and other
terms of the Merger, and the Company Board's belief that the
terms of the Merger Agreement, including the Merger
Consideration and the exchange ratio, represents the most
favorable terms that could be negotiated with I-Net.

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<PAGE>

8. The fact that the Merger Agreement permits the Company to
provide access and furnish information to, and participate in
discussions or negotiations with, third parties in response to
a Superior Proposal if the Company Board determines in good
faith, after receiving formal advice from its financial
advisor and outside counsel, that taking such action is
reasonably necessary for the Company Board to comply with its
fiduciary duties to the Company's shareholders under
applicable law.

The Company Board was aware of the fact that Mr. Dix, the President of
I-Net, previously served as an executive officer of the Company. See "Prior
Relationship between the Company and Richard Dix." The Company Board also
considered a variety of potentially negative factors relating to the Merger,
including (i) the dilutive effect of issuance of Company Common Stock to the
I-Net stockholders, option holders and warrant holders, (ii) the uncertainty of
I-Net's development and the fact that I-Net has no historical operations, (iii)
the transaction costs, (iv) the fact that the Sale of Assets was a condition to
I-Net's obligations under the Merger Agreement, (v) the risks that the
anticipated benefits of the Merger might not be obtained and (vi) the
termination fees and expenses payable by the Company if the Merger is not
consummated.

The foregoing discussion of the information and factors considered by
the Company Board is not intended to be exhaustive, but includes the material
factors considered by the Company Board. In view of the variety of factors
considered in connection with its evaluation of the Merger, the Company Board
did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination and recommendation. Individual directors may have given differing
weights to different factors. In addition, the Company Board considered the
interests of certain persons discussed under "-- Interests of Certain Persons."

Opinion of the Financial Advisor to the Company
- -----------------------------------------------

HFBE has acted as the Company's financial advisor in connection with
the Merger. HFBE has advised the Company Board that, in its opinion, the terms
of the merger are fair, from a financial point of view, to the Company's
shareholders. The full text of the HFBE opinion, which describes the procedures
followed, assumptions made and other matters considered in the opinion, is
included in this document as Annex C. Shareholders should read the full opinion.

HFBE'S OPINION ADDRESSES ONLY THE MERGER CONSIDERATION. IT DOES NOT ADDRESS THE
UNDERLYING BUSINESS DECISION TO PROCEED WITH THE MERGER AND DOES NOT CONSTITUTE
A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW THE SHAREHOLDER SHOULD VOTE WITH
RESPECT TO THE MERGER OR ANY OTHER RELATED MATTER.

In arriving at its written opinion, HFBE, in addition to the factors
reviewed with respect to the Sale of Assets previously described, among other
things:

1. conducted discussions with members of senior management of the
Company concerning the Company's business and prospects;

2. reviewed the business plan of I-Net and held discussions with
management of I-Net regarding the execution of its business
plan;

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<PAGE>

3. reviewed the Merger Agreement, including Amendment No. 1
thereto; and

4. reviewed such other matters as HFBE deemed necessary,
including an assessment of general economic, market and
monetary conditions.

In preparing its opinion, HFBE relied on the accuracy and completeness
of all information supplied or otherwise made available to it by the Company and
I-Net. HFBE did not independently verify the furnished information, or undertake
an independent appraisal of the assets of the Company or I-Net.

HFBE's opinion is based upon market, economic, financial and other
conditions as they existed and can be evaluated as of the date of the opinion.
HFBE expressed no opinion as to the price at which the securities to be issued
in the Merger may trade after the Merger. HFBE assumed that there had been no
material change in the Company's financial condition, results of operations,
business or prospects since the date of the last financial statements made
available to HFBE. HFBE relied on advice of counsel to the Company as to all
legal matters with respect to the Company, the Merger and the Merger Agreement,
and upon the Company with respect to the accounting treatment to be accorded the
transaction. In addition, HFBE did not make an independent evaluation, appraisal
or physical inspection of the assets or individual properties of the Company or
I-Net.

The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to particular
circumstances. Therefore, the HFBE opinion is not readily susceptible to partial
analysis or summary description. Furthermore, in arriving at its opinion, HFBE
did not attribute any particular weight to any analysis or factor considered by
it, but rather made qualitative judgments as to the significance and relevance
of each analysis or factor. Accordingly, HFBE believes that its analysis must be
considered as a whole and that considering any portion of its analysis and the
factors considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its opinion. In its
analyses, HFBE made many assumptions with respect to general business and
economic conditions and other matters, many of which are beyond the control of
the Company. Estimates contained in these analyses are not necessarily
indicative of actual values or predictive of future results or values. In
addition, analyses relating to the value of the businesses do not purport to be
appraisals or to reflect the prices at which businesses may actually be sold.

Pursuant to the terms of HFBE's engagement, the Company has agreed to
pay HFBE a fee of $25,000 for rendering its opinion as to the fairness, from a
financial point of view, of the Merger. The Company has agreed to reimburse HFBE
for all its related expenses and to indemnify HFBE against certain liabilities,
including liabilities under federal securities laws arising out of HFBE's
engagement.

RELATIVECONTRIBUTION ANALYSIS. In determining the fairness from a
financial point of view of the proposed Merger, HFBE considered the fact that
the Company had generated negative operating income in the last few years, was
currently generating negative operating income and was expected to continue to
do so in the future. HFBE also considered the fact that the Company is a public
company, which was recently delisted from Nasdaq. Furthermore, the assets of the
Company remaining after the TSC transaction were also expected to generate
negative operating income. In addition, I-Net is a newly formed entity with no
operations; however, I-Net has agreed to raise $15 million in equity financing.

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<PAGE>

Based on the foregoing, HFBE analyzed the contributions of each of the
Company and I-Net in terms of net asset value ("NAV"). The value of the net
assets of the Company is based on discussions with management of the Company
regarding the value of the assets of the Company remaining after the
consummation of the TSC transaction.

HFBE observed that the relative contribution by the Company to the
combined company at closing would be between approximately 17% to 19% on a NAV
basis. HFBE compared this relative contribution with the approximately 24%
continuing ownership stake that the Company's shareholders would have in the
combined company following the Merger. Since the Company's relative contribution
was below 24%, the transaction appeared fair to HFBE.

Anticipated Accounting Treatment; Federal Income Tax Considerations
- -------------------------------------------------------------------

Since the former stockholders of I-Net will own approximately 76% of
the Company's outstanding Company Common Stock following the Merger, for
accounting purposes I-Net will be deemed to be the acquiring company and the
Company will be deemed to be the acquired company. Accordingly, the Merger will
be accounted for as a reverse purchase of the Company by I-Net using the
purchase method of accounting. The purchase method of accounting prescribes that
the acquiring company allocate the cost of an acquired company to the assets
acquired and the liabilities assumed as of the date of acquisition based on
their estimated fair values. Any excess of cost over the estimated fair values
of net assets is recorded as goodwill and is amortized over its expected benefit
period. See "Annex G - Unaudited Pro-Forma Combined Financial Statements." The
financial statements of the merged company filed for post-merger periods will
depict the acquisition of the Company by I-Net, and will include financial
statements of I-Net for pre-merger comparable periods.

The Merger is expected to constitute a "reorganization" within the
meaning of Section 368 of the Code. No gain or loss will be recognized by the
Company or I-Net or by the Company's shareholders, as a result of the Merger.

Dilution
- --------

After the Merger, the present I-Net stockholders will own
approximately 76% of the Company (85% assuming the full 9,000,000 shares
issuable in the I-Net Financing are issued and taking into consideration the
effect of outstanding options and warrants to purchase shares of I-Net Common
Stock which will be converted into substantially identical options and warrants
to purchase shares of Company Common Stock after the Merger). Because I-Net's
current stockholders will control the Company, it was important for the Company
Board to ensure that the present Company shareholders received fair
consideration as a result of the Merger. While the Company believes that the 24%
of the reorganized Company to be owned by the present Company shareholders after
the Merger is equal to or greater than 100% of the value of the Company prior to
the Merger, there can be no assurance that the Company's estimation is correct.

Nasdaq Re-listing Requirements
- ------------------------------

On February 17, 2000, the Company received a letter from the Nasdaq
Stock Market indicating that Nasdaq had determined to delist the Company Common
Stock from the Nasdaq National Market. Because it is the intention of the
parties that the Company be a Nasdaq listed company following the Merger, the
Company will need to satisfy Nasdaq's initial listing standards in order for its
shares to be listed on the Nasdaq National Market. The initial listing standards
are: (i) net tangible assets of $6 million, market capitalization,

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<PAGE>

total assets or total revenues greater than $75 million, or net income of $1
million in the most recently completed fiscal year or in two of the last three
most recently completed fiscal years; (ii) a public float of at least 1,000,000
shares; (iii) a market value of the public float of at least $5 million; (iv) a
minimum bid price of at least $5.00 per share; (v) at least 400 shareholders;
and (vii) certain corporate governance standards. The Company believes that the
reorganized Company will meet these quantitative standards after the Merger.
However, Nasdaq may also apply non-quantitative requirements to the reorganized
company, and such requirements could delay a favorable listing decision or even
cause a denial of listing.

Changes to 2000 Stock Option Plan
- ---------------------------------

Upon the consummation of the Merger, if the shareholders approve the
2000 Plan at the Meeting, the terms of the 2000 Plan will be amended to increase
the number of shares available under the 2000 Plan from 1,000,000 to 5,000,000
and to include language which will subsequently set the number of shares
available for issuance under the 2000 Plan at 5,000,000 plus 20% of the number
of shares of Company Common Stock outstanding over 25,000,000. The amendment
will also limit the aggregate number of incentive stock options which may be
granted under the 2000 Plan to 5,000,000 shares. See "Proposal 5 Adoption of
2000 Plan".

Management After the Merger
- ---------------------------

Directors

On the Record Date, the directors of the Company were Ms. Julie H.
Edwards, Mr. Jerriel L. Evans, Sr., Mr. Carl Shafer, Mr. Charles Way, Ms.
Darlene Jones, Mr. Peter Losavio and Mr. Richard Goeggel. For information
relating to the directors who constitute the current Company Board, see
"Proposal 6 - Election of Directors." Upon consummation of the Merger, Mr.
Evans, Sr., Mr. Charles Way, Mr. Peter Losavio, Ms. Darlene Jones and Mr.
Richard Goeggel shall resign from the Company Board, and Ms. Julie H. Edwards
and Mr. Carl Shafer will remain on the Company Board. Pursuant to the Merger
Agreement, I-Net has designated Mr. Richard Dix, Dr. Nancy Upton, Mr. Jack
Tompkins and Mr. Lloyd Shoppa (the "Director Appointees") to serve on the Board.
Since the Company has a classified Board of Directors divided into three
classes, the individuals set forth below will be the Company Board upon
consummation of the Merger.

Term to Expire in 2001
----------------------
Ms. Julie H. Edwards
Mr. Carl Schafer

Term to Expire in 2002
----------------------
Mr. Jack Tompkins
Dr. Nancy Upton

Term to Expire in 2003
----------------------
Mr. Richard Dix
Mr. Lloyd Shoppa

In accordance with the requirements of Rule 14f-1 promulgated under
the Exchange Act, I-Net has provided certain information to the Company to be
included in this Proxy Statement, which is set forth

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<PAGE>

below. For certain information relating to Mr. Schafer and Ms. Edwards, see
"Proposal 6" below. I-Net has advised the Company that each of the Director
Appointees has consented to serve on the Company Board and that, to the best of
its knowledge, none of the Director Appointees (i) has a family relationship
with any of the directors or executive officers of the Company, (ii)
beneficially owns any securities (or rights to acquire securities) of the
Company or (iii) has been involved in any transactions, or has any business
relationships with the Company or any of its directors, executive officers or
affiliates, of the type required to be disclosed pursuant to Rule 14f-1 under
the Exchange Act. The information contained herein concerning I-Net and its
directors has been furnished by I-Net. The Company assumes no responsibility for
the accuracy or completeness of such information.

The name, present principal occupation or employment and five-year
employment history of each Director Appointee and certain other information is
set forth below. Unless otherwise indicated, each occupation set forth opposite
an individual's name refers to employment with I-Net. Except as noted, none of
the persons listed below owns any shares of Company Common Stock or has engaged
in any transactions with respect to shares of Company Common Stock during the
past 60 days. During the last five years, neither I-Net, nor any Director
Appointee has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) nor was such person a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction, and
as a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws. Unless
otherwise indicated, all Director Appointees listed below are citizens of the
United States.

Richard B. Dix is the founder and Chairman of the Board, Chief
Executive Officer and President of I-Net. From April 1998 to June 1999, Mr. Dix
served as Executive Vice President of the Company. In addition, Mr. Dix has
served as President and Chief Executive Officer of Dix Development Corporation
since 1996. From August 1990 to December 1995, he served as President and Chief
Executive Officer of Do Rags, Inc. Mr. Dix received a BBA from Baylor
University.

Jack I. Tompkins has served as a director of I-Net since March 2000.
Mr. Tompkins served as a Senior Vice President of Enron Corp. from 1988 to 1996.
From 1996 to the present, he has served as the Managing Partner of Raintree
Capital and ARTA Equity Advisors. In 1999, Mr. Tompkins served as the CFO of
Crescent Real Estate and from 1999 to the present he has served as Chairman and
CEO of iExalt, Inc. Currently, he serves on the Board of Directors of iExalt,
Inc. and Internet Law Library, Inc.

Nancy B. Upton, Ph.D. has served as a director of I-Net since March
2000. Dr. Upton has been employed since 1983 as a University Professor at Baylor
University where she holds the Ben Williams Chair in Entrepreneurship. Dr. Upton
currently serves on the Board of Directors of Fidelity Bank of Texas, Tribo
Petroleum, BowOil Company, the Academy of Management, Entrepreneurship Division,
the United States Association of Small Business and Entrepreneurship and the
Stetson University, School of Business's Family Business Center. In addition to
her directorships, Dr. Upton is the Chair of the Executive Committee for the
Academy of Management, Entrepreneurship Division and the Vice President of the
United States Association of Small Business and Entrepreneurship's Women and
Minority Division.

Lloyd Shoppa has served as a director of I-Net since March 2000. Mr.
Shoppa served as President of Bell Helicopter, a division of Textron Inc., from
1995 and Vice Chairman from January 1997 until his retirement in 1997. Mr.
Shoppa served as President of Bell Helicopter Canada from April 1987 to April
1990. Since August 1990, Mr. Shoppa has served as Chairman and a director of
Shoppa's Material Handling, Inc.

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<PAGE>

Since November 1983, he has served as Chairman and a director of Shoppa's Farm
Supply, Inc. Since January 1999, he has served as President and a director of
Clean Air Flow, Inc. Mr. Shoppa was a 1997 inductee into the NMA Management Hall
of Fame.

Advisory Board Members

Pallab K. Chatterjee, Ph.D. has served as an advisory director of
I-Net since March 2000. Dr. Chatterjee has served as Chief Operating Officer of
i2 Technologies since March 2000. Dr. Chatterjee served as Senior Vice President
and Chief Information Officer of Texas Instruments Incorporated from 1997 to
January 2000. From January 1995 to May 1997, he served as President of Texas
Instrument's Personal Productivity Products where he was responsible for laptop
computers, educational and pocket solution products. From 1992 to January 1995,
he served as Senior Vice President and Chief Technical Officer, Semiconductor
Group and Director of Research and Development/Technology. Dr. Chatterjee served
as Vice President/Director, R&D from 1989 to 1992. He is a Senior Fellow in IEEE
and was elected to the National Academy of Engineering in 1997.

Michael H. Stone, Ph.D. has served as an advisory director of I-Net
since March 2000. Dr. Stone has served as Chairman of the Board of American Iron
Horse Motorcycle Company since September 1998. From 1994 to 1997, he served as
President and COO of the United Baseball League. From 1991 to 1994, he also
served as President and CEO of Triad Technologies International, and from 1983
to 1990, he served as President and COO of the Texas Rangers Baseball Club.

Donald L. Sexton, Ph.D. has served as an advisory director of I-Net
since March 2000. In 1994, Dr. Sexton established the National Center for
Entrepreneurship Research at the Ewing Marion Kauffman Foundation and served as
its director until his retirement in 1997. He now serves as a consultant to the
Center. From 1986 to 1994, Dr. Sexton held the William H. Davis Chair in
Entrepreneurship at Ohio State University. From 1979 to 1986, he held the Caruth
Chair in entrepreneurship and was the Director for Entrepreneurship at Baylor
University.

Donald Comrie has served as an advisory director since March 2000. Mr.
Comrie has served since 1995 as Chairman, President and Co-Founder of Xcape, a
leading web-engineering corporation. From 1994 to 1995, Mr. Comrie was a product
manager with MBI, one of the nation's leading direct marketers. Mr. Comrie
received his MBA and BA from Columbia University.

Executive Officers

The Merger Agreement provides that the following individuals will be
named as executive officers of the Company:

Name Position
---- --------
Richard Dix Chief Executive Officer and Chairman
Tom Jacobs Executive Vice-President-Operations
& Strategic Development
Craig Fleming Chief Financial Officer

For a description of the terms of employment for Mr. Dix, Mr. Jacobs
and Mr. Fleming, see "Interests of Certain Persons in the Merger."

