NETWOLVES CORP
DEF 14A, 2001-01-19
COMPUTER INTEGRATED SYSTEMS DESIGN
Previous: GREATBIO TECHNOLOGIES INC, 10QSB, EX-27, 2001-01-19
Next: STEMCELL GLOBAL RESEARCH INC, 10SB12G/A, 2001-01-19


                            SCHEDULE 14A INFORMATION

      Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
                          Act of 1934 (Amendment No. )

Filed by the  Registrant [X]
Filed by a Party other than the  Registrant [ ]
Check the appropriate box:


[ ] Preliminary Proxy Statement    [ ] Confidential, for Use of the
                                       Commission Only (as permitted by Rule
                                       14a-6(e)(2))

[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12.



                              NETWOLVES CORPORATION
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

     (1)  Title  of each  class of  securities  to  which  transaction  applies:
          ----------------------------------------------------------------------
     (2)  Aggregate number of securities to which transaction applies:
          ----------------------------------------------------------------------
     (3)  Per unit  price  or other  underlying  value of  transaction  computed
          pursuant to Exchange  Act Rule 0-11 (Set forth the amount on which the
          filing fee is calculated and state how it was determined):
          ----------------------------------------------------------------------
     (4)  Proposed maximum aggregate value of transaction:
          ----------------------------------------------------------------------
     (5)  Total fee paid:
          ----------------------------------------------------------------------
[ ]  Fee paid previously with preliminary materials.
[ ]  Check box  if any  part of the fee is offset as provided  by  Exchange  Act
     Rule  0-11(a)(2)  and identify the filing for which the  offsetting fee was
     paid  previously.  Identify the previous filing by  registration  statement
     number, or the Form or Schedule and the date of its filing.
     (1)  Amount Previously Paid:
          ----------------------------------------------------------------------
     (2)  Form, Schedule or Registration Statement No.:
          ----------------------------------------------------------------------
     (3)  Filing Party:
          ----------------------------------------------------------------------
     (4)  Date Filed:
          ----------------------------------------------------------------------
<PAGE>
                              NETWOLVES CORPORATION
                                 ---------------

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                                February 23, 2001
                                 ---------------

To our Shareholders:

     An annual meeting of  shareholders  will be held at 2502 Rocky Point Drive,
Suite 740, Tampa, Florida 33607 on Friday,  February 23, 2001 beginning at 10:00
a.m. At the meeting, you will be asked to vote on the following matters:

     1.   Election of two directors.

     2.   Approval of our 2000 Stock Option Plan, as set forth in Exhibit A.

     3.   Any other matters that properly come before the meeting.

     The above  matters  are set forth in the proxy  statement  attached to this
notice to which your attention is directed.

     If you are a stockholder of record at the close of business on December 27,
2000,  you  are  entitled  to  vote  at the  meeting  or at any  adjournment  or
postponement  of the meeting.  This notice and proxy  statement  are first being
mailed to shareholders on or about January 17, 2001.

                                   By Order of the Board of Directors,

                                           WALTER M. GROTEKE
                                         Chairman of the Board

Dated:  January 17, 2001
Melville, New York
<PAGE>
                              NETWOLVES CORPORATION
                         200 Broadhollow Road, Suite 200
                            Melville, New York 11747

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

                                 PROXY STATEMENT
                                 ---------------

                         ANNUAL MEETING OF SHAREHOLDERS
                            Friday, February 23, 2001

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

     Our Annual  Meeting of  Shareholders  will be held on Friday,  February 23,
2001 at 2502 Rocky Point Drive,  Suite 740,  Tampa,  Florida 33607 at 10:00 a.m.
This proxy statement contains  information about the matters to be considered at
the meeting or any adjournments or postponements of the meeting.

                                ABOUT THE MEETING

What is being considered at the meeting?

     You will be voting on the following:
--   election of two directors;
--   approval of our 2000 Stock Option Plan.

In addition,  our management will report on our  performance  during fiscal 2000
and respond to your questions.

Who is entitled to vote at the meeting?

     You may vote if you owned stock as of the close of business on December 27,
2000. Each share of stock is entitled to one vote.

How do I vote?

     You can vote in two ways:
--   by attending the meeting or
--   by completing, signing and returning the enclosed proxy card.


Can I change my mind after I vote?

     Yes,  you may change  your mind at any time before the vote is taken at the
meeting.  You can do this by (1)  signing  another  proxy  with a later date and
returning it to us prior to the meeting or filing with our corporate secretary a
written notice revoking your proxy, or (2) voting again at the meeting.

                                       2
<PAGE>
What if I return my proxy card but do not include voting instructions?

     Proxies that are signed and returned but do not include voting instructions
will be voted FOR the election of the nominee  directors and FOR approval of our
2000 Stock Option Plan.

What does it mean if I receive more than one proxy card?

     It means that you have multiple  accounts with brokers  and/or our transfer
agent.  Please vote all of these  shares.  We  recommend  that you contact  your
broker  and/or our transfer  agent to  consolidate  as many accounts as possible
under the same name and address. Our transfer agent is American Stock Transfer &
Trust Co., 800-937-5449.

Will my shares be voted if I do not provide my proxy?

     If you hold your shares  directly in your own name,  they will not be voted
if  you do not  provide  a  proxy.  Your  shares  may  be  voted  under  certain
circumstances if they are held in the name of a brokerage firm.  Brokerage firms
generally  have the  authority  to vote  customers'  unvoted  shares on  certain
"routine"  matters,  including the election of directors.  When a brokerage firm
votes its customer's  unvoted  shares,  these shares are counted for purposes of
establishing  a quorum.  At our meeting these shares will be counted as voted by
the brokerage firm in the election of directors, but will not be counted for all
other  matters to be voted on because  these other  matters  are not  considered
"routine" under the applicable rules.

How many votes must be present to hold the meeting?

     Your shares are counted as present at the meeting if you attend the meeting
and vote in person or if you properly return a proxy by mail. In order for us to
conduct our  meeting,  a majority of our  outstanding  shares as of December 27,
2000 must be  present  at the  meeting.  This is  referred  to as a  quorum.  On
December 27, 2000, there were 8,742,613 shares outstanding and entitled to vote.

What vote is required to approve each item?

     The affirmative  vote of a majority of the votes cast at the Annual Meeting
on the  proposal  is required  for  approval of the  election of  directors  and
approval of the 2000 Stock Option Plan. Shares not voted, including abstentions,
will have no effect on the vote for the election of directors and the 2000 Stock
Option Plan.

                                       3
<PAGE>
                       PROPOSAL 1 - ELECTION OF DIRECTORS

     Our by-laws  provide for a board of directors  consisting  of not less than
three nor more than seven  directors,  classified  into three  classes as nearly
equal in number as possible,  whose terms of office expire in successive  years.
Our board of directors now consists of five directors as set forth below.
<TABLE>
<CAPTION>
         Class I                       Class II                    Class III
         -------                       --------                    ---------
(To serve until the Annual    (To serve until the Annual   (To serve until the Annual
 Meeting of Shareholders        Meeting of Shareholders      Meeting of Shareholders
         in 2000)                       in 2001)                    in 2002)
--------------------------     -------------------------    -------------------------
<S>                            <C>                             <C>
Ed Lavin (1)(2)                James A. Cannavino (1)(2)       Walter M. Groteke
Myron Levy(1)(2)                                               Walter R. Groteke
---------
<FN>
(1)  Member of Audit Committee
(2)  Member of Compensation Committee
</FN>
 </TABLE>
     Ed Lavin and Myron  Levy,  directors  in Class I, are to be elected at this
Annual  Meeting of  Shareholders  to hold  office  until the  Annual  Meeting of
Shareholders in 2003 or until their successors are duly elected and qualified.

     Unless you indicate  otherwise,  shares  represented by executed proxies in
the form enclosed will be voted, if authority to do so is not withheld,  for the
election as directors of the aforesaid nominees (each of whom is now a director)
unless any such nominee shall be unavailable,  in which case such shares will be
voted for a substitute nominee designated by the board of directors.  We have no
reason to believe that any of the nominees will be  unavailable  or, if elected,
will decline to serve.

