NETWOLVES CORP
10-K/A, 1999-11-23
COMPUTER INTEGRATED SYSTEMS DESIGN
Previous: NETWOLVES CORP, 10-12G/A, 1999-11-23
Next: EON COMMUNICATIONS CORP, S-1/A, 1999-11-23



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K/A
                                 AMENDMENT NO. 1


  [ X ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
            THE SECURITIES EXCHANGE ACT OF 1934

                     For the fiscal year ended June 30, 1999
                                       or
  [  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
           THE SECURITIES EXCHANGE ACT OF 1934
                   For the transition period from       to

                           Commission File No. 0-25831

                              NetWolves Corporation
             (Exact name of registrant as specified in its charter)

             New York                              11-3430302
 (State or other jurisdiction          (I.R.S. Employer Identification No.)
  of incorporation or organization)

200 Broadhollow Road, Melville, New York               11747
(Address of Principal Executive Offices)            (Zip Code)

Registrant's telephone number, including area code:     (516) 393-5016

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.0033 per share
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No[  ]


Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [x].


State the aggregate market value of the voting stock held by  non-affiliates  of
the  registrant.  (The aggregate  market value shall be computed by reference to
the price at which the stock was sold,  or the average  bid and asked  prices of
such stock,  as of a specified date within 60 days prior to the date of filing).
As of September 30, 1999 approximately $127,095,190.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest  practicable  date  (applicable only to corporate
registrants).  Common  Stock,  par value  $.0033  per share;  outstanding  as of
September 30, 1999 - 6,176,016.

Documents  incorporated by reference:  Part III - Registrant's  definitive proxy
statement to be filed pursuant to Regulation 14A of the Securities Act of 1934.

<PAGE>


ITEM 1.   BUSINESS

General

     NetWolves Corporation ("NetWolves" or the "Company") designs,  develops and
sells products which provide a secure, integrated, modular internet gateway. The
products connect business networks  comprised of multiple computers sharing both
small and large  geographic  areas to the  Internet.  The primary  product,  the
FoxBox, is multi-functional.  It supports secure access to the Internet for 3 to
400 users through a single dedicated  connection or up to 8 users simultaneously
through a non-dedicated connection,  provides advanced electronic mail functions
for unlimited users and delivers firewall security to protect the computers of a
private network from access by other users. The Company's initial target markets
are the end users in the small and mid-sized  businesses and large organizations
with satellite  offices.  Larger end users to whom the product is intended to be
marketed are  companies  with  multi-state  locations,  government  agencies and
educational  markets.  NetWolves  products  are  designed  to  service  numerous
markets,   including  the  financial,   medical,  legal,  travel,   hospitality,
entertainment, hotel and auto and petroleum industries.

     The  Company's  strategy is to  establish  the FoxBox as the  standard  for
enterprise-wide  network  connectivity  worldwide.  To  achieve  its  objectives
worldwide, NetWolves seeks to form relationships with leading companies in their
respective  areas  to  deliver   application-specific   internet   solutions  to
organizations  worldwide.  In  furtherance  of this  objective,  the Company has
entered into agreements with Anicom,  Inc. and Comdisco,  Inc., and has acquired
The Sullivan Group ("TSG").
Inc.

     In January  1999,  NetWolves  entered into a  distribution  agreement  with
Anicom,  Inc. appointing Anicom, Inc. as the exclusive master distributor of its
products in North  America  subject to certain  minimum  purchase  requirements.
Anicom is one of the largest  distributors  in the United  States of  multimedia
wiring systems with customers  including  Cisco Systems and Fast Com and intends
to sell the Company's  products to its 75 offices  located in the United States.
In addition,  Anicom will maintain inventory of the FoxBox from all 75 locations
and intends to distribute the FoxBox nationwide. The Company delivered its first
significant order, approximately $1,700,000, in March/April 1999.

     In January 1999,  the Company  entered into an agreement  with The Sullivan
Group,  a leading  consulting  organization  serving the needs of the automobile
aftermarket,  convenience  stores and oil  industry.  It  maintains an extensive
library of training  modules  available to its client base which  includes Amoco
Oil, British Petroleum,  Chevron,  Chrysler,  Exxon,  General Motors,  Mobil Oil
Shell, Tosco and Unocal. Pursuant to its agreement, The Sullivan Group appointed
NetWolves as its exclusive  provider in the United  States of a delivery  system
whereby The Sullivan Group intends to sell its proprietary  training programs to
approximately 40,000 retail locations throughout the United States. NetWolves is
customizing an Internet  solution  specifically to deliver distance  learning to
these locations utilizing its FoxBox technology.

<PAGE>

     In July 1999, the Company entered into a merger agreement pursuant to which
it acquired the outstanding  capital stock of The Sullivan Group in exchange for
180,000  restricted  shares of the Company's  common stock.  The five  principal
officers and  employees  of The Sullivan  Group were  retained  under  long-term
employment contracts.  To finance the anticipated sales to be generated from the
application  of the FoxBox  technology to The Sullivan  Group's  client base, in
July 1999, the Company entered into an agreement with Comdisco, Inc. under which
Comdisco  has  provided  the  Company  access  to up to a  $320  million  credit
facility.  This credit  facility is intended to be utilized in  connection  with
Comdisco  installing  the  FoxBox  in up to  40,000  locations  over a four year
period.  Comdisco  also has  agreed  to  provide  management,  installation  and
technology  services  with  respect  to the sale of the  FoxBox to The  Sullivan
Group's clients.

     NetWolves, LLC was an Ohio limited liability company formed on February 13,
1998, which was merged into Watchdog Patrols,  Inc. on June 17, 1998.  Watchdog,
the legal surviving entity of the merger was incorporated  under the laws of the
State of New York on January 5, 1970.  As a result of the merger and  subsequent
sale of Watchdog's business,  Watchdog changed its name to NetWolves Corporation
and the former NetWolves LLC members owned 61.2% of the outstanding common stock
of NetWolves  Corporation.  NetWolves LLC was not affiliated with Watchdog prior
to the merger.

Products and Services

     The FoxBox is a multi-services  internet communications gateway that offers
a combined internet access and firewall security  solution.  The FoxBox includes
the following  products or services which would have to be purchased  separately
to achieve the same functionality:  an exchange server, a web server, a firewall
which protects the computers of a private  network from access by other users, a
router,  internet hardware and software setup, and product training.  The FoxBox
costs substantially less than purchasing its functionality in separate products,
which  costs  would  exceed  $30,000.   Further,   its   "all-in-one"   solution
significantly reduces costly network  administration  overhead,  since there are
less divergent  components to administer in the FoxBox.  Each of the features in
the FoxBox is designed to work together using integrated  hardware and software,
and a common interface. This facilitates expansion and support of the converging
voice and data industries. NetWolves currently offers five FoxBox models: FoxBox
DDR,  at a  suggested  wholesale  price of $3,400;  FoxBox  ISDN,  at a price of
$4,400;  FoxBox 56K,  for $5,500;  FoxBox T1, for  $7,100;  and FoxFox S2E,  for
$4,100.

     The FoxBox offers the following features:

     --   It can securely connect any number of users in a small geographic area
          (LAN)  simultaneous  to the  Internet  through  a  single  dial-up  or
          dedicated connection.

     --   Up to  eight  users at one time can  connect  to the  Web/Internet  on
          non-dedicated connections.

     --   Hierarchical caching, which are rules that tell a computer to look for
          the data  stored  on a  series  of a  computer  before  accessing  the
          internet  for data,  gives the FoxBox more  efficient  web viewing and
          greater ability to transfer files from one file to another.

<PAGE>

     --   Any number of users can send and receive  e-mail  individually,  while
          sharing one internet service provider account.

     --   A firewall protects the LAN from Internet-borne attacks.

     --   An advanced network address  translation module allows the creation of
          powerful address  translation rules for greater firewall  flexibility.

     --   Files that store events for review at a later date ensure appropriate
          use of internet  resources.

     --   Scalability allows internet usage to grow as a company expands.

     --   A  network  file  server   centrally  stores  programs  and  data  for
          accessability  to  multiple  users  simultaneously  and share data and
          programs from a central location.

     --   It can be used as a stand-alone firewall to protect the resources of a
          private network from users outside on a public network.

     --   It allows a company to publish and host a web site.

     The  FoxBox also offers the following optional features:

     --   High speed tape backup/restore module (SCSI) allows all stored data on
          the  FoxBox to be backed up onto a DAT tape,  which is a  standardized
          tape for file back up.

     --   Fast SCSI hard drive  provides  extra storage for shared files and Web
          data at faster access speeds.

     --   Extra 9.1 gigabyte SCSI hard drive  provides  extra storage for shared
          files and Web data.

     --   E-Mail  Archive  module  allows all inbound and outbound  e-mail to be
          saved for archival/compliance purposes.

     --   Advanced  access control module allows control over who can access the
          web and the sites to which they have access.

     --   Virtual  Private  Networking  (VPN)  module  provides  a  process  for
          encrypting data for secure transmission over public networks.

     Firewall and Security Functions

     NetWolves  believes that  security is an essential  element of any Internet
connectivity  solution. For this reason, the FoxBox includes a high end firewall
security protection, without requiring the purchase of additional components.

     The FoxBox is designed to protect a company's private data and systems from
outside  intruders  with  its  firewall  security  system,  incorporating  three
separate firewall technologies:

     --   Stateful  packet  filters verify that all incoming data packets coming
          from the Internet  have been  requested by an  authorized  user on the
          LAN.

     --   Proxy applications  prevent  unauthorized  internet  applications from
          accessing the LAN.

     --   Network Address Translation (or NAT), which are conversions
          of public addresses to and from private  addresses,  makes the network
          invisible to outside  Internet users by hiding the internal  network's
          addresses of each sender or receiver of information.
<PAGE>

     All packets of data entering the FoxBox from the Internet are first checked
for  validity  against a series of  stateful  packet  filters.  The data is then
forwarded to proxy applications that further inspect the contents of the packets
for potential security violations. If the data is determined to be valid by both
the stateful packet filters and proxy  applications,  it is allowed to enter the
secure LAN.

     The  FoxBox  DDR  and  FoxBox  ISDN  dial  on  demand  units  come  with  a
preconfigured  firewall and network address  translation  rules that allow these
products to securely connect the LAN to the Internet.  The FoxBox 56K, FoxBox T1
and FoxBox  S2E are  designed  with fully  configurable  firewalls  and  network
address   translation  rules  that  give  the  network   administrator   greater
flexibility in allowing or denying incoming and outgoing data.

     E-Mail Services

     A key feature of the FoxBox is its  advanced  and  powerful  management  of
electronic  mail. With only one Internet  account,  an unlimited number of users
can send and receive e-mail. In addition,  the FoxBox supports e-mail standards.
For e-mail between a FoxBox and the Internet, NetWolves uses the standard simple
mail transfer protocol (SMTP),  which is the standard for e-mail transmission on
the Internet.  SMTP is  accomplished  using a product called  Sendmail,  version
8.8.8,  which is the standard SMTP server on the Internet.  Sendmail manages the
sending  of  e-mail  from a FoxBox to any other  host on the  Internet.  For LAN
users,  the FoxBox  supports a number of different  protocols.  If the FoxBox is
used as the LAN's  e-mail  server,  two  common  client-server  e-mail  protocol
standards are supported:

     --   POP-3 - a process for  retrieving  e-mail from its stored  location to
          the viewer.

     --   IMAP - a method of viewing electronic mail at its stored location.

     The FoxBox supports several e-mail clients, including:

     --   Microsoft Exchange

     --   Microsoft Internet Mail

     --   Netscape Navigator Mail

     --   Eudora

     --   Pegasus

     The FoxBox supports several e-mail gateways, including:

     --   Microsoft Exchange Server

     --   Lotus cc: Mail

     --   GroupWise Mail

     --   Others with SMTP gateways

<PAGE>

     Graphical User Interface for Administration/Management

     A  Web-based   graphical  user   interface,   or  GUI  allows  the  network
administrator to configure the various  subsystems of the FoxBox.  The FoxBox is
completely  transparent  to the Internet user.  Likewise,  because the FoxBox is
easy to setup, it will feel transparent to the administrator. This is especially
true  should  changes be  required  following  initial  installation.  Since all
administration  of  the  FoxBox  is  performed   through  a  Web  browser,   the
administrator can be on any workstation on the LAN.

Anicom


     In January  1999,  NetWolves  entered  into an agreement  with Anicom.  The
agreement  appoints  Anicom as NetWolves'  exclusive  master  distributor of its
products  throughout  North  America for a five year  period.  There are minimum
purchase  requirements under the agreement to maintain  exclusivity though there
are no  specific  purchase  commitments  beyond  its  initial  order  which  was
delivered in  March/April  1999.  NetWolves  has also reserved the right to make
direct sales or leases of its  products to  customers,  distributors  and Anicom
resellers  during the term of the  agreement  provided that it pays a stipulated
commission to Anicom of such sales. The agreement further provides for Anicom to
maintain  inventory of  NetWolves'  products and to  distribute  these  products
throughout  its 75 locations in the United  States.  The agreement  provides for
certain  rights of  termination,  including the option of NetWolves to terminate
during  the first two years of the  agreement  on 30 days prior  written  notice
provided  that,  as a  condition  to  the  effectiveness  of  such  termination,
NetWolves shall pay Anicom a stipulated  fee.  Anicom's only rights to terminate
are in the event of bankruptcy or insolvency proceedings against NetWolves or in
the event the products  covered the agreement  cease to be manufactured by or on
behalf of  NetWolves.  In the event of  termination  by  Anicom,  Anicom has the
right, but not the obligation, to direct NetWolves to repurchase from Anicom any
portion of any new undamaged  and unused  products sold within a one year period
and owned by and remaining in Anicom's inventory. For the fiscal year ended June
30, 1999,  the Company  shipped  approximately  $1,700,000  of product to Anicom
which accounted for approximately 95% of the Company's  revenues for such fiscal
year.  The Company  does not  believe  the loss of Anicom  would have a material
effect on its operations.


     Additionally,  for cash consideration paid to the Company of $300,000,  the
Company issued Anicom 300,000  warrants to purchase  common stock of the Company
at an exercise price of $5 per share.  The warrants  issued to Anicom shall vest
in equal  installments over three years,  commencing on the first anniversary of
the agreement and shall expire in January 2004.  Anicom also obtained  piggyback
registration rights with respect to the issuable shares of common stock.

The Sullivan Group

     In January  1999,  NetWolves  entered into an  agreement  with The Sullivan
Group  ("TSG"),  a  leading  consulting  organization  serving  the needs of the
automotive  aftermarket,  convenience  store and oil  industry for more than ten
years. Its senior  management  comprises former  high-level  executives from the
industry it serves.  TSG provides its clients with  competitive  and comparative
industry   intelligence   generally   categorized   as   benchmarking   studies,
best-in-class  performance and emerging  industry  trends.  TSG also employs its

<PAGE>

Profit  Coach  System  , a  profit-driven  management  process  used to  provide
information to its clients.  Through its division, The Duffy-Vinet Institute, it
also maintains an extensive library of training modules.

     Under the January 1999  agreement with  NetWolves,  NetWolves was appointed
the exclusive  provider of multi-services  internet gateway  products,  which is
intended  to  enable  TSG  to  sell  its   proprietary   training   programs  to
approximately  40,000  retail  locations  throughout  the  United  States.  This
combined technology is intended to facilitate simultaneous  interactive distance
learning  at all  sites.  The  agreement  is for a period of five  years with an
automatic five year renewal unless previously terminated.  NetWolves also agreed
to  customize  its  FoxBox  to serve the needs of TSG.  Initial  deliveries  are
scheduled to commence in the quarter ending December 31, 1999.  While deliveries
will be made against specific purchase orders yet to be received,  NetWolves has
agreed to  deliver to TSG's  customers  approximately  40,000  units over a five
calendar  year period  ranging from 350 units in 1999 and 4,150 units in 2000 to
14,000 in 2003.  It is  intended  that the units will be leased  over a 48 month
term at a monthly rate of $200 per unit.

     In July 1999, the Company entered into a merger agreement pursuant to which
it  acquired  the  outstanding  capital  stock of TSG in  exchange  for  180,000
restricted shares of its common stock. The five principal officers and employees
of TSG were retained under three-year employment contracts.  The merger provides
for the Company to make working capital  advances to its TSG subsidiary of up to
$4,750,000 through November 15, 1999. Through September 30, 1999,  $2,600,000 in
advances have been made. Under the agreement, NetWolves has the right to provide
no  additional  advances,  in which  event its equity  interest  in TSG would be
reduced. See Note 4 of Notes to Consolidated Financial Statements.


     To finance the  anticipated  sales to be generated from the  application of
the FoxBox  technology to TSG's client base, in July 1999,  the Company  entered
into an agreement  with Comdisco  under which  Comdisco has provided the Company
access to a credit  facility of up to $320 million to be utilized in  connection
with Comdisco  installing the FoxBox in up to 40,000  locations over a four year
period.  Under the  agreement,  the  Company  intends to lease the FoxBox to its
customers for 48 months at a monthly fee estimated under the agreement at $200 .
Comdisco will then acquire all of the right, title and interest in the equipment
with the  exception  of  intellectual  property  rights,  software  upgrades and
software  application  and content and take an  assignment of the lease from the
Company,  without  recourse.  At the time of  assignment,  Comdisco will pay the
Company 95% of the present  value of the rental  stream  using an interest  rate
commensurate with each customer's credit rating and prevailing market rates.


Research and Development

     The  internet  and  the  computer   hardware  and  software   industry  are
characterized by rapid technological  change, which requires ongoing development
and  maintenance of products.  It is customary for  modifications  to be made to
products as experience with its use grows or changes in manufacturer's  hardware
and software so require.

     NetWolves'  research and  development  organization  is comprised of a core
team of engineers  who  specialize  in different  areas of product  development.
NetWolves engineering team has experience in a variety of industries,  including
information  security,  designing  networking  protocols,  building  interfaces,
designing  databases,  and computer  telephony.  Their  expertise is used in the
design  of the  FoxBox  and  seeking  improved  methods  for the  FoxBox to meet
customer needs. As of September 30, 1999, the Company's research and development
group  consists  of nineteen  employees.  The  Company  seeks to recruit  highly
qualified employees and its ability to attract and retain such employees will be
a  principal  factor in its  success  in  achieving  and  maintaining  a leading
technological position.

<PAGE>

     For the year  ended  June 30,  1999,  the  Company  expended  approximately
$418,000 for research and development expenses.  The Company intends to increase
its investment in product development and believes that its future services will
depend, in part, on its ability to develop,  manufacture and market new products
and enhancements to existing products on a cost-effective and timely basis.

Manufacturing and Testing


     The  manufacturer  currently used by the Company is Boca Research,  Inc., a
hardware  assembly  and  engineering  firm  located in Boca Raton,  Florida.  In
September  1999, the Company  entered into a strategic  alliance  agreement with
Boca  Research.  Under the terms of the  agreement,  Boca Research has agreed to
manufacture  the FoxBox on a  non-exclusive  basis and has  provided  250 FoxBox
units for immediate delivery.  The two-year agreement also provides (a) for Boca
Research to provide  certain  engineering  services to the Company  necessary to
enable Boca  Research to  manufacture  a thin client unit for use by TSG and (b)
the purchase of a minimum of 2,000 thin client  units by the Company  during the
two year agreement.  The agreement further  contemplates the parties negotiating
in good faith a joint marketing agreement wherein the Company would license Boca
the right to manufacture  equipment  comprising the FoxBox technology on an OEM,
private  label basis in certain  limited sales  channels.  To date, no marketing
agreement has been executed.


     While the Company maintains a relationship with Boca Research which existed
prior  to  its  September   1999   agreement,   it  believes  that   alternative
manufacturers  are  available in the event the Company seeks to change or expand
upon manufacturers of its products.

     Production Process

     The  process  used to  produce  NetWolves  products  begins  with  hardware
configuration,   installing  the   appropriate   version  of  FoxBox   software,
configuring client-specific software components, followed by a 24-hour "burn-in"
process. Raw/prefabricated materials, components, and subassemblies required for
production  include  mother  boards,   CPU's,  cases,  Ethernet  cards,  network
communication  cards,  hard drives,  memory,  CPU fans and power  supplies.  The
Company  believes that these materials are available from several  companies and
that alternative sources of supply are currently available.

     Testing

     A majority of testing is performed as part of the manufacturing process. In
addition,  NetWolves  performs  quality  testing via the  Internet on a periodic
basis to  verify  that  the  assembled  products  meet  all  production  quality
criteria.  Also,  randomly  chosen FoxBox units are shipped from the  production
assembly facility back to NetWolves for additional testing.

<PAGE>

     In addition to testing the product on a regular basis, NetWolves researches
the status of existing  components  used in the FoxBox to  determine if they are
being  phased  out or  prices  have  changed.  If it  concludes  that a  certain
component must be substituted,  trial testing is performed on a new component to
determine if it meets product  component  criteria.  If it meets this  criteria,
which  includes  cost   effectiveness,   longer  life   expectancy  and  product
efficiency, a plan to develop and use the component is implemented.

Customer Service and Technical Support

     The Company maintains an experienced staff of customer service personnel to
provide technical support to its customers.  Each member of the customer service
staff is certified  through an ongoing in-house  training and testing program to
provide  support for each individual  product.  The Company's  customer  service
staff provides  product support via telephone and e-mail 24 hours per day, seven
days per  week.  The  Company  generally  provides  software  and  documentation
updates,  including  maintenance  releases,  operating system upgrades and major
functional upgrades, as part of its customer support services.

Sales and Marketing

     The  Company's  strategy of  marketing  and sales plan for it to enter into
agreements  with  providers of products in a wide variety of markets,  including
financial,  medical, legal, travel,  hospitality,  entertainment,  hotel and the
auto industries in order to leverage their existing client base for sales of the
Company's  products.  With this  objective,  the Company  has  entered  into the
aforesaid  agreements  with  Anicom,  Inc.  and  Comdisco,  Inc.  and is seeking
additional  strategic  alliances  both  domestically  and on a worldwide  basis,
including  the proposed  marketing  agreement  with Boca  Research.  The Company
intends to hire sales and marketing  consultants in five (5) regional areas, New
York,  Tampa,  Chicago,  Washington  D. C. and Los Angeles.  These  persons will
perform several important  functions  including managing the master distribution
agreements  between the Company and its partners and also customizing  solutions
for the various market segments.

     The Company has implemented  marketing initiatives to support the sales and
distribution  of  its  products  and  services,  and  to  communicate  corporate
direction.  The Company's  sales and marketing  employees  are  responsible  for
collateral  development,  lead  generation  and awareness of the Company and its
products.  Marketing  programs  include  public  relations,  seminars,  industry
conferences  and  trade  shows,  advertising  and  direct  mail.  The  Company's
marketing  employees also contribute to both the product direction and strategic
planning processes by providing market research and conducting surveys and focus
groups.

<PAGE>

Licensing and Intellectual Property

     The Company  considers  certain  features of its  products,  including  its
methodology  and  technology  to  be  proprietary.   The  Company  relies  on  a
combination  of  trade  secret,   copyright  and  trademark  laws,   contractual
provisions  and  certain   technology  and  security  measures  to  protect  its
proprietary  intellectual  property.  The Company  does not  currently  have any
patents or pending patent applications.  Notwithstanding the efforts the Company
takes to protect its proprietary rights, existing trade secret,  copyright,  and
trademark laws afford only limited protection. In addition, effective protection
of copyrights,  trade secrets,  trademarks and other  proprietary  rights may be
unavailable or limited in certain foreign countries.  The Company believes that,
because  of the rapid rate of  technological  change in the  computer  industry,
factors  such  as  the  knowledge,  ability  and  experience  of  the  Company's
employees,  product and service  offering  development,  and quality of customer
support services are more important than any available trade secret or copyright
protection.

     The Company  does not intend to sell or transfer  title of its  products to
its  clients  though  this  structure  may  change as the  Company  expands  its
operations.  The  products  are  intended to be licensed  generally  pursuant to
licensing  agreements  for which extended  payment terms may be offered.  In the
case of extended payment term agreements, the customer is contractually bound to
equal  monthly fixed  payments.  The first year of  maintenance  is bundled with
standard licensing agreements.  In the case of extended payment term agreements,
maintenance  may be bundled for the length of the payment term.  Thereafter,  in
both instances, the customer may purchase maintenance annually.

Competition

     The Company faces  competition from the  manufacturers of several different
types  of  products  used  as  multi-service  packaged  solutions  for  Internet
gateways. Its major competitors are Whistle, which was recently acquired by IBM,
Team Internet and Free Gate.  The Company  expects  competition  to intensify as
more  companies  enter the market and compete  for market  share.  In  addition,
companies  currently  in the  server  market  may  continue  to  change  product
offerings in order to capture further market share. Many of these companies have
substantially   greater   financial  and  marketing   resources,   research  and
development staffs,  manufacturing and distribution facilities.  There can be no
assurance that the Company's current and potential  competitors will not develop
products that may or may not be perceived to be more  effective or responsive to
technological  change  than  that of the  Company,  or that  current  or  future
products  will  not be  rendered  obsolete  by such  developments.  Furthermore,
increased competition could result in price reductions,  reduced margins or loss
of market  share,  any of which  could  have a  material  adverse  effect on the
Company's business operating results and financial condition.

      The Company believes that an important competitive factor in its market is
the cost  effective  integration  of many  services  in a single  unit.  In this
regard,  the Company  believes that it compares  favorably to its competitors in

<PAGE>

price and overall cost of ownership  including  administrative  and  maintenance
costs. However,  equally important are other factors,  including but not limited
to, product reliability, availability,  upgradability, and technical service and
support. The Company's ability to compete will depend upon, among other factors,
its  ability to  anticipate  industry  trends,  invest in product  research  and
development, and effectively manage the introduction of new or upgraded products
into targeted markets.

Employees

     As of September  30,  1999,  the Company  employed 38 full-time  employees.
Approximately,  19 of these employees are involved in research and  development,
13 in sales and  marketing,  and 6 in finance  and  general  administration.  In
addition, the Company has retained independent contractors on a consulting basis
who support engineering and marketing  functions.  To date, the Company believes
it has been  successful  in  attracting  and  retaining  skilled  and  motivated
individuals.  Competition  for qualified  management and technical  employees is
intense in the computer  industry.  The  Company's  success will depend in large
part upon its continued ability to attract and retain qualified  employees.  The
Company has never  experienced a work stoppage and its employees are not covered
by a collective  bargaining  agreement.  The Company  believes  that it has good
relations with its employees.

Officers of the Registrant

                                Served as
Name                     Age    Officer Since          Position
- ----                     ---    -------------          --------

Walter M Groteke          29     June 1998        Chairman of the Board,
                                                  President and
                                                  Chief Executive Officer

Daniel G. Stephens       28        June 1998      Vice Chairman of the Board and
                                                  Chief Information Officer

Walter R. Groteke        52        August 1998    Vice President - Sales and
                                                  Marketing



ITEM 2.   PROPERTIES

     The Company  maintains  approximately  250 square  feet of office  space in
Melville,  New York at a monthly rental of approximately $1,600, which currently
accommodates  the  Company's   headquarters  for  administrative  and  financial
functions.  The lease  expired in January and is currently  on a  month-to-month
basis.  The  Company  has a  three  year  lease  expiring  in  August  2001  for
approximately  4,100  square feet of space in Tampa,  Florida,  which  currently
accommodates the Company's research and development facilities.  The annual rent
is approximately  $28,500. The Company also maintains leased facilities in Tampa
under a three year lease  expiring in June 2002 for  approximately  6,340 square
feet that is used for administrative,  sales and marketing purposes.  The annual
rent is approximately $163,500. The Company believes that its present facilities
are  adequate  to meet its  current  business  requirements  and  that  suitable
facilities for expansion will be available, if necessary, to accommodate further
physical expansion of corporate  operations and for additional sales and support
offices.

<PAGE>

ITEM 3.   LEGAL PROCEEDINGS

     There are no  material  legal  proceedings,  other  than  ordinary  routine
litigation  incidental  to the  business,  to which  the  Company  or any of its
subsidiaries is ai party or of which any of their property is the subject.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year.


<PAGE>


                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS

     NetWolves'  common  stock has traded on the OTC  Bulletin  Board  under the
symbol "WOLV" since December 1998. Prior to the December name and symbol change,
the Company's stock traded under the symbol "WDGT",  Watchdog Patrols,  Inc. The
following  table sets forth the high and low closing prices for the common stock
for the calendar quarters indicated:

<TABLE>
<CAPTION>
                                                     High         Low
                                                     ----         ---

     <S>                                            <C>         <C>
     1999
     Third Quarter . . . . . . . . . . . . . .      $31.25      $16.50
     Second Quarter. . . . . . . . . . . . . .       22.25        9.75
     First Quarter . . . . . . . . . . . . . .       16.00        4.50

     1998
     Fourth Quarter. . . . . . . . . . . . . .      $4.875       $3.25
     Third Quarter . . . . . . . . . . . . . .        7.75        4.50
     Second Quarter (since June 17, 1998) . . .       5.00       1.625

</TABLE>

     As of September 30, 1999, there were approximately 183 holders of record of
the common stock.  On September  30, 1999,  the closing sales price of NetWolves
common stock was $26.00 per share.

     NetWolves has not paid any cash  dividends on its Common Stock and does not
presently  intend to do so.  Future  dividend  policy will be  determined by its
Board of Directors on the basis of NetWolves'  earnings,  capital  requirements,
financial  condition  and other factors  deemed  relevant.  In this regard,  the
Company will be submitting for shareholder  approval a proposal giving the Board
of Directors discretion to approve a two-for-one or three-for-one stock split.

     The transfer  agent and  registrar of  NetWolves'  Common Stock is American
Stock Transfer and Trust Co., 40 Wall Street, New York, New York 10005.

<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

     The  following   selected   financial   data  has  been  derived  from  the
consolidated  financial  statements included elsewhere in this report and should
be read in conjunction with such financial statements.

<TABLE>
<CAPTION>

                                     Period from
                                     February 13, 1998
                                     (inception) to         Year ended
                                     June 30, 1998         June 30, 1999
                                     ------------------    -------------

<S>                                   <C>                   <C>
Statements of Operations Data:
 Net sales                            $   29,621            $ 1,789,144
 Cost of sales                             5,681                582,724
                                      ----------            -----------

 Gross profit                             23,940              1,206,420
 Operating expenses                      149,510              7,698,694
                                      ----------            -----------

 Loss before other income (expense)
   and benefit from income taxes        (125,570)            (6,492,274)
 Interest income (expense), net            2,666                 48,154
 Other income                              3,490                488,793
                                      ----------            -----------

 Loss before benefit from income taxes  (119,414)            (5,955,327)
 Benefit from income taxes                20,000                   -
                                      ----------            -----------

 Net loss                             $  (99,414)           $(5,955,327)
                                      ==========            ===========

 Basic and diluted net loss per share $    (0.04)           $     (1.27)
                                      ==========            ===========
 Weighted average common shares
     outstanding                       2,810,102              4,691,651
                                      ==========            ===========

</TABLE>

<TABLE>
<CAPTION>
                                                   June 30,
                                                   --------
                                         1998                   1999
                                         ----                   ----
 <S>                                   <C>                    <C>
Financial position:
 Cash and cash equivalents            $1,118,416             $5 ,585,981
 Marketable securities, available
   for sale                            1,063,828                 606,000
 Working capital                       2,918,327               5,799,246
 Total assets                          2,959,451               9,636,934
 Long-term debt, net of
  current maturities                           0                 266,537
 Minority interest                             0                 274,500
 Total shareholders' equity            2,928,003               8,354,802
</TABLE>

<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

     The Form 10-K includes,  without limitation,  certain statements containing
the words "believes." "anticipates", "estimates", and words of a similar nature,
constitute  "forward-looking  statements"  within  the  meaning  of the  Private
Securities  Litigation Reform Act of 1995. This Act provides a "safe harbor" for
forward-looking   statements  to  encourage  companies  to  provide  prospective
information  about  themselves  so long as they  identify  these  statements  as
forward  looking  and  provide  meaningful,  cautionary  statements  identifying
important  factors that couild cause actual results to differ from the projected
results.  All statements  other than  statements of historical fact made in this
Form 10-K are  forward-looking.  In particular,  the statements herein regarding
industry  prospects and future  results of operations or financial  position are
forward-looking  statements.  Forward-looking  statements  reflect  management's
current expectations and are inherently uncertain.  The Company's actual results
may differ significantly from management's expectations.

Overview


     The Company is a corporation with a limited  operating  history,  formed in
February  1998,  when it commenced  field trial and limited sales of its primary
product,  "The  FoxBox".  Additionally,  efforts  were made to obtain  operating
capital  and  convert  the  Company to a public  entity.  This was  successfully
accomplished  through a reverse merger with Watchdog  Patrols,  Inc., a publicly
traded (OTCBB),  non-reporting  corporation.  Operating  expenses have increased
significantly since the Company's  inception.  This reflects the cost associated
with the formation of the Company as well as increased efforts to promote market
awareness for the FoxBox  (Multi-  services  Internet  communications  gateway),
solicit new customers,  recruit  personnel,  build operating  infrastructure and
continued product  development.  The FoxBox is a  multi-functional  product that
connects  business  networks  [Local Area Networks (LANs) and Wide Area Networks
(WANs)] to the Internet.  It supports secure access to the Internet for 3 to 400
users through a single connection,  provides advanced  electronic mail functions
for unlimited users and delivers firewall security. The Company's initial target
markets  are  the  end  users  in  small  and  mid-size   businesses  and  large
organizations  with satellite  offices.  In January 1999 the Company was able to
secure two Agreements which have the potential to generate  significant revenues
over the term of the  agreement.  The first of which  would be TSG  ("Sullivan")
agreement  whereby Sullivan  appointed the Company as its exclusive  provider of
the Company's  multi-service  Internet delivery system (known as "FoxBox") to be
used in conjunction with Sullivan's  proprietary  interactive  distance learning
training  programs.  The period of the agreement is for a term of five years. In
July 1999,  the Company  acquired  TSG and in July 1999  secured a $320  million
credit  facility  with  Comdisco,  Inc. to finance the  anticipated  sales to be
generated from the  application  of the FoxBox  technology to TSG's client base.
Under the  agreement,  the Company  intends to lease the FoxBox to its customers
for 48 months at a monthly fee estimated  under the agreement at $200 . Comdisco
will then acquire all of the right, title and interest in the equipment with the
exception  of  intellectual  property  rights,  software  upgrades  and software
application  and content and take an  assignment  of the lease from the Company,
without recourse.  At the time of assignment,  Comdisco will pay the Company 95%
of the present value of the rental  stream using an interest  rate  commensurate
with each  customer's  credit rating and  prevailing  market  rates.  The second
agreement is with Anicom, Inc. ("Anicom").  The Company entered into a five-year
exclusive  master  distribution  agreement  with Anicom,  Inc. to distribute the
FoxBox throughout North America.


     The Company has a limited  operating history in which to base an evaluation
of the business and  prospects.  The Company's  prospects  must be considered in
light of the risks  frequently  encountered  by companies in their early stages,
particularly for companies in the rapidly evolving technology industry.  Certain
risks for the Company include,  but are not limited to unproven  business model,
capital  requirements and growth  management.  To counter this risk, the Company
must,  among other things,  increase its customer base,  continue to develop its
distribution network,  successfully execute its business and marketing plan, and
expand the operating infrastructure.  There can be no assurance that the Company
will be successful in addressing such risks, and the failure to do so could have
a material  adverse effect on the Company's  financial  condition and results of
operations.  Since inception, the Company has incurred significant losses and as


<PAGE>

of June 30, 1999 had an accumulated  deficit of  approximately  $6 million.  The
Company believes that its success depends in large part on its ability to create
market  awareness and  acceptance  for the FoxBox,  raise  additional  operating
capital to grow operations, build technology and non-technology infrastructures,
expand the sales force and distribution network, and continue new product R&D.

Results of Operations
For the year ended June 30, 1999 compared to the period
from February 13, 1998 (inception) through June 30, 1998


     The net sales from  operations  were $1,789,144 and $29,621 for the periods
June 30, 1999 and June 30,  1998,  respectively.  Sales in 1999 almost  entirely
related to the  initial  stocking  order of 500  FoxBox  units sold to Anicom in
March/April 1999.  $58,429 of dividend and interest income was generated through
June 30,  1999 as  compared to $6,156 for the period  ended June 30,  1998.  The
increase is primarily  attributable  to the relatively  short time for which the
securities were held in the prior period.  Additionally,  the Company had a gain
of $478,518 on the sale of marketable securities.


     NetWolves had gross profit of 67% for the period ended June 30, 1999. As of
yet, the Company has not had a full year of  production in order to have a basis
of comparison.  However, the Company believes that gross profit greater than 67%
are achievable at increased  production  levels.  These results will depend,  in
part, on the effects of  economies-of-scale,  the use of third-party  assemblers
and the ability to competitively  purchase rapidly evolving commodity  hardware,
which  is  a  significant  component  of  "cost  of  goods  sold."  The  use  of
non-Proprietary  hardware is one of many inherent  design features of the FoxBox
which   facilitates   an  efficient  and  cost   effective   production   cycle.
Additionally,  this  allows  the  Company  to  focus  its core  R&D  efforts  on
developing  cutting edge  Software.  There can be no assurance  that the Company
will be successful in increasing  its margins due to one or more factors.  These
factors include, but are not limited to  increases/decreases in direct labor and
material cost, as well as increased  competition and general economic conditions
in the future.

     Operating  expenses were  $7,698,694  and $149,510 for the periods June 30,
1999 and June 30, 1998,  respectively.  The operating expenses for June 30, 1999
consisted  primarily of $5,278,255 of general and administrative  costs relating
to the establishment of the infrastructure  and the continued  operations of the
business.  $418,109 of costs were incurred relating to research and development,
and $2,002,330 related to selling and marketing. Included in the above mentioned
operating  expenses are $4,195,063 of  compensation  for services in the form of
the Company's common stock and options.  Operating  expenses for the period June
30,  1998 were  limited  and  provide  an  inadequate  basis  for  comparability
purposes.

Liquidity and Capital Resources

     On June 17,  1998 the  Company  executed  a reverse  merger  with  Watchdog
Patrols, Inc. a publicly traded non-reporting company engaged in the activity of
providing   armed   and   unarmed   security   guard   services   for   the  New
York/Metropolitan Area. This merger made available to the Company, approximately
$2.3 million of cash, cash  equivalents and marketable  securities to be used as
operating  capital.  On November 22, 1998 the Company sold substantially all the
assets  of the  security  guard  business,  consisting  primarily  of  uniforms,
vehicles,  computer  systems and furniture to a third party.  This  generated an
additional  $600,000 of cash flow to the  Company.  On June 29,  1999  NetWolves
concluded a private  offering of 800,000 shares of common stock which  generated
$5.4 million (net of $.6 million of expenses) to be used in operations.

<PAGE>


     In July  1999 the  Company  secured a $320  million  credit  facility  with
Comdisco,  Inc.  to  finance  the  anticipated  sales to be  generated  from the
application of the FoxBox  technology to TSG's client base. Under the agreement,
the  Company  intends  to lease the FoxBox to its  customers  for 48 months at a
monthly fee  estimated  under the agreement at $200 . Comdisco will then acquire
all of the right,  title and  interest in the  equipment  with the  exception of
intellectual  property rights,  software  upgrades and software  application and
content and take an assignment of the lease from the Company,  without recourse.
At the time of  assignment,  Comdisco  will pay the  Company  95% of the present
value of the  rental  stream  using an  interest  rate  commensurate  with  each
customer's credit rating and prevailing market rates.

