Document:

EXHIBIT 10.1

                     VALUATION AND RELATED FAIRNESS OPINION

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                                  EXHIBIT 10.1

                              VALUATION REPORT AND
                            RELATED FAIRNESS OPINION

                         PEPPERMILL CAPITAL CORPORATION

                           Vancouver, British Columbia

                                December 2, 1999

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                               EVANS & EVANS, INC.
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Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation
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                                TABLE OF CONTENTS
                                                                          Page
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   1.0 - BACKGROUND AND THE PROPOSED TRANSACTION                            1
   2.0 - ASSIGNMENT                                                         3
   3.0 - CREDENTIALS OF EVANS & EVANS, INC.                                 4
   4.0 - SCOPE OF VALUATION REVIEW                                          6
   5.0 - ASSUMPTIONS                                                       14
   6.0 - DEFINITION OF FAIR MARKET VALUE                                   15
   7.0 - VARNER TECHNOLOGIES, INC.                                         16
   8.0 - REVIEW OF FINANCIAL POSITION - VARNER TECHNOLOGIES, INC.          38
   9.0 - REVIEW AND ASSESSMENTS OF VARNER TECHNOLOGIES, INC.               45
  10.0 - PEPPERMILL CAPITAL CORPORATION                                    50
  11.0 - TANGIBLE ASSET BACKING OF PEPPERMILL
         CAPITAL CORPORATION                                               52
  12.0 - VALUATION METHODOLOGIES                                           52
  13.0 - VALUATION OF VARNER TECHNOLOGIES, INC.                            58
  14.0 - VALUATION OF PEPPERMILL CAPITAL CORPORATION                       64
  15.0 - FAIRNESS CONSIDERATIONS                                           66
  16.0 - CONCLUSION AS TO FAIRNESS                                         69
  17.0   RESTRICTIONS AND CONDITIONS                                       71
  18.0 - STATEMENT OF INDEPENDENCE                                         77

         Appendix 1: Comparable Companies

         Appendix 2: Business Plan, Financial Statements, and Projections

                                       (i)

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Valuation Report and Related Fairness Opinion: December 2, 1999
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               DRAFT VALUATION REPORT AND RELATED FAIRNESS OPINION
                         PEPPERMILL CAPITAL CORPORATION

1.0- BACKGROUND AND THE PROPOSED TRANSACTION

     Peppermill  Capital  Corporation  ("Peppermill" or the "Public Company") of
     Vancouver,  British  Columbia was  incorporated on April 10, 1998 under the
     laws of the State of Nevada.  Peppermill  is in the  process of  becoming a
     fully registered and reporting  public company on the National  Association
     of Securities  Dealers  ("NASD")  Over-the-Counter  ("OTC")  Bulletin Board
     ("BB").  In order to do this Peppermill  management has completed and filed
     on October  29,  1999 a Form 10QSB with the U.S.  Securities  and  Exchange
     Commission  ("SEC").  The common shares of Peppermill  began trading on the
     NASD OCT BB on November 29, 1999.

     Peppermill  was  originally  incorporated  in 1998  with the  intention  of
     operating within the mining and exploration industry.  Since this time, the
     management   of   Peppermill   has  decided  to  examine   other   business
     opportunities for the Public Company.

     On October 19, 1999 Peppermill entered into a Share Purchase Agreement with
     Varner Technologies, Inc ("VTI" or the "Company") of Chesterfield, Missouri
     by which certain shareholder of Peppermill will sell 90.0024% (representing
     all of their  shareholdings)  to VTI for  US$300,000.  The  result  of this
     transaction  will create a reverse  merger between VTI and  Peppermill.  In
     addition  it is  intended  that VTI will enter into a reverse  merger  with
     Peppermill as follows:

     (1)  Peppermill  will  acquire  all of the  issued and  outstanding  common
          shares of VTI on the basis of issuing 1.0  Peppermill  common share in
          exchange for 1.8624479 common shares of VTI; and

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Valuation Report and Related Fairness Opinion: December 2, 1999
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     (2)  exchange 1.0 preferred share of Peppermill for 1.0 preferred shares of
          VTI (the share purchase  agreement and reverse merger is  collectively
          referred to as the "Proposed Transaction").

     Varner  Technologies,  Inc. was incorporated on November 17, 1994. In March
     of 1997 the  Company  founded  a  marketing  arm,  Networking  People  with
     Technology,  LLC  ("NPWT")  of  which  Varner  owns 60% of the  issued  and
     outstanding shares of NPWT.

     The remaining  40% of NPWT is held  beneficially  by the Company's  founder
     Clay Varner.  Mr.  Varner has informed the authors of the Report he intends
     to transfer his 40% interest in NPWT to the Company in return for a nominal
     sum.  This  is to be  completed  prior  to  the  closing  of  the  Proposed
     Transaction.

     NPWT was originally  formed to test  distribution of products and services.
     After a successful  test,  VTI entered into a licensing  agreement  NPWT to
     market   products   and   services   through  its   so-called   Independent
     Representatives.

     VTI currently  has  representatives  in 49 states with its greatest  market
     share in  Illinois  and  Missouri,  as well as,  pockets  of  influence  in
     Maryland, Pennsylvania, Virginia, Nebraska, Arkansas and California.

     VTI and Peppermill are collectively referred to as "the Companies".

     The  Proposed   Transaction  is  subject  to  the  approval  of  Peppermill
     shareholders and to the approval of the SEC.

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Valuation Report and Related Fairness Opinion: December 2, 1999
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2.0- ASSIGNMENT

     Given the above Proposed Transaction,  Evans & Evans, Inc. ("Evans & Evans"
     or the "authors of the Report")  were asked and engaged by the  Independent
     Committee of Peppermill to prepare a Valuation  Report and related Fairness
     Opinion  (the  "Report")  with  respect to the fairness of the terms of the
     Proposed  Transaction,  from a financial point of view, to the shareholders
     of Peppermill.

     Accordingly,  Evans & Evans was  required to prepare a formal  valuation of
     all of the issued and  outstanding  shares of VTI and all of the issued and
     outstanding  shares of Peppermill as at October 31, 1999 (as noted earlier,
     the  Valuation  Date),  the most  recent  date for  which  the most  recent
     financial information was available on VTI and a date that was close to the
     Valuation  Date  as  well  as  to  the  most  recent  Peppermill  financial
     statements  (i.e.,  September 30, 1999).  Also,  consideration was given to
     pick a Valuation Date that was also close to the date of the signing of the
     Share Purchase Agreement.

     In connection with the Proposed Transaction cited above, the management and
     directors of Peppermill have conducted their own independent investigation,
     due diligence and financial analysis of the Proposed Transaction.

     The  Independent  Committee  of  Peppermill  has  requested  Evans & Evans'
     opinion to provide a secondary,  independent verification of, rather than a
     substitute for, Peppermill's internal analysis.

     The Report is prepared for the directors and shareholders of Peppermill and
     may also be submitted to the SEC.

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Valuation Report and Related Fairness Opinion: December 2, 1999
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3.0- CREDENTIALS OF EVANS & EVANS, INC.

     Evans & Evans,  Inc.  was founded in 1989.  For the past ten years the firm
     has been  extensively  involved in the  financial  services and  management
     consulting fields.

     Today, Evans & Evans has offices in Vancouver,  British Columbia;  Calgary,
     Alberta;  Toronto,  Ontario;  Kanata,  Ontario;  Halifax,  Nova  Scotia and
     Portland, Oregon.

     Mr. Michael A. Evans,  Principal,  founded Evans & Evans, Inc. in 1989. For
     the past  nine  years he has been  extensively  involved  in the  financial
     services  and  management  consulting  fields in  Vancouver  where he was a
     Vice-President  of two firms,  The Genesis  Group  (1986-1989)  and Western
     Venture Development Corporation  (1989-1990).  Over this period he has been
     involved in the  preparation of over 250 technical and assessment  reports,
     business plans, business valuations, and feasibility studies for submission
     to the  Vancouver  Stock  Exchange  and  the  British  Columbia  Securities
     Commission as well as for private purposes.  Formerly, he spent three years
     in the  computer  industry  in  Western  Canada  with Wang  Canada  Limited
     (1983-1986)  where he worked in the areas of marketing and sales. Mr. Evans
     also possesses  several years'  management  experience in the food services
     industry with  McDonald's  Restaurants of Canada Ltd. in Richmond,  British
     Columbia  (1977-1980).  Mr. Evans is an Instructor at the British  Columbia
     Institute of Technology in the Faculty of Business.

     Richard W. Evans, Principal,  began full-time work with Evans & Evans, Inc.
     in 1992.  Since then he has been  involved in the  financial  services  and
     management  consulting  fields and has been involved in the  preparation of
     over  50  technical  and  assessment  reports,   business  plans,  business
     valuations,  and  feasibility  studies for

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Valuation Report and Related Fairness Opinion: December 2, 1999
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     submission to the  Vancouver  and Alberta  Stock  Exchanges and the British
     Columbia  and  Alberta  Securities  Commissions  as  well  as  for  private
     purposes.

     For ten years previous to this, he was extensively involved in the computer
     industry in Vancouver  where he served for two years as the General Manager
     of Sidus Systems Inc.  responsible for the company's C$15 million  business
     operation in Western  Canada.  Previous to this,  he spent eight years with
     Digital  Equipment of Canada  Limited where he was laterally  involved in a
     sales,  marketing  and  management  capacity  in the  company's  direct and
     channel  organizations.  In his  capacity  with  Digital  and  Sidus he was
     involved in assessing and assisting various technology companies with their
     marketing and financial operations.  Furthermore, he was involved with over
     fifty   software,   hardware  and   telecommunications   organizations   in
     establishing  various OEM,  distribution and VAR marketing  agreements with
     Digital  and Sidus.  During  his tenure  with  Digital  he  initially  held
     positions  as  Technical  Service  and  Support  Analyst  as well as System
     Integration  Project Manager. As a Technical Service and Support Analyst he
     was  responsible  for reviewing  various  mainframe,  mini-computer  and PC
     software  and  network  applications  as well as  supporting  a variety  of
     Digital software  applications.  In this capacity he was involved with over
     thirty  different  western  Canadian  corporate   accounts.   As  a  System
     Integration  Project  Manager with Digital he was involved  directly in the
     software development process.  This included formal training and experience
     in software  development  and design and in undertaking  reviews  regarding
     software  construction  using  a  "Plan,  Design,   Implement  and  Manage"
     methodology.  In this  capacity  he was  involved  with a  number  of large
     corporate   accounts  in   installing   and  servicing   various   software
     applications. Mr. Evans' software application experience included extensive
     work with real-time,  BASIC, C, PASCAL, C++, COBOL,  FORTRAN, Ada languages
     as well as with  relational  database  and  fourth  generation  application
     development  tools. Mr. Evans has and is presently working with the Unified
     Modeling Language, Booch, Coad/Yourdon,  CRC, Fusion, Martin/Odell,

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Valuation Report and Related Fairness Opinion: December 2, 1999
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     MOSES,  OMT,  and   Shlaer/Mellor,   Business  Object  Notation,   Software
     Engineering   Institute,   Data  Modeling   Techniques,   Dynamic  Modeling
     Techniques,   Implementation  Modeling  Techniques,  Organization  Modeling
     Techniques and User Interface Modeling Techniques. During the past year he,
     through  Evans & Evans,  Inc. has actively  been involved in the process of
     evaluating and valuing various types of software  applications for Canadian
     regulatory bodies,  private companies,  Canadian financial institutions and
     brokerage firms as well as government  agencies related to: Shop Floor Data
     Collection and Analysis,  Programmable  Logic  Controllers,  Real-Time Data
     Analysis,  Internet  Software,  Medical  Software,  Government  Utility and
     Engineering Design, Telecommunications,  Bank Debt Collection, Seismic Data
     Processing,  3D  Engineering,  Wireless  Communication  and  Trading  Floor
     Telecommunication.  Mr. Evans holds: a Bachelor of Business  Administration
     degree from Simon Fraser  University,  British  Columbia (1981); a Master's
     degree in Business  Administration from the University of Portland,  Oregon
     (1983) where he graduated with honours.  Mr. Evans is a Registered  Student
     in the British  Columbia  Chapter of the  Canadian  Institute  of Chartered
     Business Valuators (CICBV).

4.0- SCOPE OF VALUATION REVIEW

     The authors of the Report have reached the opinions  contained  here within
     by relying on the following:

     Varner Technologies, Inc.

     o    Interviewed  management  and  principals  of VTI  during  October  and
          November of 1999. The interviews  were conducted to elicit  management
          perceptions  of its actions.  The authors of the Report found that Mr.
          Varner  and Mr.  Heflin  have a clear  understanding  of the goals and
          objectives of the

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Valuation Report and Related Fairness Opinion: December 2, 1999
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          Company,  both  short  and  long  term,  and of  steps  that  must  be
          undertaken in order to achieve those goals and objectives.

     o    Reviewed and  confirmed  the education  credentials  and  occupational
          backgrounds  of the Company's  Directors/Officers  whose  expertise is
          critical to the Company in achieving its stated  business  objectives.
          These reviews were generally positive.  Reviewed Shareholders list for
          the Company.

     o    Reviewed  the  audited  financial  statements  of VTI for the  periods
          ending December 31, 1996, 1997 and 1998 as well as management-prepared
          financial statements for the period ended October 31, 1999.

     o    Reviewed  Separation  Agreement  dated January 7, 1997 between  Varner
          Technologies, Inc. and Craig E. Caesar.

     o    Reviewed  Subscription  Agreement,  date of  Memorandum is October 31,
          1996, for VTI.

     o    Reviewed  Private  Placement  for VTI including  Financial  Statements
          dated June 30, 1995.

     o    Reviewed Stock Option Agreement dated June 11, 1996 for VTI.

     o    Reviewed Incorporation Documents for VTI and related material.

     o    Reviewed  annual General  Meeting  Minutes dated November 28, 1998 for
          VTI and related material.

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     o    Reviewed APLIO Authorized Reseller  Application Form dated December 8,
          1998 for VTI.

     o    Reviewed  Internet  Dial-Up  Service  Agreement  dated January 1, 1998
          between Varner Technologies, Inc. and Calvary Temple.

     o    Reviewed  resellers  agreement  between the Company and Soflo, Inc. of
          Florida providing  unrestricted access for basic service of #13.45 per
          month per account.

     o    Reviewed  AlterDial  Subscription  Agreement  for Current T1 Customers
          between the Company and UUNET Technologies, Inc. of Fairfax, Virginia.

     o    Reviewed Lease Agreement  dated 9/11/98  between Varner  Technologies,
          Inc. and Bull Moose Tube Inc.

     o    Reviewed Equipment Leases dated 9/18/97 between VTI and Inter-Tel, and
          dated September 8, 1998 and between VTI and Inland Associates, Inc.

     o    Reviewed Lyrix  Interactive Voice Response Service Agreement March 12,
          1997 between Varner Technologies, Inc. and Lyrix.

     o    Reviewed  World  Wide  Web  Page  Service   Agreement  between  Varner
          Technologies, Inc. and Socket Internet Services Corporation.

     o    Reviewed  Proposal  for Pre-Paid  Phone Cards dated  September 4, 1998
          between Varner Technologies, Inc. and Office Forms & Graphics.

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     o    Reviewed  Wholesale  Customer  Agreement dated 09/01/98 between Varner
          Technologies, Inc. and PSINet.

     o    Reviewed  Re-Seller  Agreement between Varner  Technologies,  Inc. and
          VIVE Synergies Inc.

     o    Reviewed Agreement between Varner Technologies, Inc. and STATS Inc. as
          outlined  in letter  dated  March 26,  1996 from STATS Inc.  to Varner
          Technologies, Inc.

     o    Reviewed various press releases of competitors of Varner Technologies,
          Inc.

     o    Reviewed documents and correspondence  regarding  Arbitration  between
          Sports Team Analysis & Tracking Systems of Missouri,  Inc. (STATS) and
          Varner Technologies, Inc.

     o    Reviewed U.S.  Corporation Income Tax Returns for Varner Technologies,
          Inc.  for 1994,  1995,  1997,  1998;  U.S.  Income Tax Return for an S
          Company  for Varner  Technologies,  Inc.  for 1995;  U.S.  Corporation
          Short-Form Income Tax Return for Varner  Technologies,  Inc. for 1996;
          U.S.  Partnership Return of Income for 1998 for Networking People with
          Technology, LLC.

     o    Reviewed 1999 Summary Business Plan for Varner Technologies,  Inc. and
          Executive Summary of Varner  Technologies,  Inc. - Mission  Statement:
          Network People with Technology and projections (refer to Appendix 2).

     o    Reviewed Power Point Presentation, February 18, 1999.

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     o    Analyzed  the  Company's  planned  targeted  market  and  its  related
          marketing plans thereto. This was facilitated through discussions with
          software and Internet  Service  Providers in the  following  interview
          order: America Online; Internet Direct, Sprint, Freei.Net; SuccessNet;
          Twisted Pair Networking,  Access, Quick Connection;  Active InterLink;
          UUNet;  PSINet;  American Internet  Services;  Apex Internet Services;
          AT&T Worldnet Service; Bridgadoon.com,  Inc.; FlashNet; IBM; MCI; MSN;
          Mindspring; EarthLink; OSNet; Quest; and SpryNet, Inc.

     o    Assessed  market,  financial  and  other  information  on the  various
          industries and the their target  market(s).  This included  conducting
          searches and reviewing various industry surveys, market studies, trade
          magazines and other publications.

     o    Investigated  the  Company's   relationships  with  its  existing  and
          proposed  principal   customers  to  the  extent  appropriate  in  the
          circumstances.

     o    Certain current and historical  public stock market and financial data
          on comparable publicly traded companies and other data with respect to
          past  business  transactions   involving  Internet  Service  Providers
          considered by Evans & Evans to be relevant.

     o    The  authors  of the Report did not visit the  Company's  facility  in
          Chesterfield,  Missouri  and are  therefore  unable to  comment on the
          Company's physical operations and technical  capabilities,  other than
          management disclosure.

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     Peppermill Capital Corporation

     o    Reviewed  the SEC filed form  10-SB and  related  materials  contained
          within this documents.

     o    Reviewed the February 28, 1999,  September  30, 1998 and September 30,
          1999 management-prepared financial statements of Peppermill.

     o    Reviewed the articles of incorporation  and the corporate  charter and
          certificate of Peppermill.

