MERGER AGREEMENT AND PLAN OF REORGANIZATION

MERGER AGREEMENT AND

PLAN OF REORGANIZATION

BY AND AMONG

XYZ, INC.

XYZ / .............. MERGER CORP., AND

YYY .............. SERVICES, INC.,

This MERGER AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), is

made and entered into this 10th day of October 2000, by and among XYZ, INC., a

.............. corporation ("XYZ"), XYZ / .............. MERGER CORP., a ..............

corporation ("Merger Corp"), and YYY .............. SERVICES, INC., a

.............. corporation ("YYY").

RECITALS:

A. The parties hereto wish to provide for the merger of YYY

with and into Merger Corp (the "Merger"), pursuant to which Merger Corp will be

the surviving entity, upon the terms and conditions set forth in the Plan of

Merger attached hereto as EXHIBIT A (the "Plan of Merger") and the terms and

conditions set forth herein.

B. XYZ, Merger Corp and YYY intend that the Merger qualify

and be treated as a reorganization within the meaning of Section 368(a) of the

Internal Revenue Code of 1986, as amended.

AGREEMENT:

IN CONSIDERATION OF the foregoing recitals and the mutual agreements

contained herein, the parties hereto agree as follows:

1. MERGER.

(a) Subject to, and upon, the terms and conditions set

forth in this Agreement, the parties hereto agree to effect the Merger of

YYY with and into Merger Corp in accordance with the .............. Business

Corporation Act (the ".............. Corporation Act").

(b) At the Effective Date (as defined below), YYY

shall be merged with and into Merger Corp and the separate existence of

YYY shall thereupon cease. Merger Corp shall be the surviving entity of

the Merger. Merger Corp, with all its purposes, objects, rights, privileges,

powers and franchises, shall continue unaffected and unimpaired by the Merger.

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Directors of XYZ, (ii) the Board of Directors of Merger Corp, and (iii) the

Board of Directors of YYY. Upon the execution and delivery of this

Agreement, the Merger will be submitted to the shareholders of YYY for

approval. Upon approval of the Merger by the shareholders of YYY as

provided in SEXYZON 6, Merger Corp and YYY will prepare, execute and file

(i) Articles of Merger under the .............. Corporation Act in the form attached

hereto as EXHIBIT B, to be filed with the Secretary of State of the State of

..............; (ii) and the Plan of Mercer to be attached to and filed with the said

Articles of Merger. The Merger shall be effective upon the filing of such

Articles of Merger with the Secretary of State of the State of .............., or at

such time thereafter as may be provided in the said Articles of Merger (the

"Effective Date").

2. EFFECT OF MERGER.

(a) At the Effective Date, YYY shall be merged with

and into Merger Corp, and the separate existence of YYY shall thereupon

cease. Merger Corp shall be the surviving entity. The existence of Merger Corp.

with all its purposes, objects, rights, privileges, powers and franchises, shall

continue unaffected and unimpaired by the Merger.

(b) All property, privileges, and powers of YYY

shall be vested in Merger Corp without reversion or impairment.

YYY shall be vested in Merger Corp, and Merger Corp shall after the

Effective Date be responsible for all such liabilities, debts, obligations and

duties.

(d) Any proceeding pending by or against YYY may be

continued as if the Merger did not occur, or Merger Corp, as the surviving

entity, may be substituted in the proceeding for YYY.

(e) Except as provided in SEXYZON 2(F) below, the charter

and bylaws of Merger Corp as existing and constituted immediately prior to the

Effective Date shall remain, be and constitute the charter and bylaws of Merger

Corp, as the surviving entity.

(f) The name of Merger Corp, as the surviving entity,

shall as a result of the Merger be changed to YYY ..............s, Inc.

(g) If, at any time after the Effective Date-Merger Corp

shall consider or be advised that any deeds, bills of sale, assignments,

assurances or any other actions or things are necessary or desirable to vest,

perfect or confirm of record or otherwise in Mercer Corp its right, title or

interest in, to or under any of the rights, properties or assets of YYY

acquired or to be acquired by Merger Corp as a result of, or in connection with,

the Merger or to otherwise carry out this Agreement,

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the officers of Merger Corp, or any one of them, shall and will be authorized to

execute and deliver, in the name and on behalf of the parties hereto or

otherwise, all such deeds, bills of sale, assignments and assurances and to take

and do, in the name and on behalf of the parties hereto or otherwise, all such

other actions and things as may be necessary or desirable to vest, perfect or

confirm any and all right, title and interest in, to and under such rights,

properties or assets in Merger Corp or to otherwise carry out this Agreement.