Nominee Biographies

     Ed Lavin has been a director of the Company since February 1999.  Since May
2000, Mr. Lavin has been President and Chief Executive Officer of Hawkeye Group,
a  telecommunications  company.  From March 1999 until May 2000,  Mr.  Lavin was
Chairman and Chief Executive Officer of Staples Communications,  a subsidiary of
Staples  Corporation.  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  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.

     Mr. Myron Levy has been a director of the Company and chairman on our audit
committee  since  November  2000.  Mr.  Levy has been the  President  of  Herley
Industries,  Inc.  since June 1993 and served as Executive  Vice  President  and
Treasurer  since May 1991,  and prior  thereto as Vice  President  for  Business

                                       4
<PAGE>
Operations  and Treasurer  since October 1988.  For more than ten years prior to
joining Herley Industries,  Inc., Mr. Levy, a certified public  accountant,  was
employed in various executive capacities,  including Vice-President,  by Griffon
Corporation (formerly Instrument Systems  Corporation).  Mr. Levy is a certified
public  accountant and held various  positions with Arthur  Andersen LLC for the
nine years prior to his employment by Griffon Corporation.

Standing Director Biographies

     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.

     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.

     James A.  Cannavino has been a director of the Company  since April,  2000.
Mr.  Cannavino is President and Chief  Executive  Officer of CyberSafe,  Inc., a
corporation  specializing  in network  security.  He was the President and Chief
Executive Officer of Perot Systems  Corporation  through July 1997, and prior to
that  was  a  Senior  Vice  President  at  IBM,  responsible  for  strategy  and
development.  He  also  served  on the IBM  Corporate  Executive  Committee  and
Worldwide  Management Council, and on the board of IBM's integrated services and
solutions  company.  Mr. Cannavino is the Chairman of the Board of Direct Insite
Corp.  and  currently  serves on the boards of  National  Center for Missing and
Exploited Children, 7th Level, Inc. and Marist College.

Directors' Compensation

     Directors who are not our  employees  receive an annual fee of $1,500 and a
fee of $1,000 for each board of directors or committee meeting attended.

     During the fiscal year ended June 30, 2000 there were

     --   four meetings of the Board of Directors,
     --   one meeting of the Audit Committee, and
     --   two meetings of the Compensation Committee.

     Our Audit  Committee is involved in  discussions  with  management  and our
independent  public  accountants  with  respect to financial  reporting  and our
internal  accounting  controls.  The  committee  recommends  to  the  board  the
appointment of our independent  auditors.  The independent auditors periodically
meet  alone  with the  committee  and  always  have  unrestricted  access to the
committee.  Our  Compensation  Committee  awards  stock  options to officers and
employees and recommends  executive  compensation.  See "Compensation  Committee
Report on Executive  Compensation."  We have no standing  nominating  committee.
Each director  attended or  participated  in at least 75% of the meetings of the
board of directors and the committees on which he served.

                                       5
<PAGE>
               PROPOSAL 2 - ADOPTION OF THE NETWOLVES CORPORATION
                             2000 STOCK OPTION PLAN


Introduction

     At the meeting,  you will be asked to adopt the NetWolves  Corporation 2000
Stock Option Plan.  The board adopted the 2000 Stock Option Plan in July,  which
adoption is not subject to stockholder approval.


     We believe that our long-term  success  depends upon our ability to attract
and retain  qualified  directors,  officers,  employees and  consultants  and to
motivate  their best  efforts on our  behalf.  Our  directors,  officers,  other
employees and  consultants,  as well as those of our subsidiaries or affiliates,
are eligible to  participate  in the 2000 Stock Option Plan. We believe that the
2000 Stock Option Plan has been and will continue to be an important part of our
compensation of directors,  officers,  employees and  consultants,  particularly
since as of December 1, 2000, we only have approximately 42,000 shares available
for grant under our other existing stock option plan.

     The 2000 Stock Option Plan,  as amended,  is set forth as Exhibit A to this
proxy  statement.  The  principal  features of the 2000 Stock  Option  Plan,  as
amended,  are summarized  below, but the summary is qualified in its entirety by
the full text of the 2000 Stock Option Plan, as amended.

Stock Subject to the Plan

     The stock to be offered under the 2000 Stock Option Plan consists of shares
of our common  stock,  whether  authorized  but  unissued or  reacquired.  Up to
1,500,000  shares of common stock may be issuable upon the exercise of all stock
options under the 2000 Stock Option Plan. The number of shares  issuable is also
subject to adjustments  upon the occurrence of certain  events,  including stock
dividends,    stock   splits,    mergers,    consolidations,    reorganizations,
recapitalizations,  or  other  capital  adjustments.  As of  December  1,  2000,
1,194,250  .options  have been issued under the 2000 Stock Option Plan, of which
450,000  options  have been issued to Walter M.  Groteke and 100,000  options to
Walter R. Groteke.

Administration of the Plan

     The 2000 Stock Option Plan is to be  administered by our board of directors
or by a  compensation  committee or a stock option  committee  consisting  of no
fewer than two "non-employee  directors," as defined in the Securities  Exchange
Act of 1934. We expect that our compensation  committee will administer the 2000
Stock Option Plan.

     Subject  to the  terms of the 2000  Stock  Option  Plan,  the  board of the
committee may determine  and  designate  the  individuals  who are to be granted
stock  options  under the 1999  Stock  Option  Plan,  the number of shares to be
subject to options and the nature and terms of the  options to be  granted.  The
board or the  committee  also has  authority to interpret  the 2000 Stock Option
Plan and to prescribe,  amend and rescind the rules and regulations  relating to
the 2000 Stock Option Plan.  The committee  may amend or modify any  outstanding
stock option in any manner not inconsistent with the terms of the Plan.

                                       6
<PAGE>
Grant of Options

     Our directors, officers, employees and consultants, as well as those of our
subsidiaries or affiliates, are eligible to participate in the 2000 Stock Option
Plan.

     The options  granted  under the 1999 Stock  Option  Plan are  non-qualified
stock  options.  The  exercise  price for the options  will be not less than the
market value of our common stock on the date of grant of the stock  option.  The
committee must adjust the option price,  as well as the number of shares subject
to option, in the event of stock splits,  stock dividends,  recapitalization and
certain other events involving a change in our capital.

Exercise of Stock Options

     Stock  options  granted  under the 2000 Stock  Option Plan shall expire not
later than ten years from the date of grant.

     Stock  options  granted  under  the  2000  Stock  Option  Plan  may  become
exercisable in one or more  installments  in the manner and at the time or times
specified by the committee.  Unless  otherwise  provided by the  committee,  and
except in the manner  described below upon the death or total  disability of the
optionee, a stock option may be exercised only in installments as follows: up to
one-third of the subject  shares on and after the first  anniversary of the date
of grant,  two-thirds on or after the second  anniversary  of the date of grant,
and up to all of the subject  shares on and after the third  anniversary  of the
date of the grant of such option,  but in no event later than the  expiration of
the term of the option.

     Upon the exercise of a stock option,  optionees may pay the exercise  price
in cash,  by certified or bank  cashiers  check or, at our option,  in shares of
common  stock  valued at its fair  market  value on the date of  exercise,  or a
combination of cash and stock. Withholding and other employment taxes applicable
to the  exercise of an option  shall be paid by the optionee at such time as the
board or the committee  determines that the optionee has recognized gross income
under  the  Internal  Revenue  Code of 1986,  as  amended,  resulting  from such
exercise. These taxes may, at our option, be paid in shares of common stock.

     A stock option is exercisable during the optionee's lifetime only by him or
his  permitted  transferee  and  cannot  be  exercised  by him or his  permitted
transferee  unless,  at all  times  since  the date of grant  and at the time of
exercise,  he  is  employed  by  us,  any  parent  corporation  or  any  of  our
subsidiaries  or  affiliates,  except that,  upon  termination of his employment
(other  than (1) by  death,  (2) by total  disability  followed  by death in the
circumstances  provided  below or (3) by total  disability),  an  option  may be
exercised  for a period of three months after this  termination  but only to the
extent  such  option  is  exercisable  on the date of such  termination.  In the
discretion of the  committee,  options may be  transferred to (1) members of the
optionee's  family,  (2) a trust,  (3) a family  limited  partnership  or (4) an
estate planning vehicle primarily for the optionee's family.