     Conditions of the Report

     o    Evans & Evans will rely on a letter of representation,  to be obtained
          from  management of Peppermill  and VTI prior to issuance of the final
          form of the Report,  wherein they confirm certain  representations and
          warranties  that they made to the authors of the  Report,  including a
          general  representation  that they have no information or knowledge of
          any  material  facts or  information  not  specifically  noted in this
          Report,  which, in their view,  would reasonably be expected to affect
          the valuation conclusions expressed herein.

     o    All dollar  amounts  specified  in the Report are  expressed  in U.S.,
          unless noted.  Where  applicable,  an exchange rate of $1.50  Canadian
          Dollars ("C") to $1.00 United States Dollar ("US") has been applied.

     o    At the Valuation Date,  Peppermill and VTI had no material  contingent
          liabilities,    unusual   contractual   obligations   or   substantial
          commitments  other than in the ordinary course of business,  and there
          was no material litigation

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          threatened  or pending  that would  affect the authors of the Report's
          conclusions, other than that disclosed to the authors of the Report.

     o    At the Valuation  Date, no specific  special  purchaser was identified
          that would pay a premium to purchase the Companies.  Management of the
          Companies  could not provide the authors of the Report with any formal
          written offers.

     o    Key  management of VTI will continue to be employed  subsequent to the
          Proposed Transaction for a period not less than twenty-four months.

     o    The draft Report may not be issued to any Canadian  stock  exchange or
          to any U.S. Stock Exchange or regulatory  bodies. The draft Report may
          only be relied upon by the Companies.  The Report may not be issued to
          any  third  parties,   legal  authorities,   or  other  foreign  stock
          exchanges, or other regulatory  authorities,  or Revenue Canada or the
          Internal Revenue Service,  without the prior written approval of Evans
          & Evans.  Nor can it be used or relied  upon in any  legal  proceeding
          and/or court matter.

     o    At the Valuation Date, unless otherwise noted in the Report,  the fair
          market  value of the  Companies'  assets and  liabilities  approximate
          their net carrying values.

     o    The Companies'  financial  information,  as provided by the Companies'
          representatives  and  management,   is  assumed  to  be  accurate  and
          complete.  Evans & Evans has not verified the accuracy or completeness
          of this financial data.

     o    Evans & Evans have assumed that the  Companies  and all of its related
          parties and their principals have no contingent  liabilities,  unusual
          contractual

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          arrangements,  or substantial commitments,  other than in the ordinary
          course  of  business,  nor  litigation  pending  or  threatened,   nor
          judgments  rendered against,  other than those disclosed by management
          and  included  in the Report  that  would  affect  our  evaluation  or
          comments.

     o    Evans & Evans,  Inc.  makes no  recommendations,  either  expressed or
          implied,  as to the suitability of the companies  described herein, or
          their securities, as investments.

     o    Evans  &  Evans,  Inc.  has  not  verified  the  status  of any of the
          Companies'  potential legal affairs and/or matters and can, therefore,
          provide the reader no comfort or make any comments as to whether there
          are any off-balance sheet or contingencies,  claims,  possible claims,
          substantial  commitments,  or litigation pending or threatened against
          the Companies, and/or any of the Directors/Officers of the Companies.

     o    The Valuation Report,  and more specifically the assessments and views
          contained therein,  is meant as independent review of the Companies as
          at  October   31,   1999.   The   authors   of  the  Report   make  no
          representations,  conclusions,  or assessments,  expressed or implied,
          regarding   the   Companies   or   events   after   the  date  of  the
          management-prepared  financial  statements,   October  31,  1999.  The
          information and assessment contained in the Report pertain only to the
          conditions   prevailing   at  the  time  the   Valuation   Report  was
          substantially completed in November of 1999.

     o    The Companies have satisfactory title to all of their assets and there
          are no liens or  encumbrances  on such  assets nor has any assets been
          pledged in any way. The Companies  have  complied with all  government
          taxation  and  regulatory  practices  as well as all  aspects of their
          contractual  agreements  that

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          would have an effect on the  Report,  and there are no other  material
          agreements entered into by the Companies that are not disclosed in the
          Report.

     o    Evans & Evans has not carried out any audit  procedures  on historical
          expenditures  or  financial  statements.  Nor have the  authors of the
          Report examined the financial accounts of the Companies.  Accordingly,
          the  authors of the  Report's  reliance  on the  historical  financial
          information  and the  financial  statements  is  based  solely  on the
          representations  of management of the  Companies.

     o    This  analysis  and  Report  does not  constitute  in any manner a tax
          opinion.  Evans & Evans has not  carried out any audit  procedures  or
          otherwise attempted to independently verify the financial  information
          as set out above. No other material  information  known by any parties
          that are related to the  Companies  has not been  disclosed to Evans &
          Evans.

5.0- ASSUMPTIONS

     The following assumptions, limiting conditions and disclaimers apply to the
     Report:

     1.   An audit of VTI's financial  statements  dated October 31, 1999, would
          not  result  in  any  material  changes  to  the   management-prepared
          financial  statements  as provided  to the  authors of the Report.  An
          audit of Peppermill's  financial  statements dated September 30, 1999,
          would not result in any  material  changes to the  management-prepared
          financial  statements as provided to the authors of the Report.  There
          is no material  change in the financial  conditions of Peppermill from
          September 30, 1999 to October 31, 1999.

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     2.   The  preferred  shares of VTI don' t have an option to be converted to
          common  shares  and  payment  of such  shares  would be through a debt
          financing.

     3.   Representations  made by management  of  Peppermill  and VTI as to the
          number of shares  outstanding in the respective  companies are assumed
          to be accurate.

     4.   Mr.  Varner  has  informed  the  authors  of the  Report he intends to
          transfer  his 40%  interest  in NPWT to the  Company  in return  for a
          nominal  sum.  This is to be  completed  prior to the  closing  of the
          Proposed Transaction.

     5.   The loss carryovers  within VTI would have no significant  fair market
          value to a notional purchaser of the Company.

          The authors of the Report  believe these  assumptions to be reasonable
          and  appropriate for the purposes of this valuation and our conclusion
          as to fairness.

6.0- DEFINITION OF FAIR MARKET VALUE

     In this Report, fair market value is defined as the highest price available
     in an open and  unrestricted  market between  informed and prudent parties,
     acting at arm's length and under no compulsion  to act,  expressed in terms
     of money or money's worth.

     With  respect to the  market  for the shares of a company  viewed "en bloc"
     there are, in essence,  as many "prices" for any business interest as there
     are purchasers and each purchaser for a particular "pool of assets",  be it
     represented by overlying shares or the assets themselves,  can likely pay a
     price unique to it because of its ability to utilize the assets in a manner
     peculiar to it. In any open market  transaction,  a purchaser will review a
     potential acquisition in relation to what

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     economies of scale (e.g., reduced or eliminated competition, ensured source
     of material supply or sales, cost savings arising on business  combinations
     following  acquisitions,  and so on), or  "synergies"  that may result from
     such an acquisition.

     Theoretically, each corporate purchaser can be presumed to be able to enjoy
     such  economies of scale in differing  degrees and therefore each purchaser
     could pay a different  price for a particular  pool of assets than can each
     other purchaser.

     Based on our  experience,  it is only in  negotiations  with such a special
     purchaser  that  potential  synergies can be quantified  and even then, the
     purchaser is  generally  in a better  position to quantify the value of any
     special benefits than is the vendor. Accordingly, we have not reflected any
     special purchaser considerations in our assessment of fair market value.

     The shares of the Companies have been valued en bloc.

7.0- VARNER TECHNOLOGIES, INC.

7.1  Company Background and Business

     VTI is an Internet  service  provider  ("ISP") offering a range of Internet
     access services to organizations  and individuals by means of the Company's
     developing  computer  network.  The  Company's  focus  is on the  so-called
     "dial-up"  (i.e.,  individual)  market.  VTI's  goal has  been to  create a
     reliable,  high speed and  low-cost  network  allowing  local access to the
     Internet  across the United  States.  In  addition to the  Internet  access
     services, the Company also offers prepaid phone cards.

     VTI was established for the purpose of providing low- and fixed-cost access
     for  individuals  and  organizations  to the Internet.  The Company  offers
     unlimited

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     Internet  access for  US$9.95  per month,  which must be paid for yearly in
     advance. The Company charges a $30 setup fee for Local Access Service and a
     $60 setup fee for 800 Nationwide Access Service.

     A  critical  success  factor  for any ISP,  as noted to the  authors of the
     Report by a number of industry participants,  is an ISP's ability to expand
     and maintain  local access  capabilities.  It is very  important  that ISPs
     provide subscribers local access (i.e., local, not long-distance, telephone
     calls).  Within the ISP market this  capability is referred to as points of
     presence  ("POPs").  VTI currently has 3,400 points of presence ("POPs") in
     North America. The Company owns twelve POPs and has entered into agreements
     with other ISPs for access to the remaining POPs. The Company's  individual
     and corporate  subscriber base consists of approximately --- subscribers as
     of October 31, 1999 (awaiting info from management).

     The Company licenses the right to market VTI products and services to NPWT.
     NPWT then enters  into  agreements  with  Independent  Representatives  who
     market the Company's  products and  services.  VTI currently has over 5,000
     Independent Representatives ("IRs").  Accordingly, all revenue is generated
     in NPWT and paid out to VTI as a royalty.  The diagram  below  outlines the
     Company's structure:

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                            -------------------------
                            Varner Technologies, Inc.

                            -------------------------
                                         |       |           -------------------
                                         |       |           Licenses right to
                                 -----   |       |           use VTI name and
                                  60%    |       |---------- sell VTI products
                                 -----   |       |           and services in
                                         |       |           return for royalty
                                         |       |           payment.
                                         |       |           -------------------
                                         |       |

                     --------------------------------------
                     Networking People With Technology, LLC

                     --------------------------------------
                                        |
                                        |
                                        |
                                        |
                                        |
                           ---------------------------
                           Independent Representatives

                           ---------------------------
                                        |
                                        |
                                        |
                                    ---------
                                    End Users

                                    ---------

     In addition to Internet  access the Company  offers low cost long  distance
     rates through the use of prepaid  calling  cards,  prepaid  computer  usage
     cards, and computer hardware.

     Further  the  Company  has  agreements  in place to provide  Voice over the
     Internet technology, and prepaid cellular phone cards.

7.2  Products and Services

     The Company's goal with the Internet via the service it calls Income Online
     are:  (1)  to  provide  the  largest  Internet  network  available  through
     consolidation of ISPs; (2) to develop nationwide  high-speed access; (3) to
     provide voice over the Internet;  (4) to standardize protocols for commerce
     and  telecommunications;  (5) to allow consumers to earn income through the
     Internet at their home (virtual  employment);  (6) to customize information
     via phone, personal computer and

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     home network  computer;  and (7) to provide  multiple  interfaces  to allow
     consumers and business to access the Internet.

     One of VTI's main products is Income Online, which has been developed based
     on the assumption that individuals will be able to make money at home using
     Web sites of the future.  Management of VTI believes  that the  advertising
     community will, over the medium- to long-term  compensate consumers to come
     to a given site in the Internet  thus  allowing the consumer to make Income
     Online.

     VTI has two principal services available:

     1.   Nationwide 800 Internet Access:

          Internet  access from any city or rural area  without the cost of long
          distance  charges.  With the 800 basic  package a subscriber  receives
          their first 30 hours of Internet access for free.

     2.   Expanded Nationwide 800 Internet Access:

          Same  features  as above  package but  includes  the first 60 hours of
          Internet access for free.

     3.   Local Nationwide Internet Access:

          VTI has organized over 3,400 locations all across the country.

     In addition to  operating  as an ISP, VTI offers a wide variety of pre-paid
     calling card options. VTI Pre-Paid calling cards range in prices from 12 to
     15 cents per minute for domestic calls.

     The Company  operates as an ISP  providing  low cost local service in major
     metropolitan areas.  Internet installation disks are distributed by IRs for
     ease of subscription. The Company offers high speed Internet access through
     128K and ISDN links.

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     The Company plans to launch the following products and services upon recent
     of additional funding:

     o    Voice over Internet  converting  the ISP to an Internet Local Exchange
          Carrier  making it  possible  to make  long  distance  calls  over the
          Internet with only a connection fee and no cost per minute.

     o    Asymmetrical Digital Subscriber Line ("ADSL") Internet access.

     o    800  Internet to allow  penetration  of rural  communities  and expand
          market share.

     o    Computer Pal support  center to aid the growing  number of PC users in
          obtaining the advice of hardware,  software,  and Internet technicians
          and experts through the use of a prepaid service plan.

     o    Internet Emergency Backup Service allowing systems to backup computers
          anywhere on the Internet.

     o    E-Commerce  and  Account  Processing  Service  will be used to  market
          services and products.

     o    Distribution of products over the Internet including Banking Services,
          Prepaid Telephone Services,  Voice X-Net, Computer  Hardware/Software,
          High Speed 2000, and Internet Service.

     o    Lay-It-Away  permitting customers to purchase a product for the future
          and pay for it over a period of time with an identified delivery date.

     o    2nd Trade  providing  a conduit  for  matching  buyers and  sellers of
          business   interests.

     o    E-Commerce  to  generate  revenues  through  transactions  across  the
          Internet for proprietary products.

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7.3  Management and Organization

     Executive Committee:

     VTI is guided by an Executive  committee  consisting  of Clayton W. Varner,
     CEO & President;  B. Ray Heflin,  Chief  Operating  Officer;  Tjody Varner,
     President,  Sales and Marketing;  and Jessica Varner,  Vice President,  Rep
     Relations.

     Chief Executive  Officer - Clayton W. Varner is responsible for the overall
     design,  management  and direction of VTI. He has 20 years of experience in
     the areas of computer technology, Information Services, and the development
     and management of an Information  System for a start-up  network  marketing
     business, Reliv International, which grew to be a public company with sales
     of $50 million a year.  Mr.  Varner is educated in Business  Administration
     and Computer Science.

     Chief Operating  Officer - B. Ray Heflin is responsible for the Information
     Systems  and  Operation's  functions  of  the  Company.  He  has  25  years
     experience in executive management and retail business operations and is an
     experienced consultant to small and medium sized retail, manufacturing, and
     technology  businesses.  Mr. Heflin held  executive  positions at Federated
     Department  Stores  and  Dillard  Department  Stores.  He  has  a  BSEE  in
     Electrical  Engineering  from  University  of Arkansas,  BSBA in Management
     (Magna Cum Laude) and MBA in Management from Columbia State University.

     Executive  Vice-President  - Robert  W.  Rapp has 12  years  experience  in
     capitalization of and investment in start-up  companies.  He has experience
     in  real  estate  development  and  in the  management  and  operations  of
     insurance agencies.  He was Senior  Vice-President and Director of American
     Life  Investors,  a holding  company  previously a minority  owner of Reliv
     International

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     Management & Operations:

     President,  Sales and Marketing - Tjody Varner is responsible for marketing
     and sales.  She has 20 years of  experience  in sales and marketing and has
     held accounting  positions with Milnot Company and Prairie Farms Dairy. Ms.
     Varner has owned and  operated a sales and  marketing  firm.  In 1997,  Ms.
     Varner became one of the first IRs with VTI.

     Vice-President  of Rep Relations - Jessica  Varner is  responsible  for the
     nationwide  communications with the independent marketing  representatives.
     She  assists in the  training of  representatives  and is  responsible  for
     providing  information  on the  conduct  of  their  business,  distributing
     informational  mailings,  handling commission processing,  and coordinating
     Teleconferences  and National  Leadership  Conferences.  She has previously
     held positions in retail sales and operations. Ms. Varner is in the process
     of  receiving  an  education  in the  area  of  communications  and  public
     relations from Maryville University.

     Board of Directors:

     Each of the members of the Executive  Committee  hold seats on the Board of
     Directors.  The remaining  Directors,  Robert Rapp, John Snow, Fred Jarosz,

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     Marvin  Solomonson,  Bryan  Thomas,  and Jim  Cragg  average  20  years  of
     experience  in  start-up   companies,   network   marketing,   finance  and
     technology.

7.4  Market and Competition

     Internet Use and Technology Trends

     In February of 1999,  International Data Corporation ("IDC") of Framingham,
     Massachusetts  released a report entitled "IDC  Predictions '99: The "Real"
     Internet Emerges". Excerpts from the report are outlined below.

          o    The number of Internet users will increase 28%, to 147 million.

          o    Internet commerce will more than double, to US$69 billion.

          o    Small businesses will take off as a key online business community

          o    Personalization / customization will be the "ante" for successful
               Internet sites.

     The Computer Almanac Industry estimated in April of 1999 that at the end of
     1998 there were 364.4  million  personal  computers  in use  globally.  The
     report also ranked the top fifteen  personal  computer  markets  around the
     world. The U.S. topped the list with 129 million personal computers in use,
     followed by Japan, Germany, the UK and France.

     Determining  how many  users  are  connected  to the  Internet  is still an
     inexact science,  and experts and those who constantly  monitor the markets
     differ with respect to exact numbers.  According to Internet surveys by NUA
     Ltd. ("NUA") of New York, New York and Dublin,  Ireland,  the vast majority
     of  Internet  users are  located in North  America,  with over 179  million
     currently connected to the Internet worldwide.  Approximately two-thirds of
     Internet users and hosts reside in Canada and the U.S.  Nielsen/Net Ratings
     estimates that in June 1999,  105

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     million people in the US were online, up 3.2% from May at 101.0 million and
     April at 95.8 million.

============================
     Millions of Users
----------------------------
 Africa               1.14
----------------------------
 Asia/Pacific        26.97
----------------------------
 Europe              42.69
----------------------------
 Middle East          0.88
----------------------------
 Canada/USA         102.03
----------------------------
 Latin America        5.29
----------------------------
 World Total        179.00
----------------------------
   Source: NUA Internet
     Surveys: How Many
     Online? June 1999
============================

     Analysts  project  that  worldwide  usage will  increase as PC  penetration
     increases outside North America, new telecommunications infrastructures are
     developed, and increased bandwidth technology is introduced.

     According to a January 1999 study  released by  InfoBeads,  a subsidiary of
     Ziff-Davis Inc., there were over 67.5 million personal computers  connected
     to the Internet in the U.S., a 50% increase over January 1998. IntelliQuest
     Research  recently  reported that average time spent per month online is up
     an hour,  from 6.0 to 7.0, over last year.  Home viewing ran at 206.5 pages
     per month in 1998 and 293.1 in 1999. The average home user is spending five
     hours a month  online at home.  IntelliQuest  Research  also  noted that an
     additional 41 million  people plan to go online at some point in the future
     - 17.2 million  within the next year.  IntelliQuest  Research  reports that
     users are spending more time online,  averaging  12.1 hours per week (i.e.,
     at home and work), as compared to 10.9 hours per week a year ago.

     IntelliQuest  Research  also  noted  that  there is an  increase  in online
     shopping and purchasing activity,  with 56 million people, or nearly 70% of
     the online  population,  shopping  online in the last three months.  At the
     same time,  23.5  million,  or 28% of the  population,  reported  that they
     actually made a purchase online in the past three months.

     Although the number of Web users is increasing  in many foreign  countries,
     Internet  commerce is  currently  U.S.-centric.  In 1998,  56% of Web users
     resided

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     outside the United States;  however,  non-U.S.  Internet commerce accounted
     for only 26% of worldwide spending. By 2003, IDC estimates 65% of Web users
     will be  international,  and non-U.S.  countries will account for just less
     than half of worldwide Internet commerce.

     According to eStats,  a division of eland,  Inc. of New York, New York half
     of U.S.  households  currently own a PC and one-third  (33%) have access to
     online services,  according to Odyssey Research of San Francisco. There are
     58 million online adults in 1999, out of which 23 million are 18 - 34 years
     old, 25.2 million are 35 - 54 and 9.8 million are seniors aged 55+.

Millions of Online Adults, By Age Group
100 MILLION

  [THE FOLLOWING TABLE WAS REPRSENTED AS A BAR CHART IN THE PRINTED MATERIAL]

                                  100 MILLIONS

                     Number
                    Online %           Total

Age 18-34             23.0             64.0

Age 35-50             25.2             80.6

Age 55+                9.8             58.0

     Internet Service Provider Market

     According to a recent article from the online news source  InternetNews.com
     entitled "ISPs Threatened by Cable Access  Encroachment"  the international
     technologies  research  firm  Arthur D.  Little  Inc.  ("ADL")  reported in
     November that there is a growing preference in the U.S for cable access for
     those subscribers desiring high speed Internet access.

     ADL reports that in the U.S. consumers favor cable modem Internet access by
     a

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     2:1 margin over  Digital  Subscriber  Line  ("DSL")  services.  ADL further
     reports that cable access providers report that more than one million cable
     modems have been installed in U.S. homes to date.

     Cable modem  access may be a small  fraction  of the 38 million  households
     currently utilizing online services,  but the ADL study found that up to 28
     percent of U.S.  households  would subscribe to a cable access provider and
     pay $40 a month for the service.  As much as 43 percent of these households
     would drop their current  dial-up ISP, rather than pay $10 extra to be able
     to continue to use their ISP's e-mail service,  chat, and other features in
     addition to cable access.  According to the report,  21 percent of the same
     households  would pay the extra fee to connect through both their cable and
     dial-up access  providers.  As much as 25 percent of those  surveyed,  said
     they would  postpone  adoption of the cable modem  service in order to wait
     for their ISP to offer a comparable high-speed Internet access solution.