3. CONVERSION OF SHARES. All of the outstanding shares of stock

of YYY shall be exchanged for and converted into shares of XYZ, except as

provided below. The manner and basis of converting all outstanding shares of

stock of YYY into shares of stock of XYZ shall be as set forth in this

SEXYZON 3. As a result of the Merger, XYZ common stock will be issued to the

shareholders of YYY, as provided below.

(a) As of the Effective Date, by virtue of the Merger,

and without any action on the part of XYZ, Merger Corp., YYY or any

shareholder of YYY, each then issued and outstanding share of stock of

YYY will be canceled and retired and converted into common stock of XYZ as

follows:

(i) The current shareholders of YYY and

their YYY shares are as set forth on SCHEDULE 3(A)(I) attached hereto. The

issued and outstanding shares of stock of YYY, except for the YYY

shares held by XYZ, XYZ Services, Inc. and Dissenting Shareholders (as defined

in SEXYZON 4), shall be converted into shares of common stock of XYZ on the

basis of 3.6875 shares of YYY common stock for one (1) share of XYZ common

stock.

(ii) The current participants under the YYY

Amended and Restated Long-Term Incentive Plan who have the right to receive

common stock in YYY in the event of a merger in which YYY is not the

surviving entity ("Capital Event Stock") are as set forth on SCHEDULE 3(A)(II).

The shares of Capital Event Stock shall be converted into shares of common stock

of XYZ on the basis of 3.6875 shares of Capital Event Stock for one (1) share of

XYZ common stock.

(iii) All common and preferred shares of YYY

stock and all warrants held by XYZ and XYZ Services, Inc. prior to the Merger

shall be canceled and shall cease to exist from and after the Effective Date.

(b) Prior to the date of this Agreement, YYY made a

commitment to issue stock options in YYY to certain of its employees,

officers and directors (the "Employee Stock Options") under the YYY

Amended and Restated Long-Term Incentive Plan as set forth on SCHEDULE 3(B). As

a result of the Merger, the Employee Stock Options will be canceled and

converted into the right to be issued fully vested stock options to acquire XYZ

common stock ("XYZ Stock Options") based on the same conversion ratio set forth

above in SEXYZON 3(A)(I) and 3(A)(II). The exercise price for the XYZ Stock

Options shall equal $5.63 per share of

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XYZ common stock. The XYZ Stock Options shall be exercisable into whole shares

of XYZ common stock only. No fractional shares of XYZ common stock shall be

issued upon the exercise of a XYZ Stock Option, and no credit will be given to a

fractional share that may result from the conversion ratio between Employee

Stock Options and XYZ Stock Options. Following the Effective Date and completion

of all legal compliance, XYZ shall deliver to each holder of Employee Stock

Options as set forth on SCHEDULE 3(B) a XYZ Stock Option pursuant to the XYZ

Stock Option Plan on terms and conditions consistent with this Agreement.

deliver to each shareholder of YYY and each holder of Capital Event Stock

entitled thereto one or more certificates representing the shares of common

stock of XYZ to which such shareholder and holder of Capital Event Stock is

entitled. The XYZ common stock certificates shall be promptly delivered after

the YYY shareholder or holder of Capital Event Stock has delivered his

certificates of YYY stock or Grant Agreements to Capital Event Stock to

Merger Corp for cancellation. Pending the delivery of the YYY stock

certificates by a YYY shareholder or the Grant Agreement by a holder of

Capital Event Stock after the Effective Date, such YYY stock and Capital

Event Stock shall represent shares of common stock in XYZ, in which it has been

converted as a part of the Merger.

(d) Following the Merger, XYZ shall hold all issued and

outstanding shares of stock of Merger Corp.

(e) Fractional shares of XYZ common stock will not be

issued. Each holder of YYY and each holder of Capital Event Stock eligible

to receive a fractional interest in a share of XYZ common stock shall receive a

cash distribution in lieu of such fractional share in the amount obtained by

multiplying such fraction by $5.63. No interest shall be payable with respect to

payment of such cash distribution.