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<PAGE>

Tom Jacobs has served as the Executive Vice President-Operations &
Strategic Development of I-Net since March 2000. Prior to joining I-Net, Mr.
Jacobs founded Astrive, Inc. and served as its President from December 1998 to
December 1999. From 1994 to 1997, Mr. Jacobs co-founded InterActive8, Inc. and
served as its Chief Executive Officer. Mr. Jacobs attended the Rochester
Institute of Technology and New York University.

Craig M. Fleming has served as Chief Financial Officer of I-Net since
March 2000. From 1993 to 1999, Mr. Fleming served as Chief Financial Officer and
Vice President-Finance of Brigham Exploration Company, an independent energy
company. From 1990 to 1993, he served as Controller of Odyssey Petroleum Co.,
Ltd., an independent energy company. After graduating with a BBA in accounting
from Texas A&M University, Mr. Fleming began his career in the audit division of
Arthur Andersen & Co. Mr. Fleming is a certified public accountant.

Vote Required
- -------------

Approval of this proposal requires the affirmative vote of at least a
majority of the outstanding shares of Company Common Stock entitled to vote on,
and that vote for or against or expressly abstain from voting, the proposal.
However, the approval of this proposal is also contingent on the approval of all
of the other Merger Proposals.

Interests of Certain Persons in the Merger
- ------------------------------------------

In considering the recommendation of the Company Board with respect to
the proposed Merger, shareholders should be aware that certain members of the
Company's management and the Company Board have interests in the proposed sale
that are in addition to the interests of the Company's shareholders generally.

Employment Agreements. Mr. Jerriel L. Evans, Sr. is currently the
President and Chief Executive Officer of the Company and Chairman of the Board.
He is also the beneficial owner of 889,460 shares of Company Common Stock. Mr.
Evans, Sr. has an employment agreement with the Company pursuant to which he is
to be paid an annual salary of at least $150,000. In conjunction with the
Merger, Mr. Evans, Sr. will be executing an amendment to his employment
agreement pursuant to which he will assist the Company for a period of twelve
months in its efforts to sell the remaining assets of the Company not relating
to its new business focus. Mr. Evans, Sr. will resign as a director of the
Company. His annual base salary will be reduced to $84,000 and he will be given
a stock option to purchase 250,000 shares at an exercise price of $3.00 per
share, which will vest quarterly over a period of twelve months. Mr. Evans, Sr.
will also continue to receive certain benefits, including participation in the
Company's employee benefit plans. Mr. Evans, Sr. has waived his rights under the
initial employment to receive a severance payment from the Company following the
change of control.

After the Effective Time, Mr. Dix will be employed as President, Chief
Executive Officer and Chairman under a three-year employment agreement
commencing as of the Effective Time of the Merger, pursuant to which he will
receive a base salary of $300,000 per annum plus an annual bonus to be
determined by the Company Board, but which shall not be less than $100,000. Mr.
Dix will receive certain benefits, including participation in the Company's
employee benefit plans. In addition, Mr. Dix currently owns 12,000,000 shares of
I-Net Common Stock and holds an option to purchase an additional 3,000,000
shares of I-Net Common Stock at an exercise price of $1.50 per share. These
shares and the option will be converted

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<PAGE>

into shares of Company Common Stock and an option to purchase Company Common
Stock in accordance with the terms of the Merger Agreement.

Craig Fleming is currently employed by I-Net as its Chief Financial
Officer. Following the Merger, Mr. Fleming will be employed by the Company in
the same capacity at an annual salary of $180,000 plus an annual bonus to be
determined by the Board of Directors. It is anticipated that, in connection with
his employment and prior to the consummation of the Merger, Mr. Fleming will be
given a stock option to purchase 300,000 shares of I-Net Common Stock at an
exercise price of $2.125, which will convert into an option to purchase Company
Common Stock upon consummation of the Merger, and will vest annually over a
three-year period.

Tom Jacobs is currently employed by I-Net as Executive Vice President
- - Operations and Strategic Development. Following the Merger, Mr. Jacobs will be
employed by the Company in the same capacity at an annual salary of $180,000
plus an annual bonus to be determined by the Board of Directors. It is
anticipated that, in connection with his employment and prior to the
consummation of the Merger, Mr. Jacobs will be given a stock option to purchase
350,000 shares of I-Net Common Stock at an exercise price of $2.125, which will
convert into an option to purchase Company Common Stock upon consummation of the
Merger, and will vest annually over a three-year period.

Severance Agreements. The Company has employment agreements with each
of Jerriel L. Evans, Sr. and Richard Goeggel. Each of these agreements provides,
in essence, that, should there be a change of control (which would include the
Sale of Assets) and the officer's employment is terminated either (i)
involuntarily, without just cause or (ii) voluntarily, if the officer has
determined in good faith that his duties have been altered in a material respect
or there has been a reduction in his compensation or employee benefits, the
officer would be entitled to receive a severance payment. With respect to the
Merger, Mr. Evans has waived his right to receive a severance payment as a
result of the Merger. In the event that Mr. Goeggel's employment is terminated,
he will be entitled to payments pursuant to his severance agreement aggregating
$30,000.

Option Vesting. Upon the consummation of the Merger, as a result of
the change of control of the Company, options to purchase 97,000 shares of
Company Common Stock, which are not currently exercisable, will vest
immediately. Of these options, (i) 50,000 options are held by Mr. Evans, Sr.,
(ii) 20,000 options are held by Mr. Goeggel and (iii) 27,000 options are held by
outside directors.

The Merger Agreement

On January 31, 2000, the Company filed a report on Form 8-K concerning
the proposed Merger with the Securities and Exchange Commission, which report
includes the Amended and Restated Merger Agreement as an exhibit thereto. On
March 2, 2000, the Company filed an amendment on Form 8-K/A which included
Amendment No. 1. See "Available Information". The following summary of the
Merger Agreement is not complete and is qualified in its entirety by reference
to the provisions in the Merger Agreement.

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<PAGE>

Terms of the Merger
- -------------------

The Company and I-Net have entered into the Merger Agreement, which
provides that a wholly-owned subsidiary of the Company will be merged with and
into I-Net with I-Net surviving the Merger as a wholly-owned subsidiary of the
Company. I-Net's stockholders will receive an aggregate of approximately
15,000,000 shares of Company Common Stock (subject to adjustment) and options to
purchase approximately 4,000,000 shares of Company Common Stock in consideration
for the Merger. In addition, to complete the I-Net Financing, I-Net may issue
warrants to purchase up to 3,000,000 additional shares of I-Net Common Stock at
no less than $1.00 per share which will convert into warrants to purchase
approximately the same number of shares of Company Common Stock upon the Merger.

Effective Time of the Merger
- ----------------------------

The Merger will become effective when the Certificate of Merger is
filed with the Secretary of State of the State of Delaware in accordance with
Delaware law or at a later date agreed upon by the parties. It is anticipated
that, if the Merger is approved at the Meeting and all other conditions to the
Merger have been fulfilled or waived, the Certificate of Merger will be filed on
or about April 22, 2000 (the "Effective Time").

Manner and Basis of Converting Shares
- -------------------------------------

As of the Effective Time of the Merger, each issued and outstanding
share of I-Net Common Stock will be converted into the right to receive the
number of shares of Company Common Stock equal to (i) the sum of (A) 15,000,000
and (B) the number of shares of Company Common Stock issuable pursuant to the
I-Net Options and I-Net Warrants, divided by (ii) the sum of (A) the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time and (B) the number of shares of Company Common Stock issuable pursuant to
the I-Net Options and I-Net Warrants (the "Exchange Ratio").

As of February 25, 2000, there were outstanding an option to purchase
3,000,000 shares of I-Net Common Stock at an exercise price of $1.50 per share
and commitments to issue additional options to purchase an aggregate of
1,000,000 shares of I-Net Common Stock at an exercise price of $2.125 per share
(collectively, the "I-Net Options"). All outstanding and unexercised I-Net
Options will be assumed by the Company under the 2000 Plan upon consummation of
the Merger. Each I-Net Option shall convert into an option to purchase the
number of shares of Company Common Stock equal to the Exchange Ratio times the
number of shares of I-Net Common Stock issuable upon exercise of the I-Net
Option immediately prior to the Merger, at an exercise price equal to the
original exercise price divided by the Exchange Ratio. The number of I-Net
Options will not exceed 4,000,000 at the Effective Time. All other terms of the
I-Net Options assumed by the Company will remain the same to the extent
permitted by the 2000 Plan

As of February 25, 2000, there were no outstanding warrants to
purchase I-Net Common Stock (the "I-Net Warrants"). I-Net is permitted to issue
warrants to purchase up to 3,000,000 shares of I-Net Common Stock in connection
with the I-Net Financing. All outstanding and unexercised I-Net Warrants will be
assumed by the Company upon consummation of the Merger. Each I-Net Warrant shall
convert into a warrant to purchase the number of shares of Company Common Stock
equal to the Exchange Ratio times the number of shares of I-Net Common Stock
issuable upon exercise of the I-Net Warrant immediately prior to the Merger, at
an exercise price equal to $1.00 divided by the Exchange Ratio. The number of
I-Net Warrants will not exceed 3,000,000 at the Effective Time. All other terms
of the I-Net Warrants assumed by the Company will remain the same.

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<PAGE>

No fractional shares of Company Common Stock will be issued in
connection with the Merger. In lieu of fractional shares, each shareholder who
would otherwise be entitled to a fractional share will instead receive the
nearest whole number of shares of Company Common Stock. Based upon the number of
outstanding shares of Company Common Stock and I-Net Common Stock as of the
Record Date, and assuming that: (i) I-Net issues 3,000,000 shares of I-Net
Common Stock to consummate the I-Net Financing (as hereinafter defined) and (ii)
there are outstanding I-Net Options to purchase an aggregate of 4,000,000 shares
of I-Net Common Stock, 19,782,340 shares of Company Common Stock will be
outstanding as of the Effective Time of the Merger, of which approximately
15,000,000 shares (75% of the total), will be issued to the holders of I-Net
Common Stock. As a result of the Merger, the former holders of I-Net Common
Stock as a group will own a majority of the outstanding shares of Company Common
Stock and will be in a position to control the election of directors and other
corporate matters which require the vote of the Company's shareholders. In
addition, Richard Dix, I-Net's President, Chief Executive Officer and Chairman,
currently owns 12,000,000 shares of I-Net Common Stock. Assuming (i) and (ii)
above are true, Mr. Dix will receive 12,000,000 shares of Company Common Stock,
and Mr. Dix will be the largest shareholder of the Company with 61% of the
outstanding shares of Company Common Stock after the Merger.

The number of shares of Company Common Stock to be issued in the
Merger is subject to adjustment based on the number of I-Net shares outstanding
at the Effective Time of the Merger. In the event that I-Net issues the maximum
of 9,000,000 additional shares of I-Net Common Stock in the I-Net Financing (or
common stock equivalents convertible into a maximum of 9,000,000 shares of I-Net
Common Stock), the number of shares of Company Common Stock the Company is
required to issue in the Merger will increase. See "I-Net Financing." As a
result of such increase in shares of I-Net Common Stock outstanding prior to the
Merger, the Exchange Ratio will decrease and the total number of shares of
Company Common Stock immediately issuable will increase to approximately
16,500,000. In such event, the total number of shares of Company Common Stock
issuable upon the conversion of the I-Net Options and I-Net Warrants, if issued,
will decrease to approximately 5,500,000. The number of shares of Company Common
Stock issuable to the stockholders of I-Net described above may also be
increased in the event that the Company issues shares of Company Common Stock to
settle the class action lawsuit filed against it in the United States District
Court for the Southern District of Texas as disclosed in the Company's Annual
Report on Form 10- K, as amended. See "Available Information." This provision
only relates to the 15,000,000 shares of I-Net Common Stock and does not extend
to any shares underlying the I-Net Warrants and I-Net Options.

In the event the Company issues Company Common Stock in a settlement
relating to the class action lawsuit, the Company would be required to issue
such additional shares of Company Common Stock to the I-Net stockholders so as
to maintain their ownership of approximately 76% of the Company Common Stock
after the consummation of the Merger. For example, if the Company issues 200,000
shares of Company Common Stock to settle the class action lawsuit, the number of
shares outstanding after the consummation of the Merger would increase to
approximately 19,982,340 shares. The Company would need to issue an additional
146,614 shares of Company Common Stock to the I-Net stockholders to maintain
their 76% ownership.

Exchange of Certificates
- ------------------------

Promptly after the Effective Time of the Merger, the Company will
arrange for the holders of certificates of I-Net Common Stock to receive in
exchange therefor certificates evidencing the number of shares of Company Common
Stock that such holders of I-Net Common Stock are entitled based on the
applicable Exchange Ratio. Until an I-Net stock certificate has been surrendered
to the Company, each such

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<PAGE>

certificate shall be deemed at any time after the Effective Time of the Merger
to represent the right to receive, upon such surrender, certificates for such
number of shares of Company Common Stock as the shareholder is entitled to under
the Merger Agreement.

Representations and Warranties
- ------------------------------

In the Merger Agreement, I-Net and Richard Dix (the "Principal
Shareholder") have made various representations and warranties (subject in some
cases to materiality and knowledge qualifiers) relating to, among other things,
I-Net's business and financial condition, the parties' requisite corporate
authority to enter into and perform their obligations under the Merger
Agreement, the absence of a breach or violation of or default under I-Net's
charter or bylaws or internal rules as a result of the consummation of the
Merger, the capitalization of I-Net, that upon the transfer in connection with
the Merger of the issued and outstanding capital stock of I-Net such shares will
be duly authorized, validly issued, fully paid and nonassessable, the assets and
liabilities of I-Net, the accuracy of I-Net's tax returns and other filings with
applicable taxing authorities, the satisfaction of certain legal requirements,
including the receipt of all governmental, regulatory and other necessary
consents or waivers for the Merger, the absence of litigation and the absence of
certain changes in I-Net's business having a material adverse affect on I-Net's
business.

The I-Net stockholders have also made representations and warranties
relating to their ownership of the I-Net Common Stock, including that the I-Net
stockholders have good and marketable title to such shares, free and clear of
any liens, that the transfer of such shares in connection with the Merger will
pass good and marketable title to such shares, free and clear of any liens, and
as to their intent to acquire the Company Common Stock to be issued in the
Merger solely for each I-Net stockholder's own account and without a view to, or
for offer or resale in connection with, any distribution thereof.

The Company has made various representations and warranties (subject
in some cases to materiality and knowledge qualifiers) relating to, among other
things, its business, its requisite corporate authority to enter into and
perform its obligations under the Merger Agreement, the absence of a breach or
violation of or default under its charter or bylaws or internal rules or
regulations governing conduct of corporate actions as a result of the
consummation of the Merger, the accuracy and timeliness of its various filings
with the Securities and Exchange Commission ("SEC") (except as otherwise
disclosed to the I-Net stockholders), the Company's business and financial
condition, the capitalization of the Company, the accuracy of the Company's tax
returns and other filings with applicable taxing authorities, the satisfaction
of certain legal requirements, including the receipt of all governmental,
regulatory and other necessary consents or waivers for the Merger, the accuracy
of the Company's financial statements delivered to I-Net or contained in the
Company's filings with the SEC, that the Company will not be a party to any
contracts in excess of $25,000 at the Effective Time, the absence of litigation
(except as disclosed to the I-Net stockholders) and the absence of certain
changes in the Company's business having a material adverse affect on the
Company's business. In addition, the Company has made representations and
warranties, that, upon issuance pursuant to the terms of the Merger Agreement,
the Company Common Stock will be duly authorized, validly issued, fully paid and
nonassessable. All representations, warranties, covenants and agreements of the
Company, I-Net, the I-Net stockholders and the Principal Shareholder expire at
the Effective Time, other than covenants and agreements that by their terms
contemplate performance after the Effective Time.

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<PAGE>

Conduct of Business Prior to Closing
- ------------------------------------

Pursuant to the Merger Agreement, the parties have agreed that, prior
to the Closing Date and except as otherwise set forth in the Merger Agreement or
consented to or approved by the parties in writing, the Company and I-Net shall
each conduct its business in the ordinary course consistent with past practice
and, except as permitted by the Merger Agreement, neither shall alter its
capital structure, increase its capitalization, or otherwise alter its business
operations.

Notwithstanding the foregoing, I-Net may:

o solicit, enter into agreements for, raise in a transaction or
series of transactions an aggregate of $15,000,000 in a
private placement or private placements of I-Net Common Stock,
shares of preferred stock, warrants to purchase up to
3,000,000 shares of I-Net Common Stock and debt which is
convertible into shares of I-Net Common Stock;
o recruit and hire executives and other employees;
o apply for trade names and trademarks;
o issue options to purchase an aggregate of 1,000,000 shares of
I-Net Common Stock;
o begin a web site design and development business, not to
exceed $500,000 in costs; and
o lease corporate office space.

