8-K

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): April 3, 2008

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.)

141 Rodeo Drive, Edgewood, New York 11717

(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:

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Appointment of Brian J. Kelley as a Director

On April 3, 2008, the Company’s Board of Directors, upon the recommendation of the Company’s Nominating/Governance Committee, appointed Brian J. Kelley to the Company’s Board of Directors to fill a vacancy in Class I directors with a term expiring at the Company’s 2010 Annual Meeting of Stockholders. Mr. Kelley is President of TAMCO Technology, a business development company focused on telecommunications asset management and financing solutions, specializing in technologies for VoIP and TDM-based business telephone systems and video conferencing solutions. Mr. Kelley was not appointed to any Committee of the Board and is not presently expected to be appointed to any specific Committee of the Board until the Board’s meeting following the 2008 Annual Meeting of Stockholders scheduled to be held in May 2008, at which time the Board traditionally appoints Committee members.

Mr. Kelley will receive cash and equity compensation on the same basis as other non-employee directors. Cash compensation to non-employee directors, in general, is (i) $10,000 per annum payable quarterly or, alternatively, at such non-employee directors election made at or prior to the annual meeting of stockholders for the upcoming year, $11,750 of the Company’s Common Stock, which are subject to forfeiture in the event the non-employee director resigns or is removed for cause before the next annual meeting of stockholders, (ii) $1,000 for each meeting of the Board attended, (iii) $500 for each Audit, Compensation and Nominating/Governance Committee and $1,000 for each Executive Advisory Committee meeting attended as a member of the applicable Committee and (iv) reimbursement for reasonable travel and other expenses incurred in attending Board and Committee meetings. In accordance with the provisions of the Company’s 2003 Non-Employee Director Stock Option Plan, upon becoming a non-employee director, Mr. Kelley was granted an option to purchase 24,000 shares of the Company’s Common Stock at an exercise price of $1.83, the closing market price of the Company’s Common Stock on April 3, 2008. Each non-employee director in office immediately following the conclusion of each annual meeting of stockholders (whether or not elected at the meeting) is granted an annual option to purchase 10,000 shares of Common Stock, as well as an option to purchase 5,000 shares for each standing Committee of the Board on which the non-employee director will be serving (10,000 shares in the case of members of the Executive Advisory Committee) and an option to purchase 10,000 shares for each such Committee that the non-employee director will be serving as Chairperson (20,000 shares in the case of the Chairperson of the Executive Advisory Committee). Each option held by non-employee directors under the 2003 Non-Employee Direct Stock Option Plan is exercisable for a period of ten years following the date of grant (subject to earlier termination at specified times following a non-employee director’s cessation of service) at an exercise price equal to 100% of the closing market price of the Company Common Stock on the date of grant.

There are no arrangements or understandings between Mr. Kelley and any other persons pursuant to which Mr. Kelley was selected as a director and there were no transactions between the Company and Mr. Kelley which require disclosure under Item 404(a) Regulation S-K.

On April 9, 2008, the Company issued a press release announcing the appointment of Mr. Kelley to our Board of Directors. A copy of the press release is attached as Exhibit 99.1 hereto.

2008 Equity Compensation Plan

On April 3, 2008, the Company’s Board of Director’s adopted, subject to stockholder approval at the Company’s 2008 Annual Meeting of the Stockholders scheduled to be held in May 2008, the Company’s 2008 Equity Compensation Plan (the “2008 Plan”). The 2008 Plan will replace the Company’s 1998 Stock Option Plan which expires on October 7, 2008. The following summary of the 2008 Plan is qualified in its entirety by reference to the full text of the 2008 Plan, a copy of which is attached to this Report as Exhibit 99.2 and is incorporated herein by reference.

The 2008 Plan authorizes the grant of awards not to exceed 1,000,000 shares of the Company’s Common Stock in the aggregate, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, recapitalizations, spin-offs, split ups and mergers and exchanges of shares and the like which result in a change in the number or kind of shares of Common Stock outstanding prior to the event.

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The 2008 Plan permits the Board of Directors and the Compensation of the Board to grant incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, (“ISOs”), non-qualified stock options which do not qualify as ISOs, stock appreciation rights (“SARs”), restricted stock and restricted stock units.

Awards may be granted under the 2008 Plan until April 2, 2018.

Employment Agreement with Kenneth A. Paladino

On April 3, 2008, the Company entered into an Employment Agreement with Kenneth A. Paladino, the Company’s President and Chief Executive Officer (the “Employment Agreement”). The following summary of the Employment Agreement is qualified in its entirety by reference to the full text of the Employment Agreement and a Restricted Stock Contract entered into pursuant to the Employment Agreement, copies of which are attached to this Report as Exhibits 99.3 and 99.4, respectively, and are incorporated herein by reference.

The Employment Agreement provides for a term ending on December 31, 2009 and continuing thereafter for three successive twelve month periods unless written notice is given by either party not to extend the term at least sixty days prior to the then effective expiration date. The Employment Agreement provides for Mr. Paladino to receive base compensation at the rate of $300,000 per annum and that Mr. Paladino is eligible to participate in any Company Executive Bonus Program that may be adopted (none presently in place). Mr. Paladino was also granted a restricted stock award covering 175,000 shares of the Company’s Common Stock under the Company’s 2008 Equity Compensation Plan and entered into a Restricted Stock Contract pursuant thereto. The Plan and the award to Mr. Paladino (and any benefits thereunder) are subject to stockholder approval at the Company’s 2008 Award Meeting of Stockholders scheduled to be held in May 2008. It is the intention of the Compensation Committee of the Board to substitute another form of long-term equity incentive compensation award for the restricted stock award if the Company’s stockholders do not approve the Company’s 2008 Equity Compensation Plan. The award vests on April 2, 2013 if Mr. Paladino remains employed by the Company on that date, subject to earlier vesting on a pro rata basis upon Mr. Paladino’s death, a Change in Control of the Company (in general, termination by Mr. Paladino within three months of a change in his duties or termination of his employment, in each case, within 18 months following a sale of all or substantially all of the Company’s assets, a consolidation or merger of the Company with any person as a result of which those who were the stockholders of the Company immediately prior to the consolidation or merger do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the consolidated or merged company’s then outstanding voting securities or certain transactions that result in those who were directors of the Company immediately before the transaction ceasing to constitute a majority of the Board of Directors of the Company or any successor to the Company), the termination of Mr. Paladino’s employment by the Company without Cause (as defined) or his Resignation For Good Reason (as defined), in each case at a rate equal to the 1/60^th of the number of shares subject to the award for each full month following the date of grant that Mr. Paladino was employed by the Company. Mr. Paladino is also eligible to participate in benefits offered to other executives and key management in accordance with the terms of the applicable plans. His salary and benefits are subject to periodic increases, but not decreases, at the discretion of the Company’s Board of Directors.

In the event of Mr. Paladino’s death or termination of his employment at the Company’s election by virtue of Disability (as defined), his Resignation for Good Reason (in general, a change in his duties that alters his overall authority, duties, responsibilities and status as Chief Executive Officer, the relocation of the Company’s principal place of business by more than 40 miles from its present location, a Change in Control (as defined), cessation of his position as President and Chief Executive Officer except as a result of disability or Cause (as defined), material breach by the Company of the Employment Agreement that is not cured within ten (10) days after notice, or, with certain exceptions, the insolvency, dissolution or liquidation of the Company), termination of his employment by the Company other than for Cause or if the Company fails to renew the Employment Agreement at the end if its initial or any additional term,Mr. Paladino and his beneficiaries or dependents will be entitled to 18 months of severance pay, a pro rata portion of his bonus (based on his most recent performance bonus) provided that the financial results of the Company the year of termination are substantially similar to its financial result for the period of his most recent performance bonus, a continuation for 18 months of the benefits being provided at the time and an acceleration of vesting of stock options held by him at the time which will remain exercisable for the greater of one year from the date of termination of employment or the period provided for under the applicable option or plan.

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Mr. Paladino has agreed that, for 18 months following the termination of his employment for any reason not, directly or indirectly, to (i) engage in, acquire an ownership interest in, or manage, operate or control, participate in the ownership, management, operation or control of, or be connected with or have any beneficial interest in, or serve as a director, officer, employee, agent, consultant, partner, investor, or independent contractor for, any person that engages in any business which is competitive with the business conducted by the Company within the 12 months preceding the termination of his employment, (ii) induce or take any action which would cause any customer, prospective customer or licensee of the Company to cease doing business with, or to reduce the level of business, or otherwise interfere with the goodwill enjoyed by, the Company, (iii) induce any employee of the Company to leave the employ of the Company or interfere with the relationship between the Company and any employee or (iv) hire any person who was, at any time during the previous six months, an employee of the Company.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

99.1	Press Release dated April 9, 2008, concerning the appointment of Brian J. Kelley as a director of the Company.
99.2	The Company’s 2008 Equity Compensation Plan.
99.3	Employment Agreement dated April 3, 2008 between the Company and Kenneth A. Paladino.
99.4	Restricted Stock Contract dated April 3, 2008 between the Company and Kenneth A. Paladino.

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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: April 9, 2008	By:	/s/ Jennifer E. Katsch
		Jennifer E. Katsch,
		Vice President-Finance Treasurer,
		and Chief Financial Officer

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EXHIBIT INDEX

Exhibit
Number   
Description  

99.1 Press Release dated April 9, 2008, concerning the appointment of Brian J. Kelley as a director of the Company.

99.2 The Company’s 2008 Equity Compensation Plan.

99.3 Employment Agreement dated April 3, 2008 between the Company and Kenneth A. Paladino.

99.4 Restricted Stock Contract dated April 3, 2008 between the Company and Kenneth A. Paladino.

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EX-99

Exhibit 99.1

TII NETWORK TECHNOLOGIES APPOINTS BRIAN J. KELLEY TO BOARD OF DIRECTORS

EDGEWOOD, NY – April 9, 2008 – TII Network Technologies, Inc. (Nasdaq: TIII), a company that develops and manufactures connectivity and data distribution solutions for the communications industry, announced today the appointment of Brian J. Kelley to the Company’s Board of Directors, effective April 3, 2008.

Mr. Kelley is currently the President of TAMCO Technology, a privately held business development company focused on telecommunications asset management and financing solutions, specializing in technologies for VoIP and TDM-based business telephone systems and video conferencing solutions. Mr. Kelley was also President and Chief Executive Officer of Cognitronics Corporation from 1994 until September of 2006 and a member of their Board of Directors during that same period. Cognitronics Corporation was publicly held and a leading designer and manufacturer of software and hardware solutions related to real time voice processing applications for the telecommunications industry. Mr. Kelley has extensive domestic and international telecommunications sales experience, a BA in Economics and received his MBA from the University of Connecticut.

Kenneth A. Paladino, President and Chief Executive Officer, stated: “We are pleased that Brian Kelley has joined our Board of Directors. He brings exceptional experience in the telecom industry, both domestically and internationally. His extensive sales and channel development experience will prove to be a great resource as we continue to execute our strategy of product diversification and growth.”

About TII Network Technologies, Inc.

TII Network Technologies, Inc. (NASDAQ: TIII) headquartered in Edgewood, New York, is a leader in designing, manufacturing and marketing network products for the communications industry.  Our products are critical to the delivery of voice, video and data services by the service providers and include:  network interface devices (“NIDs”), network gateways or intelligent NIDs (“iNIDs”), home networking, overvoltage surge protection and connectivity solutions. Additional information about the company can be found at www.tiinettech.com.

CONTACT:

TII Network Technologies, Inc.

(631) 789-5000

EX-99

Exhibit 99.2

2008 EQUITY COMPENSATION PLAN

of

TII NETWORK TECHNOLOGIES, INC.

1.          PURPOSES OF THE PLAN; EFFECTIVE DATE; STOCKHOLDER APPROVAL; AND TERM.

(a)       This equity compensation plan (the "Plan") is designed to provide an incentive to employees (including directors and officers who are employees) and directors of, and consultants to, TII NETWORK TECHNOLOGIES, INC., a Delaware corporation (the "Company"), any of its Subsidiaries or a Parent (as such terms are defined in Paragraph 18 hereof) of the Company, and to offer an additional inducement in obtaining the services of such persons. The Plan provides for the grant of equity compensation awards (each an "award") in the form of (i) "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, together with the rules and regulations thereunder in effect from time to time (the "Code"), as described in Paragraph 5 hereof ("ISOs"), (ii) nonqualified stock options which do not qualify as ISOs as described in Paragraph 5 hereof ("NQSOs"), (iii) stock appreciation rights as described in Paragraph 6 hereof ("SARs"), (iv) restricted stock as described in Paragraph 7 hereof ("Restricted Stock"), and (v) restricted stock units as described in Paragraph 8 hereof ("RSUs"). The Company makes no representation or warranty, express or implied, as to the qualification of any option as an "incentive stock option" under the Code or as to the exemption from, or the compliance with, Section 409A of the Code.

(b)       The Plan has been authorized by action of the Board of Directors on April 3, 2008 (the "Effective Date") and the Board of Directors has directed the submission of the Plan to stockholders of the Company for approval; and the Plan’s adoption and any awards (and rights, such as voting and dividend or other distribution rights, with respect to any securities underlying any awards) granted under the Plan prior to such stockholder approval are subject to and contingent on the approval of the Plan by the vote of the stockholders of the Company by April 2, 2009 in accordance with applicable law, including the Code’s requirement for a plan granting ISOs, and applicable requirements of any national securities exchange on which the Company's stock is listed or quoted. The Plan shall be subject to approval by a majority of the votes present in person or by proxy and entitled to vote thereon at the next duly held meeting of the Company's stockholders at which a quorum is present.

(c)       Unless the term of the Plan is extended pursuant to Paragraph 12 hereof, no award may be granted under the Plan after ten (10) years from the Effective Date.

2. STOCK SUBJECT TO THE PLAN.

(a)       Subject to the provisions of Paragraph 11 hereof, the aggregate number of shares of Common Stock, $.01 par value per share, of the Company ("Common Stock") for which awards may be granted under the Plan shall not exceed 1,000,000. Such shares of Common Stock may consist either in whole or in part of authorized but unissued shares of Common Stock or shares of Common Stock held in the treasury of the Company. Subject to the provisions of Paragraph 12 hereof, any shares of Common Stock subject to an award which for any reason expires, is forfeited, canceled or terminated unexercised or unsettled or which ceases for any reason to be exercisable or outstanding (other than by exercise or settlement thereof), shall again become available for the granting of awards of the same or a different type under the Plan. The Company shall at all times during the term of the Plan reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of the Plan.

(b)       In no case may a fraction of a share of Common Stock be purchased or issued under the Plan.

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1712444.3

3. ADMINISTRATION OF THE PLAN.

(a)       The Plan shall be administered by the Board of Directors or a committee (the "Committee") of the Board of Directors of the Company (the "Board of Directors"), which Committee, to the extent required by Rule 16b-3 (or any successor or similar rule, as the same may be in effect and interpreted from time to time, "Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), shall consist of not less than two (2) directors, each of whom shall be a non-employee director within the meaning of Rule 16b-3 and an "outside director" within the meaning of Treasury Regulation Section 1.162-27(e)(3). Unless otherwise provided in the By-laws of the Company or by resolution of the Board of Directors, a majority of the members of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present, and any acts approved in writing by all of the members of the Committee without a meeting, shall be the acts of the Committee. Those administering the Plan are referred to herein as the "Administrators".

(b)       Subject to the express provisions of the Plan, the Administrators shall have the authority to determine: the employees, consultants and directors who shall be granted awards; the number of shares of Common Stock subject to an award; the type and term of each award; whether an option to be granted to a employee is to be in ISO or a NQSO (options to be granted to consultants and directors who are not employees shall be NQSOs); the times when an award shall be granted; the number of shares of Common Stock to be subject to each award; the exercise price of each option and the Base Value (as defined in Paragraph 6(e) hereof) of each SAR; whether shares of Common Stock may be issued upon the exercise of an option as partly paid and, if so, the dates when future installments of the exercise price shall become due and the amounts of such installments; the Fair Market Value (as defined in Paragraph 18 hereof) of a share of Common Stock; the date each option or SAR shall become exercisable; and the date each Restricted Stock or RSU award shall be vested or settled; whether an award shall be exercisable, vested or settled in whole, in part or in installments and, if in installments, the number of shares of Common Stock to be subject to each installment, whether the installments shall be cumulative, the date each installment shall become exercisable and the term of each installment; whether to accelerate the date of exercise of any award or installment; the form of payment of the exercise price of an option; whether to restrict the sale or other disposition of the shares of Common Stock acquired upon the exercise of an option or SAR or settlement of any award and, if so, whether and under what conditions to waive any such restriction; whether and under what conditions to subject all or a portion of the grant, the vesting or the exercise of an award or the shares acquired pursuant to the exercise or settlement of an award to the fulfillment of certain restrictions or contingencies as specified in the contract referred to in Paragraph 10 hereof (the "Contract"), including, without limitation, service-based and/or performance-based restrictions or contingencies relating to entering into a noncompetition, consulting or other arrangement with the Company, any of its Subsidiaries or a Parent, to financial or other performance objectives for the Company, any of its Subsidiaries or a Parent, a division of any of the foregoing, a product line or other category, and/or to the period of continued employment or service of the awardee (as defined in paragraph 4) with the Company, any of its Subsidiaries or a Parent, and to determine whether such restrictions or contingencies have been met; whether an awardee is Disabled (as defined in Paragraph 18 hereof); the amount, if any, necessary to satisfy the obligation of the Company, any of its Subsidiaries or a Parent to withhold taxes or other amounts; to construe the respective Contracts and the Plan; with the consent of the awardee, to cancel or modify an award,

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provided that the modified provision is permitted to be included in an award granted under the Plan on the date of the modification, and provided, further, that in the case of a modification (within the meaning of Section 424(h) of the Code) of an ISO, such option as modified would be permitted to be granted on the date of such modification under the terms of the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to approve any provision of the Plan or any award granted under the Plan, or any amendment to either, which under Rule 16b-3 requires the approval of the Board of Directors, a committee of non-employee directors or the stockholders in order to be exempt (unless otherwise specifically provided herein); to make all other determinations in making awards and in establishing the terms or conditions thereof, including exercisability, vesting and settlement, which are permitted under and are not inconsistent with the Plan; and to make all other determinations necessary or advisable for administering the Plan. Any controversy or claim arising out of or relating to the Plan, any award granted under the Plan or any Contract shall be determined unilaterally by the Administrators in their sole discretion. The determinations of the Administrators on the matters referred to in this Paragraph 3 shall be conclusive and binding on the awardee. No Administrator or former Administrator shall be liable for any action, failure to act or determination made in good faith with respect to the Plan or any award hereunder.

4.          ELIGIBILITY. The Administrators may, from time to time and consistent with the purposes and limitations of the Plan, grant awards to (a) employees (including officers and directors who are employees) of, (b) directors (who are not employees) of, and (c) consultants to, the Company, any of its Subsidiaries or a Parent. Such awards granted shall cover such number of shares of Common Stock as the Administrators may determine; provided, however, that the maximum number of shares subject to awards that may be granted to any employee during any calendar year under the Plan (the "162(m) Maximum") shall be 250,000 shares. Persons selected to receive awards under the Plan are referred to as "awardees".

5. OPTIONS.

(a)        Grant of Options. The Administrators may grant awards of options, whether ISOs and/or NQSOs, to acquire shares of Common Stock as provided in this Paragraph 5. Each award of options granted pursuant to the Plan shall be made on such terms and conditions as are not inconsistent with the Plan and as are established by the Administrators at or before the time such award is granted; provided, however, that the aggregate Fair Market Value, determined at the time the award is granted, of the shares of Common Stock for which any eligible employee may be granted ISOs under the Plan or any other plan of the Company, any of its Subsidiaries or a Parent that are exercisable for the first time by such optionee during any calendar year shall not exceed $100,000 or such other limitation as may, at the time of grant, be applicable under the Code (the “ISO Limitation Amount”). The ISO Limitation Amount shall be applied by taking ISOs into account in the order in which they were granted or as otherwise may be required by Section 422 of the Code. Any option (or portion thereof) granted in excess of such ISO Limitation Amount or that for any reason is not or ceases to be treated as an ISO for Code purposes shall be treated as a NQSO to the extent of such excess or the portion thereof not treated as an ISO.

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(b)        Exercise Price of Options. The exercise price of the shares of Common Stock under each option shall be determined by the Administrators as set forth in the applicable Contract; provided, however, that (i) the exercise price of an option shall not be less than the Fair Market Value of the Common Stock subject to such option on the date of grant; (ii) if, at the time an ISO (but not a NQSO) is granted, the optionee owns (or is deemed to own under Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, any of its Subsidiaries or a Parent, the exercise price of such ISO shall not be less than 110% of the Fair Market Value of the Common Stock subject to such ISO on the date of grant.

(c)        Term of Options. Each option granted pursuant to the Plan shall be for such term as is established by the Administrators at or before the time such option is granted; provided, however, that the term of each option granted pursuant to the Plan shall be for a period not exceeding ten (10) years from the date of grant thereof, and provided further, that if, at the time an ISO (but not a NQSO) is granted, the optionee owns (or is deemed to own under Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, any of its Subsidiaries or a Parent, the term of the ISO shall be for a period not exceeding five (5) years from the date of grant. Options shall be subject to earlier termination as hereinafter provided.

(d) Exercise of Options.

(i)        An option (or any part or installment thereof), to the extent then exercisable, shall be exercised by giving written notice to the Company at its principal office (A) specifying the option being exercised and the number of shares of Common Stock as to which such option is being exercised, and (B) accompanied by payment in full of the aggregate exercise price therefor (or the amount due on exercise if the applicable Contract permits installment payments) (I) in cash and/or by certified or bank cashier’s check, (II) with the authorization of the Administrators, with previously acquired shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the exercise price of options being exercised, (III) with the authorization of the Administrators, with a concurrent sale of option shares to the extent permitted by clause (ii) of this Paragraph 5(d), or (IV) some combination thereof; provided, however, that in no case may shares be tendered if such tender would require the Company to incur a charge against its earnings for financial accounting purposes. The Company shall not be required to issue any shares of Common Stock pursuant to the exercise of any option until the required payment of the exercise price with respect thereto has been made.

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(ii)       The Administrators may permit payment of the exercise price of an option by delivery by the optionee of a properly executed notice, together with a copy of the optionee's irrevocable instructions to a broker acceptable to the Administrators to sell all or a portion of the option shares and deliver promptly to the Company the amount of sale or loan proceeds sufficient to pay such exercise price. In connection therewith, the Company may enter into agreements for coordinated procedures with one or more brokerage firms.

(iii)      An optionee shall not have the rights of a stockholder with respect to shares of Common Stock to be received upon the exercise of an option until the date of issuance of a stock certificate to the optionee for such shares or, in the case of uncertificated shares, until the date an entry is made on the books of the Company's transfer agent representing such shares; provided, however, that until such stock certificate is issued or until such book entry is made, any optionee using previously acquired shares of Common Stock in payment of an option exercise price shall continue to have the rights of a stockholder with respect to such previously acquired shares.

(e)        Handling Options on Termination of Relationship. Except as may otherwise be expressly provided in the applicable Contract, any optionee whose relationship with the Company, any of its Subsidiaries and a Parent as an employee, director or consultant has terminated for any reason (other than as a result of the death or Disability (as defined in Paragraph 18 hereof) of the optionee) may exercise such option, to the extent exercisable on the date of such termination, at any time within three months after the date of termination, but not thereafter and in no event after the date the option would otherwise have expired; provided, however, that, except as may otherwise be expressly provided in the applicable Contract, if such relationship is terminated either (i) for Cause (as defined in Paragraph 18 hereof), or (ii) without the consent of the Company, such option shall terminate immediately.

(f) Death or Disability of an Optionee.

(i)        Except as may otherwise be expressly provided in the applicable Contract, any optionee whose relationship as an employee or director of, or a consultant to, the Company, any of its Subsidiaries or a Parent has terminated by reason of Disability (without continuing in another such capacity) may exercise the optionee's option, to the extent exercisable upon the effective date of such termination, at any time within one year after such date, but not thereafter and in no event after the date the option would otherwise have expired.

(ii)       Except as may otherwise be expressly provided in the applicable Contract, if an individual optionee dies (A) while he is an employee or director of, or a consultant to, the Company, any of its Subsidiaries or a Parent, (B) within three months after the termination of such relationship (unless such termination was for Cause or without the consent of the Company or such Subsidiary or Parent) or (C) within one year following the termination of such relationship by reason of Disability, the optionee's option may be exercised, to the extent exercisable on the date of the optionee's death, by the optionee's Legal Representative (as defined in Paragraph 18) at any time within one year after death, but not thereafter and in no event after the date the option would otherwise have expired.