(f) The shares of XYZ common stock received by the

YYY shareholders and holders of Capital Event Stock pursuant to the Merger

and the shares of XYZ common stock received by holders of Employee Stock Options

upon the exercise of XYZ Stock Options after the Merger shall be subject to the

transfer restrictions set forth on EXHIBIT C, and the holders of shares of XYZ

common stock received pursuant to the Merger or upon the exercise of XYZ Stock

Options after the Merger shall be subject to the non-competition restrictions

set forth on EXHIBIT C. The XYZ shares of common stock received by the YYY

shareholders and holders of Capital Event Stock pursuant to the Merger and the

shares of XYZ common stock received by holders of Employee Stock Options upon

the exercise of XYZ Stock Options after the Merger shall bear a legend

reflecting the transfer restrictions set forth on EXHIBIT C. Said transfer and

non-competition restrictions shall, at XYZ's option, be reflected in either or

both (i) the Bylaws of XYZ to be in effect as of the Effective Date and (ii) in

an agreement executed by the YYY shareholders and holders of Capital Event

Stock as a condition to receiving their shares of XYZ common stock pursuant to

the Merger and in an agreement executed by the holder of Employee

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Stock Options as a condition to receiving shares of XYZ common stock upon the

exercise of XYZ Stock Options after the Merger.

4. DISSENTING SHAREHOLDERS. Notwithstanding anything to the

contrary contained in this Agreement, holders of shares of P.E..T.Net stock with

respect to which dissenters' rights, if any, are granted by reason of the Merger

under the .............. Corporation Act and who do not vote in favor of the Merger

and otherwise comply with the .............. Corporation Act ("Dissenting

Shareholders"), shall not be entitled to shares of XYZ stock pursuant to SEXYZON

3, unless and until the Dissenting Shareholder shall have failed to perfect

or-shall have effectively withdrawn or lost his right to dissent from the Merger

under the .............. Corporation Act, and shall be entitled to receive only the

payment provided for pursuant to the .............. Corporation Act. If any such

Dissenting Shareholder shall have failed to perfect or shall have effectively

withdrawn or lost his dissenters' rights under the .............. Corporation Act,

such Dissenting Shareholder's YYY stock shall thereupon be deemed to have

been automatically converted into, as of the Effective Date, XYZ common stock

pursuant to SEXYZON 3.

5. THE SURVIVING ENTITY. None of the issued and outstanding

shares of stock of Merger Corp shall be converted as a result of the Merger. All

such shares shall remain issued and outstanding shares of common stock of Merger

Corp, as the surviving entity of the Merger. The board of directors and officers

of YYY immediately prior to the Effective Date shall become the board of

directors and officers of Merger Corp immediately after the Effective Date.

6. APPROVAL OF SHAREHOLDERS. This Agreement shall be submitted to

the shareholders of YYY as provided by the .............. Corporation Act at a

meeting called for that purpose. There shall be required for the adoption of

this Agreement the affirmative vote of the holders of at least a majority of all

the shares of YYY stock issued and outstanding and entitled to vote.

Furthermore, unless otherwise agreed to by XYZ in writing, YYY

shareholders holding at least ninety percent (90%) of the number of shares of

YYY common stock shall not have dissented to the Merger and YYY

shall not have or be required to transfer ten percent (10%) or more of the fair

market value of its net assets or thirty percent (30%) or more of the fair

market value of its gross assets to third parties, including dissenting

shareholders, prior to or as a result of the Merger.

7. REPRESENTATIONS AND WARRANTIES OF YYY. YYY

represents and warrants that:

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(a) CORPORATE ORGANIZATION AND GOOD STANDING. YYY

is a corporation duly organized, validly existing, and in good standing under

the laws of the State of .............., and is qualified to do business as a foreign

corporation in each jurisdiction, if any, in which its property or business

requires such qualification.

(b) CAPITALIZATION. YYY's authorized capital stock

consists of 25,000,000 shares of common stock and 25,000,000 shares of preferred

stock, of which 14,941,355 shares of common stock and 2,222,222 shares of

preferred stock are issued and outstanding, fully paid and nonassessable. There

are no options, warrants, or rights outstanding to purchase shares of YYY

capital stock, except for (i) the warrant held by XYZ to purchase 2,810,315

shares of common stock, (ii) 1,005,121 shares of Capital Event Stock held by

participants under the YYY Amended and Restated Long-Term Incentive Plan,

and (iii) employee stock options to acquire up to 1,502,282 shares of YYY

common stock, which has been agreed to by the YYY board of directors but

which YYY has not yet granted to its employees.

(d) FINANCIAL STATEMENTS. YYY's audited financial

statements as of September 30, 1999, with related balance sheets and statements

of income and retained earnings for the period then ended, and the unaudited

financial statements, with related balance sheets and statements of income and

retained earnings for the period ended June 30, 2000, copies of which have been

delivered by YYY to XYZ, fairly present the financial condition of

YYY as of said dates and the results of its operations for the periods

then ended, in conformity with generally accepted accounting principles

consistently applied for the periods covered.

(e) ABSENCE OF UNDISCLOSED LIABILITIES. Except to the

extent reflected or reserved against in YYY's balance sheet as of June 30,

2000, YYY did not have at that date any liabilities or obligations

(secured, unsecured, contingent, or otherwise) of a nature customarily reflected

in a corporate balance sheet prepared in accordance with generally accepted

accounting principles.

(f) ABSENCE OF CERTAIN CHANGES. Except as heretofore

disclosed in writing by YYY to XYZ, there has been no material adverse

change in the business, properties, financial condition or net worth of

YYY since June 30, 2000.

(g) LITIGATION, AND SO FORTH. Except as heretofore

disclosed in writing by YYY to XYZ, there is no litigation, proceeding, or

investigation pending or, to the knowledge of YYY, threatened against

YYY that, if successful, might result in a material adverse change in the

business, properties, or financial condition of YYY.

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(h) CONTRACTS. Except as heretofore disclosed in writing

by YYY to XYZ, YYY is not a party to any material contract not in

the ordinary course of business that is to be performed in whole or in part at

or after the date of this Agreement.

(i) TITLE. YYY has good and marketable title to all

the real property and good and valid title to all other property included in the

balance sheet of YYY as of June 30, 2000, other than property disposed of

in the ordinary course of business after said date. Except as heretofore

disclosed in writing by YYY to XYZ, the properties of YYY are not

subject to any mortgage, encumbrance, or lien of any kind except minor

encumbrances that do not materially interfere with the use of the property in

the conduct of the business of YYY.

(j) TAX RETURNS. Except as heretofore disclosed in

writing by YYY to XYZ, the provisions for federal and state taxes

reflected in the financial, statements referred to in SEXYZON 7(D) hereof are

adequate to cover any such taxes that may be assessed against YYY in

respect of its business and its operations during the periods covered by said

financial statements and all prior periods.

(k) NO VIOLATION. Consummation of the Merger will not

constitute or result in a breach or default under any provision of any charter,

bylaw, indenture, mortgage, lease, or agreement, or any order, judgment, decree,

law, or regulation to which any property of YYY is subject or by which

YYY is bound, except for breaches or defaults that in the aggregate would

not have a materially adverse effect on YYY's properties, business

operations, or financial condition.

(1) AUTHORIZATION. Execution of this Agreement has been

duly authorized and approved by YYY's board of directors.

(m) STATEMENTS TRUE AND CORRECT. None of the information

prepared by or provided by YYY regarding YYY which is included or to

be included in the Private Offering Memorandum and Proxy Statement to be mailed

to the YYY shareholders in connection with the shareholders' meeting to

vote on the Merger, and any other documents to be filed with the Securities and

Exchange Commission or any other regulatory authority in connection with the

transaction contemplated herein, will, at the respective times such documents

are filed, and, with respect to the Private Offering Memorandum and Proxy

Statement when first mailed to the YYY shareholders be false or misleading

with respect to any material fact or omit to state any material fact necessary

to make the statements therein, in light of the circumstances under which they

were made, not misleading, or, in the case of the Private Offering Memorandum

and Proxy Statement or any amendment thereof or supplement thereto, at the time

of the shareholders' meeting, be false or misleading with respect to any

material fact, or omit to state any material fact necessary to correct any

statement in any earlier communication with respect to the solicitation of any

proxy for the shareholders' meeting.

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8. REPRESENTATIONS AND WARRANTIES OF XYZ. XYZ represents and

warrants that:

(a) CORPORATE ORGANIZATION AND GOOD STANDING. XYZ is a

corporation duly organized, validly existing, and in good standing under the

laws of the State of .............., and is qualified to do business as a foreign

corporation in each jurisdiction, if any, in which its property or business

requires such qualification.