     NetWolves had cash and cash equivalents of $5.6 million and $1.1 million at
June 30, 1999 and June 30, 1998,  respectively.  In September  1999, the Company
completed  a  private  placement  of  100,000  shares  of  common  stock  to one
accredited  investor for $1.4 million (net of $100,000 of expenses).  Management
believes  that the Company has  adequate  capital  resources to meet its working
capital  need for at  least  the  next  twelve  months  based  upon its  current
operating level. The Company intends to raise additional monies from the sale of
its  capital  stock to fund its growth  over the next 24 to 36 months.  However,
there can be no  assurance  that the  Company  will have  sufficient  capital to
finance its planned growth.


Year 2000 Issues

     Background.   Some  computers,   software,   and  other  equipment  include
programming  code in which calendar year data is abbreviated to only two digits.
As a result  of this  design  decisions,  some of these  systems  could  fail to
operate or fail to produce  correct  results if "00" is  interpreted to commonly
referred to as the "Millennium Bug" or "Year 2000 problem.

     Assessment.  The Year 2000 problem could affect  computers,  software,  and
other  equipment  which  NetWolves  Corporation  uses,  operates,  or maintains.
Accordingly,  NetWolves  Corporation has reviewed its internal computer programs
and systems to ensure  that the  programs  and systems are Year 2000  complaint.
NetWolves Corporation presently believes that its computer systems are Year 2000
complaint. However, while the estimated cost of these efforts is not expected to
be  material  to its  overall  financial  position,  or any  year's  results  of
operations, there can be no assurance to this effect.

     Products  Sold to  Consumers.  NetWolves  Corporation  believes that it has
substantially  identified and resolved all potential Year 2000 problems with the
software products it develops and markets. However, it also believes that is not
possible  to  determine  with  complete  certainty  that all Year 2000  problems
affecting its products have been  identified or corrected due to the  complexity
of these  products and the fact that these  products  interact  with other third
party vendor  products and operate  with other  systems  which are not under its
control.

     NetWolves Corporation recognizes the significance of the Year 2000 issue as
it relates to internal systems,  including IT and non-IT systems. To that extent
NetWolves Corporation has achieved the following:

     Internal  Information  Technology  Infrastructure.   NetWolves  Corporation
believes that it has identified,  modified upgraded,  or replaced  substantially
all of the major computers, software applications, and related equipment used in
connection with its internal  operations in order to minimize the possibility of
a material  disruption to its business.  While most of the upgrades were planned
as part of a  general  enhancement  to its  infrastructure,  the  timing  of the
upgrades also result in Year 2000 compliance.

<PAGE>

     Systems Other than Information Technology Systems. In addition to computers
and related systems, the operation of office and facilities  equipment,  such as
fax machines, photocopiers, telephone switches, security systems, elevators, and
other  common  devices  may be  affected  by the Year  2000  problem.  NetWolves
Corporation  has assessed and  remediated the effect of the Year 2000 problem on
its office and  facilities  equipment  under its  control,  and the total  costs
associated with completing the required modifications, upgrades, or replacements
of these internal systems were not material.

     Suppliers.  NetWolves Corporation has initiated  communications,  including
surveys,  with business  critical third party suppliers of the major  computers,
software,  and other equipment which it uses, operates, or maintains to identify
and, to the extent possible,  to resolve issues involving the Year 2000 problem.
NetWolves Corporation has received vendor certification that all of its business
critical  information  technology  systems,  including  internal  communications
systems, accounting and finance systems, customer service systems, and sales and
marketing  tracking  systems,  are Year 2000 compliant.  Accordingly,  NetWolves
Corporation  does not anticipate any  significant  Year 2000 problems with these
systems;  however, it cannot ensure that these suppliers will resolve any or all
of their Year 2000  problems  with these  systems  before  the  occurrence  of a
material  disruption  to  its  business  or  that  of its  customers.  NetWolves
Corporation  believes  that its primary  exposure is  presently  with respect to
public utilities and  telecommunications  suppliers.  Any failure of these third
parties to resolve  Year 2000  problems  with their  systems in a timely  manner
could  have  a  material  adverse  affect  on  NetWolves  Corporation  business,
financial condition, and results of operation.

     Additionally, NetWolves Corporation has initiated communications, including
surveys,  with all other  vendors  or  businesses  that  supply  any  service to
NetWolves Corporation.  While it has limited or no control over responses to its
inquiries and the actions of these third party suppliers,  NetWolves Corporation
does not view this category of services to be business critical and in the event
of a Year 2000 problem with a particular  vendor,  believes  that those goods or
services could easily be obtained from other sources.

     Banking  Relationships.  NetWolves  Corporation  has  confined  its banking
relationships to top tier financial institutions who have represented that their
respective  systems  are Year 2000  complaint.  Any  failure  of these  banks to
resolve Year 2000 problems with their systems in a timely manner would result in
financial  inconvenience and, depending upon the duration of the failure,  could
have a material adverse affect on NetWolves  Corporation financial condition and
results of operation.

     Most  Likely  Consequences  of Year 2000  Problems.  NetWolves  Corporation
believes that it has  identified  all Year 2000  problems that could  materially
adversely affect its business  operations.  However, it does not believe that it
is possible to determine  with  complete  certainty  that all Year 2000 problems
which effect it have been identified or corrected.

<PAGE>

     The number of devices  that could be affected  and the  interactions  among
these  devices  are simply too  numerous.  In  addition,  one cannot  accurately
predict how many Year 2000 problem- related failures will occur or the severity,
duration,  or financial  consequences of these perhaps inevitable  failures.  In
addition,  NetWolves  Corporation  is unable  to  determine  with any  degree of
certainty the changes in buying  habits of its current and  potential  customers
due to their concerns over Year 2000 issues. As a result,  NetWolves Corporation
expects that it could  likely  experience a  significant  number of  operational
inconveniences  and  inefficiencies   that  may  divert  management's  time  and
attention  and its  financial  and human  resources  from its ordinary  business
activities. In addition, NetWolves Corporation may experience a lesser number of
serious  system  failures  that may  require  significant  efforts  by it or its
customers to prevent or alleviate material business disruptions.

ITEM 7A   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     Management does not believe that there is any material market risk exposure
with respect to derivative  or other  financial  instruments  that would require
disclosure under this item.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements of the Company and its subsidiaries and the report
thereon of Hays and Co. are included herein:

     --   Report of Independent Public Accountants

     --   Consolidated Balance Sheets at June 30, 1999 and 1998

     --   Consolidated  Statements of Operations,  Cash Flows and  Shareholders'
          Equity for the year ended June 30, 1999 and the period  from  February
          13, 1998 (inception) to June 30, 1998

     --   Notes to Consolidated Financial Statements


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

     None


<PAGE>

                                    PART III


ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The directors  and executive  officers of the Company and their ages are as
follows:


Name                           Age                Position
- ----                           ---                ---------

Walter M Groteke               29     Chairman of the Board, President and
                                      Chief Executive Officer
Daniel G. Stephens             28     Vice Chairman of the Board and
                                      Chief Information Officer
Walter R. Groteke              52     Vice President - Sales and Marketing
                                      and Director
Ed Lavin                       55     Director
Louis Liben                    40     Director


Principal Occupations of Officers and Directors

     Walter M. Groteke,  a co-founder  of the Company,  has been Chairman of the
Board,  Chief  Executive  Officer and a director of the Company since June 1998.
Mr. Groteke is responsible for planning,  developing and  establishing  policies
and business objectives for the Company.  From June 1995 until 1997, Mr. Groteke
was regional business  development  manager for Techmatics,  Inc. an information
systems  Department  of  Defense  contractor.  From May 1993 to June  1995,  Mr.
Groteke was senior  account  manager for NYNEX's  strategic  account  management
program.

     Daniel G. Stephens,  a co-founder of the Company, has been Vice Chairman of
the Board and Chief  Information  Officer since June 1998. Mr. Stephens  directs
research and development, information systems and technical support services for
the  Company.  From May 1994  until  1997,  Mr.  Stephens  was a senior  systems
engineer for  Techmatics,  Inc. In this  capacity,  he advised the Department of
Justice on development of a nationwide series network  infrastructure to support
a law-enforcement database.

     Walter R. Groteke has been a director of the Company  since  February  1999
and Vice  President - Sales and Marketing  since August 1998.  From 1995 through
July 1998, Mr. Groteke was a regional and district sales manager for GTE Florida
and GTE Communications Corporation. Mr. Groteke founded Hawk Telecom in 1975 and
was  President  until its sale in 1994.  Mr.  Groteke is the father of Walter M.
Groteke.

     Ed Lavin has been a director of the Company since  February 1999. Mr. Lavin
has been  Chairman  and Chief  Executive  Officer of Staples  Communications,  a
subsidiary of Staples  Corporation since March, 1999. Mr. Lavin began his career
at ADT from 1967 to 1972. In 1970 he was promoted into ADT's  National  Accounts
Division.  Mr. Lavin then joined the L. M. Ericcson  Company of Sweden from 1973
to 1979 where he served as Vice  President  of Sales in the United  States.  Mr.
Lavin immigrated to Canada in 1980 to form Canadian Telecommunications Group and
was  Chairman  and CEO of Canadian  Telecommunications  Group (CTG) from 1980 to
1986.  Mr. Lavin moved to TIE  Communications  where he served as president from

<PAGE>

1987 to 1990. TIE Communications acquired Centel Communications, which was later
merged with WilTel  Communications  where he served as CEO from 1990 to 1993. In
November 1993, Mr. Lavin founded Quest America, a telecommunications  consulting
company based in Boston, Massachusetts. On April 10, 1996, Mr. Lavin led a group
that acquired Executone Information Systems' Network Division. The purchaser was
a group  financed by Bain Capital,  Inc. of Boston,  Massachusetts.  The company
name was later changed to Claricom,  Inc. In March 1999,  Claricom  successfully
merged its business with Staples Corporation.

     Louis Liben has been a director of the Company since  February  1999.  From
1997 to date, Mr. Libin has been a director, Chief Technology Officer and Senior
Vice  President  of  e.TV  Commerce,  Inc.,  a  Jacksonville,   Florida  network
distribution  technology  company.  Mr.  Libin is also a director  and the Chief
Technology Officer of Compu-DAWN, Inc., a leading public safety software company
in the United  States.  Louis Libin is the founder of Broadcast  Communications,
Inc.  (Broad  Comm),  a  broadcast  project  management  group.  Mr.  Libin is a
world-renowned expert in wireless  communications  systems. At the International
Telecommunications Union in Geneva, Switzerland, Mr. Libin represents the United
States on satellite  and  transmission  issues and is currently  Chairman of the
expert  group  on  interactive  data  services.  Mr.  Libin  has  over 15  years
experience in engineering,  communications,  and management.  From 1983 to 1986,
Mr. Libin was employed by the Radio Corporation of American ("RCA") as a project
manager. In 1986, RCA was acquired by the General Electric Corporation ("G.E.").
From 1987 to 1997,  Mr. Libin served as the Director of Technology for NBC/G.E.,
specializing  in a  broadcast  transmission  systems  and is also an  officer as
Corporate Secretary or Assistant  Corporate Secretary for all G.E.  wholly-owned
subsidiaries  that  deal  in  broadcast,   with   responsibility  for  technical
developments  and all  Federal  Communications  Commission  ("FCC")  issues  and
licenses.  From 1981 to 1982, Mr. Libin was employed by the Loral Corporation as
Electronic  Design Engineer and designed Radio Frequency  ("RF") systems for the
military.  From 1979 to 1980 he worked for Burroughs Computer Systems, Inc. (now
UNISYS) as a Field Engineer and from 1980 to 1981 for the Chryon  corporation as
Design Engineer.


ITEM 11. EXECUTIVE COMPENSATION

     The following table sets forth the annual and long-term  compensation  with
regard to the  Chairman/Chief  Executive Officer and each of the other executive
officers of the Company who received  more than  $100,000 for services  rendered
during the first year of the Company's  operations  as NetWolves,  which was the
fiscal year ended June 30, 1999.


<PAGE>



<TABLE>
<CAPTION>
                                           Summary Compensation Table
                                               Annual Compensation

Name and                   Fiscal                               Other Annual
Principal Position          Year       Salary (1)     Bonus    Compensation (2)

<S>                        <C>         <C>            <C>            <C>
Walter M. Groteke          1999        $101,250         -             -
Chairman and Chief         1998            -            -             -
Executive Officer

Daniel G. Stephens         1999         101,250         -             -
Vice Chairman and          1998            -            -             -
Chief Information
Officer

Kevin Sherlock             1999         100,000          -            -
Chief Operating Officer    1998            -             -            -
_______________

(1)  Represents compensation received under employment agreements.  Mr.
     Sherlock ceased being an officer or director of the Company effective
     August 1, 1999.
(2)  Other Annual Compensation excludes certain perquisites and other non-cash
     benefits provided by the Company since such amounts do not exceed the
     lesser of $50,000 or 10% of the total annual base salary disclosed in the
     table for the respective officer.
</TABLE>


<PAGE>


Employment Agreements

     Walter M. Groteke,  Daniel G.  Stephens and Kevin F. Sherlock  entered into
employment  agreements  in June  1998 in  connection  with  the  acquisition  of
Watchdog  Patrols,  Inc.  ("Watchdog  Patrols").  Pursuant to these  agreements,
Messrs. Groteke, Stephens and Sherlock were employed as Chief Executive Officer,
Chief Information Officer and Chief Operating Officer,  respectively, for a term
of three years.  While Mr.  Sherlock ceased being an officer and director of the
Company effective August 1, 1999, he continues to be employed under the terms of
his employment agreement, as amended. The current base salary for each person is
$130,000.

     The  employment  agreements  with  Messrs.  Groteke,  Stephens and Sherlock
further provide for certain  payments  following death or disability for certain
fringe benefits such as reimbursement for reasonable  expenses and participation
in medical plans, and for accelerated payments in the event of change of control
of the Company.

     Walter M.  Groteke,  Daniel G.  Stephens,  Kevin F.  Sherlock and Walter R.
Groteke also have entered into warrant  agreements with the Company whereby they
are  entitled  to receive  warrants  to  purchase  200,000,  200,000 and 150,000
shares,  respectively,  of the  Company's  common stock at $1.63 per share under
certain terms and conditions. The warrants are fully vested two years from their
respective  dates of employment  subject to  acceleration  under certain events.
These events include the sale or disposition of substantially all of the capital
stock or assets of the Company.


Stock Option Plan

     In June 1998,  the  Company  adopted a 1998 Long Term  Incentive  Plan (the
"1998 Incentive Plan") in order to motivate qualified  employees of the Company,
to assist the Company in attracting employees and to align the interests of such
persons with those of the Company's shareholders.

     The 1998 Incentive  Plan provides for a grant of "incentive  stock options"
within the meaning of the Section 422 of the Internal  Revenue Code of 1986,  as
amended, "non-qualified stock options," restricted stock, performance grants and
other types of awards to officers,  key employees,  consultants  and independent
contractors of the Company and its affiliates.

     The  1998  Incentive  Plan,  which  will be  administered  by the  Board of
Directors,  authorizes  the  issuance  of a maximum of 282,500  shares of common
stock,  which may be either newly issued  shares,  treasury  shares,  reacquired
shares,  shares purchased in the open market or any combination  thereof. If any
award under the 1998  Incentive  Plan  terminates,  expires  unexercised,  or is
cancelled,  the shares of common stock that would  otherwise  have been issuable
pursuant  thereto  will be available  for issuance  pursuant to the grant of new
awards.  As of August 31,  1999,  the Company  had  granted  options to purchase
243,500 shares of common stock under the 1998 Incentive Plan to its officers and
key employees.


<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth the beneficial ownership of shares of voting
stock of the Company,  as of September 30, 1999, of (i) each person known by the
Company  to  beneficially  own 5% or more of the  shares of  outstanding  common
stock, based solely on filings with the Securities and Exchange Commission, (ii)
each of the  Company's  executive  officers and  directors  and (iii) all of the
Company's  executive  officers  and  directors  as a group.  Except as otherwise
indicated, all shares are beneficially owned, and investment and voting power is
held by, the persons  named as owners.

                                      Amount and Nature
Name and Address of                   of Shares                Percentage
Benefical Owner                       Beneficially Owned       Ownership
- ---------------------                 -------------------      ----------

Greenleaf Capital Partners, LLC         861,360                   13.9%
Walter M. Groteke                       528,064   (1)(2)           8.6%
Daniel G. Stephens                      528,064   (1)(2)           8.6%
Kevin F. Sherlock                       528,064   (2)(3)           8.6%
Walter R. Groteke                       150,000   (1)              2.4%
Internet Technologies, Inc.             320,000                    5.2%
Ed Lavin                                 50,000                     *
Louis Liben                              66,000                    1.1%
Kirlin Securities, Inc.                 500,000   (4)              8.1%
Executive officers and
  directors as a group                1,322,128                   21.4%

* less than one percent (1%) unless otherwise indicated.

(1)  Does not include unvested  warrants to purchase 200,000 shares at an option
     price of $1.63 per share.

(2)  Messrs.  Walter M.  Groteke,  Daniel G. Stephens and Kevin F. Sherlock have
     agreed  that the shares  owned by them may not be sold until June 17,  2000
     without the prior written consent of Kirlin  Securities.

(3)  Does not include unvested  warrants to purchase 150,000 shares at an option
     price of $1.63 per share.  Does not  include  unvested,  performance  based
     warrants to  purchase  50,000  shares each at an option  price of $5.00 per
     share.

(4)  Represents  warrants  currently  exercisable  by Kirlin  Securities and its
     affiliates to purchase  500,000  shares of common stock at $1.63 per share.
     Kirlin  Securities,  Inc. has demand  registration  rights on the shares of
     common stock issuable upon exercise of the warrants.


ITEM 13. CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS

     On June 17,  1998,  NetWolves,  LLC merged  into a  subsidiary  of Watchdog
Patrols, Inc., which thereafter changed its name to NetWolves  Corporation.  The
merger provided for exchange of securities of NetWolves,  LLC for the securities
of the Company.  The total capital  contribution to NetWolves LLC by its members
was $64,245.  As part of such  exchange,  principals of NetWolves,  LLC received
2,640,322 shares of NetWolves  Corporation for a per share cost of approximately
$.02. Messrs. Walter M. Groteke, Daniel G. Stephens, Jr. , Kevin F. Sherlock and
Keith A.  Darling each  received  528,064  shares and Mr. Marc Jacques  received
475,258 shares. Messrs. Groteke,  Stephens,  Sherlock,  Darling and Jacques also
each received 200,000  warrants in connection with the merger,  exercisable at a
price of $1.63 per share.  Howard Habberstadt and Joseph Ariola acted as finders
for the merger  transaction  for which they received  75,000 warrants and 12,500
warrants, respectively,  exercisable at a price of $2.00 per share. The exercise
price was based upon the public  trading price of Watchdog  Patrols Inc's common
stock at the time of the acquisition.


<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  See Index to  Financial  Statements  at  beginning  of  attached  financial
     statements.

(b)  Reports on Form 8-K

     Report on Form 8-K dated July 7, 1999, as amended.


(c)  Exhibits


     3.1   Certificate of Incorporation, as amended. *
     3.2   By-Laws. *
     4.1   Specimen common stock certificate.*
     4.2   Form of warrant to investment banking firm. *
     4.3   Form of warrant to employees. *
     10.1  Merger and Reorganization Agreement dated June 15, 1998 among
           Watchdog Patrols, Inc., Watchdog Acquisition Corp. and NetWolves,
           LLC. *
     10.2  Agreement between The Sullivan Group and NetWolves Corporation dated
           January 5, 1999. *
     10.3  Distribution Agreement between NetWolves Corporation and Anicom,
           Inc.dated as of January 18, 1999.*
     10.4  Employment Agreement between NetWolves Corporation and Daniel G.
           Stephens, Jr. dated June 17, 1998.*
     10.5  Employment Agreement between NetWolves Corporation and Walter M.
           Groteke dated  June 17, 1998.*
     10.6  Employment Agreement between NetWolves Corporation and Kevin F.
           Sherlock dated  June 17, 1998.*
     10.7  Warrant Agreement between NetWolves Corporation and Walter M.
           Groteke dated  June 17, 1998.*
     10.8  Warrant Agreement between NetWolves Corporation and Daniel G.
           Stephens, Jr. dated  June 17, 1998.*
     10.9  Warrant Agreement between NetWolves Corporation and Kevin F.
           Sherlock dated June 17, 1998.*
     10.10 Stock Option Plan.*
     10.11 Form of Indemnification Agreement*
     10.12 Settlement  Agreement and Mutual Release with Keith  Darling.*
     10.13 Settlement Agreement and Mutual Release with Mark Jacques.*
     10.14 Agreement and Plan of Merger dated as of July 7, 1999 among
           NetWolves Corporation, TSG Global Education Web, Inc. and Sales and
           Management Consulting, Inc., d/b/a The Sullivan Group and Duffy-
           Vinet Institute. **
     10.15 Master  Program  Agreement  dated  July 26,  1999  between  NetWolves
           Corporation and Comdisco, Inc.
     10.16 First  Amendment to Employment  Agreement of Kevin F. Sherlock dated
           September 2, 1999.
     10.17 Strategic Alliance Agreement dated as of September 10, 1999 between
           Boca Research, Inc. and NetWolves Technologies, Inc.
     27    Financial Data Schedule*


- ------
*     Previously filed as exhibits to Report on Form 10, as amended.
**    Previously  filed as an exhibit to Report on Form 8-K dated July 7, 1999,
      as amended.


<PAGE>




     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934,  the  Company has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto  duly  authorized  on the 19th day of
November 1999.


                              NetWolves Corporation

                              By: /s/ Walter M. Groteke
                                 Walter M. Groteke
                                 Chairman of the Board, President
                                 and Chief Executive Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below on November 19, 1999 by the  following  persons in
the capacities indicated:




/s/ Walter M. Groteke                   Chairman of the Board and President
    Walter M. Groteke                   Chief Executive Officer

/s/ Daniel G. Stephens                  Vice Chairman of the Board and
    Daniel G. Stephens                  Chief Information Officer

/s/ Walter R. Groteke                   Vice President - Sales and Marketing
    Walter R. Groteke                   and Director


/s/ Peter C. Castle                     Secretary and Treasurer
    Peter C. Castle                     Principal Financial Officer and
                                        Principal Accounting Officer


________________________                Director
Ed Lavin

/s/ Louis Liben                         Director
    Louis Liben

<PAGE>


                     NETWOLVES CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998




                                    CONTENTS



INDEPENDENT AUDITOR'S REPORT.....................................            F-1

CONSOLIDATED BALANCE SHEETS
  June 30, 1999 and 1998.........................................            F-2

CONSOLIDATED STATEMENTS OF OPERATIONS
  Year ended June 30, 1999 and the period from
   February 13, 1998 (inception) to June 30, 1998................            F-3

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
  For the period from February 13, 1998  (inception)
   to June 30, 1998 and the year ended June 30, 1999.............            F-4

CONSOLIDATED  STATEMENTS  OF CASH FLOWS
  Year ended June 30,  1999 and the period from
   February 13, 1998 (inception) to June 30, 1998................       F-5  F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................      F-7  F-26
<PAGE>
Board of Directors and Shareholders
NetWolves Corporation
Melville, New York


                          INDEPENDENT AUDITOR'S REPORT

We have  audited  the  accompanying  consolidated  balance  sheets of  NetWolves
Corporation and  subsidiaries  (the "Company") as of June 30, 1999 and 1998, and
the related consolidated statements of operations, shareholders' equity and cash
flows for the year ended June 30,  1999 and the period  from  February  13, 1998
(inception) to June 30, 1998. These financial  statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated  financial  position  of  NetWolves
Corporation and  subsidiaries as of June 30, 1999 and 1998, and the consolidated
results of its  operations  and cash flows for the year ended June 30,  1999 and
the period from  February 13, 1998  (inception)  to June 30, 1998 in  conformity
with generally accepted accounting principles.





/s/ Hays & Company


August  12, 1999,  except for Notes 14, 4 and 16,  which
   are dated  September 2, September 21 and
   September 29, 1999, respectively.
New York, New York
                                      F-1
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                        June 30,
                                                             --------------------------
                                                                  1999         1998
                                                                  ----         ----
<S>                                                           <C>           <C>
ASSETS

Current assets
   Cash and cash equivalents                                  $ 5,585,981   $ 1,118,416
   Marketable securities, available for sale                      606,000     1,063,828
   Accounts receivable, net of allowance for doubtful
      accounts of $40,000 and $5,000 at June 30, 1999 and
      1998, respectively                                           76,907         6,803
   Net assets held for sale (Note 5)                                  -         720,000
   Inventories                                                    118,354        22,410
   Prepaid expenses and other current assets                      153,099        18,318
                                                              -----------   -----------
      Total current assets                                      6,540,341     2,949,775

Property and equipment, net                                       224,691         4,949
Intangible assets                                               2,849,121           -
Other assets                                                       22,781         4,727
                                                              -----------   -----------
                                                              $ 9,636,934   $ 2,959,451
                                                              -----------   -----------
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable and accrued expenses                     $    453,336   $    31,448
   Deferred compensation                                          100,000           -
   Loans and advances from TSG officer                            144,348           -
   Current maturities of long-term debt                            43,411           -
                                                              -----------   -----------
           Total current liabilities                              741,095        31,448

Long-term debt, net of current maturities                         266,537           -
                                                              -----------   -----------
           Total liabilities                                    1,007,632        31,448
                                                              -----------   -----------
Minority interest                                                 274,500           -

Commitments and contingencies (Notes 5, 8, 9, 10, 12,
 13, 14 and 16)

Shareholders' equity
   Common stock, $.0033 par value; 10,000,000 shares authorized;
      issued and outstanding: 6,063,870  June 30, 1999
      and 4,313,870  June 30, 1998                                 20,011        14,236
   Additional paid-in capital                                  14,013,687     3,012,159
   Accumulated deficit                                         (6,054,741)      (99,414)
   Accumulated other comprehensive income                         375,845         1,022
                                                              -----------   -----------
         Total shareholders' equity                             8,354,802     2,928,003
                                                              -----------   -----------
                                                              $ 9,636,934   $ 2,959,451
                                                              ===========   ===========
<FN>
The accompanying notes are an integral part of
   these consolidated financial statements.

                                      F-2
</FN>
</TABLE>
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                         Period from
                                                                         February 13,
                                                                           1998
                                                         Year ended     (inception) to
                                                        June 30, 1999   June 30, 1998
                                                        -------------   --------------

        <S>                                              <C>            <C>
        Sales                                            $ 1,789,144    $    29,621

        Cost of sales                                        582,724          5,681
                                                         -----------    -----------
        Gross profit                                       1,206,420         23,940
                                                         -----------    -----------
        Operating expenses
           General and administrative                      5,278,255        105,047
           Research and development                          418,109            -
           Sales and marketing                             2,002,330         44,463
                                                         -----------    -----------
                                                           7,698,694        149,510
                                                         -----------    -----------
       Loss before other income (expense)
          and benefit from income taxes                   (6,492,274)      (125,570)

        Other income (expense)
           Interest income                                    48,609          3,011
           Gain on sale of marketable securities             478,518            -
           Dividend income                                    10,275          3,490
           Interest expense                                     (455)          (345)
                                                         -----------    -----------
        Loss before benefit from income taxes             (5,955,327)      (119,414)

        Benefit from income taxes                                -           20,000
                                                         -----------    -----------
        Net loss                                         $(5,955,327)   $   (99,414)
                                                         -----------    -----------

        Basic and diluted net loss per share             $     (1.27)   $     (0.04)
                                                         -----------    -----------
        Weighted average common
         shares outstanding                                4,691,651      2,810,102
                                                         ===========    ===========



<FN>
The accompanying notes are an integral part of
    these consolidated financial statements.
</FN>
</TABLE>
                                      F-3
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

           PERIOD FROM FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998
                      AND FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>

                                                                            Accumulated
                                                     Additional                other          Total
                                   Common Stock       paid-in   Accumulated  comprehensive shareholders' Comprehensive
                                  Shares   Amount     capital      deficit     income         equity     income (loss)
                                  ------   ------    ---------- ----------- -------------- ------------- ------------

<S>                            <C>       <C>       <C>           <C>          <C>          <C>           <C>
Initial capital contributions
 to NetWolves, LLC                  100  $ 64,245  $       -     $       -    $     -      $  64,245

Reverse Acquisition, June 17,
 1998 (Note 3)
  Exchange of NetWolves, LLC
   membership interests            (100)  (64,245)         -             -          -        (64,245)


  Issuance of common stock to
   owners of NetWolves, LLC   2,640,322     8,713       55,532           -          -         64,245

  Outstanding common stock of
   Watchdog Patrols, Inc.     1,673,548     5,523    2,956,627           -          -      2,962,150

Marketable securities
 valuation adjustment               -         -                                   1,022        1,022    $     1,022

Net loss, period from
 February 13, 1998
 (inception) to June 30,
  1998                              -         -            -         (99,414)       -        (99,414)       (99,414)
                              ---------  --------   ----------   -----------  ---------    ---------    -----------
    Total comprehensive loss                                                                            $   (98,392)
                                                                                                        ===========
Balance, June 30, 1998        4,313,870    14,236    3,012,159       (99,414)     1,022    2,928,003

Common stock and warrants
 issued for services            770,000     2,541    4,192,522           -          -      4,195,063

Proceeds from sale of warrants      -         -        300,000           -          -        300,000

Common stock issued in private
 placement, net of expenses     800,000     2,640    5,350,085           -          -      5,352,725

Adjustment to fair value of
 Reverse Acquisition                -         -       (190,485)          -          -       (190,485)

Common  stock issued in
 purchase business
  combination (Note 4)          180,000       594    1,349,406           -          -      1,350,000

Marketable securities
 valuation adjustment               -         -            -             -      374,823      374,823    $   374,823

Net loss, year ended
 June 30, 1999                      -         -            -      (5,955,327)       -     (5,955,327)    (5,955,327)
                              ---------  --------   ----------   -----------  ---------    ---------    -----------
       Total comprehensive loss                                                                          (5,580,504)
                                                                                                        ===========
Balance, June 30, 1999        6,063,870  $ 20,011  $14,013,687   $(6,054,741) $ 375,845   $8,354,802
                              =========  ========  ===========   ===========  =========   ==========
<FN>
The accompanying notes are an integral part of
    these consolidated financial statements.
</FN>
</TABLE>
                                      F-4
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                   Period from
                                                                                   February 13,
                                                                                       1998
                                                                     Year ended    (inception) to
                                                                    June 30, 1999   June 30, 1998
                                                                    -------------  --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<S>                                                                  <C>           <C>
Cash flows from operating activities
   Net loss                                                          $(5,955,327)  $   (99,414)
   Adjustments to reconcile net loss to net cash used in
      operating activities
         Depreciation and amortization                                    15,896           401
         Realized gain on sale of marketable securities                 (478,518)          -
         Provision for doubtful accounts                                  35,000         5,000
         Common stock and warrants issued for services                 4,195,063           -
         Deferred income tax benefit                                         -         (20,000)

   Changes in operating assets and liabilities
      Accounts receivable                                                (34,883)       (11,803)
      Inventories                                                        (95,944)       (22,410)
      Prepaid expenses and other current assets                         (134,781)       (18,318)
      Accounts payable and accrued expenses                              187,863         31,448
                                                                     -----------   ------------
         Net cash used in operating activities                        (2,265,631)      (135,096)
                                                                     -----------   ------------
Cash flows from investing activities
   Proceeds from the sale of marketable securities                     1,311,169            -
   Proceeds from assets held for sale, net                               549,515            -
   Purchases of property and equipment                                  (200,383)        (5,350)
   Advances to subsidiary, net of cash acquired of
      $412,224, plus acquisition costs paid of $25,000                  (561,776)           -
   Payments of security deposits                                         (18,054)        (4,727)
                                                                     -----------   ------------
          Net cash provided by (used in) investing activities          1,080,471        (10,077)
                                                                     -----------   ------------
Cash flows from financing activities
   Proceeds from initial capital contribution                                -           64,245
   Cash acquired in Reverse Acquisition                                      -        1,460,366
   Transaction costs paid in connection
    with Reverse Acquisition                                                 -         (261,022)
   Cash proceeds from issuance of common stock, net of
    financing costs paid of $647,275                                   5,352,725            -
   Cash proceeds from sale of warrants                                   300,000            -
                                                                     -----------   ------------
          Net cash provided by financing activities                    5,652,725      1,263,589
                                                                     -----------   ------------
Net increase in cash and cash equivalents                              4,467,565      1,118,416

Cash and cash equivalents, beginning of period                         1,118,416            -
                                                                     -----------  -------------
Cash and cash equivalents, end of period                             $ 5,585,981    $ 1,118,416
                                                                     ===========   ============
<FN>
The Accompanying  notes  are an  integral  part of
 these  consolidated  financial statements.
</FN>
                                       F-5
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                   Period from
                                                                                   February 13,
                                                                                       1998
                                                                     Year ended    (inception) to
                                                                    June 30, 1999   June 30, 1998
                                                                    -------------  --------------

(continued)

SUPPLEMENTAL DISCLOSURE OF NONCASH
   INVESTING AND FINANCING  ACTIVITIES
   Reverse Acquisition (Note 3)
      Marketable securities acquired                                 $       -      $ 1,062,806
      Net assets held for sale                                          (190,485)       720,000
      Deferred income tax liability                                          -          (20,000)
      Cash acquired, net of $261,022 of transaction costs paid               -        1,199,344
                                                                     -----------   ------------
      Outstanding common stock of
       Watchdog Patrols, Inc.                                       $   (190,485)  $  2,962,150
                                                                     -----------   ------------
   Purchase acquisition (Note 4)
       Accounts receivable                                          $     70,221   $        -
       Property and equipment                                             35,255            -
       Intangible assets                                               2,849,121            -
       Accrued expenses and other liabilities                           (400,498)           -
       Long-term debt                                                   (309,948)           -
       Acquisition costs                                                 (82,875)           -
       Advances to subsidiary, net of cash acquired
                  of  $412,224                                          (536,776)           -
       Minority interest                                                (274,500)           -
                                                                     -----------   ------------
       Common stock issued in purchase acquisition                   $ 1,350,000   $        -
                                                                     ===========   ============
<FN>
The Accompanying  notes  are an  integral  part of
 these  consolidated  financial statements.
</FN>
</TABLE>

                                       F-6
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

1    The Company

     NetWolves, LLC was an Ohio limited liability company formed on February 13,
     1998, which was merged into Watchdog Patrols, Inc. ("Watchdog") on June 17,
     1998.  Watchdog,  the legal surviving entity of the merger was incorporated
     under the laws of the State of New York on January 5, 1970.  As a result of
     the merger and subsequent  sale of Watchdog's  business (Note 5),  Watchdog
     changed its name to NetWolves Corporation ("NetWolves" or the "Company").

     NetWolves is an Internet systems  developer that has designed and developed
     a multi-functional product that is a secure,  integrated,  modular Internet
     gateway.  The primary  product,  the FoxBox,  supports secure access to the
     Internet for multiple  users through a single  connection  and, among other
     things,  provides  electronic mail,  firewall security and web site hosting
     and also contains a network file server.  Since inception,  the Company has
     been developing its business plan and building its  infrastructure in order
     to effectively  market its products and shipped its first significant order
     in March 1999.  Accordingly,  it is no longer  reporting  as a  development
     stage company.

     Additionally,  in conjunction  with the acquisition of Sales and Management
     Consulting,  Inc.  (d/b/a The  Sullivan  Group,  see Note 4),  the  Company
     provides consulting, educational and training services primarily to the oil
     and gas and automotive industries throughout the United States.

2    Significant accounting policies

     Use of estimates

     In preparing consolidated financial statements in conformity with generally
     accepted accounting principles,  management makes estimates and assumptions
     that affect the reported  amounts of assets and liabilities and disclosures
     of  contingent  assets  and  liabilities  at the  date of the  consolidated
     financial  statements,  as well as the  reported  amounts  of  revenue  and
     expenses  during the  reporting  period.  Actual  results could differ from
     those estimates.

     Risks and other factors

     As  a  company  that  has  developed  a  software  product  for  use  as  a
     multi-functional  Internet  communications device,  NetWolves faces certain
     risks.  These  include,  among  other  items,  the  ability to  continue to
     implement its business plan,  dependence on proprietary  technology,  rapid
     technological  change,  challenges  in  recruiting  personal  and a  highly
     competitive market place.

     Principles of consolidation

     The consolidated  financial  statements include the accounts of the Company
     and  its  subsidiaries.   All  significant  intercompany  transactions  and
     balances have been eliminated in consolidation.  The separate  ownership of
     one  of  the   Company's   subsidiaries   is  reflected  in  the  Company's
     consolidated  financial  statements  as  minority  interest  (Note 4).  The
     minority   interest   includes  common  stock   representing  1.7%  of  the
     outstanding shares of the subsidiary plus preferred stock.


     The subsidiary has issued 250,000 shares of non-voting  Series A Cumulative
     Convertible  Preferred Stock with a $1 par value. The preferred stockholder
     is  entitled to  preferential  liquidation  rights and is also  entitled to
     cumulative  dividends  to be  included in minority  interest  expense  that
     accrue at the rate of 8% per annum commencing on June 30, 1999. On or after
     January  1,  2000,  the  preferred  stockholder  may elect to  convert  the
     preferred stock into NetWolves common stock (at fair market value at the


                                       F-7
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998


2    Significant accounting policies (continued)

     Principles of consolidation (continued)

     time of  conversion).  However,  within 15 days of receiving the conversion
     notice,  NetWolves  may elect to make a cash  redemption  of the  preferred
     stock at par value (including any unpaid cumulative  dividends) and thereby
     terminate the conversion right.

     Revenue recognition

     The Company  records  revenue in accordance with Statement of Position 97-2
     "Software  Revenue  Recognition"  ("SOP  97-2"),  issued  by  the  American
     Institute  of  Certified  Public  Accountants  (as modified by Statement of
     Position  98-9).  SOP 97-2  provides  additional  guidance  with respect to
     multiple element arrangements;  returns,  exchanges,  and platform transfer
     rights; resellers;  services; funded software development arrangements; and
     contract  accounting.  Accordingly,  revenue from the sale of perpetual and
     term software  licenses are recognized,  net of provisions for returns,  at
     the time of delivery and  acceptance of software  products by the customer,
     when the fee is fixed and  determinable  and  collectibility  is  probable.
     Maintenance revenue that is bundled with an initial license fee is deferred
     and recognized  ratably over the maintenance  period.  Amounts deferred for
     maintenance are based on the fair value of equivalent  maintenance services
     sold separately.

     The Company will recognize  revenue from  consulting and training fees when
     the services are provided.

     Marketable securities

     Marketable  securities,  which are all  classified as "available for sale",
     are valued at fair value.  Unrealized  gains or losses are  recorded net of
     income taxes as "accumulated other  comprehensive  income" in shareholders'
     equity,  whereas  realized gains and losses are recognized in the Company's
     statements of operations using the first-in, first-out method.

     Inventories

     Inventories  consist of raw materials and finished  goods.  Inventories are
     valued at the lower of cost or net  realizable  value  using the  first-in,
     first-out method.