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(g)        Restrictions on Stock Transferability. The Administrators may, at or before the time such award is granted, impose such restrictions on any shares of Common Stock delivered to an awardee on exercise of an option as they may deem advisable, including, without limitation, restricting transferability and/or designating such shares as Restricted Stock or stock subject to further service, performance, consulting or noncompetition period after settlement. Each certificate representing such shares of Common Stock shall bear a legend referencing such restrictions.

6. STOCK APPRECIATION RIGHTS.

(a)        Grant of SARs. The Administrators may grant awards of SARs as provided in this Paragraph 6. Each award of SARs granted pursuant to the Plan shall be made on such terms and conditions that are not inconsistent with the Plan as are established by the Administrators at or before the time such award is granted.

(b)        SAR Terms. The Contract for each SAR award shall specify the Base Value, the term of the SAR, the number of shares of Common Stock to which the SAR pertains, the payment terms, including the whether payable in cash and/or shares of Common Stock, any conditions imposed upon the exercisability of the SAR in the event of death, Disability or other termination of employment or termination of a consulting or other relationship with the Company, any of its Subsidiaries and a Parent, and such other provisions as the Administrators shall determine consistent with the Plan.

(c)        Exercise of SARs. SARs may be exercised with respect to all or part of the shares of Common Stock upon whatever terms and conditions the Administrators impose upon such SARs. A SAR shall be exercised by delivery to the Company of a notice of exercise in the form prescribed by the Administrators.

(d)        Other Conditions Applicable to SARs. In no event shall the term of any SAR granted under the Plan exceed ten (10) years from the date of grant. A SAR may be exercised only when the Fair Market Value of a share of Common Stock exceeds the Base Value.

(e) Payment upon Exercise of SARs.

(i)        Subject to the provisions of the Contract, upon the exercise of a SAR, the awardee is entitled to receive, without any payment to the Company (other than required tax withholding amounts), an amount (the "SAR Value") equal to the product of multiplying (A) the number of shares of Common Stock with respect to which the SAR is exercised by (B) an amount equal to the excess of (I) the Fair Market Value per share on the date of exercise of the SAR over (II) the "Base Value" of the SAR designated in the Contract (which "Base Value" shall be not less than the Fair Market Value per share on the date of grant ).

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(ii)       Payment of the SAR Value to the awardee shall be made (A) in shares of Common Stock, valued at the Fair Market Value on the date of exercise in the case of an immediate payment after exercise, (B) in cash or (C) in a combination thereof as determined by the Administrators, either at the time of the award or, unless otherwise provided in the applicable Contract, thereafter, and as provided in the Contract.

(iii)      To the extent required to satisfy the conditions of Rule 16b-3(e) under the Exchange Act or as otherwise provided in the Contract, where an election between cash and shares is permitted by the Administrators to be made by the awardee, the Administrators shall have the authority to consent to or disapprove the election of any awardee to receive cash in full or partial settlement of a SAR. In cases where an election of settlement in cash must be consented to by the Administrators, the Administrators may consent to, or disapprove, such election within ten (10) days after such election, or within such period for taking action as is specified in the election or Contract, and failure to give consent shall be disapproval. Consent may be given in whole or as to a portion of the SAR surrendered by the awardee. If the election to receive cash is disapproved in whole or in part, the SAR shall be deemed to have been exercised for shares of Common Stock, or, if so specified in the notice of exercise, not to have been exercised to the extent the election to receive cash is disapproved.

(iv)      As an alternative to the foregoing, if the Administrators determine to issue SARs that are subject to Section 409A of the Code and are intended to comply with the requirements of Section 409A of the Code, the Administrators may provide, on an elective basis (if timely elected by the awardee in a manner complying with Section 409A of the Code) or non-elective basis, in the Contract for a deferred payment, issuance and/or delivery of the cash to be paid or shares of Common Stock to be issued in connection with the SAR exercise at a time or times permitted under Section 409A of the Code. In such event, dividends or other distributions with respect to shares of Common Stock that would otherwise have been issued and received by the awardee in connection with the exercise shall be paid to the awardee currently as and when payable to stockholders of the Company or, if provided in the applicable Contract, deferred until the underlying deferred shares of Common Stock are issued and delivered. Any cash payment, dividends or other distributions that are deferred shall be credited with interest at a reasonable rate as determined by the Administrators from time to time.

(f)         Applicability of Paragraph 5(e), (f) and (g). Unless otherwise provided in the Contract, the provisions of Paragraphs 5(e), (f) and (g) shall apply to SARs as though the SARs were options (other than ISOs).

7. RESTRICTED STOCK.

(a)        Grant of Restricted Stock. The Administrators may grant awards of shares of Common Stock that are restricted as provided in this Paragraph 7 (referred to as "Restricted Stock" while so restricted). Each award of Restricted Stock granted pursuant to the Plan shall be made on such terms and conditions that are not inconsistent with the Plan as are established by the Administrators at or before the time such award is granted. Unless otherwise provided in the applicable Contract, an awardee receiving a Restricted Stock award is not required to pay the Company therefor (except for applicable tax withholding) other than the rendering of services. As determined by the Administrators, shares of Restricted Stock may be issued in book entry or electronic form or in certificated form. Unless otherwise determined by the Administrators, custody of shares of Restricted Stock in certificated form shall be retained by the Company or held in escrow by an escrow agent selected, and subject to change from time to time, by the Administrators until the termination of the Period of Restriction (as defined in Paragraph 18) pertaining thereto.

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(b)        Restrictions. The Contract for each Restricted Stock award shall specify the Period of Restriction, the number of shares of Restricted Stock in the award, and the applicable restrictions (whether service-based restrictions, with or without performance acceleration, and/or performance-based restrictions) and such other provisions as the Administrators shall determine. If a Restricted Stock award is intended to be a performance-based compensation award, the terms and conditions of the award, including the Performance Goal(s) (as defined in Paragraph 18) and Period of Restriction and, if different, performance period, shall be set forth in the Contract, and the requirements to satisfy or achieve the Performance Goal(s) as so provided therein shall be considered to be restrictions under the Plan.

(c)        Other or Additional Restrictions. The Administrators may also impose restrictions in the form a right of first refusal running to the Company, a buyback right by the Company or other restriction on transferability. Any buyback right in favor of the Company may include such terms as the Administrators may determine, including, without limitation, a purchase price in an amount of, or based on, a specific or formula price therefor and a right to exercise the buyback right in the event the awardee does not complete a specified service, consulting or noncompetition period after issuance or delivery of the shares to the awardee.

(d)        Certificate Legend. In addition to any legends placed on certificates in connection with securities laws, each certificate representing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend:

"The sale, transfer, pledge, hypothecation or other disposition of the shares represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer set forth in the 2008 Equity Compensation Plan of TII Network Technologies, Inc., in the rules and administrative procedures adopted pursuant to such Plan, and in an associated Restricted Stock Contract. A copy of the Plan, such rules and procedures, and the applicable Restricted Stock Contract may be obtained from the Secretary of TII Network Technologies, Inc."

(e)        Removal of Restrictions. Except as otherwise provided in this Paragraph 7 or elsewhere in the Plan, shares of Restricted Stock awarded under the Plan shall, subject to Paragraph 9, become freely transferable by the awardee immediately after the last day of the Period of Restriction and, where applicable, immediately after a determination of the satisfaction or achievement of any applicable Performance Goal(s) by the Administrators. Once the shares are released from the restrictions imposed pursuant to this Paragraph 7, the legend required by Paragraph 7(d) herein shall be removed and the released shares of Common Stock shall be provided to the awardee in certificated form, unless the awardee requests in writing with the consent of the Company, or the Administrators direct, that issuance and delivery of the shares be effected in book entry or electronic form or that the shares be held in escrow by an escrow agent selected, and subject to change from time to time, by the Administrators.

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(f)         Voting Rights. Unless otherwise provided in the Contract, during the Period of Restriction, awardees to whom shares of Restricted Stock hereunder may exercise voting rights with respect to those shares.

(g)        Dividends and Other Distributions. Unless otherwise provided in the Contract (which may or may not provide for the accumulation and payment of dividends and other distributions made in cash or property, other than shares of Common Stock, until the shares to which the dividends and other distributions relate vest), during the Period of Restriction, awardees entitled to or holding shares of Restricted Stock hereunder shall be entitled to receive all dividends and other distributions made in cash or property other than shares of Common Stock with respect to those shares of Restricted Stock. If any dividends or distributions are paid in shares of Common Stock, such shares shall be part of the Restricted Stock and subject to the same restrictions on transferability and the same rules for vesting, forfeiture, and custody as the shares of Restricted Stock with respect to which they were distributed.

(h)        Failure to Satisfy Performance Goal(s). In the event that the specified Performance Goal(s) are not satisfied within the time period established by the Administrators, the shares of Restricted Stock that were awarded subject to the satisfaction of such Performance Goal(s) shall be automatically forfeited and returned to the Company. Notwithstanding the foregoing, in the case of an award not intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Administrators may waive all or any part of the Performance Goal(s) and provide for vesting of the award on such basis as they deem appropriate for any one or more awardees.

(i)         Termination of Employment or Service. Unless otherwise provided in the Contract, in the event that an awardee's employment, consulting or other relationship with the Company, any of its Subsidiaries and a Parent has terminated for any reason, then the unvested portion of a Restricted Stock award shall automatically be forfeited to the Company. The Administrators may provide in a Contract made pursuant to the Plan for vesting of Restricted Stock awards in connection with the termination of an awardee's employment or service on such basis as they deem appropriate, including, without limitation, any provisions for vesting at death, Disability or other cessation of employment or service, with or without the further consent of the Administrators. The Contracts evidencing awards may contain such provisions as the Administrators may approve with reference to the effect of approved leaves of absence.

8. RSUs.

(a)        Grant of RSUs. The Administrators, at any time and from time to time, may grant RSUs as provided in this Paragraph 8 (with one RSU representing the right to one share of Common Stock) on such terms and conditions that are not inconsistent with the Plan as are established by the Administrators at or before the time such award is granted. Unless otherwise provided in the applicable Contract, an awardee receiving a RSU award is not required to pay the Company therefor (except for applicable tax withholding) other than the rendering of services.

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(b)        Restrictions. The Contract for each RSU award shall specify the Period of Restriction, the number of RSUs granted, the applicable restrictions (whether service-based restrictions, with or without performance acceleration, and/or performance-based restrictions), the payment terms, including the whether payable in cash and/or shares of Common Stock, and such other provisions as the Administrators shall determine. If a RSU award is intended to be a performance-based compensation award, the terms and conditions of such award, including the Performance Goal(s) and Period of Restriction and, if different, performance period, shall be set forth in the Contract, and the requirements to satisfy or achieve the Performance Goal(s) as so provided therein shall be considered to be restrictions under the Plan.

(c)        Dividends and Other Distributions. Unless otherwise provided in the Contract (which may or may not provide for the current payment, or for the accumulation subject to the same restrictions, vesting, forfeiture, and payment as the RSUs to which they are attributable, of dividends and other distributions made in cash or property other than shares of Common Stock), during the Period of Restriction, awardees holding RSUs shall have no rights to dividends and other distributions made in cash or property other than shares of Common Stock that would have been paid with respect to the shares represented by those RSUs if such shares were outstanding. Unless otherwise provided in the Contract, if any deemed dividends or other distributions would be paid in shares of Common Stock, the RSU award shall be adjusted as provided in Paragraph 11. In addition, unless otherwise provided in the Contract, during the Period of Restriction, any such deemed dividends and other distributions for which rights are provided but which are not paid currently shall be deemed converted to additional RSUs based on the Fair Market Value of a share on the date of payment or distribution of the deemed dividend or distribution. Awardees holding RSUs shall have no right to vote the shares of Common Stock represented by such RSUs until such shares are actually issued in settlement of such RSUs.

(d) Payment after Lapse of Restrictions.

(i)        The Administrators are expressly authorized to grant RSUs that are "nonqualified deferred compensation" covered by Section 409A of the Code, as well as RSUs that are not such nonqualified deferred compensation.

(ii)       Unless otherwise provided in the Contract, upon the vesting of a RSU through a lapse of restrictions pertaining to the RSU, the awardee is entitled to receive, without any payment to the Company (other than required tax withholding amounts), an amount equal to the product of multiplying (A) the number of shares of Common Stock with respect to which the restrictions lapse by (B) the Fair Market Value per share on the date the restrictions lapse (such amount, the "RSU Value").

(iii)      The Contract may provide for a deferral of payment of the RSU Value after the time of vesting, on an elective basis (if timely elected by the awardee in a manner complying with Section 409A of the Code) or non-elective basis, for payment of the RSU Value at a later date, adjusted (if so provided in the Contract) from the date of vesting based on an interest, dividend equivalent, earnings, or other basis (including deemed investment of the RSU Value in shares of Common Stock) set out in the Contract (the "adjusted RSU Value").

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(iv)      Payment of the RSU Value or adjusted RSU Value, as applicable, to the awardee shall be made (A) in shares of Common Stock, valued at the Fair Market Value on the date of payment in the case of an immediate payment, (B) in cash or (C) in a combination thereof as determined by the Administrators, either at the time of the award or, unless otherwise provided in the applicable Contract, thereafter, and as provided in the Contract. Any payment in shares of Common Stock shall be effected in book entry or electronic form, provided that issuance and delivery in certificated form shall occur if the awardee so requests in writing or the Administrators so direct.

(e)        Restrictions on Stock Transferability. The Administrators may impose, at or before the time such award is granted, such restrictions on any shares of Common Stock delivered to an awardee in settlement of a RSU as they may deem advisable, including, without limitation, a right of first refusal running to the Company, a buyback right by the Company or other restriction on transferability. In the event the Administrators so provide in a Contract, shares of Common Stock delivered on the settlement of a RSU may be designated as Restricted Stock and/or may be subject to a buyback right by the Company in the amount of, or based on, a specific or formula price therefor or otherwise in the event the awardee does not complete a specified service, consulting or noncompetition period after settlement.

(f)         Failure to Satisfy Performance Goal(s). In the event that the specified Performance Goal(s) are not satisfied within the time period established by the Administrators, the RSUs that were awarded subject to the satisfaction of such Performance Goal(s) shall be automatically forfeited and returned to the Company. Notwithstanding the foregoing, in the case of an award not intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Administrators may waive all or any part of the Performance Goal(s) and provide for vesting of the award on such basis as they deem appropriate.

(g)        Termination of Employment or Service. Unless otherwise provided in the Contract pertaining to a RSU award, in the event that an awardee's employment, consulting or other relationship with the Company, any of its Subsidiaries and a Parent has terminated for any reason, then the unvested portion of a RSU award shall automatically be forfeited to the Company. The Administrators may provide in a Contract made pursuant to the Plan for vesting of RSU awards in connection with the termination of an awardee's employment or service on such basis as they deem appropriate, including, without limitation, any provisions for vesting at death, Disability or other cessation of employment or service, with or without the further consent of the Administrators. The Contracts evidencing awards may contain such provisions as the Administrators may approve with reference to the effect of approved leaves of absence.

9. COMPLIANCE WITH SECURITIES LAWS.

(a)       It is a condition to the issuance of any share of Common Stock and the vesting of any award granted under the Plan that either (i) a Registration Statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of Common Stock to be issued in connection therewith shall be effective and current at the time of exercise or issuance or (ii) there is an exemption from registration under the Securities Act for the issuance of the shares of Common Stock thereupon. Nothing herein shall be construed as requiring the Company to register shares subject to any award under the Securities Act or to keep any Registration Statement effective or current.

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(b)       The Administrators may require, as a condition to the issuance of shares of Common Stock and the vesting of any award granted under the Plan, that the awardee execute and deliver to the Company such awardee's representations and warranties, in form, substance and scope satisfactory to the Administrators, as the Administrators may determine to be necessary or appropriate to facilitate the perfection of an exemption from the registration requirements of the Securities Act, applicable state securities laws or other legal requirements, including (without limitation) that (i) the shares of Common Stock to be issued are being acquired by the awardee for the awardee's own account, for investment only and not with a view to the resale or distribution thereof, and (ii) any subsequent resale or distribution of shares of Common Stock by such awardee will be made only pursuant to (A) a Registration Statement under the Securities Act that is effective and current with respect to the shares of Common Stock being sold, or (B) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption, the awardee, prior to any offer of sale or sale of such shares of Common Stock, shall provide the Company with a favorable written opinion of counsel satisfactory to the Company, in form, substance and scope satisfactory to the Company, as to the applicability of such Securities Act exemption to the proposed sale or distribution.

(c)       In addition, if at any time the Administrators shall determine that the listing or qualification of the shares of Common Stock subject to such award on any securities exchange or under any applicable law, or that the consent or approval of any governmental agency or regulatory body, is necessary or desirable as a condition to, or in connection with, the granting of an award or the issuance of shares of Common Stock thereunder, such award may not be granted, exercised or settled, in whole or in part, as the case may be, unless such listing, qualification, consent or approval shall have been effected or obtained by the Administrators free of any conditions not acceptable to the Administrators.

10.        AWARD CONTRACTS. Each award shall be evidenced by an appropriate Contract which shall be duly executed by the Company and the awardee, which Contract shall contain such terms, provisions and conditions not inconsistent herewith as may be determined by the Administrators. The terms of each award and Contract need not be identical. The Contract may be part of, incorporate by reference, or consist in whole or in part of, an employment or similar agreement between the Company and the awardee.

11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.

(a)       Notwithstanding any other provision of the Plan, in the event of any change in the outstanding Common Stock by reason of a stock dividend, stock split, combination, reclassification, recapitalization, merger in which the Company is the surviving corporation, spin-off, split-up, exchange of shares or the like which results in a change in the number or kind of shares of Common Stock which were outstanding immediately prior to such event, the aggregate number and kind of shares subject to the Plan, the exercise price of each outstanding option and the Base Value of each outstanding SAR, the aggregate number and kind of shares subject to each outstanding award, and the 162(m) Maximum, shall be

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appropriately adjusted to preserve the actual or potential inherent economic value of an award by the Board, whose determination shall be conclusive and binding on all parties.  Such adjustment may provide for the elimination of fractional shares that might otherwise be subject to the award without payment therefor and for the rounding up to the next whole cent in the case of exercise prices. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Paragraph 11 if such adjustment (i) would cause the Plan to fail to comply with Section 409A or 422 of the Code or with Rule 16b-3 (if applicable to such award), or (ii) would be considered as the adoption of a new plan requiring stockholder approval.

(b)       Subject to compliance with Section 409A of the Code (if applicable), unless the Administrators shall determine otherwise, in the event of (i) the liquidation or dissolution of the Company, or (ii) a transaction (or series of related transactions) that is approved by a majority of the members of the Company’s Board of Directors who were elected by stockholders prior to the first of such transactions (including, without limitation, a merger, consolidation, sale of stock by the Company or its stockholders, tender offer or sale of assets) and in which either (A) the voting power (in the election of directors generally) of the Company’s voting securities outstanding immediately prior to such transaction(s) cease to represent at least 50% of the combined voting power (in the election of directors generally) of the Company or such surviving entity outstanding immediately after such transaction(s) or (B) the registration of the Common Stock under the Securities Exchange Act of 1934 is terminated (each of the events described in clauses (i) and (ii) is referred to herein individually as an "Extraordinary Event"), then, unless other provision is made therefor in the transaction, the Plan and each outstanding option or SAR shall terminate, each outstanding share of Restricted Stock shall be deemed fully vested and each outstanding RSU shall be deemed fully vested and settled. In such event each awardee shall have the right to exercise, in whole or in part, any unexpired option or options or SAR or SARs issued to the awardee, to the extent that said option or SAR is then vested and exercisable pursuant to the provisions of said option or options or SAR or SARs and the Plan within fifteen (15) business days of the Company's giving of written notice to the awardee of the completion of such Extraordinary Event.

12.        AMENDMENTS AND TERMINATION OF THE PLAN. The Board of Directors, without further approval of the Company's stockholders, may at any time suspend or terminate the Plan, in whole or in part, or amend it from time to time in such respects as it may deem advisable, including, without limitation, in order that ISOs granted hereunder meet the requirements for "incentive stock options" under the Code, that awards hereunder are exempt from or comply with the requirements of Section 409A of the Code, or to comply with the provisions of Rule 16b-3, Section 162(m) of the Code or any change in applicable law, regulations, rulings or interpretations of administrative agencies; provided, however, that no amendment shall be effective without the requisite prior or subsequent stockholder approval which would (a) except as contemplated in 11 hereof, increase the maximum number of shares of Common Stock for which awards may be granted under the Plan or the 162(m) Maximum, (b) change the eligibility requirements to receive awards hereunder or (c) make any change for which applicable law or any applicable requirements of any national securities exchange on which the Company's stock is listed or quoted requires stockholder approval. No termination, suspension or amendment of the Plan shall, without the consent of the awardee, adversely affect the awardee's rights under any award granted under the Plan. The power of the Administrators to construe and administer any award granted under the Plan prior to the termination or suspension of the Plan nevertheless shall continue after such termination or during such suspension.

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13.        NON-TRANSFERABILITY. No award granted under the Plan shall be transferable otherwise than by will or the laws of descent and distribution, and options and SARs may be exercised, during the lifetime of the awardee, only by the awardee or his Legal Representatives. Except to the extent provided in the immediately preceding sentence, awards may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process, and any such attempted assignment, transfer, pledge, hypothecation or disposition shall be null and void ab initio and of no force or effect.

14.        WITHHOLDING TAXES. The Company, any of its Subsidiaries or a Parent may withhold, or agree to withhold, (a) cash, (b) with the consent of the Administrators (in the Contract or otherwise), shares of Common Stock to be issued upon exercise or settlement of an award having an aggregate Fair Market Value on the relevant date or (c) a combination of cash and shares, in an amount equal to the amount which the Administrators determine is necessary to satisfy the obligation of the Company, any of its Subsidiaries or a Parent to withhold Federal, state and local income taxes or other amounts incurred by reason of the grant, vesting, exercise, settlement or disposition of an award, or the disposition of the underlying shares of Common Stock. Alternatively, the Company, any of its Subsidiaries or a Parent may require the holder to pay to it such amount, in cash, promptly upon demand. The Company shall not be required to issue any shares of Common Stock or make any payment in connection with the exercise, vesting or settlement of any award under the Plan until all required withholding amounts with respect thereto have been received by it.

15. LEGENDS; PAYMENT OF EXPENSES.

(a)       The Company may endorse such legend or legends upon the certificates for shares of Common Stock issued upon the grant, vesting, exercise or settlement of an award under the Plan and may issue such "stop transfer" instructions to its transfer agent in respect of such shares as it determines, in its sole discretion, to be necessary or appropriate to (i) prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act and any applicable state securities laws, (ii) implement the provisions of the Plan or any agreement between the Company and the awardee with respect to such shares of Common Stock or (iii) 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 issued or transferred upon the exercise of an ISO granted under the Plan.

(b)       The Company shall pay all issuance taxes with respect to the issuance of shares of Common Stock upon the grant, vesting, exercise or settlement of an award granted under the Plan, as well as all fees and expenses incurred by the Company in connection therewith.

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16.        USE OF PROCEEDS. The cash proceeds received in connection with any award under the Plan shall be added to the general funds of the Company and used for such corporate purposes as the Board of Directors may determine, in its sole discretion.

17.        SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT CORPORATIONS. Anything in the Plan to the contrary notwithstanding, the Board of Directors may, without further approval by the Company's stockholders, substitute new awards for prior awards of the same type as is permitted to be granted under the Plan of a Constituent Corporation (as defined in Paragraph 18 thereof) or assume the prior equity compensation awards of the same type as is permitted to be granted under the Plan of such Constituent Corporation.

18.        DEFINITIONS. For purposes of the Plan, the following terms shall be defined as set forth below:

(a)       "Cause" shall mean (i) in the case of an employee or consultant, if there is a written employment or consulting agreement between the awardee and the Company, any of its Subsidiaries or a Parent which defines termination of such relationship for cause, cause as defined in such agreement, and (ii) in all other cases, cause within the meaning of applicable state law.

(b)       "Constituent Corporation" shall mean any corporation which engages with the Company, any of its Subsidiaries or a Parent in a transaction to which Section 424(a) of the Code applies (or would apply if the award assumed or substituted were an ISO), or any Parent or any Subsidiary of such corporation.

(c)       “Fair Market Value” of a share of Common Stock on any day shall be (i) if the principal market for the Common Stock is a national securities exchange, the closing sales price per share of the Common Stock on such day as reported by such exchange or on a consolidated tape reflecting transactions on such exchange, or (ii) if the principal market for the Common Stock is not a national securities exchange, the closing average of the highest bid and lowest asked prices per share of Common Stock on such day as reported by the market upon which the Common Stock is quoted, The Wall Street Journal, the National Quotation Bureau Incorporated or an independent dealer in the Common Stock, as determined by the Company; provided, however, that if clauses (i) and (ii) of this Paragraph 18(c) are all inapplicable, or if no trades have been made and no quotes are available for such day, the Fair Market Value of the Common Stock shall be determined by the Committee by any method consistent with applicable regulations adopted by the Treasury Department relating to stock options or stock valuation.

(d)       "Disability" or "Disabled" shall mean a permanent and total disability within the meaning of Section 22(e)(3) of the Code.

(e)       "Legal Representative" shall mean the executor, administrator or other person who at the time is entitled by law to exercise the rights of a deceased or incapacitated awardee with respect to an award granted under the Plan.

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(f)        "Parent" shall have the same definition as "parent corporation" in Section 424(e) of the Code.

(g)       "Performance Goal" shall mean one or more performance measures or goals set by the Administrators for each grant of a performance-based compensation award. The extent to which such performance measures or goals are met will determine the amount or value of the performance-based compensation award that an awardee is entitled to exercise, receive, or retain. Performance Goals may be particular to an awardee; may relate to the performance of a Subsidiary, operating segment, division, branch, strategic business unit, or line of business, which employs the awardee; or may be based on the performance of the Company generally. Performance Goals may be based on Common Stock value or increases therein; earnings per share or earnings per share growth; net earnings, earnings, or earnings growth (before or after one or more of interest, taxes, depreciation and/or amortization); operating profit; operating cash flow; operating or other expenses; operating efficiency; return on equity, assets, capital, or investment; sales or revenues or growth thereof; working capital targets or cost control measures; regulatory compliance; gross, operating, or other margins; credit ratings; productivity; customer satisfaction; satisfactory internal or external audits; improvement of financial ratings; achievement of balance sheet or income statement objectives; quality measures; and any component or components of the foregoing (including, without limitation, determination thereof with or without the effect of discontinued operations and dispositions of business segments, non-recurring items, material extraordinary items, special charges, and/or accounting changes), or implementation, management, attainment of a specific objective, or completion of critical projects or processes or other measurement determined by the Administrators. Performance Goals may include a threshold level of performance below which no payment or vesting may occur, levels of performance at which specified payments or specified vesting will occur, and a maximum level of performance above which no additional payment or vesting will occur. Performance Goals may be absolute in their terms or measured against or in relationship to a market index; a group of other companies comparably, similarly, or otherwise situated; or a combination thereof. Each of the Performance Goals shall be determined, where applicable and, except as provided herein or in the applicable Contract, in accordance with generally accepted accounting principles applied in the United States of America. , Subject to any limitations under Section 162(m) of the Code in the case of an award intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Administrators may adjust any Performance Goal and any evaluation of performance under a Performance Goal to take into account any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs, and (v) any non-recurring items or any extraordinary items as described in Accounting Principles Board Opinion No. 30 (or in any replacement thereof) and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report on Form 10-K for the applicable year. In addition, in the case of an award not intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Administrators, at any time, may adjust any Performance Goal and any evaluation of performance under a Performance Goal on such basis and for such reason as it may determine. Prior to the payment of any compensation under an award intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Administrators shall determine and certify the extent to which any Performance Goal and any other material terms under such award have been satisfied (other than in cases where such relate solely to the increase in the value of Common Stock).

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(h)       "Period of Restriction" shall mean the period during which Restricted Stock or RSUs are restricted, pursuant to Paragraph 7 or 8 herein.

(i)        "Subsidiary" shall mean any "subsidiary corporation" of the Company as defined in Section 424(f) of the Code and any other entity (including, without limitation, any partnership, limited liability company, joint venture or similar noncorporate entity) in a chain of corporations or other entities in which each corporation or other entity has a controlling interest in another corporation or other entity in the chain, ending with the corporation or other entity that has a controlling interest in the corporation or other entity. For this purpose, the term "controlling interest" has the same meaning as provided in Treasury Regulation Section 1.414(c)–2(b)(2)(i), provided that the phrase “at least 50 percent” is substituted for “at least 80 percent” each place it appears in Treasury Regulation Section 1.414(c)–2(b)(2)(i)..

19. GOVERNING LAW; CONSTRUCTION.

(a)       The Plan, the awards and the Contracts hereunder and all related matters shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflict of law provisions that would defer to the laws of another jurisdiction.

(b)       Neither the Plan nor any Contract shall be construed or interpreted with any presumption against the Company by reason of the Company causing the Plan or Contract to be drafted.

(c)       Whenever from the context it appears appropriate, any term stated in either the singular or plural shall include the singular and plural, and any term stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter.

20.        PARTIAL INVALIDITY. The invalidity, illegality or unenforceability of any provision in the Plan, any award or Contract shall not affect the validity, legality or enforceability of any other provision, all of which shall be valid, legal and enforceable to the fullest extent permitted by applicable law.

21.        GENERALLY APPLICABLE PROVISIONS REGARDING EMPLOYMENT OR SERVICE RELATIONSHIP.

(a)       For the purposes of the Plan, an employment relationship shall be deemed to exist between an individual and the Company, any of its Subsidiaries or a Parent if, at the time of the determination, the individual was an employee of such entity for purposes of Section 422(a) of the Code. As a result, an individual on military, sick leave or other bona fide leave of absence shall continue to be considered an employee for purposes of the Plan during such leave if the period of the leave does not exceed 90 days or, if longer, so long as the individual's right to reemployment with the Company, any of its Subsidiaries or a Parent is guaranteed either by statute or by contract. If the period of leave exceeds 90 days and the individual's right to reemployment is not guaranteed by statute or by contract, the employment relationship shall be deemed to have terminated on the 91st day of such leave.

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(b)       Notwithstanding the foregoing, except as may otherwise be expressly provided in the applicable Contract, awards granted under the Plan shall not be affected by any change in the status of the awardee so long as the awardee continues to be an employee or director of, or a consultant to, the Company, any of its Subsidiaries or a Parent (regardless of having changed from one position to another or having been transferred from one entity to another).

22.        NO EMPLOYMENT CONTRACT OR OTHER ADDITIONAL RIGHTS. Nothing in the Plan or in any award granted under the Plan shall confer on any awardee any right to continue in the employ of, as a director of, or as a consultant to, the Company, any of its Subsidiaries or a Parent, or interfere in any way with any right of the Company, any of its Subsidiaries or a Parent to terminate the awardee’s relationship at any time for any reason whatsoever without liability to the Company, any of its Subsidiaries or a Parent

23. NONQUALIFIED DEFERRED COMPENSATION.

(a)       The Company generally intends that each option and each award of Restricted Stock granted under the Plan not constitute "nonqualified deferred compensation" within the meaning of and subject to Section 409A of the Code. To the extent that the Administrators determine that any provision of the Plan or any option or Contract relating to an option or Restricted Stock provides for any such nonqualified deferred compensation (in whole or in part), the Administrators at any time may amend the Plan and/or amend, restructure, terminate or replace any Contract to either comply with Section 409A of the Code and/or minimize or eliminate any such nonqualified deferred compensation, in each case notwithstanding anything in the Plan or any applicable Contract to the contrary.

(b)       Notwithstanding the foregoing, it is intended that SARs and RSUs may be awarded that are considered to be "nonqualified deferred compensation" subject to Section 409A of the Code, and it is intended that such awards shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. The Administrators are authorized to amend any Contract and to amend or declare void any election by an awardee as may be determined by it to be necessary or appropriate to evidence or further evidence required compliance with Section 409A of the Code. It is intended that any payment which is provided pursuant to or in connection with the Plan which is considered to be deferred compensation subject to Section 409A of the Code shall be paid and provided in a manner, and at such time, including without limitation payment only in connection with the occurrence of a permissible payment event contained in Section 409A (e.g., death, "disability", "separation from service" from the Company, any of its Subsidiaries or a Parent, each as defined for purposes of Section 409A of the Code), and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. In connection with effecting such compliance with Section 409A of the Code, the following shall apply:

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(i)        If awardee is a "specified employee" for purposes of Section 409A(a)(2)(B)(i) of the Code at his separation from service, any payment or provision of benefits in connection with a "separation from service" payment event (as determined for purposes of Section 409A of the Code) shall not be made until six (6) months after awardee’s separation from service (the “409A Deferral Period”). In the event such payments are otherwise due to be made in installments or periodically during the 409A Deferral Period, the payments which would otherwise have been made in the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payments shall be made as otherwise scheduled.

(ii)       For purposes of the Plan, a "key employee" for purposes of Section 409A(a)(2)(B)(i) of the Code shall be determined on the basis of the applicable 12–month period ending on the specified employee identification date designated by the Company consistently for purposes of the Plan and similar plans or agreements or, if no such designation is made, based on the default rules and regulations under Section 409A(a)(2)(B)(i) of the Code.

(ii)       For purposes of the Plan, in determining time of (but not entitlement to) payment or provision of deferred compensation for purposes of Section 409A of the Code in connection with a termination of employment, termination of employment will be read to mean a "separation from service" within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services would be performed after that date or that the level of bona fide services awardee would perform after that date (whether as an employee or independent contractor) would permanently decrease to less than 50% of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period.

(c)       Notwithstanding any other provision of the Plan, the Company shall not be liable to any awardee if any payment or benefit that is to be provided pursuant to the Plan and that is considered "nonqualified deferred compensation" subject to Section 409A of the Code fails to comply with, or be exempt from, the requirements of Section 409A of the Code.

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EX-99

Exhibit 99.3

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of April 3, 2008 (the “Effective Date”), is made by and between KENNETH A. PALADINO (“Executive”) and TII NETWORK TECHNOLOGIES, INC., a corporation organized and existing under the laws of the State of Delaware (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company engages in the design, production, and marketing of lightning and surge protection products, network interface devices, and station electronic and VOIP enclosures products (the “Business”);

WHEREAS, the Company desires to employ Executive, and Executive desires to be employed by the Company, pursuant to the terms and conditions hereinafter provided for; and

WHEREAS, Executive’s position with the Company requires that Executive be trusted with extensive responsibility and confidential information of the Company.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of the mutual covenants and obligations herein contained, the Company and Executive (individually, a “Party”; together, the “Parties”), intending to be legally bound, agree as follows:

1. Definitions. The following words and phrases shall have the following meanings when used in this Agreement:

A.         “ Agreement” means this Employment Agreement, as hereafter amended from time to time.

B. “Base Salary” shall mean the payments provided for in Section 5 below.

C. “Board ” means the Board of Directors of the Company.

D. “Bonus ” has the meaning ascribed thereto in Section 5.B.

E. “Business ” has the meaning ascribed thereto in the recitals to this Agreement.

F.          “Change in Control” means, and shall be deemed to have occurred, upon the occurrence of both (I) (v) the sale by the Company of all or substantially all of its assets to any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), (w) the consolidation or merger of the Company with any person as a result of which merger the persons who were the stockholders of the Company immediately prior to such consolidation or merger do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the consolidated or merged company’s then outstanding voting securities or (x) a tender offer, merger, consolidation, sale of assets, sale of stock of the Company or contested election or any combination of the foregoing transactions in which the persons who were directors of the Company immediately before such transaction cease to constitute a majority of the Board of Directors of the Company or any successor to the Company and (II) within eighteen (18) months of the occurrence of one of (v), (w) or (x) in (I) above, the Executive’s (y) duties with the Company are altered or (z) employment with the Company is terminated.

 If there shall occur a Change in Control of the Company, then Executive shall have the right to terminate his employment pursuant to this Agreement by providing written notice to the Company within three (3) months of the occurrence of the Change in Control, which termination shall be deemed a Resignation for Good Reason. Notwithstanding anything herein to the contrary, if Executive does not provide notice within such three (3) month period, no Change in Control shall be deemed to have occurred; provided, however, no such notice shall be necessary if the Change of Control resulted from termination by the Company as provided in (z) of (II) above.

G.          “Company” has the meaning ascribed thereto in the recitals to this Agreement, or any successor in interest thereto.

H.         “Confidential Information” means any and all of the following concerning the Business: (i) any and all trade secrets; (ii) data, know-how, processes, inventions, discoveries, concepts, ideas, designs, and methods; (iii) projections, estimates, pricing lists and data, research and development (past, current and planned), market studies, and business plans; (iv) customer lists, current and anticipated customer requirements, and sales information; (v) computer software and programs (including object code and source code), computer database technologies, systems, structures and architectures (and related processes); (vi) policy and procedure manuals or handbooks, tax records, personnel histories and records, information regarding properties and any other confidential information regarding the Business, however documented; and (vii) any and all notes, analyses, compilations, studies, summaries, and other material prepared by or for the Company containing or based, in whole or in part, on any information included in the foregoing.

I.          “Disability” means the inability of Executive, due to mental, emotional or physical injury, impairment or illness, to effectively perform substantially all of his employment duties for a period of one hundred twenty (120) or more days (whether or not consecutive) in any 12-month period. The determination as to whether Executive is Disabled shall be made by a physician, duly licensed to practice medicine in the State of New York, selected by the Company, which determination shall be conclusive and binding upon the Parties hereto. The physician shall be reasonably acceptable to Executive or his legal representative.

J. “Executive ” has the meaning ascribed thereto in the preamble to this Agreement.

K.         “ Insolvency” means (i) the inability of the Company to pay its debts and obligations as they become due, including but not limited to the Base Salary due Executive from time to time, (ii) the filing by, or the consent to the filing against, the Company of a petition under any applicable bankruptcy, receivership or insolvency law or statute, or (iii) the filing against the Company of a petition under any applicable bankruptcy, receivership or insolvency law or statute which is not dismissed within one hundred twenty (120) days from the date of its filing.

L.         “ Party” or “Parties” has the meaning ascribed thereto in the recitals to this Agreement.

M.        “ Person ” means any natural person, corporation, partnership, limited liability company or other legal entity.

N.         “Resignation For Good Reason” means the voluntary termination by Executive of his employment with the Company as a result of: (i) the assignment to Executive of duties that alter the overall authority, duties, responsibilities, nature and status of his role as Chief Executive Officer, unless such assignment is promptly withdrawn upon objection by Executive, (ii) the relocation of the Company’s principal place of business to a location more than forty (40) miles from its present location,

 (iii) a Change in Control, (iv) the failure to elect or appoint, or re-elect or re-appoint, Executive to, or removal or attempted removal from, his position as President and Chief Executive Officer of the Company (excepting in connection with the proper termination of Executive’s employment by the Company by reason of death, Disability or Cause), (v) the material breach by the Company of any provision of this Agreement and failure to cure same within ten (10) days after its receipt of written notice thereof, (vi) the Insolvency of the Company or (vii) the dissolution or liquidation of the Company (other than as part of a reorganization, merger, consolidation or sale of all or substantially all of the assets of the Company not involving a Change in Control whereby the business of the Company is continued). Prior to effectuating a Resignation For Good Reason, unless previously provided, Executive shall provide the Company a written statement setting forth the basis for his belief that his resignation qualifies as a reason for such Resignation For Good Reason.

O.        “ Termination For Cause” means involuntary termination of Executive’s employment by the Company based upon the reasonable belief of the Board (excluding, if applicable, Executive if he is a member of the Board) that Executive has engaged in any one of the following: (i) fraud, embezzlement or intentionally misappropriating of Company assets in excess of a de minimis amount, or any attempt by Executive to secure any personal profit related to the Business without the informed written approval of a majority all members of the Board (other than Executive); (ii) refusal by Executive to substantially comply with the reasonable directives of the Board, or continued failure to perform, or continuing neglect in the performance of, material duties assigned to Executive after demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes Executive has not substantially performed his duties, and after Executive has been provided a reasonable time (which shall be not less than ten (10) days) in which to thereafter perform such duties; (iii) Executive’s reckless or willful misconduct in the performance of Executive’s material duties and, to the extent same are subject to cure, then failure to cure same within ten (10) days after his receipt of written notice thereof; (iv) Executive’s conviction of, or entry of a plea of nolo contendere to, any felony involving moral turpitude or fraud; (v) the material breach by Executive of any provision of this Agreement and failure to cure same within ten (10) days after his receipt of written notice thereof; (vi) Executive’s repeated use of alcohol or, other than as prescribed by a physician, any controlled substance, in each case that renders Executive unable to perform his duties to the Company; or (vii) violation in a material way by Executive of any policy promulgated by the Board and, to the extent the violation is subject to cure, then failure to cure same within ten (10) days after his receipt of written notice thereof. The Company shall provide Executive a written statement setting forth the basis for its belief that an action or inaction of Executive qualifies as a reason for such Termination For Cause.

2. Employment.

A.         As of the Effective Date, the Company agrees to and does hereby employ Executive to serve as its President and Chief Executive Officer, and Executive agrees to and does hereby accept such employment, all upon the terms and subject to the conditions set forth in this Agreement. Executive shall at all times report to, and his business activities shall at all times be subject to the direction and control of, the Board.

B.         The Company shall use its commercially reasonable efforts to (i) cause the Executive be a member of the Board throughout the term of employment, and (ii) include him in the management slate for election as a director at every stockholders’ meeting at which his term as a director would otherwise expire.

3. Term of Employment. Subject to and except as provided for in Section 6 of this Agreement, the term of Executive’s employment hereunder shall begin as of the Effective Date and continue until December 31, 2009; and, thereafter, shall automatically be extended for up to three (3) times, each time for successive twelve (12) month terms, unless written notice is given by Executive or the Company advising the other of such Party’s election not to extend the term of employment hereunder, which notice shall be given not less than sixty (60) days prior to the then effective expiration date.

4. Duties.

A.         Executive agrees to devote substantially all of his business time, attention, energies and efforts to promote the success of the Company and to discharge his duties and responsibilities as the Chief Executive Officer of the Company, to the exclusion of all other business activities, except such other activities (i) as the Board may instruct consistent with the requirements hereof or to which it may consent in writing and (ii) passive investments in other businesses which (a) if privately owned, are not a direct or indirect competitor of the Company or, if publicly owned, do not involve Executive’s owning more than three percent (3%) of the outstanding capital stock or other equity interests of such company, and (b) do not require services on the part of Executive that would reasonably be expected to, or which do, impair or interfere with the performance of his duties hereunder. Notwithstanding the foregoing, Executive may pursue charitable and civic activities not in competition with the business of the Company, so long as such activities do not unreasonably interfere with Executive’s performance of his duties hereunder.

B.         While employed by the Company, Executive shall discharge such duties and responsibilities as are customarily performed by a Person having the responsibilities of Chief Executive Officer, including such matters as may be reasonably determined and assigned to Executive from time to time by the Board consistent with Executive’s position.

5. Compensation and Benefits. The Company shall pay to Executive the following amounts as compensation and benefits for the services performed pursuant to this Agreement during the term or any additional term of this Agreement:

A.          Base Salary. The Company shall pay Executive an annualized Base Salary of Three Hundred Thousand Dollars ($300,000.00), payable in regular intervals in accordance with the Company’s payroll practices as in effect from time to time, but in no event less often than monthly.

B.          Bonus. Executive shall be eligible to participate in the Company’s Executive Management Bonus Program (the “Bonus”).

C.          Restricted Stock. Subject to approval of the Board, Executive will be awarded one hundred seventy-five thousand (175,000) restricted shares of the Company’s common stock, $0.01 par value per share (the “Restricted Stock”). All of such Restricted Stock shall vest on a date five (5) years from the grant date of such shares (the “Vesting Date”); provided, however, Executive must be employed by the Company on the Vesting Date. Notwithstanding the foregoing, the Restricted Stock shall vest, on a pro rata basis, upon (i) the death of Executive, (ii) a Change in Control of the Company or (iii) the termination of Executive without Cause or Resignation For Good Reason, in each case at the rate equal to 1/60^th of the number of shares of Restricted Stock for each full month following the grant date that Executive was employed by the Company.

D.          Benefits. During the term of this Agreement, Executive is entitled to participate in any deferred compensation or other employee benefit plans, including any profit sharing or 401(k) plans, option plans, group life, health, hospitalization and disability insurance plans, deferred compensation plans and other employee welfare benefits maintained by the Company in the same manner and on the same basis (including, but not limited to, eligibility and cost assessment requirements) as may be offered to other executive and key management employees of the Company in accordance with the terms of such plans. Executive and his dependents shall also be entitled to participate in such other benefit plans and arrangements as are now provided or are hereafter extended to executive employees of the Company and their dependents in accordance with the terms of such plans or arrangements.

E.          Vacations and Leave Time. Executive shall be entitled to twenty (20) annual paid vacation days in each year and such sick, holiday and other absences consistent with the Company’s policies as are established from time to time by the Board. Any vacation or other paid time off which is not used in any year shall not accrue, nor shall the Company be liable for any such benefits not used by Executive prior to the termination of his employment, except and to the extent as may be provided under such policies; provided, that vacation time not taken in one year may be taken within the next six (6) months of the following year, in addition to the twenty (20) vacation days allowed for the following year.

F.          Business Expenses. Executive shall be entitled, in accordance with the Company’s reimbursement policies in effect from time to time, to receive reimbursement from the Company for reasonable business expenses incurred by Executive in the performance of his duties under this Agreement, provided Executive furnishes the Company with vouchers, receipts and other details of such expenses in the form required by the Company.

G.          Increases. Executive’s annual salary and other benefits provided for hereunder are subject to periodic increases, but not decreases, at the discretion of the Board (or the Compensation Committee or other committee of the Board so authorized).

6. Termination of Employment and Effect.

A.          Death, Disability, Etc. This Agreement and Executive’s employment hereunder shall terminate upon (i) Executive’s death, or (ii) the Company’s election (by twenty (20) days’ advance written notice to Executive) to terminate following Executive’s suffering of a Disability. Upon termination for any reason provided for in this Section, Executive shall not be entitled to any Base Salary, exercise or retention of any rights, Bonuses, or other benefits, except for:

(1)       amounts accrued prior to the effective date of resignation or termination;

(2) those benefits, if any, required to be extended by applicable law;

(3)       Executive’s beneficiary and/or dependents shall be entitled, for a period of eighteen (18) months, to continuation, at the Company’s expense, of (i) such benefits as are at the time of Executive’s death or termination being provided to them under Section 5.D above or any replacement benefits as may be offered to other Company executive officers’ beneficiaries or dependents in accordance with the terms of such benefit plans, and (ii) any additional benefits as may be provided during such eighteen (18) month period to dependents of the Company’s executive officers in accordance with the terms of the Company’s policies and practices;

(4)       any unpaid Bonus amount relating to periods prior to the year in which the termination occurs plus a pro rata amount of Executive’s most recent performance Bonus paid (Bonus paid in the prior period divided by number of months in such period) for each full month of employment for the Executive in the year of termination; provided, however, the financial results of the Company in the year of termination must be substantially similar to the financial results of the Company for the period of Executive’s most recent performance Bonus;

(5)       severance payments in amounts equal to, and payable in respect of, Executive’s Base Salary existing on the date of such death or termination, which payments shall continue for eighteen (18) months following such death or termination (but such severance payments shall discontinue and no longer be payable upon Executive’s taking any action contrary to his covenants provided for in Sections 7, 8 and 9), payable in regular intervals in accordance with the Company’s payroll practices as in effect from time to time, but in no event, less often than monthly. In the event of Executive’s Disability, and Executive’s death during such eighteen (18) month period, such amounts shall be paid to Executive’s designated beneficiary or, in the absence of such designated beneficiary, his estate, during the balance of such eighteen (18) month period; and

(6)       Executive’s stock options shall immediately vest in full and the stock options shall be exercisable for the greater of one (1) year from the date of termination or the period provided for under the stock option plan or plans under which the options were granted.

In the event of Executive’s death or Disability, the Company shall use its commercially reasonable efforts to assist Employee and his dependents in the payment in a timely manner of all compensation and other benefits discussed in this Section 6.A, including, but not limited to, the filing and pursuit of all claims under related insurance policies, rights under stock options and all such assistance as may be requested in filing for disability claims with the government.

B.          Termination For Cause or Voluntary Resignation. Subject to the provisions set forth in Section 1.0 requiring notice and an opportunity to cure, the Company may, immediately and unilaterally, terminate Executive’s employment hereunder for “Cause” at any time. In the event of a Termination For Cause or Executive’s voluntary resignation from employment (other than a Resignation for Good Reason), Executive shall not be entitled to receive, and the Company shall not be obligated to pay, any Base Salary, Bonus, severance salary, exercise or retention of any rights, or any other benefits, except for (i) amounts accrued prior to the effective date of termination, and (ii) those, if any, required to be extended by applicable law. Following a Termination For Cause, the Company shall be entitled to such rights and remedies provided for at law.

C. Resignation For Good Reason or Termination Without Cause or Non-Renewal.

(1)       Executive may, immediately and unilaterally, terminate his employment hereunder at any time by giving the Company sixty (60) days’ advance written notice of Executive’s election to terminate or resign; provided, however, if Executive is Resigning For Good Reason other than a Change in Control, such notice shall not be required and the only notice required shall be as provided for in Section 1.N of this Agreement.

(2)       If Executive’s employment hereunder is terminated due to either a Resignation For Good Reason or a termination by the Company under circumstances not constituting a Termination With Cause, or if the Company fails to renew this Agreement prior to the expiration of the initial term or any additional term of this Agreement, then, in any such case, Executive shall not be entitled to any further Base Salary, exercise or retention of any rights, Bonuses, or other benefits, except for:

a.         amounts accrued prior to the effective date of resignation or termination;

b.         those benefits, if any, required to be extended by applicable law;

c.         in the event that the Company fails to renew this Agreement prior to the expiration of the initial term or any additional term of this Agreement only, any unpaid Bonus amount relating to periods prior to the year in which the termination occurs plus a pro rata amount of Executive’s most recent performance Bonus paid (Bonus paid in the prior period divided by number of months in such period) for each full month of employment for the Executive in the year of termination; provided, however, the financial results of the Company in the year of termination must be substantially similar to the financial results of the Company for the period of Executive’s most recent performance Bonus;

d.         severance payments in amounts equal to, and payable in respect of, Executive’s Base Salary existing on the date of such resignation or termination, which payments shall continue to be paid, in the amounts and at the times then in effect, for eighteen (18) months following such termination or resignation (but such severance payments shall discontinue and no longer be payable upon Executive’s taking any action contrary to his covenants provided for in Sections 7, 8 and 9), payable in regular intervals in accordance with the Company’s payroll practices as in effect from time to time, but in no event, less often than monthly; and

e.         Executive’s stock options shall immediately vest in full and be exercisable for the greater of one year from the date of termination or the period provided for under the stock option plan or plans under which the options were granted.

(3)       Unless a contrary interpretation is necessary in the case of a Change in Control to satisfy a non-discrimination or similar requirement with respect to the tax treatment of the Company’s employee benefit plans, programs or policies, an election by Executive to terminate his employment under the provisions of this Section 6.C (including as a result of a Change in Control) shall not be deemed a voluntary termination of employment of Executive for the purpose of interpreting the provisions of any of the Company’s employee benefit plans, programs or policies.

D.          Treatment of Options. Except as otherwise provided in this Agreement, upon the termination of Executive’s employment pursuant to this Section 6, the options granted by the Company to Executive in accordance with the Agreement shall be treated in the manner set forth in the Plan.

E.          Release. The Company shall not be required to commence performance of its obligations under this Section 6 (i) until such time as the Company has received a release agreement, in form satisfactory to the Company, duly executed by Executive (or Executive’s beneficiary or representative) and (ii) Executive is not in material violation of any of the material terms or provisions of this Agreement.

F.         Notwithstanding termination of Executive’s employment hereunder, the obligations and commitments of Executive set forth in Sections 7, 8 and 9 shall continue in effect and survive termination, except as otherwise provided in those Sections.

7.  Nondisclosure of Confidential Information. Executive acknowledges and agrees that all Confidential Information known or obtained by Executive, whether before or after the date of this Agreement, is the property of the Company. Executive agrees that Executive will not, at any time, disclose to any unauthorized persons or use for Executive’s own account or for the benefit of any third party any Confidential Information, whether Executive has such information in Executive’s memory or embodied in writing or other physical form, without the Company’s written consent, unless and to the extent that the Confidential Information is required to be disclosed as provided in Section 7.A below or is or becomes generally known to and available for use by the public other than as a result of Executive’s fault or the fault of any other person known by Executive to be bound by a duty of confidentiality to the Company.

A.          Permitted Disclosure. If Executive is required (by oral questions, deposition, interrogatories, requests for information or documents, subpoena, civil investigative domain or other process) to disclose all or any part of any Confidential Information, Executive will first provide the Company with prompt notice of such requirement, as well as notice of the terms and circumstances surrounding such requirements, so that the Company may seek an appropriate protective order or waive compliance with the provisions of this Agreement. If the Company does not seek an appropriate protective order prior to the date on which Executive is required to make such disclosure, the Company shall be deemed to have waived Executive’s compliance herewith; provided that Executive may only disclose that portion of such Confidential Information as he is advised by his legal counsel as being required to be disclosed.

B.          Destruction or Return on Termination. Upon termination of Executive’s employment hereunder, Executive shall, upon request of the Company, return to the Company all writings and materials comprising any part of or containing any of the Confidential Information without retaining any copies, extracts or other reproductions thereof; and, to the extent not returned to the Company, Executive will certify to the Company any such materials or writings which were destroyed by him.

8. Ownership of Executive Inventions.

A.          Inventions and Related Matters. Executive agrees that the Company shall have sole and exclusive ownership rights in any conception, ideas, invention, improvement, or know-how (whether or not patentable) arising out of, resulting from, or derivative of Executive’s duties and services as an employee of the Company or undertaken within the scope of Executive’s duties hereunder. Any resulting or derivative rights, including patent, trademark, service mark or other rights, shall be and become the exclusive property of the Company and the Company shall be exclusively entitled to the entire right, title and interest existing with respect hereto. In furtherance thereof, at the Company’s request, Executive agrees to convey and assign to the Company the entire right, title and interest of Executive, if any, in and to any conceptions, ideas, inventions, improvements, or know-how which arise out of, result from, or are derivative of, Executive’s duties and services as an employee of the Company or undertaken within the scope of his duties hereunder.

B.          Original Works. Any copyrightable work (including, but not limited to, software code and applications), whether published or unpublished, created by Executive in connection with or during the performance of his duties or services hereunder shall be considered a work made for hire to the fullest extent permitted by law, and all right, title and interest therein, including the worldwide copyrights, shall be the sole and exclusive property of the Company as the employer and party specially commissioning such work. In the event that any such copyrightable work or portion thereof shall not be legally qualified as a work made for hire, or shall subsequently be so held, Executive agrees to properly convey to the Company the entire right, title and interest in and to such work or portion thereof, including but not limited to the worldwide copyrights, extensions of such copyrights, and renewal copyrights therein, and further including all rights to reproduce the copyrighted work, to prepare derivative works based on the copyrighted work, to distribute copies of the copyrighted work, to display the copyrighted work, and to register the claim of copyright therein and to execute any and all documents with respect thereto.

C.          Executive Assistance. Executive agrees (i) to disclose to the Company in writing any matters created or authored by him which are, or are intended to be, the property of the Company pursuant to the provisions of this Section; (ii) to assign to the Company without additional compensation all of Executive’s rights, if any, therein; and (iii) to execute and deliver to the Company such applications, assignments and other documents as may reasonably be requested in order to apply for and obtain patents, copyrights, or other registrations with respect thereto.

9. Covenant Not to Compete; Non-Solicitation. Executive covenants and agrees that, for a period of eighteen (18) months following the termination of his employment with the Company for any reason, he will refrain from any of the activities proscribed below in this Section.

A.          Non-Compete. Executive shall not, directly or indirectly through any Person, for himself or for others, (i) engage in, acquire an ownership interest in, or manage, operate or control, participate in the ownership, management, operation or control of, or be connected with or have any beneficial interest in, or serve as a director, officer, employee, agent, consultant, partner, investor, or independent contractor for, any Person that engages in any business which is competitive with the Business conducted by the Company within the twelve (12) months preceding the termination of Executive’s employment, or (ii) induce or attempt to induce, or take any action the direct result of which is to cause, any customer, prospective customer or licensee of the Company to cease doing business with, or to reduce the level of business then being conducted with, or otherwise interfere with the goodwill enjoyed by, the Company. Notwithstanding the foregoing, it shall not be a violation of this Agreement for Executive to maintain passive investments in other businesses which, if privately owned, are not a direct or indirect competitor of the Company or, if publicly owned, do not involve Executive’s owning more than three percent (3%) of the outstanding capital stock or other equity interests of such companies.

B.          Non-Solicitation. Excluding the placement of ads in periodicals and other publications of general circulation and hiring of clerical personnel, Executive shall not, directly or indirectly through any Person, for himself or for others, (i) induce or attempt to induce any Person employed in the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any such employee, or (ii) hire any Person who is or was at any time during the previous six (6) months, an employee of the Company.

C.          Reasonableness of Restrictions. Executive understands that the foregoing restrictions limit his abilities to compete with the Business, but Executive nevertheless believes that he has received and will receive sufficient consideration and other benefits pursuant to the terms of this Agreement and the transactions contemplated herein to clearly justify such restrictions. Executive has carefully considered the nature and extent of the restrictions contemplated by this Agreement, and hereby acknowledges and agrees that the same are reasonable in time and territory and do not confer a benefit upon the Company disproportionate to the detriment to Executive.

10. Remedies. Executive acknowledges that: (a) the services to be performed by him under this Agreement are of a special, unique, unusual and intellectual character; (b) the Business is, or is expected to be, global in scope; (c) the Company competes with persons having access to markets and capital superior to that possessed by it; (d) the restrictive covenants applicable to Executive will not prevent Executive from obtaining gainful employment and are reasonable and necessary in order to protect the Business; and (e) Executive has consulted with, or been advised by the Company that he should consult with, an independent legal counsel concerning the undertakings of the Executive set forth in, and the provisions of, this Agreement. If Executive breaches the covenants set forth or provided for in Sections 7, 8 or 9, the Company, in addition to any other rights and remedies available under the Agreement or otherwise, shall be entitled to obtain injunctive or other equitable relief to restrain any breach or threatened breach or otherwise to specifically enforce the provisions of Sections 7, 8 and 9, it being agreed that money damages alone would be inadequate to compensate the Company and would be an inadequate remedy for such breach. The rights and remedies of the parties to this Agreement are cumulative and not alternative.

11. Tax Provisions. The Company shall have the right to and shall deduct or withhold from the compensation payable to Executive pursuant to this Agreement any amounts required to be deducted or withheld by federal, state and municipal laws as now in effect or which may be enacted after the date of this Agreement.

12. Cooperation. At the expense of the Company, Executive agrees to reasonably cooperate with the Company during the course of third-party proceedings arising out of the Business about which Executive has knowledge or information. Such proceedings include, but are not limited to, internal investigations, administrative investigations or proceedings and lawsuits (including pre-trial discovery). Cooperation includes, but is not limited to, Executive’s making himself reasonably available upon reasonable notice and at reasonable times for interviews, meetings, depositions, hearings and trials without the need for subpoena or assurances by the Company, providing any and all documents in his possession that relate to the proceeding, and providing reasonable assistance in locating any and all relevant notes and documents. Executive agrees not to communicate with, or give statements to, third parties relating to any matter about which Executive has knowledge or information as a result of his employment except to the extent that such communication or statements are required by legal process, in which case Section 7.A above shall apply to such communication or statements, or it is Executive’s good faith belief that such communication or statements are in the Company’s business interests and, then, only to the extent such disclosure is not in violation of the covenant of nondisclosure set forth in Section 7. The provisions of this Section shall survive Executive’s employment termination with the Company and termination of this Agreement for any reason.

13. Miscellaneous.

A.          Notices. Notices and other communications required or permitted by this Agreement shall be deemed delivered if delivered personally (with written confirmation of receipt), or by facsimile (with written confirmation of receipt), or by registered or certified mail (return receipt requested), when received by the addressee if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth in this section (or to such other addresses and facsimile numbers as a party may designate by notice to the other party) as follows:

If to the Company: TII Network Technologies, Inc.

141 Rodeo Drive

Edgewood, NY 11717

Attention: Chairman of the Board of Directors

Facsimile: (631) 789-5063

With a Copy to: Meltzer, Lippe, Goldstein & Breitstone, LLP

190 Willis Avenue

Mineola, NY 11501

Attention: Ira Halperin, Esq.

Facsimile: (516) 747-0653

If to the Executive: Kenneth A. Paladino

23 Mowbray Avenue

Bay Shore, NY 11706

or at such other address notice of which has been given as provided herein.

B.          Expenses. The Company shall pay the fees and expenses of Executive’s legal counsel in connection with the preparation and negotiation of this Agreement.

C.          Governing Law. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of New York and the laws of the United States. No conflicts of law or similar rule or law that might refer the governance and construction of this Agreement to the laws of another state, republic or country shall be considered.

D.          Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be unenforceable for any reason, such provision shall be deemed to be severable, and this Agreement shall otherwise continue in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

E.          Assignments; Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, including any entity which acquires all or substantially all of the Company’s assets to which the Company’s rights and obligations hereunder are assigned. This Agreement shall be binding upon and inure to the benefit of the Executive and his personal representatives, but the obligations undertaken herein by Executive shall not and may not be transferred or assigned by the Company or Executive and any purported transfer or assignment thereof shall be null and void ab initio.

F.          Entire Agreement; Modifications. This Agreement along with the documents expressly referenced in this Agreement constitute the entire agreement and understanding of the Company and Executive with respect to the terms and conditions of Executive’s employment with the Company, and the payment of compensation and benefits, and supersedes all prior and contemporaneous written or verbal agreements and understandings between Executive and the Company relating to such subject matter. This Agreement may only be amended by written instrument signed by Executive and an authorized officer of the Company after receiving such approvals of the Board required by the circumstances. Any and all prior agreements, understandings or representations relating to the Executive’s employment with the Company are terminated and canceled in their entirety and are of no further force or effect.

G.          Waivers. A discharge of the terms of this Agreement shall not be deemed valid unless by full performance by the Parties or unless corroborated by a writing signed by the Parties. A waiver by the Company of any breach by Executive of any provision or condition provided for in this Agreement to be performed or observed by Executive shall not be deemed a waiver of any similar or dissimilar provisions or conditions at the same or any prior or subsequent time. The Parties covenant and agree that if a Party fails or neglects for any reason to take advantage of any of the terms, remedies or rights provided for in this Agreement or under applicable law, such failure or neglect shall not be deemed a waiver of any such terms, remedies or rights subsequently arising, or as a waiver of any of the terms, covenants or conditions of this Agreement or the requirement for performance or observance thereof. None of the terms, covenants and conditions of this Agreement may be waived by a Party except in a writing signed by such Party.

H.          Expense of Enforcement. If, as a consequence of any dispute arising under or with regard to this Agreement or its performance, any Party shall be required to retain the services of legal counsel or to initiate any legal proceeding, the prevailing Party shall be entitled to recover from the other Party all reasonable costs and expenses incurred with respect to such dispute or proceeding, including but not limited to reasonable attorneys’ fees, the costs of discovery, court costs, expert witness fees and other reasonable and direct out-of-pocket costs.

I.          Waiver of Jury Trial; Jurisdiction. THE PARTIES HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT. THE PARTIES HERETO EACH HEREBY ACCEPT THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS HAVING JURISDICTION OVER OR LOCATED IN NASSAU OR SUFFOLK COUNTY, STATE OF NEW YORK, FOR THE RESOLUTION OF ALL DISPUTES ARISING IN CONNECTION WITH THIS AGREEMENT.

J.          Indemnification. Subject to the Company’s certificate of incorporation and bylaws and without limiting Executive’s rights to indemnification thereunder, the Company shall indemnify and hold harmless Executive with respect to his performance of services hereunder on the Company’s behalf, to the fullest extent permitted by applicable law, including without limitation the payment of all expenses, including reasonable attorneys’ fees, incurred by Executive in connection with the defense of any action, suit, proceeding or investigation and any appeal thereof.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

            IN WITNESS WHEREOF, the Company and Executive have duly executed this Employment Agreement as of the date of this Agreement.

TII NETWORK TECHNOLOGIES, INC.

By:  /s/ Jennifer E. Katsch                                                 

Name:   Jennifer E. Katsch                                                 

Title: Vice President-Finance                                             

/s/ Kenneth A. Paladino                                                     

KENNETH A. PALADINO

EX-99

Exhibit 99.4

TII NETWORK TECHNOLOGIES, INC.

2008 EQUITY COMPENSATION PLAN

RESTRICTED STOCK CONTRACT

Granted April 3, 2008

This Restricted Stock Contract (“Contract”) is entered into as of April 3, 2008 pursuant to Paragraphs 3, 4 and 7 of the 2008 Equity Compensation Plan of TII Network Technologies, Inc. (the “Plan”) and evidences the grant, and the terms, conditions and restrictions pertaining thereto, of Restricted Stock awarded to Kenneth A. Paladino (the “awardee”).

1. Capitalized Terms. Capitalized terms in this Contract have the meaning assigned to them in the Plan, unless this Contract provides, or the context requires, otherwise.

2. Award of Shares.

(a) In consideration of the services rendered and to be rendered to TII Network Technologies, Inc. (the “Company”) and/or its Subsidiaries and Parent (if any) by the awardee, the Company acting through the Committee hereby grants to the awardee a Restricted Stock award as of April 3, 2008 (“Award Date”), covering 175,000 shares of the Company’s Common Stock (the “Award Shares”) and subject to the terms, conditions, and restrictions set forth in this Contract. This award is granted pursuant to the Plan and is subject to the terms thereof. If there is any conflict between the terms of the Plan and this Contract, the terms of the Plan will control.

(b) Notwithstanding the foregoing or any other provision herein, this award of Restricted Stock shall automatically be revoked, no Award Shares may become vested and the awardee shall have no rights and receive no benefit hereunder (including, without limitation, voting rights or dividends) unless and until the stockholders of the Company have approved the Plan as contemplated in Paragraph 1(b) of the Plan.

3. Period of Restriction.

(a) For purposes of this Contract, subject (except as provided in Paragraph 2(b)) to earlier vesting or forfeiture as provided below, the period of restriction (the “Period of Restriction”) applicable to the Award Shares is five years from the Award Date (the date of such vesting, whether pursuant to this Paragraph 3(a) or Paragraph 4, being the “Vesting Date”), and the awardee shall become vested in the Award Shares if he is continuously in Company Service (as defined in Paragraph 5) during the period commencing on the Award Date and ending on the Vesting Date.

(b) Except as otherwise provided pursuant to Paragraph  4, the Award Shares shall be free of restrictions and freely transferable (subject to limitations of applicable securities laws) by the awardee on the Vesting Date.

4. Change in Control, Cessation of Company Service and Vesting or Forfeiture.

(a) Notwithstanding Paragraph 3, but subject to Paragraph 2(b), the Award Shares shall vest, on a pro rata basis, upon the first to occur of (i) the occurrence of a Change in Control of the Company, (ii) the awardee’s death or Disability or (iii) the termination of the awardee’s Company Service by the Company without Cause or by the awardee’s Resignation For Good Reason (each an “Early Vesting Event”), in each case at the rate equal to 1/60^th of the number of Award Shares for each full month following the Award Date that the awardee is continuously in Company Service from and after the Award Date. When, if and to the extent vesting occurs, the Period of Restriction with respect to the vested Award Shares shall automatically terminate and the vested Award Shares shall be free of restrictions and freely transferable (subject to limitations of applicable securities laws). For purposes hereof, the terms “Change in Control” of the Company, “Cause” and “Resignation For Good Reason” have the meaning assigned to them in that certain Employment Agreement dated as of April 3, 2008 by and between the awardee and the Company.

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(b) If vesting occurs due to an Early Vesting Event which is a Change in Control of the Company as set forth in Paragraphs 4(a)(i) above during the Period of Restriction, any Award Shares still subject to restrictions at the date of such Change in Control and not thereby vested shall continue to be eligible for vesting as provided in Paragraph 3 or on account of a subsequent Early Vesting Event as provided in Paragraph 4(a).

(c) If the awardee’s Company Service (as defined in Paragraph 5) ceases for any reason during the Period of Restriction, any Award Shares still subject to restrictions at the date of such cessation of Company Service, determined after any vesting due to an Early Vesting Event, shall be automatically forfeited to the Company.

5. Company Service.

(a) For purposes hereof, “Company Service” means service as an employee or director of, or a consultant to, the Company, any of its Subsidiaries or a Parent (regardless of the awardee’s having changed from one position to another or having been transferred from one entity to another). Notwithstanding any contrary provision or implication herein, in determining cessation of Company Service for purposes hereof, transfers between the Company and/or any Subsidiary or a Parent shall be disregarded and shall not be considered a cessation of Company Service, and changes in status between that of an employee, director or consultant shall be disregarded and shall not be considered a cessation of Company Service.

(b) Nothing in the Plan or this Contract shall confer upon the awardee any right to continue Company Service or in any way affect any right of the Company to terminate the awardee’s Company Service without prior notice at any time for any or no reason.

6. Voting Rights. Subject to Paragraph 2(b), during the Period of Restriction, the awardee may exercise full voting rights with respect to the Award Shares by written and timely proxy delivered as directed by the Company.

7. Dividends and Other Distributions.

(a) Subject to Paragraph 2(b), during the Period of Restriction, all dividends and other distributions paid with respect to the Award Shares in cash or in property other than Common Stock shall be paid directly to the awardee, whether or not the Award Shares with respect to which such dividends and other distributions are paid are vested.

(b) Subject to Paragraph 2(b), during the Period of Restriction, all dividends and other distributions paid with respect to the Award Shares in Common Stock shall be deposited with the Company as provided in Paragraph 8. All such dividends and other distributions shall be considered to be additional Award Shares and shall be subject to the same restrictions on transferability, earning, vesting and forfeiture as the Award Shares with respect to which they were paid.

8. Stock Certificates.

(a)        The stock certificate(s) for the Award Shares shall be registered on the Company’s stock transfer books in the name the awardee in book entry or electronic form or in certificated form as determined by the Committee. If issued in certificated form, physical possession of the stock certificate(s) shall be held by Company until such time as the Period of Restriction lapses. The awardee shall provide a duly executed stock power in blank to the Company as directed by the Committee.

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(b)       Any Award Shares issued in book entry or electronic form shall be subject to the following restriction, and any certificate(s) evidencing the Award Shares shall bear the following legend, during the Period of Restriction:

The sale, transfer, pledge, hypothecation or other disposition of the shares represented by this certificate, whether voluntary, involuntary or by operation of law, is subject to certain restrictions on transfer set forth in the 2008 Equity Compensation Plan of TII Network Technologies, Inc., in the rules, regulations and administrative procedures adopted pursuant to such Plan, and in an associated Restricted Stock Contract. A copy of the Plan, such rules, regulations and procedures, and the applicable Restricted Stock Contract may be obtained from the Secretary of TII Network Technologies, Inc.

9. Withholding Taxes. The Company shall have the right to retain and withhold the amount of taxes required by any government or governmental authority to be withheld or otherwise deducted and paid with respect to the Award Shares. At its discretion, the Committee may require the awardee to reimburse the Company for any such taxes required to be withheld by the Company and may withhold any distribution in whole or in part until the Company is so reimbursed. In lieu thereof, the Company shall have the right to withhold from any other cash amounts due to or to become due from the Company to the awardee an amount equal to such taxes required to be withheld by the Company to reimburse the Company for any such taxes or to retain and withhold, or cause to be returned to it, a number of shares having a Fair Market Value on the Vesting Date not less than the amount of such taxes, and cancel any such shares so withheld or returned, in order to reimburse the Company for any such taxes.

10. Governing Law. The Plan, and this Contract and all related matters, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to conflict of law provisions that would defer to the laws of another jurisdiction. Any dispute under the Plan, or under this Contract, shall be adjudicated solely and exclusively in the Federal and State Courts having jurisdiction over, or located in, Nassau or Suffolk County, State of New York, and no other Court shall have jurisdiction of the Plan, this Contract, the Award Shares, or any dispute hereunder.

11. Successors. This Contract shall be binding upon and inure to the benefit of the parties hereto and the successors, assigns, heirs, and legal representatives of the respective parties.

12. Severability. If any provision of this Contract, or part thereof, is determined to be unenforceable for any reason whatsoever, it shall be severable from the remainder of this Contract and shall not invalidate or affect the other provisions of this Contract, which shall remain in full force and effect and shall be enforceable according to their terms. No covenant shall be dependent upon any other covenant or provision herein, each of which stands independently.

To evidence their Contract to the terms, conditions, and restrictions, the Company and the awardee have signed this Contract as of the date first above written.

TII NETWORK TECHNOLOGIES, INC.	By:   /s/ Jennifer E. Katsch                                     Jennifer E. Katsch Vice President-Finance
AWARDEE:	/s/ Kenneth A. Paladino                               Kenneth A. Paladino

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