(b) CAPITALIZATION. XYZ's authorized capital stock

consists of 30,000,000 shares of common stock and 1,000,000 shares of preferred

stock, of which 17,209,884 shares of common stock, 400,000 shares of Series A

redeemable preferred stock and 200,000 shares of Series B convertible preferred

stock are issued and outstanding, fully paid and nonassessable. There are no

options, warrants, or rights outstanding to purchase shares of XYZ capital stock

from XYZ, except for (i) warrants and other rights held by First Union Capital

Partners, Inc. and (ii) qualified or non-qualified stock options which were

granted to employees of XYZ by XYZ's Stock Option Committee.

statements as of September 30, 1999, with related balance sheets and statements

of income and retained earnings for the period then ended, and the unaudited

financial statements, with related balance sheets and statements of income and

retained earnings for the period ended June 30, 2000, copies of which have been

delivered by XYZ to YYY, fairly present the financial condition of XYZ as

of said dates and the results of its operations for the periods then ended, in

conformity with generally accepted accounting principles consistently applied

for the periods covered.

(d) ABSENCE OF UNDISCLOSED LIABILITIES. Except to the

extent reflected or reserved against in XYZ's balance sheet as of June 30, 2000,

XYZ did not have at that date any liabilities or obligations (secured,

unsecured, contingent, or otherwise) of a nature customarily reflected in a

corporate balance sheet prepared in accordance with generally accepted

accounting principles.

(e) ABSENCE OF CERTAIN CHANGES. Except as heretofore

disclosed in writing by XYZ to YYY, there has been no material adverse

change in the business, properties, financial condition or net worth of XYZ

since June 30, 2000.

(f) LITIGATION, AND SO FORTH. Except as heretofore

disclosed in writing by XYZ to YYY, there is no litigation, proceeding, or

investigation pending or, to the knowledge of XYZ, threatened against XYZ that,

if successful, might result in a material adverse change in the business,

properties, or financial condition of XYZ.

(g) CONTRACTS. Except as heretofore disclosed in writing

by XYZ to YYY, XYZ is not a party to any material contract not in the

ordinary course of business that is to be performed in whole or in part at or

after the date of this Agreement.

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(h) TITLE. XYZ has good and marketable title to all the

real property and good and valid title to all other property included in the

balance sheet of XYZ as of June 30, 2000, other than property disposed of in the

ordinary course of business after said date. Except as heretofore disclosed in

writing by XYZ to YYY, the properties of XYZ are not subject to any

mortgage, encumbrance, or lien of any kind except minor encumbrances that do not

materially interfere with the use of the property in the conduct of the business

of XYZ.

(i) TAX RETURNS. Except as heretofore disclosed in

writing by YYY to XYZ, the provisions for federal and state taxes

reflected in the financial statements referred to in SEXYZON 8(C) hereof are

adequate to cover any such taxes that may be assessed against XYZ in respect of

its business and its operations during the periods covered by said financial

statements and all prior periods.

(j) NO VIOLATION. Consummation of the Merger will not

constitute or result in a breach or default under any provision of any charter,

bylaw, indenture, mortgage, lease, or agreement, or any order, judgment, decree,

law, or regulation to which any property of XYZ is subject or by which XYZ is

bound, except for breaches or defaults that in the aggregate would not have a

materially adverse effect on XYZ's properties, business operations, or financial

condition.

(k) AUTHORIZATION. Execution of this Agreement has been

duly authorized and approved by XYZ's board of directors.

9. CONDUCT OF YYY PENDING THE EFFEXYZVE DATE. YYY

covenants that between the date of this Agreement and the Effective Date:

(a) CHARTER AND BYLAWS. No change will be made in

YYY's charter or bylaws.

(b) CAPITALIZATION, AND SO FORTH. YYY will not make

any change in its authorized or issued capital stock, declare or pay any

dividend or other distribution, or issue, encumber, purchase, or otherwise

acquire any of its capital stock.

directors will submit this Agreement to the shareholders of YYY at a

meeting as contemplated by SEXYZON 6.

(d) PRIVATE OFFERING MEMORANDUM AND PROXY STATEMENT. In

connection with the shareholders' meeting contemplated by SEXYZON 6, YYY

shall (i) assist XYZ in the preparation of a Private Offering Memorandum and

Proxy Statement to be delivered to the YYY shareholders; (ii) mail or

cause to be mailed such Private Offering Memorandum and Proxy Statement to its

shareholders; and (iii) furnish XYZ with all information concerning YYY

that XYZ may reasonably request in connection with the preparation of the

Private Offering Memorandum and Proxy Statement.

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(e) CONDUCT OF BUSINESS. YYY will use its best

efforts to maintain and preserve its business organization, employee

relationships, and goodwill intact, and will not, without the written consent of

XYZ, enter into any material commitment except in the ordinary course of

business or increase, directly or indirectly, the compensation of any officer or

employee whose annual rate of compensation after the increase will exceed

$20,000.

10. CONDUCT OF XYZ PENDING THE EFFEXYZVE DATE. XYZ covenants that

between the date of this Agreement and the Effective Date:

(a) CHARTER AND BYLAWS. No change will be made in XYZ's

charter or bylaws except as contemplated herein.

(b) CAPITALIZATION, AND SO FORTH. Without YYY's

prior consent, XYZ will make no change in its authorized or issued capital

stock, declare or pay any dividend or other distribution, or issue, encumber,

purchase, or otherwise acquire any of its capital stock.

maintain and preserve its business organization, employee relationships, and

goodwill intact, and will not, without the written consent of YYY, enter

into any material commitment except in the ordinary course of business.

11. CONDITIONS PRECEDENT TO OBLIGATION OF YYY. YYY's

obligation to consummate the Merger shall be subject to fulfillment on or before

the Effective Date of each of the following conditions, unless waived in writing

by YYY:

(a) XYZ'S REPRESENTATIONS AND WARRANTIES. The

representations and warranties of XYZ set forth in SEXYZON 8 hereof shall be

true and correct at the Effective Date as though made at and as of that date,

except as affected by transactions contemplated hereby.

(b) XYZ'S COVENANTS. XYZ shall have performed all

covenants required by this Agreement to be performed by it on or before the

Effective Date.

adopted by the necessary vote of the holders of P:E.T.Net stock entitled to vote

as set forth in SEXYZON 6 hereof.

(d) OPINION OF XYZ'S COUNSEL. XYZ shall have delivered to

YYY the opinion of its counsel, prior to the Effective Date, in form and

substance satisfactory to counsel for YYY, to the effect that:

(i) XYZ is a corporation duly organized, validly

existing, and in good standing, and is duly qualified to do business as a

foreign corporation in each

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jurisdiction (if any) in which, to the best knowledge of counsel, its property

or business requires such qualification.

(ii) XYZ's authorized capital stock is as set

forth in SEXYZON 8(B) hereof.

(iii) The execution and consummation of this

Agreement have been duly authorized and approved by XYZ's board of directors,

and consummation of this Agreement will not constitute or result in any breach

or default of the character described in SEXYZON 8(J) hereof of which counsel

has knowledge.

(iv) Counsel has no knowledge of any liabilities

or obligations of the type described in SEXYZON 8(D) hereof; any litigation,

proceeding, or investigation of the type described in SEXYZON 8(F) hereof; or

any defects in title or mortgages, encumbrances, or liens of the type described

in SEXYZON 8(H) hereof.

(v) The shares of XYZ common stock into which

YYY common stock is to be converted pursuant to this Agreement will, upon

such conversion, be duly and validly authorized and issued, and will be fully

paid and nonassessable.

(e) OFFICER'S CERTIFICATE. Prior to execution of the Plan

of Merger, XYZ shall deliver to YYY an Officer's Certificate providing

that (i) each of the representations and warranties contained in SEXYZON 8 is

true and correct; (ii) all covenants contained in SEXYZON 10 have been performed

or satisfied; and (iii) there has been no material adverse chance in the

financial condition or net worth of XYZ since June 30, 2000.

(f) PROXY INFORMATION. None of the information with

respect to XYZ that shall have been furnished by or on behalf of XYZ for

inclusion in the proxy solicitation material sent to the shareholders of

YYY in connection with the meeting of such shareholders to be held in

accordance with SEXYZON 6 hereof shall be false or, misleading in any material

respect or shall fail to state any fact necessary to make the statements therein

not false or misleading in any material respect.

12. CONDITIONS PRECEDENT TO OBLIGATION OF XYZ. XYZ's obligation to

consummate the Merger shall be subject to fulfillment on or before the Effective

Date of each of the following conditions, unless waived in writing by XYZ:

(a) YYY'S REPRESENTATIONS AND WARRANTIES. The

representations and warranties of YYY set forth in SEXYZON 7 hereof shall

be true and correct at the Effective Date as though made at and as of that date,

except as affected by transactions contemplated hereby.

(b) YYY'S COVENANTS. YYY shall have performed

all covenants required by this Agreement to be performed by it on or before the

Effective Date.

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adopted by the necessary vote of the holders of YYY stock entitled to vote

asset forth in SEXYZON 6 hereof.

(d) DISSENTING SHAREHOLDERS OF YYY. Unless

otherwise agreed to by XYZ in writing, (i) the number of shares of common stock

of YYY with respect to which objections to the Merger and demands for

payment of the fair value thereof shall have been made in accordance with the

.............. Corporation Act,, and with respect to which such demands shall not

have been withdrawn, shall not exceed ten percent (10%) of the number of shares

entitled to object and make such demand; and (ii) YYY shall not have or be

required to transfer ten percent (10%) or more of the fair market value of, its

net assets or thirty percent (30%) or more of the fair market value of its gross

assets to third parties, including dissenting shareholders, prior to or as a

result of the Merger.

(e) OPINION OF YYY'S COUNSEL. YYY shall have

delivered to XYZ the opinion of its counsel, prior to the Effective Date, in

form and substance satisfactory to counsel for XYZ, to the effect that:

(i) YYY is a corporation duly organized,

validly existing, and in good standing, and is duly qualified to do business as

a foreign corporation in each jurisdiction (if any) in which, to the best

knowledge of counsel, its property or business requires such qualification.

(ii) YYY's authorized capital stock is as

set forth in SEXYZON 7(B) hereof.

(iii) The execution and consummation of this

Agreement have been duly authorized and approved by YYY's board of

directors and shareholders, and consummation; of this Agreement will not

constitute or result in any breach or default of the character described in

SEXYZON 7(K) hereof of which counsel has knowledge.

(iv) Counsel has no knowledge of any liabilities

or obligations of the type described in SEXYZON 7(E) hereof; any litigation,

proceeding, or investigation of the type described in SEXYZON 7(G) hereof; or

any defects in title or mortgages, encumbrances, or liens of the type described

in SEXYZON 7(I) hereof.

(v) Counsel has no knowledge of any options,

warrants, or rights to acquire shares of YYY common stock except those

held by XYZ, XYZ Services, Inc. or participants under the YYY Amended and

Restated Long-Term Incentive Plan.

(f) OFFICER'S CERTIFICATE. Prior to execution of the Plan

of Merger, YYY shall deliver to XYZ an Officer's Certificate providing

that (i) each of the representations and warranties contained in SEXYZON 7 is

true and correct; (ii) all

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covenants contained in SEXYZON 9 have been performed or satisfied; and (iii)

there has been no material adverse change in the financial condition or net

worth of YYY since June 30, 2000.

(g) EFFEXYZVE DATE. Approval of the Merger by the

shareholders of YYY and the filing of Articles of Merger with the

Secretary of State of .............. effectuating the Merger shall have occurred on

or before October 30, 2000.

13. ACCESS. From the date hereof to the Effective Date, XYZ, and

YYY shall provide each other with such information and permit each other's

officers and representatives such access to its properties and books and records

as the other may from time to time reasonably request. If the Merger is not

consummated, all documents received in connection with this Agreement shall be

returned to the party furnishing the same; and all information so received by

YYY shall be treated as confidential; all information so received by XYZ

shall be treated by XYZ in accordance with its current rights and duties as

holder of a majority of the outstanding shares of capital stock of YYY.

14. SECURITIES LAW COMPLIANCE. XYZ will take such action required

to be taken under applicable securities laws and XYZ will also take such action

to secure all necessary exemptions or clearances under all securities laws

applicable to (i) the Merger and (ii) the issuance of XYZ common stock pursuant

thereto. XYZ will promptly deliver to YYY copies of any filings made by

XYZ or Merger Corp pursuant to this Section.