     Property and equipment

     Property and equipment are stated at cost.  Costs  assigned to property and
     equipment of the acquired  business  (Note 4) were based on estimated  fair
     value at  acquisition.  Depreciation  is provided on furniture and fixtures
     and machinery and equipment over their estimated lives, ranging from 5 to 7
     years, using the straight-line method. Leasehold improvements are amortized
     over the lesser of the term of the respective  lease or the useful lives of
     the related  assets.  Expenditures  for maintenance and repairs are charged
     directly to the appropriate  operating  accounts at the time the expense is
     incurred.  Expenditures  determined to represent  additions and betterments
     are capitalized.

                                      F-8
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998


2    Significant accounting policies (continued)

     Intangible assets


     Intangible assets at June 30, 1999 consist of intangible assets acquired in
     connection with the Company's purchase business combination  effective June
     30,  1999  (Note 4).  These  assets  include a training  library,  industry
     benchmarking data and the Profit Coach profitability analysis module with a
     fair value of $400,000, $100,000 and $500,000,  respectively. The remaining
     portion of the  intangible  asset is allocated  to goodwill,  which will be
     amortized over an estimated useful life of 10 years.


     Software development costs

     Costs  associated with the  development of software  products are generally
     capitalized  once  technological  feasibility  is  established.   Purchased
     software  technologies are recorded at cost. Software costs associated with
     technology  development and purchased  software  technologies are amortized
     using  the  greater  of the ratio of  current  revenue  to total  projected
     revenue for a product or the straight-line method over its estimated useful
     life.  Amortization of software costs begins when products become available
     for general  customer  release.  Costs incurred prior to  establishment  of
     technological  feasibility  are  expensed  as  incurred  and  reflected  as
     research and development costs in the accompanying  consolidated statements
     of operations.

     Start-up and organization costs

     The Company  accounts for start-up  costs in accordance  with  Statement of
     Position  98-5,  "Reporting  on the  Costs of  Start-up  Activities"  ("SOP
     98-5"),  issued by the American Institute of Certified Public  Accountants.
     SOP 98-5 requires the cost of start-up activities,  including  organization
     costs,  to be expensed as incurred.  Impairment  of  long-lived  assets The
     Company  reviews its  long-lived  assets,  including  software  development
     costs,  intangible  assets  and  property  and  equipment,  for  impairment
     whenever  events or changes in  circumstances  indicate  that the  carrying
     amount  of  the  assets  may  not  be  fully   recoverable.   To  determine
     recoverability  of  its  long-lived   assets,  the  Company  evaluates  the
     probability  that  future  undiscounted  net cash flows,  without  interest
     charges,  will be less than the carrying amount of the assets.  The Company
     has  determined  that as of June 30, 1999,  there has been no impairment in
     the carrying value of long-lived assets.

     Income taxes

     The Company  accounts  for income  taxes using the  liability  method which
     requires the  determination of deferred tax assets and liabilities based on
     the  differences  between  the  financial  and  tax  bases  of  assets  and
     liabilities  using  enacted  tax  rates  in  effect  for the  year in which
     differences are expected to reverse. The net deferred tax asset is adjusted
     by a valuation allowance, if, based on the weight of available evidence, it
     is more likely than not that some  portion or all of the net  deferred  tax
     asset  will  not be  realized.  The  Company  and its  subsidiaries  file a
     consolidated Federal income tax return.

                                      F-9
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998


2    Significant accounting policies (continued)

     Stock options

     Statement  of  Financial  Accounting  Standards  No. 123,  "Accounting  for
     Stock-Based  Compensation"  ("SFAS  123")  establishes  a fair  value-based
     method of accounting for stock  compensation  plans. The Company has chosen
     to adopt the  disclosure  requirements  of SFAS 123 and  continue to record
     stock   compensation  for  its  employees  in  accordance  with  Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
     ("APB 25").  Under APB 25, charges are made to operations in accounting for
     stock  options  granted to employees  when the option  exercise  prices are
     below the fair market  value of the common stock at the  measurement  date.
     Options granted to non-employees are recorded in accordance with SFAS 123.

     Basic and diluted net loss per share

     The Company  displays  earnings per share in accordance  with  Statement of
     Financial Accounting  Standards No.128,  "Earnings Per Share" ("SFAS 128").
     SFAS 128  requires  dual  presentation  of basic and diluted  earnings  per
     share.  Basic  earnings  per share  includes no dilution and is computed by
     dividing net income (loss) available to common shareholders by the weighted
     average  number  of  common  shares  outstanding  for the  period.  Diluted
     earnings per share  includes  the  potential  dilution  that could occur if
     securities  or other  contracts  to issue  common  stock were  exercised or
     converted into common stock.

     The effect of the  recapitalization on the NetWolves,  LLC members has been
     given retroactive  application in the earnings per share  calculation.  The
     common stock issued and outstanding with respect to the pre-merger Watchdog
     shareholders  has been  included  since the  effective  date of the merger.
     Outstanding  stock  options and warrants  have not been  considered  in the
     computation  of  diluted  per  share  amounts,  since  the  effect of their
     inclusion would be  antidilutive.  Accordingly,  basic and diluted earnings
     per share amounts are identical.

     Cash and cash equivalents

     Generally,  the Company considers  investments with original  maturities of
     three months or less to be cash equivalents.

     Concentrations and fair value of financial instruments

     Financial   instruments   that   potentially   subject   the   Company   to
     concentrations  of credit risk consist  principally of cash investments and
     marketable securities. At June 30, 1999, the Company's cash investments are
     held at primarily one  financial  institution.  In addition,  the Company's
     marketable  securities  consist  primarily of an  investment in warrants to
     purchase  restricted  common stock of an unrelated company (Note 6). Unless
     otherwise disclosed,  the fair value of financial instruments  approximates
     their recorded values.

                                      F-10
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998


3    Reverse acquisition

     On June 17, 1998,  Watchdog acquired all of the outstanding common stock of
     NetWolves,  LLC (the "Reverse  Acquisition").  For accounting purposes, the
     acquisition  has been treated as an  acquisition  of Watchdog by NetWolves,
     LLC and as a recapitalization of NetWolves,  LLC. The historical  financial
     statements  prior  to June 17,  1998  are  those  of  NetWolves,  LLC.  The
     acquisition  of  Watchdog  has been  recorded  based  on the fair  value of
     Watchdog's net tangible assets, which consist primarily of cash, marketable
     securities  and certain  assets  held for sale (Note 5), with an  aggregate
     value of $2,962,150  (net of  transaction  costs of  $261,022).  Since this
     transaction is in substance, a recapitalization of NetWolves, LLC and not a
     business combination, pro forma information is not presented.

     As part of the Reverse Acquisition, the NetWolves, LLC membership interests
     were converted into 2,640,322  shares of Watchdog common stock and warrants
     to purchase an aggregate of 620,000  shares of Watchdog  common stock at an
     exercise  price of  $1.63  per  share.  Immediately  prior  to the  Reverse
     Acquisition,  there were 1,673,548  shares of Watchdog  common stock issued
     and outstanding.  In addition, certain pre-Reverse Acquisition shareholders
     of Watchdog received warrants to purchase 500,000 shares of Watchdog common
     stock  at  an  exercise  price  of  $1.63  per  share.  Additionally,   two
     individuals,  who provided  consulting services with respect to the Reverse
     Acquisition, received warrants to purchase an aggregate of 87,500 shares of
     Watchdog  common  stock at an  exercise  price of $2.00  per  share.  These
     warrants are described further in Note 10.

     In connection with the Reverse Acquisition, in the fourth quarter of fiscal
     1999, the Company  reduced the fair value of Watchdog's net tangible assets
     (the assets held for sale) and,  accordingly,  recorded  an  adjustment  to
     additional paid-in capital of $190,485.

4    Purchase acquisition

     On July 7, 1999, NetWolves and Sales and Management Consulting, Inc. (d/b/a
     The Sullivan  Group)  ("SMCI")  executed a merger  agreement (the "Merger")
     pursuant to which NetWolves acquired the outstanding capital stock of SMCI.
     Under the terms of the Merger,  TSG Global  Education Web, Inc.  ("TSG") (a
     subsidiary  of   NetWolves),   with   4,150,000   shares  of  common  stock
     outstanding, purchased all of the outstanding shares of SMCI's common stock
     in exchange for 180,000 shares of NetWolves'  restricted  common stock. The
     shareholders  are restricted  from selling,  transferring  or pledging such
     shares for an eighteen-month  period.  Upon consummation of the Merger SMCI
     merged into TSG and TSG was the surviving entity.

     Concurrent  with the Merger,  the  shareholders  of SMCI  purchased  70,000
     shares of TSG common stock at $.35 per share for aggregate cash proceeds of
     $24,500.  This  represents  1.7% of the  outstanding  common  stock of TSG.
     Additionally,  TSG issued  250,000  shares of TSG Series A Cumulative  (8%)
     Convertible  Preferred  Stock to one of the SMCI  shareholders,  which  was
     issued  in  partial  settlement  of  outstanding  liabilities  owed  to the
     shareholder.  This TSG common and  preferred  stock has been  reflected  as
     minority interest in the accompanying consolidated financial statements.

                                      F-11
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

4    Purchase acquisition (continued)

     The purchase price approximated  $1,350,000 (exclusive of acquisition costs
     of  $82,875),  which  consisted of 180,000  shares of NetWolves  restricted
     common  stock valued at $7.50 per share (fair value of the common stock was
     based  upon the  gross  sales  price  received  by  NetWolves  in a private
     placement  that was completed on June 29, 1999,  Note 10). The  acquisition
     has been  accounted  for with an effective  date of June 30, 1999 using the
     purchase method of accounting.  Accordingly,  assets and  liabilities  were
     recorded at their fair values as of June 30, 1999,  and  operations of SMCI
     will be included in the  Company's  consolidated  statements  of operations
     commencing July 1, 1999.

     An  allocation  of the fair value of the assets  acquired  and  liabilities
     assumed is as follows:
<TABLE>
<CAPTION>
               <S>                                                   <C>
               Purchase price
                  NetWolves common stock issued                      $ 1,350,000
                  Acquisition costs                                       82,875
                                                                     -----------
                                                                     $ 1,432,875
                                                                     ===========
               Allocation of purchase price
                  Fair value of tangible assets and liabilities
                      Current assets                                    $ 70,221
                      Non-current assets                                  35,255
                      Current liabilities                               (443,909)
                      Non-current liabilities                           (266,537)
                      Advances to TSG, net of cash acquired
                       of $412,224                                      (536,776)
                                                                     -----------
                                                                      (1,141,746)
                                                                     -----------
                  Minority interest
                      Common stock                                       (24,500)
                      Preferred stock                                   (250,000)
                                                                     -----------
                                                                        (274,500)
                                                                     -----------
                  Intangible assets acquired                           2,849,121
                                                                     -----------

                                                                     $ 1,432,875
                                                                     ===========
</TABLE>

     At the time of the Merger and in  accordance  with TSG's newly formed stock
     option plan, the SMCI  shareholders (who are all employees of TSG) received
     605,000 five-year options to purchase TSG common stock at an exercise price
     of $.35 per  share.  Management  has  determined  that the  exercise  price
     approximates  the  estimated  fair  value  of  the  TSG  common  stock  and
     accordingly, the options have an intrinsic value of zero. Additionally, the
     SMCI shareholders are entitled to an additional 175,000 options to purchase
     TSG  common  stock  (with an  exercise  price at fair  value at the time of
     grant),  subject to TSG meeting  specific  earnings  targets over the three
     years ending June 30, 2000, 2001 and 2002.  These options will be accounted
     for as  compensation  expense  in  accordance  with  APB25  in such  future
     periods.  All of the  shareholders  of SMCI entered into 5-year  employment
     agreements with TSG (Note 14).


                                      F-12
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

4    Purchase acquisition (continued)

     The  Merger  also  provides  for  NetWolves  to  make up to  $4,750,000  of
     non-interest  bearing open account working capital advances to TSG pursuant
     to an agreed upon  schedule  through  November 15,  1999.  Through June 30,
     1999,  $949,000 has been  advanced and an  additional  $1,651,000  has been
     advanced  from July 1, 1999 through  September 21, 1999.  Should  NetWolves
     decide not to make  further  working  capital  advances,  the number of TSG
     shares owned by NetWolves will be reduced in accordance with the agreement.
     Based upon the  $2,600,000  advanced  through  September  21, 1999  (should
     NetWolves  decide not to make any  further  advances),  NetWolves  could be
     required to return  987,500 TSG shares to the  treasury of TSG.  This would
     reduce  NetWolves'  current  ownership  interest from  4,150,000  shares to
     3,162,500 (from 98.3% to 97.8%). Subject to NetWolves first refusal rights,
     TSG has the right to sell any shares,  ultimately returned by NetWolves, to
     third  parties  at  fair  value,  which  could  further  reduce  NetWolves'
     ownership interest.

     In  accordance  with the Merger,  the Board of Directors of TSG consists of
     three members  designated  by NetWolves  and two members  designated by the
     SMCI shareholders.  A four-fifths majority of the TSG Board is required for
     specified  significant  actions including:  sale or merger of the business,
     changes  to  the  TSG  capital  structure,  declaration  of  dividends  and
     repayment  of the working  capital  advances  made by  NetWolves.  A simple
     majority of the TSG Board is required  for all general  operating  matters.
     Included in the consolidated  entity's cash and cash equivalents balance at
     June  30,  1999 is  $412,224  of cash  held by TSG to be used  for  working
     capital purposes.

     Prior to the Merger negotiations, in January 1999, the Company entered into
     an  agreement  with SMCI  whereby  SMCI  appointed  the Company as its sole
     provider of a multi-service Internet delivery system (known as "FoxBox") to
     be  used  in  conjunction  with  SMCI's  proprietary  interactive  distance
     learning training programs.

     The following  unaudited pro forma financial  information has been prepared
     assuming that the  acquisition  of SMCI had taken place at the beginning of
     the  respective  periods  presented.  The  pro  forma  information  is  not
     necessarily indicative of the combined results that would have occurred had
     the  acquisition  taken place at the  beginning  of the  period,  nor is it
     necessarily indicative of the results that may occur in the future.
<TABLE>
<CAPTION>
                                                                     Period from
                                                                     February 13,
                                                      Year ended     1998 to June 30,
                                                      June 30, 1999      1998
                                                      -------------  ----------------
                                                       (Unaudited)     (Unaudited)

     <S>                                               <C>            <C>
     Revenue                                           $ 2,904,000    $  644,000
     Net loss                                          $(6,940,000)   $ (328,000)
     Basic and diluted net loss per share              $     (1.48)   $     (.12)
</TABLE>
                                      F-13
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998


5    Net assets held for sale

     In November 1998, the Company sold substantially all of the business assets
     related to Watchdog's  uniformed  security guard  services  operations to W
     Acquisition  Corp. (the "Purchaser") for $600,000.  The Purchaser  acquired
     all  inventory,  furniture and  equipment,  customer  lists,  trade rights,
     contracts,  goodwill and rights to the name "Watchdog  Patrols,  Inc." (the
     "Assets").  The Company  retained  responsibility  for settling  most other
     working capital  assets/liabilities,  including accounts receivable,  other
     current assets, accounts payable and accrued expenses (the "Retained Assets
     and  Liabilities").  The Retained Assets and Liabilities  were all directly
     related  to the  uniformed  security  guard  business  and were not used or
     settled by the Company in the normal course of business.  Accordingly,  the
     resultant  net proceeds have been included in the net assets held for sale.
     In connection with the settlement of the Retained  Assets and  Liabilities,
     the Company  reduced the estimated  fair value of such items by $190,485 in
     the fourth quarter of 1999.

     The net  assets  held for sale are  classified  as a current  asset and are
     reflected at net realizable value based on the selling price of the Assets,
     the net estimated liquidation value of the Retained Assets and Liabilities,
     and the net negative cash flows from the  operations of the security  guard
     business  during the period from June 17, 1998 (the date of acquisition) to
     the date of disposal in November  1998. Net assets held for sale consist of
     the following:
<TABLE>
<CAPTION>
                                                                              June 30,
                                                                     -------------------------
                                                                        1999           1998
                                                                     ----------- -------------
     <S>                                                             <C>         <C>
     Sale of Assets                                                  $       -   $     600,000

     Retained Assets and Liabilities
         Accounts receivable                                                 -         500,000
         Other current assets                                                -         140,000
         Accounts payable and accrued expenses                               -        (460,000)
     Cash out-flows from operations during holding period                    -         (60,000)
                                                                     ----------- -------------
            Net assets held for sale                                 $       -   $     720,000
                                                                     =========== =============
</TABLE>
                                      F-14

<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

6    Marketable securities, available for sale

     The following is a summary of marketable securities, available for sale:
<TABLE>
<CAPTION>
                                                               Gross
                                               Amortized     unrealized       Fair
                                                  cost       gain (loss)      value
                                               ---------     -----------      -----
        <S>                                   <C>          <C>           <C>

        June 30, 1999
        Equity securities                     $    35,000  $    415,000  $    450,000
        Bonds                                     195,155       (39,155)      156,000
                                              -----------  ------------  ------------
                                              $   230,155  $    375,845  $    606,000
                                              ===========  ============  ============
        June 30, 1998
        Mutual funds/equity securities        $   569,131  $       (536) $    568,595
        Bonds                                     493,675         1,558       495,233
                                              -----------  ------------  ------------
                                              $ 1,062,806  $      1,022  $  1,063,828
                                              ===========  ============  ============
</TABLE>
     At June 30, 1999,  the Company's  equity  securities  consist  solely of an
     investment in warrants to purchase  restricted common stock of an unrelated
     publicly traded company. As of August 12, 1999, the estimated fair value of
     the  warrants  decreased  by  approximately  33% from  the  June  30,  1999
     estimated fair value.

     Proceeds from sales of  marketable  securities  and realized  gains on such
     sales aggregated $1,311,169 and $478,518,  respectively, for the year ended
     June 30, 1999.

     The  maturities  of the Company's  debt  securities at June 30, 1999 are as
     follows:
<TABLE>
<CAPTION>

                                                                      Amortized      Fair
                                                                         cost        value
                                                                      ---------      -----
      <S>                                                              <C>         <C>
      Due in one year or less                                          $     -     $     -
      Due after one year through five years                               97,375      66,500
      Due after six years through ten years                               97,780      89,500
                                                                       ---------   ---------
                                                                       $ 195,155   $ 156,000
                                                                       =========   =========
</TABLE>
                                      F-15
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998



7    Property and equipment, net

     Property and equipment consist of the following:
<TABLE>
<CAPTION>
                                                                   June 30,
                                                             -------------------
                                                               1999       1998
                                                             ---------   -------
      <S>                                                    <C>         <C>
      Machinery and equipment                                $ 121,462   $ 3,350
      Furniture and fixtures                                    92,685     2,000
      Leasehold improvements                                    26,841       -
                                                             ---------   -------
                                                               240,988     5,350
      Less accumulated depreciation and amortization           (16,297)     (401)
                                                             ---------   -------
      Property and equipment, net                            $ 224,691   $ 4,949
                                                             =========   =======
</TABLE>
8    Accounts payable and accrued expenses

  Accounts payable and accrued expenses
consist of the following:
<TABLE>
<CAPTION>
                                                                   June 30,
                                                             -------------------
                                                               1999       1998
                                                             ---------   -------
      <S>                                                    <C>         <C>
      Trade accounts payable                                 $ 286,868  $ 11,448
      Compensated absences                                      50,354       -
      Other accrued expenses                                    68,909    20,000
      Commissions payable                                       36,204       -
      Payroll taxes payable                                     11,001       -
                                                             ---------  --------
                                                             $ 453,336  $ 31,448
                                                             =========  ========
</TABLE>
9    Long-term debt
     Long-term debt consists of the following:
<TABLE>
<CAPTION>

                                                                   June 30,
                                                             -------------------
                                                               1999       1998
                                                             ---------   -------
      <S>                                                    <C>         <C>

      Notes payable to DVI                                   $ 309,948   $   -
      Less current maturities of long-term debt                (43,411)      -
                                                             --------    -------
      Long-term debt, net of current maturities              $ 266,537   $   -
                                                             =========   =======
</TABLE>
                                      F-16
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

9    Long-term debt (continued)

     The notes  payable (the "DVI  Notes") to the  Duffy-Vinet  Institute,  Inc.
     ("DVI") were assumed by the Company in connection with the Merger (Note 4).
     The DVI Notes are secured by all of the assets SMCI had  acquired  from DVI
     in 1992. These assets consist of furniture,  fixtures and equipment (with a
     net book value of $12,000) and a portion of the intangible  assets acquired
     from SMCI  including  a  library  of master  tapes and  completed  training
     programs.

     At the time of the  Merger,  the  fair  value  of the  liability  (totaling
     $309,948)  was  determined by  calculating  the present value of the future
     payments  to be made using an  implied  interest  rate of 11%.  At June 30,
     1999,  the DVI Notes  required  66 monthly  payments  of $6,280,  including
     interest.

     Aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>

        Year ending June 30,
                <S>                 <C>
                2000                 $  43,411
                2001                    48,434
                2002                    54,039
                2003                    60,293
                2004                    67,270
                Thereafter              36,501
                                     ---------
                                     $ 309,948
                                     =========
</TABLE>

10   Shareholders' equity

     Common stock issuances

     For the year ended June 30, 1999,  the Company issued  1,750,000  shares of
     its common stock as follows:


     .    150,000   unregistered  shares  were  issued  to  the  Company's  Vice
          President  of  Sales  and  Marketing  (who is also a  Director  of the
          Company) for services  rendered  during the six months ended  December
          31, 1998,  which  resulted in a charge to operations of  approximately
          $576,000.  Management  determined  the fair value of the common  stock
          based  on its  quoted  market  price  on the  day of  issuance  less a
          discount  of 25% due to the  restricted  nature  of the stock.

     .    260,000  unregistered  shares were  issued to  Internet  Technologies,
          Inc.,  a  consultant  to the Company  ("Internet  Technologies"),  for
          services  rendered during the nine months ended March 31, 1999,  which
          resulted  in  a  charge  to  operations  of  approximately   $999,000.
          Management  determined the fair value of the common stock based on its
          quoted  market price on the day of issuance less a discount of 25% due
          to the  restricted  nature of the  stock.  Internet  Technologies  has
          demand registration rights on 200,000 of these shares.


                                      F-17
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

10   Shareholders' equity (continued)

     Common stock issuances (continued)


     .    100,000  unregistered shares were issued to a financial consultant and
          100,000 unregistered shares were issued to the Company's legal counsel
          for services  rendered  during the three months ending March 31, 1999,
          which resulted in an aggregate  charge to operations of  approximately
          $768,000.  Management  determined  the fair value of the common  stock
          based  on its  quoted  market  price  on the  day of  issuance  less a
          discount  of 25% due to the  restricted  nature  of the stock.

     .    100,000  unregistered  shares  were  issued  in  conjunction  with the
          appointment of two new Directors of the Company effective  February 1,
          1999 (50,000 shares each), which resulted in a charge to operations of
          approximately  $384,000.  Management  determined the fair value of the
          common  stock based on its quoted  market price on the day of issuance
          less a discount of 25% due to the  restricted  nature of the stock.


     .    On June 29,  1999,  the  Company  completed a private  placement.  The
          Company sold 800,000 shares of unregistered  common stock at $7.50 per
          share (a total of  $6,000,000)  exclusive of commission and other fees
          totalling  $647,275.  The placement  agent received  80,000  warrants,
          exercisable  at $9.375  each;  the  warrants  vest one year  after the
          closing of the private  placement and expire four years after vesting.
          Additionally,  60,000 shares were issued to Internet  Technologies for
          services rendered in connection with the private  placement.  Internet
          Technologies  also has the right to  receive  up to 60,000  additional
          shares based upon the  completion of a second  private  placement,  if
          any.

     .    180,000  unregistered shares were issued in connection with the Merger
          (Note  4) on June  30,  1999  valued  at  $7.50  per  share,  totaling
          $1,350,000.

Another shareholder,  Greenleaf Capital Partners,  LLC (a pre-Merger shareholder
of Watchdog),  has demand  registration rights on its 1,141,360 shares of common
stock.

     Stock option plan

In June 1998,  the Company  adopted the 1998 Long Term Incentive Plan (the "1998
Incentive  Plan") in order to motivate  qualified  employees of the Company,  to
assist the Company in  attracting  employees  and to align the interests of such
persons with those of the Company's shareholders. The 1998 Incentive Plan, which
authorizes the issuance of a maximum of 282,500 shares of common stock, provides
for a grant of incentive stock options,  non-qualified stock options, restricted
stock,  performance grants and other types of awards to officers, key employees,
consultants and independent  contractors of the Company and its affiliates.  The
1998 Incentive Plan is  administered  by the Board of Directors,  which has sole
discretion and authority,  consistent  with the provisions of the 1998 Incentive
Plan, to determine which eligible  participants  will receive options,  the time
when options will be granted and the terms of options granted.

                                      F-18
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

10   Shareholders' equity (continued)

     Stock option plan (continued)

     During the third and fourth  quarters of the year ended June 30, 1999,  the
     Company  granted  options to purchase  219,000 shares of common stock under
     the 1998  Incentive  Plan to key employees at exercise  prices ranging from
     $5.00 to $16.25  per share  that vest in equal  installments  over three to
     five years  commencing on the first  anniversary of the date of grant.  The
     exercise  prices  represent the closing quoted price of the common stock on
     the day  immediately  prior to the grants.  All options expire in ten years
     from the grant date.

     Warrants

     On June 17, 1998, in conjunction with the Reverse Acquisition,  the Company
     granted  warrants  to  purchase  1,207,500  shares of its  common  stock as
     follows:

     .    620,000  ten-year  warrants  issued to the former members of NetWolves
          LLC at an exercise price of $1.63 per share. Originally,  an aggregate
          of  1,000,000   warrants  were  granted  to  six   individuals;   upon
          termination  of two of these  individuals  in  January  1999,  380,000
          warrants were cancelled resulting in 620,000 outstanding warrants. The
          warrants were originally issued as performance-based warrants, vesting
          only upon achieving  specified financial targets. In January 1999, the
          vesting  terms of 600,000  of the  warrants  were  amended so that the
          warrants  would  automatically  vest in June  2000.  Accordingly,  the
          modification  changed  the  warrant  to  a  fixed-warrant  and  a  new
          measurement date was established.  The intrinsic value of the modified
          warrants approximated $1,908,000,  which will be charged to operations
          over the 18-month vesting period (also see Note 14).

     .    500,000 five-year warrants issued to certain  pre-Reverse  Acquisition
          shareholders  of  Watchdog  at an  exercise  price of $1.63 per share.
          These  warrants  became  exercisable  when  granted.  The  pre-Reverse
          Acquisition shareholders have demand registration rights on the shares
          of common stock issuable upon exercise of these warrants.

     .    87,500  five-year  warrants  issued to two  individuals  who  provided
          consulting  services  with  respect to the Reverse  Acquisition  at an
          exercise price of $2.00 per share.  These warrants became  exercisable
          when granted.

     For the year ended June 30, 1999, the Company granted  warrants to purchase
     its common stock as follows:

     .    200,000  ten-year  warrants  issued to the Company's Vice President of
          Sales and  Marketing  (who is also a Director  of the  Company)  at an
          exercise  price of  $1.63  per  share.  The  warrants  vest in 5 years
          subject to acceleration if specified  financial  targets are achieved.
          These warrants were issued for services rendered during the six months
          ended  December  31, 1998 and  resulted in a charge to  operations  of
          approximately $699,000, based upon the intrinsic value of the warrants
          on the date of grant.

                                      F-19
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

10   Shareholders' equity (continued)

     Warrants (continued)

     .    100,000  two-year  warrants  were issued to two  terminated  employees
          (50,000  warrants  each) at an exercise price of $5.00 per share (also
          see Note 14). The warrants vest only upon the independent contractors'
          submission  of  valid,   legally  binding   purchase  orders  totaling
          $10,000,000  for the period from January 1, 1999 to December 31, 1999.
          The  potential   charge  to  operations   upon   achieving   specified
          performance  criteria  is  approximately  $115,000.  The  value of the
          warrants has been calculated  using the  Black-Scholes  option-pricing
          model with the  following  assumptions:  no dividend  yield,  expected
          volatility of 65%,  risk-free  interest rate of 4.62%, and an expected
          term of two years.

     .    25,000 five year  warrants  were granted to a consultant in March 1999
          for services  rendered,  which  resulted in a charge to  operations of
          $131,000, based on the fair value of the warrant at the time of grant.

     .    300,000 warrants were issued to Anicom, Inc. for cash consideration of
          $300,000 (see Note 13).

     .    80,000  warrants were issued to the placement agent in connection with
          a private  placement  of common stock (see  "common  stock  issuances"
          above).

     Summary of options and warrants

     The Company has adopted the  disclosure  provisions of SFAS 123 and applies
     APB  25  in  accounting  for  stock  options   granted  to  employees  and,
     accordingly,  recognizes  non-cash  compensation  charges  related  to  the
     intrinsic  value of employee stock  options.  If the Company had elected to
     recognize  compensation  expense  based  upon the fair value at the date of
     grant consistent with the methodology prescribed by SFAS 123, the effect on
     the Company's net loss and net loss per share would be as follows:
<TABLE>
<CAPTION>
                                                                     Period from
                                                                     February 13,
                                             Year ended             1998 (inception)
                                               June 30,               to June 30,
                                                 1999                    1998
                                             -------------          ----------------
      <S>                                    <C>                      <C>
      Net loss
          As reported                        $ (5,955,327)            $  (99,414)
          Pro forma                          $ (5,549,779)            $  (99,414)

      Basic and diluted net loss per share
          As reported                        $      (1.27)            $     (.04)
          Pro forma                          $      (1.18)            $     (.04)
</TABLE>
                                      F-20
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998


10   Shareholders' equity (continued)

     Summary of options and warrants (continued)

     The fair value of common stock  options and  warrants  granted to employees
     during  the  year  ended  June  30,  1999 has  been  calculated  using  the
     Black-Scholes  option-pricing  model  with the  following  assumptions:  no
     dividend  yield,  expected  volatility  of 65%,  risk-free  interest  rates
     ranging from 4.6% to 5.9%, and expected lives ranging from 5 to 10 years.

     The  following  is a summary  of all of the  Company's  stock  options  and
     warrants  that were  describe  in  detail  above  (excluding  the TSG stock
     options):
<TABLE>
<CAPTION>

                                                                        Weighted
                                                                         average
                                                                        exercise
                                                  # of Options            price
                                                  ------------         ----------
     <S>                                           <C>                 <C>
     Outstanding at February 13, 1998 (inception)

        Granted                                    1,587,500           $    1.65
        Exercised                                        -             $      -
        Forfeited                                        -             $      -
                                                   ---------
     Outstanding at June 30, 1998                  1,587,500           $    1.65

        Granted                                      924,000           $    5.08
        Exercised                                        -             $      -
        Forfeited                                   (396,000)          $    1.77
                                                   ---------
     Outstanding at June 30, 1999                  2,115,500           $    3.13
                                                   ---------
</TABLE>
     The  following  table  summarizes  information  about all of the  Company's
     options and warrants outstanding at June 30, 1999:
<TABLE>
<CAPTION>
                                     Options outstanding
                                  Number        Weighted average         Options
           Options             outstanding at remaining contractual    exercisable
        Exercise Price         June 30, 1999       life (years)     at June 30, 1999
        --------------         -------------  --------------------- ----------------
        <S>                     <C>                    <C>              <C>
        $       1.630           1,320,000               7.1             500,000
        $       2.000              87,500               4.0              87,500
        $       5.000             574,500               5.1              25,000
        $       9.375              80,000               4.0                 -
        $       10.250 - $16.250   53,500               9.8                 -
                                ---------                               --------
                                2,115,500                               612,500
                                =========                               ========
</TABLE>
                                      F-21

<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998


11   Benefit from income taxes

     The benefit from income taxes consists of the following:
<TABLE>
<CAPTION>
                                                                      Period from
                                                                      February 13,
                                                                          1998
                                                   Year ended         (inception) to
                                                   June 30, 1999      June 30, 1998
                                                   -------------     ---------------
       <S>                                          <C>              <C>
       Current  Federal and states                  $       -        $       -
       Deferred  Federal                                    -             15,000
       Deferred  states                                     -              5,000
                                                    ------------     -----------
       Benefit from income taxes                    $       -        $    20,000
                                                    ============     ===========
</TABLE>
     The following  table  summarizes the  significant  differences  between the
     Federal  statutory  tax  rate  and the  Company's  effective  tax  rate for
     financial reporting purposes:
<TABLE>
<CAPTION>

                                                                       Period from
                                                                        February 13,
                                                                           1998
                                                         Year ended    (inception) to
                                                        June 30, 1999   June 30, 1998
                                                        -------------  --------------
       <S>                                                    <C>          <C>
       Federal statutory tax rate                             (34.0)%      (34.0)%
       State and local taxes net of Federal tax effect         (6.0)        (5.0)
       Stock and option compensation                           17.8           -
       Non-deductible reserves                                   .2           -
       Effect of graduated tax rates                             -           9.0
       Permanent differences                                     .3          1.9
       Valuation allowance on deferred tax asset               21.7         11.4
                                                         ------------  ---------------
           Effective tax rate                                     0%       (16.7)%
                                                         ============  ===============
</TABLE>
     The tax effects of temporary  differences and carry forwards that give rise
     to deferred tax assets or liabilities are summarized as follows:
<TABLE>
<CAPTION>
                                                                     June 30,
                                                         ----------------------------
                                                              1999             1998
                                                              ----             ----
        <S>                                               <C>            <C>
        Non-deductible reserves                          $     16,000    $      1,500
        Accrual to cash conversion  TSG                        73,000             -
        Net operating loss carry forward                    1,100,000          32,000
        Net assets held for sale                                  -           (20,000)
        Valuation allowance on net deferred tax asset      (1,189,000)        (13,500)
                                                          -----------     -----------
           Deferred tax asset, net                        $       -       $       -
                                                          ===========     ===========
</TABLE>
                                      F-22
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

11   Benefit from income taxes (continued)

     The Company has provided for full valuation  allowances on the net deferred
     tax assets due to the uncertainty of future income tax estimates.

     At June 30, 1999, the Company has net tax operating loss  carryforwards  of
     approximately $2,750,000 available to offset future income tax liabilities,
     if any. The  carryforward  losses expire in the years 2011 through 2019 and
     have  not  been  recognized  in  the  accompanying  consolidated  financial
     statements  as a result of a valuation  of the total  potential  tax asset.
     Approximately  $700,000 of these carryforwards were generated by SMCI prior
     to the Merger  and,  accordingly,  are subject to  restriction  pursuant to
     Section 382 of the Internal Revenue Code.

12   Related party transactions

     In  connection  with the Merger,  the Company has assumed  obligations  and
     entered into  commitments  with one of the Company's  shareholders,  who is
     also a director and treasurer of TSG, as follows:

     .    Deferred  compensation  payable aggregating $100,000 at June 30, 1999,
          represents  unpaid  salary to the TSG  officer for  services  rendered
          prior to the  Merger.  The  deferred  compensation  is  payable in six
          monthly installments of $16,667 commencing in October 1999.

     .    TSG leases its office facilities from the TSG officer for annual lease
          payments of approximately $75,000 through December 2004.

     .    The loans and advances  from the TSG officer of $144,348 is payable in
          four equal monthly  installments of $37,203 (including interest at 8%)
          commencing on July 1, 1999.

     In addition,  in July 1999, another shareholder,  who is also the President
     and Chief Executive Officer of TSG, borrowed $50,000 at an interest rate of
     6% per  annum.  Interest  on the loan is payable  quarterly  and the entire
     principal balance is payable upon the third anniversary date of issuance.

13   Major customer - Anicom, Inc.

     In January  1999,  the Company  entered into a five-year  exclusive  master
     distribution  agreement  with Anicom,  Inc.  ("Anicom") to  distribute  the
     FoxBox  throughout  North  America.  Additionally,  Anicom is  entitled  to
     receive  a  commission  on any  sales or  leases  of the  FoxBox  unit made
     directly by the Company that Anicom was not involved  with and a commission
     on certain technical  support revenue earned by the Company.  The agreement
     may be  terminated  by the Company with payment of a specified  termination
     fee or it may be  terminated  should  Anicom  fail  to meet  minimum  order
     requirements.  In accordance  with the terms of the agreement,  the Company
     shipped  approximately  $1,700,000 of product to Anicom which accounted for
     approximately  95% of the  Company's  revenue  for the year  ended June 30,
     1999.
                                      F-23
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

13   Major customer - Anicom, Inc. (continued)

     For cash consideration paid to the Company of $300,000,  the Company issued
     Anicom  300,000  warrants  to  purchase  common  stock of the Company at an
     exercise price of $5 per share. The warrants issued to Anicom shall vest in
     equal installments over three years, commencing on the first anniversary of
     the  agreement  and shall  expire in January  2004.  Anicom  also  obtained
     piggyback registration rights with respect to the issuable shares of common
     stock.

14   Commitments and contingencies

     Leases

     The  Company has  entered  into  several  leases for office  space,  office
     equipment and vehicles. In addition, as a result of the Merger, TSG assumed
     several leases which are included  below. At June 30, 1999, the approximate
     future minimum annual lease payments  (including the lease for office space
     with the TSG officer, Note 12) are summarized as follows:
<TABLE>
<CAPTION>

        Fiscal year ending June 30,
                <S>               <C>
                2000              $       323,000
                2001                      314,000
                2002                      275,000
                2003                      102,000
                2004                       39,000
                                  ---------------
                                  $     1,053,000
                                  ===============
</TABLE>

     Total rent expense for the year ended June 30, 1999 and for the period from
     February  13,  1998  (inception)  to June 30, 1998 was  $139,417  and $351,
     respectively.

     Employment agreements

     In  conjunction  with the  consummation  of the  Reverse  Acquisition,  the
     Company entered into  employment  agreements with 5 executives who were the
     principal  pre-Reverse  Acquisition owners of NetWolves,  LLC. Two of these
     executives were subsequently  terminated and one executive restructured his
     employment  contract  as  discussed  below.  Each  of  the  agreements  are
     substantially identical and provide for the following significant terms:

     .    employment  term of three years  commencing  June 1999, with automatic
          renewals for  additional  three-year  terms unless  terminated  by the
          Company for cause or terminated by the executive,

     .    salary of $100,000,  increasing up to $250,000, dependent on specified
          revenue targets,

     .    bonus of 2% of the Company's gross profit, and

     .    200,000  warrants for four of the executives and 180,000  warrants for
          the fifth executive (see Note 10).

                                      F-24
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

14   Commitments and contingencies (continued)

     Employment agreements (continued)

     In January 1999, two of the five executives  were terminated  pursuant to a
     Settlement  Agreement and Mutual  Release.  In exchange for terminating the
     employment  agreements  and  cancellation  of 380,000  warrants  (in total)
     previously issued,  the Company will pay each terminated  executive $50,000
     in cash and enter into a Manufacturer's  Representation  Agreement ("MRA").
     The MRA appoints the terminated  executive as an independent  non-exclusive
     sales person to promote the sale of the Company's products.  The MRA is for
     a one-year term commencing January 1999 and provides for a 5% commission on
     all net sales attributed to such representative.  Additionally, each of the
     terminated executives received 50,000 performance-based  warrants (see Note
     10).

     On  September  2,  1999,  one  of  the  five  executives  restructured  his
     employment  agreement  whereby the executive  tendered his resignation as a
     Director and as Chief Operating  Officer of the Company effective August 1,
     1999  with  his  employment  agreement  terminating  on June 15,  2001.  In
     addition, 50,000 of the executive's 200,000 warrants were cancelled.

     In  connection  with the  Merger  (Note 4),  TSG  entered  into  employment
     agreements  with 5 executives who were the principals of SMCI.  Each of the
     agreements  are  substantially  identical  and  provide  for the  following
     significant terms:

     .    employment terms of three years with automatic renewals for additional
          one-year  terms  unless  terminated  by either party  through  written
          notice,
     .    annual salaries of $150,000 for two individuals and $100,000 for three
          individuals adjusted annually for cost of living increases,

     .    two of the executives  shall each receive 5% of pre-tax profits of TSG
          (up to a maximum of 100% of each  employee's base salary) and three of
          the executives  shall each receive 1.67% of pre-tax profits of TSG (up
          to a maximum of 50% of each employee's base salary),

     .    An  aggregate of 605,000  incentive  TSG stock  options  issued to the
          employees (Note 4),

     .    An  aggregate of 175,000  contingently  issuable  incentive  TSG stock
          options to the employees (Note 4),

     .    If within  eighteen  months of the Merger,  TSG has not  initiated  an
          initial  public  offering  or  acquired a  publicly  held  shell,  two
          executives  shall  receive  10% of  pre-tax  profits  of TSG up to $10
          million  and 5% of pre-tax  profits in excess of $10  million,  not to
          exceed, in the aggregate, $1.5 million in compensation in any year.

     Pension Plan

     As of a result of the Merger,  TSG has assumed the obligations of a defined
     contribution  plan that  provides  retirement  benefits  to  qualified  TSG
     employees.  Company  contributions  to  the  plan  are  discretionary.   In
     addition, employees have the option of deferring and contributing a portion
     of their annual  compensation to the plan in accordance with the provisions
     of the plan.

                                      F-25
<PAGE>
                     NETWOLVES CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEAR ENDED JUNE 30, 1999 AND THE PERIOD FROM
                 FEBRUARY 13, 1998 (INCEPTION) TO JUNE 30, 1998

14   Commitments and contingencies (continued)

     Legal matters

     Certain  claims,  suits and  complaints  arising in the normal  course with
     respect to the Company's  uniformed security guard services operations have
     been filed or are pending against the Company. Generally, these matters are
     all  covered by a general  liability  insurance  policy.  In the opinion of
     management,  all such  matters  are without  merit or are of such kind,  or
     involve  such  matters,  as would  not  have a  significant  effect  on the
     financial position or results of operations of the Company,  if disposed of
     unfavorably.

15   Quarterly results of operations

     As a result of an  adjustment  to the  accounting  for certain stock option
     compensation,  the Company  recorded an adjustment in the fourth quarter of
     fiscal 1999, pertaining to the third quarter, which resulted in an increase
     to the net loss of $449,000 or $.10 per share.

16   Subsequent events

     Comdisco, Inc. agreement

     On July 26, 1999 the Company entered into an agreement with Comdisco,  Inc.
     ("Comdisco")  whereby  Comdisco will provide  management,  installation and
     technology  services to the  Company's  proprietary  Internet  distribution
     system.  In addition,  the agreement  provides for the creation of a credit
     facility to be utilized in connection with the sale and installation of the
     FoxBox in up to 40,000 locations over a four-year  period.  However,  there
     can be no assurances that the Company will actually  require the use of the
     credit facility.


     In connection with the agreement,  Comdisco was granted a five-year warrant
     to purchase 125,000 shares of the Company's  unregistered  common stock, at
     an  exercise  price  of  $10  per  share.   The  warrants  are  immediately
     exercisable.  The value of the warrants of approximately $1,676,000 will be
     amortized over the initial term of the agreement  (four years) and has been
     calculated using the Black-Scholes  option-pricing model with the following
     assumptions:  no dividend  yield,  expected  volatility  of 65%,  risk-free
     interest rate of 5.84%, and an expected term of five years.


     Issuance of warrants

     For services  rendered,  on July 31, 1999,  a financial  consultant  of the
     Company  was  granted a five-year  warrant to  purchase  100,000  shares of
     common  stock,  at an exercise  price of $12 per share.  The  warrants  are
     immediately  exercisable and the shares  issuable  pursuant to the warrants
     have piggyback registration rights.

     Private placement

     On September  29, 1999,  the Company  sold 100,000  shares of  unregistered
     common  stock  to an  accredited  investor  at $15 per  share  (a  total of
     $1,500,000) exclusive of commissions totalling $105,000.

                                      F-26



                            Master Program Agreement


This Master Program Agreement  ("Agreement") dated July 26, 1999 is entered into
between  NetWolves  Corporation,   a  New  York  corporation,   located  at  200
Broadhollow Road, Melville, New York 11747, ("NetWolves"), and Comdisco, Inc., a
Delaware  Corporation,  located  at 6111  N.  River  Road,  Rosemont,  IL  60018
("Comdisco").

NetWolves  is the  manufacturer  of  certain  equipment  known as the FoxBox and
Comdisco is in the business of financing  equipment  and  providing  services in
connection with the equipment.

This Agreement  contemplates an on-going business relationship in which Comdisco
will (i) acquire  from  NetWolves,  all of the right,  title and interest in the
equipment with the exception of intellectual property rights,  software upgrades
and software  application  and content;  (ii) take an  assignment  in associated
leases between NetWolves and certain  customers of NetWolves;  and (iii) provide
services with respect to the equipment as NetWolves'  subcontractor  and take an
assignment of the services fees in connection therewith.

NOW  THEREFORE,  in  consideration  of  the  foregoing  and  the  covenants  and
conditions  set forth herein,  the parties have entered into this  Agreement and
mutually agree as follows.

Definitions

"Commencement  Certificate" means an acceptance certificate substantially in the
form of Exhibit A confirming acceptance of the leased Equipment.

"Equipment" means the FoxBox equipment which will be sold to Comdisco under this
Agreement  and leased to Target  Customers  by  NetWolves  or sold  directly  by
NetWolves to Target Customers. The Equipment is specified in Exhibit B.

"Lease" or "Lease  Documents" means the Product  Agreement and related Equipment
Schedule  in the  form of  Exhibit  C which  NetWolves  will  use to  lease  the
Equipment and provide Services to Target Customers.

"Lessee" means a Target Customer under a Lease.

"Losses" means all losses, claims, liabilities,  demands and expenses whatsoever
including, without limitation, reasonable attorney's fees.

"Related Software" means NetWolves'  software described in Exhibit D which is an
integral part of the Equipment.

"Services" means the roll-out, maintenance, deinstallation and other services as
detailed in the Statement of Work under Services and Lease Documents provided by
Comdisco to Target Customers as NetWolves' subcontractor.

"Services  Documents" means the Services  Agreement and Services Schedule in the
form of  Exhibit  E which  NetWolves  will use to  provide  Services  to  Target
Customers who purchase the Equipment directly from NetWolves.

"Software Application and Content"

"Target  Customer" shall be limited to companies that will lease or purchase the
Equipment as detailed in Exhibit F.

"Transaction  Package for Leased  Equipment"  means the following  completed and
properly  executed  documents  between  NetWolves and the Target  Customer:  (i)
Product Agreement; (ii) Equipment Schedule.

"Transaction  Package for Purchased Equipment" means the following completed and
properly  executed  documents  between  NetWolves and the Target  Customer:  (i)
Services Agreement; (ii) Services Schedule; and (iii) Master Sale Agreement.
<PAGE>
1.0  Transaction Origination, Administration and Assignment

1.1  Comdisco and  NetWolves  will,  simultaneously  with the  execution of this
     Agreement,  execute the Master Agreement and Services  Schedule in the form
     of Exhibit G to  provide  the  Services  on behalf of  NetWolves  to Target
     Customers pursuant to the terms of this Agreement.

1.2  Upon approving the credit of a Target Customer (as detailed in Section 3.0)
     Comdisco will prepare and forward  original Lease or Services  Documents to
     NetWolves, as applicable,  to present to the Target Customer for execution.
     Any  changes to the Lease or Services  Documents  will  require  Comdisco's
     approval.

1.3  Upon Comdisco's receipt and approval of the Transaction  Package for Leased
     Equipment,  NetWolves,  upon  receipt  of  payment  from  Comdisco  for the
     Equipment,  will be deemed to have  assigned to Comdisco all of  NetWolves'
     right,  title  and  interest  in  the  Equipment,  with  the  exception  of
     intellectual  property rights,  software upgrades and Software  Application
     and Content, the Product Agreement,  and the Equipment Schedule,  including
     the right to receive  any rental  payments  included  therein.  Thereafter,
     NetWolves  will have no further  right to any rentals  associated  with the
     Lease  Documents  during  the  Initial  Term  of  any  Equipment  Schedule.
     Notwithstanding the foregoing  assignment,  NetWolves shall not be relieved
     of  any  of  its   obligations  as  a  manufacturer,   including   warranty
     obligations.

1.4  Upon Comdisco's receipt and approval of a Transaction Package for Purchased
     Equipment,  NetWolves,  upon  receipt  of  payment  from  Comdisco  for the
     Equipment,  will be deemed to have assigned to Comdisco all amounts due, if
     any, under a Master Sale  Agreement,  and all right,  title and interest to
     the Services Agreement and Services Schedule (except for any obligations to
     be performed by NetWolves pursuant to the Master Agreement) and all amounts
     due or to become due thereunder. Thereafter, NetWolves will have no further
     right to any revenues associated with the foregoing documents.

1.5  Upon taking an assignment as described in 1.3 and 1.4 above or upon receipt
     of  the  executed  Master  Sale  Agreement,  Comdisco  will  undertake  all
     invoicing on  NetWolves'  letterhead  to the Target  Customer in accordance
     with the  terms of the  Lease or  Services  Documents  or the  Master  Sale
     Agreement,  as applicable.  If NetWolves  becomes aware of any default by a
     Target  Customer under the Lease or Services  Documents,  it shall promptly
     notify Comdisco.

1.6  Lessee shall be  responsible  for and shall file and pay all property taxes
     incurred  in  connection  with the  lease  of the  Equipment.  The  Product
     Agreement  shall  provide  that  Lessee  shall  indemnify  and hold  Lessor
     harmless from and against all taxes,  other than those taxes based upon the
     net income of Lessor.

1.7  NetWolves  will at all times  remain the owner of the Related  Software and
     agrees to transfer all Related Software to the Target  Customers,  pursuant
     to the terms of NetWolves' standard documentation evidencing such transfer.

1.8  Comdisco  acknowledges that it is purchasing the Equipment for resale/lease
     and will provide NetWolves with valid exemption certificates.


2.0  Financial Arrangement
<PAGE>
2.1  Comdisco  has  entered  into  this  financial  arrangement  on the basis of
     NetWolves  intending to implement  40,000 Target Customer  locations within
     forty-eight (48) months from the date of this Master Program Agreement.

2.2  The calculation of the Equipment  purchase price is contingent upon whether
     the Target Customer purchases or leases the Equipment ("purchase price").

     2.2.1Target Customer Elects to Purchase the Equipment. If a Target Customer
          elects to purchase the Equipment  from  NetWolves  instead of entering
          into a  Lease,  and  elects  not  to  take  the  Services,  then  upon
          Comdisco's receipt and approval of a Transaction Package for Purchased
          Equipment  containing the Master Sale  Agreement  only, and receipt of
          the sale  price  from the  Target  Customer,  Comdisco  will  remit to
          NetWolves an amount equal to the purchase  price of the Equipment less
          $1,400.  If a Target  Customer  elects to purchase the  Equipment  and
          elects to take the Services, then upon Comdisco's receipt and approval
          of a Transaction  Package for  Purchased  Equipment and receipt of the
          sale price from the Target Customer,  Comdisco will remit to NetWolves
          the full purchase price. All Services provided will be based on a term
          of forty-eight (48) months.

     2.2.2Target  Customer  Elects to Lease the Equipment.  If a Target Customer
          elects  to lease  the  Equipment,  then upon  Comdisco's  receipt  and
          approval of a Transaction  Package for Leased Equipment,  the purchase
          price for each unit of Equipment  will equal the present  value of the
          rental  stream  at an  interest  rate  commensurate  with  the  Target
          Customer's  credit rating and prevailing  market rates.  Comdisco will
          purchase the Equipment from NetWolves, without recourse but subject to
          Section 4.1(h), at 95% of the purchase price. Comdisco agrees to remit
          payment  to  NetWolves  for the  Equipment  within  ten  (10)  days of
          Comdisco's receipt and approval of the applicable  Transaction Package
          for Leased  Equipment  and  Commencement  Certificate.  At the time of
          payment, NetWolves will provide Comdisco with a bill of sale.

2.3  Comdisco  will  charge a Service  fee of $600.00  to  install  each item of
     Equipment.  Comdisco  will  charge a  minimum  Service  fee of  $300.00  to
     deinstall each item of Equipment.  In the event NetWolves  charges a Target
     Customer  a Service  Fee  greater  than  $300.00  to  deinstall  an item of
     Equipment, NetWolves and Comdisco will share the excess amount on the basis
     of 73% to NetWolves and 27% to Comdisco. All amounts in connection with the
     installation  or  deinstallation  of the  Equipment  will be invoiced  upon
     completion of such installation or deinstallation.

2.4  For the first  twelve  (12) months of an  Equipment  Schedule or a Services
     Schedule,  as applicable,  the Target customer will not be obligated to pay
     Service fees other than for  installation and  deinstallation,  because the
     Equipment is considered  to be under  manufacturer  warranty.  Beginning in
     month thirteen (13) of the Equipment or Services Schedule, Customer will be
     obligated to pay a Service fee of $28.00 per month per item of Equipment.

2.5  The rent under an  Equipment  Schedule is estimated to be $200.00 per month
     per item of Equipment installed, exclusive of taxes.

2.6  The Lease Documents will require Lessee to pay Lessor the last month's rent
     at the time that the first rent payment is due.

2.7  Comdisco's  obligation  to purchase the  Equipment and to pay NetWolves the
     purchase price is contingent upon the following:
<PAGE>
     a.   Lessee's  credit has been  approved and there is no adverse  change in
          Lessee's credit as defined under the Equipment Schedule.

     b.   The Lessee is not in default under any Equipment Schedule.

     c.   Comdisco has received a completed and approved Transaction Package for
          Leased Equipment, and an executed Commencement Certificate.

     d.   Comdisco  has  received  a  completed  and  approved  the   applicable
          Transaction  Package for  Purchased  Equipment and the sale price from
          the Target Customer.

     e.   NetWolves is not in default under this Agreement, the Master Agreement
          or the Services Schedule.

     f.   Neither  NetWolves nor a Target Customer is in default under any Lease
          or Services Documents.

2.8  NetWolves agrees that Comdisco may, on a periodic basis,  review and audit,
     at reasonable times and on reasonable notice,  NetWolves' sale of Equipment
     to Target Customers.

3.0  Credit Review

3.1  Prior to  entering  into  Lease  or  Services  Documentation  with a Target
     Customer, NetWolves will request credit approval from Comdisco with respect
     to the  Target  Customer.  Credit  approval  and the rent  under  the Lease
     Documents will be calculated  based on the Credit Table set forth below and
     all credit approval will be valid for a period of forty-five (45) days from
     the date of approval.

3.2  Credit Table
     Moodys Rating            Basis Points Above Like Term Treasuries
     -------------            ---------------------------------------
     AAA   Aa3                175 basis points
     A1   A3                  200
     Baa1   Baa3              225
     Below Baa3               Individual Credit Review Needed

     Comdisco  reserves  the right to re-adjust  the basis  points  listed above
     based upon a change in market  conditions as determined by Comdisco  within
     six (6)  months  from the date of this  Agreement  and every six (6) months
     thereafter.  If market  conditions  change so that  Comdisco  readjusts the
     basis points as provided for herein,  and NetWolves deems such readjustment
     to be above  competitive  market  rates,  NetWolves  will obtain  three (3)
     quoted  rates  from a third  party  using a similar  point  structure  (the
     "Quoted  Rates").  If Comdisco  matches  the  average of the Quoted  Rates,
     NetWolves  will be deemed to accept  Comdisco's  readjustment.  If Comdisco
     elects  not to match  the  Quoted  Rates,  NetWolves  may  obtain  hardware
     financing from one of the three parties supplying the Quoted Rates.


4.0  Representations and Warranties

4.1  NetWolves  hereby  represents  and warrants (as of the date of execution of
     this Agreement as to (a) and (b) below) that:
<PAGE>

a.   It is a corporation  duly  organized and validly  existing in good standing
     under the laws of the jurisdiction of its incorporation with full corporate
     power  to  enter  into  this  Agreement  and  to  carry  out   transactions
     contemplated herein.

b.   The  execution  and  delivery of this  Agreement,  and all other  documents
     contemplated  herein (including but not limited to the Warrant  Agreement),
     as well as performance of the contemplated transactions hereunder have been
     duly authorized by all necessary  corporate action and this Agreement,  and
     all other  documents  contemplated  herein,  constitute a legal,  valid and
     binding obligation enforceable in accordance with its terms.

c.   Except as detailed  in this  Agreement,  there will be no other  agreements
     between  NetWolves  and the Target  Customer  relating to the Equipment and
     Services in contradiction of the terms of this Agreement. Nothing contained
     in this Agreement  shall  preclude  NetWolves from selling or leasing other
     services to the Target Customer.

d.   All credit information known to NetWolves concerning a Target Customer will
     have been disclosed or made available to Comdisco.

e.   The Target  Customer is not be in default  under any other  agreement  with
     NetWolves which is not the subject of this Agreement.

f.   As of the payment of the purchase  price to  NetWolves,  it is the owner of
     the Equipment and that title to the Equipment will be free and clear of all
     liens, claims,  interests and encumbrances of any kind, including,  but not
     limited to, infringement for claims of third party proprietary rights.

g.   If Comdisco purchases the Equipment from NetWolves,  pursuant to the Target
     Customer's  election to lease the  Equipment,  title to the Equipment  will
     vest in Comdisco upon payment of the purchase price.

h.   The Equipment will be in working order at the time of  installation  at the
     Target  Customer  location,  will  perform  in  all  material  respects  in
     accordance  with  NetWolves   specifications  published  at  the  time  the
     Equipment  is  installed,  and will be subject to  NetWolves  then  current
     manufacturer warranties.

4.2  Comdisco  hereby  represents and warrants that, as of the date of execution
     of this Agreement that:

     a.   It is a  corporation  duly  organized  and  validly  existing  in good
          standing under the laws of the jurisdiction of its incorporation  with
          full corporate power to enter into this Agreement and to carry out the
          transactions contemplated herein.

     b.   The execution and delivery of this Agreement,  and all other documents
          contemplated  herein,  as well as the performance of the  contemplated
          transactions  hereunder  have been duly  authorized  by all  necessary
          corporate   action  and  this  Agreement,   and  all  other  documents
          contemplated herein,  constitute a legal, valid and binding obligation
          enforceable in accordance with its terms.


5.0  Indemnification

     5.1  NetWolves  agrees to  indemnify  and hold  harmless  Comdisco  and its
          affiliates, subsidiaries, employees and agents, successors and assigns
          from any and all:
<PAGE>
          a.   Losses arising from any third party claims based upon a breach of
               NetWolves' representations,  warranties or obligations under this
               Agreement.

          b.   Losses  resulting  directly or indirectly from claims  including,
               without   limitation,   third  party  claims  arising  in  strict
               liability   or   negligence   or   claims  of   infringement   or
               misappropriation  of any  proprietary  interest  or  right of any
               third party, including without limitation any trademark,  patent,
               copyright or trade secret in connection with the Equipment and/or
               Related Software:

          c.   Losses  arising from third party claims based upon any inaccurate
               or incomplete  information willfully or intentionally provided by
               NetWolves.

5.2  In the event that a third party  claims that the  Equipment  or any Related
     Software  infringes a trade secret,  patent,  copyright or any  proprietary
     right of a third party,  NetWolves agrees to defend Comdisco, at NetWolves'
     expense,   and  NetWolves  will  pay  all  costs,  damages  and  reasonable
     attorney's  fees awarded to a third party  arising from such  infringement.
     Comdisco  agrees to promptly  notify  NetWolves  of any such claim and will
     allow  NetWolves  to  control  the  defense  and  any  related   settlement
     negotiations,  provided such settlement does not affect Comdisco's right as
     owner of the  Equipment  nor  diminish  or  increase  Comdisco's  or Target
     Customer's rights or obligations under the Lease or Services Documentation.
     Comdisco may  participate  in the defense of any such claim at its own cost
     and expense.


6.0  Limitation of Liability

     IN CONNECTION WITH THIS AGREEMENT,  NEITHER  COMDISCO NOR NETWOLVES WILL BE
     LIABLE TO THE OTHER FOR INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES EVEN IF
     ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
<PAGE>
7.0  Equipment Maintenance

7.1  The   responsibilities   of  Comdisco  and  NetWolves  in  connection  with
     maintenance  will be as detailed in the Statement of Work,  attached to the
     Services Schedule under the Master Agreement.


8.0  Remarketing

8.1  Comdisco will, at the request of NetWolves,  either  directly or indirectly
     through its subcontractor, perform the following services following a Lease
     termination:

     a.   Upon  expiration  of the Initial Term of any Equipment  Schedule,  any
          in-place  extension  rental and  in-place  purchase  price  negotiated
          between  Comdisco and Lessee will be apportioned  between Comdisco and
          NetWolves as follows: NetWolves 73% and Comdisco 27%.

     b.   For any  Equipment  that is  returned to Comdisco by a Lessee at lease
          termination,  and that is  remarketed to a subsequent  user,  Comdisco
          will take the first  $400.00  per item of  Equipment  for  storage and
          refurbishing costs incurred by Comdisco.  Any remarketing  proceeds in
          excess of $400.00  shall be  apportioned  73% to NetWolves  and 27% to
          Comdisco.


9.0  Term and Termination

9.1  This Agreement  shall be effective as of the date first set forth above and
     shall  continue  for an  initial  period  of four (4) years  (the  "initial
     term"),  and  thereafter  shall be  automatically  renewed  for  additional
     one-year  periods (the "extended  term"),  unless  terminated in writing by
     either party given thirty (30) days prior to the  expiration of the initial
     term.  During the extended term,  either party may terminate this Agreement
     at any time upon thirty (30) days prior written notice.

9.2  Either party may, by written notice,  terminate this Agreement for cause if
     the other party fails to cure a material  default under the Agreement.  Any
     material  default  must  be  specifically   identified  in  the  notice  of
     termination. After written notice, the notified party will have thirty (30)
     days to remedy any default.  Failure to remedy the material  default within
     the  time  period  provided  for  herein  will  give  cause  for  immediate
     termination.

9.3  Notwithstanding any termination of this Agreement, the terms and conditions
     of this  Agreement  will survive for purposes of any Equipment  Schedule or
     Services Schedule in effect with a Target Customer.

9.4  Provided  Comdisco  is not in material  default  under this  Agreement  and
     subject to  paragraphs  4.1(c) and 3.2,  during the initial or any extended
     term of this  Agreement  or upon the lease or purchase  of 20,000  units of
     Equipment as  contemplated  under this  Agreement,  whichever  comes first,
     NetWolves  agrees not to enter into any  agreement in  connection  with any
     Target Customer with any other technology services provider for the purpose
     of  providing  hardware  financing  and the  Services  specified  under the
     Statement of Work in Exhibit E.


10.0 Publicity
<PAGE>
     Except as hereinafter provided in this Section, NetWolves and Comdisco will
     consult  with each other  before  issuing  any press  release or  otherwise
     making any public  statements  with respect to this  Agreement or the other
     transactions contemplated hereby, including using any tradename, or service
     mark  which  identifies  the  other  party,  and  shall not issue any press
     release or make any such public statement prior to receiving the consent of
     the  other  party,  which  consent  will not be  unreasonably  withheld  or
     delayed.  Nothing  contained  herein shall prohibit any party from making a
     press release or other statement required by law or by obligations pursuant
     to any agreement  with any automated  interdealer  quotation  system if the
     party  making  the  disclosure  has first  consulted  with the other  party
     hereto.


11.0 Warrant Coverage

     In   consideration   of  entering  into  this  Agreement,   NetWolves  will
     simultaneous with the execution of this Agreement issue a Warrant Agreement
     granting to  Comdisco  the right to purchase  175,000  shares of  NetWolves
     Common Stock, for an Exercise Price of $10.00 per share,  with a term of no
     less  than  five (5)  years.  The  form of  Warrant  Agreement  shall be as
     attached to this  Agreement as Exhibit H, "Warrant  Agreement".  The number
     and purchase  price of shares shall be subject to adjustment as provided in
     Section  8 of the  Warrant  Agreement.  The  Exercise  Price may be paid at
     Comdisco's  election  either by cash or check or by  surrender  of Warrants
     ("Net Issuance") as determined in the Warrant Agreement.


12.0 Confidentiality

     Each party  (including its employees and agents) will use the same standard
     of care to protect  any  confidential  information  of the other  disclosed
     during negotiation or performance of this Agreement that it uses to protect
     its own confidential information. Confidential Information will not include
     information which (i) is or becomes publicly  available through no wrongful
     act of the receiving  party;  (ii) was known by the receiving  party at the
     time of disclosure  without any  obligation of  confidentiality;  (iii) was
     acquired by the receiving  party from a third party without  restriction on
     nondisclosure; or (iv) was developed independently by the receiving party.


13.0 Miscellaneous

13.1 Each party is an independent  contractor and, except as expressly set forth
     herein,  will have no authority to bind or commit the other party.  Nothing
     herein shall be deemed or construed to create a joint venture,  partnership
     or agency relationship between the parties.

13.2 Except as set forth  herein,  neither  party may  assign  their  rights and
     obligations  described in this Agreement  without the prior written consent
     of the other party except for assignments to affiliates or subsidiaries who
     agree to be bound by the terms of this Agreement. In addition, in the event
     of any such assignment on the part of NetWolves, NetWolves agrees to remain
     primarily  liable  for  the  performance  of  all  obligations   hereunder.
     Notwithstanding the foregoing,  Comdisco may subcontract the performance of
     its  Services to a third  party or assign its rights as provided  for under
     the Lease.

13.3 The waiver by either party of a breach of any  provision of this  Agreement
     will not be construed as a waiver of any subsequent breach. The invalidity,
     in whole or in part, of any provision of this Agreement will not affect the
     validity of the remaining provisions.
<PAGE>
13.4 This  Agreement  including  each Exhibit  represents  the entire  agreement
     between the parties and  supersedes  all oral or other  written  agreements
     understandings  between the parties  concerning the Equipment and Services.
     This  Agreement  may not be  modified  unless in writing  and signed by the
     party against whom enforcement of the modification is sought.

13.5 Any notice,  request or other  communication  under this  Agreement will be
     given in writing and deemed  received upon the earlier of actual receipt or
     three (3) days  after  mailing  if mailed  postage  prepaid  by  regular or
     airmail to the  address  set forth  above or, one day after such  notice is
     sent by courier or facsimile transmission.  Copies to NetWolves also are to
     be provided to David H. Lieberman, Esq., Blau, Kramer, Wactlar & Lieberman,
     P.C., 100 Jericho Quadrangle, Jericho, NY 11731.

13.6 Those terms and conditions which would, by their meaning or intent, survive
     the expiration or termination of this Agreement will so survive.

13.7 THIS  AGREEMENT  IS GOVERNED  BY THE LAWS OF THE STATE OF NEW YORK  WITHOUT
     REGARD TO ITS  CONFLICT  OF LAWS  PROVISIONS.  If there is any  dispute  or
     litigation  as a result of this  Agreement,  the  prevailing  party will be
     entitled to reasonable  attorney's fees. Any action by either party must be
     brought within two (2) years after the cause of action arose.

13.8 All Exhibits to this Agreement are hereby  incorporated  into and deemed to
     be a part of this Agreement.

13.9 In connection with the Services,  in the event of any conflict between this
     Agreement and the Master Agreement, the Master Agreement will govern.

13.10Terms  and   conditions  on  any   NetWolves'   purchase   order  or  other
     acknowledgment  form in addition to, different from or in conflict with the
     terms of this Agreement will be of no force or effect.

13.11NetWolves  will promptly  deliver to Comdisco  after filing such  documents
     with the Securities and Exchange Commission, at Comdisco's request:

     a.   NetWolves' Quarterly and Annual forms 10Q and 10K.

     b.   Such other information concerning the financial condition of NetWolves
          which is  available  to the public as  Comdisco  may from time to time
          request.

13.12Comdisco  and  NetWolves  will  cooperate  by  furnishing  such records and
     supporting material relating to transactions  contemplated hereunder as may
     be reasonably  requested by each party,  and in the  preparation  of forms,
     including notices to Lessees,  and the execution of such other documents as
     may be necessary to fulfill the intent and  effectuate  the purpose of this
     Agreement.

13.13This  Agreement  shall be  binding  upon and  inure to the  benefit  of the
     parties hereto and their respective successors,  personal  representatives,
     executors, heirs and permitted assigns.


IN WITNESS  WHEREOF,  the parties have executed this Agreement on the date first
set forth above.

NETWOLVES CORPORATION                        COMDISCO, INC.

By; /s/ Walter M. Groteke                    By: /s/ John Christopher

Title: ___________________________           Title: ____________________________

Date: _____________________________          Date: ____________________________


                                                               PRODUCT AGREEMENT

This  Product  Agreement  dated  ______________________________  is  made by and
between  NetWolves  Corporation  ("NetWolves")  with offices at 200  Broadhollow
Road, Melville, New York 11747, and ____________________________________________
____________________________________________________("Customer") with offices at
____________________________________________________.



SECTION 1. PROPERTY LEASED

NetWolves  leases to Customer  all of the  Products  described  on any  Schedule
entered into pursuant to the terms of this Product Agreement.

SECTION 2. TERM

On the Commencement Date Customer will be deemed to accept the Products, will be
bound to its rental obligations for the Products and the term of a Schedule will
begin and continue  through the Initial Term and thereafter  until terminated by
either party upon prior written notice  received  during the Notice  Period.  No
termination may be effective prior to the expiration of the Initial Term.

SECTION 3. RENT AND PAYMENT

Rent is due and payable in advance, in immediately available funds, on the first
day of  each  Rent  Interval  to the  payee  and at the  location  specified  in
NetWolves'  invoice.  Interim  Rent is due and  payable  when  invoiced.  If any
payment is not made when due, Customer will pay interest at the Overdue Rate.

SECTION 4. SELECTION AND WARRANTY AND DISCLAIMER OF
           WARRANTIES

4.1  Selection.  Customer  acknowledges  that it has  selected  the Products and
disclaims any reliance upon statements made by NetWolves.

4.2 Warranty and Disclaimer of Warranties.  NetWolves warrants to Customer that,
so long as  Customer is not in default,  NetWolves  will not disturb  Customer's
quiet and peaceful possession,  and unrestricted use of the Products. During the
term of the Schedule, NetWolves grants to Customer all applicable warranties for
the Products.  NetWolves assigns to Customer during the term of the Schedule any
manufacturer's warranties for the Products. NetWolves is not responsible for any
liability,  claim,  loss,  damage  or  expense  of any  kind  (including  strict
liability in tort) caused by the Products  except for any loss or damage  caused
by the negligent acts of NetWolves.  UNDER NO  CIRCUMSTANCES,  WILL NETWOLVES BE
LIABLE FOR INDIRECT,  SPECIAL,  CONSEQUENTIAL  OR PUNITIVE  DAMAGES EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

SECTION 5. TITLE AND ASSIGNMENT

5.1 Title.  Customer holds the Products subject and subordinate to the rights of
the Owner,  NetWolves,  any Assignee and any Secured Party.  Customer authorizes
NetWolves, as Customer's agent, to prepare,  execute and file in Customer's name
precautionary  Uniform Commercial Code financing statements showing the interest
of the Owner,  NetWolves,  and any Assignee or Secured Party in the Products and
to insert  serial  numbers in  Schedules as  appropriate.  Except as provided in
Sections 5.2 and 7.2, Customer will, at its expense,  keep the Products free and
clear  from any  liens  or  encumbrances  of any  kind  (except  any  caused  by
NetWolves)  and will  indemnify  and hold  NetWolves,  Owner,  any  Assignee and
Secured Party harmless from and against any loss caused by Customer's failure to
do so.

5.2  Relocation or Sublease.  Upon prior written  notice,  Customer may relocate
Products to any location within the  continental  United States provided (i) the
Products will not be used by an entity  exempt from federal  income tax and (ii)
all additional costs (including any  administrative  fees,  additional taxes and
insurance coverage) are reconciled and promptly paid by Customer.

Customer may sublease the Products upon the reasonable  consent of NetWolves and
the Secured  Party.  Such  consent to sublease  will be granted if: (i) Customer
meets the relocation  requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Customer assigns its
rights  in the  sublease  to  NetWolves  and the  Secured  Party  as  additional
collateral and security,  (iv) Customer's  obligation to maintain and insure the
Products is not altered,  (v) all financing  statements required to continue the
Secured  Party's  prior  perfected  security  interest  are filed,  and (vi) the
sublease is not to a leasing  entity  affiliated  with the  manufacturer  of the
Products described on the Schedule.  NetWolves acknowledges  Customer's right to
sublease for a term which extends  beyond the expiration of the Initial Term. If
Customer  subleases the Products for a term  extending  beyond the expiration of
such Initial Term of the applicable  Schedule,  Customer shall remain  obligated
upon the  expiration  of the  Initial  Term to  return  such  Products,  or,  at
NetWolves'  sole  discretion  to (i) return Like  Products  or (ii)  negotiate a
mutually acceptable lease extension or purchase.  If the parties cannot mutually
agree upon the terms of an extension or purchase,  the term of the Schedule will
extend upon the  original  terms and  conditions  until  terminated  pursuant to
Section 2.
<PAGE>
No  relocation or sublease  will relieve  Customer  from any of its  obligations
under this Product Agreement and the applicable Schedule.

5.3 Assignment by NetWolves. The terms and conditions of each Schedule have been
fixed by  NetWolves  in order to  permit  NetWolves  to sell  and/or  assign  or
transfer its interest or grant a security  interest in each Schedule  and/or the
Products to a Secured Party or Assignee.  In that event the term  NetWolves will
mean the Assignee and any Secured Party. However, any assignment, sale, or other
transfer by NetWolves will not relieve NetWolves of its obligations to Customer,
including its warranty  obligations,  and will not materially  change Customer's
duties or  materially  increase the burdens or risks  imposed on  Customer.  The
Customer hereby consents to any such assignment, sale or transfer. Customer also
agrees that:

(a)  The Secured  Party will be entitled to exercise all of  NetWolves'  rights,
     but will not be obligated to perform any of the  obligations  of NetWolves.
     The Secured Party will not disturb Customer's quiet and peaceful possession
     and  unrestricted use of the Products so long as Customer is not in default
     and the  Secured  Party  continues  to receive all Rent  payable  under the
     Schedule;

(b)  Customer  will pay all Rent and all other  amounts  payable to the  Secured
     Party,  despite  any  defense  or  claim  which it has  against  NetWolves.
     Customer reserves its right to have recourse directly against NetWolves for
     any defense or claim; and

(c)  Subject to and without  impairment  of Customer's  leasehold  rights in the
     Products,  Customer  holds the Products for the Secured Party to the extent
     of the Secured Party's rights in the Products.

SECTION 6. NET LEASE AND TAXES

6.1 Net Lease. Each Schedule constitutes a net lease.  Customer's  obligation to
pay Rent and all other amounts is absolute and  unconditional and is not subject
to any  abatement,  reduction,  set-off,  defense,  counterclaim,  interruption,
deferment or recoupment for any reason whatsoever.

6.2 Taxes and Fees.  Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges  (together with any related  interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each  Schedule  against  Lessor,  Lessee  or the  Products  by any  governmental
authority (except only Federal,  state and local taxes on the capital or the net
income of Lessor).  Lessee will file all  personal  property tax returns for the
Products  and pay all  property  taxes due.  Lessee  will  reimburse  Lessor for
property taxes within thirty (30) days of receipt of an invoice.

SECTION 7. CARE, USE AND MAINTENANCE, ATTACHMENTS AND
           RECONFIGURATIONS AND INSPECTION BY NETWOLVES

7.1 Care,  Use and  Maintenance.  Customer  will  maintain  the Products in good
operating order and appearance,  protect the Products from deterioration,  other
than normal wear and tear,  and will not use the Products for any purpose  other
than that for which it was designed.  If commercially  available,  Customer will
maintain in force a standard  maintenance  contract with the manufacturer of the
Products,  or another  party  acceptable  to  NetWolves,  and upon  request will
provide  NetWolves  with a complete copy of that  contract.  If Customer has the
Products  maintained by a party other than the manufacturer,  Customer agrees to
pay any costs  necessary  for the  manufacturer  to bring the  Products  to then
current release,  revision and engineering  change levels, and to re-certify the
Products as eligible for  manufacturer's  maintenance  at the  expiration of the
lease  term.  The lease term will  continue  upon the same terms and  conditions
until recertification has been obtained.

7.2  Attachments and  Reconfigurations.  Upon prior written notice to NetWolves,
Customer may reconfigure and install  Attachments on the Products.  In the event
of such a  Reconfiguration  or Attachment,  Customer  shall,  upon return of the
Products,  at its expense,  restore the  Products to the original  configuration
specified on the Schedule in accordance with the  manufacturer's  specifications
and in the same operating order, repair and appearance as when installed (normal
wear and tear  excluded).  If any parts are removed from the Products during the
Reconfiguration  or  Attachment,  the  restoration  will include,  at Customer's
option,  the  installation  of either the original  removed parts or Like Parts.
Alternatively,   with  NetWolves'  prior  written  consent  which  will  not  be
unreasonably  withheld,  Customer may return the Products with any Attachment or
upgrade.  If any parts of the Products are removed during a  Reconfiguration  or
Attachment,  NetWolves  may  require  Customer to provide  additional  security,
satisfactory  to the  NetWolves,  in order to ensure  performance  of Customer's
obligations  set  forth  in  this  subsection.  Neither  Attachments  nor  parts
installed on Products in the course of  Reconfiguration  shall be  accessions to
the Products.
<PAGE>
However,  if the  Reconfiguration or Attachment (i) adversely affects NetWolves'
tax  benefits  relating to the  Products;  (ii) is not capable of being  removed
without causing material damage to the Products;  or (iii) if at the time of the
Reconfiguration  or Attachment the  manufacturer  does not offer on a commercial
basis a means for the removal of the additional items; then such Reconfiguration
or Attachment is subject to the prior written consent of NetWolves.

7.3 Inspection by NetWolves. Upon request,  Customer, during reasonable business
hours and subject to Customer's  security  requirements,  will make the Products
and  its  related  log  and  maintenance  records  available  to  NetWolves  for
inspection.

SECTION 8. REPRESENTATIONS AND WARRANTIES OF CUSTOMER

Customer  represents and warrants that for each Schedule entered into under this
Product Agreement:

(a)  The  execution,  delivery and  performance  of the Customer  have been duly
     authorized by all necessary corporate action;

(b)  The individual executing was duly authorized to do so;

(c)  The Master Agreement, Product Agreement and each Schedule constitute legal,
     valid and binding agreements of the Customer enforceable in accordance with
     their terms; and

(d)  The  Products  are  personal  property  and  when  subjected  to use by the
     Customer will not be or become fixtures under applicable law.

SECTION 9. DELIVERY AND RETURN OF PRODUCTS

Customer assumes the full expense of transportation and in-transit  insurance to
Customer's  premises and for  installation  of the Products.  Upon expiration or
termination of each Schedule,  Customer will, at NetWolves'  instructions and at
Customer's expense (including transportation and in-transit insurance), have the
Products  deinstalled,  audited  by the  manufacturer,  packed  and  shipped  in
accordance with the  manufacturer's  specifications and returned to NetWolves in
the same operating order, repair and appearance as when installed (ordinary wear
and tear  excluded),  to a location  within  the  continental  United  States as
directed  by  NetWolves.  All items  returned  to  NetWolves  in addition to the
Products become property of NetWolves.

SECTION 10. LABELING

Upon request,  Customer will mark the Products indicating  NetWolves'  interest.
Customer will keep all Products  free from any other  marking or labeling  which
might be interpreted as a claim of ownership.

SECTION 11. INDEMNITY

Customer will indemnify and hold  NetWolves,  any Assignee and any Secured Party
harmless  from and  against  any and all claims,  costs,  expenses,  damages and
liabilities,  including reasonable attorney's fees, arising out of the ownership
(for strict liability in tort only), selection,  possession, leasing, operation,
control,  use,  maintenance,  delivery,  return  or  other  disposition  of  the
Products.  However, Customer is not responsible to a party indemnified hereunder
for any claims,  costs,  expenses,  damages and  liabilities  occasioned  by the
negligent acts of such indemnified party. Customer agrees to carry bodily injury
and  property  damage  liability  insurance  during the term of the  Schedule in
amounts  and  against  risks  customarily  insured  against by the  Customer  on
Products  owned by it. Any amounts  received by NetWolves  under that  insurance
will be credited against Customer's obligations under this Section.

SECTION 12. RISK OF LOSS

12.1  Customer's  Risk of Loss. If the Schedule  indicates that the Customer has
responsibility  for the risk of loss of the Products,  then the following  terms
will apply:

Effective upon delivery and until the Products are returned,  Customer  relieves
NetWolves  of  responsibility  for all  risks of  physical  damage to or loss or
destruction  of the  Products.  Customer will carry  casualty  insurance for the
Products in an amount not less than the  Casualty  Value.  All policies for such
insurance will name NetWolves and any Secured Party as additional insured and as
loss payee,  and will provide for at least thirty (30) days prior written notice
to  NetWolves  of  cancellation   or  expiration.   The  Customer  will  furnish
appropriate evidence of such insurance.

Customer  shall  promptly  repair any damaged  Product  unless such  Product has
suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,  Customer
will provide  written  notice of that loss to NetWolves  and Customer  will,  at
NetWolves' option, either (a) replace the damaged Product with Like Products and
marketable  title to the Like Products will  automatically  vest in NetWolves or
(b) pay the  Casualty  Value and after that payment and the payment of all other
amounts due and owing, Customer's obligation to pay further Rent for the damaged
Product will cease.

12.2  NetWolves'  Risk of Loss.  If the Schedule  indicates  that  NetWolves has
responsibility  for the risk of loss of the Products,  then the following  terms
will apply:
<PAGE>
Effective  upon delivery and  throughout  the Initial Term of a Schedule and any
extension, NetWolves agrees to insure the Products against physical damage to or
loss  or  destruction  due to  external  cause  as  specified  by the  terms  of
NetWolves'  then  current  insurance  policy.  NetWolves  relieves  Customer  of
responsibility  for  physical  damage  to or loss  or  destruction  of  Products
reimbursed by that insurance.  Customer will give NetWolves prompt notice of any
damage,  loss or destruction to any Product and NetWolves will determine  within
fifteen (15) days of its receipt of that notice  whether the item has suffered a
Casualty  Loss.  If any  Product  suffers  damage or a  Casualty  Loss  which is
reimbursable under NetWolves' insurance,  upon payment by Customer of NetWolves'
deductible,  NetWolves will: (i) (for damaged  Products) arrange and pay for the
repair of any damaged  Product;  or (ii) (for any Casualty  Loss) at  NetWolves'
option either replace the damaged Product with Like Products, or upon payment of
all other amounts due by Customer  terminate the relevant Schedule as it relates
to the damaged Product.

If any Product suffers damage or a Casualty Loss which is not reimbursable under
NetWolves' insurance,  then Customer will comply with the provisions of the last
paragraph of Section 12.1 regarding  repair,  replacement or payment of Casualty
Value.

If NetWolves fails to maintain insurance coverage as required by this subsection
12.2, Customer will assume such risk of loss and, at the request of any Assignee
or Secured Party, will promptly provide insurance coverage.  This paragraph does
not relieve NetWolves of its obligations to maintain coverage of the Products.

SECTION 13. DEFAULT, REMEDIES AND MITIGATION

13.1  Default.  The  occurrence  of any one or more of the  following  Events of
Default constitutes a default under a Schedule:

(a)  Customer's  failure to pay Rent or other  amounts  payable by Customer when
     due if that failure continues for ten (10) days after written notice; or

(b)  Customer's  failure to perform any other term or  condition of the Schedule
     or the material  inaccuracy of any  representation  or warranty made by the
     Customer in the Schedule or in any document or certificate furnished to the
     NetWolves  hereunder if that failure or  inaccuracy  continues  for fifteen
     (15) days after written notice; or

(c)  An assignment by Customer for the benefit of its creditors,  the failure by
     Customer to pay its debts when due, the insolvency of Customer,  the filing
     by  Customer  or the filing  against  Customer  of any  petition  under any
     bankruptcy or insolvency  law or for the  appointment of a trustee or other
     officer with similar powers, the adjudication of Customer as insolvent, the
     liquidation of Customer, or the taking of any action for the purpose of the
     foregoing; or

(d)  The occurrence of an Event of Default under any Schedule or other agreement
     between Customer and NetWolves or its Assignee or Secured Party.

13.2  Remedies.  Upon the  occurrence  of any of the above  Events  of  Default,
NetWolves, at its option, may:

(a)  enforce Customer's performance of the provisions of the applicable Schedule
     by appropriate court action in law or in equity;

(b)  recover from Customer any damages and or expenses, including Default Costs;

(c)  with notice and demand, recover all sums due and accelerate and recover the
     present  value of the  remaining  payment  stream of all Rent due under the
     defaulted  Schedule  (discounted at the same rate of interest at which such
     defaulted  Schedule was discounted with a Secured Party plus any prepayment
     fees charged to  NetWolves by the Secured  Party or, if there is no Secured
     Party,  then  discounted  at 6%) together  with all Rent and other  amounts
     currently due as liquidated damages and not as a penalty;

(d)  with notice and process of law and in compliance with  Customer's  security
     requirements,  NetWolves  may  enter  Customer's  premises  to  remove  and
     repossess the Products  without being liable to Customer for damages due to
     the repossession,  except those resulting from NetWolves',  its assignees',
     agents' or representatives' negligence; and

(e)  pursue any other remedy permitted by law or equity.

The above remedies, in NetWolves' discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.

13.3  Mitigation.  Upon return of the Products  pursuant to the terms of Section
13.2, NetWolves will use its best efforts in accordance with its normal business
procedures  (and without  obligation  to give any priority to such  Products) to
mitigate  NetWolves'  damages as  described  below.  EXCEPT AS SET FORTH IN THIS
SECTION, CUSTOMER HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE  WHICH MAY REQUIRE  NETWOLVES TO MITIGATE ITS DAMAGES OR MODIFY ANY
OF NETWOLVES'S  RIGHTS OR REMEDIES STATED HEREIN.  NetWolves may sell,  lease or
otherwise dispose of all or any part of the Products at a public or private sale
for cash or credit with the privilege of purchasing  the Products.  The proceeds
from any sale, lease or other disposition of the Products are defined as either:
<PAGE>
(a)  if sold or otherwise  disposed of, the cash  proceeds  less the Fair Market
     Value of the  Products  at the  expiration  of the  Initial  Term  less the
     Default Costs; or

(b)  if leased,  the present  value  (discounted  at three points over the prime
     rate  as  referenced  in  the  Wall  Street  Journal  at  the  time  of the
     mitigation) of the rentals for a term not to exceed the Initial Term,  less
     the Default Costs.

Any proceeds will be applied against  liquidated  damages and any other sums due
to NetWolves  from Customer.  However,  Customer is liable to NetWolves for, and
NetWolves  may  recover,  the  amount  by which the  proceeds  are less than the
liquidated damages and other sums due to NetWolves from Customer.

SECTION 14. ADDITIONAL PROVISIONS

14.1 Binding Nature. Each Schedule is binding upon, and inures to the benefit of
NetWolves and its assigns. CUSTOMER MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.

14.2 Applicable Law. THIS PRODUCT AGREEMENT AND EACH SCHEDULE IS GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS PROVISIONS.
NO RIGHTS OR REMEDIES  REFERRED TO IN ARTICLE 2A OF THE UNIFORM  COMMERCIAL CODE
WILL BE CONFERRED ON CUSTOMER UNLESS EXPRESSLY GRANTED HEREIN OR A SCHEDULE.

14.3  Counterparts.  Any Schedule may be executed in any number of counterparts,
each of which will be deemed an  original,  but all such  counterparts  together
constitute one and the same instrument.  If NetWolves grants a security interest
in all or any part of an Schedule, the Products or sums payable thereunder, only
that  counterpart  Schedule  marked  "Secured  Party's  Original"  can  transfer
NetWolves' rights and all other counterparts will be marked "Duplicate".

14.4 Nonspecific  Features and Licensed  Products.  If the Products are supplied
from  NetWolves'  inventory  and  contains  any  features  not  specified in the
Schedule,  Customer grants NetWolves the right to remove any such features.  Any
removal will be performed by the  manufacturer  or another  party  acceptable to
Customer,  upon the request of  NetWolves,  at a time  convenient  to  Customer,
provided that Customer will not unreasonably delay the removal of such features.

Customer acknowledges that the Products may contain or include software or other
licensed  products  of a third  party.  Customer  will  obtain  no  title to the
software or licensed  products  which at all times  remains the  property of the
owner of the  software or  licensed  products.  A license  from the owner may be
required and it is  Customer's  responsibility  to obtain any  required  license
before the use of the software or licensed product. Customer agrees to treat the
software and licensed  products as  confidential  information  of the owner,  to
observe all copyright restrictions, and not to reproduce or sell the software or
licensed products.

14.5  Additional  Documents.  Customer  will,  upon  execution  of this  Product
Agreement  and  as  may  be  requested  thereafter,  provide  NetWolves  with  a
secretary's  certificate  of incumbency  and  authority and any other  documents
reasonably  requested by NetWolves.  Upon the execution of each Schedule with an
aggregate Rent in excess of $2,000,000,  Customer will provide NetWolves with an
opinion from Customer's counsel regarding the  representations and warranties in
Section 8. Customer will furnish, upon request, audited financial statements for
the most recent period.

14.6 NetWolves' Right to Match.  Customer's rights under Section 5.2 and 7.2 are
subject to NetWolves' right to match any sublease or upgrade proposed by a third
party.  Customer will provide  NetWolves with the terms of the third party offer
and  NetWolves  will have three (3) business  days to match the offer.  Customer
shall  obtain  such  upgrade  from or sublease  the  Products  to  NetWolves  if
NetWolves has timely matched the third party offer.

14.7 Electronic  Communications.  Each of the parties may  communicate  with the
other by electronic means under mutually agreeable terms.

SECTION 15. DEFINITIONS

Assignee - means an entity to whom  NetWolves has sold or assigned its rights as
owner and lessor of the Products.

Attachment  - means any  accessory,  equipment  or device  and the  installation
thereof that does not impair the original function or use of the Products and is
<PAGE>
capable of being removed without causing  material damage to the Products and is
not an accession to the Products.

Casualty Loss - means the irreparable loss or destruction of Products.

Casualty  Value - means the greater of the aggregate  Rent  remaining to be paid
for the  balance  of the lease  term or the Fair  Market  Value of the  Products
immediately  prior to the Casualty Loss.  However,  if a Casualty Value Table is
attached to the relevant Schedule its terms will control.

Commencement  Certificate - means the NetWolves provided  certificate which must
be signed by Customer within ten (10) days of the Commencement Date as requested
by NetWolves.

Commencement Date - is defined in each Schedule.

Default Costs - means  reasonable  attorney's fees and remarking costs resulting
from a Customer default or NetWolves' enforcement of its remedies.

Event of Default - means the events described in Subsection 13.1.

Fair Market Value - means the  aggregate  amount which would be obtainable in an
arm's-length  transaction  between an  informed  and willing  buyer/user  and an
informed and willing seller under no compulsion to sell.

Initial Term - means the period of time  beginning on the first day of the first
full  Rent  Interval  following  the  Commencement  Date  for all  Products  and
continuing for the number of Rent Intervals indicated on an Schedule.

Interim  Rent - means the  pro-rata  portion of Rent due for the period from the
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.

Licensed  Products - means any software or other licensed  products  attached to
the Products.

Like  Part -  means a  substituted  part  which  is lien  free  and of the  same
manufacturer  and part number as the removed part,  and which when  installed on
the Products will be eligible for maintenance  coverage with the manufacturer of
the Products.

Like Products - means  replacement  Products which are lien free and of the same
model, type, configuration and manufacture as Products.

Notice  Period - means the time  period  described  in a Schedule  during  which
Customer  may  give  NetWolves  notice  of the  termination  of the term of that
Schedule.

Overdue Rate - means the lesser of 18% per year or the maximum rate permitted by
the law of the state where the Products are located.

Owner - means the owner of the Products.

Products - means the property  described on a Schedule and any  replacement  for
that property  required or permitted by this Product Agreement or a Schedule but
not including any Attachment.

Reconfiguration  - means any change to Products  that would upgrade or downgrade
the performance capabilities of the Products in any way.

Rent - means  the  rent,  including  Interim  Rent,  Customer  will  pay for the
Products expressed in an Schedule either as a specific amount or an amount equal
to the amount which  NetWolves pays for the Products  multiplied by a lease rate
factor plus all other amounts due to NetWolves under this Product Agreement or a
Schedule.

Rent  Interval  - means a full  calendar  month or  quarter  as  indicated  on a
Schedule.

Schedule - means a Schedule which  incorporates  all of the terms and conditions
of this Product  Agreement and the Master Agreement and, for purposes of Section
14.3, its associated Commencement Certificate(s).

Secured  Party - means an  entity  to whom  NetWolves  has  granted  a  security
interest in a Schedule and related Products for the purpose of securing a loan.


IN WITNESS  WHEREOF,  the  parties  have  caused this  Product  Agreement  to be
executed  by their  duly  authorized  officers  as of the day and year first set
forth above.


_____________________________________   NETWOLVES, CORPORATION
Customer

By: _________________________________   By:  ___________________________________

Title: ______________________________   Title:  ________________________________

Form 6004  2/99
<PAGE>
                           EQUIPMENT SCHEDULE NO. ___

                                 DATED _______

                    TO THE PRODUCT AGREEMENT DATED ________


LESSEE:                         LESSOR:  NetWolves Corporation

Address for Legal Notices:      Address for All Notices:
- -------------------------


Attn:  Corporate Secretary      Attn:

Address for Administrative
- --------------------------
Correspondence:                 Address for Invoices:
- --------------                  --------------------



Attn:                           Attn:
Phone:
Fax:                            Lessee Reference No:
                                -------------------

                                (24 digits maximum)

                                Initial Term:   48 Months

Location of Equipment:
- ---------------------           Rent:
                                ----
                                Estimated Equipment Rent:
                                ------------------------
                                Months 1-48: $200.00 Per Unit/ Per Month

                                Service Rent:
                                ------------
                                Installation:   $600.00
                                Ongoing Maintenance:  Months 1-12: $0
                                Months 13-48: $28.00 Per Unit/Per Month

                                Transportation Charges (Select one):
                                ----------------------------------
Attn:                           ____ Amortized Over Initial Term
Phone:                          ____  Lessee Pays Vendor Directly

EQUIPMENT (as defined below):
- ---------
Item            Machine  Model/
No.  Qty.  Mfg.  Type   Feature             Description
- ---  ----  ---- ------- -------             -----------
<PAGE>
Risk of Loss:  Pursuant to the Product  Agreement,  Lessor and Lessee agree that
the risk of loss is the responsibility of the Lessee.

Notice Period: The Notice Period will be not less than ninety (90) days nor more
than twelve (12) months  prior to the  expiration  of the Initial  Term,  or any
extension  thereof.  If Lessee gives proper written  notice of  termination  but
fails to return the Equipment on the expiration date of the Initial Term, or any
extension  thereof,  the  Schedule  will  continue  in full force and effect and
Lessee will be required to provide an additional  sixty (60) days written notice
of termination.  Such  termination  will be effective at the end of the month in
which the last day of the sixty (60) day  notice  requirement  occurs.  The Rent
will continue at the current rate until the effective date of the written notice
of termination and the Equipment is properly returned.

Special  Terms:  The  following  additional  terms are a part of this  Equipment
Schedule.  The terms and conditions of the Product  Agreement as they pertain to
this Equipment Schedule are modified and amended as follows:

For purposes of this Equipment  Schedule,  all references to "Equipment" will be
deemed to mean "Product",  and all references to "Lessee" will be deemed to mean
"Customer" as set forth in the Product Agreement. In addition, all references to
"Lessor"  will be deemed  to mean  "NetWolves  Corporation"  as set forth in the
Product Agreement.

Multiple Delivery Special Term
- ------------------------------
1.      Equipment
        ---------
Lessor's  obligation to lease Equipment under this Equipment Schedule applies to
Equipment  described  in this  Equipment  Schedule  for  which  Lessor  receives
Commencement Certificates from Lessee during the period from ____ to _____ up to
an aggregate  purchase  price of  $_________.  Lessee  acknowledges  that it has
either  received or approved  Lessor's  purchase  documentation.  If the cost or
configuration of the Equipment changes, Lessor may adjust the Lease Rate Factors
to reflect these additional costs or related expenses.

2.      Commencement Date
        -----------------
The  Commencement  Date for each item of Equipment  will be the day on which the
Equipment is installed and qualified for a commercially available manufacturer's
standard maintenance contract or warranty coverage. Lessee agrees to confirm the
Commencement  Date by providing  Lessor with a  Commencement  Certificate in the
form  attached  hereto.  Lessor will  summarize  all  Commencement  Certificates
received in the same calendar month into a Summary Schedule in the form attached
to this Equipment  Schedule as Exhibit I, and the Initial Term will begin on the
first day of the next  calendar  month.  Lessee  agrees that for  administrative
purposes,  including  without  limitation,  invoicing  of  Rent  and  taxes  and
assignment of an  identifying  lease number,  Lessor may  administer the Summary
Schedule as if it constituted a separate Equipment Schedule.  Alternatively,  if
Lessor  requests  Lessee  to  execute a Summary  Schedule,  Lessee  will have an
appropriate  official of Lessee execute and promptly return the Summary Schedule
to Lessor.  Executed Summary Schedules will incorporate the terms and conditions
of the Product  Agreement  and this  Equipment  Schedule  and will  constitute a
separate Equipment Schedule.

3.      Adverse Change
        --------------
If Lessee  defaults or there is an adverse change in Lessee's  credit  standing,
Lessor,  at its option with prior written notice to Lessee,  will be relieved of
its   obligations  to  lease   Equipment  for  which  Lessor  has  not  received
Commencement Certificates from Lessee prior to the date of such notice.

4.      Prepayment
        ----------
In consideration of Lessor entering into this Equipment Schedule,  Lessee agrees
to remit  payment of the Rent  payment  for Month 48 with the Rent  payment  for
Month 1.
<PAGE>
5.      Vendor Credits
        --------------
If after the Commencement Date for an item of Equipment,  Lessee finds such item
of Equipment to be  inoperable,  Lessee will seek  recourse  solely  against the
vendor of the Equipment for resolution of any problems concerning performance of
the Equipment. If the item of Equipment is replaced by the vendor, Lessee agrees
to provide Lessor with the serial number for the replacement equipment within 10
days of  replacement.  Lessor will not process any invoices  associated with the
Equipment being returned to vendor or the replacement equipment.

Notwithstanding  the foregoing,  if after the  Commencement  Date for an item of
Equipment,  Lessee  finds that (i) the vendor  has  over-charged  for an item of
Equipment,  or (ii) the vendor has shipped an incorrect item of Equipment,  upon
30 days prior written  notice from Lessee,  Lessor agrees to process any credits
received from the vendor and apply the credits to the Rent hereunder. The rental
adjustment will be effective on Lessor's next billing cycle following the 30 day
notice period.

 6.     Requirements for Return of Equipment at Lease Termination
        ---------------------------------------------------------
Lessee  will  appoint  a  principal   contact   person  (the   "Contact")   with
responsibility  for  coordinating  delivery  and  return  of  Equipment  to  one
centralized shipping location.

Lessee's Contact will provide Lessor a ten day written notice of the Equipment's
availability  for  pick-up,  but  in  no  event  prior  to  Lessee's  notice  of
termination pursuant to the "Notice Period" provision of the Schedule.

If Lessee elects to return less than all of the  Equipment,  Lessee will provide
Lessor with the description of the Equipment being returned,  including the line
number.  Upon Lessee's  request,  Lessor will provide Lessee with a report which
Lessee can use to identify the Equipment description by line number.

Lessor will make arrangements for its transportation carrier to contact Lessee's
Contact to  coordinate  the  return of the  Equipment.  Lessor's  transportation
carrier  will be  responsible  for packing the  Equipment on site on the date of
pick-up.

Lessee will be responsible and submit payment upon receipt of an invoice for the
Fair  Market  Value of any  Equipment  or  Equipment  parts which are missing or
returned damaged (the "Affected  Equipment"),  provided Lessor or its agents did
not cause such Affected Equipment.

7.      Personal Property Tax
        ---------------------
Notwithstanding  anything to the contrary  contained  in the Product  Agreement,
Lessor hereby  appoints  Lessee as its agent for the purpose of filing  personal
property tax returns.  Lessee will pay the appropriate  taxing  jurisdiction for
any  personal  property  tax owed that is  imposed  against  Lessee or Lessor in
connection  with the Equipment,  together with any penalties,  fines or interest
thereon.

Lessee agrees to pay when due and  indemnify  and hold Lessor  harmless from and
against  Lessee's  failure  to  remit  payment  of  personal  property  tax owed
(together with any related  interest or penalties not arising from negligence on
the part of Lessee) now or hereafter  imposed or assessed  against the Lessor or
the Equipment by the relevant  taxing  jurisdiction.  Lessee will cooperate with
Lessor in obtaining all relevant documentation necessary to substantiate payment
of such personal property tax if requested by Lessor.

8.      General Services Terms:
        ----------------------
Lessor will begin  performing the Services as described in the Statement of Work
attached as Exhibit II within thirty (30) days from  execution of this Equipment
Schedule.  The performance of the Services will be coterminous  with the Initial
Term of the  associated  Equipment.  The  Service  Rent  will be as set forth in
Section 9 herein.  Any change to the  Statement  of Work must be  documented  in
writing.  Lessor will have no obligation  to commence work in connection  with a
change  request  until the  change  has been  approved  in writing by Lessor and
Lessee.  Lessee will reimburse  Lessor for all reasonable  expenses  incurred in
connection with Lessor's performance under the Statement of Work.
<PAGE>
Lessor warrants that the Services will be performed in a professional manner.

EXCEPT  AS  EXPRESSLY  SET  FORTH  IN THIS  EQUIPMENT  SCHEDULE  OR THE  PRODUCT
AGREEMENT, LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER,  EXPRESS OR
IMPLIED,  INCLUDING,  WITHOUT  LIMITATION,  ANY WARRANTY OF  MERCHANTABILITY  OR
FITNESS FOR A PARTICULAR PURPOSE.

Proprietary Materials will mean all materials, information and other deliverable
items  developed  under a  Statement  of Work  as  well  as  proprietary  tools,
methodologies, documentation and methods of analysis used in connection with the
Services. Lessee acknowledges and agrees that all such Proprietary Materials are
owned by  either  Lessor  or its  subcontractor  and  that  Lessee  receives  no
ownership  interest  herein.  Notwithstanding  the  foregoing,  Lessor grants to
Lessee the right to use such Proprietary  Materials  delivered to Lessee under a
Statement  of Work  for  Lessee's  internal  business  use  only and not for the
benefit of a third party.

Each party  (including  its  employees and agents) will use the same standard of
care to protect any confidential information of the other, or a subcontractor of
Lessor,  disclosed  during  negotiation  or performance of the Statement of Work
that  it  uses  to  protect  its  own  confidential  information.   Confidential
information  will not  include  information  which  (i) is or  becomes  publicly
available  through no wrongful act of the receiving party; (ii) was known by the
receiving   party  at  the  time  of  disclosure   without  any   obligation  of
confidentiality;  (iii) was acquired by the  receiving  party from a third party
without restriction on nondisclosure; or (iv) was developed independently by the
receiving party.

Lessor's  liability  to Lessee  from any  cause  whatsoever  arising  out of the
Services  under this  Equipment  Schedule  will not,  in any  event,  exceed the
aggregate of the Service  Rent paid by Lessee for the  Services,  excluding  the
monthly Rent paid for the Equipment under this Equipment  Schedule,  giving rise
to the claim  during  the  twelve  (12) month  period  immediately  prior to the
occurrence of the claim. UNDER NO CIRCUMSTANCES, WILL EITHER PARTY BE LIABLE FOR
INDIRECT, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

Lessee will provide  Lessor with access to each site  specified in the site list
to be provided by Lessee. Lessee will be responsible for preparing each site for
the  installation  of the  Equipment,  including  but not limited to,  providing
specified  power  and  cabling,   environmental  and  wiring  requirements,  and
obtaining and maintaining  necessary  permits and  certifications.  In the event
that  Lessee  fails  to fully  prepare  the site  prior to  installation  of the
Equipment as  described  above,  Lessee will be  responsible  for an  additional
charge at the hourly rate set forth in the Statement of Work.

9.      Services Rent:
        -------------
Installation Services:  Lessee will be responsible for an Installation charge of
$600.00 upon  delivery and  acceptance  of the  Equipment as evidenced by Lessee
completing  a  Commencement  Certificate.  Lessor  will  invoice  Lessee for the
Installation charge at the time that Lessor invoices Lessee for the Rent payment
for Months 1 and 48 of the Initial Term.

On-Going  Maintenance  Services:  Service  Rent will be invoiced  and due on the
first day of each month, in advance,  beginning on the 13th month of the Initial
Term of each Summary Schedule.

10.     Principal Contact
        -----------------
Lessee  agrees that it will  designate  an  individual  as a central  contact to
coordinate  confirmation  of delivery  and  acceptance  of the  Equipment at the
end-user   locations.   The  central  contact  will   consolidate   Commencement
Certificates  from the end-user  locations prior to forwarding such verification
to Lessor.

Product  Agreement:  This Equipment  Schedule is issued  pursuant to the Product
Agreement identified on page 1 of this Equipment Schedule.  All of the terms and
conditions of the Product  Agreement are incorporated in and made a part of this
Equipment  Schedule as if expressly  described in this Equipment  Schedule,  and
this Equipment  Schedule  constitutes a separate  lease for the  Equipment.  The
parties  reaffirm  all of the  terms and  conditions  of the  Product  Agreement
(including,  without limitation, the representations and warranties set forth in
<PAGE>
the  Product  Agreement)  except as modified by this  Equipment  Schedule.  This
Equipment Schedule may not be amended or rescinded except by a writing signed by
both parties.

                                        NetWolves Corporation
as Lessee                               as Lessor

By:_______________________________      By:_____________________________________

Title:____________________________      Title:__________________________________

Date:_____________________________      Date:___________________________________

<PAGE>
                                   EXHIBIT I

                                SUMMARY SCHEDULE
                                ----------------

        This Summary Schedule dated _________ is executed  pursuant to Equipment
Schedule  No.  ______ to the  Product  Agreement  dated ____  between  NetWolves
Corporation  ("Lessor") and _______  ("Lessee").  All of the terms,  conditions,
representations  and warranties of the Product Agreement and Equipment  Schedule
No. are  incorporated  herein and made a part hereof and this  Summary  Schedule
constitutes an Equipment Schedule for the Equipment described below.


1.   Equipment:
     ---------
                         Equipment
        Qty.     Mfg.    Type/Model       Serial #       Location
        ---      ---     ----------       --------       --------

                                 "SEE ATTACHED"


2.   Commencement Date:       (See attached)
     -----------------

3.   Initial Term Begins:
     -------------------

4.   Total Equipment Cost:
     --------------------

5.   Rent:
     ----

6.   Representations of Lessee:
     -------------------------
     Each item of Equipment has been delivered to the location  indicated above,
     tested,  inspected,  found to be in good working  order and accepted by the
     Lessee on the Commencement Date.

Please sign and return one copy of this  Summary  Schedule to Lessor  within ten
(10) days of receipt.


                                        NetWolves Corporation
as Lessee                               as Lessor

By:            SAMPLE                   By:
   -----------------------------           -------------------------------------

Title:                                  Title:
      --------------------------              ----------------------------------
<PAGE>
                            COMMENCEMENT CERTIFICATE
                            ------------------------

     This Certificate dated is executed pursuant to Equipment Schedule No. _____
to  the  Product  Agreement  dated  __________  between  NetWolves  Corporation.
("Lessor") and _________ ("Lessee").


1.      Equipment:
        ---------
                         Equipment
        Qty.    Mfg.     Type/Model        Serial #          Location
        ---     ---      ----------        --------          --------







2.      Commencement Date:
        -----------------

3.      Representations of Lessee:
        -------------------------
The  Equipment  has been  delivered to the  location  indicated  above,  tested,
inspected,  found to be in good working  order and accepted by the Lessee on the
Commencement Date.


        as Lessee

        By:_________________________________

        Title:______________________________

<PAGE>
                                   EXHIBIT II

                            STATEMENT OF WORK NO. 1
                           TO THE EQUIPMENT SCHEDULE
                        DATED ____________________, 1999
                  BETWEEN NETWOLVES CORPORATION ("NETWOLVES")
                   AND _________________________ ("CUSTOMER")


1.0  Scope of Services
     NetWolves  will  provide the  following  services at the sites  detailed in
     document to be supplied by customer to the Services Schedule for Customer's
     systems.
     Installation
     Maintenance
     Tier 1 Help Desk
     Moves, Adds, Changes (Optional)
     De-Installation (Optional)
     Project Planning (management)

2.0  Service Components

     2.1  Installation
          NetWolves  will install the equipment for which site surveys have been
          completed.

          2.1.1 Service Scope

                Perform  and  review  site  survey  for each  site  and  confirm
                readiness.  Resolve any open issues to complete site  readiness.
                Develop site specific installation procedures.
                Coordinate and finalize scheduling of:

               * All involved NetWolves, Customer and third party personnel.
               * Shipping and receipt of equipment at each site.
               * Physical implementation of the equipment.
               * Testing  and  certification  of  installed  equipment  in
                 accordance with the test script.
               * Site sign-off by Customer's site representative.
               * Circuit provisioning.

          2.1.2 Service Deliverables

                Site specific installation procedures.
                Fully installed, tested, and functional equipment.
                Comprehensive installation documentation, including:
               * Descriptions, configurations  and  other  pertinent information
                  for each item of installed equipment.
               * Checklist of completed implementation steps and results.
               * Outstanding or open issues list.
               * Completed sign-off forms.

          2.1.3 Assumptions

               Customer  personnel  will be  available as scheduled to assist in
               the installation pursuant to the project plan.

               Customer  will  provide  NetWolves  with an  implementation  test
               script for each site.

               Installation  schedules will be agreed upon between NetWolves and
               Customer.
<PAGE>
               Installations will occur during normal business hours (8:00 AM to
               5:00 PM local time,  Monday through  Friday  excluding New Year's
               Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
               the Friday after Thanksgiving, and Christmas Day).

               NetWolves  will provide  implementation  test script per Customer
               request.

               Shipping costs are not included.

2.2  Maintenance

     NetWolves will provide maintenance for the equipment  identified in Exhibit
     B.

     2.2.1 Service Scope

          Determine maintenance coverage requirements.

          Maintain  inventory of configured "hot swap" boxes to be deployed upon
          dispatch.

          Upon  notification  from  NetWolves  help desk,  inventory box will be
          shipped overnight for installation.

          Technician will arrive at site and de-install current box, install and
          test  new  box  and  ship  broken  unit  to  Netwolves   facility  for
          refurbishment

          Provide  documentation  on  all of  the  above  to  Customer  and,  if
          appropriate,   to  the  NetWolves  Help  Desk  or  NetWolves   Network
          Management Center.

     2.2.2 Service Deliverables

          Next day on-site replacement for broken boxes

2.3  Moves, Adds and Changes (Optional)

     NetWolves  will  provide  moves,  adds,  and  changes on a demand  basis to
     facilitate modifications to the network environment.

     2.3.1 Service Scope

          Determine  scope of work to be  performed,  including  scheduling  and
          pricing.

          Coordinate  necessary  services or materials to facilitate  the change
          (equipment, software, telecommunications, etc.).

          Identify resources to perform the change (NetWolves,  Customer, and/or
          third-party personnel).

          Schedule and coordinate execution of the change.

          Execute the change and test, as applicable.

          6x12 to next day on-site response.

     2.3.2 Service Deliverables

          Implementation  of the change as  specified  by an  authorized  change
          request.

          Notification and documentation upon completion, as appropriate.

     2.3.3 Assumptions

          Moves, adds, and changes are modifications to the network  environment
          which  are  outside  the  scope  of this  Statement  of  Work  and are
          therefore priced on a demand basis.

          Customer will provide access to Customer sites where these  activities
          will be performed.

          Customer will provide site contacts,  as appropriate,  for inspection,
          decision-making and site sign-off.

          Moves,  adds and changes will only be provided  based upon  authorized
          change requests.

2.4  De-Installation (Optional)

     NetWolves  will  de-install  the equipment for which site surveys have been
     completed.

     2.4.1 Service Scope

          Development of site specific de-installation procedures.

          De-installation of equipment as determined by procedures.
<PAGE>
          Prepare equipment for shipment.

     2.4.2 Service Deliverables

          Site specific de-installation procedures.

          De-installation documentation, including:

          *    Descriptions,  serial numbers,  versions,  and/or other pertinent
               information identified in the de- installation procedures.

          *    Checklist of completed de-installation steps and results.

          *    Outstanding or open issues list.

     2.4.3 Assumptions

          NetWolves will perform  de-installations  only at those sites at which
          NetWolves is performing implementation of new equipment.

          Customer will provide a list of the equipment to be de-installed

2.5  Help Desk  Operation

*    Customer  will have access to the Help Desk on a 7x24x365  basis except for
     New Year's Day,  Memorial  Day,  July 4, Labor Day,  Thanksgiving  Day, the
     Friday after  Thanksgiving,  and Christmas  Day.  NetWolves  will route all
     calls outside of the scheduled access hours to Customer for resolution.

*    The Help Desk will  provide the first  point of contact for end users.  End
     users may submit requests to the Help Desk via telephone,  e-mail, or voice
     mail.

*    The first point of contact will consist of  providing  the initial  problem
     analysis and resolution.  Escalations will be handled under mutually agreed
     upon escalation procedures.

*    NetWolves  will  provide a Help Desk  Supervisor  who will manage the daily
     operation of the Help Desk. The Help Desk  Supervisor  will report directly
     to the NetWolves Help Desk Service  Manager who will be responsible for the
     overall management of the Help Desk.

<PAGE>

                                   Exhibit D
       to the Master Program Agreement between NetWolves Corporation and
                                 Comdisco, Inc.
                              Dated July 26, 1999


                                Related Software
                                ----------------



Fox OS
Fox A1
ESCN Navigator
ESCN Mother
ESCN Workbench
ESCN Mission Control

All training content  provided  through the ESCN System,  created or licensed by
NetWolves Corporation/The Sullivan Group.
<PAGE>
                                   Exhibit E
                               Comdisco Services
                        to the Master Program Agreement
                between NetWolves Corporation and Comdisco, Inc.
                              Dated July 26, 1999


           Form of Services Agreement and Services Schedule Attached.
<PAGE>
                                                              SERVICES AGREEMENT

This  Services  Agreement  dated  ______________________________  is made by and
between  NetWolves  Corporation  ("NetWolves")  with offices at 200  Broadhollow
Road,     Melville,     New    York    11747,     and     ______________________
__________________________________________________  ("Customer") with offices at
____________________________________________________________________________.





SECTION 1.  SCOPE

1.1 Schedules. NetWolves will provide Services under the terms and conditions of
this Services Agreement and as more particularly defined in each Schedule.  Each
Schedule  will  constitute  a separate  agreement  with  respect to the Services
provided.

1.2  Changes.  Any  change to this  Services  Agreement  must be  documented  in
writing. NetWolves will have no obligation to commence work in connection with a
change  request  until the change has been  approved in writing by NetWolves and
Customer.

1.3 NetWolves may, as it deems  appropriate,  use  subcontractors for all or any
portions of the Services.

SECTION 2.  FEES

2.1 Fees.  Customer  will pay the fees for the  Services  in the  amounts and in
accordance with the payment terms set forth in each Schedule.

2.2 Late Fee.  Whenever  any payment is not made within  thirty (30) days of the
invoice  date,  Customer  will pay  interest  at the lesser of one and  one-half
percent (1.5%) per month or the maximum amount permitted by law.

2.3.  Expenses.  Customer will reimburse  NetWolves for all reasonable  expenses
incurred in connection with services requested by Customer which are outside the
scope of the Services outlined under a Schedule.

2.4 Taxes. Customer will pay or reimburse NetWolves for any taxes, fees or other
charges  imposed by any local,  state or federal  authority  (together  with any
related interest or penalties not due to the fault of NetWolves)  resulting from
this Services  Agreement,  or from any  activities  hereunder,  except for taxes
based on NetWolves' net income.

SECTION 3.  TERM

Each  Schedule  will take effect upon the signature of both parties and continue
through the term as specified therein.

The Services to be provided under each Schedule will begin on the date set forth
in the Schedule.

SECTION 4.  WARRANTIES AND LIABILITY

4.1  Services.  NetWolves  warrants  that the  Services  will be  performed in a
professional manner.

4.2  Exclusive  Warranty.  EXCEPT  AS  EXPRESSLY  SET  FORTH IN THIS  AGREEMENT,
NETWOLVES MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED,
INCLUDING,  WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.

4.3  Liability.  NetWolves'  liability  to  Customer  from any cause  whatsoever
arising  out of this  Services  Agreement  will not,  in any  event,  exceed the
aggregate of the fees paid by Customer for the Services giving rise to the claim
during the twelve (12) month period  immediately  prior to the occurrence of the
claim.  UNDER NO  CIRCUMSTANCES,  WILL  EITHER  PARTY BE  LIABLE  FOR  INDIRECT,
SPECIAL,  CONSEQUENTIAL  OR PUNITIVE DAMAGES EVEN IF SUCH PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
<PAGE>
SECTION 5.  MUTUAL INDEMNIFICATION

Each party will indemnify and hold the other party and its employees and agents,
harmless against any and all claims, liabilities,  losses, damages and causes of
action  relating  to  bodily  injury,   including  death,  arising  out  of  the
intentional or negligent acts or omissions of the indemnifying  party during the
performance  of a  Schedule.  The  indemnifying  party,  however,  will  not  be
responsible  for injury  attributed  to the  intentional  or  negligent  acts or
omissions of the indemnified party, its employees or agents.

SECTION  6.  OWNERSHIP AND CONFIDENTIALITY

6.1 Ownership.  Proprietary  Materials will mean all materials,  information and
other deliverable items developed under a Schedule as well as proprietary tools,
methodologies, documentation and methods of analysis used in connection with the
Services.  Customer  acknowledges and agrees that all such Proprietary Materials
are owned by either  NetWolves' or its  subcontractor and that Customer receives
no ownership interest herein. Notwithstanding the foregoing, NetWolves grants to
Customer the right to use such Proprietary Materials delivered to Customer under
a Schedule for Customer's  internal business use only and not for the benefit of
a third party.  Any  proprietary  software  product will be licensed to Customer
under a separate license agreement.

6.2  Confidentiality.  Each party  (including its employees and agents) will use
the same standard of care to protect any confidential  information of the other,
or a subcontractor, disclosed during negotiation or performance of this Services
Agreement that it uses to protect its own confidential information. Confidential
information  will not  include  information  which  (i) is or  becomes  publicly
available  through no wrongful act of the receiving party; (ii) was known by the
receiving   party  at  the  time  of  disclosure   without  any   obligation  of
confidentiality;  (iii) was acquired by the  receiving  party from a third party
without restriction on nondisclosure; or (iv) was developed independently by the
receiving party.

SECTION 7.  TERMINATION

Either party may, by written notice,  terminate a Services Schedule for cause if
the  other  party  fails to cure a  material  default  under the  Schedule.  Any
material  default must be specifically  identified in the notice of termination.
After written  notice,  the notified party will have ten (10) days to remedy any
monetary  default and thirty (30) days to remedy any other  default.  Failure to
remedy the material default within the time period provided for herein will give
cause for immediate  termination.  If termination is due to Customer's  material
default, Customer will immediately pay to NetWolves the amounts then owing under
the relevant Schedule up to the date of termination. The foregoing payments will
be in addition  to all other legal and  equitable  rights of  NetWolves  and any
remedies set forth in a Services Schedule.

SECTION 8.  MISCELLANEOUS

8.1 Each party is an independent  contractor  and, except as expressly set forth
herein, will have no authority to bind or commit the other party. Nothing herein
shall be deemed or construed to create a joint  venture,  partnership  or agency
relationship between the parties.
<PAGE>
8.2 Customer  may not assign this  Services  Agreement,  or any of its rights or
obligations therein.

8.3 The waiver by either  party of a breach of any  provision  of this  Services
Agreement  will not be  construed  as a waiver  of any  subsequent  breach.  The
invalidity,  in whole or in part, of any  provision of this  Services  Agreement
will not affect the validity of the remaining provisions.

8.4 This  Services  Agreement  including  each  Schedule  represents  the entire
agreement  between  the  parties  and  supersedes  all  oral  or  other  written
agreements or understandings  between the parties concerning the Services.  This
Agreement may not be modified  unless in writing and signed by the party against
whom enforcement of the modification is sought.

8.5 Any notice,  request or other  communication  under this Services  Agreement
will be given in writing and deemed  received upon the earlier of actual receipt
or three (3) days after mailing if mailed postage  prepaid by regular or airmail
to the  address set forth above or, one day after such notice is sent by courier
or facsimile transmission.

8.6 No third party is intended to be, or will be construed to be, a  beneficiary
of any provision of this Services Agreement nor have any right to enforce any of
its provisions or to pursue any remedy for its breach.


8.7 Those terms and conditions which would, by their meaning or intent,  survive
the expiration or termination of any Schedule will so survive.

8.8  THIS SERVICES AGREEMENT AND EACH SCHEDULE
IS GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS
PROVISIONS.  If there is any dispute or  litigation as a result of this Services
Agreement,  the prevailing party will be entitled to reasonable attorney's fees.
Any action by either party must be brought  within two (2) years after the cause
of action arose.

8.9 During the term of each  Schedule  and for a period of one (1) year from the
completion of the Services  thereunder,  Customer agrees not to knowingly employ
or solicit for  employment  any  NetWolves  or  subcontractor  employee  who was
involved in the furnishing of the Services under the relevant Schedule.

8.10 Terms and conditions on Customer's  purchase order or other  acknowledgment
form will be of no force or effect.
<PAGE>
8.11 NetWolves will not be considered in default hereunder due to any failure in
its  performance  of this  Services  Agreement  should such failure arise out of
causes beyond its control.  Such causes include, but are not limited to, acts of
God, acts of any federal, state or local government or authority, fires, floods,
or  other  disasters,  strikes,  degradation  of  telephone  or  other  means of
communication services or utility outages.




IN WITNESS  WHEREOF,  the  parties  have caused this  Services  Agreement  to be
executed  by their  duly  authorized  officers  as of the day and year first set
forth above.

______________________________________    NetWolves Corporation
Customer

By: __________________________________    By: __________________________________

Title: _______________________________    Title: _______________________________
Form 6000, 10/98

<PAGE>
                     SERVICES SCHEDULE DATED [INSERT DATE]
                           TO THE SERVICES AGREEMENT
                              DATED [INSERT DATE]
                  BETWEEN NETWOLVES CORPORATION ("NETWOLVES")
                        AND [CUSTOMER NAME] ("CUSTOMER")


A.   Scope of Services

     NetWolves  will provide the Services in the attached  Statement of Work. In
     the event of any conflict between this Services Schedule and a Statement of
     Work, the Statement of Work will govern.

B.   Fees

     [Include  the  details  of the  payment  schedule  here  or on an  attached
     Exhibit. As part of the payment schedule indicate when NetWolves will begin
     invoicing for each fee component.]

     Expenses will be billed monthly, or at NetWolves' option, as incurred.

C.   Commencement of the Services

     The Services will commence on [insert date that Services will begin].

D.   Term

     The term of this Schedule will commence upon  execution by both parties and
     will continue for a period of [months/weeks] from [insert trigger date].

E.   Change Control

     Upon the identification of any mutually acceptable change to this Schedule,
     Customer and NetWolves will complete a Change Authorization Form.

F.   Responsibilities

     Customer will assign a program  sponsor who will have full  authority  with
     respect  to all  matters  pertaining  to  this  Schedule  and  who  will be
     NetWolves'  primary contact.  If Customer  reassigns its program sponsor or
     such  individual  has any other conflict which would impact the delivery of
     the  Services,  Customer  will  promptly  replace  such person with another
     person  no less  qualified  or  knowledgeable  as to  Customer's  business.
     Customer will also make available to NetWolves other necessary resources on
     a timely basis and will ensure that  Customer's  personnel  involved in the
     Services have  sufficient  knowledge of all relevant  aspects of Customer's
     business,  including  technical,   financial  and  functional  requirements
     relevant to this Schedule.

     Customer  acknowledges  and agrees  that  NetWolves'  ability to perform in
     accordance  with this Schedule is  contingent  on  Customer's  accurate and
     timely  performance  of its  responsibilities.  In the event that  Customer
     fails to perform any of its  responsibilities  specified herein,  NetWolves
     may perform such responsibilities and Customer will reimburse NetWolves for
     all  costs  incurred.  Notwithstanding  the  foregoing,  NetWolves  has  no
     obligation to perform any such responsibilities.

                               Schedule - Page 1
 This document is proprietary and confidential to NetWolves, Inc. Unauthorized
                          distribution is prohibited.

<PAGE>
G.   Reviews

     When Customer review or acceptance of procedures,  plans or any other items
     are  provided  for, and  NetWolves  has not  received  written  notice from
     Customer of  acceptance  or objection  within  three (3)  business  days of
     Customer's receipt of the submitted item, the item will be deemed accepted.

H.   Delays

     In the event that  NetWolves is delayed in the  performance of the Services
     as a result of Customer's  acts or failure to act,  Customer will reimburse
     NetWolves  for all costs  incurred,  including  but not limited to any cost
     associated  with  NetWolves'  resources.  In the  event  of a delay  in the
     commencement  of the Services,  NetWolves and Customer will mutually  agree
     upon a new commencement date.

I.   Exhibits

     The Exhibits to this  Services  Schedule are hereby  incorporated  into and
     deemed to be a part of this Services Schedule.

     [List Exhibits here.]

J.   Special Terms

     Customer  will  provide  NetWolves  with access to each Site  specified  in
     Exhibit __ to enable  NetWolves to perform the  Services.  Customer will be
     responsible for preparing each Site for the  installation of the equipment,
     including  but not  limited  to,  providing  specified  power and  cabling,
     environmental  and  wiring  requirements,  and  obtaining  and  maintaining
     necessary permits and certifications.

This Services Schedule is issued pursuant to the Services  Agreement  identified
above.  All  of  the  terms  and  conditions  of  the  Services   Agreement  are
incorporated herein and made a part hereof. This Services Schedule constitutes a
separate agreement with respect to the Services provided.


_________________________________               NetWolves Corporation
Customer

By:______________________________               By:_____________________________

Title:___________________________               Title:__________________________

Date:____________________________               Date:___________________________


The terms and conditions of this Schedule,  including pricing, are valid only if
executed by [insert date].


3/99


                               Schedule - Page 2
 This document is proprietary and confidential to NetWolves, Inc. Unauthorized
                          distribution is prohibited.

<PAGE>
                                   EXHIBIT A

                            STATEMENT OF WORK NO. 1
                            TO THE SERVICES SCHEDULE
                        DATED ____________________, 1999
                        BETWEEN NETWOLVES ("NETWOLVES")
                   AND _________________________ ("CUSTOMER")


1.0  Scope of Services

     NetWolves  will  provide the  following  services at the sites  detailed in
     document to be supplied by customer to the Services Schedule for Customer's
     systems.  For purposes of this  Statement of Work,  "systems" will mean the
     equipment identified in Exhibit B.
     Installation
     Maintenance
     Tier 1 Help Desk
     Moves, Adds, Changes (Optional)
     De-Installation (Optional)

2.0  Service Components

     2.1  Installation

          NetWolves  will install the equipment for which site surveys have been
          completed.

          2.1.1 Service Scope

                Obtain  and  review  site  survey  for  each  site  and  confirm
                readiness.  Resolve any open issues to complete site  readiness.
                Develop site specific installation procedures.
                Coordinate and finalize scheduling of:

               *    All involved NetWolves, Customer and third party personnel.
               *    Shipping and receipt of equipment at each site.
               *    Physical implementation of the equipment.
               *    Testing  and   certification   of  installed   equipment  in
                    accordance with the test script.
               *    Site sign-off by Customer's site representative.

          2.1.2 Service Deliverables

               Site specific installation procedures.

               Fully installed, tested, and functional equipment.

               Comprehensive installation documentation, including:


               *    Descriptions, configurations and other pertinent information
                    for each item of installed equipment.
               *    Checklist of completed implementation steps and results.
               *    Outstanding or open issues list.
               *    Completed sign-off forms.

          2.1.3 Assumptions

               Customer  personnel  will be  available as scheduled to assist in
               the installation pursuant to the project plan.

               Customer  will  provide  NetWolves  with an  implementation  test
               script for each site.

               Installation  schedules will be agreed upon between NetWolves and
               Customer.

               Installations will occur during normal business hours (8:00 AM to
               5:00 PM local time,  Monday through  Friday  excluding New Year's
               Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
               the Friday after Thanksgiving, and Christmas Day).
<PAGE>
2.2  Maintenance

     NetWolves will provide maintenance for the equipment  identified in Exhibit
     B.

     2.2.1 Service Scope

          Determine maintenance coverage requirements.

          Maintain  inventory of configured "hot swap" boxes to be deployed upon
          dispatch.

          Upon  notification  from  NetWolves  help desk,  inventory box will be
          shipped overnight for installation.

          Technician will arrive at site and de-install current box, install and
          test  new  box  and  ship  broken  unit  to  Netwolves   facility  for
          refurbishment

          Provide  documentation  on  all of  the  above  to  Customer  and,  if
          appropriate,   to  the  NetWolves  Help  Desk  or  NetWolves   Network
          Management Center.

     2.2.2 Service Deliverables

          Next day on-site replacement for broken boxes

2.3  Moves, Adds and Changes (Optional)

     NetWolves  will  provide  moves,  adds,  and  changes on a demand  basis to
     facilitate modifications to the network environment.

     2.3.1 Service Scope

          Determine  scope of work to be  performed,  including  scheduling  and
          pricing.

          Coordinate  necessary  services or materials to facilitate  the change
          (equipment, software, telecommunications, etc.).

          Identify resources to perform the change (NetWolves,  Customer, and/or
          third-party personnel).

          Schedule and coordinate execution of the change.

          Execute the change and test, as applicable.


     2.3.2Service  Deliverables  Implementation of the change as specified by an
          authorized  change  request.   Notification  and  documentation   upon
          completion, as appropriate.

     2.3.3 Assumptions

          Moves, adds, and changes are modifications to the network  environment
          which  are  outside  the  scope  of this  Statement  of  Work  and are
          therefore priced on a demand basis.

          Customer will provide access to Customer sites where these  activities
          will be performed.

          Customer will provide site contacts,  as appropriate,  for inspection,
          decision-making and site sign- off.

          Moves,  adds and changes will only be provided  based upon  authorized
          change requests.

2.4  De-Installation (Optional)

     NetWolves  will  de-install  the equipment for which site surveys have been
     completed.

     2.4.1 Service Scope

          Development of site specific de-installation procedures.

          De-installation of equipment as determined by procedures.

          Prepare equipment for shipment.

     2.4.2 Service Deliverables

          Site specific de-installation procedures.

          De-installation documentation, including:

          *    Descriptions,  serial numbers,  versions,  and/or other pertinent
               information identified in the de- installation procedures.
<PAGE>
          *    Checklist of completed de-installation steps and results.

          *    Outstanding or open issues list.

     2.4.3 Assumptions

          NetWolves will perform  de-installations  only at those sites at which
          NetWolves is performing implementation of new equipment.

          Customer will provide a list of the equipment to be de-installed

2.5  Help Desk Operation

*    Customer  will have access to the Help Desk on a 7x24x365  basis except for
     New Year's Day,  Memorial  Day,  July 4, Labor Day,  Thanksgiving  Day, the
     Friday after  Thanksgiving,  and Christmas  Day.  NetWolves  will route all
     calls outside of the scheduled access hours to Customer for resolution.

*    The Help Desk will  provide the first  point of contact for end users.  End
     users may submit requests to the Help Desk via telephone,  e-mail, or voice
     mail.

*    The first point of contact will consist of  providing  the initial  problem
     analysis and resolution.  Escalations will be handled under mutually agreed
     upon escalation procedures.

*    NetWolves  will  provide a Help Desk  Supervisor  who will manage the daily
     operation of the Help Desk. The Help Desk  Supervisor  will report directly
     to the NetWolves Help Desk Service  Manager who will be responsible for the
     overall management of the Help Desk.

<PAGE>
                                   Exhibit F
                        to the Master Program Agreement
                       between NetWolves Corporation and
                                 Comdisco, Inc.
                              Dated July 26, 1999


                                Target Customer
                                ---------------


Any company or account engaged in the distance learning  application through the
Sullivan Group and NetWolves Corporation.
<PAGE>
                                   Exhibit G
                        to the Master Program Agreement
                       between NetWolves Corporation and
                                 Comdisco, Inc.
                              Dated July 26, 1999


            Form of Master Agreement and Services Schedule attached.




                          FIRST AMENDMENT TO EMPLOYMENT
                         AGREEMENT OF KEVIN F. SHERLOCK


     WHEREAS Kevin F.  Sherlock  ("Executive"),  an  individual  residing at 162
Boney Lane, St. James, New York 11780, entered into an employment agreement with
NetWolves  Corporation,  a New York  corporation  having its principal  place of
business located at 33 Walt Whitman Drive, Suite 125,  Huntington  Station,  New
York  11743  (the  "Company"),  dated  as of  June  17,  1998  (the  "Employment
Agreement"); and

     WHEREAS,  the parties now desire to amend certain  terms of the  Employment
Agreement;

     NOW, THEREFORE, the parties agree as follows:

     1. Section 1 of the  Employment  Agreement  is amended such that  Executive
shall tender his resignation as a Director and as Chief Operating Officer of the
Company  effective  August 1, 1999.  At the direction of the Board of Directors,
during the remaining term of the Employment Agreement,  Executive's duties shall
be to attempt to secure  acquisition,  financing,  investment  and joint venture
candidates for NetWolves,  as well as other similar duties which may be assigned
to him. Executive agrees to work from his home and shall not be provided with an
office at any of the Company's offices.

     2. Section 2.2 of the Employment Agreement is deleted in its entirety.

     3.  Section 2.3 of the  Employment  Agreement  is deleted in its  entirety,
except that the Company hereby agrees that the warrant issued to Executive shall
be amended as set forth in Exhibit "A" hereto.

     4. Section 2.4 of the  Employment  Agreement is amended such that Executive
shall not be entitled  to incur  travel,  cellular  phone  and/or  entertainment
expenses  above a total  amount  equal to $250.00  during  any one month  period
without first receiving the written  approval of the Company.  Reimbursement  of
all such  expenses by the Company shall be subject to submission by Executive of
appropriate  documentation  evidencing  such  expenses  and shall be paid by the
Company  within thirty (30) days of the Company's  receipt of  documentation  of
such expenses. As of the date of the First Amendment there are business expenses
of $1,800.00,  which have been incurred by Executive  that will be reimbursed to
Executive simultaneously with the execution of this First Amendment,  subject to
Executive's submission of appropriate documentation evidencing such expenses.

     5. Section 2.7 of the Employment Agreement is deleted in its entirety.

     6.  Section 3.1 of the  Employment  Agreement  is deleted in its  entirety,
except that the Company  hereby agrees that  Executive  shall be paid the sum of
$130,000 per annum, payable semi-monthly,  ending as of June 15, 2001. Executive
shall be  entitled  to no further  compensation  from the  Company.  Executive's
employment  shall  terminate  automatically  on June 15, 2001, with no rights of
renewal.

     7. All other terms of the Employment  Agreement  shall remain in full force
and effect.

Dated:    September 2, 1999

                               /s/   Kevin F. Sherlock
                                     KEVIN F. SHERLOCK


                              NETWOLVES CORPORATION

                              By:   /s/ Peter C. Castle

<PAGE>



                                                       Exhibit A

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK  ISSUABLE UPON EXERCISE HAVE
BEEN  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  OR
UNDER ANY STATE  SECURITIES LAW. THE COMPANY WILL NOT TRANSFER THIS WARRANT,  OR
ANY  SHARES OF COMMON  SHARES  ISSUABLE  UPON  EXERCISE,  UNLESS (i) THERE IS AN
EFFECTIVE  REGISTRATION  COVERING  THIS  WARRANT  OR  SHARES  UNDER  THE ACT AND
APPLICABLE  STATE  SECURITIES  LAWS,  (ii) IT FIRST  RECEIVES AN OPINION FROM AN
ATTORNEY,  REASONABLY  ACCEPTABLE  TO THE  COMPANY,  STATING  THAT THE  PROPOSED
TRANSFER  IS EXEMPT  FROM  REGISTRATION  UNDER THE ACT AND UNDER ALL  APPLICABLE
STATE  SECURITIES  LAWS,  OR (iii) THE  TRANSFER  IS MADE  PURSUANT  TO RULE 144
PROMULGATED UNDER THE ACT.

                                                             For the Purchase of
                                                               200,000 shares of
                                                                    Common Stock
No. N005


                           WARRANT FOR THE PURCHASE OF
                             SHARES OF COMMON STOCK
                                       OF
                             WATCHDOG PATROLS, INC.


                            (A New York corporation)


     FOR VALUE RECEIVED,  Watchdog Patrols, Inc.  ("Company"),  hereby certifies
that Kevin F. Sherlock, residing at 162 Boney Lane, Nissequogue, NY 11780 or his
registered assigns ("Registered Holder"), is entitled,  subject to the terms set
forth below,  to purchase  from the  Company,  200,000  shares of Common  Stock,
$.0033 par value,  of the Company  ("Common  Stock"),  at a purchase price equal
$1.63.  The number of shares of Common Stock  purchasable  upon exercise of this
Warrant,  and the purchase  price per share,  each as adjusted from time to time
pursuant to the provisions of this Warrant,  are hereinafter  referred to as the
"Warrant Shares" and the "Exercise Price," respectively.

1.   Exercise.

     1.1  Procedure  for Cash  Exercise.  This  Warrant may be  exercised by the
Registered  Holder,  in whole or in part, by the surrender of this Warrant (with
the Notice of Exercise Form  attached  hereto as Exhibit I duly executed by such
Registered  Holder) at the  principal  office of the  Company,  or at such other
office or agency as the Company may  designate,  accompanied by payment in full,
in lawful money of the United States,  of an amount equal to the then applicable
Exercise Price  multiplied by the number of Warrant Shares then being  purchased
upon such exercise.
<PAGE>
     1.2 Procedure for Cashless Exercise. In lieu of the payment of the Exercise
Price in the manner set forth in Section 1.1, the  Registered  Holder shall have
the right (but not the  obligation)  to convert this Warrant,  in whole or part,
into  Common  Stock  ("Conversion  Right")  as  follows:  Upon  exercise  of the
Conversion  Right,  the Company shall deliver to the Registered  Holder (without
payment by the  Registered  Holder of any of the Exercise  Price) that number of
shares of Common  Stock  equal to the  quotient  obtained  by  dividing  (x) the
"Value" (as defined below) of the portion of the Warrant being  converted on the
second  trading day  immediately  preceding the date the Warrant is delivered to
the  Company  pursuant  to  Section  1.3 if the  Conversion  Right is  exercised
("Valuation Date") by (y) the "Market Price" (as defined below) on the Valuation
Date.

     The "Value" of the portion of the Warrant being  converted  shall equal the
remainder  derived from  subtracting  (a) the Exercise  Price  multiplied by the
number of shares of Common  Stock  underlying  the portion of the Warrant  being
converted from (b) the Market Price of the Common Stock multiplied by the number
of shares of Common Stock underlying the portion of the Warrant being converted.
As used herein,  the term  "Market  Price" at any date shall be deemed to be the
last reported  sale price of the Common Stock on such date,  or, in case no such
reported  sale takes place on such day,  the average of the last  reported  sale
prices for the  immediately  preceding  three  trading  days, in either case, as
reported by the national securities exchange on which the Common Stock is listed
or  admitted to  trading,  or, if the Common  Stock is not listed or admitted to
trading on any national securities exchange or if any such exchange on which the
Common  Stock is listed or  admitted  to  trading is not its  principal  trading
market, the last sale price as reported by the Nasdaq Stock Market if the Common
Stock is quoted on the Nasdaq National Market or Nasdaq SmallCap Market.  If the
Common  Stock is not listed on a national  securities  exchange or quoted on the
Nasdaq National Market or Nasdaq SmallCap Market,  but is traded in the residual
over-the-counter market, the Market Price shall mean the last sale price for the
Common Stock,  as reported by the NASD OTC Bulletin  Board if quoted on the NASD
OTC  Bulletin  Board and,  if not,  the  average of the bid and asked  prices as
published by the National Quotation Bureau,  Incorporated,  or similar publisher
of such  quotations.  If the Market Price cannot be  determined  pursuant to the
above,  the Market  Price shall be such price as the Board of  Directors  of the
Company shall determine in good faith.

     1.3 Exercise of Conversion  Right. The Conversion Right may be exercised by
the Holder on any business day by  delivering  to the Company the Warrant with a
duly  executed  Notice of Exercise  Form  attached  hereto as Exhibit I with the
conversion  section completed by specifying the total number of shares of Common
Stock the Registered Holder will purchase pursuant to such conversion.

     1.4 Date of Exercise. Each exercise of this Warrant shall be deemed to have
been  effected  immediately  prior to the close of  business on the day on which
this  Warrant  shall have been  surrendered  to the Company.  At such time,  the
person or persons in whose name or names any  certificates  for  Warrant  Shares
shall be issuable upon such  exercise  shall be deemed to have become the holder
or holders of record of the Warrant Shares represented by such certificates.
<PAGE>
     1.5 Issuance of Certificate.  As soon as practicable  after the exercise of
the purchase right represented by this Warrant,  the Company at its expense will
use its best efforts to cause to be issued in the name of, and delivered to, the
Registered Holder, or, subject to the terms and conditions hereof, to such other
individual  or  entity  as such  Holder  (upon  payment  by such  Holder  of any
applicable transfer taxes) may direct:

          (i) a  certificate  or  certificates  for the number of full shares of
Warrant  Shares to which such  Registered  Holder  shall be  entitled  upon such
exercise plus, in lieu of any fractional  share to which such Registered  Holder
would otherwise be entitled,  cash in an amount determined pursuant to Section 4
hereof, and

          (ii) in case such  exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor,  stating on the face or faces thereof the
number of shares  currently  stated on the face of this Warrant minus the number
of such shares purchased by the Registered Holder upon such exercise as provided
in subsections 1.1 and 1.2 above.

     1.6  Exercise Schedule.  Subject to Section 1.7 hereof, the Warrant may be
exercised as follows:

          (i)  up to  50,000  Warrant  Shares  may  be  purchased  if  NetWolves
Corporation,  a wholly owned subsidiary of the Company  ("NetWolves")  generates
revenues  of at least  $5,000,000,  without a loss before  provision  for income
taxes, for the twelve month period commencing July 1, 1998 ("Fiscal Year");

          (ii) up to  100,000  Warrant  Shares  may be  purchased  if  NetWolves
generates at least  $10,000,000 in revenues,  with at least $2,000,000 in income
before provisions for income taxes, within the Fiscal Year;

          (iii) up to  50,000  Warrant  Shares  may be  purchased  if  NetWolves
generates  revenue of  $10,000,000,  with at least  $1,000,000  in income before
provision for income taxes,  during the twelve month period following the Fiscal
Year; and

          (iv) if the  Warrant  Shares  described  in clause (ii) did not become
purchasable  under the condition  stated,  then such Warrant  Shares will become
purchasable  if  NetWolves  generates  $20,000,000  in  revenues,  with at least
$4,000,000 in income before provision for income taxes,  during the twelve month
period following the Fiscal Year.

     1.7  Determination  of NetWolves  Revenues.  In order to determine  whether
NetWolves  has generated the  threshold  level of revenues  ("Threshold  Level")
required pursuant to Section 1.6 hereof, for the exercise of this Warrant in any
applicable  period, the Company shall cause its accountants to perform (i) a SAS
No. 71 review of the NetWolves statement of operations if it reasonably believes
that the revenues for such period are in excess of 20% of the Threshold Level or
(ii) an  audit  of the  NetWolves'  statement  of  operations  if it  reasonably
believes that the revenues for such period are in excess of the Threshold  Level
by less than 20%.  The Warrant will become  exercisable  pursuant to Section 1.6
hereof after the review or audit by the  Company's  accountants  which  confirms
that the Threshold Level has been met.
<PAGE>
2.   Adjustments.

     2.1 Split,  Subdivision or Combination of Shares. If the outstanding shares
of the Company's Common Stock at any time while this Warrant remains outstanding
and unexpired shall be subdivided or split into a greater number of shares, or a
dividend in Common Stock shall be paid in respect of Common Stock,  the Exercise
Price in effect  immediately  prior to such subdivision or at the record date of
such dividend shall,  simultaneously  with the effectiveness of such subdivision
or split or immediately  after the record date of such dividend (as the case may
be), shall be  proportionately  decreased.  If the outstanding  shares of Common
Stock shall be combined or  reverse-split  into a smaller number of shares,  the
Exercise Price in effect  immediately prior to such combination or reverse split
shall,  simultaneously  with the  effectiveness  of such  combination or reverse
split, be proportionately  increased. When any adjustment is required to be made
in the Exercise Price,  the number of shares of Warrant Shares  purchasable upon
the  exercise  of this  Warrant  shall be changed to the  number  determined  by
dividing (i) an amount equal to the number of shares  issuable upon the exercise
of this Warrant immediately prior to such adjustment, multiplied by the Exercise
Price in effect immediately prior to such adjustment, by (ii) the Exercise Price
in effect immediately after such adjustment.

     2.2 Reclassification  Reorganization,  Consolidation or Merger. In the case
of any reclassification of the Common Stock (other than a change in par value or
a subdivision or  combination  as provided for in subsection 2.1 above),  or any
reorganization,  consolidation  or merger of the  Company  with or into  another
corporation  (other than a merger or  reorganization  with  respect to which the
Company  is  the  continuing  corporation  and  which  does  not  result  in any
reclassification of the Common Stock), or a transfer of all or substantially all
of the assets of the Company, or the payment of a liquidating distribution then,
as part of any such  reorganization,  reclassification,  consolidation,  merger,
sale or liquidating  distribution,  lawful  provision  shall be made so that the
Registered  Holder of this Warrant  shall have the right  thereafter  to receive
upon the  exercise  hereof,  the kind and  amount  of  shares  of stock or other
securities or property which such Registered  Holder would have been entitled to
receive  if,  immediately  prior to any such  reorganization,  reclassification,
consolidation,  merger,  sale or liquidating  distribution,  as the case may be,
such Registered  Holder had held the number of shares of Common Stock which were
then  purchasable  upon  the  exercise  of  this  Warrant.  In  any  such  case,
appropriate  adjustment (as  reasonably  determined by the Board of Directors of
the Company) shall be made in the application of the provisions set forth herein
with respect to the rights and interests  thereafter of the Registered Holder of
this  Warrant  such that the  provisions  set forth in this Section 2 (including
provisions with respect to the Exercise  Price) shall  thereafter be applicable,
as nearly as is  reasonably  practicable,  in relation to any shares of stock or
other  securities or property  thereafter  deliverable upon the exercise of this
Warrant.
<PAGE>
     2.3 Price  Adjustment.  No adjustment in the per share Exercise Price shall
be required unless such adjustment  would require an increase or decrease in the
Exercise Price of at least $0.01; provided,  however, that any adjustments which
by reason of this paragraph are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section  2 shall be made to the  nearest  cent or to the  nearest  1/100th  of a
share, as the case may be.

     2.4 Price Reduction.  Notwithstanding any other provision set forth in this
Warrant,  at any time and from time to time during the period that this  Warrant
is exercisable,  the Company in it sole discretion may reduce the Exercise Price
or extend the period during which this Warrant is exercisable.

     2.5 No  Impairment.  The Company  will not, by amendment of its Articles of
Incorporation or through any reorganization,  transfer of assets, consolidation,
merger, dissolution,  issue or sale of securities or any other voluntary action,
avoid or seek to avoid the  observance or  performance of any of the terms to be
observed  or  performed  hereunder  by the Company but will at all times in good
faith assist in the carrying out of all the  provisions of this Section 2 and in
the taking of all such actions as may be necessary  or  appropriate  in order to
protect  against  impairment  of the  rights  of the  Registered  Holder of this
Warrant to adjustments in the Exercise Price.

     2.6 Notice of  Adjustment.  Upon any  adjustment  of the Exercise  Price or
extension of the Warrant  exercise  period,  the Company  shall  forthwith  give
written notice thereto to the Registered  Holder of this Warrant  describing the
event  requiring the  adjustment,  stating the adjusted  Exercise  Price and the
adjusted number of shares  purchasable  upon the exercise hereof  resulting from
such event, and setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.

3.  Fractional  Shares.  The Company shall not be required to issue fractions of
shares of Common Stock upon exercise. If any fractions of a share would, but for
this Section 3, be issuable upon any exercise,  in lieu of such fractional share
the Company shall round up or down to the nearest whole number.

4.  Limitation  on Sales.  Each holder of this  Warrant  acknowledges  that this
Warrant and the  Warrant  Shares,  as of the date of  original  issuance of this
Warrant,  have not been registered  under the Securities Act of 1933, as amended
("Act"), and agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise
in the absence of (i) an effective  registration  statement  under the Act as to
this  Warrant or such Warrant  Shares or (ii) an opinion of counsel,  reasonably
acceptable  to the Company (the Company  hereby  agreeing  that the opinion from
Graubard  Mollen and Miller shall be  acceptable),  that such  registration  and
qualification are not required.  The Warrant Shares issued upon exercise thereof
shall be imprinted with a legend in substantially the following form:

"THE ISSUANCE OF THIS SECURITY HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT
OF 1933, AS AMENDED,  OR APPLICABLE  STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION  REQUIREMENTS OF SAID
ACT OR APPLICABLE  STATE  SECURITIES  LAWS,  SUPPORTED BY AN OPINION OF COUNSEL,
REASONABLY  SATISFACTORY TO THE COMPANY AND ITS COUNSEL,  THAT SUCH REGISTRATION
IS NOT REQUIRED."
<PAGE>
5. Certain Dividends.  If the Company pays a dividend or makes a distribution on
the Common Stock ("Dividend"),  other than a stock dividend payable in shares of
Common Stock,  then the Company will pay or distribute to the Registered  Holder
of this Warrant,  upon the exercise  hereof,  in addition to the Warrant  Shares
purchased  upon such  exercise,  the Dividend which would have been paid to such
Registered  Holder if it had been the owner of  record  of such  Warrant  Shares
immediately  prior to the date on which a record is taken for such  Dividend or,
if no record is taken,  the date as of which the records holders of Common Stock
entitled to such Dividend are determined.

6. Notices of Record Date.  In case:  (i) the Company shall take a record of the
holders  of its  Common  Stock  (or  other  stock  or  securities  at  the  time
deliverable  upon the exercise of this  Warrant) for the purpose of entitling or
enabling them to receive any dividend or other  distribution,  or to receive any
right to  subscribe  for or  purchase  any  shares  of any  class  or any  other
securities, or to receive any other right, or (ii) of any capital reorganization
of the Company,  any  reclassification of the capital stock of the Company,  any
consolidation or merger of the Company with or into another  corporation  (other
than a consolidation or merger in which the Company is the surviving entity), or
any transfer of all or substantially all of the assets of the Company,  or (iii)
of the voluntary or  involuntary  dissolution,  liquidation or winding-up of the
Company,  then,  and in each such  case,  the  Company  will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as the case
may be,  (i) the date on which a record is to be taken for the  purpose  of such
dividend,  distribution  or right,  and stating the amount and character of such
dividend,  distribution  or  right,  or (ii) the  effective  date on which  such
reorganization, reclassification,  consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which  the  holders  of record of  Common  Stock (or such  other  stock or
securities at the time  deliverable  upon the exercise of this Warrant) shall be
entitled  to  exchange  their  shares of Common  Stock (or such  other  stock or
securities)   for   securities   or  other   property   deliverable   upon  such
reorganization, reclassification,  consolidation, merger, transfer, dissolution,
liquidation  or  winding-up.  Such notice shall be mailed at least ten (10) days
prior to the  record  date or  effective  date for the event  specified  in such
notice,  provided  that the  failure  to mail such  notice  shall not affect the
legality or validity of any such action.

7.  Reservation  of  Stock.  The  Company  will at all  times  reserve  and keep
available,  solely for issuance and delivery  upon the exercise of this Warrant,
such shares of Common Stock and other stock,  securities  and property,  as from
time to time shall be issuable  upon the  exercise of this  Warrant.  So long as
this Warrant remains outstanding,  the Company shall maintain the listing of the
shares of Common Stock to be issued upon  exercise on each  national  securities
exchange on which  Common  Stock is listed or on the Nasdaq  Stock Market if the
Common Stock is then quoted on the Nasdaq Stock Market.
<PAGE>
8. Replacement of Warrants.  Upon receipt of evidence reasonably satisfactory to
the Company of the loss,  theft,  destruction  or mutilation of this Warrant and
(in the case of loss,  theft  or  destruction)  upon  delivery  of an  indemnity
agreement  (with  surety  if  reasonably   required)  in  an  amount  reasonably
satisfactory to the Company,  or (in the case of mutilation)  upon surrender and
cancellation  of this Warrant,  the Company will issue,  in lieu thereof,  a new
Warrant of like tenor.

9. Transfers, etc.

     9.1 Warrant Register.  The Company will maintain a register  containing the
names and addresses of the  Registered  Holders of this Warrant.  Any Registered
Holder may change its,  his or her  address as shown on the warrant  register by
written notice to the Company requesting such change.

     9.2  Registered  Holder.  Until any transfer of this Warrant is made in the
warrant register, the Company may treat the Registered Holder of this Warrant as
the absolute owner hereof for all purposes;  provided, however, that if and when
this  Warrant is properly  assigned in blank,  the Company may (but shall not be
obligated  to) treat the  bearer  hereof as the  absolute  owner  hereof for all
purposes, notwithstanding any notice to the contrary.

10. No Rights as Stockholder. Until the exercise of this Warrant, the Registered
Holder of this Warrant shall not have or exercise any rights by virtue hereof as
a stockholder of the Company.

11.  Successors.  The rights and obligations of the parties to this Warrant will
inure to the  benefit  of and be  binding  upon the  parties  hereto  and  their
respective heirs,  successors,  assigns,  pledgees,  transferees and purchasers.
Without  limiting  the  foregoing,  the  registration  rights  set forth in this
Warrant  shall  inure  to the  benefit  of the  Registered  Holder  and  all the
Registered Holder's  successors,  heirs,  pledgees,  assignees,  transferees and
purchasers of this Warrant and the Warrant Shares.

12. Change or Waiver.  Any term of this Warrant may be changed or waived only by
an instrument in writing  signed by the party against which  enforcement  of the
change or waiver is sought.

13.  Headings.  The headings in this Warrant are for purposes of reference  only
and shall not limit or  otherwise  affect the meaning of any  provision  of this
Warrant.

14. Governing Law. This Warrant shall be governed by and construed in accordance
with the laws of the State of New York as such  laws are  applied  to  contracts
made and to be fully performed  entirely within that state between  residents of
that state.

15.  Jurisdiction and Venue. The Company (i) agrees that any legal suit,  action
or  proceeding  arising out of or relating to this Warrant  shall be  instituted
exclusively in New York State Supreme Court, County of New York or in the United
States  District  Court for the Southern  District of New York,  (ii) waives any
objection to the venue of any such suit,  action or proceeding  and the right to
assert  that  such  forum is not a  convenient  forum for such  suit,  action or
proceeding,  and (iii) irrevocably  consents to the jurisdiction of the New York
<PAGE>
State Supreme Court,  County of New York,  and the United States  District Court
for the Southern  District of New York in any such suit,  action or  proceeding,
and the Company further agrees to accept and acknowledge  service or any and all
process  which may be served in any such suit,  action or proceeding in New York
State Supreme Court,  County of New York or in the United States  District Court
for the Southern District of New York and agrees that service of process upon it
mailed  by  certified  mail to its  address  shall be  deemed  in every  respect
effective service of process upon it in any suit, action or proceeding.

16.  Mailing of Notices,  etc. All notices and other  communications  under this
Warrant (except payment) shall be in writing and shall be sufficiently  given if
sent to the  Registered  Holder  or the  Company,  as the case  may be,  by hand
delivery,  private overnight  courier,  with  acknowledgment  of receipt,  or by
registered or certified mail, return receipt requested, as follows:

Registered Holder:      To Registered Holder's address on page 1 of this Warrant
                        Attention: [Name of Holder]

The Company:            To the Company's Principal Executive Offices Attention:
                        President

or to such other  address as any of them,  by notice to the others may designate
from time to time.  Time shall be counted  to, or from,  as the case may be, the
delivery  in person or by  overnight  courier  or five (5)  business  days after
mailing.




                         WATCHDOG PATROLS, INC.



                         By:  /s/ Philip M. LoRusso
                             ---------------------------------------------------
                              Name: Philip M. LoRusso
                              Title:Chairman

<PAGE>


                                                                       EXHIBIT I

                               NOTICE OF EXERCISE
                               ------------------


                                   Date: ______________


TO:  Watchdog Patrols, Inc.
     35 Walt Whitman Drive
     Suite 125
     Huntington Station, New York 11743


     1. The undersigned  hereby elects to purchase  _______ shares of the Common
Stock of Watchdog Patrols,  Inc., pursuant to terms of the attached Warrant, and
tenders  herewith  payment of $________ (at the rate of $___ per share of Common
Stock) in payment of the Exercise  Price  pursuant  thereto,  together  with all
applicable transfer taxes, if any.

                    or
                    --

     The  undersigned  hereby  elects to purchase ____ shares of Common Stock of
Watchdog Patrols,  Inc. by surrender of the unexercised  portion of the attached
Warrant (with a "Value" of $ based on a "Market Price" of $_______).

     2. Please issue a certificate or certificates  representing  said shares of
the  Common  Stock in the name of the  undersigned  or in such  other name as is
specified below.


                              --------------------------------------------------
                              Signature of Registered Holder

                              Print Name:
                                         ---------------------------------------

     Notice: The signature to this form must correspond with the name as written
upon the face of the within Warrant in every  particular  without  alteration or
enlargement or any change whatsoever.


            INSTRUCTIONS FOR REGISTRATION OF SECURITIES


Name
       -------------------------------------------------------------------------
                      (Print in Block Letters)

Address
       -------------------------------------------------------------------------

<PAGE>
                 AMENDMENT TO WARRANT ISSUED TO KEVIN SHERLOCK


     AMENDMENT to a Warrant (the  "Warrant")  numbered  N005, a copy of which is
annexed  hereto,  and issued by  Watchdog  Patrols,  Inc.  (whose  name has been
changed to  NetWolves  Corporation,  a New York  corporation)  (the  "Company"),
pursuant to which the Company granted to Kevin Sherlock  ("Sherlock")  the right
to purchase 200,000 shares of the Company's Common Stock, par value $0.0033 (the
"Common Stock") for $1.63 per share.

     The Company hereby acknowledges and agrees:

     1. Unless otherwise defined herein or the context otherwise requires, terms
used herein and defined in the Warrant shall be used herein as so defined.

     2. The Warrant is hereby amended as follows:

          (a) The opening  paragraph  of the Warrant  commencing  with the words
     "FOR VALUE  RECEIVED" is amended  replacing the number  "200,000"  with the
     number  "150,000" and inserting after the word "Company" in the fourth line
     thereof  the words "at any time or from time to time  during the three year
     period commencing July 1, 2000."

          (b) Section 1.6 of the Warrant is deleted in its entirety and replaced
     with the following:

          "Section 1.6. Exercise.  The Warrant,  as amended to reduce the number
     of shares of Common Stock  available  for purchase from 200,000 to 150,000,
     shall  automatically vest on July 1, 2000,  notwithstanding any termination
     of the employment of Sherlock at any time, and all or any portion  thereof
     may be exercised at any time after such date."

          (c)  Section 1.7 of the Warrant is deleted in its entirety.

     3. The terms and provisions  set forth in this  Amendment  shall modify and
supersede all  inconsistent  terms and  provisions  set forth in the Warrant and
except as expressly  modified and  superseded by this  Amendment,  the terms and
provisions of the Warrant are ratified and confirmed and shall  continue in full
force and effect.  The Company  agrees and confirms  that the Warrant as amended
hereby  shall  continue to be the legal,  valid and binding  obligations  of the
Company, enforceable in accordance with its terms.

     4. This Amendment shall be governed by and construed in accordance with the
law of the State of New York.

     IN WITNESS  WHEREOF,  the Company has  executed  this  Amendment to be duly
executed and delivered by their duly authorized officer or  representative,  and
to be effective as of the date below written.

Dated:  September 2, 1999

                                             NetWolves Corportion

                                             /s/  Peter C. Castle
                                             Name:  Peter C. Castle
                                             Title: Treasurer/Asst. Secretary


                          STRATEGIC ALLIANCE AGREEMENT
                          ----------------------------

     This Strategic  Alliance  Agreement  (this  "Agreement") is hereby made and
entered into this 10th day of September,  1999 (the  "Effective  Date"),  by and
among BOCA RESEARCH,  INC., a corporation  incorporated in the State of Florida,
United States,  having a place of business at 1377 Clint Moore Road, Boca Raton,
Florida 33487-2722  ("BOCA"),  and NETWOLVES  TECHNOLOGIES,  INC., a corporation
incorporated in the State of New York, United States, having a place of business
at 200 Broadhollow Road, Suite 207, Melville, New York 11747 ("NETWOLVES"). BOCA
and NETWOLVES are  individually  referred to in this Agreement as a "Party" and,
collectively, as "Parties."


                                    RECITALS

     WHEREAS, BOCA designs, manufactures, and supports hardware products for and
to the  specification of other companies,  and provides related  engineering and
homologation  certification  services,  and BOCA  manufactures  a thin client or
network computer (a "Thin Client" computer) which is designed to serve primarily
as clients for a network client/server architecture and configured with only the
most essential equipment, typically excluding hard disk drives ("Thin Clients");

     WHEREAS,  NETWOLVES produces sophisticated,  scalable software and hardware
technology (the "FoxBox Technology") that provides enterprise-wide connectivity,
distance learning,  firewall security and productivity  enhancing  applications.
FoxBox  Technology  includes  software  providing  server-side  and  client-side
facilities  for Thin Client (or  network)  computers  (the  "FoxBox  Thin Client
Software");

     WHEREAS,  NETWOLVES has produced general systems specifications for two (2)
new FoxBox chassis,  for the FoxBox, and for NETWOLVES Thin Clients,  to be used
with  the  FoxBox   Technology,   attached  hereto  as  Exhibits  B,  C  and  E,
respectively, (collectively, the "Specifications");

     WHEREAS, BOCA desires to manufacture FoxBox units and NETWOLVES Thin Client
units conforming to the  Specifications  and capable of interoperating  with the
FoxBox Thin Client Software and to provide related  engineering and homologation
certification services for NETWOLVES, and NETWOLVES desires BOCA to perform such
manufacturing and related services; and

     WHEREAS, BOCA and NETWOLVES desire to further investigate  participating in
joint  Marketing,  Sales,  Engineering  and  Training  activities  to  provide a
turn-key  solution  to the  Internet  Gateway  Marketplace;

     NOW THEREFORE,  in  consideration  of the premises and the mutual covenants
contained herein, the Parties hereto agree as follows:
<PAGE>

                                OPERATIVE TERMS

                                   ARTICLE 1
                                  DEFINITIONS

     For the  purposes of this  Agreement,  the  following  terms shall have the
meanings specified below:

     1.1 "Affiliate" shall mean any corporation,  partnership, joint venture, or
other  entity  (i) in  which  either  Party  own or  controls,  or is  owned  or
controlled by, or in common ownership or control with either Party to the extent
of holding directly or indirectly stock or interest representing more than fifty
percent  (50%) of the  aggregate  stock or other  interest  entitled  to vote on
general decisions  reserved to stockholders,  partners,  or other owners of such
entity;  or (ii) if a  partnership,  as to  which  a  Party  (and/or  any of its
Affiliates) is a general partner.

     1.2  "Confidential  Information"  shall mean all  information  not known or
generally  available  without  restrictions on use,  including  know-how,  trade
secrets,   intellectual  property,   operational  methods,  marketing  plans  or
strategies,  product  development  techniques or plans,  processes,  designs and
design projects,  inventions and research projects,  and other business affairs,
including  the terms  and  conditions  of this  Agreement  and the  negotiations
between the Parties with respect to this Agreement.

     1.3 "Cost of Work"  with  respect to any  particular  work shall mean costs
necessarily incurred by BOCA in proper performance of the work. Such costs shall
be at rates not higher  than any  standard  rates paid by BOCA to  suppliers  or
workers, except with prior consent of NETWOLVES.  Cost of Work shall include the
following:

          (a) Time.  Actual  labor  costs  for  performing  the work,  including
     allocable  portions of (i) wages of construction  workers directly employed
     by BOCA to  perform  the  work;  and (ii)  wages  and  salaries  of  BOCA's
     supervisory and administrative  personnel,  when such workers and personnel
     are  engaged  at  factories,  workshops  or  on  the  road  and  expediting
     production  or  transportation  of materials or equipment  required for the
     work;

          (b) Materials.  Costs of materials and equipment actually incorporated
     into the completed work,  including  transportation  of raw materials,  but
     exclusive of transportation of completed work; costs of materials in excess
     of those actually installed,  but required to provide reasonable  allowance
     for  waste,  spoilage  or overrun  and  agreed to in advance by  NETWOLVES,
     provided, however, that unused excess materials, if any, shall be delivered
     to  NETWOLVES  by  BOCA at the  time of  final  payments;  costs  including
     transportation,  installation,  maintenance,  dismantling  and  removal  of
     materials, supplies, temporary facilities,  machinery or equipment required
     in the performance of the work;

          (c) Overhead.  All factory direct and indirect expense other than Time
     and Materials  defined herein fairly  allocable to the product or products,
     or ten percent (10%) of the Materials Cost, whichever is less; and
<PAGE>
          (d)  Miscellaneous  Costs.  Premiums for  insurance and bonds that are
     directly  attributable to the Project;  sales, use or similar taxes imposed
     by governmental  authority  which are directly  related to the work and for
     which BOCA is  responsible,  including  direct costs of  subcontracting  as
     permitted in this Agreement..

     The term "Cost of Work," as used herein, shall not include:

               (i) Salaries and other compensations of BOCA personnel, except as
          specifically provided herein;

               (ii) Expenses of BOCA's principal  office and offices,  except as
          specifically provided herein;

               (iii) Overhead and general expenses, except as expressly provided
          herein;

               (iv)  BOCA's  capital  expenses,  including  interest  on  BOCA's
          capital employed for the work;

               (v) Rental costs of machinery and equipment; or

               (vi)  Costs  due to the  fault or  negligence  of BOCA or  anyone
          directly  employed  by  them,  including  the  cost of  correction  of
          damaged,  defective or nonconforming work, disposal and replacement of
          materials and equipment incorrectly ordered or supplied.

     Trade  discounts,  rebates,  refunds  and  amounts  received  from sales of
surplus materials and equipment shall accrue to NETWOLVES and BOCA shall attempt
to secure such  discounts.  Any amounts  which accrue to NETWOLVES in accordance
with the foregoing  shall be credited to NETWOLVES as a deduction  from the Cost
of Work.

     1.4  "Engineering  Release  Package"  shall  mean:

          *    Schematic ? Bill of Materials
          *    Work Instructions
          *    Firmware/Code
          *    Test Software
          *    Test Instructions
          *    Customer Software
          *    Assembly Instructions
          *    Component Specifications and Approved Vendor(s)
          *    Prototype
<PAGE>
     1.5 A  "FoxBox  Derivative"  shall  mean  any  FoxBox  product  and  FoxBox
Technology,  including the FoxBox Thin Client Software, or any parts or portions
thereof or work made from any part or portion therefrom,  which the development,
manufacture,  use  or  distribution  thereof  would  infringe  any  intellectual
property rights of NETWOLVES.

     1.6 A "FoxBox Unit" shall mean a computer conforming in all respects to the
FoxBox Specifications.

     1.7 The "Industrial Release" shall be obtained when NETWOLVES and BOCA have
successfully  completed all work necessary to put the NETWOLVES Thin Client Unit
or FoxBox Unit into  manufacturing for release to the trade. The milestone shall
be marked by the  transmission  and acceptance of an engineering  documentation,
bill of materials,  program files, and prototype  testing code conforming to the
Specifications.  This release  shall not be gated by the actual  production  but
rather the  acceptance  of the product for  production  by BOCA's  manufacturing
facility.

     1.8 "Know-How"  shall mean all knowledge and tangible  information  whether
patentable or not and physical objects related to the joint product development,
including,  but not  limited  to,  formulations,  materials,  data,  schematics,
designs,  configurations,  computer programs, drawings and sketches, testing and
test results, and regulatory information of a like nature whether or not capable
of precise,  separate  description  prior to its publication,  owned by BOCA and
NETWOLVES, which either party has the right to disclose or license to the other.

     1.9 A "NETWOLVES Thin Client Unit" shall mean a Thin Client unit conforming
in all respects to the NETWOLVES  Thin Client Unit  Specifications  and operable
with the NETWOLVES Thin Client Software.

     1.10 A "Third  Party"  shall mean any party,  except  Affiliates  of either
Party,  who is not a party to this  Agreement  and  shall  specifically  include
parties who integrate the Units into other products.

                                   ARTICLE 2
                              ENGINEERING SERVICES

2.1  FoxBox Services.

     (a) General  Statement of Work.  BOCA shall provide at no cost to NETWOLVES
engineering  services and corresponding  deliverables (the "FoxBox Services") as
set forth in Exhibit A with respect to the design and efficient manufacture of a
computer  system  conforming  in all respects to the FoxBox  Specifications  set
forth in Exhibit  C. The  deliverables  shall  include  an  Engineering  Release
package and a complete  schematic  design and  specification to produce a FoxBox
Unit with  particularity  and  detail  sufficient  to enable a  manufacturer  of
ordinary   skill  to   manufacture   FoxBoxes   conforming   with   the   FoxBox
Specifications.  BOCA shall take all steps  necessary  to obtain FCC, CUL and UL
approvals for the FoxBox Unit.  These services shall be provided to NETWOLVES at
no charge and shall be completed on or prior to November 1, 1999.
<PAGE>

     (b) Ownership of Work  Product.  NETWOLVES  shall own all right,  title and
interest  to any  intellectual  property  rights  in  and  to the  deliverables,
schematics  and  specification  and any other property  interest  related to the
FoxBox  Services.  All works of  authorship  created by BOCA with respect to the
FoxBox  Services  shall be works made for hire created by BOCA for NETWOLVES and
all such right,  title and interest  therein and thereto shall pass to NETWOLVES
upon creation by operation of law. All other  intellectual  property  related to
the FoxBox  Services  shall be  assigned,  and hereby  are  assigned  by BOCA to
NETWOLVES.  BOCA shall undertake all actions  reasonably  required by NETWOLVES,
including the execution of instruments of assignment,  applications  for letters
patent,  applications for registration of other intellectual  property rights or
other instruments  reasonably necessary to perfect NETWOLVES' interest in and to
such  intellectual  property  rights.  BOCA shall not  retain  any  intellectual
property  rights  whatsoever with respect to the FoxBox  Services,  and no other
rights  shall  vest  in or  pass  to BOCA  by  reason  of its  participation  in
undertaking to perform the FoxBox Services.

2.2  Thin Client Services.

     (a) General  Statement of Work.  BOCA shall provide at no cost to NETWOLVES
engineering services and corresponding deliverables (the "Thin Client Services")
necessary to enable BOCA to manufacture a NETWOLVES Thin Client Unit  conforming
in all respects to the NETWOLVES Thin Client Specifications set forth in Exhibit
E. The deliverables shall comprise, at least, an Engineering Release Package and
a working  NETWOLVES  Thin  Client  Unit  prototype.  BOCA  shall take all steps
necessary  to obtain FCC,  CUL and UL approvals  for the  NETWOLVES  Thin Client
Unit.  These  services  shall be provided to NETWOLVES at no charge and shall be
completed on or prior to September 1, 1999.

     (b) BOCA  Ownership of Certain Work Product.  Except for computer  software
other than BOCA's computer BIOS, BOCA shall retain all right, title and interest
to any  intellectual  property rights in and to the  deliverables  and any other
property interest related to the Thin Client Services;  provided,  however, that
nothing set forth  herein  shall be  construed to result in the transfer to BOCA
from NETWOLVES of any interest in any previously existing  intellectual property
interest of NETWOLVES  whatsoever,  including  any interest in or to the FoxBox,
FoxBox  technology,  the NETWOLVES Thin Client  Specifications  or the NETWOLVES
Thin Client Software.

     (c) NETWOLVES  Ownership of Certain Work Product.  NETWOLVES  shall own all
right,  title and  interest  in and to any and all  software  delivered  with or
designed for the NETWOLVES Thin Client by NETWOLVES  other than BOCA'S  existing
BIOS  software.  Such software  shall be works made for hire created by BOCA for
NETWOLVES and all such right,  title and interest therein and thereto shall pass
to NETWOLVES upon creation by operation of law. All other intellectual  property
related to computer  software  delivered with or designed for the NETWOLVES Thin
Client other than BOCA's  existing BIOS software  shall be assigned,  and hereby
are assigned by BOCA to NETWOLVES.  BOCA shall undertake all actions  reasonably
required by NETWOLVES,  including the execution of  instruments  of  assignment,
<PAGE>
applications  for  letters  patent,   applications  for  registration  of  other
intellectual  property  rights  or other  instruments  reasonably  necessary  to
perfect  NETWOLVES'  interest  in  and to  such  intellectual  property  rights.
Further,  nothing in this  Agreement  shall be  construed  to  preclude or limit
NETWOLVES'  right  or  ability  to  engage  the  services  of third  parties  to
independently  produce  a  Thin  Client  conforming  to  NETWOLVES  Thin  Client
Specifications  or a  Thin  Client  unit  interoperable  with  a  FoxBox  or the
NETWOLVES Thin Client Software.

     2.3 Further Engineering Services. BOCA shall provide additional engineering
services (the "Further Engineering Services") necessary to meet any technically,
commercially,  and reasonably  feasible  changes in  functionality  requested by
NETWOLVES.  Unless otherwise agreed between the parties,  such services shall be
provided  at a fee  of  One  Hundred  Dollars  ($100.00)  per  hour.  All  other
intellectual  property  related to the  Further  Engineering  Services  shall be
assigned, and hereby are assigned by BOCA to NETWOLVES. BOCA shall undertake all
actions reasonably required by NETWOLVES, including the execution of instruments
of assignment, applications for letters patent, applications for registration of
other intellectual property rights or other instruments  reasonably necessary to
perfect NETWOLVES'  interest in and to such intellectual  property rights.  BOCA
shall not retain any intellectual property rights whatsoever with respect to the
Further Engineering Services,  and no other rights shall vest in or pass to BOCA
by reason of its participation in undertaking to perform the Further Engineering
Services.

     2.4  Acceptance of  Engineering  Services.  Engineering  Services  shall be
deemed accepted unless NETWOLVES presents BOCA a notice of nonacceptance  within
forty-five (45) days upon the  presentation of deliverables  under the Agreement
setting forth with  particularity the basis for such rejection.  BOCA shall have
thirty (30) days thereafter to correct  deficiencies  identified by NETWOLVES in
such  notice.  Timely  completion  of the FoxBox  Services  and the Thin  Client
Services  shall be a condition  precedent to NETWOLVES'  obligations  under this
Agreement.

     2.5  Homologation  Services.  BOCA shall  provide  homologation  for FoxBox
products and NETWOLVES  Thin Client in those states noted by asterisk in Exhibit
D at its expense other than the NETWOLVES  obligation to pay for the filing fees
and costs. As a Further Engineering Service, at the election of NETWOLVES,  BOCA
shall provide  assistance in the  application  for and obtaining of homologation
approvals  in those  other  states  listed  in  Exhibit  D with  respect  to the
NETWOLVES Thin Client Units and FoxBox Units developed hereunder.  NETWOLVES and
its vendors agree to pay all costs associated with such applications and pay the
Engineering  Services  to BOCA as defined  under  Section  2.3 above.  NETWOLVES
agrees  to  provide  all  reasonable,  necessary  cooperation,   assistance  and
documentation  to process  such  applications.  BOCA shall make best  efforts to
assure  that all  such  homologation  approvals  may be  obtained,  but does not
represent or warrant that the respective  governments will ultimately grant such
approvals.  In the event BOCA shall sell any NETWOLVES  Thin Client Units in any
jurisdiction  wherein the NETWOLVES Thin Client  homologation  has been obtained
and  NETWOLVES  has paid the cost of same,  BOCA shall  reimburse  such fees and
costs to NETWOLVES upon the sale of its first Unit. In the event NETWOLVES shall
sell any FoxBox Units in any  jurisdiction  wherein the FoxBox  homologation has
been obtained and BOCA has paid the cost of same, NETWOLVES shall reimburse such
fees and costs to BOCA upon the sale of its first Unit.
<PAGE>
                                   ARTICLE 3
         MANUFACTURING OF FOXBOX UNITS AND NETWOLVES THIN CLIENT UNITS

     3.1 Sale of Conforming  FoxBox Units to NETWOLVES.  BOCA shall,  within the
limitations  contained in this  Article,  sell to NETWOLVES  such  quantities of
FoxBox Units conforming in all respects to the  Specifications  as NETWOLVES may
order.  BOCA shall make best  efforts to timely  satisfy such orders and provide
quality assurance services subject to the provisions set forth below. Subject to
the approval of NETWOLVES,  which approval shall not be  unreasonably  withheld,
BOCA reserves the right to subcontract the  manufacturing of the FoxBox Units to
third parties,  in its sole discretion,  provided that the FoxBox Units shall at
all times meet the required  quality and technical  specifications  set forth in
this Agreement;  further provided that such subcontractor shall be expressly and
affirmatively  bound in  writing  to comply  with the  warranty,  ownership  and
confidentiality  provisions  set forth in this  Agreement  and shall be bound to
defend,  indemnify and hold harmless NETWOLVES from claims arising from the work
of said  subcontractor;  and still further  provided that such  appointment of a
subcontractor  is  consistent  with BOCA's  obligation  to make best  efforts to
minimize the cost of manufacture to NETWOLVES.

     3.2 Sale of  Conforming  NETWOLVES  Thin Client  Units to  NETWOLVES.  BOCA
shall, within the limitations  contained in this Article, sell to NETWOLVES such
quantities of NETWOLVES Thin Client Units  conforming to the  Specifications  as
NETWOLVES may order.  BOCA shall make best efforts to timely satisfy such orders
and provide  quality  assurance  services  subject to the  provisions  set forth
below.  Provided that this Agreement shall not have been  terminated,  NETWOLVES
agrees to purchase, within two (2) years from the delivery of the NETWOLVES Thin
Client Services  deliverables,  two thousand (2,000) NETWOLVES Thin Client Units
from BOCA, provided,  however,  that any sales of NETWOLVES Thin Client Units by
BOCA within  said  period to third  parties  pursuant  to its  marketing  rights
provided  for in Section 5.1 shall be credited  against such  commitment  within
said period.  BOCA reserves the right to subcontract  the  manufacturing  of the
NETWOLVES Thin Client Units to third parties, in its sole discretion,  provided,
however,  that such  contractor  shall be expressly and  affirmatively  bound in
writing to comply with the warranty,  ownership and  confidentiality  provisions
set forth in this  Agreement  and shall be bound to defend,  indemnify  and hold
harmless NETWOLVES from claims arising from the work of said subcontractor;  and
further  provided that the  NETWOLVES  Thin Client Units shall at all times meet
the required quality and technical  specifications  set forth in this Agreement.
Such right to subcontract shall not be deemed to limit BOCA'S obligation to make
its best efforts to minimize the cost of manufacturing such product.

     3.3  Initial  Delivery.  Subject  to the  availability  of the parts  being
delivered to BOCA by September 1, 1999:

     (a) BOCA shall deliver thirty (30)  NETWOLVES Thin Client Units  acceptable
to NETWOLVES on or prior to September 15, 1999;
<PAGE>
     (b) BOCA shall deliver two hundred  fifty (250) FoxBox Units  acceptable to
NETWOLVES on or prior to September 15, 1999, as follows:
<TABLE>
<CAPTION>
QUANTITY                  NETWOLVES SKU                        BOCA SKU
- --------                  -------------                        --------
<S>                     <C>                                     <C>
 100                    NETWOLVES FoxBox S2e                    NW2Ether
  75                    NETWOLVES FoxBox T1                     NWCSUT1
  50                    NETWOLVES FoxBox DDR                    NWModem
  20                    NETWOLVES FoxBox 56K                    NWCSU56K
   5                    NETWOLVES FoxBox ISDN                   NWISDN
</TABLE>

                Provided,  however, that in the event parts are not available by
September  1, 1999,  BOCA shall  deliver the  products  within  twenty (20) days
following  receipt of all required parts and/or  components.

     3.4 Reservation of Rights by NETWOLVES. Nothing set forth in this Agreement
shall be construed to  constitute  the grant of any  exclusive  right to BOCA to
manufacture FoxBox units or the assignment of any right, title or interest in or
to the  FoxBox or any  FoxBox  technology.  Nothing  set forth  herein  shall be
construed  to  constitute  the grant of any  license  in or to the FoxBox or any
FoxBox technology, apart from such license as may be necessary to accomplish the
fulfillment  of each such order.  Nothing set forth in this  Agreement  shall be
construed  to  constitute  the  grant of any  exclusive  right to BOCA to supply
NETWOLVES  Thin Units to NETWOLVES  except as expressly set forth in Article 3.2
above.

3.5  Price and Shipping.

     (a) FoxBox Unit  Pricing.  Pricing for FoxBox Units shall be in  accordance
with Exhibit F attached  hereto or in  accordance  with such other pricing as to
which the parties may agree.

     (b) Thin Client  Pricing.  With  respect to delivery  of  conforming  goods
delivered in response to an Order,  NETWOLVES  shall pay to BOCA an amount equal
to the lesser of (i) for the first  delivery  of  NETWOLVES  Thin  Client  Units
pursuant to this  Agreement,  BOCA's Cost of Work associated with the production
of such units, plus twenty-five  percent (25%); (ii) for subsequent  deliveries,
an amount equal to the average of BOCA's Cost of Work for the first delivery and
BOCA's Cost of Work for the delivery  preceding such subsequent  delivery,  plus
twenty-five percent (25%); (iii) the maximum unit prices as set forth in Exhibit
F; or (iv) such lesser amount upon which the parties may agree in writing.  BOCA
shall make  reasonable  and best efforts to minimize  BOCA's Cost of Work at all
times  during  the term of this  Agreement.  However,  in the  event  the  price
determined  pursuant to (i) above exceeds the Exhibit F price set forth in (iii)
above, BOCA shall not have the obligation to sell such additional NETWOLVES Thin
Client  Units  pursuant to this  Agreement  unless the parties  reach a mutually
acceptable price pursuant to (iv) above;  provided,  however,  that if BOCA does
not agree to sell NETWOLVES Thin Client Units pursuant to the provisions of this
sentence,  then  NETWOLVES  shall  likewise  not be  obliged  to  purchase  such
NETWOLVES Thin Client Units.
<PAGE>
                All such units shall be delivered F.O.B. BOCA's plant in Florida
or such other place of shipment as the parties may agree. BOCA shall arrange and
pay for shipping of units in accordance  with NETWOLVES'  instructions  and BOCA
shall further pay any customs,  duties,  costs,  taxes,  insurance  premiums and
other  expenses  related  to such  shipping,  which  amounts  shall be billed to
NETWOLVES without markup.

     3.6  Delivery;  Liquidated  Damages for Late  Delivery.  BOCA shall deliver
conforming  goods within ten (10) weeks after receipt of an order from NETWOLVES
(the  "Delivery  Date"),  provided  that BOCA  shall be able to  obtain  all key
components  for such  deliveries in a timely manner  through the exercise of its
commercially reasonable efforts.  However, any such delays in obtaining said key
components  shall extend the Delivery Date on a day-for-day  basis For each full
week late of the Delivery Date, provided that NETWOLVES shall not have caused or
contributed to the delay,  NETWOLVES may deduct five percent (5%) of the Cost of
Work  from  the  price,  as  liquidated  damages  and  not as a  penalty.  These
provisions  shall  be  deemed  a  reasonable  measure  of the  damages  incurred
resulting from late delivery and the parties agree that they shall not be deemed
a penalty.  In no case shall the deduction  exceed fifteen  percent (15%) of the
Cost of Work.

     3.7 Terms of Payment/Accounting for Cost of Work. All purchase orders given
to BOCA by NETWOLVES shall be firm and noncancellable for any reason.  NETWOLVES
shall pay to BOCA a deposit equal to twenty percent (20%) of the Price,  payable
thirty (30) days following the placement of an order,  provided,  however,  that
NETWOLVES  need not pay such deposit to the extent that the  aggregate of unpaid
deposits  are less than two hundred and fifty  thousand  dollars  ($250,000.00).
NETWOLVES  shall pay the balance  thirty (30) days  following  the receipt of an
invoice stating the Cost of Work for conforming  goods delivered with respect to
such Order,  but may take a two percent (2%)  discount if payment is made within
ten days of receipt of such invoice.  Upon request, BOCA shall provide NETWOLVES
with a statement of costs setting forth  specifically  the basis for computing a
Cost of Work associated with any invoice.  In the event that NETWOLVES suffers a
substantial and material  adverse change to its financial  condition,  then BOCA
may withdraw the Two Hundred Fifty Thousand Dollars  ($250,000.00)  trade credit
set forth in this paragraph; further provided, however, that NETWOLVES shall not
be obliged to purchase any  NETWOLVES  Thin Client Units under terms that do not
include such Two Hundred Fifty Thousand Dollars ($250,000.00) credit.

     3.8  Acceptance  of FoxBox  Units.  NETWOLVES may reject any portion of any
shipment of units that are not conforming in any material respects.  To reject a
shipment,  NETWOLVES  shall give notice of intent to reject the shipment  within
thirty (30) days of delivery  together with a written  indication of the reasons
for such possible rejection,  and as promptly as reasonably possible thereafter,
give notice of final  rejection  and the full basis  therefor.  After  notice of
intent to reject,  the parties shall cooperate to determine whether rejection is
necessary or  justified.  If notice is not given,  NETWOLVES  shall be deemed to
have  accepted  delivered,  provided,  however,  in the case of products  having
latent defects upon which diligent  examination  could not have been discovered,
NETWOLVES  must give notice of  NETWOLVES'  intent within thirty (30) days after
discovery of such defects. In any event, NETWOLVES shall be entitled to a refund
of the  purchase  price of  properly  rejected  products  at the  time  they are
ultimately  rejected.  BOCA shall use, its  reasonable  efforts,  at  NETWOLVES'
request,  to provide  replacement  products  that shall be purchased by buyer as
provided in this Agreement.
<PAGE>

     3.9 Quality  Assurance  by BOCA.  BOCA agrees to monitor and assure  strict
quality  standards and adhere to the quality  specifications to be developed and
agreed upon by both  parties.  BOCA will provide per lot  shipment  reporting on
out-of-box quality results and will provide additional  available  manufacturing
quality  measurements  and audits on  request,  within  five (5)  working  days.
NETWOLVES, at NETWOLVES' expense, may at any time upon reasonable notice to BOCA
(not to  exceed  three  (3) days)  enter  BOCA's  property  and  inspect  BOCA's
facilities  and records to  investigate  BOCA's  compliance  with these  Quality
Assurance provisions.

     3.10 Accounting  Records/Audit.  BOCA shall keep full and detailed accounts
and exercise such controls as may be necessary for proper  financial  management
under this  Agreement.  NETWOLVES  shall be afforded  reasonable  access to such
accounting  records not more often than once each calendar quarter upon at least
three (3) days prior  notice.  NETWOLVES  shall bear the  expense of such review
unless  a  discrepancy  of more  than  five  percent  (5%) in  BOCA's  favor  is
discovered  with  respect  to the  computation  of Cost of Work over any  90-day
period,  in which  case BOCA  shall pay the  expense  of such  review  and shall
immediately  pay NETWOLVES  the amount of any  overcharges  resulting  from such
erroneous computation of the Cost of Work, plus interest computed at the rate of
the lesser of three  hundred  (300) basis  points over the three (3) month LIBOR
rate  (LIBOR+3)  on the date  payment was due to BOCA or the highest  applicable
legal rate, accruing from the date payment was due until paid in full.


                                   ARTICLE 4
                              INTELLECTUAL PROPERTY

     4.1 Reservation of Rights/No Implied Assignment of Rights. Each Party shall
retain all  intellectual  property and other  priority  rights in its respective
pre-existing   works  and  inventions  and  all  proprietary   rights  developed
independently of this Agreement. Except as expressly provided herein, nothing in
this  Agreement  shall be deemed to constitute  the assignment or license of any
intellectual property or other proprietary right.  Generally,  BOCA shall retain
those  rights it owns with  respect to BOCA Thin Client  machines and the entire
non-software work product of the Thin Client Engineering Services, and NETWOLVES
shall  retain  all  rights  it owns to its  Specifications,  FoxBox  and  FoxBox
Technology, including without limitation all FoxBox Thin Client Software.

     4.2 Freedom to Continue Respective  Businesses.  In particular,  BOCA shall
remain free,  without  limitation,  to make, use, sell or offer for sale any and
all BOCA Thin  Client  Units to third  parties  (but not any  FoxBox  packaging,
FoxBox Units or NETWOLVES  Thin Client  Software),  regardless of whether it has
received  any consent of  NETWOLVES.  Similarly,  NETWOLVES  shall  remain free,
without limitation,  to make, use, sell or offer for sale, or to authorize third
parties to make,  use, sell or offer for sale any and all FoxBox  Units,  FoxBox
Technology  (including the FoxBox Thin Client Software),  the Specifications and
the entire work product of the FoxBox Engineering Services and Other Engineering
Services with third  parties,  regardless of whether it has received any consent
of NETWOLVES.
<PAGE>
                                   ARTICLE 5
                  MARKETING AGREEMENT AND OTHER OPPORTUNITIES

     5.1 Both Parties shall undertake to negotiate a joint  marketing  agreement
in  good  faith  as  generally  described  in  the  Non-Binding   Memorandum  of
Understanding  set forth in  Exhibit  G,  provided,  however,  that  each  party
reserves the right, in each party's sole and exclusive  discretion,  to agree or
not to agree to enter into a definitive agreement proposed by the other party.

     5.2 If the parties do not execute a definitive joint marketing agreement on
or prior to December 31, 1999, then BOCA may terminate this Agreement  effective
upon written  notice given on or prior to January 10, 2000,  if such  definitive
agreement  was not  executed  on or prior to the date  such  notice  was  given;
provided,  however,  that  BOCA  may not  terminate  this  Agreement  under  any
circumstances  if NETWOLVES  had  previously  offered to execute a  commercially
reasonable  written agreement  containing,  at least, the terms described in the
Non-Binding Memorandum of Understanding set forth in Exhibit G.

     5.3 If BOCA makes a lawful election to terminate this Agreement pursuant to
Section 5.2,  then  NETWOLVES  may elect,  within  NETWOLVES  sole and exclusive
discretion, either to:

     (a) Continue to use deliverables  from the FoxBox Services,  in which case,
NETWOLVES  shall pay BOCA for the time and  materials  in  providing  the FoxBox
Services and NETWOLVES Thin Client Services;

     (b) Refrain  from using  deliverables  from the FoxBox  Services,  in which
case,  NETWOLVES  need not pay for time and  materials in  providing  the FoxBox
Services.  In such a case, however,  neither BOCA nor NETWOLVES may subsequently
use or disclose deliverables from the FoxBox Services.

                                   ARTICLE 6
                                CONFIDENTIALITY

     6.1  Covenant  Not to Use or  Disclose.  Each Party  acknowledges  that the
Confidential  Information  constitutes and shall constitute  valuable assets and
trade  secrets.  Accordingly,  when a Party  (the  "Receiving  Party")  receives
confidential  information  from  the  other  Party  (the  "Owning  Party"),  the
Receiving  Party  shall (i) keep  secret  and  retain in strict  confidence  any
Confidential  Information  received from the Owning Party;  (ii) not disclose to
any Third Party any Confidential  Information received from the Owning Party for
any reason whatsoever;  (iii) not disclose any Confidential Information received
from the Owning Party to the Receiving  Party's (and/or any of its  Affiliates')
employees  or  sublicensees,  except  on a  need-to-know  basis  and only  after
instructing  each such employee or sublicensee not to disclose or otherwise make
available any  Confidential  Information  to any Third Party  receiving a signed
Confidentiality  Statement  from each such  sublicensee,  and provided each such
employee  is bound by  appropriate  confidentiality  obligation  under its labor
contract  with  the  employer;  and  (iv)  not  make  use  of  any  Confidential
Information  received  from the  Owning  Party for its own  purposes  or for the
benefit of any Third Party except as authorized by this Agreement.
<PAGE>
     6.2 Additional  Restrictions on Use of NETWOLVES  Software.  BOCA shall not
copy, in whole or in part, any NETWOLVES software or accompanying documentation;
modify,  adapt or otherwise create  derivative works from all or any part of any
NETWOLVES software or accompanying documentation;  distribute all or any part of
the NETWOLVES software,  decompile,  disassemble or otherwise attempt to reverse
engineer the NETWOLVES software;  or rent or lease the NETWOLVES  software.  All
rights in or to the FoxBox software are reserved.

     6.3  Notice of Demand  for  Confidential  Information.  In the event of any
legal action or  proceeding  or asserted  requirement  under  applicable  law or
government regulations requesting or demanding the Receiving Party disclose this
Agreement or any Confidential Information, the Receiving Party shall immediately
notify the Owning  Party in writing of such request or demand so that the Owning
Party  may  seek  an  appropriate  protective  order  or take  other  protective
measures.  The  Receiving  Party  shall,  upon the request of the Owning  Party,
cooperate  reasonably with the Owning Party in contesting such request or demand
at the expense of the Owning Party  including,  without  limitation,  consulting
with the Owning Party as to the  advisability of taking legally  available steps
to resist or narrow such  request or demand.  If in the absence of a  protective
order or a waiver  hereunder from the Owning Party,  the Receiving Party, in the
reasonable written opinion of the Receiving Party's legal counsel,  is compelled
to disclose this  Agreement or any  Confidential  Information to any tribunal or
otherwise stand liable for contempt or suffer other penalty, the Receiving Party
may disclose this  Agreement or such  Confidential  Information to such tribunal
without liability  hereunder;  provided,  however, the Receiving Party (i) shall
give the Owning Party written  notice of the  Confidential  Information to be so
disclosed  as far in advance of its  disclosure  as is  practicable;  (ii) shall
furnish only that  portion of this  Agreement  or the  Confidential  Information
which is legally  required;  and (iii) shall use best efforts to obtain an order
or other reliable assurance that confidential treatment will be accorded to such
portions of this  Agreement or the  Confidential  Information to be disclosed as
the Owning Party designates.

     6.4 Notice of Threatened Misappropriation. In the event the Receiving Party
becomes  aware that any person or entity  (including,  but not  limited  to, any
Affiliate or employee of the Receiving  Party) is taking,  threatens to take, or
has taken any action which would violate any of the foregoing provisions of this
Agreement,  the Receiving Party shall promptly and fully advise the Owning Party
(with written confirmation as soon as practicable thereafter) of all facts known
to the  Receiving  Party  concerning  such  action  or  threatened  action.  The
Receiving  Party shall not in any way aid, abet, or encourage any such action or
threatened  action;  and the  Receiving  Party agrees to use its best efforts to
prevent  such  action or  threatened  action,  including,  but not  limited  to,
assigning  any cause of  action it may have  relating  to the  violation  of the
foregoing  provisions to the Owning Party;  and the Receiving Party agrees to do
all reasonable  things and cooperate in all reasonable  ways as may be requested
by the Owning Party to protect the trade secrets and  proprietary  rights of the
Owning Party in and to the Confidential Information.

     6.5 Confidentiality of Terms of Agreement. The terms and conditions of this
Agreement shall not be disclosed by either Party,  except with the prior written
consent  of the  other  Party,  or as may be  required  by law or  necessary  to
establish its rights hereunder.  Notwithstanding  the foregoing,  (i) each Party
shall have the right to disclose the terms and conditions of this Agreement,  if
necessary,  to any legal  counsel of such Party as may be required to  establish
its rights hereunder;  and (ii) subsequent the execution of this Agreement,  the
<PAGE>
Parties may jointly or individually  issue press releases or otherwise  publicly
disclose the  Parties'  relationship,  (x) provided  such Party has obtained the
prior written approval of the content of such disclosure for the other Party and
(y) that such disclosure does not include  information which would be prohibited
from  disclosure  by either  Party  pursuant to this  Agreement  or that certain
Confidentiality  Agreement  between  the  Parties.  The  approval  of such press
release or other  disclosure  of the Parties'  relationship  shall be given by a
Party within ten (3) business days following the request by the other Party,  or
in the event the approval is not given,  the  disapproving  Party shall  provide
commercially reasonable objections.

     6.6 Return or Destruction of Materials.  Upon termination of this Agreement
for any reason,  nothing  herein shall be construed to release either Party from
any obligation that matured prior to the effective date of such termination.

                                   ARTICLE 7
                                INDEMNIFICATION

     7.1 Intellectual Property. Each party agrees to indemnify,  defend and hold
harmless the other party, its Affiliates, and its/their officers, employees from
and  against  any and all Third  Party  Claims as  incurred by such party to the
extent that the other  party's  products or services  provided  and/or  utilized
under this  Agreement  are alleged and  ultimately  determined  to infringe  any
patent,  copyright  or  intellectual  property  right  registered  or  otherwise
protected  under the Laws of the United States or any other  nation.  Each party
will not indemnify the other party to the extent the  infringement  is caused by
(i) the misuse or  modification of the other party's  products or materials;  or
(ii) the use of any such materials in combination  with any product not approved
by or supplied by the other party to the extent that such combination caused the
infringement.  BOCA shall be deemed to have  approved  all hardware and software
presently  sold by NETWOLVES and all hardware and software with which  NETWOLVES
products are  customarily  used.  NETWOLVES shall be deemed to have approved all
hardware and software  presently sold by BOCA and all hardware and software with
which BOCA products are customarily  used. If BOCA Materials or any part thereof
is, or in BOCA's  opinion  is likely to be,  held to  constitute  an  infringing
product,  then  with  BOCA  Materials,  (i)  replace  it  with a  non-infringing
equivalent with at least the same functionality and performance;  (ii) modify it
to make it non-infringing in a manner that does not impair its functionality and
performance;  or  (iii)  if  none  of the  foregoing  options  are  commercially
feasible,  the  Parties  will  negotiate  in good faith to  establish a mutually
agreeable  alternative,  taking due regard to NETWOLVES market  obligations.  If
NETWOLVES  Materials or any part thereof is, or in NETWOLVES'  opinion is likely
to be, held to constitute an infringing product,  then with NETWOLVES Materials,
(i)  replace  it  with a  non-infringing  equivalent  with  at  least  the  same
functionality  and performance;  (ii) modify it to make it  non-infringing  in a
manner that does not impair its functionality and performance;  or (iii) if none
of the foregoing options are commercially  feasible,  the Parties will negotiate
in good faith to establish a mutually agreeable  alternative,  taking due regard
to BOCA market obligations.  Notwithstanding the foregoing an indemnifying party
shall  not be  obligated  to  indemnify  the other  under  this  section  for an
infringement  arising from the combination of the indemnifying  party's products
or materials with other products or materials not provided, made used or sold by
the indemnifying party in cases where both: (i) such infringement would not have
occurred  but for the use of the  other  products  or  materials;  and (ii) such
infringement  would still have  occurred if a third  party  vendor's  comparable
products or materials were substituted for the indemnifying  party's products or
materials.
<PAGE>
     7.2 General.  Except for claims of infringement  of a patent,  copyright or
intellectual  property right, each party (the "Indemnifying Party") shall at all
times during the term of this Agreement and thereafter,  indemnify,  defend, and
hold the other party ("the "Indemnified  Party"), its Affiliates,  and its/their
officers and employees  harmless against any and all Claims,  actions,  demands,
liabilities,   losses,   damages,   costs,  payments,  and  expenses  (including
reasonable attorneys' fees and expenses) (collectively,  "Claims"),  arising out
of the death of or injury to any  person or persons or out of any damage to real
or  personal  property  and  against  any  other  Claim of any  kind  whatsoever
resulting from any occurrence  caused by and  attributable  to the  Indemnifying
Party,  its  subcontractors',  or its  agents'  acts  or  omissions  during  the
performance of this  Agreement.  If both parties are or may be obligated to each
other as a result of  different  actions  taken by each party or  actions  taken
jointly by both  parties,  then each party agrees to contribute to the amount of
such Claims as is  appropriate  to reflect the  relative  fault of such party in
connection  with the events that resulted in such Claims.  The relative fault of
each party shall be determined by reference to, among other things, each party's
relative intent, knowledge, access to information, and opportunity to correct or
prevent the circumstances resulting in such Claims.

     7.3 Procedures Relating to Indemnification.

     (a) Scope.  The  procedures  set forth in this Article 7.3 shall apply with
respect to any actual or potential Claim,  any written demand,  the commencement
of any action, or the occurrence of any other event which involves any matter or
related  series of matters  against  which  NETWOLVES  or BOCA (an  "Indemnified
Party") is  indemnified  by a Party  hereto  (the  "Indemnifying  Party")  under
Article 7.1 or Article 7.2 hereof.

     (b) Notice.  Upon receiving  notice in writing of the  commencement  of any
Claim from a Third Party,  the  Indemnified  Party shall give written  notice of
such Claim, in reasonable detail, to the Indemnifying Party no later than thirty
(30) days after receiving such notice,  stating the amount  involved,  if known,
together with copies of any written  documents  initiating  or asserting  such a
Claim. The failure to so notify, or any delay in so notifying, shall not relieve
the  Indemnifying  Party  hereunder  unless  and  only to the  extent  that  the
Indemnifying  Party did not  otherwise  learn of such Claim and such  failure or
delay results in the forfeiture by the Indemnifying  Party of substantial rights
and defenses,  and will not in any event relieve the Indemnifying Party from any
obligations to the Indemnified Party other than the  indemnification  obligation
provided in Article 7.1 or Article 7.2 hereof, as the case may be.

     (c)  Assumption  of Defense.  The  Indemnifying  Party shall be entitled to
assume the defense of any Claim for which  indemnification  is sought  hereunder
with  counsel of its choice and at its expense  (in which case the  Indemnifying
Party  shall not  thereafter  be  responsible  for the fees and  expenses of any
separate counsel  retained by the Indemnified  Party except as set forth below);
provided,  however,  that such counsel shall be reasonably  satisfactory  to the
Indemnified  Party.  Notwithstanding  an election by the  Indemnifying  Party to
assume the defense of such Claim, the Indemnified  Party shall have the right to
employ separate counsel and to participate in the defense of such Claim; and the
Indemnifying  Party shall bear the reasonable fees,  costs, and expenses of such
<PAGE>
separate counsel if (i) the use of counsel chosen by the  Indemnifying  Party to
represent  the  Indemnified  Party would present such counsel with a conflict of
interest; (ii) the Indemnifying Party shall not have employed counsel reasonably
satisfactory to the Indemnified  Party to represent the Indemnified Party within
a reasonable  time after notice of the  institution of such Claim;  or (iii) the
Indemnifying  Party shall  authorize the  Indemnified  Party to employ  separate
counsel at the Indemnifying Party's expense.

     (d)  Settlements.  The  Indemnifying  Party  shall not be liable  under the
provisions  of Article 7.1 or Article  7.2  hereof,  as the case may be, for any
amount paid by the Indemnified Party to settle, compromise, or otherwise resolve
(hereinafter  "Settle" or "Settlement")  any Claims if the Settlement is entered
into without the written consent of the  Indemnifying  Party,  which consent may
not be withheld  unless such  Settlement is unreasonable in light of such Claims
against,  and defenses  available to, the Indemnified Party. If the Indemnifying
Party withholds its consent to a proposed Settlement,  and the Claim in question
is  not  Settled  as  proposed,   the  Indemnifying  Party  will  indemnify  the
Indemnified  Party in accordance with Article 7.1 or Article 7.2 hereof,  as the
case may be. The  Indemnifying  Party agrees that it will not, without the prior
written  consent of the  Indemnified  Party  (which  consent may not be withheld
unless such  Settlement is  unreasonable  in light of such Claims  against,  and
defenses available to, the Indemnified Party),  Settle any pending or threatened
Claim  unless  such  Settlement   includes  an  unconditional   release  of  the
Indemnified Party from all liability arising out of or related to such Claim, or
transactions, or conduct in connection therewith.

     (e) Cooperation. The Parties agree to cooperate, share information (subject
to the need to preserve any applicable privilege),  and consult in good faith to
the fullest extent possible,  at the Indemnifying Party's expense, in connection
with any  Claim in  respect  of  which  indemnification  is  sought  under  this
Agreement.


                                   ARTICLE 8
                         REPRESENTATIONS AND WARRANTIES

8.1 Warranty.  BOCA  represents and warrants the following:

     (a) All  Engineering  Services  performed  under  this  Agreement  shall be
performed  in  a  good  and  workmanlike  manner  in  accordance  with  industry
standards.

     (b) All Deliverables arising from Engineering Services shall conform in all
respects to the Specifications.

     (c) BOCA has and shall have all right, title and interest necessary to make
the  assignments of  intellectual  property and other  proprietary  rights where
required  under  this  Agreement,  and BOCA has and  shall  have the all  powers
necessary to transfer such rights and to execute all instruments  required under
this Agreement with respect to such rights.
<PAGE>
(d) All FoxBox Units,  when shipped
by BOCA, shall be interoperable  with NETWOLVES Thin Client Units and the FoxBox
Thin Client Software,  shall conform in all respects to the Specifications,  and
shall be  Homologized  for the states set forth in Exhibit D.

     (e) All  NETWOLVES  Thin  Client  Units,  when  shipped  by BOCA,  shall be
interoperable  with the FoxBox Units and the FoxBox Thin Client Software,  shall
conform in all respects to the Specifications,  and shall be Homologized for the
states set forth in Exhibit D.


     (f) All FoxBox Units, NETWOLVES Thin Client Units and any software embedded
therein shall correctly operate and process date data prior to, during and after
January 1, 2000.

     8.2 Intellectual  Property Rights of Third Parties. Both parties warrant to
the other that neither has or shall have  knowledge that the FoxBox Units or the
NETWOLVES Thin Client Units shall infringe on the  intellectual  property rights
of any third party.

     8.3 Remedies.  NETWOLVES' remedy for breach of the foregoing warranties, in
addition to such other remedies that may be available at law or equity, shall be
the prompt repair or replacement of nonconforming goods, or the immediate refund
of monies paid for such goods.

     8.4 Disclaimer of Certain  Warranties.  EXCEPT AS SPECIFICALLY SET FORTH IN
THIS  AGREEMENT,  BOCA AND  NETWOLVES  MAKE NO  REPRESENTATIONS  OR  WARRANTIES,
EXPRESSED OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
OTHERWISE WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT.

     8.5 Limitation of Liability.  UNDER NO CIRCUMSTANCES  SHALL EITHER PARTY BE
LIABLE  FOR ANY  INDIRECT,  CONSEQUENTIAL,  INCIDENTAL,  EXEMPLARY  OR  PUNITIVE
DAMAGES, LOSS OF EARNINGS, PROFIT, OR GOODWILL SUFFERED BY ANY PERSON OR ENTITY,
INCLUDING THE OTHER PARTY,  CAUSED  DIRECTLY OR INDIRECTLY BY THE WORK PERFORMED
PURSUANT TO THIS AGREEMENT,  BY ANY LICENSE OR SUBLICENSE GRANTED HEREUNDER,  OR
BY EACH PARTY'S  PERFORMANCE OR NON-PERFORMANCE OF THIS AGREEMENT,  EVEN IF SUCH
PARTY IS NOTIFIED BY THE OTHER  PARTY OR ANY THIRD PARTY OF THE  POSSIBILITY  OF
SUCH DAMAGES.

                                   ARTICLE 9
                 UNITED STATES REGULATIONS AND EXPORT CONTROLS

     9.1  Compliance.  Both Parties  agree to comply with all  applicable  laws,
rules,  regulations and orders of federal, state, local and foreign governments.
Both parties are subject to United States laws and  regulations  controlling the
export of technical data,  computer  software,  prototypes and other commodities
(including all Export Administration Regulations of the United States Department
<PAGE>
of Commerce), and that BOCA's obligations hereunder are contingent on NETWOLVES'
compliance  with  applicable  United  States  export laws and  regulations.  The
transfer of certain  technical data and  commodities  may require a license from
the certain agencies of the United States Government  and/or written  assurances
by NETWOLVES  that  NETWOLVES  shall not export data or  commodities  to certain
foreign countries  without prior approval of such agency.  NETWOLVES agrees that
it shall not, directly or indirectly,  export or re-export,  or knowingly permit
the export or re-export of, the Licensed Technology to any country for which the
United States  Export  Administration  Act, any  regulation  thereunder,  or any
similar  United States law or  regulation,  requires an export  license or other
United States  government  approval,  unless the  appropriate  export license or
approval has been obtained. BOCA shall provide NETWOLVES with reasonable support
and cooperation to enable NETWOLVES to obtain the required licenses or approvals
NETWOLVES  agrees that it will be solely  responsible for any violations of such
by NETWOLVES.

     9.2 Disclaimer of  Representation.  BOCA neither  represents that an export
license  shall  not be  required  nor that,  if  required,  it shall be  issued.
Further,  if such  license  is  issued,  revocation  of such  export  license or
modification  thereof  that  prevents  BOCA from  performing  all or part of its
obligations  under this Agreement shall not be deemed a breach of this Agreement
to the extent such revocation or  modification is not  attributable to BOCA; or,
if such  revocation or modification is attributable to BOCA, is remedied by BOCA
on an expedited basis and at least within sixty (60) days.

                                   ARTICLE 10
                             NON-USE OF TRADEMARKS

     Neither  Party shall use the trade names,  trademarks,  or service marks of
the other party or any adaptation  thereof,  in any advertising,  promotional or
sales literature  without prior written consent obtained from the other party in
each case.


                                   ARTICLE 11
                                  TERMINATION

     11.1  Termination  for  Convenience.  If  BOCA  has  not  timely  presented
acceptable  deliverables  for the FoxBox Services or  deliverables  for the Thin
Client  Services in  accordance  with the  provisions  of this  Agreement,  then
NETWOLVES may terminate  this Agreement for  convenience,  effective upon giving
Notice of Termination.

     11.2  Termination  for Cause.  Upon any material  breach or default of this
Agreement by any Party (the "Breaching  Party"),  the non-breaching  Party shall
have the right to  terminate  this  Agreement  and the rights,  privileges,  and
license  granted  hereunder by sixty (60) days' notice to the  Breaching  Party.
Such  termination  shall become  effective unless the Breaching Party shall have
cured any such breach or default by diligently pursuing remedial action prior to
the  expiration  of the sixty (60) day period;  provided  that, if the Breaching
Party shall be in breach or default of the same  provision  twice within any six
(6) month period, the non-breaching Party shall have the right to terminate this
Agreement immediately without providing the Breaching Party the sixty (60) days'
notice and cure period.
<PAGE>
     11.3 Effect of  Termination.  Upon  termination  of this  Agreement for any
reason,  each Party shall,  at the option of the other Party,  return or destroy
all  Confidential  Information and Know-How in its possession owned by the other
Party.


                                   ARTICLE 12
                                      TERM

     The term of this Agreement  shall be for a period of two (2) years from the
date of this Agreement  unless sooner  terminated  pursuant to the provisions of
this Agreement.

                                   ARTICLE 13
                 PUBLIC ANNOUNCEMENTS AND PROMOTIONAL MATERIALS

     NETWOLVES and BOCA shall  cooperate  with each other so that each party may
issue  a press  release  concerning  this  Agreement  within  ninety  (90)  days
following the execution of this Agreement,  provided that each party may approve
any such press release prior to its release.  Such press release shall include a
quote attributable to the executive officer of each party.

                                   ARTICLE 14
                               GENERAL PROVISIONS

     14.1 Notices. All notices, demands or other communications given under this
Agreement shall be in writing and shall be mailed by first-class, registered, or
certified mail,  return receipt  requested,  postage prepaid,  or transmitted by
hand delivery  (including  delivery by courier),  telegram,  telex, or facsimile
transmission, addressed as follows:


                (i)     If to BOCA:
                        ----------
                        Boca Research, Inc.
                        Attention:  Executive Vice President & General Manager
                        1377 Clint Moore Road
                        Boca Raton, FL  33487-2722
                        Telephone:  (561) 997-6227
                        Facsimile:   (561) 997-6934
<PAGE>
                        With a copy to:
                        --------------
                        Robert W. Federspiel
                        Spinner, Dittman, Federspiel & Dowling
                        501 E. Atlantic Avenue
                        Delray Beach, FL  33483
                        Telephone:  (561) 276-2900
                        Facsimile:   (561) 276-5489

                (ii)    If to NETWOLVES:
                        ---------------
                        NetWolves Corporation
                        Attn: Daniel G. Stephens, Jr., Chief Information Officer
                        6016 Benjamin Road, Suite 107
                        Tampa, FL  33634
                        Telephone:  (813) 885-2779
                        Facsimile:   (813) 885-2380

                        With a copy to:
                        --------------
                        Andrew C. Greenberg
                        Carlton Fields
                        P.O. Box 3239
                        Tampa, FL  33601-3239
                        Telephone:  (813) 223-7000
                        Facsimile:   (813) 229-4133

or to such other  address  which each Party may  designate by notice in writing.
Each  such  notice,  demand,  or other  communication  which  shall  be  mailed,
delivered,  or transmitted in the manner  described  above shall be deemed given
for all  purposes at such time as it is  delivered  to the  addressee  (with the
return  receipt,  the delivery  receipt,  the affidavit of  messenger,  or (with
respect to a telex) the answer back being deemed  conclusive (but not exclusive)
evidence  of such  delivery),  or at such time as  delivery  is  refused  by the
addressee upon presentation.

     14.2 Governing Law. The construction and  interpretation  of this Agreement
and the  rights of the  Parties  shall be  governed  by the laws of the State of
Florida without regard to its conflicts of laws provisions.  The parties consent
to personal  jurisdiction  and venue in the state and federal  courts located in
Florida over any dispute  arising from or in connection  with this Agreement not
otherwise  submitted to arbitration.  Each Party hereby consents to the personal
jurisdiction  of the state and  federal  courts in Florida  in any such  dispute
arising  from or  relating to this  Agreement.  Each Party  further  agrees that
services of process may be made,  in addition to any other  method  permitted by
law, by certified mail, return receipt requested, sent to the applicable address
set forth herein.  Any award or injunctive  relief granted in any dispute may be
enforced by either  Party in either the courts of the State of Florida or in the
United States District Courts in Florida.

     14.3  Assignment.  This Agreement  shall be binding upon and shall inure to
the benefit of the Parties hereto and their respective successors and assigns as
permitted  hereunder.  No person or entity  other than the Parties  hereto is or
shall be entitled to bring any action to enforce any provision of this Agreement
against any of the Parties hereto, and the covenants and agreements set forth in
this Agreement shall be solely for the benefit of, and shall be enforceable only
<PAGE>
by, the Parties hereto or their  respective  successors and assigns as permitted
hereunder.  Except for assignment to an Affiliate, a successor in interest or to
the purchaser of all or substantially all of the assets of a party, neither this
Agreement nor any rights  hereunder shall be assignable by any Party without the
prior  written  consent of the other Party  hereto,  which  consent shall not be
unreasonably withheld.

     14.4  Further  Assurances.  Each Party  agrees to take or cause to be taken
such  further  actions,  to execute,  deliver and file or cause to be  executed,
delivered and filed such further documents,  and to obtain such consents, as may
be necessary or reasonably  requested in order to fully effectuate the purposes,
terms, and conditions of this Agreement.

     14.5 Entire  Agreement;  Amendment.  This Agreement  constitutes the entire
agreement  between the Parties  with  respect to the subject  matter  hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the Parties with respect to such matters. No amendment to this Agreement
shall be made except by an instrument in writing signed on behalf each Party.

     14.6  Severability.  If any court or  arbiter  of  applicable  jurisdiction
determines that any of the agreements,  covenants,  and  undertakings  set forth
herein, or any part thereof,  is invalid or unenforceable,  the provision shall,
to the extent  possible,  be restated to reflect the  original  intention of the
Parties, and the remainder of this Agreement shall be given full effect, without
regard to the invalid or restated portions.

     14.7 Waiver.  The failure of either Party to assert a right hereunder or to
insist upon  compliance  with any term or condition of this Agreement  shall not
constitute  a waiver of that  right or excuse a similar  subsequent  failure  to
perform any such term or condition by the other Party.

     14.8  Counterparts.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.

     14.9 Compliance with Laws. In performing under this Agreement, both Parties
agree  to  comply  with all  applicable  laws,  rules,  and  regulations  of any
governmental entity.

     14.10 Force  Majeure.  Neither Party shall not be liable to the other Party
for any loss or damage  done to delays or failure to perform  resulting  from an
event of "force majeure," including without  limitation,  acts of God; accident;
war; fire; lockout; strike or labor dispute; riot or civil commotion; act of the
public enemy;  enactment,  rule,  order, or act of civil or military  authority;
unforeseeable  judicial action;  or  unforeseeable  inability to secure adequate
materials, labor, or facilities.

     14.11  Permits  and  Licenses.   The  Parties  agree  that  BOCA  shall  be
responsible for obtaining all necessary United States federal and state permits,
licenses,  and other government  approvals  relating to the work performed under
this  Agreement;  and NETWOLVES shall be responsible for obtaining all necessary
permits, licenses, and other government approvals relating to the work performed
<PAGE>
in other countries with regards to their FoxBox Units. The Party responsible for
obtaining  government  approvals  agrees  to  indemnify  the  other for any loss
incurred  due  to the  asserted  or  established  failure  to  comply  with  the
responsible Party's respective  obligation to obtain such applicable  government
approvals.  Each Party agrees to reasonably assist the other, at the responsible
Party's expense, in obtaining all such necessary government approvals.


     IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals and
duly executed this Agreement the day and year set forth above.

                                      BOCA RESEARCH, INC.


                                      By: /s/Navroze S. Mehta        9/10/99
                                          --------------------------------------
                                      Name:   Navroze S. Mehta
                                      Title:  President - BOCA Global

                                      NETWOLVES TECHNOLOGIES


                                      By:  /s/ Daniel G. Stephens
                                           -------------------------------------
                                      Name:   Daniel G. Stephens, Jr.
                                      Title:  Chief Information Officer
                                              Officer of the Company
<PAGE>
                               TABLE OF EXHIBITS




EXHIBIT A                       FOXBOX ENGINEERING SERVICES

EXHIBIT B                       FOXBOX CASE REDESIGN REQUIREMENTS

EXHIBIT C                       FOXBOX SPECIFICATIONS

EXHIBIT D                       HOMOLOGATION STATES

EXHIBIT E                       NETWOLVES THIN CLIENT SPECIFICATIONS

EXHIBIT F                       MAXIMUM UNIT PRICES

EXHIBIT G                       MEMORANDUM OF UNDERSTANDING
<PAGE>
                                   EXHIBIT A
                          FOXBOX ENGINEERING SERVICES

     1. Chassis  Designs.  BOCA shall take all steps necessary to design two (2)
FoxBox  chassis (a single  rack mount unit and a four rack mount  unit) that are
acceptable  to  NETWOLVES  in  accordance  with  the  NETWOLVES  FoxBox  Chassis
Specifications, attached hereto as Exhibit B, and to prepare detailed schematics
and  such  other  documentation  as may be  necessary  for the  manufacture  and
assembly of a conforming chassis.

     2. Detailed  Schematics and Directions for FoxBox  Manufacture.  BOCA shall
take  all  steps  necessary  to  prepare  detailed  schematics  and  such  other
documentation  (the  "Documentation")  as may be necessary for  manufacture  and
assembly of a computer  conforming in all respects to the FoxBox  Specification,
attached hereto as Exhibit C. The Documentation  shall be sufficiently  complete
and set forth with sufficient particularity to enable a person of ordinary skill
in the art to  manufacture  a computer  conforming in all respects to the FoxBox
Specification.   The  Documentation  shall  include,  without  limitation,   the
following:

     *    All documents  necessary to apply for and to achieve UL  Certification
          (1950  3d  Edition)  for  any  computer   manufactured  in  accordance
          therewith.
     *    Detailed schematic drawings of all FoxBox Unit components.
     *    Specifications package for all FoxBox Unit components.
     *    Work instructions for Mass Production of the FoxBox Units.
     *    Enhanced drawings and sourcing for customized  cables,  LEDs and other
          components unique to the FoxBox Units

     3.  Homologation  Services.  BOCA shall take all steps necessary to prepare
detailed  schematics and such other  documentation as necessary for Homologation
of the FoxBox  computers  manufactured  in accordance  therewith with the states
identified in Exhibit D, attached hereto. BOCA shall then provide all Regulatory
approval support and shall be responsible for obtaining all approvals  necessary
for  NETWOLVES  to sell  FoxBox  Units in each state  listed in Exhibit D. These
services shall include:  detailed  assessment of the requirements for each piece
of equipment by individual  country;  arranging for a proper local applicant for
approval  where  required;  collection  and  assimilation  of all  materials and
documentation  required  for  compliance;  review of test data to ensure  agency
compliance;  on-site testing support where required; assuring that all necessary
supporting documentation has been provided and properly prepared; preparing type
approval application or compliance folders for local agencies' specific formats;
attending  pre-submission and coordination meetings with the regulatory agencies
as necessary;  modification of the  application  (if necessary)  based on agency
comments, feedback and recommendations;  submission of the completed application
or  maintenance  of  a  compliance  folder;  careful  coordination  with  agency
officials  through  and until  receipt of  approvals;  and  notification  of the
application approval and delivery of the approval certificate.

     4.  Prototypes and Sourcing.  BOCA shall provide  NETWOLVES with prototypes
and sourcing for production with respect to each of the above elements.
<PAGE>
                                   EXHIBIT B
                       FOXBOX CASE REDESIGN REQUIREMENTS


1.      Overall Design Goal.

     (a)  Design two separate cases.
          i.   5 Rack mount units high.
               A.   Expandable   (access   to  all   PCI/ISA   card   slots   on
                    motherboard).
               B.   Higher Wattage, internal power supply.
          ii.  1 Rack mount unit high.
               A.   One combo PCI/ISA slot set  horizontally  for Modem,  T1/56K
                    card, 2nd Ethernet card, etc.
               B.   Possibly external power supply.
               C.   Similar in shape and size to Cisco 2500 series case.

2.   Fasteners.

     (a)  No self  tapping  screws.  They are  difficult to install and they can
          potentially leave small slivers of metal inside of the unit.

     (b)  Utilize  identical  screw in as many locations as possible.  This will
          speed assembly line construction.

3.   Faceplate.

     (a)  Possibly molded plastic if less expensive than metal.
     (b)  Use  printed  stickers  vs.  silkscreening  for  logos.  This would be
          advantageous for potential OEM's.
     (c)  Snap on faceplate/bezel.
     (d)  Construct the LED's as a single assembly to snap into the faceplate.
     (e)  Three openings.
          i.   Two hard drive  openings into which standard 3.5" hard drives can
               be inserted onto rails with power/data cable mate.
          ii.  One opening for an  internal  tape backup - specific  tape system
               needs to be chosen.

4.   Case Frame.
     (a)  Two Frames.
          i.   5 Rack Mount Units (RMU) high.
               A.   possibly  framed  similar  to a PC with a  slide-over  outer
                    covering.
          ii.  1 Rack Mount Unit high.
               A.   Similar to Cisco 2500 series.
     (b)  Solid bottom plate onto which the motherboard plate will attach.
     (c)  Optional Mounting Brackets for 19" rack.
     (d)  5 RMU case Must have mounting system for ATX power supply.
<PAGE>
5.   Power Supply.
     (a)  Must be phased to an ATX form factor for 5 RMU unit.
     (b)  Possibly external for 1 RMU unit, or custom internal.

6.   Mounting Brackets.
     (a)  Screw into box cover -> into nuts welded on cover.
     (b)  Alternate  method of  attachment so FoxBox can be mounted flat (bottom
          against the wall) onto a wall.

7.   Motherboard Plate.
     (a)  Pre-attach   mounting   hardware  for  motherboard  to  ease  assembly
          (standoffs and key slots).
     (b)  Have all mounting points utilize same screw.
     (c)  Mounting  plate  motherboard  attachment  holes  may need to change on
          occasion to support motherboard revisions.

8.   Ports and Switches.
     (a)  Move console port to front of case.
     (b)  Move ATX power switch to front.
     (c)  Remove reset switch.

9.   Hard Drive System.
     (a)  Hard drives mounted on rails for easy insertion and removal.
     (b)  Connector  assembly  on rail kit and at the back of the  drive  bay so
          cables do not slide in and out.
     (c)  Face plate pops off and drives can be removed/inserted.

10.  Packaging.
     (a)  Potentially  decrease  width of packaging  for use in  automatic  tape
          machines.

11.  Certifications.
(a)  The case design MUST be fully  compliant with all guidelines in UL 1950 3rd
     edition.
<PAGE>
                                   EXHIBIT C
                             FOXBOX SPECIFICATIONS



     The FoxBox is an Internet communications gateway providing  enterprise-wide
connectivity,  distance learning,  firewall security and productivity  enhancing
applications.  All FoxBoxes produced by BOCA shall be functionally equivalent or
superior  to existing  FoxBox  products  sold by  NETWOLVES.  FoxBoxes  shall be
delivered complete, packaged and ready for commercial distribution in accordance
with NETWOLVES' written instructions.

     Except as set forth below,  FoxBox Units shall conform in all respects with
the  following  documents:  FoxBox  Quick Start  Guide;  FoxBox  Administrator's
Manual;  FoxBox  Configuration  Guide;  FoxBox Technical Reference Guide; FoxBox
Client  Configuration  Guide;  FoxBox Virtual Private Networking Module;  FoxBox
Advanced  Access  Control  Module;  SEC  E-mail  Archive  (Security  &  Exchange
Commission); and Citrix Application Note: Connecting to a WinFrame Server.

     All  FoxBox  Units  shall be  interoperable  with the  FoxBox  Thin  Client
software  and  hardware  conforming  with the Thin  Client  Specifications.  All
hardware  must be  supported  by the FreeBSD  Operating  system,  and capable of
executing  the  following  software  at  least  as  well as  existing  NETWOLVES
hardware: Apache1.3.3; Bind 8.12; Fetchmail 4.7.8; FreeBSD 2.2.8; IMAP 4.5 Beta;
IP Filter  3.2.10;  ISC DHCP  2.0b1p16;  MRTG  2.5.3;  Perl  5.003;  PHP  3.0.6;
PostgreSQL 6.4.2; Sendmail 8.9.3; Squid 2.1Patch2;  Samba 2.0; SNMPD 3.5.3; SSH;
and SUDO 1.5.6p2.

     FoxBox Units shall further include the following components:

FoxBox DDR Model:
- ----------------
  1.    19" Rackmountable Case (8 pieces)
  2.    Power Supply 230 Watt UL approved Double Throw
  3.    Tyan Trinity (S1590S) Mother Board
  4.    Cyrix M2 300 Mhz processor with fan
  5.    32MB DIMM PC-100 SDRAM
  6.    Accton 10 Mbit PCI Ethernet card
  7.    Western Digital 4.3. GB Hard Drive with IDE cable
  8.    FoxBox Packaging
  9.    Power Cord
 10.    15` Blue (cat 5) Straight thru Ethernet
 11.    Boca Research  --  V.90 modem
 12.    Standard Phone Cord

FoxBox ISDN Model:
- -----------------
  1.    19" Rackmountable Case (8 pieces)
  2.    Power Supply 230 Watt UL approved Double Throw
  3.    Tyan Trinity (S1590S) Mother Board
<PAGE>
  4.    Cyrix M2 300 Mhz processor with fan
  5.    32MB DIMM PC-100 SDRAM
  6.    Accton 10 Mbit PCI Ethernet card
  7.    Western Digital 4.3. GB Hard Drive with IDE cable
  8.    FoxBox Packaging
  9.    Power Cord
 10.    15` Blue (cat 5) Straight thru Ethernet
 11.    US Robotics Courier Imodem ISDN TA
 12.    RJ-45 Silver Satin Cable

FoxBox 56K Model:
- ----------------
  1.    19" Rackmountable Case (8 pieces)
  2.    Power Supply 230 Watt UL approved Double Throw
  3.    Tyan Trinity (S1590S) Mother Board
  4.    Cyrix M2 300 Mhz processor with fan
  5.    32MB DIMM PC-100 SDRAM
  6.    Accton 10 Mbit PCI Ethernet card
  7.    Western Digital 4.3. GB Hard Drive with IDE cable
  8.    FoxBox Packaging
  9.    Power Cord
 10.    15` Blue (cat 5) Straight thru Ethernet
 11.    RS-232 (8 bit) Sync Serial Card
 12.    56K CSU/DSU
 13.    10` RS-232 cable (25 pin to 25 pin M/M)

FoxBox T1 Model:
- ---------------
  1.    19" Rackmountable Case (8 pieces)
  2.    Power Supply 230 Watt UL approved Double Throw
  3.    Tyan Trinity (S1590S) Mother Board
  4.    Cyrix M2 300 Mhz processor with fan
  5.    32MB DIMM PC-100 SDRAM
  6.    Accton 10 Mbit PCI Ethernet card
  7.    Western Digital 4.3. GB Hard Drive with IDE cable
  8.    FoxBox Packaging
  9.    Power Cord
 10.    15` Blue (cat 5) Straight thru Ethernet
 11.    V.35 card (8 bit) Sync Serial Card
 12.    T1 CSU/DSU
 13.    V.35 Winchester Cable

FoxBox S2E Model:
- ----------------
  1.    19" Rackmountable Case (8 pieces)
  2.    Power Supply 230 Watt UL approved Double Throw
  3.    Tyan Trinity (S1590S) Mother Board
  4.    Cyrix M2 300 Mhz processor with fan
  5.    32MB DIMM PC-100 SDRAM
  6.    Accton 10 Mbit PCI Ethernet card
  7.    Western Digital 4.3. GB Hard Drive with IDE cable
  8.    FoxBox Packaging
  9.    Power Cord
 10.    15` Blue (cat 5) Straight thru Ethernet
 11.    Accton 10Mbit PCI Ethernet Card
 12.    15` Red (cat 5) Crossover cable
<PAGE>


                                   EXHIBIT D
                               HOMOLOGATION STATES




<TABLE>
<CAPTION>

   Asia/Pacific:                      Mid-East/Africa:
   ------------                       ---------------
<S>                                     <C>
Australia/New Zealand                   Bahrain
Hong Kong (China)                       Egypt
India                                   Kuwait
Indonesia                               Nigeria
Japan                                   Saudi
Korea                                   South Africa
Malaysia
Singapore
Taiwan
Thailand

Europe:                               Latin America:
- ------                                -------------
Belgium                                 Argentina
Denmark                                 Brazil
Finland                                 Chile
France                                  Costa Rica
*Germany                                Ecuador
Holland                                 *Mexico
Italy                                   *Panama
Norway                                  Venezuela
Spain
Sweden                             North America:
*United Kingdom                         *Canada
</TABLE>
<PAGE>

                                   EXHIBIT E
                      NETWOLVES THIN CLIENT SPECIFICATIONS


     The  diskless  workstation  (Fox pup) is a thin client  designed to support
rich audio and video through our ESCN product.  It shall be relatively small and
durable with limited  moving parts.  All hardware  shall be supported by FreeBSD
3.2 operating system.

     1.   Motherboard
          a.   Netboot Capable.
          b.   Support for a 300mhz K6-AMD or GXM-National.
          c.   Support for Memory up to 128 Megs.

     2.   Memory
          a.   Type is DIMM.
          b.   Size  should  be no less  than 64  Megs,  however,  the  more the
               better.

     3.   Drives
          a.   No Hard Drive or Floppy Drive.

     4.   Sound
          a.   Any True Sound Blaster chip set.

     5.   Video
          a.   Should be supported by FreeBSD and have excellent  performance in
               an X-window  environment.  See attached list for compatible video
               cards.
          b.   The video card should have at least 4 Megs of video on the card.

     6.   Network Card
          a.   10/100 Megabit Ethernet. See attached list for compatible network
               cards.
          b.   Should  have  a  TCP/IP  Boot  prom  (uses  the  bootp  protocol)
               installed.

     7.   I/O
          a.   PS/2 Keyboard.
          b.   PS/2 Mouse.
          c.   One available PCI slot for expansion.

     8.   Monitor
          a.   14" Minimum.

     9.   Peripherals
          a.   PS/2 Keyboard.
          b.   PS/2 Mouse.
          c.   External Speakers (may be mounted on or inside monitor).
<PAGE>
     10.  Case
          a.   Max. dimensions: Width = 13", Depth = 10", Height = 3".
          b.   Desired headphone jack mounted on the front of the case.


     Below are a few video cards believed to be supported by FreeBSD:

     S3 with one of the  following  S3 chipsets:  911,  924,  801/805,  928, 732
(Trio32), 764, 765, 775, 785 (Trio64*), 864, 868, 964, 968 and M65 (Aurora64V+).

     Mach32  series:  Graphics  Ultra+,  Graphics  Ultra Pro,  Graphics  Wonder,
Graphics Ultra XLR, Graphics Ultra AXO, VLB mach32-D, PCI mach32-D, ISA mach32.

     Mach64  series:  Graphics  Xpression,  Graphics Pro Turbo,  Win Boost,  Win
Turbo, Graphics.

     Pro Turbo  1600,  Video  Xpression,  3D  Xpression,  Video  Xpression+,  3D
Xpression+, All- In-Wonder, All-In-Wonder PRO, 3D Pro Turbo, ATI-TV, [email protected],
[email protected], XPERT XL.


     Below are a few Ethernet cards believed to be supported by FreeBSD:

     SMC Elite 16 WD8013 Ethernet interface, and most other WD8003E,  WD8003EBT,
     WD8003W, WD8013W, WD8003S, WD8003SBT and WD8013EBT based clones.

     SMC Elite Ultra and 9432TX based cards are also supported.

     DEC EtherWORKS III NICs (DE203, DE204 and DE205).

     DEC EtherWORKS II NICs (DE200, DE201, DE202 and DE422).

     DEC DC21040/DC21041/DC21140 based NICs:

        ASUS PCI-L101-TB
        Accton ENI1203
        Cogent EM960PCI
        Compex CPXPCI/32C
        D-Link DE-530
        DEC DE435
        Danpex EN-9400P3
        JCIS Condor JC1260
        Linksys EtherPCI

        SMC  EtherPower  10/100  (Model  9332)
        SMC  EtherPower  (Model 8432) SMC
        EtherPower (2)
<PAGE>
      Intel EtherExpress
      Intel EtherExpress Pro/100B 100Mbit
      Novell NE1000, NE2000 and NE2100 ethernet interface
      3Com 3C501 cards
      3Com 3C503 Etherlink II
      3Com 3c505 Etherlink/+
      3Com 3C507 Etherlink 16/TP
      3Com 3C590, 3C595 Etherlink III
      3Com 3C90x cards


     NOTE: FreeBSD does not currently support PnP (plug-n-play) features present
on some ethernet  cards.  If your card has PnP and is giving you  problems,  try
disabling the PnP features.

<PAGE>



© 2019 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission