SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6
(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
TII Industries, Inc.
--------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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1) Title of each class of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
TII INDUSTRIES, INC.
1385 AKRON STREET
COPIAGUE, NEW YORK 11726
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 5, 2001
------------------
To the Stockholders of
TII Industries, Inc.:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Stockholders of
TII Industries, Inc., a Delaware corporation (the "Company"), will be held at
the Huntington Hilton, 598 Broadhollow Road, Melville, New York, on Wednesday,
December 5, 2001 at 3:00 p.m., New York time, at which the following matters are
to be presented for consideration:
1. The election of three Class I directors to serve until the 2004
Annual Meeting of Stockholders and until their respective
successors are elected and qualified;
2. A proposal to amend the Company's Restated Certificate of
Incorporation to change the name of the Company from "TII
Industries, Inc." to "TII Network Technologies, Inc.";
3. A proposal to ratify the selection by the Board of Directors of
Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending June 28, 2002; and
4. The transaction of such other business as may properly come
before the meeting or any adjournments or postponements thereof.
The close of business on October 19, 2001 has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the meeting and any adjournments or postponements thereof.
By Order of the Board of Directors,
Dorothy Roach,
Secretary
October 29, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE ENCLOSED ENVELOPE IN THE UNITED STATES.
TII INDUSTRIES, INC.
1385 AKRON STREET
COPIAGUE, NEW YORK 11726
--------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 5, 2001
------------------------
This Proxy Statement, to be mailed to stockholders of TII Industries,
Inc., a Delaware corporation (the "Company"), on or about October 29, 2001, is
furnished in connection with the solicitation of proxies by the Board of
Directors of the Company ("Proxy" or "Proxies") for use at the Annual Meeting of
Stockholders of the Company to be held on Wednesday, December 5, 2001 at 3:00
p.m., New York time, and at any adjournments or postponements thereof (the
"Meeting"). The Meeting will be held at the Huntington Hilton, 598 Broadhollow
Road, Melville, New York.
The close of business on October 19, 2001 has been fixed as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Meeting. On the Record Date, there were
outstanding 11,682,284 shares of the Company's Common Stock ("Common Stock").
The presence, in person or by proxy, of a majority of all such shares, will
constitute a quorum for the transaction of business at the Meeting.
Each outstanding share of Common Stock on the Record Date is entitled
to one vote on all matters to be voted on at the Meeting. A plurality of the
votes of shares present in person or represented by proxy at the Meeting and
entitled to vote thereon will be required for the election of directors
(Proposal 1), the affirmative vote of a majority of the Company's outstanding
shares of Common Stock will be required to adopt the proposed amendment to the
Company's Restated Certificate of Incorporation to change the name of the
Company (Proposal 2) and the affirmative vote of a majority of the shares
present in person or represented by proxy at the Meeting and entitled to vote
thereon will be required to ratify the selection of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending June 28,
2002 (Proposal 3).
Abstentions are considered as shares present and entitled to vote and,
therefore, to the extent a vote requires approval by a majority of the Company's
outstanding shares (e.g., Proposal 2) or a majority of shares present in person
or by proxy and entitled to vote (e.g., Proposal 3), abstentions will have the
effect of a negative vote thereon. Brokers who are members of the New York Stock
Exchange have discretion to vote the shares of their clients that the broker
holds of record (in "street name") for its customers with respect to
non-contested elections of directors, ratification of a board's selection of
independent public accountants and certain other matters, including the proposal
to approve the amendment to the Company's Restated Certificate of Incorporation
to change the name of the Company. Under Delaware law, shares held in street
name but not voted by brokers (called "broker non-votes") are considered not
entitled to vote. Accordingly, broker non-votes will have no effect on the
outcome on the election of directors which requires a plurality vote (Proposal
1) or approval by a majority of shares entitled to vote on the matter (e.g.,
Proposal 3), but will have the effect of a negative vote
on a matter which requires the affirmative vote of outstanding shares (e.g.,
Proposal 2). Proxies submitted which contain abstentions or broker non-votes
will be deemed present at the Meeting for determining the presence of a quorum.
Stockholders in whose name shares are registered may vote by proxy or
in person at the Meeting. To vote by mail, simply mark, sign and return the
accompanying Proxy card and return it in the enclosed envelope which requires no
postage if mailed in the United States. IF A STOCKHOLDER HOLDS SHARES THROUGH A
BROKER, BANK OR OTHER NOMINEE, THAT INSTITUTION WILL SEND YOU SEPARATE
INSTRUCTIONS DESCRIBING THE PROCEDURES FOR VOTING THOSE SHARES.
Proxies properly and timely received will be voted in accordance with
the specifications made or, in the absence of specification, for all nominees
named herein to serve as directors, to approve the proposed amendment to the
Company's Restated Certificate of Incorporation to change the Company's name and
to ratify the selection of Arthur Andersen LLP as the Company's independent
public accountants. The Board of Directors does not intend to bring before the
Meeting any matter other than those described above, and has not received notice
of, and is not aware of, any other matters that are to be presented by
stockholders for action at the Meeting. If, however, any other matters or
motions come before the Meeting, it is the intention of the persons named in the
accompanying Proxy to vote such Proxy in accordance with their judgment on such
matters or motions, including any matters dealing with the conduct of the
Meeting. Any Proxy may be revoked by the person giving it at any time prior to
the exercise of the powers conferred thereby (a) by a written notice of
revocation to the Secretary of the Company, 1385 Akron Street, Copiague, New
York 11726, (b) by submitting a duly executed Proxy bearing a later date at the
foregoing address or (c) by voting in person at the Meeting.
-2-
SECURITY HOLDINGS OF CERTAIN
STOCKHOLDERS, MANAGEMENT AND NOMINEES
The following table sets forth information, as of the Record Date
except as noted below, with respect to the beneficial ownership of the Company's
Common Stock by (i) each person (including any "group," as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) known by the Company to
beneficially own more than 5% of the outstanding shares of the Company's Common
Stock, (ii) each director and nominee to serve as a director of the Company,
(iii) each executive officer named in the Summary Compensation Table under the
caption "Executive Compensation", below, and (iv) all executive officers and
directors of the Company as a group. The Company understands that, except as
noted below, each beneficial owner has sole voting and investment power with
respect to all shares attributable to such owner.
SHARES PERCENT OF
BENEFICIAL OWNER OWNED CLASS (1)
---------------- ----- ---------
Alfred J. Roach 907,240(2) 7.6%
1385 Akron Street
Copiague, NY 11726
Jerry Bloomberg and/or Sondra Bloomberg 816,000(3) 7.0%
155 East Ames Court
Plainview, New York 11803
Timothy J. Roach 764,013(4) 6.4%
1385 Akron Street
Copiague, NY 11726
Norman H. Pessin 640,571(5) 5.5%
c/o Neuberger & Berman, LLC
605 Third Avenue
New York, NY 10158
Joseph C. Hogan 124,330(6) 1.1%
James R. Grover, Jr. 118,600(7) 1.0%
R. Dave Garwood 118,570(8) 1.0%
George S. Katsarakes 70,000(9) *
C. Bruce Barksdale 61,398(10) *
Dorothy Roach 57,120(11) *
Lawrence M. Fodrowski -- --
Thomas J. Guzek 33,000(12) *
Kenneth A. Paladino 20,000(13) *
All executive officers and directors 2,341,871(14) 18.5%
as a group (11 persons)
----------------------
(FOOTNOTES ON NEXT PAGE)
-3-
(1) Asterisk indicates that the percentage is less than one percent. Percent of
Class assumes the issuance of the Common Stock issuable upon the exercise
of options or warrants (to the extent exercisable on or within 60 days
after the Record Date) held by such person but (except for the calculation
of beneficial ownership by all executive officers and directors as a group)
by no other person or entity.
(2) Includes 196,000 shares subject to options held under the Company's stock
option plans. Excludes the shares owned by Mr. Roach's wife, Dorothy Roach,
reflected below in this table, as to which shares Mr. Roach disclaims
beneficial ownership.
(3) Based solely on information contained in a Schedule 13G, dated January 16,
2001, filed jointly by, among others, Sondra and Jerry Bloomberg with the
Securities and Exchange Commission (the "SEC") reflecting information as at
December 31, 2000. The Schedule 13G reflects that Jerry Bloomberg has
shared voting and dispositive power over all such shares and that Sondra
Bloomberg has shared voting and dispositive power over 687,000 of such
shares. Various other related persons, entities and a profit sharing plan
are reflected as also having shared voting and dispositive power over
certain of such shares.
(4) Includes 968 shares owned by Mr. Roach's wife (who has sole voting and
dispositive power with respect to the shares owned by her and as to which
Mr. Roach disclaims beneficial ownership) and 228,000 shares subject to
options held under the Company's stock option plans.
(5) Based on information contained in a Schedule 13D, dated April 25, 2000,
filed with the SEC. Includes 100,000 shares subject to an option originally
issued by the Company in 1992 to an unaffiliated third party and acquired
by Mr. Pessin in April 2000.
(6) Includes 124,250 shares subject to options held under the Company's stock
option plans.
(7) Includes 115,000 shares subject to options held under the Company's stock
option plans.
(8) Includes 60,000 shares subject to options held under the Company's stock
option plans and a warrant to purchase 14,285 shares that was acquired from
the Company in the Company's June 2000 private placement.
(9) Includes 60,000 shares subject to options held under the Company's stock
option plans.
(10) Includes 78 shares owned by Mr. Barksdale's children and 53,400 shares
subject to options held under the Company's stock option plans.
(11) Includes 5,376 shares subject to options held under the Company's stock
option plans. Excludes the shares owned by Mrs. Roach's husband, Alfred J.
Roach, reflected above in this table, as to which shares Mrs. Roach
disclaims beneficial ownership.
(12) Represents shares subject to an option held under a Company stock option
plan.
(13) Includes 15,000 shares subject to an option held under a Company stock
option plan.
(14) Includes (i) an aggregate of 1,046 shares owned by the wife of one
executive officer and director and children of another director, (ii)
952,626 shares subject to options held by executive officers and directors
under the Company's stock option plans and (iii) 14,285 shares subject to a
warrant held by a director.
-4-
PROPOSAL 1.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and By-Laws provide
that the Board of Directors shall be divided into three classes, designated
Class I, Class II and Class III. These classes are to be as nearly equal in
number as the then total number of directors constituting the entire Board of
Directors permits, with each class to include not less than two directors. The
term of office of Class I directors continues until the Meeting, the term of
office of Class II directors continues until the next succeeding annual meeting
of stockholders and the term of office of Class III directors continues until
the second succeeding annual meeting of stockholders, and, in each case, until
their respective successors are elected and qualified. At each annual meeting,
directors are chosen to succeed those in the class whose term expires at that
meeting.
The Company's Board of Directors presently consists of nine directors.
The terms of C. Bruce Barksdale, R. Dave Garwood and Joseph C. Hogan, the
present Class I directors, will expire at the Meeting. At the Meeting, holders
of Common Stock will elect three Class I directors to serve until the 2004
Annual Meeting of Stockholders and until their respective successors are elected
and qualified. Unless otherwise directed, the persons named in the enclosed
Proxy intend to cast all votes pursuant to Proxies received for the election of
C. Bruce Barksdale, R. Dave Garwood and Joseph C. Hogan to serve as Class I
directors (the "nominees"). Each director was previously elected by the
Company's stockholders, except Messrs. Garwood and Fodrowski, who were elected
by the Board of Directors. Mr. Garwood was elected as a Class I director by the
Board of Directors pursuant to the terms of an agency agreement with the
placement agent for a private placement of securities completed by the Company
in June 2000 under which the Company agreed to either appoint a person to the
Board mutually agreeable to the placement agent and the Company or permit the
placement agent to send a representative to observe meetings of the Board.
In the event that any of the nominees should become unavailable or
unable to serve for any reason, the holders of Proxies have discretionary
authority to vote for one or more alternate nominees who will be designated by
the Board of Directors. The Company believes that all of the nominees are
available to serve as directors.
BACKGROUND OF NOMINEES
CLASS I DIRECTORS
C. Bruce Barksdale, 70, was Vice President of the Company from August
1971 until December 1999 and thereafter has been a consultant to the Company. He
has been a director of the Company since 1974. Mr. Barksdale holds a Bachelor of
Science degree in Electrical Engineering from the University of South Carolina.
R. Dave Garwood, 59, has been a director of the Company since August
2000. Mr. Garwood is President of R. D. Garwood, Inc., an education and
consulting company founded by him in 1974, specializing in supply chain
management and the performance of operational audits
-5-
and due diligence work for investment firms. Mr. Garwood holds a Bachelor of
Science degree in Mechanical Engineering from Purdue University. Mr. Garwood is
also a director of Telxon Corporation.
Joseph C. Hogan, Ph.D., 79, has been a director of the Company since
January 1974. Dr. Hogan served as Dean of the College of Engineering of the
University of Notre Dame from 1967 to 1981, following which he performed various
services for the University of Notre Dame until 1985, where he remains Dean
Emeritus. From 1985 until his retirement in 1987, Dr. Hogan was a Director of
Engineering Research and Resource Development at Georgia Institute of
Technology. He is past President of the American Society of Engineering
Education. Dr. Hogan is a director of American Biogenetic Sciences, Inc.
("ABS"), a biotechnology research company.
BACKGROUND OF DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE MEETING
CLASS II DIRECTORS
James R. Grover, Jr., 82, has been a director of the Company since
1978. Mr. Grover has been engaged in the private practice of law since 1974 and
has been General Counsel to the Company since 1977. Mr. Grover was a member of
the United States House of Representatives from 1963 to 1974 and a member of the
New York State Assembly from 1957 to 1962.
George S. Katsarakes, 64, has been Executive Vice President and Chief
Operating Officer of the Company since he joined the Company in January 1998 and
has been a director of the Company since October 1998. From January 1994 until
he joined the Company, Mr. Katsarakes held senior-level positions, most
recently, Executive Vice President, at Eagle Manufacturing Company, Inc., a
manufacturer of high-technology electrical wiring devices. From December 1978
until January 1994, Mr. Katsarakes held several general management and plant
management positions with Pratt & Whitney and Otis Elevator Company,
subsidiaries of United Technologies Corporation, a provider of a broad range of
products to the commercial and defense industries. Mr. Katsarakes holds an
Industrial/Mechanical Engineering degree from Northeastern University and a
Masters of Business Administration degree from Harvard Business School.
Dorothy Roach, 78, has been Secretary of the Company since 1971, served
as Treasurer of the Company from 1979 to December 1993 and, except for a brief
period, has been a director of the Company since 1964.
CLASS III DIRECTORS
Alfred J. Roach, 86, has served as Chairman of the Board of Directors
and a director of the Company and its predecessor since its founding in 1964 and
was Chief Executive Officer of the Company from the Company's founding until
January 1995. Since September 1983, Mr. Roach has also served as Chairman of the
Board of Directors of ABS.
Timothy J. Roach, 54, has served the Company in various capacities
since December 1973. He has been President of the Company since July 1980, Chief
Executive Officer since January 1995, Vice Chairman of the Board since October
1993 and a director since January
-6-
1978. Mr. Roach also served as Chief Operating Officer of the Company from May
1987 until January 1998. Mr. Roach was a Captain in the United States Air Force
for four years prior to joining the Company and is a graduate of Harvard
University's Business School Program for Management Development. Mr. Roach has
also served as Treasurer, Secretary and a director of ABS since September 1983.
Lawrence M. Fodrowski, 53, has been a director of the Company since
October 2001. Since January 2001, Mr. Fodrowski has been Chief Financial Officer
of Gisbert McDonnell Construction, Inc. ("Gisbert McDonnell"), a construction
management firm. From January 1976 until he joined Gisbert McDonnell, Mr.
Fodrowski was Vice President, Chief Financial Officer and a director of LNR
Communications, Inc. ("LNR"), a satellite communications equipment manufacturer.
Prior to joining LNR, he was a Supervising Senior Accountant with KPMG Peat
Marwick LLP (predecessor to KPMG LLP) for five years. Mr. Fodrowski holds a
Bachelor of Science degree in Accounting from Fordham University and is a
certified public accountant in New York.
Alfred J. Roach and Dorothy Roach are married and the parents of
Timothy J. Roach. There are no other family relationships among the Company's
directors.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the Company's fiscal year ended June 29, 2001, the Company's
Board of Directors held six meetings. In addition, during that fiscal year, the
Board also acted by unanimous written consent on three occasions following
informal discussions.
The Board of Directors has Audit and Compensation Committees. The Board
does not have a standing nominating committee or committee performing a similar
function.
The Audit Committee of the Board of Directors, which presently consists
of Messrs. R. Dave Garwood, Lawrence M. Fodrowski and Joseph C. Hogan, each of
whom meets the independence requirements for audit committee members under the
listing standards of the Nasdaq National Market, on which the Company's Common
Stock is quoted. The Committee provides assistance to the Company's directors in
fulfilling the Board's oversight responsibility as to the Company's accounting,
auditing and financial reporting practices and as to the quality and integrity
of the financial reports of the Company. The specific functions and
responsibilities of the Audit Committee are set forth in the written charter of
the Audit Committee adopted by the Board of Directors, which is attached as
Appendix A to this Proxy Statement. The Audit Committee reviews and reassesses
the charter annually and recommends any changes to the Board for approval. Under
its Charter, the Audit Committee serves as an independent and objective party to
monitor the Company's financial reporting process and internal control system;
reviews and appraises the audit efforts of the Company's independent auditors;
and provides an open avenue of communication among the Company's independent
auditors, financial and senior management and the Board. Among other things, the
Audit Committee reviews the financial reports and other financial information
provided by the Company to the Securities and Exchange Commission and the
public; reviews with the Company's management and independent auditors any
material weaknesses in the Company's system of internal controls; and discusses
with the Company's management and independent auditors the quality of the
Company's financial
-7-
reporting process. The Audit Committee also recommends to the Board the
selection of the independent auditors for each fiscal year, confirms the
independence of the independent auditors and approves the engagement letter
between the Company and its independent auditors, including the fees and other
compensation to be paid to the independent auditors. A report of the Audit
Committee appears under the caption "Audit Committee Report," below. The Audit
Committee met on five occasions during the fiscal year ended June 29, 2001.
The Compensation Committee is authorized to consider and recommend to
the Board of Directors salaries, bonuses and other compensation arrangements
with respect to the executive officers of the Company; grant options under, and
administer, the Company's present and future employee stock option plans;
examine, administer and make recommendations to the full Board of Directors with
respect to other employee benefit plans and arrangements of the Company and its
subsidiaries; and report to the Board periodically with respect to such matters.
The present members of the Compensation Committee are James R. Grover, Jr. and
Joseph C. Hogan. While the Compensation Committee held no formal meetings, it
acted by unanimous written consent on eight occasions following informal
discussions during the Company's fiscal year ended June 29, 2001.
During the Company's fiscal year ended June 29, 2001, each incumbent
director attended at least 75% of the aggregate number of Board of Directors
meetings and meetings of all committees on which such director served that were
held during the portion of the year such person served as a director.
AUDIT COMMITTEE REPORT
Management has the primary responsibility for the Company's financial
reporting process, including its financial statements, while the Board is
responsible for overseeing the Company's accounting, auditing and financial
reporting practices and the Company's independent public accountants have the
responsibility for the examination of the Company's annual financial statements,
expressing an opinion on the conformity of those financial statements with
accounting principles generally accepted in the United States and issuing a
report thereon. In assisting the Board in fulfilling its oversight
responsibility with respect to the Company's year ended June 29, 2001, the Audit
Committee (which, at the time consisted of Messrs. Garwood, Hogan and James R.
Grover, Jr.):
o Reviewed and discussed the audited financial statements for the fiscal
year ended June 29, 2001 with management and Arthur Andersen LLP
("Arthur Andersen"), the Company's independent public accountants;
o Discussed with Arthur Andersen the matters required to be discussed by
Statement on Auditing Standards No. 61 relating to the conduct of the
audit; and
o Received the written disclosures and the letter from Arthur Andersen
regarding its independence as required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees. The
Audit Committee also discussed Arthur Andersen's independence with
Arthur Andersen and considered whether the provision of non-audit
services rendered by Arthur Andersen was compatible with
-8-
maintaining its independence under Securities and Exchange Commission
rules governing the independence of a company's outside auditors (see
"Ratification of the Selection of Independent Public Accountants,"
below).
Based on the foregoing review and discussions, the Audit Committee
recommended to the Board that the Company's audited financial statements for the
fiscal year ended June 29, 2001 be included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission for that year.
Respectfully,
R. Dave Garwood
James R. Grover, Jr.
Joseph C. Hogan
REQUIRED VOTE
A plurality of the votes of the shares present in person or represented
by proxy at the Meeting and entitled to vote for the election of directors will
elect directors.
The Board of Directors recommends that stockholders vote FOR C. Bruce
Barksdale, R. Dave Garwood and Joseph C. Hogan to serve as Class I directors.
-9-
EXECUTIVE OFFICERS
In addition to Alfred J. Roach, Timothy J. Roach, George S. Katsarakes
and Dorothy Roach, the following are also executive officers of the Company:
Kenneth A. Paladino, 44, has been Vice President Finance and Chief
Financial Officer of the Company since September 2000 and Treasurer since June
2001. Prior to joining the Company, Mr. Paladino was an independent consultant
and, from 1989 until February 2000, served EDO Corporation, a designer and
manufacturer of advanced electronic and electro-mechanical systems, in various
capacities including, from 1995 until joining the Company, as Chief Financial
Officer and for six years prior thereto, as Corporate Controller.
Thomas J. Guzek, 47, has been Executive Vice President and Chief
Marketing Officer of the Company since June 30, 2000. From 1981 until joining
the Company, Mr. Guzek served Cooper Bussmann, the circuit products group of
Cooper Industries, Inc., a manufacturer of electronic products and tools and
hardware, in various capacities, most recently as Vice President and General
Manager of its Cooper Electronic Technologies unit and from 1993 through 1999 as
Vice President of Worldwide Product and Market Development.
Virginia M. Hall, 48, has served the Company in various capacities
since February 1976, serving as Vice President-Administration since December
1993 and Vice President-Contract Administration from September 1990 until
December 1993.
Officers hold office until their successors are chosen and qualified.
Any officer elected or appointed by the Board of Directors may be removed at any
time by the Board. See "Executive Compensation - Agreements with Certain
Executive Officers" for information concerning the Company's Employment
Agreements with Timothy J. Roach, Thomas J. Guzek and Kenneth A. Paladino.
-10-
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the Company's three fiscal years
ended June 29, 2001, information concerning the compensation paid by the Company
to Timothy J. Roach, the Company's Chief Executive Officer and the Company's
next four most highly compensated executive officers serving at the end of
fiscal 2001 in fiscal 2001 (the "Named Executive Officers"):
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARD
----------------------------------------------- ---------------------------------------
NAME AND PRINCIPAL ALL OTHER
POSITION YEAR SALARY BONUS STOCK OPTIONS (#) COMPENSATION
---------------------------- ----------- ------------------ ---------------- -------------------- ------------------
Timothy J. Roach 2001 $250,000 $ -- 100,000 $6,312 (2)
President and 2000 250,000 -- 50,000 7,761
Chief 1999 250,000 -- 380,000 (1) 7,782
Executive Officer
Alfred J. Roach 2001 150,000 -- 100,000 --
Chairman of the 2000 150,000 -- 60,000 --
Board 1999 150,000 200 (3) 310,000 (1) --
George S. Katsarakes 2001 250,000 -- 50,000 --
Executive Vice 2000 250,000 -- 50,000 --
President and Chief 1999 247,577(4) 24,000 (4) 125,000 (1) --
Operating Officer
Thomas J. Guzek 2001 200,000 50,000 (5) 100,000 --
Executive Vice
President and Chief
Marketing Officer
Kenneth A. Paladino 2001 150,202 -- 75,000 --
Vice President
Finance, Chief
Financial Officer
and Treasurer (6)
------------------------------
(1) Includes 380,000, 310,000 and 100,000 options for Timothy J. Roach, Alfred
J. Roach and George S. Katsarakes, respectively, that were either modified
or granted in exchange for the cancellation of other options.
(2) Includes (i) $937, representing the dollar value to Mr. Roach of the
portion of the premium paid by the Company under a split dollar life
insurance policy during such year with respect to the deemed term life
insurance portion of the premiums and (ii) $5,375, representing the annual
premium paid by the Company on long-term disability insurance maintained by
the Company for the benefit of Mr. Roach.
(3) Required to be paid under Puerto Rico law.
(4) Mr. Katsarakes joined the Company in January 1998. The bonus paid to Mr.
Katsarakes in fiscal 1999 was paid as an inducement to him to join the
Company.
(5) Mr. Guzek joined the Company in July 2000. The Company agreed to pay Mr.
Guzek bonuses of $50,000 in fiscal 2001 and $50,000 in fiscal 2002 as an
inducement for him to join the Company.
(6) Mr. Paladino joined the Company in September 2000.
-11-
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning options granted
during the Company's fiscal year ended June 29, 2001 to the Named Executive
Officers:
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR SHARE (1) DATE (1) 5% 10%
--------------------------- ---------- ------------- --------- -------- -- ---
Timothy J. Roach 100,000 15.4% $1.06 1/24/2011 $66,663 $168,937
Alfred J. Roach 100,000 15.4% $1.06 1/24/2011 $66,663 $168,937
George S. Katsarakes 50,000 7.7% $1.06 1/24/2011 $33,332 $ 84,468
Thomas J. Guzek 100,000 15.4% $2.00 7/9/2010 $318,748 $125,779
Kenneth A. Paladino 75,000 11.6% $2.25 9/4/2010 $106,126 $268,944
---------------------
(1) The exercise price of each option granted was equal to the market value
of the Company's Common Stock on the date of grant and is exercisable
during a ten year period ending on the date set forth under the
"Expiration Date" column (subject to early termination in certain
instances). The options vest in five equal annual installments
commencing one year after the date of grant, except that the option
granted to Mr. Guzek vests in three equal annual installments
commencing one year after the date of grant.
(2) These are hypothetical values using assumed compound growth rates
prescribed by the Securities and Exchange Commission and are not
intended to forecast possible future appreciation, if any, in the
market price of the Company's Common Stock.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
No options were exercised by the Named Executive Officers during the
Company's fiscal year ended June 29, 2001. The following table contains
information with respect to the fiscal year-end value of unexercised options
held by the Named Executive Officers:
IN-THE-MONEY VALUE
NUMBER OF OF UNEXERCISED OPTIONS
UNEXERCISED OPTIONS OPTIONS HELD AT
HELD AT FISCAL YEAR- FISCAL YEAR-END
END (EXERCISABLE/ (EXERCISABLE/
NAME UNEXERCISABLE) UNEXERCISABLE) (1)
------------------------------ -------------- --------------------
Timothy J. Roach 162,000 / 368,000 $0 / $750
Alfred J. Roach 139,584 / 339,376 $0 / $750
George S. Katsarakes 60,000 / 165,000 $0 / $350
Thomas J. Guzek 0 / 100,000 $0 / $0
Kenneth A. Paladino 0 / 75,000 $0 / $0
---------------------
(1) Represents the number of shares of Common Stock underlying in-the-money
options multiplied by the difference between the closing price of the
Common Stock at fiscal year-end and the option exercise price.
-12-
REMUNERATION OF DIRECTORS
Non-employee directors receive a fee of $1,000 for each meeting of the
Board attended in person and members of Committees of the Board receive a fee of
$500 for each Board Committee meeting attended. Non-employee directors currently
are also granted options to purchase 25,000 shares of the Company's Common Stock
under the Company's 1994 Non-Employee Director Stock Option Plan at the time
such person becomes a non-employee director (Mr. Fodrowski waived his right to
receive this initial option in connection with his selection to the Board) and
immediately following each annual meeting of stockholders at which directors are
elected. Each option held by a non-employee director 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 fair market value on the date of grant of
the shares subject thereto. C. Bruce Barksdale serves as a marketing consultant
to the Company, for which he receives a per hour or per diem fee depending on
the amount of time expended in a day in which the Company requests him to
perform services. R. Dave Garwood serves as a sales and planning consultant to
the Company, for which the Company granted him an option to purchase 50,000
shares of the Company's Common Stock, exercisable in equal installments as four
phases of the Company's Sales and Operations Planning program are completed.
Presently one-half of the option is exercisable. James R. Grover, Jr. provides
legal services to the Company, for which he received $30,000 during the year
ended June 29, 2001.
EMPLOYMENT AGREEMENTS
The Company and Timothy J. Roach are parties to an Amended and Restated
Employment Agreement, effective as of August 1, 1997, pursuant to which Mr.
Roach is serving as the Company's President and Chief Executive Officer. The
Amended and Restated Employment Agreement provides for a five-year term
presently ending July 31, 2004, with automatic one-year extensions on each July
31 during the term unless either party gives notice of termination at least 90
days prior to such July 31. Under the Amended and Restated Employment Agreement,
Mr. Roach is presently entitled to an annual salary of $250,000 per year,
subject to increases and bonuses at the discretion of the Board of Directors. In
addition, the agreement requires the Company to provide Mr. Roach with an
allowance, not to exceed 20% of his then salary, to reimburse him for the cost
of maintaining a secondary residence in Puerto Rico, where the Company maintains
gas tube manufacturing facilities. The Company also is to continue to maintain
insurance benefits provided to Mr. Roach at levels and terms no less favorable
than in effect on August 1, 1997. Mr. Roach has agreed, among other things, not
to disclose confidential information of the Company and not to directly or
indirectly engage, during the term of the agreement and for two years
thereafter, in any activity which is competitive with the Company's business. In
consideration for such covenant, Mr. Roach is to receive, for each year during
the two-year period following termination of his employment, an amount equal to
his highest salary rate in effect at any time during the one-year period
preceding the date of such termination unless Mr. Roach's employment is
terminated by reason of his death, voluntary termination other than for "good
reason" (in general, adverse changes in his powers, duties, position or
compensation or certain changes in the location where his duties are to be
performed), or for cause and he is capable of providing day-to-day services to a
competitor. In the event of termination of employment by reason of death or
disability, Mr. Roach or his
-13-
beneficiary is entitled to receive a continuation of his compensation for a
period of one year and two years, respectively. In the event Mr. Roach
terminates his employment for "good reason," the Company will also be required
to pay him a sum equal to three times the amount of his highest annual salary
and highest bonus for the current or two preceding fiscal years, subject to
reduction as to any amount that would constitute a "parachute payment" under the
Internal Revenue Code of 1986, as amended, to the maximum amount that would not
constitute such a "parachute payment." In the event of the termination of Mr.
Roach's employment other than for cause, all outstanding stock options then held
by Mr. Roach shall fully vest.
Thomas J. Guzek is a party to an Employment Agreement, dated June 30,
2000, with the Company under which Mr. Guzek is serving as Executive Vice
President, Chief Marketing Officer. The Employment Agreement provides for a term
expiring June 30, 2003, subject to possible earlier termination. Under the
agreement, Mr. Guzek's salary is presently $200,000 and is subject to review at
the end of each year of employment. Mr. Guzek is also entitled to receive a
monthly automobile allowance of $750. As an inducement to joining the Company,
the Company paid Mr. Guzek $50,000 upon joining the Company and $50,000 on July
1, 2001, and is providing Mr. Guzek a housing allowance of $3,500 per month from
September 2000 until August 2002. In addition, on July 10, 2000, the Company
granted Mr. Guzek an option to purchase 100,000 shares of the Company's Common
Stock under the Company's 1998 Stock Option Plan at an exercise price of $2.00
per share, the market value of the Company's Common Stock on the date of grant
of the option. The option becomes exercisable in three equal annual installments
commencing one year after the date of grant. In the event of termination of Mr.
Guzek's employment by the Company, other than for cause, death or disability, or
by Mr. Guzek following a reduction in rank or authority, Mr. Guzek will be
entitled to receive all compensation and bonuses that he would have received for
a one year period of time, in a lump sum, and all outstanding options held by
Mr. Guzek shall fully vest and be exercisable for the maximum time allowed for
the exercise thereof under the terms of the applicable stock option plan but not
exceeding 90 days following such termination. Mr. Guzek has agreed not to
disclose confidential information of the Company during or after his employment,
and, during the term of his employment, and for a period of two years
thereafter, not to directly or indirectly engage in certain activities which are
competitive to the Company.
Kenneth A. Paladino is a party to an Employment Agreement, dated
September 5, 2000, with the Company under which Mr. Paladino is serving as Vice
President, Finance and Chief Financial Officer. The Employment Agreement
provides for a term expiring September 4, 2003. Under the agreement, Mr.
Paladino's salary is presently $190,000 and is subject to review at the end of
each year of employment. As an inducement to joining the Company, on September
5, 2000, the Company granted to Mr. Paladino an option to purchase 75,000 shares
of the Company's Common Stock under the Company's 1998 Stock Option Plan at an
exercise price of $2.25 per share, the market value of the Company's Common
Stock on the date of grant of the option. The option becomes exercisable in five
equal annual installments commencing one year after the date of grant. In the
event of the termination of Mr. Paladino's employment by the Company, other than
for cause, death or disability, or by Mr. Paladino following a reduction in rank
or authority or a move of Mr. Paladino's primary place of work without his
mutual agreement, Mr. Paladino will be entitled to receive all compensation that
he would have received for a one year period of time, and all outstanding
options held by Mr. Paladino shall fully vest and be exercisable for the maximum
time allowed for the exercise thereof under the terms of the
-14-
applicable stock option plan but not exceeding 90 days following such
termination. Mr. Paladino has agreed not to disclose confidential information of
the Company during or after his employment and, during the term of his
employment and for a period of one year thereafter, not to directly or
indirectly engage in certain activities which are competitive to the Company.
REPORT OF BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
CONCERNING EXECUTIVE COMPENSATION
The following report is submitted by the Compensation Committee of the
Board of Directors which, among other things, considers and recommends to the
Board of Directors salaries, bonuses and other compensation arrangements with
respect to the Company's executive officers. While both the full Board of
Directors and the Compensation Committee have authority with respect to granting
stock options under the Company's 1995 Stock Option Plan and 1998 Stock Option
Plan, all options granted to executive officers under these plans during the
Company's fiscal year ended June 29, 2001 were granted by the Compensation
Committee.
The Compensation Committee has viewed salaries for the Company's
executive officers as a means of providing basic compensation at levels
sufficient to attract and retain qualified executives. Levels of base salary
have been, subject to the requirements of any employment agreement between the
Company and the executive officer, determined on a subjective basis in light of
the executive's level of responsibility, performance and expertise, as well as
prevailing economic conditions, the Company's performance and competitive
factors.
Bonuses, if awarded, have been to provide short-term incentive and to
reward the executive's personal performance and contribution to the Company's
recent overall performance or as an inducement to join the Company. Performance
bonuses have been determined by reference to specific pre-established
performance targets, on a subjective basis by examining the executive's
achievements or, at times, pursuant to agreements entered into as an inducement
for an executive to join the Company. During fiscal 2001, no performance bonuses
were granted to executive officers.
The Compensation Committee has considered options a useful means of
enabling the Company to provide long-term incentive to executives in a manner
that enables the Company to conserve cash for operations and growth while tying
the executive's interest to the interests of stockholders through stock
ownership and potential stock ownership. Option grants have been made, based
upon the executive's performance and expected contribution to the long-term
goals of the Company. (see "-- Option Grants in Last Fiscal Year," above).
Timothy J. Roach's compensation is determined using the same criteria
as used for other executive officers, subject to the terms of his Amended and
Restated Employment Agreement which became effective August 1, 1997. Mr. Roach's
salary has been $250,000 since that agreement was entered into and he has
received no bonuses during that time. Options to purchase 100,000 shares of
Common Stock were granted to Mr. Roach during fiscal 2001. See "--Employment
Agreements," above, for a description of Mr. Roach's Amended and Restated
Employment Agreement.
-15-
Section 162(m) of the Internal Revenue Code of 1986, as amended
("Section 162(m)"), precludes a public company from taking a Federal income tax
deduction for annual compensation paid to its chief executive officer or any of
its four other most highly compensated executive officers in excess of
$1,000,000 for any such person. Certain "performance based compensation" is
excluded from the deduction limitation. Cash compensation being paid by the
Company does not, and is not expected to, reach the threshold at which the
deduction limitation would be imposed. The Company's stock option plans have
been structured in a manner designed to enable any amount which is considered
compensation as a result of the exercise of stock options or the disposition of
the shares underlying an exercised option to be excluded from the deduction
limitation. Accordingly, in light of the Company's current compensation levels,
Section 162(m) is not expected to affect the Company's ability to deduct items
treated as compensation for Federal income tax purposes.
Respectfully submitted,
James R. Grover, Jr.
Joseph C. Hogan
-16-
PERFORMANCE GRAPH
The following graph compares the cumulative return to holders of the
Company's Common Stock for the five years ended June 29, 2001 with (i) the
Nasdaq Stock Market-US Index and (ii) the Nasdaq Telecommunications Index. The
comparison assumes $100 was invested on June 30, 1996 in the Company's Common
Stock and in each of the comparison groups and assumes reinvestment of dividends
(the Company paid no dividends during the periods):
[PERFORMANCE GRAPH APPEARS HERE]
6/96 6/97 6/98 6/99 6/00 6/01
TII Industries, Inc. $100 $ 86 $ 69 $ 28 $ 31 $ 16
Nasdaq Stock Market-US Index $100 $122 $160 $230 $340 $185
Nasdaq Telecommunications Index $100 $110 $185 $304 $340 $144
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since fiscal 1982, the Company has leased equipment from PRC Leasing,
Inc. ("PRC"), a corporation wholly-owned by Alfred J. Roach, Chairman of the
Board of Directors and a director of the Company. The equipment lease was
amended on July 18, 2001 to extend the term of the lease until July 18, 2002 and
for additional one year periods on each July 18 commencing July 18, 2002 and
ending on the succeeding July 17 unless terminated at the end of any such year
by either party, or at any time by the Company, on thirty days' notice. The
present annual rent is $139,476. The Company believes that the rentals charged
by PRC are comparable to the rentals which would have been charged by unrelated
leasing companies for similar equipment.
-17-
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who
beneficially own more than 10% of the Company's Common Stock, to timely file
initial statements of stock ownership and statements of changes of beneficial
ownership with the Securities and Exchange Commission and furnish copies of
those statements to the Company. Based solely on a review of the copies of the
statements furnished to the Company to date, or written representations that no
statements were required, the Company believes that all statements required to
be filed by such persons with respect to the Company's fiscal year ended June
29, 2001 were timely filed.
PROPOSAL 2.
PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE THE NAME OF THE CORPORATION
REASONS FOR NAME CHANGE
The Company has historically been primarily engaged in the design,
production and marketing of lightening and overvoltage surge protection products
and station electronic products for use by telephone operating companies
("Telcos"). Since that time, as Telcos and other communications providers expand
and upgrade their networks with new technologies to provide users with the
expanded bandwidth necessary for high-speed transmission of data and video, the
Company has developed several products to satisfy these developing markets, not
only for Telcos but also for cable television providers and competitive access
providers of telecommunications services. For example, to address the growing
demands and complexities of communications networks in the home, the Company has
developed the Digital Closet(TM), a multi-service residential gateway, that it
is beginning to offer for sale to the public through authorized dealers.
Residential gateways connect broadband service to an in-home network that allows
communications and data transfer between networked devices in the home and the
Internet.
To emphasize the broadening base of both the Company's products and
customers, as well as reflect and complement the direction in which the Company
is moving, the Board of Directors has determined that it is advisable, and
proposes and recommends to the Company's stockholders, that the Company change
its name from "TII Industries, Inc.," which connotes a business of wide
diversification, to "TII Network Technologies, Inc.," which emphasizes a
business focused on technology for telecommunications networks.
IMPLEMENTATION OF NAME CHANGE
If the amendment is adopted by stockholders and filed with the
Secretary of State of the State of Delaware, Article 1 of the Company's Restated
Certificate of Incorporation, as amended, will be amended to read as follows:
"1. The name of the corporation is TII Network Technologies, Inc."
-18-
The amendment, if adopted by stockholders, will become effective on
such date as selected by the Board of Directors and set forth in a Certificate
of Amendment to the Company's Restated Certificate of Incorporation to be filed
with the Secretary of State of Delaware.
EFFECT ON STOCKHOLDERS
The change of name will not effect in any way the validity or
transferability of stock certificates outstanding at the time of the name
change, the capital structure of the Company or the trading of the Company's
Common Stock on the Nasdaq National Market. After the change of name, the
Company's Common Stock will continue to be traded on Nasdaq under the symbol
"TIII." Following implementation of the amendment, stockholders may continue to
hold their existing certificates or receive new certificates reflecting the name
change by delivering their existing certificates to the Company's transfer
agent. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT
DELIVER ANY STOCK CERTIFICATES TO THE TRANSFER AGENT UNTIL ADVISED OF THE
EFFECTIVENESS OF THE NAME CHANGE.
REQUIRED VOTE
Adoption of the amendment to the Company's Restated Certificate of
Incorporation to change the name from "TII Industries, Inc." to "TII Network
Technologies, Inc." requires the affirmative vote of the holders of a majority
of the Company's outstanding shares of Common Stock. If the amendment to the
Restated Certificate of Incorporation is not approved by stockholders, the
Restated Certificate of Incorporation will continue in effect but the Company's
name will remain as "TII Industries, Inc." The Board of Directors recommends a
vote FOR approval of Proposal 2.
PROPOSAL 3.
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen") and its predecessor, Arthur
Andersen & Co. have acted as the Company's independent public accountants for
the past 28 years. The Board proposes that the stockholders ratify the Board's
selection of Arthur Andersen as the independent public accountants of the
Company for the year ending June 28, 2002. If the resolution selecting Arthur
Andersen as independent public accountants is adopted by stockholders, the Board
of Directors nevertheless retains the discretion to select different auditors
should it then deem it in the Company's interests. Any such future selection
need not be submitted to a vote of stockholders. Arthur Andersen has indicated
to the Company that it intends to have a representative present at the Meeting
who will be available to respond to appropriate questions. This representative
will have the opportunity to make a statement if he so desires.
-19-
AUDIT FEES
Fees billed to the Company by Arthur Andersen for its audit of the
Company's annual financial statements for the year ended June 29, 2001 and for
its review of the financial statements included in the Company's Quarterly
Reports on Form 10-Q filed with the Securities and Exchange Commission for that
year totaled approximately $225,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not engage Arthur Andersen to provide advice to the
Company regarding financial information systems design and implementation during
the Company's fiscal year ended June 29, 2001.
ALL OTHER FEES
Fees billed to the Company by Arthur Andersen during the Company's 2001
fiscal year for all other non-audit services rendered to the Company, including
tax related services, totaled approximately $62,000.
In connection with the recently revised standards for independence of
the Company's independent public accountants promulgated by the Securities and
Exchange Commission, the Audit Committee has considered whether the provision of
such services is compatible with maintaining the independence of Arthur
Andersen.
REQUIRED VOTE
The affirmative vote of a majority of the shares of Common Stock
present in person or represented by proxy at the Meeting and entitled to vote on
this proposal is required to approve this proposal. The Board of Directors
recommends a vote FOR Proposal 3.
MISCELLANEOUS
STOCKHOLDER PROPOSALS
From time to time stockholders may present proposals which may be
proper subjects for inclusion in the proxy statement and form of proxy related
to that meeting. In order to be considered, such proposals must be submitted in
writing on a timely basis. Stockholder proposals intended to be included in the
Company's proxy statement and form of proxy relating to the Company's 2002
Annual Meeting of Stockholders must be received by July 1, 2002. Any such
proposals, as well as any questions relating thereto, should be directed to the
Secretary of the Company, 1385 Akron Street, Copiague, New York 11726. As to any
proposals intended to be presented by a stockholder, without inclusion in the
Board of Directors' proxy statement and form of proxy for the Company's next
Annual Meeting, the proxies named in the Board of Directors' form of proxy for
that meeting will be entitled to exercise discretionary authority on that
proposal unless the Company receives notice of the matter on or before September
14, 2002. Any such notices should also be directed to the Secretary of the
Company at the above address.
-20-
However, even if such notice is timely received, such proxies may nevertheless
be entitled to exercise discretionary authority on that matter to the extent
permitted by Securities and Exchange Commission regulations.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
June 29, 2001, which has been filed with the Securities and Exchange Commission,
is also available, without charge, to stockholders who are interested in more
detailed information about the Company. Requests for a copy of that report
should be addressed to Ms. Virginia M. Hall, Vice President-Administration, 1385
Akron Street, Copiague, New York 11726, telephone number (631) 789-5000.
SOLICITATION OF PROXIES
The cost of solicitation of Proxies, including the cost of reimbursing
banks, brokers and other nominees for forwarding proxy solicitation material to
the beneficial owners of shares held of record by them and seeking instructions
from such beneficial owners, will be borne by the Company. Proxies may be
solicited without extra compensation by certain officers, directors and regular
employees of the Company by mail and, if determined to be necessary, by
telephone, telecopy, telegraph or personal interview. The Company has retained
W.F. Doring & Co., Inc., 150 Bay Street, Jersey City, New Jersey 07302 to aid in
the solicitation of Proxies. For its services, W.F. Doring & Co., Inc. will
receive a fee of $2,500 plus reimbursement for certain out-of-pocket expenses.
OTHER MATTERS
The Board of Directors does not intend to bring before the Meeting any
matter other than those specifically described above and knows of no matters
other than the foregoing that are proposed to come before the Meeting. If any
other matters or motions properly come before the Meeting, it is the intention
of the persons named in the accompanying Proxy to vote the Proxy in accordance
with their judgment on such matter or motions, including any matters dealing
with the conduct of the Meeting.
By Order of the Board of Directors,
Dorothy Roach,
Secretary
October 29, 2001
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
TII INDUSTRIES, INC.
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors (the "Board") of TII Industries, Inc. (the "Corporation") in
fulfilling its oversight responsibilities by reviewing the financial reports and
other financial information being provided by the Corporation to any
governmental body or the public; the Corporation's systems of internal controls
regarding finance, accounting, legal compliance and ethics that management and
the Board have established or may establish; and the Corporation's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Corporation's policies, procedures and
practices. The Audit Committee's primary duties and responsibilities are to:
o Serve as an independent and objective party to
monitor the Corporation's financial reporting process
and internal control system.
o Review and appraise the audit efforts of the
Corporation's independent auditors.
o Provide an open avenue of communication among the
independent auditors, financial and senior management
and the Board.
The Audit Committee will fulfill these responsibilities by carrying out the
activities enumerated in Section IV of this Charter and such other activities
consistent with this Charter as may from time to time be necessary or
appropriate.
II. COMPOSITION OF THE AUDIT COMMITTEE
Effective June 14, 2001, the Audit Committee shall be comprised of
three or more members of the Board, as determined by the Board, each of whom
shall be independent directors, and free from any relationship that, in the
opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Audit Committee. For purposes of this
Charter, the definition of independent directors will be based on the rules of
the Nasdaq Stock Market, Inc. for audit committees, as amended, modified or
supplemented from time to time. All members of the Audit Committee must be able
to read and understand fundamental financial statements, including a balance
sheet, income statement and cash flow statement, or will become able to do so
within a reasonable period of time after his or her appointment to the Audit
Committee. Additionally, at least one member of the Committee must have past
employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background which
results in such member's
A-1
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.
The members of the Audit Committee shall be elected by the Board at the
annual organizational meeting of the Board and shall serve at the pleasure of
the Board. Unless a chairman of the Audit Committee (the "Chairman") is elected
by the Board, the members of the Committee may designate a Chairman by majority
vote of the full Audit Committee membership.
III. MEETINGS
The Audit Committee shall meet from time to time as called by the
Chairman or as requested by Management or the independent auditors. The Audit
Committee may ask members of management or others to attend meetings of the
Audit Committee and provide pertinent information as necessary. The Audit
Committee shall meet at least annually with management and the independent
auditors to discuss any matters that the Audit Committee, Management or the
independent auditors believe should be discussed privately. In addition, the
Audit Committee or its Chairman shall discuss with management the Corporation's
quarterly financial statements consistent with Section IV.4. below. The Audit
Committee shall maintain minutes or other records of meetings and activities of
the Audit Committee.
IV. RESPONSIBILITIES AND DUTIES
The duties of the Audit Committee shall include the following:
Documents/Reports Review
------------------------
1. Review this Charter periodically, but at least annually, and update
this Charter as conditions dictate.
2. Review, prior to its filing or prior to its release, as the case may
be, the Corporation's Form 10-K and annual report to stockholders.
3. Review the Corporation's Form 10-Q prior to its filing. The Chairman
may represent the entire Audit Committee for purposes of this review.
4. Review such other reports or other financial information submitted to
the Securities and Exchange Commission or the public as the Audit
Committee shall deem appropriate. The Chairman may represent the entire
Audit Committee for purposes of this review.
Independent Auditors
--------------------
5. Recommend to the Board the selection of the independent auditors for
each fiscal year, confirm their independence and approve the engagement
letter including the fees and other compensation to be paid to the
independent auditors. On an annual basis, the Audit Committee should
review and discuss with the auditors all significant relationships
which effect the auditors' independence and should receive the written
statement from the
A-2
independent auditors required by Independence Standards Board Standard
No. 1, as amended, modified or supplemented from time to time.
6. Recommend to the Board the advisability of having the independent
auditors perform work related to their expertise, other than the annual
audit or quarterly reviews.
7. Review the performance of the independent auditors and approve any
proposed discharge of the independent auditors when circumstances
warrant.
8. Periodically consult with the independent auditors out of the presence
of management about internal controls and the completeness and accuracy
of the Corporation's financial statements.
9. Instruct the independent auditors that they report to the Audit
Committee and the Board of Directors of the Corporation.
Financial Reporting Processes
-----------------------------
10. Discuss the quality of the financial reporting process with management
and the independent auditors. Also, make inquiries as to the
appropriateness of the Corporation's accounting principles as applied
to its financial statements.
11. Consider and approve, if appropriate, the adoption of new, and major
changes to the Corporation's accounting principles and practices as
suggested by the independent auditors or management.
12. Have discussions with management and the independent auditors regarding
the interim financial reporting process, if and when required.
13. Review the accounting for significant or unusual transactions and for
significant audit adjustments.
Process Improvement
-------------------
14. Review with Management and the independent auditors any material
weaknesses in the Corporation's system of internal accounting controls.
15. Establish regular and separate systems of reporting to the Audit
Committee by each of management and the independent auditors regarding
any significant judgments made in management's preparation of the
financial statements and the view of each as to appropriateness of such
judgments.
16. Following completion of the annual audit, review separately with each
of management and the independent auditors any significant issues
encountered during the course of the audit, including any restrictions
on the scope of work or access to required information.
A-3
17. Review any significant disagreement among management and the
independent auditors in connection with the preparation of any of the
Corporation's financial statements.
18. Review with the independent auditors and management the extent to which
changes or improvements in financial or accounting practices, as
approved by the Audit Committee, have been implemented.
Legal Compliance
----------------
19. Review, with the Corporation's counsel, legal compliance matters
including corporate securities trading policies.
20. Review with the Corporation's counsel any matters that could have a
significant impact on the Corporation's financial statements.
21. Prepare a report to be included in the Corporation's Proxy statement
for annual meetings of shareholders in accordance with SEC rules.
Other Responsibilities
----------------------
Perform any other activities consistent with this Charter, and the
Corporation's Certificate of Incorporation, By-laws and governing law, as the
Audit Committee or the Board deems necessary or appropriate.
A-4
PROXY TII INDUSTRIES, INC. PROXY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 5, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the undersigned,
TIMOTHY J. ROACH and VIRGINIA M. HALL, or either of them, with full power of
substitution, to vote all shares of the capital stock of TII Industries, Inc.
(the "Company") which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of the Company to be held on Wednesday, December 5, 2001, at
3:00 p.m., New York time, at the Huntington Hilton, 598 Broadhollow Road,
Melville, New York, receipt of Notice of which meeting and the Proxy Statement
accompanying the same being hereby acknowledged by the undersigned, and at any
adjournments or postponements thereof, upon the matters described in the Notice
of Meeting and Proxy Statement and upon such other business as may properly come
before the meeting or any adjournments or postponements thereof, hereby revoking
any proxies heretofore given.
EACH PROPERLY EXECUTED PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE ON THE REVERSE SIDE HEREOF. A VOTE FOR EACH LISTED NOMINEE
AND FOR PROPOSALS 2 AND 3 IS RECOMMENDED BY THE BOARD OF DIRECTORS. WHERE NO
DIRECTION TO VOTE ON A SPECIFIC MATTER IS GIVEN, THE PROXIES WILL BE DEEMED
AUTHORIZED TO VOTE FOR EACH LISTED NOMINEE TO SERVE AS A DIRECTOR AND FOR
PROPOSALS 2 AND 3.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE IF YOU ELECT TO VOTE BY MAIL
TII INDUSTRIES, INC.
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CONTROL NUMBER
|_| Mark this box with an X if you have made changes to your 000000 0000000000 0 0000
name or address details below.
000000000.000 ext.
000000000.000 ext.
MR. A. SAMPLE 000000000.000 ext.
DESIGNATION (IF ANY) 000000000.000 ext.
ADD 1 000000000.000 ext.
ADD 2 000000000.000 ext.
ADD 3 000000000.000 ext.
ADD 4 000000000.000 ext.
ADD 5
ADD 6 ---------------------------------------------------------
BARCODE
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C 1234567890
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Please mark vote in box in the following manner using dark ink only [X]
---------------------------------------------------------- --------------------------------------------------------
The Board of Directors recommends a vote FOR the listed The Board of Directors recommends a vote FOR the
nominees. following proposals:
---------------------------------------------------------- --------------------------------------------------------
1. Election of Directors For Withhold For Against Abstain
Nominees:
01- C. Bruce Barksdale |_| |_| 2. To adopt an amendment to |_| |_| |_|
the Company's Restated
Certificate of Incorporation
to change the Company's name
to "TII Network Technologies,
Inc."
02- R. Dave Garwood |_| |_|
03- Joseph C. Hogan |_| |_| 3. To ratify the selection |_| |_| |_|
of Arthur Andersen LLP as
independent public accountants
for the Company.
NOTE: Please sign your name(s) EXACTLY as you name(s) appear(s) on this proxy. All joint holders should sign.
When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL
title.
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Signature Signature Date