15. THIRD PARTY CONSENTS. Each party to this Agreement shall use

its best efforts to obtain, as soon as reasonably practicable; all permits,

authorizations, consents, waivers and approvals from third parties or

governmental authorities necessary to consummate this Agreement and the

transactions contemplated hereby, including,, without limitation, any permits,

authorizations, consents, waivers and approvals required in connection with the

Merger.

16. TERMINATION.

(a) CIRCUMSTANCES OF TERMINATION. This Agreement may be

terminated (notwithstanding approval by the shareholders of YYY):

(i) By the mutual consent in writing of the

boards of directors of YYY and XYZ.

(ii) By the board of directors of YYY if

any condition provided in SEXYZON 11 hereof has not been satisfied or waived on

or before the Effective Date.

(iii) By the board of directors of XYZ if any

condition provided in SEXYZON 12 hereof has not been satisfied or waived on or

before the Effective Date.

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(iv) By the board of directors of XYZ if the

Effective Date has not occurred by October 30, 2000.

(b) EFFECT OF TERMINATION. In the event of a termination

of this Agreement pursuant to SEXYZON 16(A) hereof, each party shall pay the

costs and expenses incurred by it in connection with this Agreement and no party

(or any of its officers, directors, and shareholders) shall be liable to any

other party for any costs, expenses, damage, or loss of anticipated profits

hereunder.

17. GENERAL PROVISIONS.

(a) ENTIRE AGREEMENT. This Agreement (including the

exhibits hereto and any other documents or instruments referred to herein)

constitutes the entire agreement, and supersedes all prior agreements and

undertakings, both oral and written, among the parties with respect to the

subject matter hereof.

(b) NO THIRD-PARTY BENEFICIARIES. This Agreement is not

intended to confer upon any person other than the parties hereto any rights or

remedies hereunder.

by an instrument in writing signed by each of the parties hereto.

(d) GOVERNING LAW. This Agreement shall be governed by,

and construed in accordance with, the laws of the State of ...............

(e) RESOLUTION OF DISPUTES. Any dispute, controversy or

claim arising out of or relating to this Agreement shall be resolved by binding

arbitration before a single arbitrator held in Knoxville, .............. in

accordance with the Commercial Arbitration Rules of the American Arbitration

Association then in effect. The arbitrator shall resolve the dispute as

expeditiously as practicable. The decision of the arbitrator shall be final,

binding and not appealable. The arbitrator shall have the authority to award

relief under legal or equitable principles, including interim or preliminary

relief, and to allocate responsibility for the costs of the arbitration.

Judgment upon the award rendered by the arbitrator may be entered in any court

having jurisdiction.

(f) WAIVER OF COMPLIANCE. Any failure by any party to

this Agreement to comply with any obligation, covenant, agreement, or condition

contained herein may be expressly waived in writing by the other parties hereto,

but such waiver to failure to insist upon strict compliance shall not operate as

a waiver of, or estoppel with respect to any subsequent or other failure.

(g) ASSIGNMENT. This Agreement and all of the provisions

hereof shall be binding upon and inure to the benefit to the parties hereto and

their respective successors and permitted assigns, but neither this Agreement

nor any of the rights, interests, or obligations hereunder shall be assigned by

any of the parties hereto without the prior written consent of all the other

parties.

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(h) COUNTERPARTS. This Agreement may be executed

simultaneously in two or more counterparts, each of which shall be deemed an

original, but all of which together shall constitute one and the same

instrument.

(i) SEVERABILITY. If any term or provision of this

Agreement is determined to be invalid, illegal or incapable of being enforced,

all other conditions and provisions hereof will nevertheless remain in full

force and effect so long as the economic substance of the transactions

contemplated hereby is not affected in any manner adverse to any party hereto.

(j) FURTHER ASSURANCES. Each of the parties hereto agrees

that after the Effective Date it will from time to time, upon the reasonable

request of another party hereto, take such further action as the other may

reasonably request to carry out the transactions contemplated by this Agreement,

including, without limitation, the execution and delivery of all further

evidences and instruments of transfer and assignment.

(k) EFFEXYZVENESS. This Agreement shall have no force or

effect whatsoever unless and until the same shall have been executed and

delivered by each of the parties hereto.

IN WITNESS WHEREOF, the parties thereto have duly executed this

Agreement as of the date first above written.

XYZ, INC.

By: /s/

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President

XYZ/YYY MERGER CORP

By: /s/

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President

YYY .............. SERVICES, INC.

By: /s/

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President