     Peter D.  Shapiro,  ADL's  communications  practice  principal,  noted  the
     following: "America Online Inc. and other dial-up ISPs are vulnerable. This
     is a major reason they are campaigning around the country and in Washington
     to win direct access to cable modem users,"  Shapiro said.  "There are good
     business  reasons  for  both  AOL and  cable  companies  to  resolve  their
     differences  now. AOL faces a steady  erosion of their  subscriber  base as
     this  process  goes  forward.  On the cable side,  they need to build their
     infrastructure to be the network of choice."

     Gartner  Group's  Dataquest unit and Frost & Sullivan of New York, New York
     report that while ISP  subscription  fees from US households  are currently
     estimated at a rate of $7 billion per year,  as the  Internet  continues to
     evolve, ISPs must examine other revenue-generating  opportunities to remain
     competitive.

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     Dataquest reports on two emerging trends in the ISP marketplace:

     1.   "A  serious  issue for ISPs to  consider  is the rapid  decline in the
          growth at which new  households  will  become  subscribers,"  said Dr.
          Harry Hoyle, vice president for Dataquest's e-Home: Telecom and Online
          Services US program.  "This alone will result in the lower growth rate
          of  consumer  expenditure  on home  PC-based  Internet  access from 39
          percent  annually  from 1996 to the middle of 1999,  to a  projected 8
          percent annual growth through 2001."

     2.   The expanding "free-to-user"  mentality.  Dataquest analysts said more
          US consumers  will expect free  Internet  access in the future.  "Free
          Internet  access at  conventional  modem speeds is already  offered by
          e-mail  only  services,  as well as some  smaller  ISPs,"  Hoyle said.
          "While it's unlikely that US households  will migrate en masse to free
          access  providers,  the growth in households with free Internet access
          will  accelerate due to the intense  competition for the remaining new
          subscribers and the need to retain existing subscribers."

     The trend  towards  free  Internet  access is currently  more  prevalent in
     Europe than in the United States. In Europe,  ISPs have focused on reducing
     customer  acquisition costs in an effort to drive down Internet  subscriber
     fees.

     In many instances,  ISPs are forming  relationships  with  brick-and-mortar
     brands  such as banks  and  retailers  through  outsourcing  agreements  or
     co-branding.  "These new relationships  offer established  brick-and-mortar
     retailers an  opportunity  to quickly  launch a presence on the  Internet,"
     says Dr. Harry Hoyle, a Dataquest Vice  President.  "Conversely,  it offers
     ISPs a way of enriching their sites to attract more transaction income that
     will replace the revenue lost from Internet access subscriptions."

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     In a report entitled "US Internet Value Added Services  Market",  Frost and
     Sullivan noted that ISPs and Web hosting firms must distinguish  themselves
     from the 4,000  competitors in the marketplace in order to succeed.  "It is
     not enough any more just to offer  Internet  access," said Frost & Sullivan
     analyst  Generosa  Litton.  "Services  such as Web hosting and  application
     hosting are both key  value-added  services that enable a firm to stand out
     in a 'noisy' market."

     Frost & Sullivan reports that Internet value-added services generated $1.47
     billion in 1998, a 316 percent  increase  over 1997.  The report also found
     the value-added  services market to be poised for tremendous growth, led by
     the  increasing use of the Internet as a marketing and  distribution  tool,
     the need for management and support services, and new technologies.

     According  to a recent  report  from  International  Data Corp.  ("IDC") of
     Framingham,  Massachusetts, the US ISP market will continue to grow through
     the year 2003.  The report,  entitled  "Internet  Service  Provider  Market
     Review and  Forecast,  1998-2003,"  projects  that s that the US ISP market
     will generate almost $4.5  billion-worth of extra revenue annually over the
     next three years.

     However,  IDC projects  that a  significant  portion of this growth will be
     realized by market leaders,  which IDC identifies as America  Online,  Inc.
     ("AOL") and MCI WorldCom.  IDC predicts  revenues in the US ISP market will
     increase 41% from $10.7 billion in 1998 to $15.1 billion in  1999.According
     to IDC,  revenues  will  increase  at a compound  annual  growth rate of 28
     percent  through  2003  to  $37.4  billion,   making  the  ISP  market  the
     fastest-growing telecommunications market ever.

     IDC's  report  splits the ISP market into four market  segments:  corporate
     access, individual access, wholesale, and value-added services. In 1998 the
     individual  access segment was the largest,  with $4.7 billion in revenues.
     According  to  Mark

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     Winther,  IDC's Group Vice President of Worldwide  Telecommunications,  the
     individual market looks set to maintain its position as the largest segment
     until 2003,  when  value-added  services  will become the largest  segment.
     According to the report,  AOL owns the largest share of the overall market,
     with 23% and MCI WorldCom is second, with 17%.

     IDC is also projecting  competition to increase in the market.  Mr. Winther
     was quoted as saying  "Access will become a commodity and vendors will have
     limited  opportunity  to  differentiate  or compete  other than on cost. To
     maintain  growth  and  competitiveness  into the  first  decade of the 21st
     century, ISPs will have to invest in value-added  services,".  According to
     Winther, the key growth drivers in the near term are a mix of new customers
     and existing customers' expanded spending.

     Competition

     Current estimates of the ISP market in the U.S. place the number of ISPs at
     over 4,000.  Many of these are small local or regional ISPs that offer dial
     up services  only for a small  regional  area.  However,  the growth in the
     Internet usage rates and the cost associated with developing a network have
     also  resulted in a number of large,  national  ISPs.  Outlined  below is a
     small sample of some of the direct competitors to the Company.

     America Online, Inc. ("AOL") of Dulles, Virginia

     Founded in 1985,  America Online,  Inc. (NYSE:  AOL) operates two worldwide
     Internet  online  services  --  AOL  Interactive  Services  and  CompuServe
     Interactive Services and several Internet brands including ICQ, AOL Instant
     Messenger  and Digital  City,  Inc.;  the  Netscape  Netcenter  and AOL.COM
     portals;  and the Netscape  Navigator and  Communicator  browsers;  and AOL
     MovieFone,  the nation's largest movie listing guide and ticketing service.
     AOL is the  single

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     largest ISP in the U.S. with more than 19 million subscribers.  In 1998 AOL
     acquired CompuServe (now subsidiary CompuServe Interactive Services), which
     has 2 million subscribers.  In 1999, AOL purchased Netscape  Communications
     and its a Navigator Web browser and the Netcenter Internet portal.

     Through its strategic alliance with Sun Microsystems,  the AOL develops and
     offers businesses wishing to become e-businesses easy-to-deploy, end-to-end
     e-commerce and enterprise solutions under the alliance iPlanet brand.

     The Interactive Services Group operates the AOL and CompuServe services and
     their related brand and product  extensions;  Netscape  Netcenter;  and the
     Netscape  Navigator  and  Communicator  browsers.  This group also includes
     broadband development, AOL Devices like AOL-TV, and Integrity Assurance.

     The  Interactive  Properties  Group's  mission is to  continue  to seek out
     opportunities  to build or acquire  branded  properties that operate across
     multiple  services or  platforms.  It oversees ICQ,  Digital City,  and AOL
     MovieFone.

     The Netscape  Enterprise Group serves Netscape's  enterprise  customers and
     contributes to AOL's part of the alliance with Sun Microsystems.

     AOL Interactive  Services offers 19 channels covering  everything from news
     to finance  to  entertainment  and more that give AOL  members a variety of
     popular content and features,  products,  e-mail,  chat, Buddy ListTM,  and
     Instant MessageTM features, along with fully integrated Internet access.

     AOL's pricing plan is outlined below:

     o    $21.95  per  month  standard  plan  providing  access  to AOL  and the
          Internet, without hourly fees.*

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Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 31
--------------------------------------------------------------------------------

          o    $19.95 per month ($239.40 1 year prepaid subscription)  providing
               access to AOL and the Internet,  without hourly fees, for members
               who pay in advance for 1 year.*

          o    $9.95 per month "bring-your-own-access " plan providing unlimited
               access to thousands of unique AOL features*,  including access to
               the  Internet,  for  individuals  who  already  have an  Internet
               connection or access through the work or school environment.

          o    $4.95  per  month  light  usage  plan  providing  3 hours of AOL,
               including the Internet, with additional time priced at just $2.50
               per hour*.

          o    $9.95 per month  limited  usage  plan  providing  5 hours of AOL,
               including the Internet, with additional time priced at just $2.95
               per hour*.

     *    Pricing plans do not include premium services,  which carry additional
          charges.

     PSINet, Inc. ("PSINet") of Herndon, Virginia

     PSINet offers a variety of access  services,  Web-site  design and hosting,
     electronic  commerce,  and  security  programs.  PSINet  has  offices in 11
     countries and serves 60,000 corporate customers. PSINet refers to itself as
     an Internet Super Carrier offering global e-Commerce  infrastructure  and a
     full suite of retail and wholesale  Internet services through  wholly-owned
     PSINet  subsidiaries.  Services are provided on  PSINet-owned  and operated
     fiber,  satellite,  Web hosting and switching  facilities  providing direct
     access  in  more  than  800  metropolitan  areas  in 22  countries  on five
     continents.  PSINet is no longer an  Internet  service  provider  (ISP) for
     individual  consumers,  but it does allow other  consumer-based ISPs to use
     its networks for a fee.

     PSINet  reported it had more than 530 points of presence  (POPs) around the
     world serving primary markets in Belgium,  Brazil, Canada, France, Germany,
     Hong Kong,  Italy,  Japan,  Mexico,  the  Netherlands,  Republic  of Korea,
     Switzerland, the United Kingdom and the United States.

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                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

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Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 32
--------------------------------------------------------------------------------

     PSINet's Internet access services includes  electronic mail, Internet voice
     and fax, and other productivity tools for businesses. PSINet also offers an
     exclusive  range  of   productivity   tools  for  modern   business,   live
     audio-video.   Business   customers  are  also  offered  PSINet's  hosting,
     collocation,  and  design  services,   e-commerce  and  virtual  storefront
     solutions.

     For the third quarter of 1999, PSINet revenues of $140.6 million with a net
     loss of $87.7  million.  The Company  reports its global  customer base has
     grown to  approximately  80,000  business  accounts  and  over 1.2  million
     carrier customers.

     MindSpring Enterprise, Inc. ("MindSpring") of Atlanta, Georgia

     MindSpring  has  more  than  one  million  subscribers  throughout  the US,
     rivaling  EarthLink for the #4 spot behind AOL (17 million  accounts),  the
     Microsoft  Network,  and AT&T WorldNet.  Dial-up  Internet access offerings
     account for nearly 85% of MindSpring's sales.  MindSpring also provides Web
     hosting  (45,000   accounts)  and  dedicated   access  lines  for  business
     customers.

     On September 23, MindSpring and EarthLink Network,  Inc. announced plans to
     merge in a transaction that will create the second largest Internet Service
     provider in the U.S. The  transaction is expected to close in first quarter
     of 2000.

     In the third quarter of 1999  MindSpring  released a new Internet  Software
     package,  MindSpring 4.0,  designed to appeal to a broader customer base of
     "switchers" and first-time Internet users. In September of 1999, MindSpring
     launched the company's  first TV  advertising  campaign,  "You'd be Happier
     Using  MindSpring,"  in 12  markets  nationwide.  A recent J. D.  Power and
     Associates 1999 National ISP Online Residential Customer Satisfaction study
     ranked  MindSpring  number one in overall customer  satisfaction  among the
     largest National Internet Service Providers. MindSpring's services include:

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                               EVANS & EVANS, INC.
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Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 33
--------------------------------------------------------------------------------

<TABLE>
<S>                                                <C>
     o  Space for personal web pages               o  The "Spaminator" tool to reduce junk email
     o  MindSpring Internet Software               o  56k access in most areas
     o  Access to over 20,000 newsgroups           o  Internet chat access
     o  No risk, 30-day money back guarantee
</TABLE>

     MindSpring's pricing policy is outlined below:

      ========================================================================
                            The Works     Unlimited     Standard     Light
      ========================================================================
      Monthly Cost            $26.95       $19.95        $14.95      $6.95

      ========================================================================
      Access/month            unlimited    unlimited     20 hours    5 hours

      ========================================================================
      Extra Hours             n/a          n/a           $1/hr       $2/hr
      ========================================================================
      Web space               10MB         5MB           5MB         5MB
      ========================================================================
      Extra Web space         $4.95/ea.    $4.95/ea.     $4.95/ea.   $4.95/ea.
      ========================================================================
      Bandwidth               450MB        225MB         225MB       225MB
      ========================================================================
      Mailboxes               5            3             1           1
      ========================================================================
      Extra Mailboxes         $5.00/ea     $5.00/ea      $5.00/ea    $5.00/ea
      ========================================================================

     For the third quarter ended September 30, 1999,  MindSpring reported income
     of  $3,380,000 on revenues of  $88,179,000.  MindSpring  had  approximately
     1,297,000  customers  at the end of the  third  quarter  of  1999,  up from
     1,228,000  at the end of the prior  quarter  and  455,000 at the end of the
     third  quarter  1998.  Included in the total are  approximately  61,000 Web
     Hosting  customers,  and  approximately  3,000  dedicated  Internet  access
     accounts.

     The merger of  Mindspring  and Earthlink  Network,  Inc. will create an ISP
     with the following characteristics:

     o    An  estimated   combined  member  base  of   approximately  3  million
          subscribers

     o    Initial projected marketing expenditure of $80 million per quarter

     o    90,000  member  Web  hosting  accounts  and a full  range  of  related
          products and services

     o    Nearly 4,000 employees in Atlanta;  Dallas; Phoenix;  Harrisburg,  PA;
          Pasadena, Sacramento and San Jose, CA; and Seattle, WA

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                               EVANS & EVANS, INC.
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Valuation Report and Related Fairness Opinion: December 2, 1999
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--------------------------------------------------------------------------------

     o    A strong history of award-winning service and customer support. A 1999
          JD Power and Associates study ranked  MindSpring and EarthLink numbers
          one and two, respectively,  in overall customer satisfaction among the
          largest National Internet Service Providers.

     EarthLink Network, Inc. ("ENI") of Pasadena, California

     Founded  in July of 1994,  ENI now has  more  than  1.5  million  customers
     throughout the US and Canada.  ENI's services include Internet access, high
     speed  access,  web site  hosting,  e-commerce,  personal web pages,  and a
     variety of value added services for both individual  consumers and business
     clients. ENI's pricing policy is outlined below:

     o    TotalAccess USA: $19.95 per month for unlimited access to the Internet

     o    TotalAccess 800:  TotalAccess 800 provides toll-free 800 access to the
          Internet from anywhere in the  continental  United States.  $24.95 per
          month for five free hours $4.95 for each additional hour.

     In July of 1999 ENI entered into an agreement  with UUNET,  a subsidiary of
     MCI WorldCom,  Inc. of Clinton,  Missouri  team up to offer the  nationwide
     consumer DSL access, to begin rollout in late 1999.

     As noted above,  ENI has entered into a merger agreement with MindSpring to
     be completed in the first quarter of 2000.

     FlashNet Communications, Inc. ("FlashNet") of Fort Worth, Texas

     FlashNet  provides  Internet  access  to  approximately  244,000  customers
     through  more  than  697  POPs in  more  than  450  cities  across  the US.
     FlashNet's services include Web access,  e-mail,  newsgroup access, and Web
     pages.  FlashNet offers its 2,900 small and  medium-sized  business clients
     high-speed  dedicated and

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                               EVANS & EVANS, INC.
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Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 35
--------------------------------------------------------------------------------

     broadband access, Web hosting,  and e-commerce  opportunities.  It plans to
     add long-distance access and advanced data services.

     FlashNet  was founded in 1995 with two POPs;  one in Dallas  (Irving),  the
     other in Fort Worth,  Texas. As growth in the ISP industry began,  FlashNet
     looked to expand its  operations by  implementing  three more POPs in major
     markets. By early January 1996,  FlashNet was serving Tucson,  Little Rock,
     and  Albuquerque.  By  December  1996,  FlashNet  had grown to over  50,000
     customers.

     FlashNet serves individual and small business customers with unlimited use,
     flat rate pricing and a full range of Internet services. FlashNet's pricing
     plan is outlined below:

     ---------------------------------------------------------------------------
                Plan Name            Monthly         Semi-Annual     Annual
                                      Price             Price        Price
     ---------------------------------------------------------------------------
     Flashchoice Standard            $17.95              $99.95      $169.95
                                                                     $129.95
                                                                     $149.95
     ---------------------------------------------------------------------------
                                                                     $189.95
     Flashchoice Preferred                                           $149.95
                                     $19.95              $109.95     $169.95
     ---------------------------------------------------------------------------
     Flashchoice Daytime             $6.95

     ---------------------------------------------------------------------------
     CleanNet Package                $19.95

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

     For the third  quarter  ended  September  30,  1999,  the company  reported
     revenues of $12.6 On November 8th, 1999, FlashNet entered into a definitive
     agreement to merge with Prodigy Communications  Corporation  ("Prodigy") of
     White  Plains,  New York  (NASDAQ:  PRGY).  Prodigy  has a  member  base of
     approximately  1.5  million  subscribers.  Under  the  terms of the  merger
     agreement,  Prodigy will issue 0.35 shares of Prodigy common stock for each
     share of FlashNet  common  stock  outstanding  on the  closing  date of the
     transaction.  Based  on the  number  of

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation
--------------------------------------------------------------------------------

     shares of FlashNet and Prodigy  currently  outstanding,  Prodigy will issue
     approximately  4,990,000  shares  to  complete  the  merger,   representing
     approximately 7% of Prodigy's then outstanding shares.

7.5  Marketing Plan

     The Company  plans to increase the number of  subscribers  for its Internet
     service  through  the  acquisition  of  independent  ISPs across the United
     States and through its network of independent representatives.

     The Company does not restrict marketing regions or geographical territories
     for its IRs. The Company  provides IRs with ongoing training and management
     support services.

     All of the Company's  marketing efforts are undertaken by the system of IRs
     which are compensated as outlined below:

<TABLE>
<CAPTION>
         -------------------------------------------------------------------------------------------------------------
         Title                                    Requirement               Commission
         -------------------------------------------------------------------------------------------------------------
<S>                                               <C>                       <C>
         Independent                              o Sign IR                 o Purchase prepaid cards at 15%
         Representative (IR)                        agreement                 discount
                                                  o Enroll for VTI          o Eligible for first-line
         Independent                                Management                generation royalty of 5% on sponsored IR
         Representative enrolled in                 Services Program        o Quick Start Bonus ("QSB") is paid
         Management Services Program (WR)           (Optional)                to first up-line sponsor
         -------------------------------------------------------------------------------------------------------------
         Managing                                 o 20 Qualifying           o Purchase pre-paid cards at 20%
         Directors (MD)                             Points* ("QP")            discount
                                                  o 6 new WRs or 3          o Eligible for 9 levels of
                                                    New WRs and               generation royalties (max. 15%)
                                                    becomes a local         o Management Bonus ("MB") and QSB
                                                    trainer                   is paid to first up-line MD and first
                                                  o Must maintain             up-line sponsor
                                                    a total of 20 QPs
         -------------------------------------------------------------------------------------------------------------
         Regional Manager (RM)                    o 10 new QPs                Purchase pre-paid cards at 20%
</TABLE>

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                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 37
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
         -------------------------------------------------------------------------------------------------------------
         Title                                    Requirement               Commission
         -------------------------------------------------------------------------------------------------------------
<S>                                               <C>                       <C>
                                                  o 12 new WRs or             discount
                                                    6 New WRs and           o Eligible for 9 levels of
                                                    becomes a national        generation royalties (max. 15%)
                                                    trainer                 o MB and QSB are paid to first
                                                  o Must maintain             up-line MD and first up-line sponsor
                                                    a total of 30 QPs
         -------------------------------------------------------------------------------------------------------------
         Executive                                o 5 RMs                   o Purchase pre-paid cards at 30%
         Manager (EM)                               established for           discount
                                                    120 days who have       o Eligible for 9 levels of
                                                    completed the             generation royalties (max. 25%)
                                                    requirements for RM     o MB and QSB are paid to first
                                                  o Must maintain             up-line EM and first up-line sponsor
                                                    a total of 100 QPs
         -------------------------------------------------------------------------------------------------------------
         Entrepreneur Level                       o 2 EMs                   o Purchase pre-paid cards at 35%
         Representative (ELR)                       established for           discount
                                                    120 days                o Eligible for 9 levels of
                                                  o Must maintain             royalties plus an additional 5% on
                                                    a total of 340QPs         9th level (max. 10%)
                                                                            o Eligible for 2-year auto lease
         -------------------------------------------------------------------------------------------------------------
         Presidential Director Level              o 3 ELRs                  o Purchase pre-paid cards at 40%
         Representative (PDLR)                    o Must maintain             discount
                                                    a total of 1,000        o Eligible for 9 levels of
                                                    QPs                       royalties plus an additional 5% on
                                                                              9th level (max. 10%)
                                                                            o Eligible for 3-year auto lease
         -------------------------------------------------------------------------------------------------------------
</TABLE>
          *Each of the Company's  products and services has an associated number
          of Qualifying Points as determined by management of the Company.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 38
--------------------------------------------------------------------------------

8.0- REVIEW OF FINANCIAL PLAN -- VARNER TECHNOLOGIES, INC.