     Upon termination of all employment by total disability, the optionee or his
permitted  transferee  may exercise  such options at any time within three years
after his termination,  but only to the extent such option is exercisable on the
date of such termination.

     In the event of the death of an  optionee  (1)  while our  employee,  or an
employee of any parent  corporation or any  subsidiary or affiliate,  (2) within
three months after termination of all employment or provision of services (other

                                       7
<PAGE>
than for total  disability)  or (3) within  three  years  after  termination  on
account of total disability of all employment with us, any parent corporation or
any subsidiary or affiliate,  the  optionee's  estate or any person who acquires
the right to exercise such option by bequest or  inheritance or by reason of the
death of the optionee may exercise the optionee's  option at any time within the
period of three years from the date of death. In the case of clauses (1) and (3)
above,  the option shall be  exercisable  in full for all the  remaining  shares
covered by it, but in the case of clause  (2) the  option  shall be  exercisable
only to the  extent  it was  exercisable  on the  date of  such  termination  of
employment.

Change in Control

     In the event of a "change in control," (a) all options  outstanding  on the
date of the change in control shall become  immediately  and fully  exercisable,
and (b) an optionee will be permitted to surrender for cancellation within sixty
(60) days after the change in control  any option or portion of an option  which
was granted more than six (6) months prior to the date of such surrender, to the
extent not yet  exercised,  and to receive a cash  payment in an amount equal to
the excess,  if any, of the fair market value (on the date of  surrender) of the
shares of common  stock  subject to the option or portion  thereof  surrendered,
over the aggregate purchase price for such shares.

     For the  purposes  of the 2000 Stock  Option  Plan,  a change in control is
defined as

          (i) any person who is not currently such becomes the beneficial owner,
     directly or indirectly,  of securities of the Company  representing  25% or
     more of the combined voting power of the Company's then outstanding  voting
     securities; or

          (ii)  three  or more  directors,  whose  election  or  nomination  for
     election is not approved by a majority of the  Incumbent  Board (as defined
     in the plan), are elected within any single 12-month period to serve on the
     Board of Directors; or

          (iii) members of the Incumbent Board cease to constitute a majority of
     the Board of Directors without the approval of the remaining members of the
     Incumbent Board; or

          (iv) any merger (other than a merger where the Company is the survivor
     and there is no  accompanying  change in control under  subparagraphs  (i),
     (ii)  or  (iii)  of  this  paragraph   (b),consolidation,   liquidation  or
     dissolution of the Company,  or the sale of all or substantially all of the
     assets of the Company.

Federal Income Tax Consequences

     The  following  is a brief  summary  of the  principal  federal  income tax
consequences under current federal income tax laws relating to the options. This
summary is not  intended  to be  exhaustive.  Among  other  things,  it does not
describe state, local or foreign income tax consequences.

     We  understand  that under  present  federal  tax laws,  the grant of stock
options creates no tax consequences for an optionee or for us. Upon exercising a
non-qualified  stock option,  the optionee  must  generally  recognize  ordinary
income  equal to the  "spread"  between the  exercise  price and the fair market
value of the common stock on the date of exercise.  The fair market value of the
shares on the date of exercise will  constitute the tax basis for the shares for
computing gain or loss on their subsequent sale.

                                       8
<PAGE>
     Compensation that is subject to a substantial risk of forfeiture  generally
is not included in income until the risk of  forfeiture  lapses.  Under  current
law, optionees who are either directors, officers, or more than 10% shareholders
are subject to the "short-wing" insider trading restrictions of Section 16(b) of
the  Exchange  Act of 1934.  The  Section  16(b)  restriction  is  considered  a
substantial  risk of  forfeiture  for tax  purposes.  Consequently,  the time of
recognition of  compensation  income and its amount will be determined  when the
restriction  ceases to apply.  The Section 16(b)  restriction  lapses six months
after the date of exercise.

     Nevertheless,  an optionee who is subject to the Section 16(b)  restriction
is entitled to elect to recognize  income on the date of exercise of the option.
The  election  must be made  within  30 days  of the  date of  exercise.  If the
election is made,  the results are the same as if the optionee  were not subject
to the Section 16(b) restriction.

     If  permitted  by our  board  of  directors  and if the  optionee  pays the
exercise price of an option in whole or in part with previously-owned  shares of
common   stock,   the   optionee's   tax  basis  and  holding   period  for  the
newly-acquainted   shares  is  determined   as  follows:   As  to  a  number  of
newly-acquired shares equal to the number of previously-owned shares used by the
optionee to pay the exercise price,  the optionee's tax basis and holding period
for the previously-owned  shares will carry over to the newly-acquired shares on
a   share-for-share   basis,   thereby   deferring  any  gain  inherent  in  the
previously-owned  shares.  As  to  each  remaining  newly  acquired  share,  the
optionee's  tax basis will equal the fair market  value of the share on the date
of exercise and the  optionee's  holding  period will begin on the day after the
exercise date. The optionee's  compensation income and our deduction will not be
affected  by whether  the  exercise  price i paid in cash or in shares of common
stock.

     We will  generally  be  entitled  to a  deduction  for  federal  income tax
purposes  at the same time and in the same  amount as an optionee is required to
recognize  ordinary  compensation  income.  We will be  required  to comply with
applicable federal income tax withholding and information reporting requirements
with respect to the amount of ordinary  compensation  income  recognized  by the
optionee. If our board of directors permits shares of common stock to be used to
satisfy tax  withholding,  such shares will be valued at their fair market value
on the date of exercise.

     When a sale of the  acquired  shares  occurs,  an optionee  will  recognize
capital gain or loss equal to the difference  between the sales proceeds and the
tax basis of the  shares.  Such gain or loss will be treated as capital  gain or
loss if the shares are capital  assets.  The capital  gain or loss will  receive
long-term  capital gain or loss  treatment if the shares have been held for more
than 12 months.  There will be no tax  consequences  to us in connection  with a
sale of shares acquired under an option.

                                       9
<PAGE>
Recommendation of the Board

     Our board of directors believes that it is in our best long-term  interests
to have available for issuance under a stock option plan a sufficient  number of
shares to attract, retain and motivate our highly qualified officers, employees,
directors  and  consultants  by  tying  their  interests  to  our  shareholders'
interests.

     The  affirmative  vote of a majority of the votes cast on this  proposal in
person  or by  proxy  at  the  special  meeting  is  required  for  approval  by
shareholders of the 2000 Stock Option Plan. However, even without such approval,
the 2000 Stock Option Plan will continue in full force and effect.

     Our board of  directors  recommends  a vote FOR  approval of the 2000 Stock
Option Plan.

