Document:

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                                                                       Exhibit E

                       AGREEMENT OF LIMITED PARTNERSHIP
                                      OF
                                KMT PARTNERS LP

     This Agreement of Limited Partnership of KMT Partners LP (this "Agreement")
is entered into by and among Kennerly Partners L.P., a Texas limited
partnership, as the general partner (the "General Partner"), and those persons
executing limited partner signature pages to this Agreement as the limited
partners (the "Limited Partners").  The General Partner and the Limited Partners
shall be collectively referred to as the "Partners" and individually as a
"Partner."

     In consideration of the mutual covenants set forth in this Agreement and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the General Partner and the Limited Partners agree as
follows:

                                   ARTICLE I
                                   Formation

     1.1  Agreement.  The Partners hereby establish KMT Partners LP as a limited
          ---------
partnership (the "Partnership") pursuant to the Texas Revised Limited
Partnership Act, Texas Revised Civil Statutes, Article 6132a-1 (the "Act").

     1.2  Filing.  The General Partner shall execute and file on behalf of the
          ------
Partners and the Partnership an appropriate Certificate of Limited Partnership
with the Secretary of State of Texas.

     1.3  Office Address, Registered Office and Agent.  The principal place of
          -------------------------------------------
business, the principal office and the registered office of the Partnership will
be 500 Crescent Court, Suite 250, Dallas, Texas 75201 or at such other place as
is determined by the General Partner.  The registered agent of the Partnership
will be Shannon J. Collins.

                                   ARTICLE I
                Name, Business, Term and Partnership Interests

     2.1  Partnership Name.  The business of the Partnership shall be conducted
          ----------------
under the name "KMT Partners LP".

     2.2  Purposes of Partnership.  The principal purposes of the Partnership
          -----------------------
will be (i) to acquire shares of the issued and outstanding capital stock (the
"Investment") of Microtouch Systems, Inc. (the "Company"), in an initial amount
of $2,500,000, through purchases in the open market and privately negotiated
transactions, (ii) to finance the acquisition of the Investment in a manner
determined appropriate by the General Partner, and (iii) to do all things, take
all actions, exercise all rights, cast all votes and perform all functions which
are necessary, appropriate or related to the acquisition and ownership of the
Investment.
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     2.3  Term.  The term of the Partnership shall commence on the effective
          ----
date of this Agreement and continue until December 31, 2019, unless earlier
dissolved and liquidated as provided in this Agreement.

     2.4  Partnership Interests.  The Partners' percentage interests in the
          ---------------------
income, gains, losses, deductions, voting rights and distributions, as may be
affected by the terms of this Agreement (the "Partnership Interests"), are as
set forth on Exhibit "A" to this Agreement.

                                  ARTICLE III
                             Capital Contributions

     3.1  General Partner's Capital Contribution.  Upon and by the execution of
          --------------------------------------
this Agreement, the General Partner shall contribute an amount equal to 0.10% of
the aggregate capital contributed to the Partnership by the Limited Partners.

     3.2  Limited Partners' Capital Contribution.  Upon its execution and
          --------------------------------------
delivery of the signature pages to this Agreement, each Limited Partner shall
make a contribution of cash to the Partnership in the amount set forth opposite
its name on Exhibit "A."

No interest shall be paid by the Partnership by reason of any capital
contribution made by a Partner, whether consisting of property, services or
cash.

     3.3  Possible Additional Capital Contributions.  No Partner shall be
          -----------------------------------------
obligated to make any capital contributions to the Partnership other than in the
amounts required in Sections 3.1 and 3.2. However, the Partnership may need
additional capital to increase the amount of its Investment to exceed the
initial amount set forth in Section 2.2. In such instances, the General Partner
shall request each Limited Partner to make its pro rata share, based upon its
Partnership Interest, of such required additional capital. The amount requested
to be contributed by a Limited Partner pursuant to this Section 3.3 must be
contributed within twenty (20) days following written notice delivered to the
Limited Partners by the General Partner. No Limited Partner will be personally
liable to make such capital contribution.