Similarly, the Company may consummate the Sale of Assets and a private
placement of shares of Company Common Stock not to exceed 750,000 shares. The
Company may not, however, settle or agree to settle any action or proceeding
pending before any court or governmental body without the prior approval of
I-Net.

Acquisition Proposals
- ---------------------

In the Merger Agreement, the Company agreed that it would not solicit,
initiate or encourage, participate in any discussions or negotiations, or enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement relating to the sale of the Company to a third party.

Notwithstanding the foregoing, until the date on which shareholder
approval of the Merger is obtained, the Company may terminate the Merger
Agreement if it receives an inquiry, proposal or offer from any third person
relating to the sale of the Company to such third party which the Company Board
by majority vote determines in good faith is likely to be consummated and result
in a more favorable transaction to the Company's shareholders from a financial
point of view than the Merger (a "Superior Proposal"). Prior to terminating the
Merger Agreement, the Company must notify I-Net in writing of the terms of the
Superior Proposal and may not accept and enter into the Superior Proposal until
after the third business day following I-Net's receipt of such notice. In the
event the Company terminates the Merger Agreement as a result of a Superior
Proposal, it will be required to pay I-Net a termination fee. For further
information, see "-- Merger Expense Reimbursement; Break-up Fee."

Closing Conditions
- ------------------

The respective obligations of the Company, I-Net and the I-Net
stockholders to consummate the Merger are subject to:

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<PAGE>

o approval by the Company's shareholders of (i) the Sale
Proposal; (ii) a change of the corporate name of the Company
to "I-Net Holdings, Inc." at or prior to the Closing Date,
(iii) an increase in the number of authorized shares of
Company Common Stock to 100,000,0000 shares, and (iv) the
election of the Officers and directors as described in "Merger
- Management After the Merger" above;
o the condition that there will be no provision of any
applicable law or regulation and no judgment, injunction,
order or decree prohibiting or enjoining the consummation of
the Merger;
o the parties having received all required third party consents
and approvals; and
o I-Net having completed, or completing concurrently with the
Effective Time, the I-Net Financing.

The obligation of the Company to consummate the Merger is subject to:

o the performance of each of I-Net and the I-Net stockholders in
all material respects all of its obligations hereunder
required to be performed by it at or prior to the Effective
Time;
o the representations and warranties of I-Net and the I-Net
stockholders contained in the Merger Agreement and in any
certificate or other writing delivered by I-Net and the I-Net
stockholders being true and correct at and as of the Effective
Time as if made at and as of such time (except to the extent
such representations and warranties speak specifically as of
an earlier date);
o the Company having received a certificate signed by the
President or a Vice-President of I-Net to the foregoing
effect;
o since the date of the Merger Agreement, there not having been
any event, occurrence, development or state of circumstances
which, individually or in the aggregate, has had a material
adverse effect on I-Net; and
o employment agreements with Mr. Evans and the Principal
Shareholder having been fully executed by the parties thereto,
other than the Company.

The obligations of I-Net and the I-Net stockholders to consummate the
Merger are subject to:

o the consummation of the Sale of Assets by the Company;
o at the Effective Time, the Company and its subsidiaries having
at least $3,500,000 in net assets;
o there not having been any event, occurrence, development or
state of circumstances which, individually or in the
aggregate, has had a material adverse effect on the Company;
o the performance of the Company in all material respects all of
its obligations under the Merger Agreement required to be
performed by it at or prior to the Effective Time;
o the representations and warranties of the Company contained in
the Merger Agreement and in any certificate or other writing
delivered by the Company being true and correct at and as of
the Effective Time as if made at and as of such time (except
to the extent such representations and warranties speak
specifically as of an earlier date);
o I-Net having received a certificate signed by the President or
a Vice-President of the Company to the foregoing effect;
o except as disclosed to I-Net, the Company having timely filed
all documents and reports required to be filed under the
Exchange Act and the Securities Act;

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<PAGE>

o employment agreements with Mr. Evans and the Principal
Shareholder having been fully executed by the parties thereto,
other than I-Net; and
o the due diligence conducted by I-Net and its representatives
with respect to the consolidated class action suit filed
against the Company in the United States District Court for
the Southern District of Texas on December 6, 1999 not having
caused I-Net or its representatives to become aware of any
facts relating to the class action suit which, in good faith
judgment of I-Net, make it inadvisable for I-Net to proceed
with the consummation of the Merger.

In addition, the Company has agreed to use its best efforts to have
the shares of Company Common Stock approved for initial listing on the Nasdaq
National Market or listing on a national securities exchange agreed upon by the
parties in writing.

Waiver of Conditions
- --------------------

Each party to the Merger Agreement may, to the extent legally
permitted, extend the time for performance of any obligations of any other party
to the Merger Agreement, or waive compliance of any party with any terms or
conditions in the Merger Agreement.

Voting Agreement
- ----------------

In connection with the execution of the Merger Agreement, Jerriel L.
Evans, Sr. and certain other affiliated shareholders of the Company have agreed
to vote all shares of Company Common Stock held by them in favor of the Merger
Agreement and the Merger. The shares covered by this agreement currently equal
16.9% of the outstanding shares of Company Common Stock. Such agreement is not
intended to prohibit any shareholder who is also a director of the Company from
acting in accordance with the shareholder's respective fiduciary duty as a
director of the Company.

Registration Rights
- -------------------

The shares of Company Common Stock to be issued upon the effectiveness
of the Merger to the stockholders of I-Net will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the
exemption provided by Section 4(2) of the Securities Act as a transaction not
involving any public offering and under applicable state securities laws. Such
non-public offering is in part based upon the investment representations of the
recipients of the shares. The shares to be issued upon the Merger will be
"restricted securities" within the meaning of the Securities Act and will not be
transferrable without further compliance with the registration requirements of
the Securities Act or compliance with an exemption from such requirements.
Neither the Company nor I-Net has received an opinion of legal counsel with
regard to the availability of such exemption and no assurance can be given that
the SEC and/or the securities administrators of certain states would concur that
the Section 4(2) exemption and equivalent state non-public offering/private
offering exemptions are available for the transaction.

Pursuant to a Registration Rights Agreement, the Company will provide,
at its expense, the I-Net stockholders with four demand and unlimited piggy-back
registration rights to register the resale of such shares under the Act. The
Company has agreed to use its best efforts to register all of the shares issued
to the I-Net stockholders promptly after the Effective Time.

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<PAGE>

I-Net Financing
- ---------------

In accordance with the Merger, I-Net is required to seek to complete a
private placement of I-Net Common Stock, preferred stock or convertible debt
(which must convert into I-Net Common Stock immediately prior to the Effective
Time) and/or I-Net Warrants resulting in at least $15.0 million in net proceeds
on or before the Effective Time (the "I-Net Financing"); provided, however, that
to consummate the I-Net Financing, I-Net may not, without the prior written
consent of the Company, issue more than (i) 9,000,000 shares of I-Net Common
Stock (including shares issuable upon the conversion of preferred stock or
convertible debt) or (ii) warrants to purchase more than 3,000,000 shares of
I-Net Common Stock. Upon consummation of the closing of the I-Net Financing, the
investors in such financing shall be deemed I-Net stockholders under the Merger
Agreement. The aggregate number of shares issuable by the Company as merger
consideration is subject to adjustment depending on the number of shares issued
as a result of the I- Net Financing. In the event of an increase or decrease in
the aggregate number of shares of Company Common Stock issuable to the I-Net
stockholders, there will be a corresponding decrease or increase, respectively,
of the number of shares of Company Common Stock that will be issuable upon
exercise of the I-Net Options and I-Net Warrants.

Governmental and Regulatory Approvals
- -------------------------------------

I-Net and the Company are aware of no governmental or regulatory
approvals required for consummation of the Merger, other than compliance with
applicable securities and "blue sky" laws of various states and the filing of
the Certificate of Merger under Delaware law.

Merger Expense Reimbursement; Break-up Fee
- ------------------------------------------

Whether or not the Merger is consummated, each of the Company and
I-Net will be responsible for its own costs and expenses incurred in connection
with the Merger and the transactions contemplated thereby.

If the Company terminates and cancels the Merger Agreement because the
Company receives and accepts a Superior Proposal, the Company shall pay I-Net a
termination fee of $250,000. If the Merger Agreement is terminated by the I-Net
stockholders if the Company Board fails to recommend the Merger to its
shareholders, seeks to enter into in discussions with a third party for the sale
of the Company (other than a Superior Proposal), recommends the approval of a
competing acquisition proposal (other than a Superior Proposal) or breaches any
material representation, warranty, covenant or other agreement, the Company will
pay I-Net a termination fee of $250,000. In the event the Company breaches any
material representation, warranty, covenant or other agreement, it will also
reimburse I-Net for any and all reasonable fees and expenses relating to or
arising out of the transactions contemplated by the Merger Agreement, in an
amount not to exceed $50,000 in the aggregate. If the Merger Agreement is
terminated by the Company if as a result of I-Net breaching any material
representation, warranty, covenant or other agreement, I-Net will pay the
Company a termination fee of $250,000, and reimburse the Company for any and all
reasonable fees and expenses relating to or arising out of the transactions
contemplated by the Merger Agreement, in an amount not to exceed $50,000 in the
aggregate. The failure of the Company to complete a private placement of shares
of Company Common Stock, not to exceed 750,000 shares or the failure of I-Net to
consummate the I-Net Financing will not result in the payment of a termination
fee or the reimbursement of any expenses to the Company.

-48-

<PAGE>

Termination
- -----------

The Merger Agreement may be terminated and cancelled at any time prior
to the Closing Date by mutual written consent of the Company, and the I-Net
stockholders. The Merger Agreement may be terminated by either the Company or
the I-Net stockholders if: (i) any of the representations or warranties of the
other party prove to be inaccurate or untrue in any respect and are not cured
within 30 days after notice thereof; (ii) any obligation, term or condition to
be performed, kept or observed by the other party under the Merger Agreement has
not been performed, kept or observed in any material respect at or prior to the
time specified in the Merger Agreement; (iii) the Effective Time shall not have
occurred on or before June 30, 2000, unless extended pursuant to the Merger
Agreement; or (iv) a court of competent jurisdiction shall have issued an order,
decree or ruling permanently retraining, enjoining or otherwise prohibiting the
transactions contemplated by Merger Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable.

Dissenters' Rights
- ------------------

Under the Texas Business Corporation Law, the Company's shareholders
are not entitled to appraisal rights in connection with the Merger or the other
transactions contemplated by the Merger Agreement.

PROPOSAL NO. 3

INCREASE OF AUTHORIZED SHARES OF COMMON STOCK

The Company Board has adopted resolutions approving and recommending
to the Company's shareholders for their approval, in the event the Merger is
approved, an amendment to Article Four of the Company's Articles of
Incorporation to provide therein for an increase in the number of authorized
shares of Company Common Stock to 100,000,000 shares. The full text of the
amended Article Four is attached hereto as Annex D.

The authorized capital stock of the Company currently consists of (i)
15,000,000 shares of Company Common Stock, of which [4,782,340] shares were
issued and outstanding as of the Record Date, 456,500 shares were reserved for
issuance upon exercise of outstanding options and 210,000 shares were reserved
for issuance upon the exercise of certain currently outstanding warrants, and
(ii) 1,500,000 shares of preferred stock, of which no shares were issued and
outstanding as of the Record Date.

Pursuant to the terms of the Merger Agreement, the Company will be
issuing an aggregate of approximately 15,000,000 shares of Company Common Stock
to the stockholders of I-Net. The Company does not currently have sufficient
shares authorized to consummate the Merger with I-Net. In addition, the Company
has agreed to increase the number of options issuable under the 2000 Plan to
5,000,000 shares, which amount shall increase automatically by 20% of the number
of issued and outstanding shares of Company Common Stock over 25,000,000 shares.
Following the consummation of the Merger, the Company desires additional
authorized shares of Company Common Stock to provide flexibility with respect to
possible future option grants (including grants under the 2000 Plan) stock
splits, equity financings, stock-for- stock mergers, stock dividends or other
transactions that involve the issuance of Company Common Stock. This proposed
amendment will further serve to preserve the Company's ability to take such
actions. The

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<PAGE>

Company Board believes the authorization of the increase in the number of shares
of Company Common Stock is in the best interest of the Company's shareholders.

Although the Company Board has no present intention of doing so,
having additional authorized shares of Common Stock could (within the limits
imposed by applicable law) issue additional shares of Company Common Stock,
which could make more difficult or discourage an attempt to obtain control of
the Company by means of a merger, tender offer, proxy contest or other means in
the future. The existence of the additional authorized shares could thus have
the effect of discouraging unsolicited takeover attempts. The issuance of new
shares could also be used to dilute the stock ownership of a person or entity
seeking to obtain control of the Company should the Company Board consider the
action of such entity or person not to be in the best interests of the
shareholders and the Company.

While the Company from time to time may consider issuing shares of
Company Common Stock in connection with mergers, the Company currently has no
plans, agreements or understandings, except in connection with the Merger with
I-Net, for issuing any shares of Company Common Stock for such purposes, nor
does the Company currently have any plans, agreements or understandings for
otherwise issuing any shares of Company Common Stock other than in connection
with outstanding options and options to be issued in connection with the Merger
Agreement and the transactions contemplated thereby or under the 2000 Plan. In
addition, the Company currently has no plans, agreements or understandings for
issuing any shares of its already authorized preferred stock. However, if this
proposal is approved by the Company's shareholders, subject to compliance with
applicable laws and regulations, the Company Board in most instances could
authorize the issuance of all or part of the additional shares at any time for
any proper corporate purpose without further shareholder action.

If approved by the Company's shareholders and if the other Merger
Proposals are approved, the amendments to the Company's Articles of
Incorporation will become effective upon filing with the Secretary of State of
the State of Texas a Certificate of Amendment, which filing is expected to take
place prior to the Effective Time.

Vote Required
- -------------

Approval of this proposal requires the affirmative vote of two-thirds
of the outstanding shares of Company Common Stock entitled to vote thereon.
Unless otherwise specified, the persons designated in the proxy will vote the
shares covered thereby at the Meeting FOR the approval of the Amendment.

Recommendation of the Board of Directors
- ----------------------------------------

THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY'S
COMMON STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.

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<PAGE>

PROPOSAL NO. 4

AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO CHANGE THE
COMPANY'S NAME

The Company Board has adopted resolutions approving and recommending
to the Company's shareholders for their approval, in the event the Merger is
approved, an amendment to the Articles of Incorporation that will change the
Company's name from "Evans Systems, Inc." to "I-Net Holdings, Inc." The full
text of the amendment to the Company's Articles of Incorporation is attached
hereto as Annex D. In the judgment of the Company Board, the change of the
corporate name better reflects the Company's core business focus following
consummation of the Merger as an Internet company and a provider of e-commerce.
The Company also believes the name change will enable the Company to better
create brand identity of its business operations. If the proposed name change is
adopted, the Company intends to use the name I-Net Holdings, Inc. following the
Merger, in its communications with shareholders and the investment community.

If the amendment is adopted, shareholders will not be required to
exchange outstanding stock certificates for new certificates. If approved by the
shareholders, the amendment to the Articles of Incorporation will become
effective upon the filing of a Certificate of Amendment to the Articles of
Incorporation with the Secretary of State of the State of Texas, which filing is
expected to take place shortly after the Meeting.

Recommendation of the Board of Directors
- ----------------------------------------

THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE COMPANY
COMMON STOCK VOTE "FOR" THE APPROVAL OF THIS PROPOSAL.

PROPOSAL NO. 5

ADOPTION OF 2000 OPTION PLAN

The Company Board has adopted resolutions approving and recommending
to the Company's shareholders for their approval proposal to approve the 2000
Stock Option Plan (the "2000 Plan"), set forth in Annex E to this proxy
statement. The 2000 Plan will not become effective unless it is so approved by
the Company's shareholders. The following summary of the 2000 Plan is qualified
in its entirety by reference to Annex E.

The Company Board believes that the continued growth and profitability
of the Company depends, in large part, upon the ability of the Company to
maintain a competitive position in attracting and retaining key personnel. The
purpose of the 2000 Plan is to act as an incentive, to retain in the employ and
as directors

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<PAGE>

of the Company, persons of training, experience and ability, to attract new
employees and directors, whose services are considered valuable, to encourage
the sense of proprietorship and to stimulate the active interest of such persons
in the development and financial success of the Company and its subsidiaries. If
the Merger is not consummated, up to 1,000,000 shares of Company Common Stock
will be reserved (subject to adjustment in the event of stock splits and other
similar events) and may be issued pursuant to awards granted under the 2000
Plan. If the Merger is consummated, an amendment to the 2000 Plan increasing the
number of shares of Company Common Stock reserved under the 2000 Plan to an
initial amount of 5,000,000 shares, which amount will be adjusted to equal 20%
of the number of shares of Company Common Stock outstanding over 25,000,000
shares (subject to adjustment in the event of stock splits and other similar
events) and may be issued pursuant to awards granted under the 2000 Plan. The
closing bid price of the Company Common Stock on the OTC Bulletin Board on
February 24, 2000 was $2.88 per share.