                                       10
<PAGE>
                                 STOCK OWNERSHIP

     The following table sets forth the beneficial ownership of shares of voting
stock of the  Company,  as of December 1, 2000,  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.
<TABLE>
<CAPTION>
                                      Common Stock
                                      Beneficially        % of Outstanding
Name of Beneficial Owner (9)             Owned                 Shares
----------------------------          ------------        ----------------
<S>                                   <C>                      <C>
Direct Insite Corp.                   2,000,000 (1)            22.9%
Greenleaf Capital Partners, LLC         861,360                 9.9%
Walter M. Groteke                     2,853,064 (2)            31.1%
Daniel G. Stephens                      628,064 (3)             7.0%
Walter R. Groteke                       175,000 (4)             2.0%
Peter C. Castle                         120,833 (5)             1.4%
James A. Cannavino                      200,000 (6)             2.2%
Ed Lavin                                 50,000                    *
Myron Levy                               55,000 (7)                *
Kirlin Securities, Inc.                 500,000 (8)             5.4%
Executive officers and
 directors as a group (6 persons)     3,453,897                37.8%
---------------
<FN>
*  less than one percent (1%)

(1)  The  voting  rights  to these  shares  are held by Mr.  Walter  M.  Groteke
     pursuant to the terms of a voting agreement.
(2)  Includes  2,000,000 shares owned by Direct Insite Corp. covered by a voting
     agreement,  options to purchase 225,000 shares of common stock at $5.00 per
     share and warrants to purchase  200,000 shares of common stock at an option
     price of $1.63 per share.  Does not  include  options to  purchase  225,000
     shares of common stock at $5.00 per share.
(3)  Includes warrants to purchase 200,000 shares at $1.63 per share.
(4)  Includes  options to purchase  50,000  shares at $5.00 per share.  Does not
     include 200,000 warrants at $1.63 per share.
(5)  Includes  options to purchase  50,833  shares of common  stock at $5.00 per
     share and options to purchase  65,000  shares of common stock at $12.00 per
     share.  Does not include  options to purchase 64,167 shares of common stock
     at $5.00 per share.
(6)  Represents  a warrant  issued to Mr.  Cannavino  for  joining  the Board of
     Directors to purchase  200,000  shares of common stock at an exercise price
     of $10.00 per share.
(7)  Includes a warrant issued to Mr. Levy for joining the Board of Directors to
     purchase  50,000  shares of common stock at an exercise  price of $5.00 per
     share.
(8)  Includes warrants currently exercisable by Kirlin Securities,  Inc. 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.
(9)  The  natural  person or  persons  who  exercise  sole or shares  voting and
     dispositive  powers over the shares held of record by these entities are as
     follows:  Greenleaf  Capital  Partners,  LLC - Mr. Phillip  LoRosso and Mr.
     Edmund McCormick, Kirlin Securities, Inc. - Mr. Anthony Kirincic.
</FN>
</TABLE>

                                       11
<PAGE>
                                   MANAGEMENT

Our Officers

     Our officers are:
<TABLE>
<CAPTION>
  Name                       Age             Position
  ----                       ---             --------
  <S>                         <C>       <C>
  Walter M Groteke            30        Chairman of the Board, President and
                                        Chief Executive Officer
  Walter R. Groteke           53        Vice President - Sales and Marketing
  Peter C. Castle             32        Vice President-Finance, Treasurer
                                        and Secretary
----------
</TABLE>

     Mr. Peter C. Castle has been our Vice President-Finance since January 2000,
Controller  from August 1998 until  December  1`999 and  Treasurer and Secretary
since August 1999.  From 1996 through July 1998,  Mr.  Castle was the  Southeast
Regional  Finance  Manager for  Megellan  Health  Service,  Inc., a $1.6 billion
managed behavioral care company based in Georgia.  Prior thereto, Mr. Castle was
the Controller for Physician's Care Network of NY, Inc.


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 fiscal year ended June 30, 2000.

                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                       Annual Compensation
                                       ----------------------------------------------------
            Name and                                                         Other annual
       Principal Position              Fiscal Year     Salary (1)    Bonus  compensation (2)
-------------------------------------  -----------     ---------     -----  ---------------
<S>                                       <C>          <C>          <C>        <C>
Walter M. Groteke                         2000         $ 130,000    $    -      $    -
 Chairman and Chief Executive Officer     1999           101,250         -           -
                                          1998               -           -           -
Daniel G. Stephens                        2000           130,000         -           -
 Vice Chairman and Chief Information      1999           101,250         -           -
 Officer                                  1998               -           -           -
Walter R. Groteke                         2000           154,740         -           -
 Vice President                           1999               -           -           -
                                          1998               -           -           -
<FN>
(1)  Represents compensation received under employment agreements.  Mr. Stephens
     resigned as an officer and director of the Company in July 2000.

                                       12
<PAGE>
(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.
</FN>
</TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

     The following table sets forth  information  concerning  options  exercised
during the year  ended June 30,  2000 by the named  executive  officers  and the
value of unexercised options held by them as of June 30, 2000.
<TABLE>
<CAPTION>
                                           Number of Securities          Value of Unexercised
                     Shares               Underlying Unexercised             In-The-Money
                   acquired on               Options at Fiscal             Options at Fiscal
                                  Value         Year End (#)                 Year End ($)
Name              Exercise (#)  Realized   Exercisable  Unexercisable   Exercisable  Unexercisable
----              -----------   --------   -----------  -------------   -----------  -------------
                                  ($)
                                  ---
<S>                       <C>     <C>            <C>       <C>               <C>       <C>
Walter M. Groteke         -       -              -         200,000           -         $ 724,000
Daniel G. Stephens        -       -              -         200,000           -         $ 724,000
Walter R. Groteke         -       -              -         200,000           -         $ 724,000
Peter C. Castle           -       -              -          40,000           -         $  10,000

(1)    Based upon the closing price of common stock of $5.25 on June 30, 2000.
</TABLE>
Employment Agreements

     Walter M. Groteke entered into an employment  agreement  effective  October
2000  pursuant  to which he is  employed  as our Chief  Executive  Officer.  The
agreement is for a term of five years at an annual  salary of $275,000,  subject
to cost of living increments.  The employment agreement with Mr. Groteke further
provides 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.

Stock Option Plans

     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,"
"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 is 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 canceled, 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.

                                       13
<PAGE>
     In July 2000,  the Company  adopted its 2000 Long Term  Incentive Plan (the
"2000 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.


Compensation Committee Interlocks and Insider Participation

     During  fiscal 1999,  the  Company's  Compensation  Committee  consisted of
Messrs.  Ed Lavin,  James A.  Cannavino  and Walter R.  Groteke.  Except for Mr.
Walter R. Groteke, who is an officer and director of the Company,  none of these
persons were officers or employees of the Company during fiscal 1999 nor had any
relationship not disclosed in this Proxy Statement.

                                       14
<PAGE>
             COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION


  The  compensation  of our  executive  officers is generally  determined by the
Compensation  Committee  of  the  board  of  directors,  subject  to  applicable
employment  agreements  and  incentive  plans.  Each member of the  Compensation
Committee is a director who is not employed by us or any of our affiliates.  The
following  report with  respect to certain  compensation  paid or awarded to our
executive  officers  during  fiscal  2000  is  furnished  by the  directors  who
comprised the Compensation Committee during fiscal 2000.

Executive Compensation Objectives

  Our  compensation  programs  are  intended to enable us to attract,  motivate,
reward  and  retain  the  management   talent  required  to  achieve   corporate
objectives,  and thereby increase shareholder value. It is our policy to provide
incentives  to its senior  management to achieve both  short-term  and long-term
objectives  and to  reward  exceptional  performance  and  contributions  to the
development  of our  businesses.  To  attain  these  objectives,  our  executive
compensation  program includes a competitive base salary, the ability to receive
cash incentive bonuses and stock-based compensation.

  Stock options are granted to employees,  including our executive officers,  by
the Compensation  Committee under our stock option plans. The Committee believes
that stock options provide an incentive that focuses the  executive's  attention
on managing our company from the perspective of an owner with an equity stake in
the  business.  Options  are awarded  with an  exercise  price equal to the fair
market value of common stock on the date of grant and have a maximum term of ten
years.  Among our executive  officers,  the number of shares  subject to options
granted to each  individual  generally  depends upon the level of that officer's
responsibility.  The  largest  grants are  generally  awarded to the most senior
officers  who,  in the view of the  Compensation  Committee,  have the  greatest
potential  impact on our  profitability  and  growth.  Previous  grants of stock
options  are  reviewed  but are not  considered  the most  important  factor  in
determining the size of any executive's stock option award in a particular year.

Determining Executive Officer Compensation

  The Compensation  Committee annually  establishes,  subject to the approval of
the board of directors and any applicable  employment  agreements,  the salaries
which will be paid to our executive  officers during the coming year. In setting
salaries,  the  Compensation  Committee  takes  into  account  several  factors,
including  competitive  compensation data, the extent to which an individual may
participate in the stock plans maintained by us, and qualitative factors bearing
on an  individual's  experience,  responsibilities,  management  and  leadership
abilities, and job performance.

  For  fiscal  2000,  pursuant  to the  terms  of his  then  current  employment
agreement  with us, Mr.  Daniel G.  Stephens,  our then Vice  Chairman and Chief
Information  Officer,  received  a base  salary  of  $150,000.  In light of this
employment  agreement,  the Compensation  Committee was not required to make any
decision regarding his compensation. Mr. Walter R. Groteke, our Vice President -
Sales and  Marketing,  received a base  salary of $150,000  consistent  with his
existing salary. The Compensation  Committee determined that the compensation to
these persons was appropriate.

                                       15
<PAGE>
Compensation of Chief Executive Officer

  For fiscal 2000,  pursuant to the terms of his  employment  agreement with us,
Mr. Walter M. Groteke, our Chairman and Chief Executive Officer, received a base
salary of  $150,000.  In light of his then  current  employment  agreement,  the
Compensation  Committee  was not  required to make any  decision  regarding  the
compensation of Mr. Groteke.

Tax Considerations

  One  of  our  objectives  is to  maintain  cost-effective  and  tax  efficient
executive compensation programs.  Section 162(m) of the Internal Revenue Code of
1986, as amended,  limits the tax deduction to $1 million for compensation  paid
to any one of the named  executive  officers  identified in this proxy statement
unless  certain   requirements   are  met.  One  of  the  requirements  is  that
compensation  over $1 million must be based upon attainment of performance goals
approved  by  shareholders.  Our  plans,  to the  extent  they are  approved  by
shareholders, are designed to meet these requirements. The Committee's policy is
to  preserve  corporate  tax  deductions  attributable  to the  compensation  of
executives  while  maintaining  the  flexibility to approve,  when  appropriate,
compensation  arrangements  which it deems  to be in the best  interests  of our
company  and our  shareholders,  but which may not always  qualify  for full tax
deductibility.

    The Compensation Committee

         Ed Lavin  (Chairman)
         James A. Cannavino

                                       16
<PAGE>
                       PERFORMANCE GRAPH

    The following graph sets forth the cumulative  total return to the Company's
shareholders  during the period  indicated  as well as an overall  stock  market
index (S & P  SmallCap  600  Index) and the  Company's  peer group  index (S & P
Computer Software & Services):

                 COMPARISON OF 16 MONTH CUMULATIVE TOTAL RETURN*
                          AMONG NETWOLVES CORPORATION,
                  THE S & P SMALLCAP 600 INDEX AND A PEER GROUP

<TABLE>
<CAPTION>
                                              Cumulative Total Return
--------------------------------------------------------------------------------
                                     03/01/1999        06/1999          6/00
<S>                                    <C>              <C>            <C>
NETWOLVES CORPORATION                  100.00           182.00          80.50
PEER GROUP                             100.00           111.93         133.73
S & P SMALLCAP 600                     100.00           116.91         148.99
<FN>
*    $100  INVESTED  ON  3/1/99  IN STOCK  OR ON  2/28/99  IN INDEX -  INCLUDING
     REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
</FN>
</TABLE>

                                       17
<PAGE>
                             AUDIT COMMITTEE REPORT


  The Audit Committee has adopted a charter to set forth its responsibilities. A
copy of the charter is attached as Exhibit "B" to this proxy statement.

  The Audit Committee has reviewed and discussed the company's audited financial
statements  as of and for the year ended June 30, 2000 with  management  and the
company's independent public accountants.

  The Audit Committee has also received and reviewed the written disclosures and
the letter from the  independent  public  accountants  required by  Independence
Standard No. 1, Independence  Discussions with Audit Committees,  as amended, by
the Independence  Standards Board, and has discussed with the independent public
accountants their independence.

  Based on the reviews and  discussions  referred to above,  the Audit Committee
recommended to the board of directors that the financial  statements referred to
above be included in the Company's Annual Report on Form 10-K for the year ended
June 30, 2000 for filing with the Securities and Exchange Commission.

  The Audit Committee:

     Ed Lavin
     James A. Cannavino




          COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT

  Section 16(a) of the Exchange Act requires our executive  officers,  directors
and persons who own more than ten  percent of a  registered  class of our equity
securities  ("Reporting  Persons") to file  reports of ownership  and changes in
ownership on Forms 3, 4 and 5 with the  Securities  and Exchange  Commission and
the  Nasdaq  Stock  Exchange.  These  Reporting  Persons  are  required  by  SEC
regulation  to furnish us with copies of all Forms 3, 4 and 5 they file with the
SEC and Nasdaq.  Based solely upon our review of the copies of the forms we have
received,  we believe that all Reporting Persons complied on a timely basis with
all filing  requirements  applicable to them with respect to transactions during
fiscal 2000.

                                       18
<PAGE>
                         INDEPENDENT PUBLIC ACCOUNTANTS

     Richard A. Eisner & Co., LLP acted as our  independent  public  accountants
for the fiscal year ended June 30, 2000. A representative of Richard A. Eisner &
Co., LLP plans to be present at the Annual Meeting with the  opportunity to make
a  statement  if he  desires  to do so,  and will be  available  to  respond  to
appropriate questions.

                              FINANCIAL STATEMENTS

     A copy of our Annual Report to Shareholders  for the fiscal year ended June
30,  2000  has  been  provided  to  all  shareholders  as of  the  Record  Date.
Shareholders  are  referred to the report for  financial  and other  information
about us, but such report is not incorporated in this proxy statement and is not
a part of the proxy soliciting material.

                            MISCELLANEOUS INFORMATION

     As of the date of this Proxy  Statement,  the Board of  Directors  does not
know of any business other than that specified above to come before the meeting,
but, if any other  business  does  lawfully  come before the meeting,  it is the
intention of the persons named in the enclosed Proxy to vote in regard  thereto,
in accordance with their judgment.

     We will pay the cost of  soliciting  proxies in the  accompanying  form. In
addition  to  solicitation  by use of the  mails,  certain of our  officers  and
employees may solicit proxies by telephone,  telegraph or personal interview. We
may also  request  brokerage  houses and other  custodians,  and,  nominees  and
fiduciaries,  to forward  soliciting  material to the beneficial owners of stock
held of record by such persons, and may make reimbursement for payments made for
their expense in forwarding  soliciting material to the beneficial owners of the
stock held of record by such persons.

     We must  receive  stockholder  proposals  with  respect to our next  annual
meeting of  shareholders  no later than  September 1, 2001 to be considered  for
inclusion in our next Proxy Statement.

                                  By Order of the Board of Directors,

                                          WALTER M. GROTEKE
                                         Chairman of the Board

Dated:  January 17, 2001
Melville, New York

                                       19
<PAGE>
                                                                       Exhibit A
                              NETWOLVES CORPORATION
                             2000 Stock Option Plan
                             ----------------------

SECTION 1.  GENERAL PROVISIONS
            ------------------
1.1.  Name and General Purpose
      ------------------------
     The name of this plan is the NETWOLVES  CORPORATION  2000 Stock Option Plan
(hereinafter  called  the  "2000  Plan").  The  2000  Plan is  intended  to be a
broadly-based incentive plan which enables NETWOLVES CORPORATION (the "Company")
and its  subsidiaries  and affiliates to foster and promote the interests of the
Company by attracting  and retaining  directors,  officers and employees of, and
consultants  to, the Company who  contribute to the  Company's  success by their
ability, ingenuity and industry, to enable such directors,  officers,  employees
and  consultants  to  participate  in the  long-term  success  and growth of the
Company by giving  them a  proprietary  interest  in the  Company and to provide
incentive  compensation   opportunities  competitive  with  those  of  competing
corporations.