     3.4  Failure to Make Additional Capital Contributions.  If any Limited
          ------------------------------------------------
Partner (a "Failing Partner") shall fail or refuse to make timely any additional
capital contribution when requested pursuant to Section 3.3, and such failure or
refusal shall have continued for a period of ten (10) days following written
demand therefor by the General Partner, then after the expiration of the ten
(10) day grace period the General Partner, on behalf of the Partnership, may
pursue one or more of the following remedies: (i) reduce the financial
commitment of the Partnership with respect to the right being exercised; (ii)
borrow the deficiency from a third party (including a Partner or its affiliate);
(iii) sell additional Limited Partner interests in the Partnership on whatever
terms the General Partner, in its sole discretion, deems appropriate to replace
the uncontributed portion of

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additional capital desired by the Partnership; (iv) reallocate Partnership
Interests in a manner that the General Partner thinks equitably reflects the
capital contribution made by the non-Failing Partners, or (v) pursue some
combination of the foregoing.

     By execution of this Agreement, each Partner expressly authorizes and
empowers the General Partner, as his or her attorney-in-fact, to effectuate the
rights of the Partnership, and to negotiate, execute and deliver any documents
necessary or appropriate to accomplish the rights of the General Partner on
behalf of the Partnership under this Section 3.4.  Such appointment of the
General Partner as attorney-in-fact is an irrevocable appointment coupled with
an interest and full power and authority to deal with the Partnership Interest
in any manner contemplated herein.  Each Partner by his or her execution of this
Agreement expressly acknowledges the uniqueness of the Partnership Interest, the
clear need for prompt response to all requests for additional capital
contributions, and the reasonableness and equity of the remedy selected by all
Partners in this Section 3.4.

     3.5  Capital Accounts.  The Partnership shall establish and maintain a
          ----------------
capital account ("Capital Account") for each Partner in accordance with Section
704(b) of the Code and Treasury Regulations Section 1.704-1(b)(2)(iv).

                                  ARTICLE IV
                               Income and Losses

     4.1  Accounting Records.  The Partnership shall keep its books and records
          ------------------
using the accounting method determined appropriate by the General Partner in
accordance with accepted accounting principles.  The Partnership's books and
records shall be open for inspection and copying by any Partner.  The fiscal
year of the Partnership shall be the calendar year.

     4.2  Allocation of Income and Loss.  Items of income, gain, loss or
          -----------------------------
deduction recognized by the Partnership in accordance with the method of
accounting and the books and records of the Partnership, shall be allocated to
and among the Partners, prior to taking into account distributions of cash flow
for the subject tax year, as set forth below:

          (a)  Net income and gain shall be allocated as follows:

               (i)  First, to the Partners with deficit Capital Account balances
          pro rata in accordance with such deficit balances in an amount to each
          such Partner until such Partner's deficit balance has been reduced to
          zero;

               (ii) Next, among the Limited Partners in the proportion of the
          difference between their respective Unreturned Capital Contributions
          less their respective Capital Account balances, until the credit
          balance of each Limited Partner's Capital Account is equal to such
          Limited Partner's Unreturned Capital Contributions;

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               (iii)  Next, among the Partners in such amounts as necessary to
          cause their Capital Account balances, but in the case of the Limited
          Partners' only their Capital Account balances in excess of their
          Unreturned Capital Contributions, to be in the ratio of their Payout
          Percentages; and

               (iv)   Thereafter, among the Partners pro rata in accordance with
          their Payout Percentages.

     (b)  Net loss and deductions shall be allocated as follows:

               (i)    First, to the Partners in such amounts as necessary to
          cause their Capital Account balances in excess of their Unreturned
          Capital Contributions to be in the ratio of their Payout Percentages;

               (ii)   Next, to the Partners with Capital Account balances in
          excess of their Unreturned Capital Contributions, pro rata in
          accordance with, and in an amount equal to, such excess positive
          balances;

               (iii)  Next, to the Partners with positive balances in their
          Capital Accounts in the ratio of such positive balances, and in
          amounts equal to such positive balances; and

               (iv)   Thereafter, to the Partners in accordance with their
          Partnership Interests.