Administration
- --------------

The 2000 Plan is administered by the Company Board. Pursuant to the
terms of the 2000 Plan, the Company Board has appointed a committee (the
"Committee") to administer certain aspects of the 2000 Plan. The Committee has
the authority to make rules and regulations for the administration of the 2000
Plan.

Eligibility of Employees
- ------------------------

The persons eligible for participation in the Plan as recipients of
options (the "Optionees") shall include employees, officers, directors,
consultants and advisors of the Company or any of its subsidiaries; provided
that incentive stock options may only be granted to employees of the Company and
its subsidiaries. In selecting Optionees, and in determining the number of
shares to be covered by each option granted to Optionees, the Committee may
consider the office or position held by the Optionee or the Optionee's
relationship to the Company, the Optionee's degree of responsibility for and
contribution to the growth and success of the Company or any Subsidiary, the
Optionee's length of service, age, promotions, potential and any other factors
that the Committee may consider relevant. An Optionee who has been granted an
option hereunder may be granted an additional option or options, if the
Committee shall so determine. As of February 19, 2000, approximately 242
employees were eligible to participate in the 2000 Plan.

Company Common Stock Subject to the 2000 Plan
- ---------------------------------------------

The 2000 Plan currently authorizes the issuance of a maximum of
1,000,000 shares of Common Stock. The maximum number of shares that may be
subject to options granted under the 2000 Plan to any individual in any calendar
year may not exceed 500,000, and the method of counting such shares shall
conform to any requirements applicable to "performance-based" compensation under
Section 162 (m) of the Internal Revenue Code of 1986, as amended (the "Code").
If any option under the 2000 Plan shall expire or terminate for any reason,
without having been exercised in full, the unpurchased shares subject thereto
shall again be available for the purposes of the 2000 Plan.

Upon the consummation of the Merger, if the 2000 Plan is approved, the
terms of the 2000 Plan will be amended to increase the number of shares
available under the 2000 Plan from 1,000,000 to 5,000,000 and to include
language which will subsequently tie the number of shares available under the
2000 Plan to the number of shares of Company Common Stock outstanding. As a
result of the amendment, the number of shares available under the 2000 Plan will
increase to equal 20% of the number of shares of Company Common Stock
outstanding over 25,000,000 shares. The amendment will also limit at 5,000,000
the number

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<PAGE>

of shares which may be issued as incentive stock options under the 2000 Plan.
The amendment to the 2000 Plan is set forth in Annex F to this proxy statement.
By approving this proposal, shareholders are also approving the increase in the
option plan upon consummation of the Merger. See also "The Merger Changes to
2000 Stock Option Plan."

Options to purchase an aggregate of 295,000 shares of Company Common
Stock were granted by the Board in January 2000 through March 2000 under the
2000 Plan. Of such options, (i) Jerriel L. Evans, Sr. was granted an option to
purchase an aggregate of 250,000 shares of Company Common Stock at an exercise
price of $3.00, (ii) Charles Way was granted an option to purchase an aggregate
of 7,000 shares of Company Common Stock at an exercise price of $3.13, (iii)
Darlene Evans Jones was granted an option to purchase an aggregate of 5,000
shares of Company Common Stock at an exercise price of $3.13, (iv) Jerry Evans,
Jr. was granted an option to purchase an aggregate of 27,000 shares of Company
Common Stock at an exercise price of $3.13 and (v) four employees of the Company
were each granted options to purchase 1,500 shares of Company Common Stock at an
exercise price of $3.13. All of such options are subject to and conditioned upon
stockholder approval of the 2000 Plan. In the event that the 2000 Plan is not
approved by shareholders, the Company intends to issue such options outside of
the 2000 Plan. The 2000 Plan will become effective upon such approval.

In addition, following the consummation of the Merger, the I-Net
Options will be converted into options to purchase approximately 4,000,000
shares of Company Common Stock, all of which will be covered by the 2000 Plan.

Exercise Price and Terms
- ------------------------

The option price per share applicable to options granted under the
2000 Plan shall be determined by the Committee, but (i) as to an incentive stock
option shall not be less than 100% of the fair market value per share of Company
Common Stock on the date such option is granted and (ii) as to a non-qualified
stock option, shall not be less than 80% of the fair market value on the date
such option is granted. If an option granted to the Company's Chief Executive
Officer or to any of the Company's other four most highly compensated officers
is intended to qualify as "performance-based" compensation under Section 162 (m)
of the Code, the exercise price of such option shall not be less than 100% of
the fair market value on the date such option is granted. The Committee shall
fix the term of each option, provided that the maximum length of the term of
each option granted under the 2000 Plan shall be ten years.

Federal Income Tax Consequences
- -------------------------------

The following summary is based on an analysis of the Code as currently
in effect, existing laws, judicial decisions, administrative rulings,
regulations and proposed regulations, all of which are subject to change.
Moreover, the following is only a summary of United States federal income tax
consequences. Actual tax consequences may be either more or less favorable than
those described below depending on a participant's particular circumstances.
Accordingly, each participant should consult his or her own tax advisor with
respect to the tax consequences of participation in the 2000 Plan.

Incentive Stock Options. Incentive stock options granted under the
2000 Plan are intended to be "incentive stock options" within the meaning of
Section 422 of the Code. Under present law, the grantee of an incentive stock
option will not realize taxable income upon the grant or the exercise of the
incentive stock option and the Company will not receive an income tax deduction
at either such time. However, if the

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<PAGE>

incentive stock option is exercised more than three (3) months after the
optionee has left the employ of the Company, the optionee will recognize taxable
income equal to the difference between the fair market value of the Company
Common Stock at the time of exercise and the sum of the optionee's basis in the
option (if any) plus any consideration paid by the optionee upon such exercise.
Generally, if the optionee was an employee of the Company at any time during the
period beginning on the date the option is granted and ending on the date three
(3) months before the date such option is exercised and the optionee does not
sell the Company Common Stock acquired upon exercise of an incentive stock
option within either (i) two years after the grant of the incentive stock option
or (ii) one year after the date of exercise of the incentive stock option, the
gain upon a subsequent sale of the Company Common Stock will be taxed as
long-term capital gain. If the optionee, within either of the above periods,
disposes of the Company Common Stock acquired upon exercise of the incentive
stock option ( a "disqualifying disposition"), the optionee must recognize as
compensation income, the gain upon such disposition. Generally, the gain would
be equal to the difference between the option's exercise price and the Company
Common Stock's fair market value at the time of exercise. This compensation
income will be added to the option's basis for purposes of determining the
capital gain, as discussed below, on the disposition of the acquired Company
Common Stock. If the price that the optionee received on the disqualifying
dispositions of the Company Common Stock would result in a loss to the optionee
if the foregoing tax rule regarding disqualifying dispositions were applied,
then the amount of compensation income that the optionee would recognize would
be the excess, if any, of the amount realized on the sale over the basis of the
acquired Company Common Stock. In such event, the Company would be entitled to a
corresponding income tax deduction equal to the amount recognized as
compensation income by the optionee. The gain in excess of such amount
recognized by the optionee as compensation income would be taxed as long-term
capital gain or short-term capital gain (subject to the holding period
requirements for long-term or short-term capital gain treatment).

The exercise of an incentive stock option will generally result in the
excess of the Common Stock's fair market value on the date of exercise over the
exercise price being included in the optionee's alternative minimum taxable
income ("AMTI"). If, however, a disqualifying disposition occurs in the year in
which the option is exercised, the maximum amount that will be included in AMTI
is the gain on the disposition of the Company Common Stock. Should there be a
disqualifying disposition in a year other that the year of exercise, the income
resulting from the disqualifying disposition will not be considered income for
alternative minimum tax purposes. In addition, the basis of the Company Common
Stock for determining gain or loss for alternative minimum tax purposes will be
the exercise price for the Common Stock increased by the amount that AMTI was
increased due to the earlier exercise of the Common Stock. Liability for the
alternative minimum tax is a complex determination and depends upon an
individual's overall tax situation. Before exercising an incentive stock option,
an optionee should discuss the possible application of the alternative minimum
tax with his tax advisor.

Non-Qualified Stock Options. Upon exercise of a non-qualified stock
option granted under the Plan, the optionee will recognize ordinary income in an
amount equal to the excess of the fair market value of the Company Common Stock
received over the exercise price of such Company Common Stock. That amount will
increase the optionee's basis in the Company Common Stock acquired pursuant to
the exercise of the option. Upon a subsequent sale of , the optionee will
recognize short term or long term capital gain or loss depending upon his
holding period for the Company Common Stock and upon the subsequent appreciation
or depreciation in the market value of the Company Common Stock. The Company
will be allowed an income tax deduction for the amount recognized as
compensation income by the optionee upon the optionee's exercise of the option.

-54-

<PAGE>

During the last completed fiscal year and through the Record Date,
options to purchase shares of Company Common Stock have been granted pursuant to
the 2000 Plan to (i) the named executive officers, (ii) all current executive
officers as a group and (iii) all employees, including all current officers who
are not executive officers, as a group, as follows (options to purchase shares
of Company Common Stock have not been granted to any directors who are not
executive officers of the Company pursuant to the 2000 Plan). The shares shown
do not give effect to the conversion of the I-Net Options for options under the
2000 Plan for holders thereof pursuant to the Merger:

NEW PLAN BENEFITS (1)
2000 STOCK OPTION PLAN (2)

Name and Position Dollar Value Number of Units
- ----------------- ------------ ---------------

Jerriel L. Evans, Sr.
Chairman of the Board,
President, Chief Executive Officer N/D 250,000

Executive Group(3) N/D 89,000

Non-Executive Director Group N/D 0

Non-Executive Employee Group N/D 6,000

- --------------------

(1) N/D means that the amount is not determinable.

(2) As benefits are not determinable pursuant to Instruction 3 of Item 10
of Rule 14a-101 of the Exchange Act, benefits stated are the number of
shares covered by options granted to each of the groups of employees
under the 2000 Plan. Such grants are subject to shareholder approval
of the 2000 Plan. The future value, if any, is not determinable.

(3) Includes Mr. Goeggel, Mr. Way, Mrs. Jones and Mr. Evans, Jr. and
non-executive employees of the Company.

Required Vote
- -------------

The affirmative vote of the holders of a majority of the shares of
Company Common Stock present, in person or by Proxy, is required to approve the
2000 Plan.

Recommendation of the Board of Directors
- ----------------------------------------

THE COMPANY BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2000
PLAN.

-55-

<PAGE>

PROPOSAL NO. 6

THE DIRECTOR PROPOSAL

At the Meeting, the Company's shareholders will be asked to separately
consider and vote upon the election of the Company Board. Article Seven of the
Company's Articles of Incorporation provides for the organization of the Company
Board into three classes. All directors are chosen for a full three-year term to
succeed those whose terms expire. At the Meeting, it is proposed that two (2)
Class B directors to the Company Board be elected to serve until the 2002 Annual
Meeting of Shareholders or until their respective successors are duly elected
and shall have qualified and three (3) Class A directors be elected to the
Company Board to serve until the 2003 Annual Meeting of Shareholders or until
their respective successors are duly elected and shall have qualified. Upon
consummation of the Merger, Mr. Evans, Sr., Mr. Charles Way, Ms. Darlene Jones,
Mr. Peter Losavio and Mr. Richard Goeggel have agreed to resign from the Company
Board and Mr. Richard Dix, Dr. Nancy Upton, Mr. Jack Tompkins and Mr. Lloyd
Shoppa (the "Director Appointees") will be appointed to the Company Board. See
"The Merger Agreement Management After Merger" in Proposal 2 above for a
description of the Company Board if the Merger is consummated.

Unless otherwise specified, all Proxies received will be voted in
favor of the election of Charles N. Way and Julie H. Edwards to Class B of the
Company Board to serve until the 2002 Annual Meeting of Shareholders and in
favor of the election of Richard Goeggel, Jerriel L. Evans, Sr. and Carl W.
Schafer to Class A of the Company Board to serve until the 2003 Annual Meeting
of Shareholders. All nominees for director in this Proposal No. 6 are currently
directors of the Company. Management has no reason to believe that any of the
nominees will not remain a candidate for election at the date of the Meeting.
Should any of the nominees not then remain a candidate, the Proxies will be
voted in favor of those nominees who remain candidates and may be voted for
substitute nominees selected by the Company Board. The following table and the
paragraphs following the table set forth information regarding the current ages,
terms of office and business experience of the current and proposed directors of
the Company:

Expiration of Current
Term of Office as
Name Age Director
- ---- --- ---------------------

Nominees for Election to Class B
of the Board of Directors:

Julie H. Edwards 41 1999

Charles N. Way 57 1999

Nominees for Election to Class A
of the Board of Directors:

Richard A. Goeggel 48 2000

Jerriel L. Evans, Sr. 60 2000

Carl W. Schafer 64 2000

-56-

<PAGE>

Expiration of Current
Name Age Term of Office as
- ---- --- ---------------------

Continuing Members of the
Board of Directors:

Class C Directors:

Peter J. Losavio 58 2001

Darlene E. Jones 41 2001

Jerriel L. Evans, Sr. has been a member of the Company Board since
August 1968. Mr. Evans founded the Company in 1968 and has served as its
Chairman of the Board, President and Chief Executive Officer since that time.

Peter J. Losavio, Jr. has been a member of the Company Board since May
1993. Mr. Losavio was born in Baton Rouge, Louisiana in 1949 and graduated from
Baton Rouge High School in 1967. Mr. Losavio is a Board Certified Tax Attorney.
He became a licensed and certified accountant in Louisiana in 1979. He completed
the certified financial planning program offered by the College for Financial
Planning in Denver, Colorado in 1987. Since 1967, Mr. Lasavio has had a private
law practice in Baton Rouge, Louisiana.

Darlene E. Jones has been a member of the Company Board since December
1992. Ms. Jones is also Treasurer and serves as the Administrative Manager for
the Company. She has held these positions since 1993. She joined the Company in
1980.

Charles Way has been a member of the Company Board since March 1982
and the Controller of the Company since June 1998. Mr. Way previously served as
the Company's Chief Financial Officer and Vice President from June 1980 until
September 1997. Mr. Way joined the Company in June of 1979.

Richard A. Goeggel has been a member of the Company Board since
December 1998. Until 1997, Mr. Goeggel was employed as Vice President and CFO of
Truck Accessories Group, Inc. From 1995 to 1996 he served as financial advisor
to the Board of Directors of Stanley Stores, Inc.; and from 1989 to 1995 he was
employed with Apple Tree Markets, Inc. as Vice President, treasurer and
director. Mr. Goeggel joined the Company in January 1998 as financial advisor
and was hired as Vice President and Chief Financial Officer in June 1998.

Julie H. Edwards has been a member of the Company Board since December
1997. Ms. Edwards was employed with Smith Barney, Harris Upham & Co. from 1984
to 1991 and served as Vice President of Corporate Finance with Smith Barney,
Harris Upham & Co., from 1988 to 1991. Since 1991, Ms. Edwards has been employed
with Frontier Oil Corporation, for which she has served as Senior Vice President
of Finance and Chief Financial Officer since August 1994.

Carl W. Schafer has been a member of the Company Board since December
1992. He served as a principal of Rockefeller and Company, Inc., from 1987 to
1990. He is currently president of the Atlantic

-57-

<PAGE>

Foundation, Hamilton, New Jersey. He is currently a trustee or director of
Roadway Express, Inc., Frontier Oil Corporation, Nutraceutix, Inc., Electronic
Clearing House, Inc., Labor Ready Inc., the Paine Webber and Guardian Groups of
Mutual Funds, Harbor Branch Institution, Inc., and the Johnson Atelier School of
Sculpture.

There are no family relationships between any directors and executive
officers of the Company except that Jerriel L. Evans, Sr. and Maybell H. Evans
are husband and wife and Jerry L. Evans, Jr. and Darlene E. Jones are their son
and daughter, respectively.

Required Vote
- -------------

Directors are elected by a plurality of the votes cast, in person or
by proxy, at the Meeting. Votes withheld and broker non-votes are not counted
toward a nominee's total.

Recommendation of the Board of Directors
- ----------------------------------------

THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF THE COMPANY'S COMMON
STOCK VOTE FOR THE ELECTION OF EACH OF THE NOMINATED DIRECTORS.

Board Meetings and Committees

During the fiscal year ended September 30, 1999 ("Fiscal 1999"), the
Company Board formally met on six occasions. Each of the directors attended (or
participated by telephone in) more than 75% of such meetings of the Company
Board and committees on which he or she served during Fiscal 1999. The Company
Board has no committees other than the Compensation Committee and the Audit
Committee.

The Company's Compensation Committee, which is comprised of Peter J.
Losavio (Chairman), Carl W. Schafer and Julie H. Edwards, reviews and approves
the compensation of the Company's executive officers and administers and
interprets the Company's stock option plans. The Compensation Committee met or
took action on two occasions during Fiscal 1999.

The Company's Audit Committee, which is comprised of Carl W. Schafer
(Chairman), Peter J. Losavio and Julie H. Edwards recommends the Company's
independent auditors, reviews the scope of their engagement, consults with the
auditors, reviews the results of their examination, acts as liaison between the
Company Board and the auditors and reviews various Company policies, including
those relating to accounting and internal controls. The Audit Committee met or
took action on two occasions during Fiscal 1999.

Board of Directors Compensation

During Fiscal 1999, each director, who is not an employee of the
Company, received $1,500 for each Company Board meeting attended, and $500 for
each committee meeting attended, which was held on a day other than a Company
Board meeting day. The Company also pays its non-employee directors a monthly
retainer fee of $500. Employees of the Company receive no additional
compensation for service as a director. All directors are reimbursed for their
reasonable out-of-pocket expenses incurred in connection with their duties to
the Company.

On December 1, 1999, the Company issued each of its three outside
directors non-qualified stock options to purchase 2,500 shares of Company Common
Stock under the Company's 1995 Stock Option Plan.

-58-

<PAGE>

In December 1998, the Company granted certain members of the Company
Board options to acquire an aggregate of 75,000 shares at $11.63 per share.

Executive Officers of the Company

The following table contains the names, positions and ages of the
executive officers of the Company who are not directors.

Principal Occupation for the Past
Name Five Years and Current Public Directorships Age
- ---- ------------------------------------------- ---

Jerry L. Evans, Jr. Mr. Evans has been with the Company for over 34
fifteen years, having started with the
Company as a Store Associate in 1983. Mr.
Evans served as Vice President of Investor
Relations from 1993 to 1998 when he was
appointed Vice President of Corporate and
Investor Relations and Human Resources in
April 1998.

Maybell Evans Ms. Evans has served as the Company's 60
Secretary since its inception. She served as
a member of the Company Board from August
1968 until January 2000. Ms. Evans joined the
Company full time in 1968, managing accounts
receivable, collections, and corporate
affairs.

-59-

<PAGE>

Executive Compensation

The following table sets forth, for the fiscal years ended September
30, 1999, 1998, and 1997, certain summary information concerning annual and
long-term compensation paid by the Company for services in all capacities to the
Company of the Chief Executive Officer, and the other most highly compensated
executive officers of the Company at September 30, 1999 who received
compensation of at least $100,000 during Fiscal 1999 (collectively, the "Named
Officers").

SUMMARY COMPENSATION TABLE

Annual Compensation Awards
Long Term
Compensation
-------------------------------- ----------------------------
Other Annual Restricted
Name and Compensation Stock All Other
Principal Position Year Salary($) Bonus($) ($)(1) Awards($) Options(#) Compensation
------------------ ---- --------- -------- ------ --------- ---------- ------------

<S> <C> <C> <C> <C> <C> <C> <C>
Jerriel L. Evans, Sr.(2)
Chairman of the Board, 1999 96,250 -0- -- -- 75,000 (2)
President and Chief 1998 125,093 -0- -- -- 91,500 (2)
Executive Officer 1997 125,093 -0- -- 1,210 -- (2)

Richard A. Goeggel (3)
Vice-President and 1999 120,000 -0- -- -- -0- --
Chief Financial Officer 1998 85,000 -0- -- -- 50,000 --
1997 -0- -0- -- -- -0- --
</TABLE>

- --------------------

(1) Although the officers receive certain perquisites, the value of such
perquisites did not exceed for any officer the lesser of $50,000 or 10%
of the officer's salary and bonus.

(2) In addition to the compensation for Mr. Evans set forth above, he also
receives lease income for the rental of various properties used by the
Company.

(3) Mr. Goeggel's employment with the Company (including time spent as a
consultant) began in January 1998.

-60-

<PAGE>

Option/SAR Grants in Last Fiscal Year

The following table sets forth certain information concerning
Options/SARs granted during Fiscal 1999 to the Named Officers:

Potential Realizable Value of
Assumed
Annual Rates of Stock Price
Appreciation for Option
Term(2)

Shares % of Total
Underlying Granted to Exercise or
Options/SARs Employees Base Expiration
Name Granted(#) in Fiscal 1999 ($/Share)(1) Date 5%($) 10%($)
---- ---------- -------------- ------------ ---- ----- ------

<S> <C> <C> <C> <C> <C> <C>
Jerriel L. Evans, Sr. 75,000 76% 11.75 12/01/03 $243,473 $538,012
Richard A. Goeggel - - - - - -
</TABLE>

(1) The exercise price of the options granted is equal to the market value
of the Company Common Stock on the date of grant.

(2) Potential realizable value of each grant assumes that the market prices
of the underlying security appreciates from the market value of the
Company Common Stock on the date of grant at annualized rates of 5% and
10% over the term of the award. Actual gains, if any, on stock option
exercises are dependent on the future performance of common stock.
There can be no assurance that the amounts reflected on this table will
be achieved.

Option Exercises and Fiscal Year-End Option Values

The following table sets forth all stock options exercised by the Named
Officers during Fiscal 1999 and the number and value of unexercised options held
by such executive officers at Fiscal Year-End.

Number of Securities Value of Unexercised
Underlying Unexercised In-the-money
Options at Options at
Fiscal Year-End Fiscal Year-End($)(2)
------------------------------ ------------------------------

Shares Value
Acquired on Realized
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------ ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
Jerriel L. Evans, Sr. -0- -0- 25,000 50,000 -0- -0-
Richard A. Goeggel -0- -0- 30,000 20,000 -0- -0-
</TABLE>

-61-
<PAGE>
- ---------------

(1) Value realized is calculated based on the difference between the option
exercise price and the closing market price of the Company Common Stock
on the date of exercise multiplied by the number of shares to which the
exercise relates.

(2) Value of unexercised in-the-money options is calculated based on the
difference between the option exercise price and the closing price of
the Company Common Stock at fiscal year-end, multiplied by the number
of shares underlying the options. The closing price of the Company
Common Stock as reported on the NASDAQ Stock Market on September 30,
1999 was $1.625.

Employment Agreements

Jerriel L. Evans, Sr. and the Company entered into an employment
agreement, dated April 6, 1998, for Mr. Evans to serve as President and Chief
Executive Officer of the Company through September 30, 2001. The agreement
provides for an annual base salary of $120,000 during the first year of its
term, $140,000 during the second year of its term, $150,000 during the third
year of its term and for annual increases in each of the remaining years to be
determined by the Company Board. The agreement also provides for an annual bonus
in an amount equal to 7 1/2% of the net consolidated after-tax profits of the
Company. The agreement provides that certain options granted to Mr. Evans will
vest upon a change of control of the Company. During the term of his employment
with the Company, Mr. Evans is also entitled to (i) participation in all other
benefit plans provided by the Company to its executives, (ii) four weeks paid
vacation per year, (iii) term life insurance policies in the aggregate face
amount of $2,000,000, and (iv) a $500 per month non-accountable car allowance.
The agreement also restricts Mr. Evans from competing with the Company or
soliciting customers or other business for any entity other than the Company
during the term of the agreement and from disclosing certain confidential
information with respect to the Company. In the event the Merger is consummated,
Mr. Evans has agreed to execute an amendment to his employment agreement. For a
description of the terms of his amendment, see "Proposal 2 - Interests of
Certain Persons in the Merger."

Richard A. Goeggel and the Company entered into an employment
agreement, dated June 22, 1998, for Mr. Goeggel to serve as Vice President and
Chief Financial Officer of the Company through June 15, 2000. The agreement
provides for an annual base salary of $120,000 during the first year of its term
and for annual increases in each of the remaining years to be determined by the
Company Board. The agreement provides that certain options granted to Mr.
Goeggel will vest upon a change of control of the Company. During the term of
his employment with the Company, Mr. Goeggel is also entitled to (i)
participation in all other benefit plans provided by the Company to its
executives, and (ii) two weeks paid vacation per year. Upon a change of control
of the Company that results in Mr. Goeggel's removal as Vice-President or Chief
Financial Officer, a significant change in the conditions of his employment or
other breach of the agreement, Mr. Goeggel has the right to elect to deem his
employment to have been terminated by the Company and receive a lump sum payment
equal to the remaining term of the agreement (which amount shall be reduced such
that all payments will be deductible to the Company and not subject to the
excise tax imposed by the United States Internal Revenue Code of 1986, as
amended). Except as expressly permitted in the agreement, Mr. Goeggel is also
restricted from competing with the Company or soliciting customers or other
business for any entity other than the Company during the term of the agreement
and from disclosing certain confidential information with respect to the
Company.

-62-

<PAGE>

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file.

The Company believes, based solely on review of copies of such forms
furnished to the Company, or written representations that no Form 5's were
required and that all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with during Fiscal 1999.

REPORT OF THE COMPENSATION COMMITTEE

Comprised of Carl W. Schafer, Julie H. Edwards and Peter J. Losavio,
Jr.

The Compensation Committee of the Company Board is responsible for
developing and making recommendations to the Board with respect to the Company's
executive compensation policies. This Committee Report sets forth the components
of the Company's executive officer compensation and describes the basis on which
the Fiscal 1999 compensation determinations were made by the Committee with
respect to the executive officers of the Company.

In designing its executive compensation programs, the Company follows
its belief that executive compensation should reflect the value created for
shareholders while supporting the Company's strategic goals.

The following guidelines have been implemented by the Committee:

1. Executive compensation is meaningfully related to the value
created for shareholders.
2. Executive compensation reinforces strategic performance
objectives and rewards individuals for outstanding
contributions to the Company's success.
3. Executive compensation is designed to attract and retain
quality talent, which is critical for both the short-term and
long-term success of the Company.

The Committee currently implements a compensation program based on
four components: a base salary, a bonus program related to the Company's
performance and individual performance during the relevant year, a stock benefit
program, and an Employee Stock Ownership Program. The Committee regularly
reviews the various components of the Company's executive compensation to ensure
consistency with the Company's objectives.

Base Salary -- The Committee, in recommending the appropriate base
salaries of the Company's executive officers, generally considers the level of
executive compensation for similar companies in the industry. In addition, the
Committee takes into account (i) the performance of the Company and the role of
the individual executive officer with respect to such performance, and (ii) the
particular executive officer's responsibilities and the long-term performance of
the executive officer in those areas of responsibility.

Annual Incentives -- The bonus program provides direct financial
incentives in the form of annual cash bonuses to executive officers exceeding
the Company's annual goals. The Committee recommends cash

-63-

<PAGE>

bonuses based upon an evaluation of the contributions of each individual officer
during the applicable first year.

Long-Term Incentives -- The stock benefit program currently serves as
the Company's primary long-term incentive plan for executive officers and key
employees. The objectives of the stock benefit program are to align executive
officer compensation and shareholder return and to enable executive officers to
develop and maintain a significant, long-term stock ownership position in the
Company Common Stock. In addition, grants of stock options to the named
executive officers and others are intended to attract, retain, and motivate
executives to improve long-term corporate performance and stock market
performance. Stock options become more valuable as the Company's stock price
increases.

Employee Stock Ownership Plan (ESOP) -- The Company's ESOP is a
defined contribution plan. Under this plan, units are awarded pursuant to a
compensation-based formula. The units are held in trust for the employee and are
paid upon plan termination or employee election. This plan benefits any Company
employee who is employed six months and is eighteen (18) years of age. Executive
officers participate in this plan.

Consistent with the Company's compensation program outlined above,
compensation for each of the named executive officers as well as other senior
executives consists of a base salary, bonus, stock options, and ESOP shares. The
base salaries for Fiscal 1999 were at levels commensurate with competitive
amounts paid to executives with comparable qualifications, experience, and
responsibilities of other companies who engaged in the same or similar business
as the Company.

The Committee believes that the compensation of the Chief Executive
Officer ("CEO") should be impacted by the Company's performance. Mr. Evans
founded the Company in 1968 and has served as the CEO since that time. During
Fiscal 1999, Mr. Evans received a base salary of $120,000 which the Committee
views as below average compared to the base salaries of Chief Executive Officers
of other companies in the same or similar business as the Company who have
comparable qualifications, experience, and responsibilities. The number of
shares granted pursuant to the Company's ESOP are not determinable in Fiscal
1999 and, therefore, are not reported here.

Carl W. Schafer
Julie H. Edwards
Peter J. Losavio, Jr.

-64-

<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During Fiscal 1999, the Company leased three convenience store
locations from the majority shareholder of the Company. One ten-year lease
commenced in June 1987, with monthly lease payments of $2,500 and allows for one
five-year automatic renewal at the Company's option. One ten-year lease
commenced in December 1995, with monthly lease payments of $1,500 and allows for
two five-year automatic renewals at the Company's option. The other location was
sold by the majority shareholder in December 1998. The amounts paid under these
leases were $54,300, $76,800 and $73,000 for the years ended September 30, 1999,
1998 and 1997, respectively. Future minimum lease commitments as of September
30, 1999 are $119,500.

As of September 30, 1999 the Company rented, on a month-to-month basis,
five convenience store locations from the majority shareholder. Previously, the
Company rented additional locations which were sold by the shareholder to
unrelated parties. The total month-to-month rent paid for the year ended
September 30, 1998 was $34,800 and $104,000 for the year ended September 30,
1997. All five locations were sold by the shareholder to unrelated third parties
in December 1997.

Other current assets at September 30, 1998 include a $111,000 note
receivable from a former director which was refinanced from an earlier note. The
note was paid in December 1998.

From time to time the Company makes advances to individuals who are
shareholders, directors, officers and/or employees. Such advances are usually
unsecured and accrue interest at 9%. There were no advances outstanding at
September 30, 1999 and 1998.

-65-

<PAGE>

PERFORMANCE GRAPH

Set forth below is a line graph comparing the percentage change in the
cumulative total shareholders' return on the Company Common Stock against the
cumulative total return of the Composite Index and index of certain companies
selected by the Company as comparable to the Company for the period beginning on
September 30, 1994 to September 30, 1999. The graph assumes that the value of
the investment in the Company Common Stock at its initial public offering price
and each index was $100 on September 30, 1994, and that all dividends, if any,
were reinvested.

The chart displayed below is presented in accordance with SEC
requirements. Shareholders are cautioned against drawing any conclusions from
the data contained therein, as past results are not necessarily indicative of
future financial performance.

COMPARATIVE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG EVANS SYSTEMS, INC.
NASDAQ MARKET INDEX AND PEER GROUP INDEX
(in dollars)

[Chart]

<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY/INDEX/MARKET 9/30/1994 9/29/1995 9/30/1996 9/30/1997 9/30/1998 9/30/1999

<S> <C> <C> <C> <C> <C> <C>
Evans Systems Inc. 100.00 123.17 121.95 53.80 117.85 32.03
Customer Selected Stock List 100.00 131.70 144.07 132.83 69.37 55.96
NASDAQ Market Index 100.00 121.41 141.75 192.67 200.23 323.92
</TABLE>

Assumes $100 invested on September 30, 1994
Assumes dividend reinvested
Fiscal year ending September 30, 1999

(1) The companies selected to form the peer group index are: Adams
Resources and Energy; Dairy Mart Convenience Stores; E-Z Serve
Corporation; Environ Technology Corporation; FFP Partners L.P.; Kinark
Corporation; Lomak Petroleum, Inc.; Mapco, Inc.; Omega Environmental,
Inc.; Par Technology Corporation; Specialty Chemical Resources; and
Virogroup, Inc.

Note: National Convenience Stores was bought by Diamond Shamrock and later
merged with Ultarmar. Therefore, these two companies could no longer be
included in the Company's peer index group.

-------------

-66-

<PAGE>

SHAREHOLDER PROPOSALS

Proposals of shareholders intended for inclusion in the Proxy Statement
to be furnished to all shareholders entitled to vote at the next annual meeting
of shareholders of the Company must be received at the Company's principal
executive offices not later than [ ], 2001. In order to curtail controversy as
to the date on which a proposal was received by the Company, it is suggested
that proponents submit their proposals by Certified Mail - Return Receipt
Requested.

With respect to any shareholder proposals to be presented at the next
annual meeting which are not included in the Company's proxy materials,
management proxies for such meeting will be entitled to exercise their
discretionary authority to vote on such proposals notwithstanding that they are
not discussed in the proxy materials unless the proponent notifies the Company
of such proposal by not later than [ ], 2001.

OTHER BUSINESS

So far as it is known, there is no business other than that described
above to be presented for action by the shareholders at the forthcoming Meeting,
but it is intended that Proxies will be voted upon any other matters and
proposals that may legally come before the Meeting, or any adjustments thereof,
in accordance with the discretion of the persons named therein.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the following
regional offices: 7 World Trade Center, Suite 1300, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 upon payment of
the fees prescribed by the Commission. Such material may also be accessed
electronically by means of the Commission's home page on the internet at
http//www.sec.gov.

ACCOMPANYING DOCUMENTS

Accompanying this Proxy Statement is the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1999, as amended, which
contains the following information which is specifically incorporated by
reference in this Proxy Statement:

Item 1: Business
Item 2: Properties
Item 3: Legal Proceedings
Item 5: Market for Common Equity and Related Shareholder Matters
Item 7: Management's Discussion and Analysis of Plan of Operations
Item 8: Financial Statements and Supplementary Data.

-67-

<PAGE>

The Company's Quarterly Report on Form 10-Q for quarter ended December
31, 1999 will also be provided to the shareholders with this Proxy Statement. In
addition, the following documents are attached to this Proxy Statement and are
specifically incorporated by reference in this Proxy Statement:

1. Pro-forma Financial Statements of the Company following the Sale of Assets
and the Merger (Annex G)

By Order of the Board of Directors

Maybell H. Evans,
Secretary

Bay City, Texas
___________, 2000

-68-

<PAGE>

ANNEX A

FAIRNESS OPINION OF HFBE OF SALE OF ASSETS

January 21, 2000

Mr. J. L. Evans, Sr.
Chairman of the Board and CEO
Evans Systems, Inc.
720 Avenue F North
Bay City, TX 77414

Dear Mr. Evans:

You have requested Howard Frazier Barker Elliott, Inc. ("HFBE") to
render its opinion as to the fairness, from a financial point of view, to Evans
Systems, Inc. ("ESI" or the "Company"), a Texas corporation, and its
shareholders, of the consideration to be paid by TSC Services, Inc. ("TSC") for
the Texas based Petroleum Marketing and Convenience Store operations (the
"Assets") pursuant to an Asset Purchase Agreement (the "Agreement"). In the
proposed Agreement, TSC will pay ESI $16.2 million, subject to inventory
adjustments, and the assumption of $900,000 of capital lease obligations for the
Assets as described in the Agreement (the "Transaction").

As part of our financial advisory activities, HFBE engages in the
valuation of businesses and securities in connection with mergers and
acquisitions, private placements, and valuations for estate, corporate and other
purposes. We are experienced in these activities and have performed assignments
similar in nature to that requested by you on numerous occasions. The opinion of
HFBE is solely for the use of the Board of Directors and cannot be used for any
other purpose without our prior written consent.

In rendering our written opinion, HFBE: (i) reviewed ESI's Annual
Report, Form 10-K and related financial information for the year ended September
30, 1999, and ESI's Amended Annual Report on Form 10-K/A and related financial
information for the year ended September 30, 1998; (ii) reviewed certain
information relating to the business, earnings, cash flow and prospects of the
ESI Assets furnished to HFBE by ESI; (iii) conducted discussions with members of
senior management of ESI concerning its business and prospects; (iv) reviewed
the historical market prices and trading activity for ESI's common stock and
compared them with that of certain companies which HFBE deemed to be reasonably
similar to ESI; (v) compared the results of operations of the Assets with that
of certain companies which it deemed to be reasonably similar to the ESI Assets;
(vi) analyzed the nature and financial terms of certain business combinations
involving companies in lines of business we believe to be generally comparable
to the ESI Assets; (vii) considered the pro forma effect of the Asset sale on
certain of ESI's income statement and balance sheet items; (viii) reviewed the
Agreement; (ix) considered independent appraisals of certain of the Assets; and
(x) reviewed such other matters as HFBE deemed necessary, including an
assessment of general economic, market and monetary conditions.

In preparing its opinion, HFBE relied on the accuracy and completeness
of all information supplied or otherwise made available to HFBE by ESI. HFBE did
not independently verify such information or assumptions, including financial
forecasts, or undertake an independent appraisal of the assets of ESI. HFBE's
opinion is based upon market, economic, financial and other conditions as they
exist and can be

A-1

<PAGE>

evaluated as of the date of the opinion. HFBE's opinion does not constitute a
recommendation to any shareholder of ESI as to how any such shareholder should
vote on the Transaction. The opinion does not address the relative merits of the
Transaction and any other transaction or business strategies discussed by the
Company's Board of Directors as alternatives to the Transaction or the decision
of the ESI Board of Directors to proceed with the Transaction. No opinion is
expressed by HFBE as to the price at which the securities of ESI may trade at
any time following the Transaction.

HFBE assumed that there had been no material change in ESI's financial
condition, results of operations, business or prospects since the date of the
last financial statements made available to HFBE. HFBE relied on advice of
counsel to ESI as to all legal matters with respect to ESI and the Agreement and
upon ESI with respect to the accounting treatment to be accorded the
Transaction. In addition, HFBE did not make an independent evaluation appraisal
or physical inspection of all the assets or individual properties of ESI.

The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. Furthermore, in arriving at our
opinion, HFBE did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis or factor. Accordingly, HFBE believes that our
analysis must be considered as a whole and that considering any portion of such
analysis and of the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
its opinion. In our analyses, HFBE made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of ESI. Any estimates contained in
these analyses are not necessarily indicative of actual values or predictive of
future results or values which may be significantly more or less favorable than
as set forth therein. In addition, analyses relating to the value of the
businesses do not purport to be appraisals or to reflect the prices at which
businesses may actually be sold.

Neither HFBE nor our employees have any present or contemplated future
interest in the Company which might tend to prevent us from rendering a fair and
unbiased opinion.

Subject to and based upon the foregoing, it is our opinion that the
consideration to be paid by TSC in the proposed transaction is fair, from a
financial point of view, to ESI and its shareholders.

Sincerely,

HOWARD FRAZIER BARKER ELLIOTT, INC.

By:
-----------------------------------
Alex W. Howard, CFA, ASA
Senior Managing Director

By:
-----------------------------------
Garry L. Marshall, CFA
Vice President

A-2

<PAGE>

ANNEX B

DISSENTERS' RIGHTS STATUTE

PROVISIONS FOR DISSENTERS' RIGHTS
UNDER THE TEXAS BUSINESS CORPORATIONS ACT

Article 5.11 RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN
CORPORATE ACTIONS.-- A. Any shareholder of a domestic corporation shall have the
right to dissent from any of the following corporate actions:

(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and the
shareholder holds shares of a class or series that was entitled to vote thereon
as a class or otherwise;

(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided in
the articles of incorporation) of all, or substantially all, the property and
assets, with or without good will, of a corporation requiring the special
authorization of the shareholders as provided by this Act and the shareholders
hold shares of a class or series that was entitled to vote thereon as a class or
otherwise;

(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the shareholder are
to be acquired.

B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if:

(1) the shares held by the shareholder are part of a class or series,
shares of which are on the record date fixed to determine the shareholders
entitled to vote on the plan of merger or plan of exchange:

(a) listed on a national securities exchange;

(b) listed on the Nasdaq Stock Market (or successor quotation system)
or designated as a national market security on an interdealer quotation system
by the National Association of Securities Dealers, Inc., or successor entity; or

(2) the shareholder is not required by the terms of the plan of merger
or plan of exchange to accept for the shareholder's shares any consideration
that is different than the consideration (other than cash in lieu of fractional
shares that the shareholder would otherwise be entitled to receive) to be
provided to any other holder of shares of the same class or series of shares
held by such shareholder; and

(3) the shareholder is not required by the terms of the plan of merger
or the plan of exchange to accept for the shareholder's shares any consideration
other than:

(a) shares of a domestic or foreign corporation that, immediately after
the effective time of the merger or exchange, will be part of a class or series,
shares of which are:

B-1

<PAGE>

(i) listed, or authorized for listing upon official notice of
issuance, on a national securities exchange;

(ii) approved for quotation as a national market security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc., or successor entity; or

(iii) held of record by not less than 2,000 holders;

(b) cash in lieu of fractional shares otherwise entitled to be
received; or

Article 5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE
ACTION. -- A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:

(1) (a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof shall be
delivered or mailed in that event. If the action is effected and the shareholder
shall not have voted in favor of the action, the corporation, in the case of
action other than a merger, or the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days after the action
is effected, deliver or mail to the shareholder written notice that the action
has been effected, and the shareholder may, within ten (10) days from the
delivery or mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and class
of the shares owned by the shareholder and the fair value of the shares as
estimated by the shareholder. Any shareholder failing to make demand within the
ten (10) day period shall be bound by the action.

(b) With respect to the proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the case
of action other than a merger, and the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days after the date the
action is effected, mail to each shareholder of record as of the effective date
of the action notice of the fact and date of the action and that the shareholder
may exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or documents
filed by the corporation with the Secretary of State to effect the action. If
the shareholder shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment of the fair value of
the shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was delivered
to the corporation pursuant to Section A of Article 9.10 of this Act, excluding
any appreciation or depreciation in anticipation of the action. The demand shall
state the number and class of shares owned by the dissenting shareholder and the
fair value of the shares as estimated by the shareholder. Any shareholder
failing to make demand within the twenty (20) day period shall be bound by the
action.

B-2

<PAGE>

(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may be, of
a demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity shall deliver or mail to the shareholder a written notice that shall
either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.

(3) If, within sixty (60) days after the date on which are the
corporate action was effected, the value of the shares is agreed upon between
the shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in shares or in the corporation.

B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.

C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit them pertinent evidence as to the value of the
shares. The appraiser shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.

D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the

B-3

<PAGE>

clerk of the court. Notice of the filing of the report shall be given by the
clerk to the parties in interest. The report shall be subject to exceptions to
be heard before the court both upon the law and the facts. The court shall by
its judgment determine the fair value of the shares of the shareholders entitled
to payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately, but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign and domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs, shall be allotted between the parties in the manner
that the court determines to be fair and equitable.

E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.

F. The provisions of this Article shall not apply to a merger if, on
the date of the filing of the articles of merger, the surviving corporation is
the owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.

G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action.
If the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.

Article 5.13 PROVISIONS AFFECTING REMEDIES OF DISSENTING
SHAREHOLDERS.-- A. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act shall not thereafter be
entitled to vote or exercise any other rights of a shareholder except the right
to receive payment for his shares pursuant to the provisions of those articles
and the right to maintain an appropriate action to obtain relief on the ground
that the corporate action would be or was fraudulent, and the respective shares
for which payment has been demanded shall not thereafter be considered
outstanding for the purposes of any subsequent vote of shareholders.

B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire

B-4

<PAGE>

by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.

C. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act may withdraw such demand
at any time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.

B-5

<PAGE>
ANNEX C

OPINION OF FINANCIAL ADVISOR TO MERGER

March 1, 2000

Mr. J. L. Evans, Sr.
Chairman of the Board and CEO
Evans Systems, Inc.
720 Avenue F North
Bay City, TX 77414

Dear Mr. Evans:

You have requested Howard Frazier Barker Elliott, Inc., ("HFBE") to
render its opinion as to the fairness, from a financial point of view, to the
shareholders of the Company of the Merger Consideration, as defined below, in
the proposed merger (the "Merger") of the Company with I-Net Holdings ("I-Net"),
a Delaware Corporation. Pursuant to the Agreement and Plan of Merger dated
January 23, 2000, as amended on January 31, 2000 and February 29, 2000(the
"Agreement"), I-Net will merge with and into the Company and all of the
outstanding shares of I-Net common stock shall be converted into 15,000,000
shares of the Company's common stock, which is subject to adjustment pursuant to
the terms of the Agreement (the "Merger Consideration").

As part of our financial advisory activities, HFBE engages in the
valuation of business and securities in connection with mergers and
acquisitions, private placements, and valuations for estate, corporate and other
purposes. We are experienced in these activities and have performed assignments
similar in nature to that requested by you on numerous occasions. The opinion of
HFBE is solely for the use of the Board of Directors and cannot be used for any
other purpose without our prior written consent.

In rendering our written opinion, HFBE: (i) reviewed ESI's Annual
Report, Form 10-K and related financial information for the year ended September
30, 1999, and ESI's Amended Annual Report on Form 10-K/A and related financial
information for the year ended September 30, 1998; (ii) reviewed certain
information relating to the business, earnings, cash flow, and prospects of the
assets of ESI (the "ESI Assets") that will remain after the consummation of the
proposed asset sale to TSC Services, Inc. (the "TSC Transaction") furnished to
HFBE by ESI; (iii) conducted discussions with members of senior management of
ESI concerning its business and prospects; (iv) reviewed the historical market
prices and trading activity for ESI's common stock and compared them with that
of certain companies which HFBE deemed to be reasonably similar to ESI; (v)
compared the results of operations of the ESI Assets with that of certain
companies which it deemed to be reasonably similar to the ESI Assets; (vi)
analyzed the nature and financial terms of certain business combinations
involving companies in lines of business we believe to be generally comparable
to the ESI Assets; (vii) considered the pro forma effect of the Merger on
certain of ESI's income statement and balance sheet items; (viii) reviewed the
Agreement; (ix) reviewed the business plan of I-Net and held discussions with
management of I-Net regarding the execution of its business plan; and (x)
reviewed such other matters as HFBE deemed necessary, including an assessment of
general economic, market and monetary conditions.

C-1

<PAGE>

evaluated as of the date of the opinion. HFBE's opinion does not constitute a
recommendation to any shareholder of ESI as to how any such shareholder should
vote on the Merger. The opinion does not address the relative merits of the
transaction and any other transaction or business strategies discussed by the
Company's Board of Directors as alternatives to the Merger or the decision of
the ESI Board of Directors to proceed with the Merger. No opinion is expressed
by HFBE as to the price at which the securities of ESI may trade at any time
following the Merger.

HFBE assumed that there had been no material change in ESI's financial
condition, results of operations, business or prospects since the date of the
last financial statements made available to HFBE. HFBE relied on advice of
counsel to ESI as to all legal matters with respect to ESI, the Merger and the
Merger Agreement and upon ESI with respect to the accounting treatment to be
accorded the transaction. In addition, HFBE did not make an independent
evaluation appraisal or physical inspection of the assets or individual
properties of ESI or I-Net.

The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to the
partial analysis or summary description. Furthermore, in arriving at our
opinion, HFBE did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis or factor. Accordingly, HFBE believes that our
analysis must be considered as a whole and that considering any portion of such
analysis and of the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
its opinion. In our analyses, HFBE made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of ESI and I-Net. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or values which may be significantly more or less
favorable than as set forth therein. In addition, analyses relating to the value
of the businesses do not purport to be appraisals or to reflect the prices at
which businesses may actually be sold.

Neither HFBE nor our employees have any present or contemplated future
interest in the Company or I-Net which might tend to prevent us from rendering a
fair and unbiased opinion.

Subject to and based upon the foregoing, it is our opinion that the
consideration to be paid by ESI in the proposed Merger is fair, from a financial
point of view, to ESI and its shareholders.

Sincerely,

HOWARD FRAZIER BARKER ELLIOTT, INC.

By:
-----------------------------------
Alex W. Howard, CFA, ASA
Senior Managing Director

By:
-----------------------------------
Garry L. Marshall, CFA
Vice President

C-2

<PAGE>

ANNEX D

AMENDMENT TO ARTICLES OF INCORPORATION

Name Change Amendment
- ---------------------

Article ONE of the Restated Articles of Incorporation will be deleted
in its entirety, and replaced as follows:

"ARTICLE ONE: The name of the corporation is I-NET HOLDINGS,
INC."

Capitalization Amendment
- ------------------------

The first paragraph of Article FOUR of the Restated Articles of
Incorporation, relating to capitalization, will be deleted in its entirety, and
replaced as follows

"ARTICLE FOUR: The aggregate number of shares of stock that
the Corporation shall have authority to issue is: one hundred one
million five hundred thousand (101,500,000), consisting of one hundred
million (100,000,000) shares of common stock (the "Common Stock") of
the par value of one cent ($.01) each and one million five hundred
thousand (1,500,000) shares of preferred stock (the "Preferred Stock")
of the par value of one cent ($.01) each."

D-1

<PAGE>

ANNEX E

2000 STOCK OPTION PLAN

EVANS SYSTEMS, INC.

2000 STOCK OPTION PLAN

1. Purpose of the Plan.

This 2000 Stock Option Plan (the "Plan") is intended as an
incentive, to retain in the employ and as directors of EVANS SYSTEMS, INC. (the
"Company") and any Subsidiary of the Company, persons of training, experience
and ability, to attract new employees and directors, whose services are
considered valuable, to encourage the sense of proprietorship and to stimulate
the active interest of such persons in the development and financial success of
the Company and its Subsidiaries.

It is further intended that certain options granted pursuant
to the Plan shall constitute Incentive Stock Options while certain other options
granted pursuant to the Plan shall be Nonstatutory Stock Options.

The Company intends that the Plan meet the requirements of
Rule 16b-3 ("Rule 16b-3") promulgated under the Exchange Act and that
transactions of the type specified in subparagraphs (c) to (f) inclusive of Rule
16b-3 by officers and directors of the Company pursuant to the Plan will be
exempt from the operation of Section 16(b) of the Exchange Act. In all cases,
the terms, provisions, conditions and limitations of the Plan shall be construed
and interpreted consistent with the Company's intent as stated in this Section
1.

2. Administration of the Plan.

The Board of Directors of the Company (the "Board") shall
appoint and maintain as administrator of the Plan a committee (the "Committee"),
which shall serve at the pleasure of the Board. In the discretion of the Board,
a Committee shall consist solely of two or more Outside Directors (as such term
is defined in Section 162(m) of the Code) and Non-Employee Directors (as such
term is defined in Rule 16b- 3). The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan. The Committee, subject
to Sections 3 and 5 hereof, shall have full power and authority to designate
recipients of Options, to determine the terms and conditions of respective
Option agreements (which need not be identical) and to interpret the provisions
and supervise the administration of the Plan. The Committee shall have the
authority, without limitation, to designate which Options granted under the Plan
shall be Incentive Stock Options and which shall be Nonstatutory Stock Options.
To the extent any Option does not qualify as an Incentive Stock Option, it shall
constitute a separate Nonstatutory Stock Option.

Subject to the provisions of the Plan, the Committee shall
have the authority, in its discretion: (1) to grant Incentive Stock Options and
Nonstatutory Stock Options; (2) to determine, upon review of relevant
information and in accordance with Section 5 of the Plan, the fair market value
of the Common Stock; (3) to determine the exercise price per share of Options,
to be granted, which exercise price shall be determined in accordance with
Section 5 of the Plan; (4) to determine the Employees to whom, and the time or
times at which, Options shall be granted and the number of shares to be
represented by each Option; (5) to interpret the Plan; (6) to prescribe, amend
and rescind rules and regulations relating to the

E-1

<PAGE>

Plan; (7) to determine the terms and provisions of each Option granted (which
need not be identical) and, with the consent of the holder thereof, modify or
amend each Option; (8) to accelerate or defer (with the consent of the Optionee)
the exercise date of any Option, consistent with the provisions of Section 5 of
the Plan; (9) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Board; and (10) to make all other determinations deemed necessary or
advisable for the administration of the Plan.

All decisions, determinations and interpretations of the
Committee shall be final and binding on all Optionees and any other holders of
any Options granted under the Plan.

In the event that for any reason the Committee is unable to
act or if the Committee at the time of any grant, award or other acquisition
under the Plan of Options or Stock does not consist of two or more Non-Employee
Directors, then any such grant, award or other acquisition may be approved or
ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3.

3. Designation of Optionees.

The persons eligible for participation in the Plan as
recipients of Options (the "Optionees") shall include employees, officers and
directors of the Company or any Subsidiary; provided that Incentive Stock
Options may only be granted to employees of the Company and the Subsidiaries. In
selecting Optionees, and in determining the number of shares to be covered by
each Option granted to Optionees, the Committee may consider the office or
position held by the Optionee or the Optionee's relationship to the Company, the
Optionee's degree of responsibility for and contribution to the growth and
success of the Company or any Subsidiary, the Optionee's length of service, age,
promotions, potential and any other factors that the Committee may consider
relevant. An Optionee who has been granted an Option hereunder may be granted an
additional Option or Options, if the Committee shall so determine.

4. Stock Reserved for the Plan.

Subject to adjustment as provided in Section 6 hereof, a total
of 1,000,000 shares of the Company's Common Stock (the "Stock") shall be subject
to the Plan. The shares of Stock subject to the Plan shall consist of unissued
shares or previously issued shares held by any Subsidiary of the Company, and
such amount of shares of Stock shall be and is hereby reserved for such purpose.
Any of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option expire or be cancelled prior to its
exercise in full or should the number of shares of Stock to be delivered upon
the exercise in full of an Option be reduced for any reason, the shares of Stock
theretofore subject to such Option may be subject to future Options under the
Plan.

Notwithstanding the foregoing, with respect to any Options
that are intended to qualify as performance-based compensation under Section
162(m) of the Code, the maximum number of shares of Stock that may be subject to
options granted under the Plan to any individual in any calendar year shall not
exceed 500,000, and the method of counting such shares shall conform to any
requirements applicable to performance-based compensation under Section 162(m)
of the Code.

E-2

<PAGE>

5. Terms and Conditions of Options.

Options granted under the Plan shall be subject to the
following conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:

a. Option Price. The purchase price of each share of
Stock purchasable under an Option shall be determined by the
Committee at the time of grant, but shall not be less than
100% of the Fair Market Value (as defined below) of such share
of Stock on the last trading day prior to the date the Option
is granted in the case of an Incentive Stock Option and not
less than 85% of the Fair Market Value of such share of Stock
on the last trading day prior to the date the Option is
granted in the case of a Nonstatutory Stock Option; provided,
however, that with respect to an Optionee who, at the time an
Incentive Stock Option is granted, owns (within the meaning of
Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company
or of any Subsidiary, the purchase price per share of Stock
shall be at least 110% of the Fair Market Value per share of
Stock on the last trading day prior to the date of grant. In
addition, if an Option granted to the Company's Chief
Executive Officer or to any of the Company's other four most
highly compensation officers is intended to qualify as
performance-based compensation under Section 162(m) of the
Code, the exercise price of such Option shall not be less than
100% of the Fair Market Value of such share of Stock on the
date the Option is granted. The exercise price for each Option
shall be subject to adjustment as provided in Section 6 below.
Fair Market Value means the closing price of publicly traded
shares of Stock on a national securities exchange or The
Nasdaq Stock Market, Inc. ("Nasdaq"), or, if not so listed or
regularly quoted, the mean between the closing bid and asked
prices of publicly traded shares of Stock in the
over-the-counter market, or, if such bid and asked prices
shall not be available, as reported by any nationally
recognized quotation service selected by the Company, or as
determined by the Committee in a manner consistent with the
provisions of the Code. Anything in this Section 5(a) to the
contrary notwithstanding, in no event shall the purchase price
of a share of Stock be less than the minimum price permitted
under rules and policies of any national securities exchange
or Nasdaq if and so long as the Stock is listed on any such
exchange or Nasdaq.

b. Option Term. The term of each Option shall be fixed
by the Committee, but no Option shall be exercisable more than
ten (10) years after the date such Option is granted;
provided, however, that in the case of an Optionee who, at the
time such Option is granted, owns more than 10% of the total
combined voting power of all classes of stock of the Company
or any Subsidiary, then such Incentive Stock Option shall not
be exercisable with respect to any of the shares subject to
such Incentive Stock Option later than the date which is five
years after the date of grant.

c. Exercisability. Subject to Section 5(j) hereof,
Options shall be exercisable at such time or times and subject
to such terms and conditions as shall be determined by the
Committee at the time of grant.

d. Method of Exercise. Options to the extent then
exercisable may be exercised in whole or in part at any time
during the option period, by giving written notice to the
Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the purchase
price, in cash, by check or such other instrument as may be
acceptable to the Committee (including a cashless exercise).
As determined by the

E-3

<PAGE>

Committee, in its sole discretion, at or after grant, payment
in full or in part may also be made by (i) exchanging Stock
owned by the Optionee which is not the subject of any pledge
or security interest (based on the Fair Market Value of the
Stock on the trading day before the Option is exercised), (ii)
the Optionee's written selection to have shares of Stock
withheld by the Company from the shares of Stock otherwise to
be received with such withheld shares of Stock having a Fair
Market Value on the date of exercise equal to the exercise
price of the Option, or (iii) by a combination of the
forgoing, provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any shares
surrendered to the Company is at least equal to such exercise
price. An Optionee shall have the right to dividends and other
rights of a stockholder with respect to shares of Stock
purchased upon exercise of an Option after (i) the Optionee
has given written notice of exercise and has paid in full for
such shares and (ii) becomes a stockholder of record with
respect thereto.

e. Non-transferability of Options. No Option granted
hereunder shall be transferable otherwise than by (i) will or
(ii) the laws of descent and distribution; provided however,
that to the extent the option agreement provisions do not
disqualify such option for exemption under Rule 16b-3 under
the Act of 1934, as amended, Nonstatutory Stock Options may be
transferable during an Optionee's lifetime to immediate family
members of an optionee, partnerships in which the only
partners are members of the Optionee's immediate family, and
trusts established solely for the benefit of such immediate
family members. Any attempt to transfer, assign, pledge or
otherwise dispose of, or to subject to execution, attachment
or similar process, any Option contrary to the provisions
hereof shall be void and ineffective and shall give no right
to the purported transferee.

f. Termination by Death. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or
service to the Company or any Subsidiary terminates by reason
of death, the Option may thereafter be exercised, to the
extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal
representative of the estate or by the legatee of the Optionee
under the will of the Optionee, for a period of one year after
the date of such death or until the expiration of the stated
term of such Option as provided under the Plan, whichever
period is shorter.

g. Termination by Reason of Disability. Unless otherwise
determined by the Committee at grant, if any Optionee's
employment with or service to the Company or any Subsidiary
terminates by reason of total and permanent disability (as
defined in Section 22(e)(3) of the Code, "Disability"), any
Option held by such Optionee may thereafter be exercised, to
the extent it was exercisable at the time of termination due
to Disability (or on such accelerated basis as the Committee
shall determine at or after grant), but may not be exercised
after one year after the date of such termination of
employment or service or the expiration of the stated term of
such Option, whichever period is shorter; provided, however,
that, if the Optionee dies within such one year period, any
unexercised Option held by such Optionee shall thereafter be
exercisable to the extent to which it was exercisable at the
time of death for a period of one year after the date of such
death or for the stated term of such Option, whichever period
is shorter.

h. Other Termination. Unless otherwise determined by the
Committee at grant, if any Optionee's employment with or
service to the Company or any Subsidiary terminates for any
reason other than death or Disability, the Option shall
thereupon terminate, except that the portion of any Option
that was exercisable on the date of such termination of
employment

E-4

<PAGE>

may be exercised for the lesser of three months after the date
of termination or the balance of such Option's term if the
Optionee's employment or service with the Company or any
Subsidiary is terminated by the Company or such Subsidiary
without Cause. The transfer of an Optionee from the employ of
the Company to a Subsidiary, or vice versa, or from one
Subsidiary to another, shall not be deemed to constitute a
termination of employment for purposes of the Plan.

i. Limit on Value of Incentive Stock Option. The
aggregate Fair Market Value, determined as of the date the
Incentive Stock Option is granted, of Stock for which
Incentive Stock Options are exercisable for the first time by
any Optionee during any calendar year under the Plan (and/or
any other stock option plans of the Company or any Subsidiary)
shall not exceed $100,000. To the extent the aggregate Fair
Market Value (determined at the time the respective Incentive
Stock Option is granted) exceeds $100,000 such excess
Incentive Stock Option shall be treated as options which do
not constitute) Incentive Stock Options

j. Transfer of Incentive Stock Option Shares. If an
Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of
any share or shares of Stock issued to him upon exercise of an
Incentive Stock Option granted under the Plan within the
two-year period commencing on the day after the date of the
grant of such Incentive Stock Option or within a one-year
period commencing on the day after the date of transfer of the
share or shares to him pursuant to the exercise of such
Incentive Stock Option, he shall, within 10 days after such
disposition, notify the Company thereof and immediately
deliver to the Company any amount of United States federal
income tax withholding required by law.

6. Term of Plan.

The Plan shall become effective upon its adoption by the Board
of Directors, provided it is duly approved by vote of the holders of a majority
of the outstanding shares of the Company entitled to vote on the adoption of the
Plan within twelve months after the date of adoption of the Plan by the Board of
Directors. It shall continue in effect for a term or ten (10) years unless
sooner terminated under Section 14 of the Plan. If the Plan is not approved, the
Plan shall termiante and any award grants hereunder shall be null and void.

7. Adjustments Upon Changes in Capitalization or Merger.

Subject to any required action by the stockholders of the
Company, the number of shares of Stock covered by each outstanding Option, and
the number of shares of Stock which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Stock of the Company or the
payment of a stock dividend with respect to the Stock or any other increase or
decrease in the number of issued shares of Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Stock subject to an Option.

E-5

<PAGE>

In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not-otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets or the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice,
and the Option will terminate upon the expiration of such period.

8. Purchase for Investment.

Unless the Options and shares covered by the Plan have been
registered under the United States Securities Act of 1933, as amended (the
"Securities Act"), or the Company has determined that such registration is
unnecessary, each person exercising an Option under the Plan may be required by
the Company to give a representation in writing that he is acquiring the shares
for his own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof.

9. Taxes.

The Company may make such provisions as it may deem
appropriate, consistent with applicable law, in connection with any Options
granted under the Plan with respect to the withholding of any United States
taxes or any other tax matters.

10. Effective Date of Plan.

The Plan shall be effective on January 21, 2000 (the date that
it was approved by the Board), provided, however, that the Plan shall
subsequently be approved by majority vote of the Company's shareholders not
later than January 21, 2001.

11. Amendment and Termination.

The Board may amend, suspend, or terminate the Plan, except
that no amendment shall be made that would impair the rights of any Optionee
under any Option theretofore granted without his consent, and except that no
amendment shall be made which, without the approval of the stockholders of the
Company would:

a. materially increase the number of shares that may be
issued under the Plan, except as provided in Section 7;

b. materially increase the benefits accruing to the
Optionees under the Plan;

c. materially modify the requirements as to eligibility
for participation in the Plan;

E-6

<PAGE>

d. decrease the exercise price of an Incentive Stock
Option to less than 100% of the Fair Market Value on the date
of grant thereof or the exercise price of a Nonstatutory
option to less than 85% of the Fair Market Value on the date
of grant thereof; or

e. extend the term of any Option beyond that provided
for in Section 5(b).

The Committee may amend the terms of any Option theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any Optionee without his consent. The Committee may also substitute
new Options for previously granted Options, including options granted under
other plans applicable to the participant and previously granted Options having
higher option prices, upon such terms as the Committee may deem appropriate.

12. Government Regulations.

The Plan, and the grant and exercise of Options hereunder, and
the obligation of the Company to sell and deliver shares under such Options,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies, or by national securities exchanges or
Nasdaq if and so long as the Stock is listed on any such exchange or Nasdaq, as
may be required.

13. General Provisions.

a. Certificates. All certificates for shares of Stock
delivered under the Plan shall be subject to such stop
transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, or
other securities commission having jurisdiction, any
applicable Federal, provincial or state securities law, any
stock exchange upon which the Stock is then listed and the
Committee may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such
restrictions.

b. Employment Matters. The adoption of the Plan shall
not confer upon any Optionee of the Company or any Subsidiary,
any right to continued employment or, in the case of an
Optionee who is a director, continued service as a director,
with the Company or a Subsidiary, as the case may be, nor
shall it interfere in any way with the right of the Company or
any Subsidiary to terminate the employment of any of its
employees or the service of any of its directors at any time.

c. Limitation of Liability. No member of the Board or
the Committee, or any officer or employee of the Company
acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each
and any officer or employee of the Company acting on their
behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any
such action, determination or interpretation.

d. Registration of Stock. Notwithstanding any other
provision in the Plan, no Option may be exercised unless and
until the Stock to be issued upon the exercise thereof has
been registered under the Securities Act and applicable state
securities laws, or is, in the opinion of counsel to the
Company, exempt from such registration in the United States or
exempt from the prospectus and registration requirements under
applicable provincial legislation. The Company shall not be
under any obligation to register under applicable federal or
state

E-7

<PAGE>

securities laws any Stock to be issued upon the exercise of an
Option granted hereunder, or to comply with an appropriate
exemption from registration under such laws or the laws of any
province in order to permit the exercise of an Option and the
issuance and sale of the Stock subject to such Option.
However, the Company may in its sole discretion register such
Stock at such time as the Company shall determine. If the
Company chooses to comply with such an exemption from
registration, the Stock issued under the Plan may, at the
direction of the Committee, bear an appropriate restrictive
legend restricting the transfer or pledge of the Stock
represented thereby, and the Committee may also give
appropriate stop transfer instructions to the Company's
transfer agents.

14. DEFINITIONS. As used above, the following definitions shall
apply:

"Board" shall mean the Board of Directors of the Company.

"Cause" shall mean a felony conviction or the failure of an Optionee to
contest prosecution for a felony or an Optionee's willful misconduct or
dishonesty, any of which is deemed by the Committee, in its sole discretion, to
be harmful to the business or reputation of the Company or any Subsidiary.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Company" shall mean Evans Systems, Inc., a Texas corporation.

"Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 2 of the Plan, if one is appointed.

"Eligible Director" shall mean each director of the Company who is not
an employee of the Company or any Subsidiary.

"Employee" shall mean any person, including officers and directors,
employed by the Company or any Subsidiary of the Company. The payment of a
director's fee by the Company shall not be sufficient to constitute "employment"
by the Company.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

"Incentive Stock Option" shall mean an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

"Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.

"Options" shall mean the Incentive Stock Options and Nonstatutory Stock
Options granted pursuant to the Plan.

"Optioned Stock" shall mean the Common Stock subject to an Option.

"Optionee" shall mean an Employee who receives an Option.

"Plan" shall mean this 2000 Incentive Stock Plan.

E-8

<PAGE>

"Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 8 of the Plan.

"Stock" shall mean the Common stock of the Company.

"Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.

EVANS SYSTEMS, INC.

E-9

<PAGE>

ANNEX F

2000 PLAN AMENDMENT

4. Stock Reserved for the Plan

(a) Maximum Number of Shares. Subject to the provisions of
Paragraph 7 hereof, there shall be available for awards under the Plan
granted wholly or partly in shares of the Company's Common Stock (the
"Stock") (including rights or options that may be exercised for or
settled in Stock) an aggregate number of shares of Stock equal to:

(i) 5,000,000 shares of Common Stock; plus
(ii) (A) twenty percent of the total number of shares of
Stock or Stock equivalents outstanding in excess of
25,000,000 minus (B) the total number of shares of
Stock subject to outstanding awards on the date of
calculation under any other stock-based plan for
employees of the Company and its subsidiaries.

(b) Determination of Available Shares. The Committee may from
time to time adopt and observe such procedures concerning the counting
of shares against the Plan maximum as it may deem appropriate.

(c) Restoration of Unused and Surrendered Shares. The number
of shares of Stock that are subject to Awards under the Plan, that are
forfeited or terminated, expire unexercised, are settled in cash in
lieu of Stock or in a manner such that all or some of the shares
covered by an Award are not issued to a Participant or are exchanged
for Awards that do not involve Stock, shall again immediately become
available for Awards hereunder.

(d) Reservation of Unused and Surrendered Shares. Any shares
of Stock that may remain unsold and that are not subject to outstanding
Options at the termination of the Plan shall cease to be reserved for
the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to
meet the requirements of the Plan.

(e) Description of Shares. The shares to be delivered under
the Plan shall be made available from (a) authorized but unissued
shares of Stock, (b) Stock held in the treasury of the Company, or (c)
previously issued shares of Stock reacquired by the Company, including
shares purchased on the open market, in each situation as the Board or
the Committee may determine from time to time at its sole option.

(f) Maximum Number of Grants to Individual. Notwithstanding
the foregoing, with respect to any Options that are intended to qualify
as performance-based compensation under Section 162(m) of the Code, the
maximum number of shares of Stock that may be subject to options
granted under the Plan to any individual in any calendar year shall not
exceed 500,000, and the method of counting such shares shall conform to
any requirements applicable to performance-based compensation under
Section 162(m) of the Code.

F-1

<PAGE>

Insert Section 5(k)

(k) Limit on Number of Incentive Options Under the Plan. The
number of options which shall be Incentive Stock Options under this
Plan shall not exceed 5,000,000.

F-2

<PAGE>

ANNEX G
EVANS SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS

Page
Unaudited Pro Forma Combined Financial Statements:
Unaudited Pro Forma Combined Balance Sheet as of December 31, 1999.....G-3
Unaudited Pro Forma Combined Statement of Operations for the year
ended September 30, 1999...........................................G-4
Unaudited Pro Forma Combined Statement of Operations for the quarter
ended December 31, 1999............................................G-5
Notes to Unaudited Pro Forma Combined Financial Statements..............G-6

G-1

<PAGE>
EVANS SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial statements have been
prepared based on the historical financial statements of Evans Systems, Inc.
("ESI") and I-Net Holdings, Inc. ("I-Net"). Such financial statements have been
adjusted to give effect to (i) the sale by ESI of 750,000 shares of its common
stock pursuant to a private placement transaction for $562,500; (ii) the sale by
ESI of substantially all of the assets within its Texas petroleum marketing and
Texas convenience store segments pursuant to the Asset Purchase Agreement dated
December 3, 1999, by and between TSC Services, Inc. ("TSC") and ESI (the "TSC
Transaction"); (iii) the sale by I-Net of common stock for $15 million; and (iv)
the merger of ESI and I-Net pursuant to the Amended and Restated Agreement and
Plan of Merger dated January 31, 2000, as amended on March 1, 2000. The
unaudited pro forma combined statements of operations include the results of
operation for the remaining segments of ESI after giving effect to the TSC
Transaction. These statements should be read in conjunction with the Audited
Consolidated Financial Statements and notes thereto contained within ESI's
annual report on Form 10-K for the year ended September 30, 1999.

I-Net was formed in December 1999 and has had no significant operations other
than incorporation and fund raising activities.

The unaudited pro forma combined balance sheet at December 31, 1999 has been
presented as if the transactions described above had been consummated at that
date. The unaudited pro forma combined statement of operations for the year
ended September 30, 1999 and the quarter ended December 31, 1999 have been
prepared as if all such transactions described above occurred at the beginning
of such period.

The unaudited pro forma combined financial statements are not necessarily
indicative of the results of future operations.

PricewaterhouseCoopers LLP has not examined, reviewed or compiled the pro forma
financial statements and expresses no opinion or any assurance thereon.

G-2

<PAGE>
EVANS SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1999
(in thousands)
<TABLE>
<CAPTION>

Pro forma adjustments
-----------------------
Sale of
Sale of Texas
Historical common operations
ESI stock to TSC
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 60 $ 563 (a) $ 15,154 (b)
(31) (a) (10,617) (b)
(650) (b)
Accounts receivable 3,831
Inventory 2,960 (2,479) (b)
Prepaid and
Other current assets 497 (205) (b)
---------- ---------- ----------
Total current assets 7,348 532 1,203
---------- ---------- ----------

Property and equipment 27,534 (23,723) (b)
Less accumulated
depreciation
and amortization 12,883 (11,072) (b)
---------- ---------- ----------
Property and equipment, net 14,651 (12,651)
---------- ---------- ----------
Goodwill
Investment in
marketable securities 703
Other assets 203
---------- ---------- ----------
Total Assets $ 22,905 $ 532 ($11,448)
========= ========== ==========

LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and
accrued expenses $ 7,256
Current maturity of long-term
debt 9,922 (42) (b)
(9,417) (c)
Accrued interest 981 (981) (c)
---------- ---------- ----------
Total current liabilities 18,159 0 (10,440)

Long-term debt 1,273 (800) (b)
(219) (c)
---------- ---------- ----------
Total liabilities 19,432 0 (11,459)

Redeemable common stock 160
---------- ---------- ----------
Stockholders' equity
Common stock 41 7 (a)
Additional paid-in capital 15,812 525 (a)

Retained earnings (deficit) (12,145) 11 (b)
Unrealized gain on
marketable securities 39
Treasury stock (434) 0
---------- ---------- ----------
Total stockholders' equity $ 3,313 $ 532 $ 11
---------- ---------- ----------

Total liabilities and
stockholders' equity $ 22,905 $ 532 ($11,448)
---------- ---------- ----------

</TABLE>

<TABLE>
<CAPTION>
Pro forma adjustments
----------------------------------------
ESI before Formation Sale of Pro forma
the of common Acquisition giving effect
"Merger" I-Net stock of ESI to "Merger"
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 4,479 $ 1 (d) $ 15,000 (e) $ 19,330
(150)(e)

Accounts receivable 3,831 3,831
Inventory 481 481
Prepaid and 0 0
Other current assets 292 292
------------------------------------------------------------------------
Total current assets 9,083 1 14,850 0 23,934
------------------------------------------------------------------------

Property and equipment 3,811 3,811
Less accumulated 0
depreciation
and amortization 1,811 1,811
------------------------------------------------------------------------
Property and equipment, net 2,000 0 0 0 2,000
------------------------------------------------------------------------
Goodwill 0 12,283 (f) 12,283
Investment in
marketable securities 703 703
Other assets 203 203
------------------------------------------------------------------------
Total Assets $ 11,989 $ 1 $ 14,850 $ 12,283 $ 39,123
========================================================================

LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and
accrued expenses $ 7,256 7,256
Current maturity of long-term
debt 463 463

Accrued interest 0 0
------------------------------------------------------------------------
Total current liabilities 7,719 0 0 0 7,719

Long-term debt 254 254

------------------------------------------------------------------------
Total liabilities 7,973 0 0 0 7,973

Redeemable common stock 160 160
------------------------------------------------------------------------
Stockholders' equity
Common stock 48 1 (d) 149 (f) 198
Additional paid-in capital 16,337 14,850 (e) 12,134 (f) 31,226
(12,095)(g)
Retained earnings (deficit) (12,134) 12,134 (g) 0
Unrealized gain on
marketable securities 39 (39)(g) 0
Treasury stock (434) (434)
------------------------------------------------------------------------
Total stockholders' equity 3,856 1 14,850 12,283 30,990
------------------------------------------------------------------------

Total liabilities and
stockholders' equity $ 11,989 $ 1 $ 14,850 $ 12,283 $ 39,123
------------------------------------------------------------------------
</TABLE>

G-3

<PAGE>

EVANS SYSTEMS, INC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
(in thousands except for per share amounts)
<TABLE>
<CAPTION>

Pro forma adj
Sale of Texas Pro forma Pro forma
Historical operations ESI before Historical Pro forma giving effect
ESI to TSC the "Merger" I-Net adjustments to "Merger"
----------- ------------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Motor fuel sales $ 70,243 ($60,572)(h) $ 9,671 $ 9,671
Other sales and services 17,030 (12,465)(h) 4,565 4,565
-------- -------- -------- -------- -------- --------
Total revenue 87,273 (73,037) 14,236 0 0 14,236
Cost of sales 75,419 (63,868)(h) 11,551 11,551
-------- -------- -------- -------- -------- --------
Gross profit 11,854 (9,169) 2,685 0 0 2,685
-------- -------- -------- -------- -------- --------
Operating expenses:
Employment expenses 6,864 (4,812)(h) 2,052 2,052
Other operating expenses 3,558 (2,765)(h) 793 793
General and administrative 3,223 (1,578)(h) 1,645 1,645
Depreciation and amortization 1,589 (1,383)(h) 206 2,457 (i) 2,663
-------- -------- -------- -------- -------- --------
Total operating expenses 15,234 (10,538) 4,696 0 2,457 7,153
-------- -------- -------- -------- -------- --------
Operating loss (3,380) 1,369 (2,011) 0 (2,457) (4,468)
-------- -------- -------- -------- -------- --------
Other income (expense)
Loss on impairment of
marketable securities (8,602) (8,602) (8,602)
Gain on sale of assets 381 381 381
Interest expense, net (1,708) 1,528 (h) (180) (180)
Other (44) (44) (44)
-------- -------- -------- -------- -------- --------
Total other income (expense) (9,973) 1,528 (8,445) 0 0 (8,445)
-------- -------- -------- -------- -------- --------
Loss from continuing operations
before income taxes (13,353) 2,897 (10,456) 0 (2,457) (12,913)
Benefit from income taxes (47) (47) (47)
-------- -------- -------- -------- -------- --------
Loss from continuing operations (13,306) 2,897 (10,409) 0 (2,457) (12,866)
Discontinued operations:
Gain on disposal of ChemWay 3,973 3,973 3,973
-------- -------- -------- -------- -------- --------
Net loss ($ 9,333) $ 2,897 ($ 6,436) $ 0 ($ 2,457) ($ 8,893)
======== ======== ======== ======== ======== ========

Basic and diluted earnings (loss) per
common share:
Continuing operations ($ 3.46) ($ 2.26) ($ 0.66)
Discontinued operations $ 1.03 $ 0.86 $ 0.20
-------- -------- -------- -------- -------- --------
Loss per common share ($ 2.43) ($ 1.40) ($ 0.45)
======== ======== ======== ======== ======== ========

Basic and diluted weighted
average common shares
outstanding 3,846 4,596 15,000 19,596 (j)
-------- -------- -------- -------- -------- --------

</TABLE>

G-4
<PAGE>

EVANS SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Pro forma adj
Sale of Texas Pro forma Pro forma
Historical operations ESI before Historical Pro forma giving effect
ESI to TSC the "Merger" I-Net adjustments to "Merger"
----------- ------------- ------------ --------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
Revenue:
Motor fuel sales $ 18,481 ($12,569) (h) $ 5,912 $ 5,912
Other sales and services 3,531 (5,976) (h) (2,445) (2,445)
-------- -------- -------- -------- -------- --------
Total revenue 22,012 (18,545) 3,467 0 0 3,467
Cost of sales 19,427 (16,524) (h) 2,903 2,903
-------- -------- -------- -------- -------- --------
Gross profit 2,585 (2,021) 564 0 0 564
-------- -------- -------- -------- -------- --------
Operating expenses:
Employment expenses 1,459 (851) (h) 608 608
Other operating expenses 800 (608) (h) 192 192
General and administrative 620 (347) 273 273
Depreciation and amortization 373 (324) 49 614 (i) 663
-------- -------- -------- -------- -------- --------
Total operating expenses 3,252 (2,130) 1,122 0 614 1,736
-------- -------- -------- -------- -------- --------
Operating loss (667) 109 (558) 0 (614) (1,172)
-------- -------- -------- -------- -------- --------
Other income (expense)
Loss on impairment of
marketable securities 0 0
Gain on sale of assets 1 1 1
Interest expense, net (555) 538 (h) (17) (17)
Other 7 7 7
-------- -------- -------- -------- -------- --------
Total other income (expense) (547) 538 (9) 0 0 (9)
-------- -------- -------- -------- -------- --------
Loss from continuing operations
before income taxes (1,214) 647 (567) 0 (614) (1,181)
Benefit from income taxes 0 0
-------- -------- -------- -------- -------- --------
Loss from continuing operations (1,214) 647 (567) 0 (614) (1,181)
Discontinued operations:
Gain on disposal of ChemWay 266 266 266
-------- -------- -------- -------- -------- --------
Net loss ($ 948) $ 647 ($ 301) $ 0 ($ 614) ($ 915)
======== ======== ======== ======== ======== ========

Basic and diluted earnings (loss) per
common share:
Continuing operations ($ 0.30) ($ 0.12) ($ 0.06)
Discontinued operations $ 0.06 $ 0.05 $ 0.02
-------- -------- -------- -------- -------- --------
Loss per common share ($ 0.24) ($ 0.06) ($ 0.05)
======== ======== ======== ======== ======== ========

Basic and diluted weighted
average common shares
outstanding 4,032 -- 4,782 -- 15,000 19,782 (j)
-------- -------- -------- -------- -------- --------

</TABLE>

G-5
<PAGE>

EVANS SYSTEMS, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

(a) On February 22, 2000, Evans agreed to sell 750,000 shares of ESI
common stock to accredited investors in a private placement
transaction for $0.75 per share resulting in net proceeds of
$532,000 after deducting certain offering expenses including
printing, accounting and legal and "Blue Sky" fees, as well as
related expenses. Proceeds were used to fund certain expenses
associated with the TSC Transaction and the Company's proposed
merger with I-Net, as discussed elsewhere in this proxy statement,
and to provide working capital

(b) To reflect the sale of substantially all of the operating assets and
inventory relating to the Evans' Texas-based petroleum marketing and
convenience stores to TSC for cash of $15,154,000 and the assumption
of capital lease obligations of $842,000 and the payment of
transaction costs of $650,000.

(c) To reflect the use of proceeds from the sale of the Texas-based
assets to repay bank debt and related accrued interest payable.

(d) I-Net was formed in December 1999 with the contribution of $1,000
and has had no significant operations other than incorporation and
fund raising activities.

(e) One of the conditions of the Merger is that I-Net will sell common
stock for cash of $15,000,000. Related transaction costs are
estimated to be $150,000.

(f) The merger of Evans and I-Net will be accounted for as a reverse
acquisition with Evans being the legal acquirer and I-Net the
acquirer for accounting purposes. Accordingly, goodwill of
$12,284,000 has been recorded to reflect the difference between the
average bid price for Evans common stock for the five business days
before and after March 1, 2000 of $3.375 times the 4,782,340 shares
of Evans common stock anticipated to be outstanding on the date the
merger is consummated and the estimated fair value of Evans assets,
net of its liabilities. Such goodwill will be amortized over its
estimated life of five years.

(g) To eliminate the historical stockholders equity accounts of Evans.

(h) To eliminate the historical results of operations of Evans'
Texas-based petroleum marketing and convenience stores.

(i) To give effect to amortization of goodwill over a period of 5 years.

(j) Assuming the full 9,000,000 shares issuable in the I-Net Financing
are issued and the resultant change in the exchange ratio, the
number of shares outstanding would increase by 1,500,000 shares.
Basic and diluted loss per common shares outstanding would be as
follows:

Year Ended Quarter Ended
September 30, 1999 December 31, 1999

Continuing operations ($0.12) ($0.06)
Discontinued operations .05 .02
--- ---
Loss per common shares ($0.06) ($0.05)

G-6
<PAGE>
ANNEX H

I-NET HOLDINGS, INC.
BALANCE SHEET
DECEMBER 31, 1999

Assets

Current Assets
$ 1,000
------------
Cash $ 1,000
============

Liabilities and Shareholder's Equity

Current Liabilities
Accounts Payable $ 10,000

Shareholder's Equity
Common Stock 12,000
(12 million shares issued and outstanding)
Additional Paid-in-capital 18,000
Retained earnings (39,000)
------------
(9,000)
------------
$ 1,000
============

<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF

EVANS SYSTEMS, INC.

Proxy -- Annual Meeting of Shareholders
April 10, 2000

The undersigned, a shareholder of Evans Systems, Inc., a Texas
corporation (the "Company"), does hereby constitute and appoint Jerriel L.
Evans, Sr. and Charles N. Way and each of them, the true and lawful attorneys
and proxies with full power of substitution, for and in the name, place and
stead of the undersigned, to vote all of the shares of Common Stock of the
Company that the undersigned would be entitled to vote if personally present at
the Annual Meeting of Shareholders of the Company to be held at the Best Western
Matagorda Hotel located at 407 Seventh Street, Bay City, Texas, on April 10,
2000, at 10:00 a.m., local time, or at any adjournment or adjournments thereof.

The undersigned hereby instructs said proxies or their substitutes as
set forth below.

1. TO APPROVE THE SALE OF ASSETS.