8.1  Financial Position

     The current  and  historical  financial  position of VTI is outlined in the
     table below:

                            Varner Technologies, Inc.

                                  Total Assets

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                    October 31,     % of       December 31,  % of      December 31,    % of
                                       1999        Assets         1998      Assets        1997       Assets
-----------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>            <C>       <C>           <C>        <C>
Assets
-----------------------------------------------------------------------------------------------------------
Current Assets
-----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents             388,772      39.0           65,940    15.5           83,442     17.7
-----------------------------------------------------------------------------------------------------------
Notes Receivable                            0       0.0                0     0.0                0      0.0
-----------------------------------------------------------------------------------------------------------
Inventory                              35,605       3.6           70,811    16.6           83,930     17.8
-----------------------------------------------------------------------------------------------------------
Prepaid Expenses                       78,615       7.9            5,260     1.2            1,888      0.4
-----------------------------------------------------------------------------------------------------------
Accounts Receivable                    75,097       7.5           24,971     5.9                0      0.0
-----------------------------------------------------------------------------------------------------------
Accounts Receivable -
Stockholders                                0       0.0           36,556     8.6           31,556      6.7
                                      -------     -----          -------   -----          -------    -----
-----------------------------------------------------------------------------------------------------------
                                      578,089      58.0          203,538    47.8          200,816     42.6
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
Net Property and Equipment            164,852      16.6          213,038    50.0          258,158     54.8
-----------------------------------------------------------------------------------------------------------
Incorporation Costs,                   95,620       9.6            5,592     1.3            8,400      1.8
-----------------------------------------------------------------------------------------------------------
Notes Receivable -
Shareholders                          157,481      15.8                0     0.0                0      0.0
-----------------------------------------------------------------------------------------------------------
Security Deposits                           0       0.0            3,587     0.8            3,587      0.8
                                      -------     -----          -------   -----          -------    -----
-----------------------------------------------------------------------------------------------------------
                                      417,953      42.0          222,217    52.2          270,145     57.4
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
Total Assets                          996,042     100.0          425,755   100.0          470,961    100.0
-----------------------------------------------------------------------------------------------------------
</TABLE>

8.2  Operating History

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                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

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Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 39
--------------------------------------------------------------------------------

         The historical results of VTI are outlined in the table below:

                            Varner Technologies, Inc.
                                Income Statement

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                   10 Months Ended               Year Ended                Year Ended
                                     October 31,      % Of      December 31,      % Of     December 31,      % Of
                                        1999        Revenue         1998         Revenue       1997        Revenue
-------------------------------------------------------------------------------------------------------------------
<S>                                   <C>             <C>        <C>              <C>          <C>           <C>
Revenues
-------------------------------------------------------------------------------------------------------------------
Sales                                 1,803,952       100.0      1,551,621        100.0        380,424       100.0
-------------------------------------------------------------------------------------------------------------------
Cost Of Goods Sold                      932,817        51.7      1,479,374         95.3        530,807       139.5
                                      ---------        ----      ---------        -----      ---------       -----
-------------------------------------------------------------------------------------------------------------------
Gross Profit (Loss)                     871,135        48.3         72,247          4.7       -150,383       -39.5
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
Operating Expenses:
-------------------------------------------------------------------------------------------------------------------
Commissions                           1,015,421        56.3        799,762         51.5        223,194        58.7
-------------------------------------------------------------------------------------------------------------------
Salaries                                211,209        11.7        193,717         12.5        214,422        56.4
-------------------------------------------------------------------------------------------------------------------
Payroll Taxes                            15,071         0.8         17,163          1.1         19,644         5.2
-------------------------------------------------------------------------------------------------------------------
Contract Labor                          222,476        12.3         68,785          4.4         69,588        18.3
-------------------------------------------------------------------------------------------------------------------
Advertising                                   0         0.0              0          0.0         51,652        13.6
-------------------------------------------------------------------------------------------------------------------
Professional Fees                             0         0.0         24,379          1.6         20,936         5.5
-------------------------------------------------------------------------------------------------------------------
Depreciation & Amortization              80,500         4.5        119,833          7.7        115,702        30.4
-------------------------------------------------------------------------------------------------------------------
Entertainment                             1,545         0.1          3,603          0.2          4,397         1.2
-------------------------------------------------------------------------------------------------------------------
Travel                                   62,050         3.4         45,829          3.0         31,362         8.2
-------------------------------------------------------------------------------------------------------------------
Bank And C/C Charges                     39,648         2.2          2,041          0.1            359         0.1
-------------------------------------------------------------------------------------------------------------------
Office Supplies                          10,656         0.6         14,420          0.9         13,824         3.6
-------------------------------------------------------------------------------------------------------------------
Telephone                                24,083         1.3         21,819          1.4         21,544         5.7
-------------------------------------------------------------------------------------------------------------------
Operating Supplies                        4,421         0.2          2,249          0.1          5,370         1.4
-------------------------------------------------------------------------------------------------------------------
Repairs And Maintenance                   3,054         0.2          3,225          0.2            908         0.2
-------------------------------------------------------------------------------------------------------------------
Insurance                                10,768         0.6         17,897          1.2         18,944         5.0
-------------------------------------------------------------------------------------------------------------------
Outside Service                             144         0.0          8,522          0.5         24,397         6.4
-------------------------------------------------------------------------------------------------------------------
Rent                                     58,573         3.2         25,895          1.7         24,647         6.5
-------------------------------------------------------------------------------------------------------------------
Promotional                              19,973         1.1         12,397          0.8         30,402         8.0
-------------------------------------------------------------------------------------------------------------------
Trade Shows And Meetings                 85,860         4.8         46,154          3.0          3,292         0.9
-------------------------------------------------------------------------------------------------------------------
Prizes & Awards                           3,773         0.2         99,350          6.4              0         0.0
-------------------------------------------------------------------------------------------------------------------
Legal                                   109,957         6.1        117,802          7.6         24,057         6.3
-------------------------------------------------------------------------------------------------------------------
Other Taxes & Licenses                    2,015         0.1         16,041          1.0          1,638         0.4
-------------------------------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 40
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                   10 Months Ended               Year Ended                Year Ended
                                     October 31,      % Of      December 31,      % Of     December 31,      % Of
                                        1999        Revenue         1998         Revenue       1997        Revenue
-------------------------------------------------------------------------------------------------------------------
<S>                                   <C>             <C>        <C>              <C>          <C>           <C>
-------------------------------------------------------------------------------------------------------------------
Postage And Freight                      18,326         1.0         35,757          2.3         11,362         3.0
-------------------------------------------------------------------------------------------------------------------
Interest                                  5,154         0.3          7,569          0.5          5,145         1.4
-------------------------------------------------------------------------------------------------------------------
Artwork And Design                          527         0.0            176          0.0          7,300         1.9
-------------------------------------------------------------------------------------------------------------------
Auto                                        285         0.0          2,119          0.1            465         0.1
-------------------------------------------------------------------------------------------------------------------
Administrative                           13,247         0.7         17,742          1.1          9,928         2.6
-------------------------------------------------------------------------------------------------------------------
Equipment Rental                         31,260         1.7         21,720          1.4          6,178         1.6
                                      ---------        ----      ---------        -----      ---------       -----
-------------------------------------------------------------------------------------------------------------------
Total Expenses                        2,049,996       113.6      1,745,966        112.5        960,657       252.5
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
Operating Loss                       -1,178,861       -65.3     -1,673,719       -107.9     -1,111,040      -292.1
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
Other Income:
-------------------------------------------------------------------------------------------------------------------
Interest Income                           4,999         0.3          2,119          0.1          7,147         1.9
-------------------------------------------------------------------------------------------------------------------
Miscellaneous                                 0         0.0              0          0.0            343         0.1
                                      ---------        ----      ---------        -----      ---------       -----
-------------------------------------------------------------------------------------------------------------------
Net Loss                             -1,173,862       -65.1     -1,671,600       -107.7     -1,103,550      -290.1
-------------------------------------------------------------------------------------------------------------------
</TABLE>

8.4  Tangible Asset Backing

     In  determining  the  underlying  book value of the shares of VTI as at the
     Valuation Date and in assessing the risk associated with the Company, it is
     useful to view the tangible asset backing of the Company.

<TABLE>
<CAPTION>
         ------------------------------------------------------------------------------------------------------
                                                                                                Tangible Asset
                                                          Net Book Value        Adjustment          Backing
         ------------------------------------------------------------------------------------------------------
<S>                                                             <C>                   <C>            <C>
         Assets
         ------------------------------------------------------------------------------------------------------
         Current Assets
         ------------------------------------------------------------------------------------------------------
         Cash                                                    388,772               0             388,772
         ------------------------------------------------------------------------------------------------------
         Notes Receivable                                              0               0                   0
         ------------------------------------------------------------------------------------------------------
         Inventory                                                35,605               0              35,605
         ------------------------------------------------------------------------------------------------------
         Accounts Receivable                                      75,097               0              75,097
         ------------------------------------------------------------------------------------------------------
         Accounts Receivable - Stockholders                            0               0                   0
         ------------------------------------------------------------------------------------------------------
         Prepaid Expense                                          78,615               0              78,615
                                                              ----------        --------           ---------
         ------------------------------------------------------------------------------------------------------
                                                                 578,089                             578,089
         ------------------------------------------------------------------------------------------------------
         Liabilities
         ------------------------------------------------------------------------------------------------------
         Current Liabilities
         ------------------------------------------------------------------------------------------------------
         Accounts Payable & Accruals                             696,773               0             696,773
         ------------------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 41
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
         ------------------------------------------------------------------------------------------------------
                                                                                                Tangible Asset
                                                          Net Book Value        Adjustment          Backing
         ------------------------------------------------------------------------------------------------------
<S>                                                           <C>              <C>                <C>
         Notes Payable-ST-Bank                                   100,000               0             100,000
         ------------------------------------------------------------------------------------------------------
         Advances from Stockholders                                    0               0                   0
         ------------------------------------------------------------------------------------------------------
         Unearned Revenue                                        258,771               0             258,771
         ------------------------------------------------------------------------------------------------------
         Taxes Payable                                                 8               0                   8
         ------------------------------------------------------------------------------------------------------
         Current Portion of Capitalized Lease Payable             39,896               0              39,896
                                                              ----------        --------           ---------
         ------------------------------------------------------------------------------------------------------
                                                               1,095,448                           1,095,448
         ------------------------------------------------------------------------------------------------------

         ------------------------------------------------------------------------------------------------------
         Working Capital                                       ($517,359)                          ($517,359)
         ------------------------------------------------------------------------------------------------------
         Net Property and Equipment                              164,852                             164,852
         ------------------------------------------------------------------------------------------------------
         Incorporation Costs,                                     95,620         -95,620                   0
         ------------------------------------------------------------------------------------------------------
         Notes Receivable - Shareholders                         157,481                             157,481
         ------------------------------------------------------------------------------------------------------
         Capitalized Lease Payable                                 1,665                               1,665
         ------------------------------------------------------------------------------------------------------

         ------------------------------------------------------------------------------------------------------
         Tangible Asset Backing, say                                                                (200,000)
         ------------------------------------------------------------------------------------------------------
</TABLE>

8.5  Financial Projections

     Management of the Company has prepared financial  projections for the years
     ended December 31, 2000 through 2003 as outlined below:

<TABLE>
<CAPTION>
       ------------------------------------------------------------------------------------------------------------------
                                           % of                    % of                     % of                   % of
                             2000         Income       2001       Income       2002        Income      2003       Income
       ------------------------------------------------------------------------------------------------------------------
<S>                        <C>             <C>      <C>            <C>      <C>             <C>      <C>            <C>
       Income
       ------------------------------------------------------------------------------------------------------------------
       Internet Prods      2,100,000       21.5     3,640,000      26.4     5,200,000       26.4     6,750,000      27.3
       ------------------------------------------------------------------------------------------------------------------
       Voice Xnet Prods    1,000,000       10.2       840,000       6.1       800,000        4.1             0       0.0
       ------------------------------------------------------------------------------------------------------------------
       Voice If Prods      3,600,000       36.9     5,600,000      40.6     8,400,000       42.6    10,750,000      43.4
       ------------------------------------------------------------------------------------------------------------------
       Prepaid Card Prod     700,000        7.2       140,000       1.0             0        0.0             0       0.0
       ------------------------------------------------------------------------------------------------------------------
       Hard/Software, Di     277,000        2.8       383,800       2.8       554,000        2.8       692,500       2.8
       ------------------------------------------------------------------------------------------------------------------
       Pop Install Fees            0        0.0             0       0.0             0        0.0             0       0.0
       ------------------------------------------------------------------------------------------------------------------
       Consulting                  0        0.0             0       0.0             0        0.0             0       0.0
       ------------------------------------------------------------------------------------------------------------------
       Rep Sign-Ups        2,600,000       26.6     3,780,000      27.4     5,600,000       28.4     7,500,000      30.3
       ------------------------------------------------------------------------------------------------------------------
       Duplic Kits, Supd           0        0.0             0       0.0             0        0.0             0       0.0
       ------------------------------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 42
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
       ------------------------------------------------------------------------------------------------------------------
                                           % of                    % of                     % of                   % of
                             2000         Income       2001       Income       2002        Income      2003       Income
       ------------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>      <C>            <C>      <C>             <C>       <C>           <C>
       Miscellaneous          50,000        0.5        75,000       0.5       100,000        0.5       125,000       0.5
       ------------------------------------------------------------------------------------------------------------------
       Chargebacks/         -327,000       -3.3      -458,800      -3.3      -654,000       -3.3      -817,500      -3.3
       Allowance
       ------------------------------------------------------------------------------------------------------------------
       Unearned -           -233,680       -2.4      -203,200      -1.5      -304,800       -1.5      -254,000      -1.0
                           ---------      -----    ----------     -----    ----------      -----    ----------     -----
       Prepaid Sv
       ------------------------------------------------------------------------------------------------------------------
       Total Income:       9,766,320      100.0    13,796,800     100.0    19,695,200      100.0    24,746,000     100.0
       ------------------------------------------------------------------------------------------------------------------

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

       ------------------------------------------------------------------------------------------------------------------
       Cost Of Sales
       ------------------------------------------------------------------------------------------------------------------
       Internet Accts/Ac   1,069,442       11.0     1,731,654      12.6     2,410,703       12.2     3,013,636      12.2
       ------------------------------------------------------------------------------------------------------------------
       Voice Xnet Product    486,760        5.0       408,879       3.0       389,408        2.0             0       0.0
       ------------------------------------------------------------------------------------------------------------------
       Voice Ip Products     763,776        7.8     1,188,096       8.6     1,782,144        9.0     2,280,721       9.2
       ------------------------------------------------------------------------------------------------------------------
       Prepaid Phone         459,886        4.7        91,977       0.7             0        0.0             0       0.0
       Cards
       ------------------------------------------------------------------------------------------------------------------
       Unexpired Ph Mins      95,400        1.0      -166,000      -1.2       -41,000       -0.2             0       0.0
       ------------------------------------------------------------------------------------------------------------------
       Switch Efficiency    -500,000       -5.1      -725,000      -5.3      -725,000       -3.7      -725,000      -2.9
       ------------------------------------------------------------------------------------------------------------------
       Computer HW/SW        193,900        2.0       266,560       1.9       387,800        2.0       484,750       2.0
       ------------------------------------------------------------------------------------------------------------------
       Building Sales      2,600,000       26.6     3,780,000      27.4     5,600,000       28.4     7,500,000      30.3
       ------------------------------------------------------------------------------------------------------------------
       Delivery &             80,000        0.8        95,000       0.7       120,000        0.6       140,000       0.6
                           ---------      -----    ----------     -----    ----------      -----    ----------     -----
       Packing-Ups/E
       ------------------------------------------------------------------------------------------------------------------
       Total               5,249,164       53.7     6,671,166      48.4     9,924,055       50.4    12,694,107      51.3
       ------------------------------------------------------------------------------------------------------------------

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

       ------------------------------------------------------------------------------------------------------------------
       Gross Margin        4,517,156       46.3     7,125,634      51.6     9,771,145       49.6    12,051,893      48.7
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
       Operating Expenses
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
       Commiss - Internet    371,998        3.8       645,994       4.7       923,277        4.7     1,199,040       4.8
       ------------------------------------------------------------------------------------------------------------------
       COMMISS - Xnet        149,240        1.5       125,361       0.9       119,392        0.6             0       0.0
       ------------------------------------------------------------------------------------------------------------------
       Commiss - Ip          690,624        7.1     1,074,304       7.8     1,611,450        8.2     2,062,281       8.3
       ------------------------------------------------------------------------------------------------------------------
       Commis - Prepds        92,414        0.9        18,483       0.1             0        0.0             0       0.0
       ------------------------------------------------------------------------------------------------------------------
       Credit Card Fees      200,000        2.0       280,000       2.0       400,000        2.0       500,000       2.0
       ------------------------------------------------------------------------------------------------------------------
       Wages - Employees     720,740        7.4     1,006,210       7.3     1,414,600        7.2     1,746,100       7.1
       ------------------------------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 43
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
       ------------------------------------------------------------------------------------------------------------------
                                           % of                    % of                     % of                   % of
                             2000         Income       2001       Income       2002        Income      2003       Income
       ------------------------------------------------------------------------------------------------------------------
<S>                          <C>            <C>       <C>           <C>       <C>            <C>       <C>           <C>
       Wages - Officers      265,000        2.7       378,490       2.7       540,700        2.7       675,900       2.7
       ------------------------------------------------------------------------------------------------------------------
       Contract              100,000        1.0       125,000       0.9       125,000        0.6       125,000       0.5
       Labor/Consul
       ------------------------------------------------------------------------------------------------------------------
       Contests -            250,000        2.6       350,000       2.5       500,000        2.5       625,000       2.5
       Prizes/Awards
       ------------------------------------------------------------------------------------------------------------------
       Payroll                97,144        1.0       136,600       1.0       193,000        1.0       240,000       1.0
       Taxes/Employees
       ------------------------------------------------------------------------------------------------------------------
       Audit & Payroll        70,000        0.7        70,000       0.5        95,000        0.5       100,000       0.4
       ------------------------------------------------------------------------------------------------------------------
       Advertising/Promotion  40,000        0.4        55,000       0.4        80,000        0.4        90,000       0.4
       ------------------------------------------------------------------------------------------------------------------
       Artwork & Design        4,000        0.0         5,000       0.0         6,000        0.0         7,000       0.0
       ------------------------------------------------------------------------------------------------------------------
       Auto Lease Expense     15,000        0.2        20,000       0.1        20,000        0.1        20,000       0.1
       ------------------------------------------------------------------------------------------------------------------
       Bank Charges            2,500        0.0         2,500       0.0         2,500        0.0         2,500       0.0
       ------------------------------------------------------------------------------------------------------------------
       Dues &                    700        0.0         1,200       0.0         1,200        0.0         1,200       0.0
       Subscriptions
       ------------------------------------------------------------------------------------------------------------------
       Employment Exp -       10,000        0.1        15,000       0.1        15,000        0.1        17,500       0.1
       Hiring
       ------------------------------------------------------------------------------------------------------------------
       Entertain/Meal         10,000        0.1        15,000       0.1        20,000        0.1        25,000       0.1
       Exp - 50
       ------------------------------------------------------------------------------------------------------------------
       Equipment Rental       33,000        0.3        38,000       0.3        43,000        0.2        48,000       0.2
       ------------------------------------------------------------------------------------------------------------------
       Insurance - Health     83,600        0.9       126,640       0.9       177,818        0.9       244,026       1.0
       ------------------------------------------------------------------------------------------------------------------
       Insurance - Risk,      32,000        0.3        45,000       0.3        65,000        0.3        83,000       0.3
       Cont
       ------------------------------------------------------------------------------------------------------------------
       Insurance - S/H         5,000        0.1         5,000       0.0         5,000        0.0         5,000       0.0
       Life
       ------------------------------------------------------------------------------------------------------------------
       Legal/Professional    125,000        1.3       125,000       0.9       125,000        0.6       125,000       0.5
       Ex
       ------------------------------------------------------------------------------------------------------------------
       Licenses & Permits      1,000        0.0         1,200       0.0         1,500        0.0         1,500       0.0
       ------------------------------------------------------------------------------------------------------------------
       Meetings &            200,000        2.0       250,000       1.8       400,000        2.0       450,000       1.8
       Conference
       ------------------------------------------------------------------------------------------------------------------
       Miscellaneous           5,000        0.1        10,000       0.1        10,000        0.1        10,000       0.0
       Expense
       ------------------------------------------------------------------------------------------------------------------
       Office Supplies        30,000        0.3        35,000       0.3        40,000        0.2        45,000       0.2
       ------------------------------------------------------------------------------------------------------------------
       Outside                25,000        0.3        35,000       0.3        45,000        0.2        60,000       0.2
       Services-Temp
       ------------------------------------------------------------------------------------------------------------------
       Postage/Frt -          40,000        0.4        55,000       0.4        70,000        0.4        95,000       0.4
       Non-Sales
       ------------------------------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 44
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
       ------------------------------------------------------------------------------------------------------------------
                                           % of                    % of                     % of                   % of
                             2000         Income       2001       Income       2002        Income      2003       Income
       ------------------------------------------------------------------------------------------------------------------
<S>                        <C>             <C>        <C>          <C>       <C>            <C>      <C>            <C>
       Printing/Copying       30,000        0.3        35,000       0.3        40,000        0.2        45,000       0.2
       ------------------------------------------------------------------------------------------------------------------
       Rent Expense -         75,000        0.8        75,000       0.5        85,000        0.4        90,000       0.4
       Space
       ------------------------------------------------------------------------------------------------------------------
       Repairs &              20,000        0.2        25,000       0.2        35,000        0.2        40,000       0.2
       Maintenance
       ------------------------------------------------------------------------------------------------------------------
       Security Services         750        0.0         1,250       0.0         1,250        0.0         1,250       0.0
       ------------------------------------------------------------------------------------------------------------------
       Supplies -             40,000        0.4        45,000       0.3        50,000        0.3        55,000       0.2
       Computers<$25
       ------------------------------------------------------------------------------------------------------------------
       Taxes - Other          15,000        0.2        25,000       0.2        30,000        0.2        35,000       0.1
       Deducti
       ------------------------------------------------------------------------------------------------------------------
       Telephone/Cellular     60,000        0.6        75,000       0.5        85,000        0.4        95,000       0.4
       ------------------------------------------------------------------------------------------------------------------
       Transfer Agent         10,000        0.1        10,000       0.1        25,000        0.1        25,000       0.1
       Fees
       ------------------------------------------------------------------------------------------------------------------
       Travel - Excl         125,000        1.3       150,000       1.1       150,000        0.8       175,000       0.7
       Meals &
       ------------------------------------------------------------------------------------------------------------------
       Utilities                 500        0.0         1,000       0.0         1,000        0.0         1,000       0.0
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
       Total Operating     4,045,210       41.4     5,492,232      39.8     7,551,687       38.3     9,165,297      37.0
       Expenses:
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
       Other Income And
       Expenses
       ------------------------------------------------------------------------------------------------------------------
       Interest Income        72,000        0.7        55,000       0.4        80,000        0.4       110,000       0.4
       ------------------------------------------------------------------------------------------------------------------
       Licensing Fees -      150,000        1.5       250,000       1.8       500,000        2.5       750,000       3.0
       Software
       ------------------------------------------------------------------------------------------------------------------
       Deprec. &            -594,767       -6.1    -1,521,967     -11.0    -1,831,967       -9.3    -2,191,967      -8.9
       Amortiz. Expense
       ------------------------------------------------------------------------------------------------------------------
       Interest Expense            0        0.0             0       0.0             0        0.0             0       0.0
                           ---------      -----    ----------     -----    ----------      -----    ----------     -----
       ------------------------------------------------------------------------------------------------------------------
       Other Net            -372,767       -3.8    -1,216,967      -8.8    -1,251,967       -6.4    -1,331,967      -5.4
       ------------------------------------------------------------------------------------------------------------------

       ------------------------------------------------------------------------------------------------------------------
       Pretax Income          99,179        1.0       416,435       3.0       967,491        4.9     1,554,629       6.3
       (Loss)
       ------------------------------------------------------------------------------------------------------------------
       Income Tax            -29,000       -0.3   -133,000         -1.0      -314,000       -1.6      -508,000      -2.1
                           ---------      -----    ----------     -----    ----------      -----    ----------     -----
       ------------------------------------------------------------------------------------------------------------------
       Net Income (Loss)      70,179        0.7       283,435       2.1       653,491        3.3     1,046,629       4.2
       ------------------------------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 45
--------------------------------------------------------------------------------

9.0- REVIEW AND ASSESSMENTS OF VARNER TECHNOLOGIES, INC.

     The overall rating of the business is as follows:

                         -------------------------------
                           Financial & Financial Plan

                                      6.5

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

                         -------------------------------
                            Technologies and Products

                                       7.0

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

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

                                     Overall

                                      7.125

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

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

                            Markets & Marketing Plans

                                       8.0

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

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

                                 Management Team

                                       7.0

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

     Ratings are based on a scale of 1 to 10, 10 being the best.

     Management and Organization

     1.   Evans & Evans,  Inc. have verified the  educational  and  occupational
          backgrounds of the  operational  management  team.  Their work related
          backgrounds and educational references were acceptable.

     2.   The  management  team is  adequate in the areas of  understanding  the
          Internet  and in  technical  and  sales and  marketing  issues as they
          relate to the Internet.

     3.   The  Company's  management  team is adequate to implement its business
          plans in the medium-term.

     4.   The Company is the  beneficiary  of a $1.0  million key man  insurance
          policy on Mr. Varner.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 46
--------------------------------------------------------------------------------

     Products & Technology

     1.   The Company currently offers no proprietary products and services.

     2.   The Company has entered into wholesale  agreements with such ISPs such
          as PSINet, Inc. of Herndon, Virginia for dial up access in those areas
          where it does not have POPs.  This  allows  the  Company to expand its
          service area without the capital cost  associated  with installing and
          maintaining network  infrastructure.  Under the agreement with PSINet,
          Inc. the Company pays a base charge of $10 per account.

     3.   There does not appear to exist any  significant  risk with  respect to
          the technical  feasibility  of the  Company's  service and products as
          discussed above.

     4.   The  heart  of  the  Company's  potential,   sustainable   competitive
          advantage lies in its ability to be the long-term, fixed- and low-cost
          supplier of Internet access to the U.S. market. To the degree that the
          Company's  planned  procedures  and methods do not  achieve  levels of
          efficiency  and  productivity  planned by  management,  the  Company's
          business plans may be severely impacted.

     Markets and Marketing Plan

     1.   The ISP  marketplace  is very  competitive  in the U.S. with currently
          over 4,000 regional and  nationally-based  ISP's.  However,  there has
          been  a  significant  trend  towards  consolidation  in  the  industry
          resulting in a number of large,

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 47
--------------------------------------------------------------------------------

          publicly  traded  companies  which have access to  significantly  more
          funds then the Company.

     2.   As  competition  in the ISP market  increases,  the ability of ISPs to
          offer value added services will become  increasingly  important.  Such
          value-added services would include e-commerce, virtual office, unified
          messaging,  and multimedia  networking.  The ability of the Company to
          continuously upgrade its technology is critical.

     3.   The use of Internet  within the U.S. is seen as extensive  and growing
          at a  satisfactory  rate in terms of the use of ISPs so as to  support
          the Company's projected  operating  performance over the next three to
          five years.

     4.   Due to  the  Company's  limited  operating  history,  as  well  as the
          likelihood of increased competition and the possibility of slower than
          projected industry growth,  there can be no assurance that the Company
          can achieve its projected market penetration goals.

     5.   In the future the Company could face competition from firms that offer
          products which replace its services and products.

     6.   The likelihood of competition increasing in the industry is high given
          the overall growth potential of the industry.  Increasing  competition
          may lead to margin  erosion and the  potential  shake-out  of industry
          participants not able to achieve  adequate  volumes of sales.  This is
          evidenced by the trend towards free Internet  access in Europe,  which
          many  analysts  feel  will  begin to be  demanded  in the U.S.  in the
          medium-term.

     7.   A major risk factor  facing the Company is the changing  nature of the
          Internet access and telecommunication  industries.  Additional pricing
          pressure  may be

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 48
--------------------------------------------------------------------------------

          brought to bear on the Company  because of these  changes.  Therefore,
          the Company's ability to compete on a price basis,  particularly for a
          service  which  is so  commodity  oriented,  may  become  increasingly
          important and difficult.

     8.   The  Company  has  a  competitive   advantage  due  to  its  low-  and
          fixed-price strategy.

     9.   A significant amount of funding will be required to fund its expansion
          and marketing  expenses.  There can be no assurance  that such funding
          will be available, and if so, in a timely manner.

     10.  Maintaining  pricing appears difficult in this marketplace,  given the
          commodity  nature of the business.  Given the  possibility of constant
          price fluctuations,  the Company's pricing strategy - to be low-cost -
          will be very  difficult to  maintain.  Maintaining  low-cost  Internet
          access  lies  at  the  heart  of  its  planned   primary   sustainable
          competitive advantage.

     Financial Plan

     1.   The Company is projecting  revenues of approximately  $5.2 million for
          the year  ended  December  31,  1999.  Based on the  results as at the
          Valuation  Date  (revenue of $1.8 million) it does not appear that the
          Company will meet these targets.

     2.   The Company's  projections  are based on the receipt of $11 million in
          equity  financing  in the year  ended  December  31,  2000 to fund the
          acquisition of a number of independent ISPs as well as the development
          of  additional  POPs at which the  Company  intends to install its own
          network  equipment.  The authors of the Report have been provided with
          no evidence  that such a level of

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 49
--------------------------------------------------------------------------------

          financing  can be raised and as such would  advise the reader that the
          above noted  projections  should be discounted by a factor of at least
          50%.

     3.   The Company's  projected  expenses do appear to be reasonable based on
          actual historical results. The Company's largest expenses, have in the
          past,  and will  continue to be  associated  with  commissions  to its
          marketing representatives.

     4.   The ability of the Company to achieve its projections are based on the
          assumption  that the  Company  receives  approximately  $11 million in
          funding in 2000.  The  majority of the funds are  allocated to mergers
          and acquisitions ($2.0 million),  investment in infrastructure  ($1.25
          million)  and  research  and  development  ($1.5  million).  While the
          authors of the  Report  are of the  opinion  that  these  amounts  are
          appropriate,  the  ability to  generate  such funds  remains a serious
          risk.

     5.   The Company's projected cost of sales and gross margin do appear to be
          in line with  current  results  in 1999.  This  would  suggest  to the
          authors of the Report that the  Company  has now reached a  subscriber
          base that  covers its fixed  network  costs and allows the  Company to
          begin   generating  the  operating   cash  flows   necessary  to  fund
          operations.

     6.   The Company is projecting  significant increases in its Voice Over the
          Internet  products,  with these representing the single largest source
          of revenue.  Given the current status of these products (i.e., not yet
          having  been  commercially  introduced),   these  must  be  considered
          speculative.

     7.   Given the number of competitors in the  marketplace and the likelihood
          of increased competition,  which may result in margin compression, the
          Company's planned growth in revenues is aggressive.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 50
--------------------------------------------------------------------------------

     8.   The ability of the Company to achieve  revenues of  approximately  $10
          million  in 2000 are based on its  ability to acquire a number of ISPs
          and absorb the majority of their  subscribers.  Given the  competitive
          nature  of the  marketplace,  there  can  be no  assurance  that  such
          acquisition  candidates  will be available or that the Company will be
          able to retain the subscriber bases.

10.0- PEPPERMILL CAPITAL CORPORATION

10.1 Company Background and Business

     Peppermill was originally  incorporated to undertake mining and exploration
     activities.

     On June 18, 1998 Peppermill  acquired mineral claims known as "Star Claims"
     consisting of 11 units located near the town of Merritt,  British  Columbia
     for $2,129 with expiration dated in 1999. The units cover 587 acres.

     However due to the poor performance of the mining sector, management of the
     Public Company deemed it appropriate to begin pursuing alternative business
     opportunities.

     As at September 30, 1999, the Public Company had a net loss of US$ 40,832.

10.2 Management and Organization

     The Public Company  currently has no full-time  employees or managers.  The
     directors of the Public Company are outlined below:

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 51
--------------------------------------------------------------------------------

     Micheal Mitsiadis,  attended Langara College in Vancouver, British Columbia
     for several  years.  He obtained  his real estate  license and was employed
     with Royal  Pacific  Realty for two years and  subsequently  for five years
     with Sutton Group Realty. For the past eleven years, Mr. Mitsiadis has been
     the corporate finance officer for Georgian Group.

     Raymon  Paquette,  attended the University of Saskatchewan and subsequently
     operated  eight large  clothing  operations,  three  commercial  buildings,
     developed real estate property and established eight theme restaurants.  He
     is currently the Managing Director of The Canadian Mining Company, a public
     company whose shares are listed for trading on The Alberta Stock Exchange.

     Richard Harderer,  attended Mount Royal College in Calgary,  Alberta, where
     he  obtained  a  diploma  in  Business  Administration,  with  a  major  in
     marketing.

     He was employed with The Alberta Stock  Exchange from November 1989 to July
     1992 as a Listing and Filing  Assistant and from July 1992 to April 1996 as
     a Listing Officer.

     He has been President of PubCo  Services Inc. a firm  providing  consulting
     services to public  companies  and  companies  going  public since April of
     1996.

11.0- TANGIBLE ASSET BACKING -- PEPPERMILL CAPITAL CORPORATION

     In determining the underlying book value of the shares of Peppermill and in
     assessing the risk  associated  with the company,  it is useful to view the
     tangible asset backing of the company as at the Valuation Date.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 52
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
         ------------------------------------------------------------------------------------------------------
           Canadian Dollars                                09-30-99                          Tangible Asset
                                                        Net Book Value       Adjustment         Backing
         ------------------------------------------------------------------------------------------------------
<S>                                                             <C>                                 <C>
         Assets
         ------------------------------------------------------------------------------------------------------
         Current Assets
         ------------------------------------------------------------------------------------------------------
         Cash                                                      1,570                               1,570
                                                                 -------                            --------
         ------------------------------------------------------------------------------------------------------
                                                                   1,570                               1,570
         ------------------------------------------------------------------------------------------------------
         Liabilities
         ------------------------------------------------------------------------------------------------------
         Current Liabilities
         ------------------------------------------------------------------------------------------------------
         Accounts Payable to Related Parties                       9,800                               9,800
         ------------------------------------------------------------------------------------------------------
         Accounts Payable & Accrues                                1,561                               1,561
                                                                 -------                            --------
         ------------------------------------------------------------------------------------------------------
                                                                  11,361                              11,361
         ------------------------------------------------------------------------------------------------------

         ------------------------------------------------------------------------------------------------------
         Working Capital                                         ($9,791)                            ($9,791)
         ------------------------------------------------------------------------------------------------------
         Mining Claim - At Cost                                    2,129                               2,129
                                                                 -------                            --------
         ------------------------------------------------------------------------------------------------------

         ------------------------------------------------------------------------------------------------------
         Tangible Asset Backing, say                                                                 (12,000)
         ------------------------------------------------------------------------------------------------------
</TABLE>

12.0 - VALUATION METHODOLOGIES

     In valuing a business, there is no single or specific mathematical formula.
     The particular approach and the factors to consider will vary in each case.
     Valuation approaches are primarily income based or asset based.

     Income  based  approaches  are  appropriate  where an  enterprise's  future
     earnings  are  likely to  support a value in excess of the value of the net
     assets employed in its operation. Commonly used income based approaches are
     the  capitalization of indicated  earnings or cash flow and discounted cash
     flow.

     Asset based  approaches can be founded on either going concern  assumptions
     (i.e.  an  enterprise  is viable as a going  concern but has no  commercial
     goodwill) or liquidation assumptions (i.e. an enterprise is not viable as a
     going  concern,  or going concern value is closely  related to  liquidation
     value).

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 53
--------------------------------------------------------------------------------

     Valuation approaches applicable to assets that are comprised  predominantly
     of intangible assets (e.g. high-technology  techniques,  research, patents)
     can be grouped into three general categories: (1) cost approach; (2) market
     approach (or sales comparison approach); and (3) income based approach.

     As there are many definitions of cost, the cost approach generally reflects
     the original cost or cost to reproduce the asset. This approach is premised
     on the  principle  that the most an investor  will pay for an investment is
     the cost to obtain an investment  of equal utility  (whether by purchase or
     reproduction).  With respect to an investment,  the most that an intrinsic,
     notional  purchaser  would pay is the costs  related  to being  able to put
     oneself in the same  situation,  at the  Valuation  Date,  as implied in an
     option agreement,  legal contract and/or earn-out situation, where there is
     some reasonable  expectation of future cash flows to be generated from such
     an agreement(s).

     The market or sales comparison  approach uses the sales price of comparable
     assets  as the  basis for  determining  value.  If  necessary,  the  market
     transaction data is adjusted to improve its comparability and applicability
     to the asset being valued.

     The  income-based  approach  considers the expected  future  earnings to be
     derived  through the use of the asset or the execution of the options.  The
     present  value of the  expected  future  earnings  is  determined  with the
     application of a discount or capitalization rate, reflecting the investor's
     required rate of return on investment.

     Valuation of Varner Technologies, Inc.

     Given the nature and status of the Company's overall business operations at
     the  Valuation  Date as well as to the  approaches  of  valuation  outlined
     above,  it is the

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 54
--------------------------------------------------------------------------------

     opinion of the authors of the Report that that the most appropriate  method
     in  determining  the  enterprise of VTI at the  Valuation  Date involved an
     income-based  approach  (i.e.,  Rules-of-Thumb)  based  on a going  concern
     assumption for the Company.  After which,  fair market value of the Company
     was determined using the enterprise value and deducting certain amounts for
     proper consideration of the obligations to the preferred shareholders.