     For purposes of this Agreement, the following terms shall have the meanings
ascribed to them below:

          "Payout Percentages" shall mean 15% for the General Partner and 85%
     for the Limited Partners allocated among the Limited Partners pro rata in
     accordance with their Partnership Interests.

          "Unreturned Capital Contributions" shall mean as to each Limited
     Partner an amount equal to the excess of the aggregate capital
     contributions made by a Limited Partner to the Partnership over the
     aggregate distributions made to the Limited Partner from the Partnership
     pursuant to Section 4.3(a).

     4.3  Distributions.  The General Partner shall distribute cash flow, when
          -------------
it determines it is available, to the Partners.  Notwithstanding the frequency
or amounts of distributions, cash flow shall be distributed as follows:

                                      -4-
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          (a) First, to the Limited Partners pro rata in accordance with their
     Unreturned Capital Contributions, in such amount and until such time as
     each such Limited Partner's Unreturned Capital Contributions has been
     reduced to zero; and

          (b) Thereafter, to the Partners pro rata in accordance with their
     Payout Percentages.

     4.4  Limitations on Allocations.  Notwithstanding the provisions contained
          --------------------------
in Sections 4.2 and 4.3 of this Agreement, should any provision conflict with
the provisions contained in Treasury Regulations Section 1.704-1(b)(iv), the
provisions of said Treasury Regulations shall apply so as to cause the
Partnership's provisions relating to allocations and distributions to be in
compliance with such Regulations.

     4.5  Distributions in Kind.
          ---------------------

          (a)  Notwithstanding anything in this Agreement to the contrary, the
     General Partner may, in its absolute discretion, distribute all or a
     portion of the Investment, or other property, securities or assets of the
     Partnership in lieu of, or in addition to, cash flow at such times and in
     such amounts as determined by the General Partner in its sole discretion.
     At the time of such distribution, the General Partner shall establish the
     fair market value of the assets distributed in accordance with Section
     4.5(d).

          (b)  Prior to a distribution of property (other than cash and other
     than in complete liquidation of the Partnership or a Partner's Partnership
     Interest), the Capital Accounts of the Partners shall be adjusted to
     reflect the manner in which the unrealized income, gain, loss and deduction
     inherent in such property (that has not previously been reflected in the
     Capital Accounts), would be allocated among the Partners if there were a
     taxable disposition of the property on the date of distribution.

          (c)  If the distribution of property (other than cash) is to a Partner
     in complete liquidation of the Partner's interest in the Partnership or in
     liquidation of the Partnership, prior to such distribution, the Capital
     Accounts of all the Partners shall be adjusted to reflect the manner in
     which the unrealized income, gain, loss and deduction inherent in all the
     Partnership's property (that has not previously been reflected in the
     Capital Accounts) would be allocated among the Partners if there were a
     taxable disposition of all such property on the date of the liquidating
     distribution.

          (d)  For purposes of determining the value of securities, those
     securities which are listed on a national securities exchange shall be
     valued at their closing sales price on the trading day immediately prior to
     the date of distribution. If no sales occurred on such trading day, then on
     the day of distribution. If no trading occurred on either day, then the
     value shall be based upon the mean between the "bid" and "asked" prices on
     the trading day immediately prior to the date of distribution. Securities
     which are not listed on a public exchange shall

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     be assigned such value as the General Partner may determine in its sole
     discretion, and such value shall be final, binding and conclusive. If
     necessary to assure compliance with the General Partner's fiduciary duty,
     the General Partner may from time to time seek valuation assistance from
     unrelated professionals.

                                   ARTICLE V
                                   Management

     5.1  Powers and Duties.  The General Partner shall have exclusive control
          -----------------
and management of the Partnership and shall have all of the rights and powers of
a general partner. Specifically, the General Partner shall have the power to do
all things and perform all acts necessary and appropriate for the successful
accomplishment of the purposes outlined in Section 2.2, including, without
limitation:

          (a) to acquire, own and maintain the Investment for the Partnership;

          (b) to obtain any and all financing of the Partnership, whether
     interim, permanent or otherwise, including loans from Partners;

          (c) to sell or otherwise dispose of some or all of the Investment, or
     other assets of the Partnership;

          (d) to determine the manner in which the Partnership should cast its
     vote with respect to its rights as an owner of the Investment, and to
     effectuate such vote;

          (e) to determine if and when additional capital contributions should
     be requested from the Limited Partners in accordance with Section 3.3, and
     the amount of such requested contributions;

          (f) to determine if the Partnership should exercise, or vote in favor
     of the exercise, of any registration rights, co-sale rights, preemptive
     rights, buy/sell rights, rights as an owner under any governing
     shareholders' agreement or operating agreement, and any other rights the
     Partnership has in conjunction with the Investment, to determine the time
     and manner in which such rights should be exercised, and to exercise such
     rights;

          (g) to establish the terms of the relationship among the Partnership,
     the Company and the other shareholders of the Company;

          (h) to (i) determine if the Partnership needs additional capital and
     the amount of capital needed, (ii) accept contributions of capital from any
     person and issue Limited Partner interests to such person in exchange for
     its contribution, (iii) determine the percentage interests and rights of
     such newly admitted Limited Partner, and (iv) amend this Agreement to admit
     such person as a Limited Partner in the Partnership and to make such other
     changes

                                      -6-
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     as necessary to reflect the agreement reached between such newly admitted
     Limited Partner and the General Partner on behalf of the Partnership;

          (i) to negotiate, execute and deliver one or more agreements on such
     terms as deemed appropriate in the General Partner's sole discretion with
     Cardinal Partners, L.P., providing for the joint pursuit of investments in
     the capital stock of the Company; and

          (j) to negotiate, execute and deliver any and all documents determined
     appropriate or necessary by the General Partner to accomplish and
     effectuate any of the rights or authorities of the General Partner on
     behalf of the Partnership as provided for or contemplated in this Article V
     or elsewhere in this Agreement.

     5.2  Compensation of General Partner.  The General Partner shall not
          -------------------------------
receive any compensation for the services it performs for the Partnership.
However, the General Partner may receive compensation from the Company for
services which it provides to the Company. The General Partner shall be
reimbursed for actual expenditures incurred in the administration of the
Partnership's business.

     5.3  Third Party Reliance.  The General Partner has full, complete and
          --------------------
absolute authority over the Partnership's affairs. Any person dealing with the
Partnership shall rely completely and exclusively upon the authority of the
General Partner and shall accept any document, agreement, check or other
instrument executed by the General Partner on behalf of the Partnership as
authorized under this Agreement.

     5.4  Indemnification.  Upon the determination as set forth in Section 11.06
          ---------------
of the Act that such indemnification is permissible under Section 11.02 of the
Act, the Partnership (but not the Limited Partners) hereby indemnifies and holds
harmless any person who is or was a General Partner (and its affiliates) against
any and all losses, costs, expenses (including reasonable attorneys' fees),
penalties, taxes, fines, settlements, damages and judgments resulting from the
fact the General Partner was, is or is threatened to be named a defendant or
respondent in a legal proceeding because such party was or is a General Partner
in the Partnership, EVEN IF SUCH LOSSES, COSTS AND EXPENSES ARE ATTRIBUTABLE TO
THE GENERAL PARTNER'S NEGLIGENCE. However, this indemnification shall only be
effective if the General Partner (i) acted in good faith, (ii) reasonably
believed that in instances that the General Partner was acting in its official
capacity that its conduct was in the Partnership's best interest and in all
other instances that the General Partner's conduct was not opposed to the
Partnership's best interests, and (iii) in a criminal proceeding, had no cause
to believe its conduct was unlawful. Notwithstanding the foregoing, this
indemnification shall not be applicable to a legal proceeding in which the
General Partner is found liable for intentional misconduct, gross negligence or
fraud in the performance of the General Partner's duty to the Partnership or the
Limited Partners.

     5.5  Tax Matters Partner.  The General Partner is hereby designated the
          -------------------
"tax matters partner" of the Partnership and is authorized and required to
represent the Partnership (at the

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Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities. The Partnership will reimburse the General Partner
for all expenses incurred by it while acting as the "tax matters partner."

                                  ARTICLE VI
                             Transfer of Interests

     6.1  General Prohibition.  No Partner may sell, assign, transfer, encumber
          -------------------
or otherwise dispose of its Partnership Interest (a "Transfer"), or any part
thereof, without the prior written consent of the General Partner.

     6.2  Effect of Article.  Any purported Transfer of a Partnership Interest
          -----------------
consummated in violation of this Article shall be null and void and of no force
or effect.  Any transferee acquiring an interest in the Partnership shall
acquire the same subject to all the terms and provisions of this Agreement.

                                  ARTICLE VII
                          Dissolution and Liquidation

     7.1  Dissolution.  The Partnership shall dissolve upon the expiration of
          -----------
its term as set forth in Section 2.3, or if sooner upon the happening of one of
the following events: (i) any event which, in the opinion of the General
Partner, would make it in the best interest of the Partnership to be dissolved;
(ii) the bankruptcy, withdrawal, insolvency or removal of the General Partner;
or (iii) the sale, disposition or liquidation of all or substantially all of the
Investment,  and the receipt of all payments with respect thereto.

     7.2  Winding Up.  Upon dissolution, the General Partner shall proceed
          ----------
diligently to wind up the business and affairs of the Partnership, allocate
income and loss among the Partners and distribute its properties and assets, if
any.  Distributions to Partners upon the liquidation of the Partnership shall be
made pro rata in accordance with the Partners' positive capital account balances
after all allocations of income, gain and loss.  The manner in which the
Partnership is liquidated shall be within the sole and absolute discretion of
the General Partner.

     7.3  Deficit Capital Account Balances.  Upon liquidation of the
          --------------------------------
Partnership, no Partner with a deficit balance in its capital account shall have
any obligation to restore such deficit balance, or to make any contribution to
the capital of the Partnership.

                                  ARTICLE VII
                                 Miscellaneous

     8.1  Miscellaneous   This Agreement (i) may be amended or restated by an
          -------------
instrument executed by the General Partner and Limited Partners owning more than
seventy-five percent (75%) in interest (not number) of the Limited Partner
Partnership Interests; (ii) may be executed in multiple

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counterparts, each of which shall constitute an original and all of which shall
constitute one and the same agreement; (iii) shall be governed by and construed
in accordance with the laws of the State of Texas, and venue of all disputes
shall be in Dallas County, Texas; and (iv) shall be binding upon and shall inure
to the benefit of the Partners and their respective beneficiaries, legal
representatives, successors and assigns.

     8.2  NOTICE OF INDEMNIFICATION.  THE PARTIES TO THIS AGREEMENT HEREBY
          -------------------------
ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT CONTAINS CERTAIN INDEMNIFICATION
PROVISIONS PURSUANT TO SECTION 5.4.

     IN WITNESS WHEREOF, this Agreement was executed the 20th day of August,
1999, effective for all purposes as of the date the certificate of limited
partnership is filed with the Secretary of State of Texas.

                                        GENERAL PARTNER:
                                        ---------------

                                        KENNERLY PARTNERS L.P.
                                        a Texas limited partnership

                                        By:  Kennerly Management L.P.
                                        Its: General Partner

                                        By:  Kennerly Capital L.L.C.
                                        Its: General Partner:

                                        By:_____________________________________
                                             Shannon J. Collins, President

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<PAGE>

                                KMT PARTNERS LP
                        Limited Partner Signature Page

     This Limited Partner Signature Page shall be attached to, and made a part
of, the Agreement of Limited Partnership of KMT Partners LP.  By execution
hereof, the undersigned accepts and agrees to be bound by all of the terms and
provisions of such partnership agreement.

Amount subscribed for:                         $_________________________

Name of Limited Partner (Print or Type Please):_________________________________

Trustee, General Partner or other Authorized Signatory if any:__________________
                                      Position, if applicable:__________________

                                      Signature:________________________________
                                      Date of execution:________________________

Additional Signature (if required)    Signature:________________________________
                                      Position, if applicable:__________________
                                      Date of execution:________________________

Address for Notice:________________________________________
City:_________________  State:____________  Zip:___________

Phone #:____________    Fax #:____________  E-Mail address:_____________________

Attached to and made a part of this Limited Partner Signature Page are
statements affirming Subscriber Limited Partner's status as an Accredited
Investor:
<PAGE>

THE SUBSCRIBER IS AN "ACCREDITED INVESTOR," AS SUCH TERM IS DEFINED IN RULE
501(a) OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), BY REASON OF QUALIFYING UNDER ONE OR MORE OF THE TESTS
CHECKED BELOW: (CHECK AND INITIAL THE SPACE OR SPACES BELOW THAT APPLY)
                ------------------------------------------------------

----------   (a)  Any director, executive officer or general partner of the
Initial if        Partnership, or any director, executive officer or general
Applicable        partner of a general partner of the Partnership;

----------   (b)  Any natural person whose individual net worth, or joint net
Initial if        worth with that person's spouse, at the time of his or her
Applicable        purchase exceeds $1,000,000;

----------   (c)  any private business development company as defined in
Initial if        Section 202(a)(22) of the Investment Advisors Act of 1940;
Applicable

----------   (d)  Any natural person who had an individual income in excess of
Initial if        $200,000 in each of the two most recent years or joint
Applicable        income with that person's spouse $200,000 in excess of
                  $300,000 in each of those years and has a reasonable
                  expectation of reaching the same income level in the current
                  year;

----------   (e)  Any organization described in Section 501(c)(3) of the
Initial if        Internal Revenue Code, corporation, Massachusetts or similar
Applicable        business trust, or partnership not formed for the specific
                  purpose of acquiring the Units, with total assets in excess of
                  $5,000,000;

----------   (f)  Any trust, with total assets in excess of $5,000,000, not
Initial if        formed for the specific purpose of acquiring the Units, whose
Applicable        purchase is directed by a sophisticated person as described in
                  Rule 506(b) of Regulation D of the Securities Act;

----------   (g)  Any entity in which all of the equity owners are Accredited
Initial if        Investors;
Applicable

----------   (h)  Any employee benefit plan within the meaning of the Employee
Initial if        Retirement Income Security Act of 1974, if the investment
Applicable        decision is made by a plan fiduciary (as defined in Section
                  3(21) of the Act) which is either a bank, savings and loan
                  association, insurance company or registered investment
                  advisor, or if such employee benefit plan has total assets of
                  more than $5,000,000, or if such employee benefit plan is a
                  self-directed plan and the investment decisions are made
                  solely by persons that are accredited investors within the
                  meaning set forth in paragraphs (a)-(g) above.
<PAGE>

                                  EXHIBIT "A"
             Partners; Capital Contributions: Percentage Interests

       Partner          Capital Contributions             Percentage Interest
       -------          ---------------------             -------------------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
<PAGE>
          (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.

     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.
<PAGE>
     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.

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.
<PAGE>
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
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.
<PAGE>
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.

     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.
<PAGE>
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.

     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:
<PAGE>
     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 one year 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 one year  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.
<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.

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