1.2  Definitions
     -----------
     a.  "Affiliate"  means any person or entity  controlled  by or under common
control with the Company,  by virtue of the ownership of voting  securities,  by
contract or otherwise.

     b.   "Board" means the Board of Directors of the Company.

     c. "Change in Control" means a change of control of the Company,  or in any
person directly or indirectly controlling the Company, which shall mean:

          (i) any person who is not currently such becomes the beneficial owner,
     directly or indirectly,  of securities of the Company  representing  25% or
     more of the combined voting power of the Company's then outstanding  voting
     securities; or

          (ii)  three  or more  directors,  whose  election  or  nomination  for
     election  is  not  approved  by a  majority  of  the  Incumbent  Board  (as
     hereinafter  defined),  are elected  within any single  12-month  period to
     serve on the Board of Directors; or

          (iii) members of the Incumbent Board cease to constitute a majority of
     the Board of Directors without the approval of the remaining members of the
     Incumbent Board; or

          (iv) any merger (other than a merger where the Company is the survivor
     and there is no  accompanying  Change in Control under  subparagraphs  (i),
     (ii)  or  (iii)  of  this  paragraph   (b),consolidation,   liquidation  or
     dissolution of the Company,  or the sale of all or substantially all of the
     assets of the Company.

                                      A-1
<PAGE>
     Notwithstanding  the foregoing,  a Change in Control shall not be deemed to
occur pursuant to subparagraph (i) of this definition solely because 25% or more
of the combined voting power of the Company's outstanding securities is acquired
by one or more employee  benefit plans maintained by the Company or by any other
employer, the majority interest in which is held, directly or indirectly, by the
Company.  For purposes of this  definition,  the terms "person" and  "beneficial
owner"  shall  have the  meaning  set  forth in  Sections  3(a) and 13(d) of the
Exchange Act, and in the  regulations  promulgated  thereunder,  as in effect on
July 6, 2000; and the term  "Incumbent  Board" shall mean (A) the members of the
Board of  Directors  of the  Company  on July 6, 2000,  to the extent  that they
continue to serve as members of the Board of Directors,  and (B) any  individual
who  becomes a member of the  Board of  Directors  after  July 6,  2000,  if his
election or  nomination  for election as a director was approved by a vote of at
least three-quarters of the then Incumbent Board.

     d. "Committee"  means the Committee  referred to in Section 1.3 of the 2000
Plan.

     e. "Common  Stock" means shares of the Common  Stock,  par value $.0033 per
share, of the Company.

     f. "Company" means NETWOLVES CORPORATION, a corporation organized under the
laws of the State of Delaware (or any successor corporation).

     g. "Fair  Market  Value"  means the market price of the Common Stock on The
Nasdaq  Stock  Market  on the date of the  grant  or as  reported  on any  other
exchange  on which the Common  Stock is then traded on such date or on any other
date on which the Common Stock is to be valued hereunder.  If no sale shall have
been reported on any such exchange, Fair Market Value shall be determined by the
Committee.

     h.  "Non-Employee  Director" shall have the meaning set forth in Rule 16(b)
promulgated by the Securities and Exchange Commission ("Commission").

     i.  "Option"  means any option to purchase  Common Stock under Section 2 of
the 2000 Plan.

     j. "Option  Agreement" means the option agreement  described in Section 2.4
of the 2000 Plan.

     k. "Participant" means any director, officer, employee or consultant of the
Company,  a  Subsidiary  or an  Affiliate  who is selected by the  Committee  to
participate in the 2000 Plan.

     l.  "Subsidiary"  means  any  corporation  in which the  Company  possesses
directly or indirectly  50% or more of the combined  voting power of all classes
of stock of such corporation.

     m. "Total  Disability"  means  accidental  bodily injury or sickness  which
wholly and  continuously  disabled an optionee.  The Committee,  whose decisions
shall be final, shall make a determination of Total Disability.

                                      A-2
<PAGE>
1.3  Administration of the Plan
     --------------------------
     The  2000  Plan  shall be  administered  by the  Board or by the  Committee
appointed by the Board.  The Committee  shall serve at the pleasure of the Board
and shall have such powers as the Board may, from time to time, confer upon it.

     Subject to this  Section 1.3,  the  Committee  shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the 2000 Plan as it shall, from time to
time,  deem  advisable,  and to interpret  the terms and  provisions of the 2000
Plan.

     The Committee  shall keep minutes of its meetings and of action taken by it
without a meeting.  A majority of the Committee shall  constitute a quorum,  and
the acts of a majority of the  members  present at any meeting at which a quorum
is present,  or acts  approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.

1.4  Eligibility
     -----------
     Stock  Options may be granted  only to  directors,  officers,  employees or
consultants of the Company or a Subsidiary or Affiliate. Any person who has been
granted any Option may, if he is otherwise  eligible,  be granted an  additional
Option or Options.

1.5  Shares
     ------
     The aggregate  number of shares reserved for issuance  pursuant to the 2000
Plan shall be 1,500,000 shares of Common Stock, or the number and kind of shares
of stock or other  securities  which shall be substituted  for such shares or to
which such shares shall be adjusted as provided in Section 1.6.

     Such number of shares may be set aside out of the  authorized  but unissued
shares of Common Stock or out of issued shares of Common Stock  acquired for and
held in the Treasury of the Company, not reserved for any other purpose.  Shares
subject to, but not sold or issued under, any Option terminating or expiring for
any reason  prior to its  exercise in full will again be  available  for Options
thereafter granted during the balance of the term of the 2000 Plan.

1.6  Adjustments Due to Stock Splits,
      Mergers, Consolidation, Etc.
     -------------------------------
     If, at any time,  the  Company  shall  take any  action,  whether  by stock
dividend,  stock split,  combination of shares or otherwise,  which results in a
proportionate  increase  or  decrease  in the  number of shares of Common  Stock
theretofore issued and outstanding,  the number of shares which are reserved for
issuance  under the 2000 Plan and the number of shares which,  at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee,  be
increased or  decreased  in the same  proportion,  provided,  however,  that the
Company shall not be obligated to issue fractional shares.

     Likewise,  in the event of any change in the  outstanding  shares of Common
Stock by reason of any recapitalization, merger, consolidation,  reorganization,
combination or exchange of shares or other corporate change, the Committee shall
make such substitution or adjustments, if any, as it deems to be appropriate, as

                                      A-3
<PAGE>
to the number or kind of shares of Common  Stock or other  securities  which are
reserved  for  issuance  under the 2000  Plan and the  number of shares or other
securities which, at such time are subject to Options.

     In the event of a Change in  Control,  (a) all Options  outstanding  on the
date of such Change in Control shall,  for a period of sixty (60) days following
such Change in Control,  become  immediately and fully  exercisable,  and (b) an
optionee will be permitted to surrender for cancellation  within sixty (60) days
after  such  Change in Control  any  Option or  portion  of an Option  which was
granted  more than six (6) months  prior to the date of such  surrender,  to the
extent not yet  exercised,  and to receive a cash  payment in an amount equal to
the excess,  if any, of the Fair Market Value (on the date of  surrender) of the
shares of Common  Stock  subject to the Option or portion  thereof  surrendered,
over the aggregate purchase price for such Shares under the Option.

1.7  Non-Alienation of Benefits
     --------------------------
     Except as herein  specifically  provided,  no right or unpaid benefit under
the 2000 Plan shall be subject to alienation,  assignment,  pledge or charge and
any attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant  or other person  entitled to benefits  hereunder  should attempt to
alienate,  assign,  pledge or charge any benefit  hereunder,  then such  benefit
shall, in the discretion of the Committee, cease.

1.8  Withholding or Deduction for Taxes
     ----------------------------------
     If, at any time,  the Company or any  Subsidiary  or Affiliate is required,
under applicable laws and regulations, to withhold, or to make any deduction for
any taxes, or take any other action in connection with any Option exercise,  the
Participant  shall be  required  to pay to the  Company  or such  Subsidiary  or
Affiliate, the amount of any taxes required to be withheld, or, in lieu thereof,
at the option of the Company,  the Company or such  Subsidiary  or Affiliate may
accept a  sufficient  number  of shares  of  Common  Stock to cover  the  amount
required to be withheld.

1.9  Administrative Expenses
     -----------------------
     The  entire  expense of  administering  the 2000 Plan shall be borne by the
Company.

1.10 General Conditions
     ------------------
     a. The Board or the  Committee  may, from time to time,  amend,  suspend or
terminate any or all of the provisions of the 2000 Plan,  provided that, without
the  Participant's  approval,  no change may be made which would alter or impair
any right theretofore granted to any Participant.

     b. With the consent of the Participant  affected thereby, the Committee may
amend or modify any outstanding  Option in any manner not inconsistent  with the
terms of the 2000 Plan, including,  without limitation,  and irrespective of the
provisions of Section 2.3(c) below,  to accelerate the date or dates as of which
an installment of an Option becomes exercisable.

     c.  Nothing  contained  in the 2000 Plan shall  prohibit the Company or any
Subsidiary  or  Affiliate   from   establishing   other   additional   incentive
compensation  arrangements  for  employees of the Company or such  Subsidiary or
Affiliate.

                                      A-4
<PAGE>


     d. Nothing in the 2000 Plan shall be deemed to limit, in any way, the right
of the Company or any  Subsidiary  or  Affiliate  to  terminate a  Participant's
employment with the Company (or such Subsidiary or Affiliate) at any time.

     e. Any decision or action taken by the Board or the  Committee  arising out
of or in connection with the construction,  administration,  interpretation  and
effect of the 2000 Plan shall be  conclusive  and binding upon all  Participants
and any person claiming under or through any Participant.

     f. No member of the Board or of the  Committee  shall be liable for any act
or action,  whether of  commission  or  omission,  (i) by such member  except in
circumstances involving actual bad faith, nor (ii) by any other member or by any
officer, agent or employee.

1.11  Compliance with Applicable Law
      ------------------------------
     Notwithstanding any other provision of the 2000 Plan, the Company shall not
be  obligated  to issue any shares of Common  Stock,  or grant any  Option  with
respect thereto, unless it is advised by counsel of its selection that it may do
so without violation of the applicable  Federal and State laws pertaining to the
issuance of  securities  and the Company  may require any stock  certificate  so
issued to bear a legend, may give its transfer agent  instructions  limiting the
transfer  thereof,  and may  take  such  other  steps,  as in its  judgment  are
reasonably required to prevent any such violation.

1.12  Effective Dates
      ---------------
     The 2000 Plan was  adopted by the Board  effective  July 6, 2000.  The 2000
Plan shall terminate on July 5, 2010.


Section 2.  OPTION GRANTS
            -------------
2.1  Authority of Committee
     ----------------------
     Subject to the  provisions of the 2000 Plan,  the Committee  shall have the
sole and complete  authority to determine (i) the  Participants  to whom Options
shall be granted;  (ii) the number of shares to be covered by each  Option;  and
(iii) the conditions and limitations,  if any, in addition to those set forth in
Sections 2 and 3 hereof,  applicable  to the  exercise  of an Option,  including
without limitation,  the nature and duration of the restrictions,  if any, to be
imposed upon the sale or other  disposition of shares  acquired upon exercise of
an Option.

     Stock  Options  granted  under the 2000 Plan shall be  non-qualified  stock
options.

     The Committee shall have the authority to grant Options.

2.2  Option Exercise Price
     ---------------------
     The price of stock purchased upon the exercise of Options granted  pursuant
to the 2000 Plan  shall be the Fair  Market  Value  thereof at the time that the
Option is granted.

                                      A-5
<PAGE>
     The  purchase  price  is to be  paid in full  in  cash,  certified  or bank
cashier's  check or, at the option of the  Company,  Common  Stock valued at its
Fair Market Value on the date of exercise,  or a combination  thereof,  when the
Option is exercised and stock  certificates  will be delivered only against such
payment.

2.3  Option Grants
     -------------
     Each Option will be subject to the following provisions:

     a.   Term of Option
          --------------
     An Option  will be for a term of not more  than ten years  from the date of
grant.


     b.   Exercise
          --------
     (i)  By an Employee:
          --------------
     Subject  to the power of the  Committee  under  Section  1.10(b)  above and
except in the manner  described below upon the death of the optionee,  an Option
may be exercised only in installments as follows: up to one-third of the subject
shares on and after the first anniversary of the date of grant, up to two-thirds
of the subject shares on and after the second  anniversary of the date of grant,
up to all of the subject  shares on and after the third such  anniversary of the
date of the grant of such  Option but in no event later than the  expiration  of
the term of the Option.

     An Option shall be exercisable  during the optionee's  lifetime only by the
optionee and shall not be exercisable by the optionee unless, at all times since
the date of grant and at the time of exercise,  such  optionee is an employee of
or providing  services to the Company,  any parent corporation of the Company or
any  Subsidiary  or  Affiliate,  except  that,  upon  termination  of  all  such
employment or provision of services (other than by death,  Total Disability,  or
by Total Disability followed by death in the circumstances  provided below), the
optionee may exercise an Option at any time within three months  thereafter  but
only to the extent such Option is exercisable on the date of such termination.

     Upon termination of all such employment by Total  Disability,  the optionee
may exercise such Options at any time within three years thereafter, but only to
the extent such Option is exercisable on the date of such termination.

     In the  event of the  death of an  optionee  (i)  while an  employee  of or
providing services to the Company,  any parent corporation of the Company or any
Subsidiary or Affiliate,  or (ii) within three months after  termination  of all
such  employment or provision of services  (other than for Total  Disability) or
(iii) within three years after termination on account of Total Disability of all
such employment or provision of services,  such optionee's  estate or any person
who acquires the right to exercise such option by bequest or  inheritance  or by
reason of the death of the optionee may exercise such  optionee's  Option at any
time  within  the period of three  years from the date of death.  In the case of
clauses (i) and (iii) above,  such Option shall be  exercisable  in full for all
the remaining shares covered thereby, but in the case of clause (ii) such Option
shall be exercisable  only to the extent it was  exercisable on the date of such
termination.

                                      A-6
<PAGE>
  (ii) By Persons other than Employees:
       -------------------------------
     If the optionee is not an employee of the Company or the parent corporation
of the Company or any  Subsidiary or Affiliate,  the vesting of such  optionee's
right to  exercise  his  Options  shall be  established  and  determined  by the
Committee in the Option Agreement covering the Options granted to such optionee.

     Notwithstanding  the  foregoing  provisions  regarding  the  exercise of an
Option in the event of death, Total Disability,  other termination of employment
or  provision  of  services  or  otherwise,  in no  event  shall  an  Option  be
exercisable  in whole or in part  after the  termination  date  provided  in the
Option Agreement.

     c.   Transferability
          ---------------
     An Option granted under the 2000 Plan shall not be  transferable  otherwise
than by will or by the laws of descent and  distribution,  or, as  determined by
the Board or the Committee, to (i) a member or members of the optionee's family,
(ii) a trust,  (iii) a  family  limited  partnership  or (iv) a  similar  estate
planning vehicle primarily for members of the optionee's family.

2.4  Agreements
     ----------
     In  consideration  of any Options  granted to a Participant  under the 2000
Plan,  each such  Participant  shall  enter  into an Option  Agreement  with the
Company  providing,  consistent  with the 2000 Plan, such terms as the Committee
may deem advisable.

                                      A-7
<PAGE>
                                                                       Exhibit B
                              NETWOLVES CORPORATION

                         CHARTER OF THE AUDIT COMMITTEE
                         ------------------------------

I.   Audit Committee Purpose

     The Audit  Committee  is  appointed by the Board of Directors to assist the
Board in  fulfilling  its  oversight  responsibilities.  The  Audit  Committee's
primary duties and responsibilities are to:

     --   Monitor the integrity of the Company's financial reporting process and
          systems of internal controls regarding finance,  accounting, and legal
          compliance.

     --   Monitor the independence and performance of the Company's  independent
          auditors and internal auditing department.

     --   Provide an avenue of  communication  among the  independent  auditors,
          management,  the  internal  auditing  department,  and  the  Board  of
          Directors.

     The  Audit  Committee  has  the  authority  to  conduct  any  investigation
appropriate to fulfilling its responsibilities,  and it has direct access to the
independent auditors as well as anyone in the organization.  The Audit Committee
has the ability to retain, at the Company's expense,  special legal, accounting,
or other  consultants  or experts it deems  necessary in the  performance of its
duties.

