-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T7YW3h+6B1cWVsWi243monebWGvrkTZsL85H4TOiKSGeZfw1c9SFuGPbq6GLEUcx pJYOrJ3a2gc1HSw+GgOsQA== 0000910680-05-000566.txt : 20050919 0000910680-05-000566.hdr.sgml : 20050919 20050919172323 ACCESSION NUMBER: 0000910680-05-000566 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20050913 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050919 DATE AS OF CHANGE: 20050919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TII NETWORK TECHNOLOGIES, INC. CENTRAL INDEX KEY: 0000277928 STANDARD INDUSTRIAL CLASSIFICATION: SWITCHGEAR & SWITCHBOARD APPARATUS [3613] IRS NUMBER: 660328885 STATE OF INCORPORATION: DE FISCAL YEAR END: 0624 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08048 FILM NUMBER: 051091999 BUSINESS ADDRESS: STREET 1: 1385 AKRON ST CITY: COPIAGUE STATE: NY ZIP: 11726 BUSINESS PHONE: 631-789-5000 MAIL ADDRESS: STREET 1: 1385 AKRON STREET CITY: COPIAGUE STATE: NY ZIP: 11726 FORMER COMPANY: FORMER CONFORMED NAME: TII NETWORK TECHNOLOGIES INC DATE OF NAME CHANGE: 20020514 FORMER COMPANY: FORMER CONFORMED NAME: TII INDUSTRIES INC DATE OF NAME CHANGE: 19920703 8-K 1 f8k091305.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 13, 2005 TII NETWORK TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) DELAWARE ------------------------ (State of Incorporation) 1-8048 66-0328885 - --------------------- --------------------------------- (Commission File No.) (IRS Employer Identification No.) 1385 Akron Street, Copiague, New York 11726 --------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (631) 789-5000 --------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable ---------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT (a) On September 14, 2005, the Company entered into a Consulting Agreement with Alfred J. Roach, a director of the Company who, at the time, ceased being Chairman of the Company's Board of Directors (see Item 5.02 below). A copy of the Consulting Agreement between the Company and Mr. Roach is attached to this Report as Exhibit 99.1, and the following discussion is qualified in its entirety by reference thereto. The Consulting Agreement with Mr. Roach provides for Mr. Roach to make himself available at such reasonable times and periods of time as the Company may request from time to time to consult with the Company's executive officers and directors regarding the Company's business and operations, focusing on the sale and marketing of the Company's products. The Consulting Agreement provides for a term to commence on November 1, 2005 (when Mr. Roach will cease being an employee of the Company) and to end on October 31, 2009, subject as earlier termination in the event of Mr. Roach's death or breach of either of his covenants to maintain the confidentiality of confidential information of the Company and not to compete against the Company. For his services, Mr. Roach is to receive (i) a consulting fee of $160,000 per annum, (ii) 5% of net sales generated through his efforts during the term of the Consulting Agreement from customers in China, India or Russia or, prior to May 1, 2007, from one potential United States based customer, and (iii) COBRA insurance premiums for eighteen months commencing November 1, 2005. Mr. Roach retains the right to revoke the Consulting Agreement until September 21, 2005. (b) On September 14, 2005, the Company entered into a Consulting Agreement with Charles H. House, a director of the Company (see Item 5.02 below). A copy of the Consulting Agreement between the Company and Mr. House is attached to this Report as Exhibit 99.2, and the following discussion is qualified in its entirety by reference thereto. The Consulting Agreement with Mr. House provides for Mr. House to consult with the Company in the management/marketing advisory field to assist the Company in, among other things, the analysis, development and implementation of a comprehensive go-to-market business plan for the Company's new multi-service residential gateway product, Service Interface Device ("SID"), for a term of one year. For his services, Mr. House, in lieu of $60,000 cash compensation, elected to receive 35,000 shares of the Company's Common Stock. The closing bid price of the Company's Common Stock on the Nasdaq SmallCap Market on September 13, 2005, the day preceding authorization by the Company's Board of Directors and entering into the Consulting Agreement, was $1.50 per share. (c) On September 13, 2005, the Compensation Committee of Company's Board of Directors granted an option to Kenneth A. Paladino, the Company's Vice President - Finance, Chief Financial Officer and Chief Operating Officer, under the Company's stockholder approved 1998 Stock Option Plan, to purchase 150,000 shares of the Company's Common Stock until September 12, 2016 at $1.50 per share, the average of the highest and lowest sales prices per share of the Company's Common Stock on September 13, 2005. The option vests at the rate of 30,000 shares per annum commencing September 13, 2006. A copy of the Stock Option Contract, dated September 13, 2005, between the Company and Mr. Paladino is attached hereto as Exhibit 99.3, and the foregoing discussion is qualified in its entirety by reference thereto. ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On September 19, 2005, the Company issued a press release announcing its results of operations for the fourth fiscal quarter and year ended June 24, 2005. A copy of the press release is furnished as Exhibit 99.4 to this Report and is incorporated herein by reference. The foregoing information, including Exhibit 99.4 and the information therefrom incorporated herein by reference, is being furnished, and shall not be deemed "filed," for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing. ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS On September 14, 2005, the Board of Directors amended the Company's By-Laws (see Item 5.03 below) and eliminated the position of Chairman of the Board as an officer position with the Company. 2 As a result, Alfred J. Roach ceased being Chairman of the Board and was appointed Chairman Emeritus. Charles H. House was appointed by the Board as non-executive Chairman of the Board. ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR. On September 19, 2005, the Company, under authorization of its Board of Directors, filed a Certificate of Elimination with the Secretary of State of the State of Delaware to officially eliminate from its Certification of Incorporation its authorized Series C Convertible Preferred Stock and return such shares to the status of authorized but unissued shares of the Company's Preferred Stock without designation. No shares of Series C Convertible Preferred Stock were outstanding. A copy of the Certificate of Elimination is attached to the Report as Exhibit 3.1. On September 14, 2005, the Board of Directors amended the Company's By-Laws to delete Section 6 of Article IX entitled "Chairman of the Board" and thereby eliminate the position of Chairman of the Board as an officer of the Company. The Company's By-laws, as amended to date, are attached to this Report as Exhibit 3.2. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Businesses Acquired: None (b) Pro Forma Financial Information: None (c) Exhibits: 3.1 Certificate Eliminating Reference to Series C Convertible Preferred Stock from the Company's Certificate of Incorporation 3.2 By-laws of the Company 99.1 Consulting Agreement, dated September 14, 2005, between the Company and Alfred J. Roach 99.2 Consulting Agreement, dated September 14, 2005, between the Company and Charles K. House, together with Nondisclosure Agreement 99.3 Incentive Stock Option Contract, dated September 13, 2005, between the Company and Kenneth A. Paladino 99.4 Press Release dated September 19, 2005. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TII NETWORK TECHNOLOGIES, INC. Date: September 19, 2005 By: /s/ Timothy J. Roach ------------------------------------------ Timothy J. Roach, President and Chief Executive Officer 4 EXHIBIT INDEX Exhibit Number Description 3.1 Certificate Eliminating Reference to Series C Convertible Preferred Stock from the Company's Certificate of Incorporation 3.2 By-laws of the Company 99.1 Consulting Agreement, dated September 14, 2005, between the Company and Alfred J. Roach 99.2 Consulting Agreement, dated September 14, 2005, between the Company and Charles K. House, together with Nondisclosure Agreement 99.3 Incentive Stock Option Contract, dated September 13, 2005, between the Company and Kenneth A. Paladino 99.4 Press Release dated September 19, 2005. 5 EX-3.(II) 2 ex3_1-f8k091305.txt EX-3.1; CERTIFICATE OF ELIMINATION EXHIBIT 3.1 CERTIFICATE ELIMINATING REFERENCE TO A SERIES OF SHARES OF STOCK FROM THE CERTIFICATE OF INCORPORATION OF TII NETWORK TECHNOLOGIES, INC. Pursuant to the provisions of Section 151(g) of the General Corporation Law of the State of Delaware, it is hereby certified that: 1. The name of the corporation (hereinafter referred to as the "Corporation") is TII Network Technologies, Inc. The corporation was previously named TII INDUSTRIES, INC. 2. The designation of the series of shares of stock of the Corporation to which this certificate relates is SERIES C CONVERTIBLE PREFERRED STOCK. 3. The voting powers, designations, preferences, and the relative, participating, optional, or other rights, and the qualifications, limitations, and restrictions of the said series of shares of stock were provided for in a resolution adopted by the Board of Directors of the Corporation pursuant to authority expressly vested in it by the provisions of the Certificate of Incorporation of the Corporation. A Certificate setting forth the said resolution has been heretofore filed with the Secretary of State of the State of Delaware pursuant to the provisions of Section 151(g) of the General Corporation Law of the State of Delaware. 4. The Board of Directors of the Corporation has adopted the following resolution: -1- RESOLVED, that none of the authorized shares of stock of the Corporation's SERIES C CONVERTIBLE PREFERRED STOCK designated are outstanding; and further RESOLVED, that none of the said series of the shares of stock of the Corporation will be issued; and further RESOLVED, that all shares of the Corporation's preferred stock, par value $1.00 per share, heretofore designated as shares of the Corporation's SERIES C CONVERTIBLE PREFERRED STOCK be, and they hereby are, returned to the status of authorized unissued shares of the Corporation's preferred stock, par value $1.00 per share, without designation; and further RESOLVED, that the proper officers of the Corporation be, and hereby are, authorized and directed to file a certificate setting forth this resolution with the Secretary of State of the State of Delaware pursuant to the provisions of Section 151(g) of the General Corporation Law of the State of Delaware for the purpose of eliminating from the Certificate of Incorporation of the Corporation all reference to the said series of shares of stock. Signed on September 14, 2005 /s/ Timothy J. Roach ----------------------------------- Timothy J. Roach, President EX-3.(II) 3 ex3_2-f8k091305.txt EX-3.2; BY-LAWS OF THE COMPANY EXHIBIT 3.2 TII INDUSTRIES, INC. * * * * * * * * BY-LAWS (AS AMENDED THROUGH JANUARY 24, 1995). * * * * * * * ARTICLE I OFFICES Section 1. The corporation may have offices at such places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II ANNUAL MEETINGS OF SHAREHOLDERS Section 1. Annual Meetings of shareholders shall be held at such date, time and place as may be fixed from time to time by the board of directors at which the shareholders shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 2. Written or printed notice of the annual meeting stating the place, day and hour of the meeting shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. ARTICLE III SPECIAL MEETINGS OF SHAREHOLDERS Section 1. Special meetings of shareholders for any purpose other than the election of directors may be held at such time and place within or without the State of Delaware as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president, the board of directors, or the holders of not less than 25% of all the shares entitled to vote at such meeting. Section 3. Written or printed notice of a special meeting stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. The notice should also indicate that it is being issued by, or at the direction of the person calling the meeting. Section 4. The business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. ARTICLE IV QUORUM AND VOTING OF STOCK Section 1. The holders of 50% of the shares of stock issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 2. If a quorum is present the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the shareholders unless the vote of a greater or lesser number of shares of stock is required by law or the certificate of incorporation. Section 3. Each outstanding share of stock having voting power shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Section 4. The board of directors in advance of any shareholders' meeting may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders' meeting may, and on the request of any shareholder entitled to vote thereat, appoint one or more inspectors. In case any person appointed as inspector fails to appear or act, the vacancy may be filled by the board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Section 5. Whenever shareholders are required or permitted to take any action by vote, such action may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon. -2- ARTICLE V DIRECTORS Section 1. The number of directors which shall constitute the board of directors shall be not less than five (5) nor more than nine (9). The exact number of directors within the maximum and minimum limitation specified herein shall be fixed from time to time by resolution of the board of directors. The directors shall be classified with respect to the time during which they shall severally hold office by dividing them into three classes, each class consisting of one-third of the number of directors constituting the entire board, as authorized by resolution of the board of directors, and all directors of the corporation shall hold office until their successors shall be elected and shall qualify or until their earlier resignation or removal. However, in instances where the total number of directors constituting the entire board, as authorized by resolution of the board of directors, is a number other than an integral multiple of three, the number of directors to be elected each year shall reasonably approximate the number which would have been elected had the total number of directors constituting the whole board been an integral multiple of three, as determined by the board of directors. At the meeting of the shareholders of the corporation held for the election of the first such classified board, the directors of the first class (designated Class I) shall be elected for a term of one year, the directors of the second class (designated Class II) for a term of two years, and the directors of the third class (designated Class III) for a term of three years and, in each instance, until their respective successors are elected and qualified. At each annual meeting of shareholders held thereafter, the successors to the class of directors whose term shall expire that year shall be elected to hold office for a term of three years, so that the term of office of one class of directors shall expire in each year. Any newly created directorships or any decrease in directorships, as authorized by resolution of the board of directors shall be so apportioned among the classes as to make all classes as nearly equal in number as possible. Directors shall be at least twenty-one years of age but need not be residents of the State of Delaware nor shareholders of the corporation. Section 2. The directors shall have the power, from time to time, to increase or decrease their own number, within the maximum and minimum limitations specified therein, by resolution of the board of directors. Directors may not be removed from office except for cause by the affirmative vote of not less than a majority of the shares entitled to vote at an election of directors. Newly created directorships resulting from an increase in the number of directors and all vacancies occurring in the board by reason of the removal of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors, and directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be elected and qualified. Section 3. The business affairs of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the shareholders. -3- Section 4. The directors may keep the books of the corporation, except such as are required by law to be kept within the state, outside of the State of Delaware, at such place or places as they may from time to time determine. Section 5. The board of directors, by the affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise. ARTICLE VI MEETINGS OF THE BOARD OF DIRECTORS Section 1. Meetings of the board of directors, regular or special, may be held either within or without the State of Delaware. Section 2. The first meeting of each newly elected board of directors shall be held following the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present, or it may convene at such place and time as shall be fixed by the consent in writing of all the directors. Section 3. Regular meetings of the board of directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the board. Section 4. Special meetings of the board of directors may be called by the president on one day's notice to each director, either personally by telephone, or by mail or by telegram, special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. Section 5. Notice of a meeting need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice of such meeting. Section 6. A simple majority of the directors shall constitute a quorum for the transaction of business unless a greater or lesser number is required by law or by the certificate of incorporation. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by law or by the certificate of incorporation. If a quorum shall not be present at any meeting of directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. -4- ARTICLE VII EXECUTIVE COMMITTEE Section 1. The board of directors by resolution adopted by a majority of the entire board, may designate, among its members, an executive committee and other committees, each consisting of three or more directors, and each of which, to the extent provided in the resolution, shall have all the authority of the board, except as otherwise required by law. Vacancies in the membership of the committee shall be filled by the board of directors at a regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board of directors when so required. ARTICLE VIII NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or shareholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice of a meeting is required to be given under the provisions of the statutes or under the provisions of the certificate of incorporation or these by-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE IX OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a chairman of the board, vice chairman of the board, a president, a vice president, a secretary and a treasurer. The board of directors may also choose additional vice presidents, and one or more assistant secretaries and assistant treasurers. Section 2. The board of directors at its first meeting after each annual meeting of shareholders shall choose a chairman of the board, a president, one or more vice presidents, a secretary and a treasurer. The chairman of the board must be a member of the board of directors, but none of the other officers need be a member of the board. Any two or more offices may be held by the same person, except the offices of president and secretary. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board of directors. -5- Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE CHAIRMAN OF THE BOARD Section 6. The chairman of the board of directors shall preside at all meetings of the shareholders and the board of directors; shall see that all orders and resolutions of the board of directors are carried into effect; and is authorized, as is the president, to execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The vice chairman of the board of directors, if any, shall, in the absence or disability of the chairman of the board, perform the duties and exercise the powers of the chairman of the board. THE PRESIDENT Section 7. The president shall be the chief executive officer of the corporation; shall have general and active management of the business of the corporation; is authorized, as is the chairman of the board of directors, to execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation; in the absence of the chairman of the board and vice chairman of the board of directors, shall preside at all meetings of the shareholders and the board of directors; and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE VICE PRESIDENTS Section 8. The vice president, or if there shall be more than one, the vice president in the order determined by the board of directors, shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARIES Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the shareholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors, the chairman of the board or the president, under whose supervision he shall be. He shall have custody of the corporate seal of -6- the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The assistant treasurer, or, if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE X CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be represented by certificates signed by the chairman of the board of directors or the president or a vice president and the secretary or an assistant secretary or the treasurer or an assistant treasurer of the corporation, or facsimiles thereof, and shall be sealed with the seal of the corporation or a facsimile thereof. When the corporation is authorized to issue shares of more than one class there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the -7- corporation will furnish to any shareholder upon request and without charge, a full statement of the designation, relative rights, preferences, and limitations of the shares of each class authorized to be issued and, if the corporation is authorized to issue any class of preferred shares in series, the designation, relative rights, preferences and limitations of, each such series so far as the same have been fixed and the authority of the board of directors to designate and fix the relative rights, preferences and limitations of other series. Section 2. The signatures of the officers of the corporation upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue. LOST CERTIFICATES Section 3. The board of directors may direct a new certificate to be issued in place of any certificate theretofore issued by the corporation alleged to have been lost or destroyed. When authorizing such issue of a new certificate, the board of directors, in its discretion and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate, to protect the corporation from any claim that may be against it with respect to any such certificate alleged to have been lost or destroyed. TRANSFERS OF SHARES Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the corporation. FIXING RECORD DATE Section 5. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining the shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the board of directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than sixty nor less than ten days prior to any other action. When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the board fixes a new record date for the adjourned meeting. -8- REGISTERED SHAREHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. LIST OF SHAREHOLDERS Section 7. A list of shareholders, as of the record date, certified by the corporate officer responsible for its preparation or by a transfer agent shall be produced at any meeting upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the person challenged to vote at such meeting and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. ARTICLE XI GENERAL PROVISIONS DIVIDENDS Section 1. Subject to the provisions of the certificate of incorporation relating thereto, if any, dividends may be declared by the board of directors at any regular or special meeting pursuant to law. Dividends may be paid in cash, bonds, property, or in the shares of the capital stock, subject to any provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors. -9- SEAL Section 5. The corporation seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE XII AMENDMENTS These by-laws may be amended or repealed or new by-laws may be adopted by the affirmative vote of a majority of the board of directors at any regular or special meeting of the Board. By-laws adopted by the board of directors may be amended or repealed by the shareholders by the affirmative vote of a majority of the outstanding shares entitled to vote. Notwithstanding anything in the foregoing to the contrary, the affirmative vote of the holders of at least 75% of the outstanding shares of capital stock of the corporation entitled to vote in the election of directors (considered for this purpose as one class) shall be required to make, alter or repeal, or to adopt any provision inconsistent with, Sections 6, 10, or 11 of the Certificate of Incorporation or Sections 1 or 2 Article V or Article XII of these by-laws. ARTICLE XIII. INDEMNIFICATION: INSURANCE (1) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (2) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if -10- he acted in good faith and in a manner be reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (3) To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in sections (1) and (2) of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (4) Any indemnification under sections (1) and (2) of the Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in sections (1) and (2) of this Article. Such determination shall be made (i) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. (5) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section. (6) The indemnification and advancement of expenses provided by, or granted pursuant to, the other sections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by--law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (7) The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (8) The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as -11- such, whether or not the corporation would have the power to indemnify him against such liability under this section. (9) For purposes of this Article, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as he would have with respect to the resulting or surviving corporation as we would have with respect to such constituent corporation if its separate existence had continued. (10) For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of othe corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the corporation" as referred to in this section. -12- EX-99 4 ex99_1-f8k091305.txt EX-99.1; CONSULTING AGREEMENT EXHIBIT 99.1 CONSULTING AGREEMENT CONSULTING AGREEMENT (this "Agreement") dated as of September 14, 2005 between TII Network Technologies, Inc., a Delaware corporation ("TII"), and Alfred J. Roach ("Consultant"). W I T N E S S E T H : ------------------- WHEREAS, Consultant desires to render, and TII desires Consultant to render, certain consulting services from time to time on the terms herein provided; NOW, THEREFORE, in consideration of the mutual promises and covenants contained `herein, the parties hereto agree as follows: 1. General. Subject to, and upon the terms and conditions contained in, this Agreement, (a) Consultant's employment with TII shall terminate effective October 31, 2005 and (b) TII hereby retains Consultant, and Consultant hereby agrees to serve, as a consultant to TII during the Consulting Term (as hereinafter defined) and to render to TII the services described in Section 3 hereof. 2. Term. The term of this Agreement (the "Consulting Term") shall commence on November 1, 2005 and shall continue through October 31, 2009 subject to Section 5. 3. Duties. Consultant shall, during the Consulting Term, make himself available at such reasonable times and periods of time as TII may request from time to time to provide advice and counsel to TII's executive officers and directors regarding TII's business and operations, focusing on the sales and marketing of TII's products. It is understood that Consultant is not expected to be on regular or full time call but that he will be available, at the request of TII's President or Board of Directors, for advice and consultation during regular business hours (including by telephone). The days on which such services are to be performed shall be as mutually convenient to TII and Consultant. No travel shall be required of Consultant without Consultant's consent. There shall be no requirement that Consultant shall be in the New York City metropolitan area for any particular period or periods. Consultant hereby relinquishes his position as Chairman of the Board of Directors of TII and shall become its Chairman Emeritus. Consultant further agrees that he will continue to serve his present term as a member of the Board of Directors of TII. The foregoing, however, shall not constitute an agreement on the part of TII or any of its directors or shareholders to nominate or designate Consultant as a nominee for, or to elect or vote for him to serve as, a member of TII's Board of Directors. 4. Consulting Fee. For Consultant's services and compliance by Consultant with the terms and provisions of this Agreement, TII agrees to pay, and Consultant agrees to accept, consulting fees at the rate of $160,000 per annum, payable in equal monthly installments on the last day of each month during the Consulting Term. TII also agrees to pay the monthly CORBA insurance premium on behalf of Consultant for eighteen (18) months commencing November 1, 2005. In the event Consultant, during the Consulting Term, through his efforts generates sales for TII or its subsidiaries from customers in China, India or Russia which, at the time such customers are introduced by Consultant to TII or its subsidiaries, are not (and are not affiliates of) customers of TII or its subsidiaries, or, prior to May 1, 2007, from Long Island Lighting and Power, which sales are at prices and on terms acceptable to TII, Consultant shall be entitled to a commission of 5% of the "Net Sales" made be TII to such customers during the Consulting Term. "Net Sales" means the sales price paid by such customers less sales, use, ad valorem, value added and similar taxes, discounts and allowances, returns, uninsured claims and bad debts. All expenses, including, without limitation, airfare, taxi, automobile rental, hotel, food and entertainment, telephone and telecopy expenses, incurred by Consultant in soliciting sales shall be borne by Consultant. Any use of personnel of TII or its subsidiaries to assist in the sales effort (other than via telephone conferences with potential customers) shall be subject to the approval of TII, which (including telephone conferences involving TII Personnel) may be withheld by TII for any reason or no reason. 5. Early Termination. Notwithstanding Section 2, the Consulting Term shall terminate automatically upon the death of Consultant or if Consultant breaches a covenant in Section 6. 6. Covenants of Consultant. As an inducement to TII to enter into this Agreement, Consultant covenants and agrees as follows: (a) Confidential Information. Consultant agrees that he will not, at any time, directly or indirectly, divulge, disclose or use (other than with the prior written approval of TII in connection with the business and affairs of TII), for any purpose whatsoever, any confidential information that has been obtained by, or disclosed to Consultant prior to or during the Consulting Term. Confidential information includes, but is not limited to, customer and client lists and information, financial information, price lists, marketing and sales strategies and procedures, product design and research and development information, computer programs, databases and software, supplier, vendor and service provider lists and information, personnel information, operating procedures and techniques, business plans and systems, and all other records, files, and information in respect of TII and its subsidiaries. The term "confidential information" does not include any information which (i) at the time of disclosure is generally available to and known by the public, other than as a result of a disclosure directly or indirectly by Consultant, (ii) was available to Consultant on a nonconfidential basis from a source (other than TII or its present or prior employees, consultants, or advisors), provided such source was not bound by a confidentiality agreement with TII or any of its subsidiaries, or (iii) has been independently acquired or developed by Consultant without reference to any other confidential information and without violating any of Consultant's obligations under this Agreement. Notwithstanding the foregoing, Consultant may disclose confidential information, the disclosure of which is compelled by law; provided, however, if Consultant is requested or required to disclose any confidential information by process of law, Consultant will provide TII with prompt written notice thereof so that TII may seek an appropriate protective order or relief therefrom or may waive the requirements of this Section 6(a). If, failing the entry of a protective order or the receipt of a waiver, Consultant is compelled to disclose confidential information under threat of liability for contempt or other censure or penalty, Consultant may disclose such confidential information, but only to the extent so required. -2- (b) Non-Competition. During the Consulting Term and for a period of two (2) years thereafter, Consultant shall not, directly or indirectly, engage in or participate as an employee, consultant, advisor, agent, representative, officer, director or otherwise, or as a stockholder, partner, manager, member or joint venturer, or have any direct or indirect financial interest, including, but without limitation, the interest of a creditor, in any business or activity in which TII or its subsidiaries engages or may be reasonably expected to engage at any time during the Consulting Term or in which TII or its subsidiaries is contemplating engaging at the end of the Consulting Term. (c) Solicitation of Employees. Without limiting the purview of Sections 6(a) and 6(c), Consultant agrees that, during the Consulting Term and for a period of one (1) year thereafter, he will not directly or indirectly (i) solicit, induce or entice for employment, retention or affiliation, or recommend to any entity or person the solicitation, inducement or enticement for employment, retention or affiliation of, any employee of TII or its subsidiaries or (ii) engage in any activity intended to terminate, disrupt or interfere with any relationship with any customer, supplier, service provider, lessor or other person with which TII or its subsidiaries engages in business. (d) No Derogatory Statements. Consultant further agrees that he will in no way take any action or make any statements or allegations which may be derogatory of, harmful to or not in the best interests of, TII, its subsidiaries, affiliates or any of their respective officers or directors. Consultant acknowledges that he is not aware of any material misstatement or omission by TII in any governmental filing or to its shareholders, and is not aware of any breach by TII of any agreements to which TII is a party. (e) Remedies, Etc. Consultant agrees that the remedy at law for any breach of the foregoing provisions of this Section 6 will be inadequate, that TII and its subsidiaries and affiliates (who are intended third party beneficiaries of this Section 6), shall be entitled to injunctive relief, without the need to post bond, with respect to any breach or threatened breach of such provisions. Such injunctive relief shall not be exclusive, but shall be in addition to any other rights or remedies TII and its subsidiaries and affiliates might have for such breach. The covenants in this Section 6 shall survive the end of the Consulting Term and any termination of this Agreement. (f) Reformation. If any term or provision of this Section 6 shall be held invalid or unenforceable because of its duration, geographic scope or for any other reason, the parties agree that the court making such determination shall have the power to (and is hereby requested to) modify such provision, whether by limiting the geographic scope, reducing the duration or otherwise, to the minimum extent necessary to make such term or provision valid and enforceable, and such term or provision shall be enforceable in such modified form. 7. Release. (a) For and in consideration of the good and valuable consideration provided for in this Agreement, the receipt and sufficiency of which is hereby acknowledged by Consultant, Consultant, for and on behalf of himself and his heirs, administrators, executors and assigns, knowingly and voluntarily, hereby releases and forever discharges TII, its affiliates and subsidiaries and their respective officers, directors, shareholders, agents, advisors, representatives and employees (collectively, "Releasees") from any and all -3- claims, demands, causes of action, damages and liabilities of any nature whatsoever, known or unknown, suspected or unsuspected, up to and including the date on which Consultant executed this Agreement relating to TII and its subsidiaries, including but not limited to those claims arising out of or attributable to Consultant's employment and the termination of his employment with TII and its subsidiaries, including but not limited to (except as provided below), wrongful termination, unjust dismissal, defamation, libel or slander or under any federal, state or local law dealing with discrimination based on age, sex, national origin, religion, sexual preference, disability or any other protected category and with respect to claims arising out of or attributable to any contractual agreement or arrangement to which Consultant or any affiliate of Consultant is or was a party to with TII or any of its subsidiaries or affiliates. Furthermore, Consultant acknowledges that the good and valuable consideration provided to him pursuant to this Agreement is provided, in part, as full satisfaction of any and all outstanding obligations that TII may have towards him. Notwithstanding anything in this Section 7 to the contrary, there shall be expressly excluded from this release any and all claims that may arise under this Agreement or any agreement, instrument or other document entered into or executed and delivered contemporaneously with this Agreement, any rights Consultant may have pursuant to stock options heretofore granted to him by TII and the stock option agreements related thereto entered into between Consultant and TII and any claims Consultant has with respect to compensation accrued through the date hereof from TII for the TII's current payroll period through the date hereof, which shall be paid in the normal course. (b) Consultant acknowledges that there are many laws and regulations prohibiting employment discrimination, or otherwise regulating employment or claims related to employment, pursuant to which he may or may not have rights or claims. These include Title VII of the Civil Rights Act of 1964, as amended, including the Equal Employment Opportunity Act of 1972; the Age Discrimination in Employment Act of 1967, as amended (the "ADEA"); the Older Workers Benefit Protection Act of 1990 ("OWBPA") the Americans with Disabilities Act of 1990; the National Labor Relations Act, as amended; the Employee Retirement Income Security Act of 1974, as amended; the Civil Rights Act of 1866, ss.42 U.S.C. ss.1981; the Civil Rights Act of 1991; the Workers Adjustment and Retraining Notification Act of 1988; the Equal Pay Act of 1963; the Family Medical Leave Act of 1993; the New York State Human Rights Law; The City of New York Human Rights Act; and other federal, state and local human rights, fair employment and other laws. Consultant also understands there are other statutes and laws of contract and tort otherwise relating to his employment with TII and any subsidiary, affiliate or predecessor of TII under which he may or may not have rights. For purposes of this Agreement, the term "affiliate" means a person or entity that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the person specified. (c) Consult represents and agrees he has not filed any lawsuits against TII or any of its subsidiaries or affiliates, or filed or caused to be filed any charges or complaints against TII with any municipal, state or federal agency charged with the enforcement of any law. Pursuant to and as a part of Consultant's release and discharge of TII and its subsidiaries and affiliates, as set forth herein, with the sole exception of Consultant's right to bring a proceeding pursuant to the OWBPA to challenge the validity of Consultant's release of claims pursuant to the ADEA, Consultant agrees, not inconsistent with EEOC Enforcement Guidance On Non-Waivable Employee Rights Under EEOC-Enforced Statutes dated April 11,1997 and, to the fullest extent permitted by law, not to sue or file a charge, complaint, grievance or demand for -4- arbitration against TII or any of its subsidiaries or affiliates in any forum or assist or otherwise participate willingly or voluntarily in any claim, arbitration, suit, action, investigation or other proceeding of any kind which relates to any matter that involves TII or any of its subsidiaries or affiliates, and that occurred up to and including the date of Consultant's execution of this Agreement, unless required to do so by court order, subpoena or other directive by a court, administrative agency, arbitration panel or legislative body, or unless required to enforce this Agreement. To the extent any such action may be brought by a third party, Consultant expressly waives any claim to any form of monetary or other damages, or any other form of recovery or relief in connection with any such action. Nothing in this Section shall: (i) impair the responsibility of the Equal Employment Opportunity Commission (the "Commission") to enforce the ADEA, Consultant's right to file a charge or participate in the Commission's proceedings under the ADEA, or Consultant's right to challenge the knowing and voluntary nature of this Agreement under the ADEA; or (ii) be construed to prohibit Consultant from bringing appropriate proceedings to enforce this Agreement. (d) Without detracting in any respect from any other provision of this Agreement, Consultant agrees and acknowledges that: (i) this Agreement constitutes a knowing and voluntary waiver of all rights or claims he has or may have against Releasees, arising on or before the date of Consultant's execution of this Agreement, including, but not limited to, all rights or claims arising under the ADEA, including, but not limited to, all claims of age discrimination in employment and all claims of retaliation in violation of the ADEA; (ii) he has no physical or mental impairment of any kind that has interfered with his ability to read and understand the meaning of this Agreement or its terms, and that he is not acting under the influence of any medication or mind-altering chemical of any type in entering into this Agreement; (iii) Consultant does not waive rights or claims that may arise after the date of his execution of this Agreement, including without limitation any rights or claims that he may have to secure enforcement of the terms and conditions of this Agreement; and (iv) the consideration provided to Consultant under this Agreement is in addition to anything of value to which he is are already entitled. 8. Nonemployee Status. The parties agree that Consultant is and shall be treated for all purposes as an independent consultant to TII and no employment, partnership, agency, joint venture or other relationship shall be created or construed herefrom. Consultant shall have no authority to act to bind TII to any action or agreement, except on authority specifically so delegated by TII, acting through its President or a majority of its Board of Directors, in writing, and Consultant shall not represent to the contrary to any person. As an independent contractor, Consultant shall not be entitled to receive from TII or any of its subsidiaries any health or other insurance or any other benefits of any kind, except for the payment of COBRA insurance premiums in accordance with Section 4. To the extent consistent with applicable law, TII will not withhold any amounts due to Consultant as U.S. -5- federal income tax withholding from wages or as employee contributions under the Federal Insurance Contributions Act or any other state or federal laws. Consultant shall be solely responsible for the withholding and/or payment of any federal, state or local income or payroll taxes. 9. Notices. Except as otherwise provided in this Agreement, any notice, request, demand or other communication to be given under this Agreement shall be in writing and shall be sent by (a) hand delivery, (b) Federal Express (or other similar international overnight courier service), or (c) registered or certified mail, return receipt requested, in each case with delivery charges prepaid, addressed as follows: (a) if to Consultant, to him at: Alfred J. Roach 207 Inlet Drive Lindenhurst, New York 11757 (b) If to TII, to it at: TII Network Technologies, Inc. 1385 Akron Street Copiague, New York 11726 Attention: President A party may designate, by notice to the other, any new address for the purpose of this Agreement. Unless otherwise specified in this Agreement, all notices shall be effective upon the earliest of (i) receipt if delivered by hand, (ii) the first business day (a day other than a Saturday, Sunday or day when banks in New York State are authorized to close) following the business day on which it is sent (provided it is sent for next business day delivery) if sent by recognized overnight courier service or (iii) five business days after mailed by registered or certified mail, return receipt requested. 10. Successors and Assigns; Assignment; Intended Beneficiaries. The services to be provided by Consultant pursuant to this Agreement are unique. Neither this Agreement, nor any of Consultant's rights (including, without limitation, rights to payments), powers, duties or obligations hereunder, may be assigned by Consultant. This Agreement shall be binding upon and inure to the benefit of Consultant, his heirs, executors, administrators, estate and successors, and TII and its successors and assigns. 11. Amendments; Waivers; Cumulative Rights, Etc. This Agreement may not be amended or modified except in a writing signed by Consultant and TII. No term or provision of this Agreement may be waived and no consent may be given unless such waiver or consent is evidenced by a writing signed by the party to be charged. Any waiver or consent from either party respecting any term or provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which given and shall not be deemed, regardless of frequency given, to be a further or continuing waiver or consent. The failure or delay of either party at any time or times to require performance of, or to exercise any of its powers, rights or -6- remedies with respect to, any term or provision of this Agreement in no manner shall affect that party's right at a later time to enforce any such term or provision. 12. Interpretation, Headings. The parties acknowledge and agree that each has been represented by counsel of its choice in connection with entering into this Agreement, and that the terms and provisions of this Agreement have been negotiated, shall be construed fairly as to all parties hereto, and shall not be construed in favor of or against any party. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 13. Entire Agreement; Severability. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior representations, agreements and understandings, oral or otherwise, between the parties with respect to the subject matter hereof. The invalidity or unenforceability of any provision of this Agreement, or part of any provision of this Agreement, shall not affect the other provisions or parts hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions or parts were omitted. 14. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the applicable laws pertaining in the State of New York without regard to the conflicts of laws provisions of such state that would defer to the substantive laws of another jurisdiction. 15. Jurisdiction; Venue; Waiver of Jury Trial. Each party hereby consents to the personal jurisdiction of the United States District Court for the Eastern District of New York and of any of the courts of the State of New York in Suffolk County in any action, suit or proceeding arising under this Agreement. Each party agrees to bring any such action, suit or proceeding only in such courts. Each party agrees further that service of process or notice in any such action, suit or proceeding shall be effective if given in the manner set forth in Section 9 hereof. Each party also waives any right to trial by jury in any action or proceeding to enforce or defend any right under or in connection with this Agreement 16. Revocation. Consultant acknowledges that he has received a copy of this Agreement on September 13, 2005 and may take up to twenty-one (21) days to consider, sign and return this Agreement. In addition, Consultant may revoke this Agreement after signing and returning it, but only by delivering a signed revocation notice to Virigina Hall, Vice President-Administration, TII Network Technologies, Inc., 1385 Akron Street, Copiague, New York 11726, within seven (7) days of Consultant's signing and returning of this Agreement. If no such revocation occurs, the release included in Section 7, and this Agreement, shall become effective on the eighth (8th) day following your execution and delivery of this Agreement. In the event that Consultant revokes the release included in Section 7, this Agreement shall become null and void and shall not become effective. 17. Acknowledgement. By signing below, Consultant acknowledges and represents that he has read this Agreement, that he understands its meaning and content, that he has been afforded at least twenty-one (21) days to consider this Agreement, that he has been advised to consult with the attorney of his choice about this Agreement, that he has freely and -7- voluntarily assented to all of the terms and conditions hereof, and that he has signed this Agreement as his own free and voluntary act. 18. PLEASE READ CAREFULLY. THIS AGREEMENT HAS IMPORTANT LEGAL CONSEQUENCES. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. TII NETWORK TECHNOLOGIES, INC. By: /s/ Timothy J. Roach -------------------------------------- Name: Timothy J. Roach Title: President /s/ Alfred J. Roach -------------------------------------- Alfred J. Roach STATE OF NEW YORK ) )ss.: COUNTY OF SUFFOLK,) On September 14, 2005 before me, Barry V. Pittman personally came Alfred J. Roach to me known, and known to me to be the individual described in, and who executed the foregoing Agreement, and duly acknowledged to me that he executed the same. /s/ Barry V. Pittman -------------------------------------- EX-99 5 ex99_2-f8k091305.txt EX-99.2; CONSULTING AGREEMENT EXHIBIT 99.2 [LOGO OF TII NETWORK TECHNOLOGIES] 1385 Akron Street Copiague, NY 11726-2932 USA tel: 631.789.5000 fax: 631.789.5063 www.tiinettech.com Network Protection and Management September 14, 2005 Mr. Charles H. House 2464 Iron Mountain Drive Park City, UT 84060 Dear Mr. House: This will constitute and confirm our agreement that Charles H. House will act as a consultant (hereinafter "Consultant") for TII Network Technologies, Inc. (hereinafter referred to as "TII" or "Company"). 1. Consultant is retained by TII in the management/marketing advisory field to assist TII in, among other things, the analysis, development and implementation of a comprehensive go-to-market business plan for SID. Consultant will principally report to the President of TII. 2. For the services to be rendered by Consultant hereunder: A. Corporation agrees to pay and the Consultant accepts as full and complete compensation therefor 35,000 shares of the Company's Common Stock ("Stock") for a term of one year in accordance with the following: i. Consultant covenants and agrees that the Common Stock which Consultant is acquiring pursuant to this Agreement is being acquired by Consultant, for his own account for investment only and not with a view to the distribution of all or any part thereof, as the phrases "investment only" and "distribution" have meaning under the Securities Act of 1933, as amended, (the "Act"), or for the sale in connection with any distribution and that such Common Stock will not be transferred, except in accordance with the registration requirements of the Act or as applicable. Consultant understands that under existing law (i) all of the Common Stock may be required to be held indefinitely, unless a Registration Statement is effective and current with respect to the Common Stock under the Act or an exemption from such registration is available, (ii) any sales of the Common Stock in reliance upon Rule 144 promulgated under the Act may be made only in amounts in accordance with the terms and conditions of the Rule, and (iii) in the case of securities to which that Rule is not applicable and which are not registered, compliance with Regulations promulgated under the Act or some other disclosure exemption will be required. ii. Consultant covenants and agrees that the certificates representing such Common Stock shall contain the following legend, or one similar thereto: "The shares represented by this certificate were acquired for investment and have not been registered under the Securities Act of 1933, as amended (the "Act"). No sale, offer to sell or transfer of the shares represented by this certificate shall be made in the absence of an effective registration statement for the shares under the Act or an opinion of either counsel satisfactory to the Company or the Company's Counsel, that registration is not required under said Act." Continued Mr. Charles H. House September 14, 2005 Page 2 of 2 3. All expenses associated with services rendered by the Consultant hereunder will be pre-approved by TII. Consultant will render invoices for all such expenses necessarily incurred by the Consultant in the performance of said services monthly to the attention of Vice President, Administration. Vouchers for expenses are to be accompanied by stubs, airplane tickets, and accounts in reasonable detail. TII agrees to reimburse all such costs promptly upon receipt of invoice covering same. 4. Consultant does hereby sell, assign, transfer and set over to TII all of Consultant's right, title and interest in and to any result and inventions conceived or developed hereunder. 5. The Consultant shall for all purposes hereunder be deemed an independent contractor and not an employee of TII. Consultant is responsible for the payment of all applicable taxes. 6. There are no other agreements or understandings, oral or written, between the Consultant and TII regarding the subject matter of this Agreement or any part thereof, with the exception of the Non-Disclosure Agreement dated September 1, 2004 attached hereto as Attachment A, and this Agreement may only be changed in writing signed by both the parties hereto. 7. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 8. The term of this Agreement shall commence September 14, 2005 and terminate September 13, 2006. If the foregoing is in accordance with your understanding of the Agreement between us, will you kindly signify same by signing this Agreement in the space hereinbelow provided. Very truly yours, TII NETWORK TECHNOLOGIES, INC. /s/ Timothy J. Roach ------------------------------ Timothy J. Roach President & CEO Agreed and Accepted /s/ Charles H. House Charles H. House - --------------------------------- Fed. Tax ID# or SS# ____________________ Attachments: Attachment A Nondisclosure Agreement ATTACHMENT A NONDISCLOSURE AGREEMENT THIS AGREEMENT is made on September 1, 2004 by and between TII Network Technologies, Inc. ("TII") having an office at 1385 Akron Street, Copiague, New York 11726 and Charles H. House, residing at 2464 Iron Mountain Drive, Park City, UT 84060, ("the Parties"). 1. PURPOSE. The Parties hereto wish to carry on discussions during the course of which each may disclose certain Confidential Information to the other (the "Discussions"). For and in consideration of those discussions and the covenants and promises contained herein, the Parties hereby agree to the terms and conditions hereinafter expressed. 2. DEFINITION. "Confidential Information" shall mean any and all information, formula, technology, technical data, or know-how, including, but not limited to, that which relates to, or processes, research, products, services, customers, markets, software, developments, inventions, processes, designs, lab reports, research data, drawings, engineering, marketing, corporate business, or finances, which either Party may disclose to the other, whether orally or in writing, directly or indirectly, and which relates to, arises from or involves the body of knowledge relating to the intended purpose of the Parties herein. The receiving party agrees that the existence of both this Nondisclosure Agreement itself and any evaluations of either party's product which may result therefrom shall be included within the information kept confidential. 3. CONFIDENTIAL INFORMATION DOES NOT INCLUDE INFORMATION WHICH: 1) Is rightfully in the possession of the receiving party at the time of disclosure and the receiving party informs the disclosing party in writing within 15 days of the time of disclosure. 2) Prior to disclosure is, or after disclosure becomes, but not a result of any inaction or action of the receiving party, part of the public knowledge or literature. 3) Is approved for public release by the disclosing party. 4) Is disclosed to the receiving party by a third party who is under no obligation to the disclosing party to maintain such information in confidence. 4. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The receiving party agrees that it shall keep any and all Confidential Information strictly confidential and shall not disclose it, directly or indirectly, to any third party under any circumstances without the express written consent of an officer of the disclosing party. The receiving party shall not disclose the Confidential Information to its employees, except those who are required to have such information in order to further the purpose of the Parties intended herein. 5. RETURN OF MATERIALS. Any Confidential materials or documents, accompanied by all copies or reproductions of such materials or documentation, which have been furnished to the receiving party will be returned immediately upon, and in no case later than five (5) business days after delivery by the disclosing party in writing, of notice of the conclusion of the Discussions. 6. PATENT OR COPYRIGHT INFRINGEMENT. Neither this Agreement nor the disclosure by either Party hereunder of any Confidential Information to the other Party shall be deemed by implication or otherwise to grant, convey, assign, or vest in any way in or to the receiving party any right in any property or in any copyrights or patents, nor shall this Agreement grant the receiving party any rights in or to the Confidential Information, except the limited right to review such Confidential Information solely for the purpose of furthering the purpose of the Parties intended herein. 7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and for the benefit of the undersigned Parties, their successors, and assigns, provided that Confidential Information may not be assigned without written consent of the disclosing party. Failure to enforce any provision of this Agreement shall not constitute a waiver of any obligations hereof. 8. ARBITRATION. Any controversy or claim arising out of or relating to this agreement or any breach thereof or performance thereunder shall be settled by binding arbitration in New York, pursuant to the Commercial arbitration rules then in effect of the American Arbitration Association ("AAA"). The arbitrator's(s') award shall be final and binding, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Each Party shall bear its own legal and other costs related to the arbitration, except that the arbitrator(s) shall determine who shall bear the cost of the AAA and the arbitrator(s). 9. GOVERNING LAW AND JURISDICTION. This Agreement shall be governed by and construed under the laws of the State of New York. TII NETWORK TECHNOLOGIES, INC. CHARLES H. HOUSE - ------------------------------ ------------------------------------ BY: /s/ Timothy J. Roach /s/ Charles H. House --------------------------- ------------------------------------ NAME: Timothy J. Roach NAME: ------------------------- ------------------------------- TITLE: President TITLE: ------------------------ ------------------------------ EX-99 6 ex99_3-f8k091305.txt EX-99.3; INCENTIVE STOCK OPTION CONTRACT EXHIBIT 99.3 TII NETWORK TECHNOLOGIES, INC. 1998 STOCK OPTION PLAN INCENTIVE STOCK OPTION CONTRACT THIS INCENTIVE STOCK OPTION CONTRACT entered into as of September 13, 2005 between TII NETWORK TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and Kenneth A. Paladino (the "Optionee"). W I T N E S S E T H: - - - - - - - - - - 1. The Company, in accordance with the allotment made by the Compensation Committee of the Company's Board of Directors (the "Committee") and subject to the terms and conditions of the 1998 Stock Option Plan of the Company (the "Plan"), grants to the Optionee an option to purchase an aggregate of 150,000 shares of the Common Stock, $.01 par value per share, of the Company ("Common Stock") at an exercise price of $1.50 per share, being at least equal to the fair market value of such shares of Common Stock on the date hereof. This option is intended to constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), although the Company makes no representation or warranty as to such qualification. 2. The term of this option shall be ten years from the date hereof, subject to earlier termination as provided in the Plan. However, this option shall not be exercisable until September 13, 2006, at which time it shall become exercisable as to 30,000 shares of Common Stock, and as to an additional 30,000 shares of Common Stock on each of the next four anniversaries of the date hereof. The right to purchase shares of Common Stock under this option shall be cumulative, so that if the full number of shares purchasable in a period shall not be purchased, the balance may be purchased at any time or from time to time thereafter, but not after the expiration of the option. Notwithstanding the foregoing, in no event may a fraction of a share of Common Stock be purchased under this option. 3. This option shall be exercised by giving written notice to the Company at its then principal office, presently 1385 Akron Street, Copiague, New York 11726, Attention: Vice President - Administration, stating that the Optionee is exercising the option hereunder, specifying the number of shares being purchased and accompanied by payment in full of the aggregate purchase price therefor (a) in cash or by certified check, (b) with previously acquired shares of Common Stock which have been held by the Optionee for at least six months valued as provided in the Plan, or (c) a combination of the foregoing. -1- 4. The Company and/or any Subsidiary may withhold cash and/or shares of Common Stock to be issued to the Optionee in the amount which the Company determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or exercise of this option or the disposition of the underlying shares of Common Stock. Alternatively, the Company may require the Optionee to pay the Company such amount in cash promptly upon demand. 5. In the event of any disposition of the shares of Common Stock acquired pursuant to the exercise of this option within two years from the date hereof or one year from the date of transfer of such shares to him, the Optionee shall notify the Company thereof in writing within 30 days after such disposition. In addition, the Optionee shall provide the Company on demand with such information as the Company shall reasonably request in connection with determining the amount and character of the Optionee's income, the applicable deduction and the obligation to withhold taxes or other amount incurred by reason of such disqualifying disposition, including the amount thereof. The Optionee shall pay the Company and/or the Subsidiary, as the case may be, in cash on demand the amount, if any, which the Company determines is necessary to satisfy such withholding obligation. 6. Notwithstanding the foregoing, this option shall not be exercisable by the Optionee unless (a) a Registration Statement under the Securities Act of 1933, as amended (the "Securities Act") with respect to the shares of Common Stock to be received upon the exercise of this option shall be effective and current at the time of exercise or (b) there is an exemption from registration under the Securities Act for the issuance of the shares of Common Stock upon such exercise. The Optionee hereby represents and warrants to the Company that, unless such a Registration Statement is effective and current at the time of exercise of this option, the shares of Common Stock to be issued upon the exercise of this option will be acquired by the Optionee for his own account, for investment only and not with a view to the resale or distribution thereof. In any event, the Optionee will notify the Company of any proposed resale of the shares of Common Stock issued to him upon exercise of this option. If (i) the Optionee is an "affiliate" of the Company within the meaning of the Securities Act at the time of any such resale or (ii) at the time of exercise of this option the shares issued were not subject to a current and effective Registration Statement under the Securities Act covering their issuance, then any subsequent resale or distribution of shares of Common Stock by the Optionee will be made only pursuant to (x) a Registration Statement under the Securities Act which, at the time of resale, is effective and current with respect to the Optionee's sale of shares of Common Stock being sold, or (y) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption, the Optionee shall, prior to any offer of sale or sale of such shares of Common Stock, provide the Company (unless waived by the Company) with a favorable written opinion of counsel, in form and substance satisfactory to the Company, as to the applicability of such exemption to the proposed sale or distribution. Such representations and warranties shall also be deemed to be made by the Optionee upon each exercise of this option. Nothing herein shall be construed as requiring the Company to register the shares subject to this option under the Securities Act. 7. Notwithstanding anything herein to the contrary, if at any time the Company shall determine, in its discretion, that the listing or qualification of the shares of Common Stock -2- subject to this option on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to, or in connection with, the granting of an option or the issue of shares of Common Stock hereunder, this option may not be exercised in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. 8. The Company may affix appropriate legends upon the certificates for shares of Common Stock issued upon exercise of this option and may issue such "stop transfer" instructions to its transfer agent in respect of such shares as it determines, in its discretion, to be necessary or appropriate to (a) prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act, (b) implement the provisions of the Plan or this Contract or any other agreement between the Company and the Optionee with respect to such shares of Common Stock, or (c) permit the Company to determine the occurrence of a "disqualifying disposition," as described in Section 421(b) of the Code, of the shares of Common Stock transferred upon the exercise of this option. 9. Nothing in the Plan or herein shall confer upon the Optionee any right to continue in the employ of the Company, any Parent or any of its Subsidiaries, or interfere in any way with any right of the Company, any Parent or its Subsidiaries to terminate such employment at any time for any reason whatsoever without liability to the Company, any Parent or any of its Subsidiaries. 10. The Company and the Optionee agree that they will both be subject to and bound by all of the terms and conditions of the Plan, receipt of a copy of which is acknowledged by the Optionee and is made a part hereof. Any capitalized term not defined herein shall have the meaning ascribed to it in the Plan. In the event of a conflict between the terms of this Contract and the terms of the Plan, the terms of the Plan shall govern. 11. The Optionee represents and agrees that he will comply with all applicable laws relating to the Plan and the grant and exercise of this option and the disposition of the shares of Common Stock acquired upon exercise of the option, including without limitation, federal and state securities and "blue sky" laws. 12. This option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 13. This Contract shall be binding upon and inure to the benefit of any successor or assign of the Company and to any heir, distributee, executor, administrator or legal representative entitled to the Optionee's rights hereunder. 14. This Contract shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to the conflicts of law rules thereof. -3- 15. The invalidity or illegality of any provision herein shall not affect the validity of any other provision. 16. The Optionee agrees that the Company may amend the Plan and the options granted to the Optionee under the Plan, subject to the limitations contained in the Plan. IN WITNESS WHEREOF, the parties hereto have executed this Contract as of the day and year first above written. TII NETWORK TECHNOLOGIES, INC. By: /s/ Timothy J. Roach ------------------------------------------ Timothy J. Roach, President /s/ Kenneth A. Paladino ------------------------------- Kenneth A. Paladino, Optionee 11 Celano Lane West Islip, NY 11795 --------------------- Address -4- EX-99 7 ex99_4-f8k091305.txt EX-99.4; PRESS RELEASE EXHIBIT 99.4 [LOGO OF TII NETWORK TECHNOLOGIES, INC.] CONTACTS: Kenneth A. Paladino, COO/CFO Van Negris/Lexi Terrero TII Network Technologies, Inc. Van Negris & Company, Inc. (631) 789-5000 (212) 396-0606 FOR IMMEDIATE RELEASE: TII NETWORK TECHNOLOGIES REPORTS FISCAL 2005 FULL YEAR AND FOURTH QUARTER RESULTS; ALFRED J.ROACH, FORMER CHAIRMAN OF THE BOARD AND FOUNDER OF THE COMPANY, ELECTED CHAIRMAN EMERITUS; CHARLES H. HOUSE ELECTED CHAIRMAN OF THE BOARD COPIAGUE, NY -September 19, 2005 -TII Network Technologies, Inc. (Nasdaq: TIII), a leading provider of telecommunications network protection and management products, today announced its results for the fiscal 2005 fourth quarter and twelve months ended June 24, 2005. Net sales for the fourth quarter of fiscal 2005 were $7.6 million compared to $6.2 million for the comparative prior year, an increase of approximately $1.3 million or 21.3%. The increase in sales over the prior year comparative period was primarily due to an increase in installations of the Company's products upon the conclusion of the extreme winter weather conditions in the Northeast U.S. that hampered these installations during the Company's fiscal 2005 third quarter. Net sales for fiscal 2005 decreased $1.7 million or 5.9% to $26.8 million from $28.5 million in fiscal 2004. The decrease in sales for fiscal 2005 compared to fiscal 2004 was the result of a sharp increase in the need for the Company's products in the first quarter of fiscal 2004, primarily due to the hurricanes that occurred during the summer of calendar 2003. Gross profit for the fourth quarter of fiscal 2005 was $2.3 million compared to $1.8 million for the comparative prior period, an increase of approximately $482,000 or 26.5%, while gross profit margin for those quarters were 30.4% and 29.1%, respectively. Gross profit in fiscal 2005 was $7.9 million compared to $8.6 million in fiscal 2004, a decrease of approximately $713,000, or 8.3%. Gross profit margins for those periods were 29.5% and 30.2% respectively. The lower gross profit levels and margin were due to the effect of fixed overhead costs on lower sales levels. Net earnings for the fourth quarter of fiscal 2005 were $594,000 or $0.05 per diluted share, compared to $113,000 or $0.01 per diluted share, in the year ago quarter. Net earnings for fiscal 2005 were $1.4 million or $0.11 per diluted share, compared to net earnings of $1.6 million or $0.12 per diluted share in fiscal 2004. Timothy J. Roach, President and Chief Executive Officer, stated: "I am pleased to report that the solid performance we achieved in fiscal 2004 has continued into fiscal 2005, as we delivered profitable results for our shareholders. Our success in fiscal 2005, which is continuing into a strong fiscal 2006 first quarter, includes our focus on our core markets and the execution of our strategic plan to further strengthen our technology while expanding into new markets. This plan has been designed to recognize and address the rapid changes in technology in the telecommunications industry and the needs of alternate service providers. -more- TII Network Technologies, Inc. September 19, 2005 -Page Two "We believe that our accomplishments in fiscal 2005 have positioned us to capitalize on profitable growth opportunities with current and new customers in existing and new market segments. Looking ahead to fiscal 2006, we will continue to leverage our primary competitive advantage of providing the highest-quality products, with cost-effective performance and innovative features that meet changing market needs." The Company also announced that Charles H. House, an independent Director of the Company since 2003, has been elected Chairman of the Board of Directors, succeeding Alfred J. Roach, who has retired as Chairman but who will remain a member of the Board as Chairman Emeritus and advisor to the Company. Timothy J. Roach, President and Chief Executive Officer, stated: "We wish to acknowledge Alfred J. Roach's exceptional contributions to our company which he founded in 1964, serving as Chairman of the Board of Directors and a director, since its founding, and as Chief Executive Officer of the Company until January 1995. His contributions over the years have been invaluable in building the Company into one of the premier suppliers of protection products to the telecommunications industry." Charles H. House, 65, has served as a director of the Company since September 2003. Mr. House presently serves as Director of Societal Impact of Technology at Intel Corporation, a semiconductor chip maker ("Intel"). He previously served as Executive Vice President of Communications Research of Dialogic Corp., a manufacturer of hardware and software enabling technologies for computer telephony systems ("Dialogic"), which was acquired by Intel in 1999. He joined Dialogic in December 1995 as President of its wholly owned subsidiary, Spectron MicroSystems, Inc., which developed software for digital signal processing operating systems. He served as a director from July 1998 until July 2003, and Chairman from January 2001 until June 2003, of Applied Microsystems Corporation, when that company was dissolved following the sale of certain operations to Motorola, Inc. He has received many acknowledgements for his leadership including the Electronics Award of Achievement, 1977; selection to the Computer Design Hall of Fame, 1984; IEEE Fellow, 1990; EE Times Historic Contribution Award, 1997; IEEE 3rd Millennium Achievement Award, 2000. He was named in the Computer Museum and National Academy of Science exhibit and book in 1997 as one of 200 National "Wizards of Computing" for America. In addition, he has been named to the Electronic Design Hall of Fame for his work on Logic Analysis - judged one of the 20th century's top 50 inventions in electronics. Mr. House holds a Bachelor of Science degree in Solid-State Physics from California Institute of Technology, a Master of Science degree in Electronics Engineering from Stanford University, a Master of Arts degree in the History of Science and Technology from the University of Colorado and a Master of Business Administration degree in Strategic Studies from the University of California at San Diego. Mr. Roach continued: "We are very pleased that Mr. House has been unanimously selected by the Board as the Company's next Chairman of our Board of Directors. Since joining our Board, he has brought an exceptional blend of technology, marketing and business acumen to our Company as we develop and bring new products to market. We welcome his understanding of the strategic and business challenges faced by TII and are grateful for his continued commitment to our Company." --more-- + TII Network Technologies, Inc. September 19, 2005 -Page Three About TII Network Technologies, Inc. TII is a proven technology leader specializing in providing the telecommunications industry with innovative network protection and management products, including station protectors, network interface devices, DSL protectors, filters and splitters, power and data-line protectors and a multi-service residential gateway, as well as creative, custom design solutions to meet customers' individual requirements. Statements in this release that are not strictly historical are "forward-looking" statements and should be considered as subject to the risks and uncertainties that exist in the Company's operations and business environment. These factors include, but are not limited to: exposure to increases in the cost of the Company's products, including increases in the cost of the Company's petroleum-based plastic products; the Company's dependence for products and product components on Pacific Rim contract manufacturers, including on-time delivery, quality and exposure to changes in cost in the event of changes in the valuation of the Chinese Yuan; dependence on, and ability to retain, its "as-ordered" general supply agreements with its largest three customers and win new contracts; continued dependence on the traditional copper-based Telco market which has been declining over the last several years due principally to the impact of alternate technologies and competition from multi-system operators; the ability of the Company to market and sell products to new markets beyond its principal market - the copper-based Telco market; the Company's ability to timely develop products and adapt its existing products to address technological changes, including changes in its principal market; the potential for the disruption of shipments as a result of, among other things, third party labor disputes and political unrest in or shipping disruptions from countries in which the Company's contract manufacturers produce the Company's products; weather and similar conditions, particularly the effect of hurricanes/typhoons on the Company's manufacturing, assembly and warehouse facilities in Puerto Rico or the Pacific Rim; competition in the Company's traditional telecommunications market and new markets the Company is seeking to penetrate; potential changes in customers' spending and purchasing policies and practices; general economic and business conditions, especially as they pertain to the telecommunications industry; dependence on third parties for product development; risks inherent in new product development and sales, such as start-up delays and uncertainty of customer acceptance; the Company's ability to attract and retain technologically qualified personnel; the Company's ability to fulfill its growth strategies; the level of inventories maintained by the Company's customers; the Company's ability to maintain listing of its Common Stock on the NASDAQ SmallCap market; the availability of financing on satisfactory terms and other factors from time to time discussed in the Company's SEC reports. --more - -Statistical Tables Follow TII Network Technologies, Inc. September 19, 2005 -Page Four TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except earnings per share data) Three months ended Fiscal Year ended
June 24, June 25, June 24, June 25, 2005 2004 2005 2004 -------- -------- -------- -------- (Unaudited) Net sales $ 7,560 $ 6,234 $ 26,796 $ 28,485 Cost of sales 5,262 4,418 18,901 19,877 -------- -------- -------- -------- Gross profit 2,298 1,816 7,895 8,608 -------- -------- -------- -------- Operating expenses Selling, general and administrative 1,381 1,357 5,480 5,669 Research and development 331 320 1,318 1,357 -------- -------- -------- -------- Total operating expenses 1,712 1,677 6,798 7,026 -------- -------- -------- -------- Operating earnings 586 139 1,097 1,582 Interest expense (4) (2) (7) (14) Interest income 24 7 86 32 Other income 2 2 259 23 -------- -------- -------- -------- Earnings before income taxes 608 146 1,435 1,623 Provision for income taxes 14 33 43 60 -------- -------- -------- -------- Net earnings $ 594 $ 113 $ 1,392 $ 1,563 ======== ======== ======== ======== Net earnings per common share: Basic $ 0.05 $ 0.01 $ 0.12 $ 0.13 Diluted $ 0.05 $ 0.01 $ 0.11 $ 0.12 Weighted average common shares outstanding: Basic 12,161 11,908 11,971 11,820 Diluted 12,825 12,836 12,687 12,715
-more TII Network Technologies, Inc. September 19, 2005 -Page Five TII NETWORK TECHNOLOGIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
June 24, June 25, 2005 2004 -------- -------- ASSETS Current Assets: Cash and cash equivalents $ 4,529 $ 4,164 Accounts receivable, net 3,906 3,435 Inventories 8,899 5,405 Other current assets 404 374 -------- -------- Total current assets 17,738 13,378 Property, plant and equipment, net 4,229 3,947 Other assets 182 477 -------- -------- Total Assets$ 22,149 $ 17,802 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 3,733 $ 643 Accrued liabilities 1,563 1,698 -------- -------- Total current liabilities 5,296 2,341 -------- -------- Commitments and contingencies Stockholders' Equity: Preferred stock, par value $1.00 per share; 1,000,000 shares authorized; Series D Junior Participating, no shares outstanding - - Common stock, par value $.01 per share; 30,000,000 shares authorized; 12,178,733 shares issued and 12,161,096 shares outstanding as of June 24, 2005 and 11,925,421 shares issued and 11,907,784 shares outstanding as of June 25, 2004 122 119 Additional paid-in capital 37,989 37,992 Accumulated deficit (20,977) (22,369) -------- -------- 17,134 15,742 Less: Treasury shares, at cost (281) (281) -------- -------- Total stockholders' equity 16,853 15,461 Total Liabilities and Stockholders' Equity $ 22,149 $ 17,802 ======== ========
# # # -----END PRIVACY-ENHANCED MESSAGE-----