     Accordingly,  a notional  purchaser  would  associate  certain value to the
     goodwill  attached to the Company at the  Valuation  Date in reviewing  the
     entire  business as a going  concern  entity.  In the above  Rules-of-Thumb
     approach Evans & Evans have relied  extensively on information  provided by
     the Company's  management as well as data from  industry  participants  and
     competitors as indicative in calculating the  determination of the value of
     the Company.

     Evans & Evans considered a number of separate confirmation  approaches,  of
     which, the comparable  companies'  approach was utilized as a means to test
     the  reasonableness  of the  authors  of the  Report  enterprise  valuation
     conclusions utilizing the primary valuation method referred to above.

     Evans & Evans also  attempted to use a variety of  additional  confirmation
     approaches.  In this  regard,  Evans & Evans  examined and  considered  the
     following approaches, but were unable to use any of them:

     (1)  Capitalized Cash Flow approach.  With no current significant  positive
          cash flows or stability of such cash flows  assured in the  short-term
          this approach was deemed inappropriate.

     (2)  A review of certain ISP transactions.  Evans & Evans reviewed a number
          of  fairly  current  transactions  to  the  Company  to  consider  any
          indication of what these transactions  indicated firms were paying for
          companies  like  VTI.  For

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 55
--------------------------------------------------------------------------------

          example,  on  November  8,  1999  Prodigy  Communications  Corporation
          announced  it had signed a definitive  agreement  to acquire  FlashNet
          Communications, Inc. (Nasdaq: FLAS) in a stock-for-stock merger. Under
          the terms of the merger  agreement,  Prodigy will issue 0.35 shares of
          Prodigy  common  stock  for  each  share  of  FlashNet   common  stock
          outstanding  on the  closing  date of the  transaction.  Based  on the
          number  of shares  of  FlashNet  and  Prodigy  currently  outstanding,
          Prodigy  will issue  approximately  4,990,000  shares to complete  the
          merger,  representing  approximately  7% of Prodigy's then outstanding
          shares.  Another  example is a  transaction  announced on May 6, 1999,
          OneMain.com,  Inc.  (Nasdaq:ONEM)  noted it had acquired "The Grid", a
          non-metropolitan  internet  service provider based in San Luis Obispo,
          California.  At  the  end  of the  March  31,  1999,  "The  Grid"  had
          annualized  revenues  in  excess  of  $8  million,  more  than  35,000
          subscribers  and was cash flow positive.  'The Grid provides  Internet
          services  including  dial-up and dedicated  access,  web hosting,  and
          e-commerce  solutions to non-metropolitan  areas in and around the San
          Luis Obispo area.  The size and  magnitude of these  companies and the
          related  consideration  of liquid  equity  were found not to be enough
          comparable  to VTI in scope,  nature and degree,  hence  making use of
          this approach inappropriate.

     (3)  A Relief from Royalty  approach.  The relief from royalty  approach is
          based on the proposition that a firm would be willing to pay a royalty
          in lieu  of  ownership,  to  possess  the  benefits  of the  Company's
          technology.  Given a review of the  status of the  development  of the
          Company  and the  lack of  proprietary  technology  to  garner  such a
          royalty this approach was deemed to also be inappropriate.

     (4)  A Replacement Cost approach. The Replacement Cost approach is based on
          using the intellectual thoughts, experience and work which are already
          embedded in the existing  Intellectual  Property as the starting point
          for a

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 56
--------------------------------------------------------------------------------

          replacement cost analysis.  The Replacement Cost approach,  therefore,
          considers the cost for undertaking the technical and intellectual work
          required to replace the existing  technology  that presently  makes up
          the  Company's  core  business  operation.  The  authors of the Report
          carefully  considered the use of this approach in valuing the Company.
          However,  as the Company is not a  developer  of  technology  -- but a
          marketer  instead - there is no actual  technology  in place as at the
          Valuation Date to consider for replacement.

     (5)  A Modified Discounted Cash Flow approach. Evans & Evans considered the
          use of taking the  Company's  projected  cash flows and  adjusting the
          short-term  expected results as a realistic means to estimate the fair
          market  value  of the  Company.  Given,  however,  the  status  of the
          potential  fluctuations in such cash flows in the short- and long-term
          before actual  stability of operations  would be achieved,  the use of
          this approach was also deemed inappropriate.

     (6)  Evans & Evans reviewed the implied value for the shares of the Company
          based on the comparable  transactions  between  arms-length parties as
          follows:

          a)   In the first quarter of 1998 the Company  issued  400,000  common
               shares of the Company (representing 2.9% of the 13,567,115 issued
               and  outstanding  shares) for gross  proceeds of $400,000,  which
               would imply that the fair  market  value of 100% of the shares of
               the Company at that date was $1.4 million.

          b)   In the second  quarter of 1998 the Company  issued  80,000 common
               shares  of the  Company  (representing  0.58%  of the  13,647,115
               issued and  outstanding  shares)  for gross  proceeds of $80,000,
               which  would  imply  that  the fair  market  value of 100% of the
               shares of the Company at that date was $13.8 million.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 57
--------------------------------------------------------------------------------

          c)   In the first quarter of 1999 the Company  issued  316,029  common
               shares of the Company (representing 2.1% of the 15,242,388 issued
               and  outstanding  shares) for gross  proceeds of $396,785,  which
               would imply that the fair  market  value of 100% of the shares of
               the Company at that date was $17.6 million.

               This  approach was reviewed  and again  decided as an  unreliable
               determination of actual fair market value because the differences
               in the implied values of the Company between the first quarter of
               1998  and the  first  quarter  of  1999  were  not in any  manner
               supported by any significant change in the operations and balance
               sheet  of the  Company,  nor  any  reasonable  assessment  of the
               above-identified  qualitative factors.  Further, these historical
               share sales were to a number of investors  for  relatively  small
               investment  amounts,  not to  sophisticated  investors that would
               have conducted  sufficient due diligence to meet the standards of
               fair market value.

     Valuation of Peppermill Capital Corporation

     The authors of the Report deemed the most  appropriate  method of valuation
     of  Peppermill  was  an  Adjusted  Book  Value  Approach,   as  effectively
     Peppermill is a holding  shell company with no active  business and has not
     yet  begun  trading  on  the  NASD  OTC  BB at the  time  of  the  Proposed
     Transaction.

13.0 - VALUATION OF VARNER TECHNOLOGIES, INC.

13.1 Primary Valuation Approach

     Based on a survey and detailed review of the companies in the ISP industry,
     particularly   in  the   United   States,   Evans  &  Evans   has   used  a
     "Rules-of-Thumb"

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

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Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 58
--------------------------------------------------------------------------------

     income  approach to first  determine the enterprise  value of VTI as at the
     Valuation Date. At least 24 firms - who in total have millions and millions
     of  subscribers  - that were  interviewed  noted to Evans & Evans that they
     "often"  use  a  Rules-of-Thumb  approach  in  valuing  ISP  companies  for
     potential acquisition and/or merger candidates.

     Evans & Evans  discussed  with  industry  insiders  and  managers  - who on
     average had five to ten years of ISP experience - their  estimation of what
     specific  Rules-of-Thumb approach would be utilized in determining purchase
     prices or values for these companies. The following was collected:

<TABLE>
<CAPTION>
         ----------------------------------------------------------------------------------------------------------
                          Respondents                                Opinion on Rules-of-Thumb Utilized
                     Percentages (rounded)
         ----------------------------------------------------------------------------------------------------------
         ----------------------------------------------------------------------------------------------------------

         ----------------------------------------------------------------------------------------------------------
<S>                                                                    <C>
                                 70%                                   Trailing Revenues per Existing Subscriber
         ----------------------------------------------------------------------------------------------------------
                                 20%                                   Potential 12 month Revenues per Subscriber
         ----------------------------------------------------------------------------------------------------------
                                  5%                                                Multiple of Trailing Revenues
         ----------------------------------------------------------------------------------------------------------
                                  5%                                                    Trailing Revenues per POP
         ----------------------------------------------------------------------------------------------------------
</TABLE>

     Given  the  above,  Evans  &  Evans  utilized  the  "Trailing  Revenue  Per
     Subscriber"  as the  basis  for  determining  the  enterprise  value of the
     Company on a Rules-of-Thumb approach.

     Next,  Evans &  Evans  asked  managers  and  officers  of the  above  noted
     interviewed  companies what was an acceptable  range for them of "realistic
     potential  revenue per subscriber for a firm that provided prepaid Internet
     and telecommunications services. The following was collected:

         ------------------------------------------------------------------
              Respondents                            Opinion on
         Percentages (rounded)           "Trailing Revenue Per Subscriber"
                                              Industry Rules-of-Thumb
         ------------------------------------------------------------------

         ------------------------------------------------------------------
                     10%                                        US$50
         ------------------------------------------------------------------

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 59
--------------------------------------------------------------------------------

         ------------------------------------------------------------------
              Respondents                            Opinion on
         Percentages (rounded)           "Trailing Revenue Per Subscriber"
                                              Industry Rules-of-Thumb
         ------------------------------------------------------------------

         ------------------------------------------------------------------
                     25%                              US$51 to US$100
         ------------------------------------------------------------------
                     35%                             US$101 to US$150
         ------------------------------------------------------------------
                     30%                             US$176 to US$200
         ------------------------------------------------------------------

     Given the above,  Evans & Evans  believed it was  reasonable  to utilized a
     combination of the two ranges of trailing  revenue per subscriber that were
     most often selected - i.e., US$101 to US$200.

     From this  Evans & Evans  believed  that a range of  US$150  to US$175  per
     subscriber   (i.e.,   the   mid-point   being   US$150)  was  a  reasonable
     Rules-of-Thumb  range to select.  Consideration  was given to the Company's
     historical  capability to acquire  client bases of other ISPs and weighting
     was also given to all of the above noted positive  factors and risk factors
     identified and outlined in the  qualitative  analysis  conducted in section
     9.0 of the Report.

     Thereafter,  Evans & Evans applied the management's  reported "VTI's number
     of Internet dial-up  subscribers"  (i.e.,  25,000) times the Rules-of-Thumb
     mid-point  in order to assess a value to the  Company.  This  resulted in a
     range of  enterprise  value of between  US$3,750,000  (25,000 x US$150) and
     US$4,375,000  (25,000 x US$175), or if asked for a specific number, Evans &
     Evans would select the midpoint of approximately US$4,000,000.

     The  Rules-of-Thumb  Approach  involves  multiplying  the number of dial up
     subscribers of the Company by an industry standard revenue dollar value per
     subscriber as determined through Evans & Evans interview process within the
     industry  in the U.S.  Industry  insiders  made it very clear  that  paying
     "cash" above this range of  enterprise  value was  unlikely  with a company
     that has  characteristics  like VTI. Evans & Evans interviews with industry
     analysts and  competitors,  as noted above,  indicated  that the  financial
     interest they have in ISP companies in this industry is still largely based
     upon a revenue per good-standing subscriber

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 60
--------------------------------------------------------------------------------

     approach.  The  Company's  management  did  confirm  that all 25,000 of its
     customer were considered to be in good standing at the Valuation Date.

     The management of industry firms made it very clear that acquisition  costs
     above the early noted prices was highly  unlikely.  ISP managers noted that
     payment for other intangible assets and potential  subscribers was also not
     very common - as access to the existing  customers was the "only"  criteria
     important  to  investors  acquiring  such  Internet  clients.  Fixed  price
     competition  was noted as the main reason for acquiring  and  consolidating
     smaller ISPs, but was also  mentioned as a principal  determinate in paying
     less for such ISPs than even three or six months ago.  With  certain  firms
     now offering  virtually  unlimited  free Internet  access,  price and value
     compression was noted by 95% of interviewees to continue over the next five
     years.

13.2 Secondary Valuation Approach

     Comparable Companies and Transaction Approach

     The authors of the Report  identified,  and examined  data on,  eleven (11)
     companies  active in the ISP  industry in the United  States  whose  shares
     trade on North American stock exchanges.

     Based on a review of comparable public companies in the ISP industry, Evans
     & Evans  have used,  as a  confirmation  approach,  the  multiple  of sales
     approach  to  determine  the fair market  value of VTI as at the  Valuation
     Date.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
US $ Millions
--------------------------------------------------------------------------------------------------------------------------
Company                  Exchange       Market       TTM          TTM        Millions      Market Cap/      Market Cap/
                                         Cap       Revenue    Net Income       # of          Revenue        Subscribers
                                                                            Subscribers
--------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>         <C>          <C>            <C>           <C>              <C>
Prodigy Communications   Nasdaq         1,800       155.9        (67)           1.5           11.55            1,200
Corporation
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 61
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
US $ Millions
--------------------------------------------------------------------------------------------------------------------------
Company                  Exchange       Market       TTM          TTM        Millions      Market Cap/      Market Cap/
                                         Cap       Revenue    Net Income       # of          Revenue        Subscribers
                                                                            Subscribers
--------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>         <C>            <C>            <C>          <C>
America Online, Inc.     NYSE         187,800      5,058          869            19          37.13        9,884.21
--------------------------------------------------------------------------------------------------------------------------
EarthLink Network, Inc.  Nasdaq         1,800      294.1       (100.7)        1.566           6.12        1,149.43
--------------------------------------------------------------------------------------------------------------------------
FlashNet                 Nasdaq         125.6       36.9        (23.3)        0.244            3.4          514.75
Communications, Inc.
--------------------------------------------------------------------------------------------------------------------------
PSINet, Inc.             Nasdaq         3,300      463.1       (329.6)          1.2           7.13           2,750
--------------------------------------------------------------------------------------------------------------------------
Verio Inc.               Nasdaq         2,900        188       (159.3)          N/A          15.43             N/A
--------------------------------------------------------------------------------------------------------------------------
OneMain.com, Inc.        Nasdaq         471.9       64.2        (65.3)        0.561           7.35          841.18
--------------------------------------------------------------------------------------------------------------------------
MindSpring Enterprises,  Nasdaq         2,200      275.1        (17.6)        1.247           8.00        1,764.23
Inc.
--------------------------------------------------------------------------------------------------------------------------
Internet America, Inc.   Nasdaq          78.6       18.8         (3.3)         0.05           4.18           1,572
--------------------------------------------------------------------------------------------------------------------------
ProtoSource Corporation  Nasdaq          12.0        1.0         (1.1)          N/A           12.0             N/A
--------------------------------------------------------------------------------------------------------------------------
Frontline                Nasdaq          27.1        1.7         (3.9)        0.015           15.9        1,806.67
Communications
Corporation
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

     Of the above noted  competitors,  five (5) were deemed the most appropriate
     as comparable to the Company.

     Evans & Evans  have used - as a  confirmation  approach - the  multiple  of
     these  below-listed  ISPs 12-month  trailing  sales results to the 12-month
     trailing  results of the Company to assist in establishing  the first stage
     of a range of value first estimated using the Primary Valuation Approach.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------- -------------------------------------------
US $ Millions
----------------------------------------------------------------------------- -------------------------------------------
Company                 Exchange       Market        TTM           TTM           Millions     Market Cap/    Market Cap/
                                        Cap        Revenue     Net Income          # of         Revenue      Subscribers
                                                                                Subscribers
----------------------------------------------------------------------------- -------------------------------------------
<S>                     <C>            <C>           <C>         <C>               <C>            <C>          <C>
FlashNet                Nasdaq         125.6         36.9        (23.3)            0.244          3.4          514.75
Communications, Inc.
----------------------------------------------------------------------------- -------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 62
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
----------------------------------------------------------------------------- -------------------------------------------
US $ Millions
----------------------------------------------------------------------------- -------------------------------------------
Company                 Exchange       Market        TTM           TTM           Millions     Market Cap/    Market Cap/
                                        Cap        Revenue     Net Income          # of         Revenue      Subscribers
                                                                                Subscribers
----------------------------------------------------------------------------- -------------------------------------------
<S>                     <C>            <C>           <C>         <C>               <C>            <C>        <C>
OneMain.com, Inc.       Nasdaq         471.9         64.2        (65.3)            0.561          7.35         841.18
----------------------------------------------------------------------------- -------------------------------------------
Internet America, Inc.  Nasdaq          78.6         18.8         (3.3)            0.05           4.18          1,572
----------------------------------------------------------------------------- -------------------------------------------
ProtoSource Corporation Nasdaq          12.0         1.0          (1.1)             N/A           12.0           N/A
----------------------------------------------------------------------------- -------------------------------------------
Frontline               Nasdaq          27.1         1.7          (3.9)            0.015          15.9       1,806.67
                                                                                                  ----       --------
Communications
Corporation
----------------------------------------------------------------------------- -------------------------------------------

                                                                          Approximate Average     8.5        1,183.65
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

     Adjustments to the Above-Noted Average Multiplier

     Evans  & Evans  were  required  to  make  adjustments  to the  above  noted
     comparable  companies  in order to account  for the far less  sales  levels
     expected by the Company in 1999.  Annualized results of the Company to date
     in 1999 would result in sales levels of US$2.2  million by the end of 1999.
     This compares with average  trailing sales levels of US$24.5 million by the
     above   companies.   Accordingly,   management's   own  sales  results  are
     approximately  10% of the levels  accomplished by the comparable  companies
     noted  above.  Given this,  Evans & Evans also  believed it  realistic  and
     appropriate  to adjust the revenue  multiple of the Company  down by 75% to
     reflect the much lower level of annual  sales and the  resultant  financial
     risk associated with the Company. This meant that the market capitalization
     to  revenue  implied  value  would  also  have to be  reduced  from  8.5 to
     approximately 2.1.  Accordingly,  Evans & Evans took the annualized revenue
     figure of US$2.2  million  and  multiplied  it by the  adjusted  comparable
     company multiple to obtain a value range of  approximately  US$4.6 million.
     This  assessment of enterprise  value is supportive of the above  valuation
     assessment  and  does  provide  a  confirmation  of  the  high  end  of the
     enterprise  value  range for

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 63
--------------------------------------------------------------------------------

     the Company as at the  Valuation  Date - which would be expected in using a
     comparable companies approach.

13.4 Valuation Conclusion

     Based on VTI  management's  disclosure of  18,840,523  common shares of VTI
     issued  and  outstanding  and  620,000  preferred  shares of VTI issued and
     outstanding  as at October 31, 1999 (i.e.,  for a total of  19,460,523  all
     shares issued and  outstanding)  and an enterprise  value of 100% of all of
     the issued and outstanding shares of VTI as at that date in the range of to
     US$3,750,000 to US$4,375,000. The fair market value of each common share of
     VTI (after  consideration  of payment  of the  preferred  shares) is in the
     range of US$0.13 to US$0.16 calculated as:

<TABLE>
<CAPTION>
       --------------------------------------------------------------------------------------
                  US$                                                  Low           High
       --------------------------------------------------------------------------------------
<S>                                                               <C>            <C>
       All Common Shares, Issued and Outstanding                   18,840,523     18,840,523
       --------------------------------------------------------------------------------------
       Enterprise Value                                             3,750,000      4,375,000
       --------------------------------------------------------------------------------------
       Less: Preferred Shares (620,000@US$2.00 per share)         (1,240,000)    (1,240,000)
       --------------------------------------------------------------------------------------
       Less: Risk/ Cost of Debt to Pay Preferred Shareholders       (100,000)      (100,000)
       --------------------------------------------------------------------------------------
       Fair Market Value (FMV) of Common Shares, say                2,400,000      3,000,000
       --------------------------------------------------------------------------------------
       FMV Per Common Share, Say                                      US$0.13        US$0.16
       --------------------------------------------------------------------------------------
</TABLE>

     Note: (1) In calculating the FMV, Evans & Evans had to deduct obligation of
     the preferred  shareholders,  which was taken at declared face value; (2) A
     deduction of US$100,000 was done to reflect the  incremental  risk and cost
     for the Company to fund (debt) the payment of the  preferred  shareholders;
     and (3) The 4.25 million  options that have been issued were not considered
     in the FMV/share  calculation as they have yet to be exercised and there is
     no  provision  in any  agreement  reviewed by Evans & Evans as to terms and
     conditions  to their  being  exercised  (i.e.,  and at what prices and time
     frames and under what specific conditions).

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 64
--------------------------------------------------------------------------------

14.0 - VALUATION OF PEPPERMILL CAPITAL CORPORATION

14.1 Adjusted Book Value Approach

     As  effectively a holding  company (the Public Company is in the process of
     divesting its mineral property  interests),  Peppermill  should, in view of
     the authors of the Report, be valued under an Adjusted Book Value Approach.

     Under the Adjusted  Book Value  Approach,  the  following  items need to be
     considered:

     1)   The Tangible  Asset  Backing of  Peppermill as at October 31, 1999 was
          nominal  (refer to  section  11.0,  "Tangible  Asset  Backing"  of the
          Report).

     2)   A premium  or  allowance  should,  in the view of the  authors  of the
          Report,  be made for the fact that  Peppermill is a public company and
          that  achieving  such status  entailed time and expenses not accounted
          for in the  Tangible  Asset  Backing of  Peppermill.  Such  premium is
          estimated  by  Evans & Evans  to  between  US$150,000  and  US$250,000
          (mid-point of US$200,000)  based on its discussions with five regional
          promotion  and  investment   relations  firms  that  are  involved  in
          establishing basic shell NASD OTC BB companies.

     3)   Consideration of the transaction between VTI and Peppermill to acquire
          approximately  90% of all of the  issued  and  outstanding  shares  of
          Peppermill  from an arms'  length party for  US$300,000;  which has an
          implied value for 100% of Peppermill of approximately US$330,000.

     Given all of the above,  the low-end of the valuation  range for Peppermill
     is calculated as follows:

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 65
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
         --------------------------------------------------------------------------------------------------------
                     Valuation Approach               Fair Market        Weighting           Adjusted Fair
         --------------------------------------------------------------------------------------------------------
                                                       Value, Say                             Market Value
         --------------------------------------------------------------------------------------------------------
<S>                                                       <C>                  <C>                <C>
            1. Tangible Asset Backing                           0              10%                         0
               ("TAB"), October 31, 1999
         --------------------------------------------------------------------------------------------------------
            2. Public Company Premium                     200,000              50%                   100,000
         --------------------------------------------------------------------------------------------------------
            3. Current VTI/Peppermill Transaction         330,000              40%                   132,000
         --------------------------------------------------------------------------------------------------------
             FMV, Say                                                                             US$230,000
         --------------------------------------------------------------------------------------------------------
</TABLE>

     Given all of the above,  the high-end of the valuation range for Peppermill
     is calculated as follows:

<TABLE>
<CAPTION>
         --------------------------------------------------------------------------------------------------------
                                                       Fair Market                                Adjusted Fair
                     Valuation Approach                Value, Say          Weighting              Market Value
         --------------------------------------------------------------------------------------------------------

         --------------------------------------------------------------------------------------------------------
<S>                                                      <C>                  <C>                 <C>
            2. Tangible Asset Backing                           0               0%                         0
               ("TAB"), October 31, 1999
         --------------------------------------------------------------------------------------------------------
            2. Public Company Premium                     200,000               0%                         0
         --------------------------------------------------------------------------------------------------------
            3. Current VTI/Peppermill Transaction         330,000             100%                   330,000
         --------------------------------------------------------------------------------------------------------
             FMV, Say                                                                             US$330,000
         --------------------------------------------------------------------------------------------------------
</TABLE>

     Based  on  11,239,700  shares  of  Peppermill  being  actually  issued  and
     outstanding as at the Valuation  Date, the fair market value of 100% of the
     shares  of  Peppermill  as at  that  date in the  range  of  US$230,000  to
     US$330,000,  the fair market  value of each share of  Peppermill  is in the
     range of US$0.02 to US$0.03.

         --------------------------------------------------------------
         U.S. Dollars                             Low           High
         --------------------------------------------------------------
         Shares, Issued and Outstanding       11,239,700    11,239,700
         --------------------------------------------------------------
         Fair Market Value ("FMV")               230,000       330,000
         --------------------------------------------------------------
         FMV Per Share, Say                      US$0.02       US$0.03
         --------------------------------------------------------------

15.0 - FAIRNESS CONSIDERATIONS

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 66
--------------------------------------------------------------------------------

     The fairness of the Proposed  Transaction is tested by: i) calculating,  at
     the time of the  completion  of the Proposed  Transaction,  the fair market
     value  of each  share  of VTI and the fair  market  value of each  share of
     Peppermill;  ii) calculating whether the fair market value of each share of
     Peppermill  is in at  least  a  comparable  range  upon  completion  of the
     Proposed  Transaction  as  prior  to the  Proposed  Transaction;  and  iii)
     considering  qualitative  factors,  such as  synergies of  availability  of
     financing, that may result from the Proposed Transaction.

     Fair Market Value Per Share of VTI and Peppermill, as at the Valuation Date

     The fair market value of each common share of VTI as at the Valuation  Date
     was  calculated  to be in the range of US$0.13 to US$0.16.  The fair market
     value of each  common  share of  Peppermill  as at the  Valuation  Date was
     calculated to be in the range of US$0.02 to US$0.03.

     Under the  Proposed  Transaction,  the ratio of the  common  and  preferred
     shares to be exchanged is:

          (1)  Peppermill will acquire all of the issued and outstanding  common
               shares of VTI on the basis of issuing 1.0 Peppermill common share
               in exchange for  1.8624479  common shares of VTI. In other words,
               Peppermill will issue 10,116,000 of its common shares in exchange
               for 18,840,523 of VTI's common shares; and

          (2)  Peppermill will issue 1.0 preferred shares for each 1.0 preferred
               shares of VTI. In other words,  Peppermill will issue 620,000 new
               preferred shares in exchange for 620,000 preferred shares of VTI.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 67
--------------------------------------------------------------------------------

     Fair Market Value of Peppermill, Post-Proposed Transaction ("NewCo")

     The truest test of fairness - from the Peppermill shareholder's perspective
     - in the opinion of Evans & Evans,  is calculating  whether the fair market
     value of each share of  Peppermill  is in at least a comparable  range upon
     completion   of  the  Proposed   Transaction   as  prior  to  the  Proposed
     Transaction.

     There are many  events that are assumed  will occur  between the  Valuation
     Date and the closing of the Proposed  Transaction.  These events are either
     conditions  (e.g.,  the  Offering)  of  the  Proposed  Transaction  or  are
     necessary (e.g. due diligence, legal costs) aspects of the closing process.
     This section  calculates the fair market value of NewCo upon the closing of
     the  Proposed  Transaction,  the number of common and  preferred  shares of
     NewCo that will issued and  outstanding  upon the  closing of the  Proposed
     Transaction  and the fair market  value of each common  share of NewCo upon
     the closing of the Proposed Transaction.

     First, the fair market value of NewCo is calculated by:

     1)   Adding the fair market  value of VTI as at the  Valuation  Date in the
          range of US$2,400,000 to US$3,000,000.

     2)   Adding the fair market value of Peppermill as at the Valuation Date in
          the range of US$230,000 to US$330,000.

     3)   Subtracting  the  cost of VTI' and  Peppermill's  due  diligence  with
          respect to the Proposed  Transaction  of $75,000  (Company  management
          estimate).

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 68
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Item/Adjustment                                                Value (Low)         Value (High)
                                                                 in US$               in US$
------------------------------------------------------------------------------------------------
<S>                                                              <C>                  <C>
1. Add: FMV of VTI, as at the Valuation Date                     2,400,000            3,000,000
------------------------------------------------------------------------------------------------
2. Add: FMV of  Peppermill, as at the Valuation Date               230,000              330,000
------------------------------------------------------------------------------------------------
3. Less: Proposed Transaction Costs                               (75,000)             (75,000)
                                                                ----------           ----------
------------------------------------------------------------------------------------------------
Total Fair Market Value, Say                                     2,550,000            3,250,000
------------------------------------------------------------------------------------------------
</TABLE>

     The  number of shares  issued and  outstanding  of NewCo is  calculated  by
     adding:

     1)   11,239,700 shares of Peppermill, as at the Valuation Date.

     2)   Number of common and  preferred  shares to be issued to VTI as per the
          Proposed  Transaction.  Out of the 11,239,700  existing common shares,
          certain  Peppermill  shareholders are selling 10,116,000 common shares
          to VTI for US$300,000. Hence, the only additional Peppermill shares to
          be issued for the completion of the Proposed  Transaction  will be the
          issuance of 620,000  preferred  shares from the treasury of Peppermill
          to existing VTI preferred  shareholders  (the terms and  conditions of
          the preferred shares are not changing as per  management's  disclosure
          and the  payment  obligation  of such  shares has been  calculated  in
          determining the fair market value of VTI).

         -----------------------------------------------------------------------
                                                            Low         High
         -----------------------------------------------------------------------
         Total Shares, Issued and Outstanding
         -----------------------------------------------------------------------
         1. As at Valuation Date                         11,239,700  11,239,700
         -----------------------------------------------------------------------
         2. As per Proposed Transaction, additional         620,000     620,000
         -----------------------------------------------------------------------
         Total Shares, Issued and Outstanding            11,859,700  11,859,700
         -----------------------------------------------------------------------

         -----------------------------------------------------------------------
         Fair Market Value ("FMV")                        2,550,000   3,250,000
         -----------------------------------------------------------------------
         FMV Per Share, Say                                 US$0.22     US$0.27
         -----------------------------------------------------------------------

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 69
--------------------------------------------------------------------------------

     The fair market value of each of all of the shares of NewCo upon closing of
     the  Proposed  Transaction  is  estimated to be in the range of US$0.22 per
     share to  US$0.27  per share,  compared  with a fair  market  value of each
     Peppermill  share of  approximately  US$0.02 per share to US$0.03 per share
     prior to the Proposed Transaction.

16.0 - CONCLUSION AS TO FAIRNESS

     Based  upon  Evans  &  Evans  valuation  work  and  subject  to  all of the
     foregoing,  Evans & Evans is of the opinion,  as at the date of the Report,
     that the terms of the Proposed Transaction are fair, from a financial point
     of view, to the shareholders of Peppermill.

     In  assessing  the  fairness  of the  Proposed  Transaction  to the  common
     shareholders of Peppermill,  Evans & Evans has considered,  inter alia, the
     following:

     1.   Comparison  of the fair market  value,  as at October 31, 1999, of all
          the outstanding common shares of Peppermill, to the fair market value,
          on  a  pro  forma  basis,  of  the  Peppermill  common   shareholders'
          prospective  interests  in NewCo.  The shares of NewCo,  Post-Proposed
          Transaction  are of higher value than the shares of  Peppermill  as at
          the Valuation Date.

     2.   Other  potential  benefits  that  may be  realized  subsequent  to the
          capital reorganization including possible synergies between Peppermill
          and VTI. Evans & Evans have not attempted to quantify these  potential
          benefits,  as for purposes of the fairness opinion; any enhancement in
          the value of NewCo not otherwise reflected in its valuation conclusion
          favors the common shareholders of Peppermill.  Some of these potential
          benefits are as follows:

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 70
--------------------------------------------------------------------------------

          (i)  The  ability of VTI and their  existing  business  and  corporate
               finance  relationships  bring a  significant  amount of  business
               development  capability to NewCo, the same level of which may not
               be available to either independently.

          (ii) VTI has ongoing sales and revenues and cash flows.  Thus VTI will
               provide actual operating cash flows to NewCo.

          (iii)The  merger  with VTI  provides  Peppermill  with  access  to new
               business  opportunities and for expansion with operating business
               and potential acquisition candidates.

     EVANS & EVANS, INC.

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

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation                                           Page 71
--------------------------------------------------------------------------------

17.0 - RESTRICTIONS AND CONDITIONS

     This  opinion is  intended  for the  purpose  stated in this Report and, in
     particular,  is based on assumptions as to results that could reasonably be
     expected at the Valuation Date. It is not to be the basis of any subsequent
     valuation and is not to be reproduced or used other than for the purpose of
     this Report  without  prior written  permission in each specific  instance.
     Evans & Evans,  Inc.  disclaims any  responsibility or liability for losses
     occasioned  to any  parties  as a result of the  circulation,  publication,
     reproduction  or use of this  opinion  contrary to the  provisions  of this
     paragraph.  This opinion is based upon information made available to us and
     on the  assumptions  we have  made.  We  reserve  the right to  review  all
     calculations  included or referred to in this  opinion  and, if we consider
     necessary,  to revise our opinion in the light of any information  existing
     at the  Valuation  Date  which  becomes  known to us after the date of this
     opinion.

     This Report has been prepared for the Independent  Committee of Peppermill.
     The  Report  may be  distributed  by the  directors  of  Peppermill  to the
     shareholders of VTI and Peppermill at its  discretion.  This Report may not
     be relied upon by any other  person or entity  without our  express,  prior
     written consent.

18.0 - STATEMENT OF INDEPENDENCE

     Evans & Evans,  Inc.  is, for the purposes of  preparing  this  Report,  an
     independent  valuator.  None of the  partners,  employees or  associates of
     Evans & Evans, Inc., has, or anticipates the acquisition of any interest in
     the assets, shares or business undertakings of Varner Technologies, Inc. or
     Peppermill Capital Corporation.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Draft Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation
--------------------------------------------------------------------------------

                                   Appendix 1:
                              Comparable Companies

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Draft Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation
--------------------------------------------------------------------------------

     Prodigy Communications Corporation ("Prodigy") of White Plains, New York

     Prodigy offers its Internet  subscribers  Internet access, Web hosting, and
     e-commerce  services.  Prodigy still offers its original  online  services,
     including e-mail and chat groups, as Prodigy Classic.  Prodigy, which has a
     total of 1.2 million  subscribers,  which  includes  150,000 for  Prodigy's
     Mexican ISP service.  The company has agreed to combine its Internet access
     operations with those of SBC Communications  (650,000  customers).  Prodigy
     will own 57% of the partnership, which will operate under the Prodigy brand
     name; SBC will own 43%.

     PSINet, Inc. ("PSINet") of Herndon, Virginia

     PSINet offers a variety of access  services,  Web-site  design and hosting,
     electronic  commerce,  and  security  programs.  PSINet  has  offices in 11
     countries and serves  26,500  corporate  customers.  PSINet is no longer an
     Internet service provider (ISP) for individual consumers, but it does allow
     other  consumer-based  ISPs  to use  its  networks  for a fee.  PSINet  has
     assembled  a  worldwide  fiber-optic  network  with 600 points of  presence
     (POPs),  serving 22 countries in North and South America,  Europe,  and the
     Asia/Pacific region.

     Verio, Inc. ("Verio") of Inglewood, Colorado

     Verio  owns  or has  majority  stakes  in more  than  35  business-oriented
     providers  across  the US.  Verio is  buying  ISPs  with a large  number of
     dedicated  accounts  (business  accounts with direct lines to the provider)
     and is  marketing  to business  and  institutional  subscribers.  Verio has
     approximately  190  points of  presence  (POPs) in the US, and it links its
     POPs  by  leasing  fiber   capacity,   mainly  from  Qwest   Communications
     International  Inc. of Denver,  Colorado.  Focusing on small and  mid-sized
     businesses,  Verio provides  Internet access through dial-up,  DSL (digital
     subscriber  line),  frame  relay,  and ISDN  connections.  The company also
     provides  enhanced  Internet  services,  including  Web  hosting  for about
     265,000  sites in some 170  countries.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Draft Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation
--------------------------------------------------------------------------------

     OneMain.com, Inc. ("OneMain") of Southhampton, New York

     OneMain.com  focuses on the  underserved  small town,  suburban,  and rural
     markets.  OneMain.com has acquired ISPs in Arkansas,  California,  Florida,
     Illinois,  Indiana, Kansas,  Missouri,  Ohio, Pennsylvania,  Tennessee, and
     Vermont.   Overall  the  company  serves  more  than  415,000  subscribers.
     OneMain.com  offers dial-up and high-speed  Internet  access,  Web hosting,
     e-mail, and Internet relay chat as a "Hometown Internet" service,  allowing
     customers  to use local  phone  numbers  to  connect  (instead  of  pricier
     long-distance numbers).

     America Online, Inc. ("AOL") of Dulles, Virginia

     Its more than  19million  subscribers  make AOL the  world's #1 provider of
     online  services.  AOL's 1998  acquisition  of CompuServe  (now  subsidiary
     CompuServe   Interactive   Services),   which   has  more  than  2  million
     subscribers, helped to secure AOL's dominance. AOL appeals to those seeking
     entertainment,   but   CompuServe  is  geared  toward   professionals   and
     small-business  owners.  Its  purchase of Netscape  Communications  in 1999
     brought the popular Navigator Web browser and the Netcenter Internet portal
     into the AOL fold.  The company is also launching an interactive TV service
     (AOL TV) via the DIRECTV  satellite service and has forged an alliance with
     computer maker Gateway.

     MindSpring Enterprise, Inc. ("MindSpring") of Atlanta, Georgia

     MindSpring has relied on acquisitions to move into the top tier of US ISPs,
     and by merging with rival  EarthLink the company will become the number two
     ISP in the U.S.  behind AOL.  Dial-up  Internet access (more than 1 million
     subscribers)  accounts for nearly 85% of  MindSpring's  sales.  The company
     also provides Web hosting (45,000  accounts) and dedicated access lines for
     business  customers.  MindSpring,  is beginning to offer  high-speed  cable
     modem Internet access over leased networks.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Draft Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation
--------------------------------------------------------------------------------

     EarthLink Network, Inc. ("ENI") of Pasadena, California

     EarthLink Network has more than 1 million  customers  throughout the US and
     Canada.  Upon the merger with MindSpring,  the combined company will be the
     #2 US ISP behind AOL. The company's TotalAccess software package works with
     third-party browsers and is marketed through  distribution  agreements with
     several prominent

     FlashNet Communications, Inc. ("FlashNet") of Fort Worth, Texas

     FlashNet  provides  Internet access to approximately  244,000  customers in
     more than 450 cities across the US. FlashNet's services include Web access,
     e-mail,  newsgroup  access,  and Web pages.  FlashNet  offers its small and
     medium-sized  business clients  high-speed  dedicated and broadband access,
     Web hosting,  and e-commerce  opportunities.  It plans to add long-distance
     access and advanced data services.  The company uses radio,  TV, and direct
     advertising  to promote its products  and sells  several  service  packages
     through a direct sales force and independent  representatives.  In November
     of 1999, the Company agreed to be acquired by Prodigy Communications Corp.

     Internet America, Inc. ("IAI") of Dallas, Texas

     IAI offers a package  that  includes  unlimited  Web access in  addition to
     e-mail, Internet relay chat, file transfer protocol, and news access. Other
     services  include  multiple  e-mail  mailboxes and personal Web sites.  Its
     50,000  customers  (primarily  individual  users) are concentrated in North
     Texas. The company's  Airnews.net,  which is included in its dial-up access
     package or can be purchased separately by other customers, offers access to
     millions of news articles and serves about 3,800 customers in 35 countries.

     ProtoSource Corporation ("ProtoSource") of Santa Monica, California

     Through its  ProtoSource  Network,  the Internet  service  provider  offers
     online  access  to  about  3,700  residential,   business,  and  government
     customers,  primarily

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Draft Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation
--------------------------------------------------------------------------------

     in California.  In addition to dial-up and high-speed ISDN Internet access,
     ProtoSource   provides   custom   intranet   and  Web   site   design   and
     implementation,  Web hosting, and domain  registration.  The Company offers
     nationwide  access  through  an  agreement  with  communications   provider
     OmniCall.

     Frontline Communications Corporation ("Frontline") of Pearl River, New York

     Frontline  Communications  has  acquired a number of companies -- including
     many ISPs,  WebPrime  (Web  design and  development),  and  WOWFactor  (Web
     marketplace)  Frontline  primarily  serves  individual  and  small-business
     subscribers in the northeastern US. It has about 15,000  subscribers in New
     Jersey,   New  York  (including  New  York  City),   and  the  Philadelphia
     metropolitan  area.   Dedicated,   dial-up,  and  high-speed  DSL  (digital
     subscriber  line) access  options are provided  through a network of leased
     data lines and 11 POPs  (points-of-presence).  The company has  competitive
     local-exchange  carrier  status  in New  York and  plans  to build  its own
     network infrastructure.

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------

<PAGE>

Draft Valuation Report and Related Fairness Opinion: December 2, 1999
Peppermill Capital Corporation
--------------------------------------------------------------------------------

                                   Appendix 2:

      VTI Business Plan and Financial Statements and Financial Projections

--------------------------------------------------------------------------------
                               EVANS & EVANS, INC.
--------------------------------------------------------------------------------Exhibit 10.1

                                  SURREY, INC.
                          1997 LONG-TERM INCENTIVE PLAN

                  The purpose of the SURREY, INC. 1997 LONG-TERM INCENTIVE PLAN
(the "Plan") is to promote the growth and profitability of SURREY, INC. (the
"Company") and its affiliates by providing its executives and employees with an
incentive to achieve long-term corporate objectives, to attract and retain
executives and employees of outstanding competence, and to provide its
executives and employees with an equity interest in the Company.

         1. STOCK SUBJECT TO PLAN.

                  a. AGGREGATE LIMIT. An aggregate of 350,000 shares (the
         "Shares") of the Common Stock, no par value, of the Company ("Company
         Stock") may be subject to awards granted under the Plan. Such Shares
         may be authorized but unissued Company Stock or authorized and issued
         Company Stock that has been acquired by the Company. Except to the
         extent otherwise provided in paragraph 6.b., Shares that are forfeited,
         and Shares that are subject to an award which expires or is canceled,
         shall be available for reissuance under the Plan.

                  b. INDIVIDUAL LIMIT. Not more than 100,000 Shares may be
         subject to awards granted to any employee during any calendar year. If
         an award granted to an employee is canceled, the canceled award will
         continue to be counted against the maximum number of shares for which
         awards may be granted to that employee. If, after grant, the exercise
         price of a stock option is reduced, the reduction shall be treated as a
         cancellation of the option and the grant of a new option for purposes
         of this paragraph.

         2. ADMINISTRATION.

                  a. COMMITTEE. The Plan shall be administered by a committee
         (the "Committee") consisting of the entire Board of Directors of the
         Company (the "Board"), or of not less than two members of the Board
         each of whom is a "nonemployee director" within the meaning of Rule
         16b-3(a)(3) under the Securities Exchange Act of 1934 (the "Exchange
         Act"). To the extent feasible, at any time when the Company is
         registered under Section 12 of the Exchange Act, each member of the
         Committee shall be an "outside director" within the meaning of Section
         162(m)(4)(C)(i) of the Internal Revenue Code of 1986 (the "Code") and
         regulations thereunder.

                  b. POWERS AND DUTIES. The Committee shall have sole discretion
         and authority to:

                           i. adopt rules and regulations governing the
                  administration of the Plan;

                           ii. select eligible employees to whom awards will be
                  granted;

                                      -12-
<PAGE>

                           iii. determine the type, price, amount, size, and
                  terms of awards;

                           iv. determine when awards will be granted;

                           v. determine whether restrictions will be placed on
                  Shares purchased pursuant to an option or issued pursuant to
                  an award;

and make all other determinations necessary or advisable for the administration
of the Plan. The Committee's determinations need not be uniform, and may be made
by it selectively among persons who are eligible to receive awards, whether or
not such persons are similarly situated. All interpretations, decisions, or
determinations made by the Committee shall be final and conclusive.

         3. ELIGIBILITY. Any employee of the Company or its Affiliates shall be
eligible to receive awards under the Plan; however, no awards shall be made to a
director of the Company who is not an employee of the Company or an Affiliate.
An "Affiliate" is any corporation that is a "parent corporation" or a
"subsidiary corporation" with respect to the Company, as determined under
Sections 424(e) and (f) of the Code.

         4. AWARDS. The Committee may make awards in the form of stock options,
stock appreciation rights, restricted stock, performance awards, or any
combination thereof.

         5. STOCK OPTIONS. A stock option shall entitle the optionee, upon
exercise, to purchase Shares at a specified price during a specified period.
Stock options may be "Incentive Stock Options" within the meaning of Section 422
of the Code, options which do not qualify as Incentive Stock Options
("Nonqualified Options"), or a combination of Incentive Stock Options and
Nonqualified Options. Stock options shall be subject to the following
requirements:

                  a. TYPE OF OPTION. Each option shall be identified as an
         Incentive Stock Option or a Nonqualified Option. If a combination of
         Incentive Stock Options and Nonqualified Options are granted in a
         single award, the agreement evidencing the award shall specify the
         extent to which the options are Incentive Stock Options and the extent
         to which they are Nonqualified Options.

                  b. TERM. No option shall be exercisable more than ten years
         after the date it is granted.

                  c. PAYMENT. The purchase price of Shares subject to an option
         shall be payable in full when the option is exercised. Payment may be
         made in cash, in shares of Common Stock having a fair market value on
         the date of exercise which is equal to the option price, by directing
         the Company to withhold from the Shares that would otherwise be issued
         upon exercise a number of Shares having a fair market value on the date
         of exercise which is equal to the exercise price, or by any combination
         of the foregoing, subject to such terms and conditions as the Committee
         deems necessary or appropriate. The Committee, in its discretion, may
         also cooperate with an optionee who participates in a cashless exercise
         program of a broker or other agent under which all or part of the
         Shares received upon exercise of an option are sold through the broker
         or other agent or under which the broker or other agent makes a loan to
         such optionee.

                                      -13-
<PAGE>

                  d. INCENTIVE STOCK OPTIONS. An Incentive Stock Option shall be
         subject to the following additional requirements:

                           i. The purchase price of Shares subject to the option
                  shall not be less than the fair market value of the Shares at
                  the time the option is granted, as determined in good faith by
                  the Committee.

                           ii. The fair market value (determined at the time the
                  option is granted) of all Shares with respect to which
                  Incentive Stock Options first become exercisable during any
                  calendar year, under this Plan or any other plan of the
                  Company or an Affiliate, shall not exceed $100,000.

                           iii. If the optionee owns 10% or more of the total
                  combined voting power of all classes of stock of the Company
                  or an Affiliate at the time the option is granted, the
                  purchase price of Shares subject to the option shall not be
                  less than 110% of their fair market value on the date the
                  option is granted, and the option may not be exercised more
                  than five years after the date it is granted. The rules of
                  Section 424(d) of the Code shall apply in determining the
                  stock ownership of any optionee.

                           iv. The option shall not be transferable except to
                  the extent permitted by the agreement evidencing the option.
                  An option agreement may only permit an Incentive Stock Option
                  to be transferred by will or the laws of descent and
                  distribution, and an Incentive Stock Option may not be
                  exercised during the optionee's lifetime by anyone other than
                  the optionee.

Subject to the foregoing, options may be made exercisable in one or more
installments, upon the happening of certain events, or upon such other terms and
conditions as the Committee shall determine.

         6. STOCK APPRECIATION RIGHTS. A stock appreciation right shall entitle
the holder, upon exercise, to receive a payment equal to the amount by which the
fair market value of one Share on the date the right is exercised exceeds the
"base amount" established by the Committee on the date the right is granted.
Stock appreciation rights shall be subject to the following requirements:

                  a. TYPE OF RIGHT. Stock appreciation rights may be granted in
         tandem with an option or as "freestanding" rights.

                  b. TANDEM RIGHTS. Stock appreciation rights granted in tandem
         with an option shall become nonexercisable upon exercise of the option,
         and an option granted in tandem with stock appreciation rights shall
         become nonexercisable upon the exercise of the rights. Shares subject
         to an option which becomes nonexercisable by virtue of the exercise of
         a tandem right shall not be available for subsequent awards under the
         Plan.

                                      -14-
<PAGE>

                  c. TERM. No stock appreciation right shall be exercisable more
         than ten years after the date it is granted.

                  d. PAYMENT. The amount payable upon the exercise of a stock
         appreciation right may be paid in cash, in shares of Company Stock
         having a fair market value which is not more than the amount payable on
         the date of exercise, or in a combination of cash and such shares, as
         the Committee shall determine.

                  e. RIGHTS NOT TRANSFERABLE. A stock appreciation right shall
         not be transferable except to the extent permitted by the agreement
         evidencing the right. A stock appreciation right agreement may only
         permit the right to be transferred by will or the laws of descent and
         distribution, and a stock appreciation right may not be exercised
         during the holder's lifetime by anyone other than the holder.

                  f. RIGHTS IN TANDEM WITH ISOS. Stock appreciation rights
         granted in tandem with an Incentive Stock Option shall be subject to
         the following additional requirements:

                           i. The base amount of the rights shall not be less
                  than the purchase price of the Shares subject to the option.

                           ii. The rights may be exercised only when the fair
                  market value of the Shares subject to the rights exceeds the
                  purchase price of the Shares subject to the option.

                           iii. The rights may be exercised only when, and to
                  the extent, the option may be exercised.

                           iv. The rights may be transferred only when the
                  option may be transferred.

                           v. The amount payable upon exercise of the rights
                  shall not exceed the difference between the fair market value
                  of the Shares subject to the right and the purchase price of
                  the Shares subject to the option.

Subject to the foregoing, stock appreciation rights may be made exercisable in
one or more installments, upon the happening of certain events, or upon such
other terms and conditions as the Committee shall determine.

         7. RESTRICTED STOCK. Restricted stock awards shall entitle the holder
to receive Shares subject to forfeiture if specified conditions are not
satisfied at the end of a restricted period. Restricted stock awards shall be
subject to the following requirements:

                  a. RESTRICTED PERIOD. The Committee shall establish a
         restricted period during which the holder will not be permitted to
         sell, transfer, pledge, encumber, or assign the Shares subject to the
         award. Within these limits, the Committee may provide for the lapse of
         restrictions in installments, upon the occurrence of certain events, or
         upon

                                      -15
<PAGE>

         such other terms and conditions as the Committee deems appropriate. Any
         attempt by a holder to dispose of restricted Shares in a manner
         contrary to the applicable restrictions shall be void, and of no force
         or effect.

                  b. RIGHTS DURING RESTRICTED PERIOD. Except to the extent
         otherwise provided herein or under the terms of a restricted stock
         agreement, the holder of restricted Shares shall have all of the rights
         of a stockholder in the Company with respect to the restricted Shares,
         including the right to vote the Shares and to receive dividends and
         other distributions. However, all stock dividends, stock rights, and
         stock issued upon split-ups or reclassifications of Shares shall be
         subject to the same restrictions as the Shares with respect to which
         they are issued, and may be held in custody as provided below until the
         restrictions have lapsed.

                  c. FORFEITURES. Except to the extent otherwise provided in a
         restricted stock agreement, restricted Shares shall be forfeited to the
         Company, and all rights of the holder with respect to such Shares shall
         terminate, if the holder shall cease to be an employee of the Company
         and its Affiliates or if any condition established by the Committee for
         the release of any restriction shall not have occurred prior to the end
         of the restricted period.

                  d. CUSTODY. The Committee may provide that certificates
         evidencing restricted Shares shall be held in custody by a bank or
         other institution, or by the Company or an Affiliate, until the
         restrictions have lapsed. The Committee may also require the holder of
         restricted Shares to deliver a stock power to the Company, endorsed in
         blank, relating to the restricted Shares.

                  e. CERTIFICATES. A recipient of restricted Shares shall be
         issued a certificate or certificates evidencing such Shares. Such
         certificates shall be registered in the name of the recipient, and
         shall bear a legend which shall be in substantially the following form:

                  "The transferability of this certificate and the shares
                  represented hereby are subject to the terms and conditions
                  (including forfeiture) of the SURREY, INC. 1997 LONG-TERM
                  INCENTIVE PLAN and a Restricted Stock Agreement entered into
                  between the registered owner and Surrey, Inc. Copies of such
                  Plan and Agreement are on file in the offices of Surrey, Inc.,
                  13110 Trails End Road, Leander, Texas 78641."

         8. PERFORMANCE AWARDS. Performance awards shall entitle the recipient
to receive future payments of cash or distributions of Shares upon the
achievement of long-term performance goals. Performance awards shall be subject
to the following requirements:

                  a. PERFORMANCE PERIOD. The Committee shall establish a
         performance period of not more than five years.

                  b. AMOUNT OF AWARDS. The Committee shall establish a value for
         each

                                      -16-
<PAGE>

         performance award, which may be expressed in terms of specified dollar
         amounts or a specified number of Shares. Such value may be fixed or
         variable in accordance with criteria specified by the Committee at the
         time of the award.

                  c. PERFORMANCE OBJECTIVES. The Committee shall establish
         performance objectives to be achieved during the performance period,
         determining the extent to which an employee will be entitled to
         distributions with respect to the award.

                  d. PERFORMANCE MEASURES. Performance objectives may relate to
         corporate, subsidiary, unit, or individual performance, or any
         combination thereof, and may be established in terms of growth in gross
         or net earnings, earnings per share, ratio of earnings to equity or
         assets, Share value, or such other measures as the Committee shall
         determine. Multiple objectives may be used which have the same or
         different weighting, and the objectives may relate to absolute
         performance or to relative performance measured against other
         companies, subsidiaries, units, or individuals.

                  e. ADJUSTMENTS. Prior to the end of a performance period, the
         Committee may adjust previously established performance objectives to
         reflect major unforeseen events such as changes in applicable laws,
         regulations, or accounting practices; mergers, acquisitions, or
         divestitures; or other unusual or non-recurring events.

                  f. DISTRIBUTIONS WITH RESPECT TO AWARDS. Following the end of
         a performance period, the Committee shall determine the extent to which
         the performance objectives for such period have been achieved and the
         amounts, if any, that are payable with respect to performance awards
         for that period. Such amounts may be paid in cash or in Shares (based
         on their fair market value at the time of the payment), or in any
         combination of cash and Shares, as the Committee shall determine.
         Payments may be made in a lump sum or in installments, and shall be
         subject to such vesting, deferral, or other terms and conditions as the
         Committee may determine.

                  g. NONTRANSFERABILITY. A performance award shall not be
         assignable or transferable except to the extent permitted by the
         agreement evidencing the award. A performance award agreement may only
         permit an award to be transferred by will or the laws of descent and
         distribution, and during the recipient's lifetime, a performance award
         may only be paid to the recipient.

         9. AGREEMENTS. Each award shall be evidenced by an agreement setting
forth the terms and conditions upon which it is granted. Multiple awards may be
evidenced by a single agreement. Subject to the limitations set forth in the
Plan, the Committee may, with the consent of the person to whom an award has
been granted, amend an agreement to modify the terms or conditions of any award.

         10. ADJUSTMENTS. If there is a change in the outstanding Shares of
Company Stock by reason of a stock dividend or split, recapitalization,
reclassification, combination, or exchange of Shares, or by reason of a similar
corporate change, the Committee may adjust the number of Shares subject to an
award, the option price or value of an award, the maximum number of

                                      -17-
<PAGE>

Shares subject to this Plan, or the maximum number of Shares subject to an
award, as may be appropriate to reflect the nature of the change. Any such
adjustments shall be conclusive and binding for all purposes of this Plan.

         11. MERGER, CONSOLIDATION, ETC. Subject to the provisions of the
agreement evidencing an award, if the Company becomes a party to a corporate
merger, consolidation, major acquisition of property for stock, spinoff,
reorganization, or liquidation, the Board may make any arrangement it deems
advisable with respect to outstanding awards, in the number of Shares subject to
this Plan, and in the number of Shares subject to awards to any employee. Such
an arrangement may include, but shall not be limited to, the substitution of new
awards for awards then outstanding, the assumption of any award, and the
termination of any award. Any such arrangements shall be conclusive and binding
for all purposes of this Plan.

         12. INDEMNIFICATION. Each member of the Committee and the Board shall
be indemnified by the Company against any loss, cost, liability, or expense that
may be imposed upon or reasonably incurred by him as a result of any claim,
action, suit, or proceeding in which he may be involved by reason of any action
taken or omitted under this Plan; provided, such person gives the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which any person may be entitled under the Company's articles of incorporation
or bylaws, as a matter of law, or otherwise.

         13. RIGHTS AS STOCKHOLDER. Except to the extent otherwise specifically
provided herein, the recipient of an award shall have no rights as a stockholder
with respect to Shares sold or issued pursuant to the Plan until certificates
for such Shares have been issued to such person.

         14. GENERAL RESTRICTIONS. Each award granted pursuant to the Plan shall
be subject to the requirement that if, in the opinion of the Committee:

                  a. the listing, registration, or qualification of any Shares
         related thereto upon any securities exchange or under any state or
         federal law;

                  b. the consent or approval of any regulatory body; or

                  c. an agreement by the recipient with respect to the
         disposition of any such Shares;

is necessary or desirable as a condition of the issuance or sale of such Shares,
such award shall not be consummated unless and until such listing, registration,
qualification, consent, approval, or agreement is effected or obtained in form
satisfactory to the Committee.

         15. EMPLOYMENT RIGHTS. Nothing in this Plan, or in any agreement
entered into under the Plan, shall confer upon any employee the right to
continue in the employ of the Company or its Affiliates, or affect the right of
the Company or any Affiliate to terminate an employee's employment at any time,
with or without cause.

                                      -18-
<PAGE>

         16. WITHHOLDING. If the Company proposes or is required to issue Shares
pursuant to the Plan, it may require the recipient to remit to it, or withhold
from such award or from the recipient's other compensation, an amount sufficient
to satisfy any tax withholding requirements prior to the delivery of
certificates for the Shares.

         17. AMENDMENTS. The Board may at any time, and from time to time, amend
the Plan in any respect, except that no amendment:

                  a. increasing the number of Shares available for issuance or
         sale pursuant to the Plan (other than as permitted by paragraphs 10 and
         11); or

                  b. changing the classification of employees eligible to
         participate in the Plan or the definition of an Affiliate;

shall be made without stockholder approval.

         18. CONTINGENT AWARDS. Any award granted under the Plan prior to the
date on which the Plan is approved by the Company's stockholders shall be
contingent upon such approval. If stockholder approval is not received within 12
months after the date on which this Plan is adopted by the Board, such award
shall be void and of no force or effect.

         19. STOCKHOLDER APPROVAL. The approval of the Plan or any amendment by
the Company's stockholders must comply with all applicable provisions of the
Company's charter, bylaws, and applicable state law prescribing the method and
degree of stockholder approval required for granting awards of the type provided
under the Plan. Absent any such prescribed method and degree of stockholder
approval, the Plan or such amendment must be approved by a simple majority vote
of stockholders voting, either in person or by proxy, at a duly held
stockholders' meeting

         20. DURATION. No awards shall be granted under the Plan after the
earlier of: (a) the date the Plan is terminated by the Board; or (b) the tenth
anniversary of the date the Plan was first approved by the Board.

         21. COMPLIANCE WITH SECTION 16(b). In the case of employees who are
subject to Section 16 of the Exchange Act, the Company intends that the Plan and
any award granted under the Plan satisfy the applicable requirements of Rule
16b-3. If a provision of the Plan or any award would otherwise conflict with
such intent, that provision, to the extent possible, shall be interpreted so as
to avoid the conflict. To the extent of any remaining irreconcilable conflict
with such intent, the provision shall be deemed void as applied to employees who
are subject to Section 16 of the Exchange Act.

                                      -19-

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