II.  Audit Committee Composition and Meetings

     Audit Committee  members shall meet the requirements of the NASD. The Audit
Committee  shall be  comprised  such number of directors  as  determined  by the
Board,  but no less than three  directors,  each of whom shall be an independent
director (as such is defined by Nasdaq rules),  free from any relationship  that
would  interfere  with the  exercise  of his or her  independent  judgment.  All
members  of the  Committee  shall  have a basic  understanding  of  finance  and
accounting and be able to read and understand  fundamental financial statements,
and at least one member of the Committee shall have past  employment  experience
in finance or accounting,  requisite professional certification in accounting or
comparable  experience or  background  resulting in the  individual's  financial
sophistication.

     Audit Committee members shall be elected by the Board at the annual meeting
of the Board or until their successors  shall be duly elected and qualified.  If
an audit  committee  Chair is not  designated,  the members of the Committee may
designate a Chair by majority vote of the Committee membership.

     The Committee shall meet at least four times  annually,  or more frequently
as circumstances dictate. The Audit Committee Chair shall prepare and/or approve
an agenda in advance of each  meeting.  The Committee  should meet  privately in
executive session at least annually with management,  the independent  auditors,
and as a committee  to discuss any matters  that the  Committee or each of these
groups believe should be discussed.  In addition, the Committee, or at least its
Chair, should communicate with management and the independent auditors quarterly
to review the Company's financial statements and significant findings based upon
the auditors limited review procedures. The Audit Committee has the authority to
conduct  independent  investigations  and  report  to  the  Board  of  Directors
regarding the results.


                                      B-1
<PAGE>
III. Audit Committee Responsibilities and Duties

     Review Procedures
     -----------------

     1.   Review and reassess  the  adequacy of this Charter at least  annually.
          Submit the charter to the Board of Directors for approval and have the
          document  published at least every three years in accordance  with SEC
          regulations.

     2.   Review the Company's  annual  audited  financial  statements  prior to
          filing  or  distribution.   Review  should  include   discussion  with
          management and independent  auditors of significant  issues  regarding
          accounting principles, practices, and judgments.

     3.   In consultation with management and the independent auditors, consider
          the  integrity  of  the  Company's  financial  reporting  process  and
          controls.  Discuss significant  financial risk exposures and the steps
          management has taken to monitor, control, and report exposures. Review
          significant  findings  prepared by the  independent  auditors  and the
          internal auditing department together with management's responses.

     4.   Review with  management  and the  independent  auditors the  company's
          quarterly  financial  results prior to the release of earnings  and/or
          the  company's  quarterly  financial  statements  prior to  filing  or
          distribution.  Discuss the following items required to be communicated
          by the  independent  auditors in  accordance  with AICPA  Statement of
          Auditing Standards 61:

          (a)  the  auditor's  responsibilities  in  accordance  with  generally
               accepted accounting standards;

          (b)  the initial  selection of and changes in  significant  accounting
               policies or their application;

          (c)  managements' judgments and accounting estimates;

          (d)  significant audit adjustments;

          (e)  other  information  in  documents  containing  audited  financial
               statements, such as the MDandA;

          (f)  disagreements with management;

          (g)  consultation with other accountants;

          (h)  major issues discussed with management prior to retention;

          (i)  difficulties encountered in performing the audit; and

          (j)  the  auditor's  judgments  about  the  quality  of the  Company's
               accounting principles.

                                      B-2
<PAGE>
     Independent Auditors
     --------------------

     5.   The  independent  auditors  are  ultimately  accountable  to the Audit
          Committee and the Board of Directors. The Audit Committee shall review
          the   independence  and  performance  of  the  auditors  and  annually
          recommend to the Board of Directors the appointment of the independent
          auditors  or approve any  discharge  of  auditors  when  circumstances
          warrant.

     6.   Approve the fees and other significant  compensation to be paid to the
          independent auditors.

     7.   On an annual basis,  the Committee  should review and discuss with the
          independent  auditors all significant  relationships the auditors have
          with the Company that could impair their independence.

     8.   Review the independent auditors audit plan and general audit approach.

     9.   Prior to releasing the year-end  earnings,  discuss the results of the
          audit with the independent auditors, including the matters required to
          be communicated to audit committees in accordance with AICPA Statement
          of Auditing Standards 61, as then in effect.

     10.  Consider the  independent  auditors'  judgments  about the quality and
          appropriateness of the Company's  accounting  principles as applied in
          its financial reporting.

     Legal Compliance
     ----------------

     11.  On at least an annual  basis,  review with the  Company's  counsel any
          legal   matters   that  could  have  a   significant   impact  on  the
          organization's  financial  statements,  the Company's  compliance with
          applicable  laws  and   regulations,   and  inquiries   received  from
          regulators or governmental agencies.

     Other Audit Committee Responsibilities
     --------------------------------------

     12.  Annually   prepare  a  report  to  shareholders  as  required  by  the
          Securities and Exchange  Commission.  The report should be included in
          the Company's annual proxy statement.

     13.  Perform  any  other  activities  consistent  with  this  Charter,  the
          Company's  by-laws,  and governing  law, as the Committee or the Board
          deems necessary or appropriate.

     14.  Maintain minutes of meetings and  periodically  report to the Board of
          Directors on significant results of the foregoing activities.

     While the Audit Committee has the  responsibilities and powers set forth in
this  Charter,  it is not the duty of the  Audit  Committee  to plan or  conduct
audits or to determine that the Company's financial  statements are complete and
accurate and are in accordance with generally  accepted  accounting  principles.
This is the  responsibility  of  management.  Nor is it the  duty  of the  Audit
Committee to conduct investigations,  to resolve disagreements,  if any, between
management and the  independent  auditor or to assure  compliance  with laws and
regulations and the Company's Code of Conduct.

                                      B-3
<PAGE>
        NETWOLVES CORPORATION BOARD OF DIRECTORS PROXY FOR ANNUAL MEETING
                                FEBRUARY 23, 2001

     The undersigned hereby appoints WALTER M. GROTEKE and WALTER R. GROTEKE, or
either of them, attorneys and Proxies with full power of substitution in each of
them, in the name and stead of the undersigned to vote as Proxy all the stock of
the undersigned in NETWOLVES CORPORATION, a New York corporation,  at the Annual
Meeting  of  Shareholders  scheduled  to be held on  February  23,  2001 and any
adjournments thereof.

THE SHARES  REPRESENTED  HEREBY SHALL BE VOTED BY PROXIES,  AND EACH OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE  THE  MEETING.  SHAREHOLDERS  MAY  WITHHOLD  THE  VOTE  FOR  ONE OR  MORE
NOMINEE(S) BY WRITING THE NOMINEE(S)  NAME(S) IN THE BLANK SPACE PROVIDED ON THE
REVERSE HEREOF.  IF NO  SPECIFICATION  IS MADE, THE SHARES WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR APPROVAL OF THE 2000 STOCK OPTION PLAN.

                  (Continued and to be signed on reverse side)
                                SEE REVERSE SIDE

     The Board of Directors recommends a vote FOR the election of directors.

     1.   Election  of the  following  nominees,  as  set  forth  in  the  proxy
          statement:

          NOMINEES:           Ed Lavin and Myron Levy

         [  ]  FOR all nominees listed          [  ] WITHHOLD authority to vote

     (Instruction:  To withhold  authority to vote for any  individual  nominee,
     print the nominee's name on the line provided below)
     ---------------------------------------------------------------------------

     The Board of Directors recommends a vote FOR the following proposal:

     2.   Approval of  the 2000 Stock Option Plan.

     FOR  [    ]         AGAINST  [    ]          ABSTAIN   [    ]

     3.   Upon such other  business as may  properly  come before the meeting or
          any adjournment thereof.

PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE

     SIGNATURE(S)___________________________   ____________________________

     DATED:   ________________ , 2001






Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | Oct | Nov | Dec

© 2019 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission