SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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(as permitted by Rule 14a-6(e)(2))
TII Industries, Inc.
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(Name of Registrant as Specified In Its Charter)
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TII INDUSTRIES, INC.
1385 Akron Street
Copiague, New York 11726
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 4, 1996
------------------
To the Stockholders of
TII Industries, Inc.:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders
of TII Industries, Inc., a Delaware corporation (the "Company"), will be held at
the Huntington Hilton, 598 Broad Hollow Road, Melville, New York, on Wednesday,
December 4, 1996 at 4:00 p.m., New York time, at which the following matters are
to be presented for consideration:
1. The election of three Class II directors to serve until
the 1999 Annual Meeting of Stockholders and until their
respective successors are elected and qualified;
2. The adoption of amendments to the Company's Certificate of
Incorporation to remove the Company's Class B Stock and
Class C Stock from shares which the Company is authorized
to issue, renumber and reletter subsections and revise
cross references as a result of such removal, and correct
minor typographical errors, and adopt a Restated
Certificate of Incorporation which would integrate and
combine the full text of the Company's Certificate of
Incorporation, as amended, into one combined document;
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 27, 1997; 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 18, 1996 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. A list of
such stockholders will be open for examination by any stockholder for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least 10 days prior to the meeting at the offices of the Company, 1385 Akron
Street, Copiague, New York.
By Order of the Board of Directors,
Dorothy Roach,
Secretary
October 28, 1996
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
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PROXY STATEMENT
For Annual Meeting of Stockholders
To be Held on December 4, 1996
------------------------
This Proxy Statement, to be mailed to stockholders of TII Industries,
Inc., a Delaware corporation (the "Company"), on or about October 28, 1996, is
furnished in connection with the solicitation by the Board of Directors of the
Company of proxies in the accompanying form ("Proxy" or "Proxies") to be used at
the Annual Meeting of Stockholders of the Company to be held on Wednesday,
December 4, 1996 at 4:00 p.m., New York time, and at any adjournments or
postponements thereof (the "Meeting"). The Meeting will be held at the
Huntington Hilton, 598 Broad Hollow Road, Melville, New York.
The close of business on October 18, 1996 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 7,446,975 shares of the Company's Common Stock ("Common Stock"). The
presence of a majority of all such shares at the Meeting, in person or by proxy,
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 voted on at the Meeting. A plurality of the votes of shares present
in person and 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 outstanding shares will be required to adopt the
proposed amendments to, and restatement of, the Company's Certificate of
Incorporation (Proposal 2) and the affirmative vote of a majority of the shares
present in person or represented by proxy and entitled to vote will be required
to ratify the selection of Arthur Andersen LLP as the Company's independent
public accountants for the fiscal year ending June 27, 1997 (Proposal 3).
Proxies properly executed and received in time for the Meeting will
be voted in accordance with the specifications made thereon or, in the absence
of specification, for all nominees named herein to serve as directors and in
favor of each of the matters proposed in this Proxy Statement by the Board of
Directors. Proxies will also be voted in the discretion of those named in the
Proxy with respect to such other matters as may come before the Meeting. Proxies
submitted which contain abstentions or broker non-votes may be deemed present at
the Meeting for determining the presence of a quorum. Abstentions are considered
shares entitled to vote at the Meeting, while shares subject to broker non-votes
with respect to any matter are not considered shares entitled to vote with
respect to that matter. Abstentions and broker non-votes will have no effect on
the election of directors or the ratification of the selection of independent
public accountants. Since adoption of the proposed amendments to, and
restatement of, the Company's Certificate of Incorporation requires the
affirmative vote of a majority of the outstanding shares, shares abstaining and
broker non-votes will effectively be an "against" vote on that matter. Any Proxy
may be revoked by the person giving it at any time prior to the exercise of the
powers conferred thereby by a written notice of revocation to Dorothy Roach,
Secretary of the Company, 1385 Akron Street, Copiague, New York 11726, by
submitting a duly executed proxy bearing a later date at the foregoing address
or at the Meeting, or by voting in person at the Meeting.
SECURITY HOLDINGS OF CERTAIN
STOCKHOLDERS, MANAGEMENT AND NOMINEES
The following table sets forth information, as of September 30, 1996,
with respect to the beneficial ownership of 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 own more than 5% of the
outstanding shares of 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.
Common Stock
------------
Name and Address Percent
of Shares of
Beneficial Owner Owned Class (1)
- ---------------- ----- ---------
Alfred J. Roach 844,100(2) 11.2 %
Route 2-Kennedy
Avenue, Guaynabo,
Puerto Rico 00657
Dorothy Roach 60,704(3) *
Route 2-Kennedy
Avenue, Guaynabo,
Puerto Rico 00657
Timothy J. Roach 605,253(4) 8.0 %
1385 Akron Street
Copiague, NY 11726
William J. Rouhana, Jr 390,763(5) 5.2 %
575 Fifth Avenue
New York, NY 10017
Overseas Private 400,000(6) 5.1%
Investment Corporation
1615 M Street, N.W
Washington, DC 20527
C. Bruce Barksdale 25,998(7) *
Timothy R. Graham 125,000(8) 1.8 %
James R. Grover, Jr 25,600(9) *
Dr. Joseph C. Hogan 24,830(10) *
-2-
Common Stock
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Name and Address Percent
of Shares of
Beneficial Owner Owned Class (1)
- ---------------- ----- ---------
William G. Sharwell 25,000(11) *
Dare P. Johnston 28,000(12) *
Carl H. Meyerhoefer 28,000(12) *
James A. Roach 33,488(14) *
All executive officers and 2,296,638(15) 29.1 %
directors as a group
(15 persons)
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(1) Asterisk indicates that the Percent of Class is less than one percent.
Percent of Class assumes the issuance of the Common Stock issuable upon the
exercise of options or conversion of indebtedness (to the extent
exercisable on or within 60 days after September 30, 1996) held by such
persons or entity 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 100,360 shares subject to options held under the Company's 1986
Stock Option Plan. 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) Includes 8,960 shares subject to options held under the Company's 1986
Stock Option Plan. 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.
(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); 4,240 shares owned by Mr. Roach
as trustee or custodian for his children; and 100,000 shares subject to
options held under the Company's 1986 Stock Option Plan.
(5) Includes 15,000 shares subject options under the Company's 1994
Non-Employee Director Stock Option Plan.
-3-
(6) Represents 300,000 shares issuable upon conversion of $750,000 of
indebtedness and 100,000 shares issuable upon the exercise of an option.
(7) Includes 78 shares owned by Mr. Barksdale's children and 18,000 shares
subject to options held under the Company's 1983 Employee Incentive Stock
Option Plan and 1986 Stock Option Plan.
(8) Includes 15,000 shares subject to options held under the Company's 1994
Non-Employee Director Plan.
(9) Includes 20,000 shares subject to options held under the Company's 1986
Stock Option Plan and under the Company's 1994 Non-Employee Director Option
Plan.
(10) Includes 24,750 shares subject to options held under the Company's 1986
Stock Option Plan and 1994 Non-Employee Director Stock Option Plan.
(11) Represents 25,000 shares subject to options held under the Company's 1986
Stock Option Plan and under the Company's 1994 Non-Employee Director Option
Plan.
(12) Represents 28,000 shares subject to options held under the Company's 1986
Stock Option Plan.
(13) Includes 1,000 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 25,000 shares subject to
options held under the Company's 1986 Stock Option Plan.
(14) Includes 451,070 shares subject to options.
-4-
PROPOSAL 1.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation, as amended, 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 Company's Board of Directors presently consists of nine directors
divided into three classes. The term of office of Class II directors continues
until the Meeting, the term of office of Class III directors continues until the
next succeeding annual meeting of stockholders and the term of office of Class I
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 terms of three members of the Board will expire at the Meeting:
Timothy R. Graham, James R. Grover, Jr. and Dorothy Roach, all of whom were
previously elected by stockholders. At the Meeting, holders of Common Stock will
elect three Class II directors to serve until the 1999 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 Timothy R.
Graham, James R. Grover, Jr. and Dorothy Roach (the "nominees") to serve as
Class II directors.
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 II DIRECTORS
Timothy R. Graham, 46, has been a director of the Company since
August 1992. Since October 1994, Mr. Graham has served as Executive Vice
President of WinStar Communications, Inc. ("WinStar Communications"), a
telecommunications and information services company. From October 1990 through
September 1994, Mr. Graham was engaged in the private practice of law and served
in various capacities with National Capital Management Corporation, a company
engaged through its subsidiaries in various businesses, such as the ownership of
real estate rental properties, industrial manufacturing and insurance matters,
including as Corporate Secretary and as President of its primary real estate and
insurance subsidiaries. During that period, Mr. Graham also acted in various
capacities for WinStar Services, Inc. ("WinStar Services"), a wholly-owned
subsidiary of
-5-
WinStar Companies, Inc. ("WinStar Companies") and its affiliated companies,
which are engaged in the business of merchant banking and consulting. Prior to
1990, Mr. Graham was a partner in the law firm of Nixon, Hargrave, Devans &
Doyle specializing in corporate finance, regulatory and business law. Mr. Graham
is also a director of National Capital Management Corporation.
James R. Grover, Jr., 77, has been a director of the Company since
1978. Mr. Grover has been engaged in the private practice of law in the State of
New York since 1974, and has been General Counsel to the Company for more than
the past five years.
Dorothy Roach, 73, has been Secretary of the Company for more than
the past five years, served as Treasurer of the Company for more than five years
prior to relinquishing that position in December 1993 and, except for a brief
period, has been a director of the Company since 1964.
BACKGROUND OF CONTINUING DIRECTORS
CLASS I DIRECTORS
C. Bruce Barksdale, 65, has been a Vice President of the Company
since August 1971, becoming Senior Vice President (responsible for customer and
product development) in October 1993, and a director of the Company since 1974.
Mr. Barksdale holds a Bachelor of Science degree in Electrical Engineering from
the University of South Carolina.
Dr. Joseph C. Hogan, 74, 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 Tech. He is past
President of the American Society of Engineering Education. Dr. Hogan is also a
director of American Biogenetic Sciences, Inc. ("ABS"), a company that conducts
research and development of therapeutic and diagnostic products primarily in the
areas of blood coagulation and neurodegenerative diseases.
William G. Sharwell, 75, was appointed as a director of the Company
in October 1995. Mr. Sharwell was President of Pace University in New York from
1984 until his retirement in 1990. He was Senior Vice President of American
Telephone & Telegraph Company between 1976 and 1984, and previously served as
executive Vice President of Operations of New York Telephone Company. Mr.
Sharwell serves as an independent general partner of Equitable Capital Partners,
L.P. and Equitable Capital Partners (Retirement Fund), L.P., registered
investment companies under the Investment Company Act of 1940. He also serves on
the Board of Directors of ABS and US Life Corporation.
CLASS III DIRECTORS
Alfred J. Roach, 81, has served as Chairman of the Board of Directors
of the Company since July 1980, Chief Executive Officer from July 1980 to
January 1995 and President and/or Chairman of the Board of Directors of the
Company and its predecessor from its founding in 1964 until July
-6-
1980. He has been a director of the Company since its formation. Mr. Roach has
also served as Chairman of the Board of Directors of ABS since September 1983.
Timothy J. Roach, 49, has served the Company in various capacities
since December 1973. He has been President of the Company since July 1980, Chief
Operating Officer since May 1987, Chief Executive Officer since January 1995,
Vice Chairman of the Board since October 1993, Assistant Chief Executive Officer
from June 1985 until January 1995 and a director since January 1978. 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.
William J. Rouhana, Jr., 44, has been a director of the Company since
August 1992. Mr. Rouhana has been Chairman of the Board since February 1991, and
Chief Executive Officer since May 1994, of WinStar Communications. Mr. Rouhana
was President and Chief Executive Officer of WinStar Companies, Inc. ("WinStar
Companies") from 1983 until November 1995, the parent of WinStar Services.
Through WinStar Companies, he served, from August 1987 to February 1989, as Vice
Chairman of the Board and Chief Operating Officer of Management Company
Entertainment Group, Inc. ("MCEG"), a diversified distributor of entertainment
products and, thereafter, as its Vice Chairman of the Board until May 1990. In
November 1990, a petition for involuntary bankruptcy was filed against MCEG
which, on MCEG's motion, was converted to Chapter 11 of the Bankruptcy Code. In
March 1992, MCEG emerged from Chapter 11.
Dorothy Roach and Alfred J. Roach are married and the parents of
Timothy J. Roach.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the Company's fiscal year ended June 28, 1996, three meetings
of the Company's Board of Directors were held. In addition, during that fiscal
year, the Board acted by unanimous consent on six 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 principal functions of the Audit Committee are to nominate
independent auditors for appointment by the Board; meet with the independent
auditors to review and approve the scope of their audit engagement and the fees
related to such work; meet with the Company's financial management and
independent auditors to review matters relating to internal accounting controls,
the Company's accounting practices and procedures and other matters relating to
the financial condition of the Company; and report to the Board periodically
with respect to such matters. The members of the Audit Committee are James R.
Grover, Jr. and Joseph C. Hogan. The Audit Committee met one time during the
Company's fiscal year ended June 28, 1996.
-7-
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 all 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 Joseph C. Hogan and
William G. Sharwell (who was elected to the Compensation Committee by the Board
of Directors on August 12, 1996 to replace James R. Grover, Jr. on this
Committee). While the Compensation Committee held no formal meetings during the
Company's fiscal year ended June 28, 1996, it acted by unanimous consent on
eight occasions during the year following informal discussions.
During the Company's fiscal year ended June 28, 1996, each 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 year, except that C. Bruce Barksdale did not attend one of the three
meetings of the Board of Directors held during the year and Dorothy Roach did
not attend two of the three meetings of the Board of Directors held during the
year.
REQUIRED VOTE
A plurality of the votes cast by 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 each of
Timothy R. Graham, James R. Grover, Jr. and Dorothy Roach to serve as Class II
directors.
EXECUTIVE OFFICERS
In addition to Alfred J. Roach, Timothy J. Roach, C. Bruce Barksdale
and Dorothy Roach, the following are also executive officers of the Company:
Virginia M. Hall, 43, 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.
John T. Hyland, Jr., 60, has served the Company in various capacities
since June 1980, most recently serving as Vice President and Treasurer since
October 1995. Prior thereto, he served as Senior Vice President-Auditing from
September 1994; Vice President-Operations (in charge of the Company's Caribbean
based manufacturing operations) from October 1993 until September 1994; and Vice
President and Controller from December 1988 until September 1993. Mr. Hyland
holds a Bachelor of Business Administration degree in Accounting from Ohio
Christian College and a Master of Business Administration in Finance from
Pacific University.
-8-
Dare P. Johnston, 55, has been Vice President - Fiber Optic
Operations since December 1993. Ms. Johnston joined the Company in September
1993 with the Company's acquisition of Ditel, Inc., a designer, manufacturer and
supplier of fiber optic products. Prior to joining the Company, Ms. Johnston
served in various capacities with Ditel, Inc. since January 1989, serving as
President since September 1990. Prior to joining Ditel, Inc., Ms. Johnston was
employed by NCNB National Bank of North Carolina since 1973, where she served as
Senior Vice President since October 1983. Ms. Johnston holds a Bachelor of Arts
degree in English from Duke University.
Carl H. Meyerhoefer, 58, has been Vice President - Research and
Development since December 1993. Mr. Meyerhoefer joined the Company in July
1993. Prior to joining the Company, Mr. Meyerhoefer held various positions with
Porta Systems, Corp., a manufacturer of telecommunications connection and
protection products, since December 1987, serving as Assistant Vice President of
Product Manufacturing since July 1991. Mr. Meyerhoefer holds a Bachelor of
Science degree in Mechanical Engineering from Stevens Institute of Technology.
James A. Roach, 43, has served the Company in various capacities
since January 1982, serving as Vice President-Marketing and Sales since July
1987. Mr. Roach is the nephew of Alfred J. Roach and the cousin of Timothy J.
Roach.
Paul G. Sebetic, 32, was elected Vice President-Finance and Chief
Financial Officer of the Company in October 1996. Mr. Sebetic joined the Company
in April 1996 as the Corporate Controller. From November 1992 until joining the
Company, Mr. Sebetic held various financial management positions with V Band
Corporation, a telecommunications equipment manufacturer, serving as Controller
since August 1995. From February 1991 through August 1992, Mr. Sebetic was the
Financial Controller of the European operations of MacDermid Inc., a specialty
chemical manufacturer.
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 - Employment Agreements" for
information concerning the Company's Employment Agreements with Timothy J.
Roach, Dare P. Johnston and Carl H. Meyerhoefer.
-9-
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the Company's three fiscal years
ended June 28, 1996, information concerning the compensation paid by the Company
to Timothy J. Roach who served as the Company's Chief Executive Officer, and
each of the four other most highly compensated persons who were serving as
executive officers of the Company, at the end of the Company's fiscal year ended
June 28, 1996:
Long-Term
Compensation
Annual Compensation Award
------------------- -----
Name and Stock All Other
Principal Position Year Salary Bonus Options(#) Compensation
- ------------------ ---- ------ ----- ---------- ------------
Timothy J. Roach, 1996 $171,618 -- -- $ 8,022(1)
Chief Executive 1995 143,677 -- 200,000 7,282
Officer 1994 135,230 -- -- 7,155
Alfred J. Roach 1996 150,000 $ 200(2) -- --
Chairman of the Board 1995 150,000 200(2) 200,000 --
1994 149,623 200(2) -- --
Dare P. Johnston 1996 120,779 -- 10,000 --
Vice President - 1995 107,692 77,071 20,000 --
Fiber Optics 1994 82,500 75,000 20,000 --
Operations
Carl H. Meyerhoefer 1996 116,580 -- -- --
Vice President - 1995 107,308 -- 20,000 --
Research and 1994 91,244 -- 20,000 --
Development
James A. Roach 1996 106,440 24,347(3) 10,000
Vice President - 1995 100,098 39,554(3) 20,000 --
Marketing 1994 91,284 48,220(3) 10,000 --
- ----------------
1 Includes (i) $1,900, representing the dollar value to Mr. Roach of the
portion of the premium paid by the Company on split dollar life insurance
policies during such year with respect to the deemed term life insurance
portion of the premiums; (ii) $6,122, representing the annual premium paid
by the Company on long-term disability insurance maintained by the Company
for the benefit of Mr. Roach.
2 Required to be paid under Puerto Rico law.
3 Commissions based on sales.
-10-
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning options granted
during the Company's fiscal year ended June 28, 1996 to the executive officers
named in the Summary Compensation Table:
Potential Realizable
Number of Percent of Value at Assumed
Securities Total Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation For
Options Employees in Price Per Expiration Option Term
Name Granted Fiscal Year Share Date 5% 10%
- ---- -------- ------------- ------- ----- ------- -------
Dare P. Johnston 10,000 8.3% $7.50 12/17/2005 $47,167 $119,531
James A. Roach 10,000 8.3% $6.75 07/02/2005 $42,450 $107,578
Each option was granted at an exercise price equal to the market
value of the Company's Common Stock on the date of grant and is exercisable
during a ten year term (subject to early termination in certain instances) with
respect to 20% of the number of shares subject to the option in each annual
period, on a cumulative basis, commencing one year after the date of grant.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
No options were exercised by any of the executive officers named in
the Summary Compensation Table during the Company's fiscal year ended June 28,
1996. The following table contains information with respect to the fiscal
year-end value of unexercised options held by the executive officers named in
the Summary Compensation Table:
Number of Value of
Unexercised Unexercised In-
Option at FY- the-Money Options
End (#) at FY-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable (1)
- ---- ------------- -----------------
Alfred J. Roach 80,360/160,000 $256,575/$320,000
Timothy J. Roach 40,000/160,000 $230,000/$320,000
Dare P. Johnston 24,000/26,000 $ 21,500/$ 29,750
James A. Roach 19,000/26,000 $ 36,038/$ 37,250
Carl H. Meyerhoefer 24,000/16,000 $ 62,125/$ 36,000
- ----------------
(1) Represents the closing price of the underlying Common Stock at fiscal
year-end minus the option exercise price.
-11-
REMUNERATION OF DIRECTORS
Non-employee directors receive a fee of $1,000 for each meeting of
the Board held and members of Committees of the Board receive a fee of $500 for
attending each meeting of the Committee of the Board on which serve.
From August 7, 1992 until July 31,1995, WinStar Services provided
financial consulting services to the Company, including identifying and
analyzing potential acquisitions and mergers, and evaluating potential
investments and other financing arrangements, pursuant to a Consulting Agreement
dated June 2, 1992. Under the Consulting Agreement, as amended, WinStar Services
received a fee of $7,500 for its services for the month of July 1995. In
addition, in connection with entering into the Consulting Agreement with WinStar
Services in 1992, the Company granted WinStar Services options to purchase an
aggregate of 400,000 shares of its Common Stock at varying exercise prices.
These options were subsequently transferred by WinStar Services to William J.
Rouhana, Jr., Timothy R. Graham and a third party who were officers, directors
or employees of WinStar Services. Options covering an aggregate of 320,000
shares have been exercised and options covering an aggregate of 80,000 shares
have expired unexercised. Of the options exercised, in January 1996, Mr. Rouhana
exercised options covering 144,000, 43,200 and 43,200 shares at exercise prices
of $5.00, $5.625 and $6.25, respectively (an aggregate of $1,233,000), and, in
February 1996, Mr. Graham exercised options to purchase 20,000, 6,000 and 6,000
shares at exercise prices of $5.00, $5.625 and $6.25, respectively (an aggregate
of $171,250). The closing sales prices of the Company's Common Stock on the date
the Consulting Agreement was entered into was $4.375 per share (adjusted to give
effect to the 1 for 2-1/2 reverse split of outstanding Common Stock effected by
the Company on April 26, 1994) and on the dates of exercise of the options
ranging from $6.875 to $7.50 per share. Mr. Rouhana, a director of the Company,
has been the principal of WinStar Services and its affiliated companies and Mr.
Graham, also a director of the Company, has been an officer and director of
WinStar Services.
EMPLOYMENT AGREEMENTS
The Company and Timothy J. Roach are parties to a five-year
Employment Agreement, effective as of August 1, 1992, pursuant to which Mr.
Roach is to serve as the Company's President, Chief Operating Officer and Vice
Chairman of the Board. Since January 1995 Mr. Roach has also served as Chief
Executive Officer of the Company. Under the Employment Agreement, Mr. Roach is
presently entitled to an annual salary of $195,000 per year (subject to periodic
increases which shall not be less than 10% per annum) and bonuses at the
discretion of the Board of Directors. In addition, the Agreement requires the
Company to provide Mr. Roach (whose principal place of business is the Company's
executive offices in Copiague, New York) with an allowance to reimburse him for
the cost of maintaining a place of abode in Puerto Rico (where the Company
maintains its principal manufacturing facilities) not to exceed 20% of his then
salary, to continue to maintain family medical and dental insurance, split
dollar life insurance policies in the aggregate amount of not less than $500,000
and long-term disability insurance. Mr. Roach has agreed not to disclose
confidential information of the Company during the term of his employment and
for a period of four years thereafter. In the event of termination of employment
by reason of death or disability, as defined, Mr. Roach or his beneficiary is
entitled to receive a continuation of his salary and the family medical benefits
for a period of one year. In the event Mr. Roach terminates his employment "for
good reason" (in general, adverse changes in his powers, duties, position or
compensation), the Company
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will be required to pay him all compensation due for the unexpired term of the
Employment Agreement, but not less than six months compensation, in a lump sum.
Dare P. Johnston is a party to an Employment Agreement, dated
September 23, 1993, with the Company's subsidiary, Ditel, Inc., under which Ms.
Johnston is serving as President/General Manager of the Ditel Fiber Optic
Division of the Company. The Employment Agreement, as extended provides for a
term expiring September 22, 1999. Under the Employment Agreement, Ms. Johnston's
current annual salary is $133,000 per annum, subject to review at the end of
each year of employment, with Ms. Johnston to receive a salary increase of up to
10% per year but not less than the percentage increase of a consumer price
index. Ms. Johnston has agreed not to disclose confidential information of the
Company during and after the term of the Employment Agreement and that, during
the term of her employment and for a period of two years thereafter, she will
not directly or indirectly engage in certain activities which are competitive
with the Company.
The Company and Carl H. Meyerhoefer are parties to an Employment
Agreement, dated July 1, 1993, pursuant to which Mr. Meyerhoefer is serving as
Vice President-Research & Development. The Employment Agreement, as extended,
provides for a term expiring July 19, 1997. Mr. Meyerhoefer's current
compensation is at the rate of $129,000 per annum. Mr. Meyerhoefer has agreed
that during the term of the Employment Agreement he will not directly or
indirectly engage in certain competitive activities. In addition, he has agreed
not to disclose confidential information of the Company during or after the term
of his employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee currently are Joseph C.
Hogan and William G. Sharwell. Mr. Sharwell was elected to the Committee in
August 1996 to replace James R. Grover, Jr., who served on the Committee with
Mr. Hogan during all of the Company's fiscal year ended June 30, 1996. The
Company has retained Mr. Grover as legal counsel during the Company's last
fiscal year and is retaining him during the Company's current fiscal year. Fees
paid Mr. Grover for services rendered to the Company during the Company's fiscal
year ended June 28, 1996 were $30,000.
REPORT OF BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
CONCERNING EXECUTIVE COMPENSATION
The following report is submitted by Messrs. James R. Grover, Jr. and
Joseph C. Hogan, who comprised the Compensation Committee of the Board of
Directors during the Company's fiscal year ended June 28, 1996. The Compensation
Committee, among other things, considers and recommends to the Board of
Directors salaries, bonuses and other compensation arrangements with respect to
the executive officers of the Company. During fiscal 1996, the Committee also
had exclusive authority with respect to granting stock options under the
Company's 1986 and 1995 Stock Option Plans. In light of recent amendments to
certain Securities and Exchange Commission rules, both this Committee and the
full Board of Directors may now grant options under these plans. This report for
the fiscal year 1996 is rendered by Messrs. Grover and Hogan who comprised the
Committee during that period.
The Compensation Committee has viewed salaries for the Company's
executive officers, including its Chief Executive Officer, as a means of
providing a basic level of compensation sufficient to attract and retain
qualified executives. Levels of base salary have been determined, on a
subjective
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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 given, have been to provide short-term
incentive and to reward the executive's personal performance and contribution to
the Company's recent overall performance. Bonuses have been determined either on
a subjective basis, by reference to specific pre-determined performance targets,
achievements, or, at times, agreements entered into as an inducement for an
executive to join the Company.
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.
In light of the contribution made by Timothy J. Roach, the Company's
Chief Executive Officer, toward the Company's improved earnings and financial
condition during fiscal 1995 and fiscal 1996, the Committee determined to
increase the annual salary of Mr. Roach in August 1995 from $142,500 to $175,000
and in August 1996 to $195,000. Although these increases exceeded the minimum
10% annual increase to which Mr. Roach is entitled under his Employment
Agreement, the Committee believes that these increases were merited based on the
Company's net income increases of 23% during fiscal 1995 and 27% during fiscal
1996, as well as Mr. Roach's leadership, efforts and commitment to the Company.
Salaries of the Company's other executive officers (other than Alfred J. Roach,
whose compensation remained unchanged) were, in general, increased for the
fiscal year 1996 to reflect the Company's performance, their individual
performance, their contribution to the Company's achievements, inflationary
factors and contractual requirements. Options were granted to three executive
officers (other than Timothy J. Roach and Alfred J. Roach) to provide additional
incentive in furtherance of the Committee's policies.
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 in excess of $1,000,000 paid to its chief
executive officer or any of its four other most highly compensated executive
officers. Certain "performance based compensation" is excluded from the
deduction limitation. The Internal Revenue Service has issued proposed
regulations under Section 162(m) which may be modified prior to adoption. Cash
compensation being paid by the Company does not, and is not expected to,
approximate the threshold at which the deduction limitation would be imposed. In
fiscal 1994, the Company amended the Company's 1986 Stock Option Plan, with
stockholder approval, in a manner designed to enable any compensation thereunder
to be excluded from the deduction limitation. The Company's 1995 Stock Option
Plan contains similar provisions. Accordingly, 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
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Performance Graph
The following graph compares the cumulative return to holders of the
Company's Common Stock for the five years ended June 28, 1996 with (i) an index
of the other publicly held companies that are included within the four-digit
(3661) Standard Industrial Code for telephone and telegraph apparatus
manufacturers, (ii) the Nasdaq Telecommunications Index and (iii) the Nasdaq
Stock Market-US Index (the Company's Common Stock has been quoted on the Nasdaq
National Market System since August 3, 1994 prior to which it was traded on the
American Stock Exchange). The comparison assumes $100 was invested on June 30,
1991 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).
[GRAPHICS INTENTIONALLY OMMITTED AND REPLACED WITH PLOT POINTS]
6/91 6/92 6/93 6/94 6/95 6/96
---- ---- ---- ---- ---- ----
TII Industries Inc. $100 $186 $214 $800 $771 $776
SIC Code Index (Peer Group) $100 $106 $103 $ 99 $130 $175
Nasdaq Telecommunications Index $100 $120 $185 $184 $213 $264
Nasdaq Stock Market-US Index $100 $120 $151 $153 $204 $261
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CERTAIN TRANSACTIONS
On July 18, 1991, as an inducement to the Company's then bank lenders
to restructure the Company's long-term bank loan, the Company acquired all of
the issued and outstanding shares of capital stock of Crown Tool & Die Company
("Crown"), and acquired certain, and leased other, equipment from PRC Leasing,
Inc. ("PRC"). At the time Crown was, and PRC remains, corporations wholly-owned
by Alfred J. Roach, Chairman of the Board of Directors and a director of the
Company. The equipment lease (as amended, the "Equipment Lease"), pursuant to
which the Company leases equipment from PRC, has a term expiring July 17, 1999
(subject to an automatic extension until July 17, 2001, unless terminated by
either party upon at least ninety days written notice prior to the scheduled
renewal period) and provides for rentals at the rate of $200,000 per year. On
August 3, 1995, the Company paid PRC $300,000 in payment of rentals for the
period July 7, 1994 through January 16, 1996. The Company believes that the
rentals charged by PRC are comparable to the rentals which would have been
charged by nonrelated leasing companies for similar equipment.
On August 4, 1995 and September 21, 1995, the Company redeemed 10,000
and 17,626 shares, respectively, of its Series A Preferred Stock (representing
all of the issued and outstanding shares of Series A Preferred Stock) from Mr.
Roach at the $100 per share liquidation and redemption value of the Series A
Preferred Stock. The Series A Preferred Stock was convertible into Common Stock
at $6.25 per share, or into an aggregate of 442,016 shares of Common Stock. The
closing sales price of the Company's Common Stock on August 4, 1995 and
September 21, 1995 were $7.50 and $9.25, respectively. Of such shares of Series
A Preferred Stock: (i) 12,390 shares were acquired in exchange for all of the
issued and outstanding shares of capital stock of Crown; (ii) 11,850 shares were
acquired by Mr. Roach from PRC which, in turn, had acquired 5,000, 2,850 and
4,000 of such shares as part of the purchase price for Crown (which received the
5,000 shares of Series A Preferred Stock in settlement of $500,000 of
indebtedness owed by Crown to PRC), for the purchase from PRC of equipment and
for rental payments through January 17, 1994 (during which period rental
payments were made, as a requirement of the Company's bank lenders, in Series A
Preferred Stock in lieu of cash) under the Equipment Lease, respectively; and
(iii) 3,386 shares were issued to Mr. Roach in payment of dividends payable in
Series A Preferred Stock on outstanding shares of Series A Preferred Stock.
Between August 1 and August 4, 1995, Alfred J. Roach (Chairman of the
Board of Directors and a director of the Company), Timothy J. Roach (President,
Chief Executive Officer and a director of the Company), William J. Rouhana, Jr.
(a director of the Company) and Timothy R. Graham (a director of the Company)
exercised, in accordance with their terms, Warrants which entitled them to
purchase 200,000, 100,000, 129,600 and 48,000 shares of Common Stock,
respectively, at $5.00 per share. The Warrants had been issued in a private
placement of Common Stock and Warrants by the Company in August 1992 in which
investors purchased an aggregate of 2,200,000 shares of Common Stock and
Warrants to purchase a like number of shares of Common Stock in units consisting
of one share of Common Stock and one Warrant for $2.50 per unit. Messrs. Alfred
J. Roach and Timothy J. Roach had acquired their units in exchange for preferred
stock, purchased by them for cash of $500,000 and $250,000, respectively, in
February 1992; WinStar Venture II, Inc., a corporation then owned by WinStar
Companies (in which, in turn, Mr. Rouhana had sole voting power over the
majority of the voting shares) purchased 180,000 of the units and subsequently
transferred the
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Common Stock and Warrants owned by it to Messrs. Rouhana and Graham and a third
party. In addition, Mr. Graham purchased 30,000 of such units individually. The
closing sales price of the Company's Common Stock on February 21, 1992, the date
the Company authorized the private placement was $5.00 per share (adjusted to
give effect to the 1 for 2 -1/2 reverse split of outstanding Common Stock
effected by the Company on April 26, 1994) and on the dates of exercise of the
Warrants ranged from $7.50 per share to $7.81 per share.
Between January 19, 1996 and February 2, 1996, Mr. Rouhana, Jr.
exercised options to purchase 144,000, 43,200 and 43,200 shares at exercise
prices of $5.00, $5.625 and $6.25, respectively, and Mr. Graham exercised
options to purchase 20,000, 6,000 and 6,000 shares at exercise prices of $5.00,
$5.625 and $6.25, respectively. The options were part of the options granted by
the Company to WinStar Services in connection with entering into a Consulting
Agreement in June 1992 under which WinStar Services rendered consulting services
to the Company until July 1995. The options were subsequently transferred by
WinStar Services to Messrs. Rouhana, Graham and a third party. The closing sales
prices of the Company's Common Stock on the date the Consulting Agreement was
entered into was $4.375 per share (adjusted for the reverse split described
above) and on the dates of exercise of the options ranged from $6.875 to $7.50
per share. The Company has caused the shares issued to be registered under the
Securities Act of 1933, as amended, for resale pursuant to certain registration
rights under the options, with the cost of such registration being borne by the
Company. See "Executive Compensation - Remuneration of Directors."
PROPOSAL 2.
ADOPTION OF AMENDMENTS TO, AND RESTATEMENT OF, THE COMPANY'S
CERTIFICATE OF INCORPORATION
The Company's Board of Directors proposes to amend the Company's
current Restated Certificate of Incorporation, as amended, to (i) remove all
Class B Stock and Class C Stock from the capital stock which the Company is
authorized to issue, (ii) renumber and reletter subsections and revise cross
references as a result of deleting the text setting forth the terms of the Class
B Stock and Class C Stock and (iii) correct minor typographical errors. The
Board of Directors proposes to reflect such amendments in a Restated Certificate
of Incorporation which would integrate and combine the full text of the
Company's Certificate of Incorporation, as amended, into one document. The
complete text of the proposed Restated Certificate of Incorporation as it would
read if the amendment and restatement is approved by the shareholders of the
Company is attached to this Proxy Statement as Appendix A and the discussion
herein is qualified in its entirety by reference thereto.
REASON FOR PROPOSAL
The Company's Class B Stock was authorized and offered to the
stockholders of the Company in 1986 as an alternative to the Company's Class A
Common Stock. The Class B Stock was identical to the Common Stock, except that
each share of Class B Stock was entitled to ten votes on each matter presented
for consideration by vote of stockholders (except that, until 1995, Common
Stock, as a separate class, was entitled to elect 25% of the Board of
Directors). Each share of Common Stock has been entitled to one vote. Each share
of Class B Stock was entitled to only 83-1/3% of any
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dividends that may have been payable with respect to Common Stock and had only
limited transferability rights. However, Class B Stock was convertible at any
time into one share of Common Stock, which does not have those transferability
limitations. All shares of Class B Stock were automatically converted into
Common Stock at such time as the outstanding number of shares of Class B Stock
fell below 5% of the aggregate number of issued and outstanding shares of Common
Stock and Class B Stock.
As a result of the voluntary conversion, in September 1995, of
321,284 of the 370,366 issued and outstanding shares of Class B Stock, the
automatic conversion provision related to the Class B Stock contained in the
Certificate of Incorporation was triggered. As a result, all remaining shares of
Class B Stock were automatically converted into Common Stock and, since that
time, there have not been any shares of Class B Stock issued or outstanding. The
Company's Certificate of Incorporation does not permit the Company to issue any
additional shares of Class B Stock without the approval of a majority of the
votes of outstanding Common Stock.
The Company's Class C Stock was authorized in 1979 for potential
issuance to a limited number of key employees resident in Puerto Rico who would
not be subject to Puerto Rico income taxes on any dividends paid by the Company
out of certain earnings. Each share of Class C Stock was entitled to dividends,
when, as and if declared by the Board of Directors, at an annual rate of $2.00
per share and were redeemable by the Company at $.01 per share. Except for the
initial issuance of 22,500 shares (which shares were subsequently redeemed by
the Company), no shares of Class C Stock have been issued and none are
outstanding.
Since the Company does not propose to issue additional shares of
either Class B Stock or Class C Stock, the Board is proposing to remove both
from the shares which the Company is authorized to issue under its Certificate
of Incorporation and, therefore, simplify the Company's Certificate of
Incorporation by deleting the complicated provisions of Class B Stock and Class
C Stock which are no longer germane. A collateral benefit to the removal of
Class B Stock and Class C Stock from authorized capital will be to reduce the
Company's franchise tax payable in the State of Delaware.
As a result of the removal of the 10,000,000 shares of authorized
Class B Stock and 100,000 shares of authorized Class C Stock, the Company's
authorized capital will consist of 31,000,000 shares of stock presently
authorized in the Company's Certificate of Incorporation, consisting of
30,000,000 shares of Common Stock having a par value of $.01 per share and
1,000,000 shares of Preferred Stock having a par value of $1.00 per share (which
the Company, by Board action, may issue in series, with each series to contain
such voting powers, designations, preferences and rights, qualifications and
restrictions as the Board may fix in connection with the issuance of any series
of Preferred Stock). As of the Record Date, 7,446,975 shares of Common Stock
were issued and outstanding and no shares of Series B Common Stock, Series C
Common Stock or Preferred Stock were issued and outstanding.
In addition, the proposed Restated Certificate of Incorporation will
renumber and reletter subsections and revise cross references in the Certificate
of Incorporation as a result of deleting the text setting forth the terms of the
Class B Stock and Class C Stock, and correct minor typographical
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errors (generally to consistently reflect references to the Company with a lower
case, rather than an upper case, letter "C") now contained in the Certificate of
Incorporation and the amendments thereto.
The Board also recommends that the Company's Certificate of
Incorporation, as amended periodically to date, be restated, integrated and
combined into one document. This will simplify the Company's Certificate of
Incorporation because all applicable current provisions of the Certificate of
Incorporation will be contained in one document instead of in a series of
documents.
The proposed amendments and restatement of the Company's Certificate
of Incorporation will have no effect on the rights of the holders of Common
Stock.
REQUIRED VOTE
The affirmative votes of the holders of a majority of the shares of
Common Stock outstanding on the Record Date will be required to approve this
proposal.
The Board of Directors unanimously recommends a vote for Proposal 2.
PROPOSAL 3.
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of Arthur Andersen LLP
as the independent public accountants of the Company for the year ending June
27, 1997. Arthur Andersen LLP and its predecessor, Arthur Andersen & Co., have
acted for the Company in such capacity for the last twenty-four years. The Board
proposes that the stockholders ratify such selection at the Meeting.
Representatives of Arthur Andersen LLP are expected to be present at
the Meeting and will be afforded the opportunity to make a statement if they so
desire and to respond to appropriate questions.
REQUIRED VOTE
The affirmative vote of a majority of the shares present or
represented at the Meeting and entitled to vote on this proposal is required to
approve the ratification of the Board's action in selecting Arthur Andersen LLP
as the Company's independent public accountants for the fiscal year ending June
27, 1997. The Board of Directors unanimously recommends that stockholders vote
FOR this proposal.
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,
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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 next Annual Meeting of Stockholders must be
received by July 1, 1997. 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.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
June 28, 1996, 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 (516) 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.
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 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 28, 1996
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APPENDIX A
RESTATED CERTIFICATE OF INCORPORATION
OF
TII INDUSTRIES, INC.
--------------------
1. The name of the corporation is TII INDUSTRIES, INC.
2. The address of its registered office in the State of
Delaware is No. 100 West Tenth Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
3. The nature of the business or purposes to be conducted
or promoted is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
4. The aggregate number of shares of stock of all classes
which the corporation shall have authority to issue is 31,000,000, consisting of
30,000,000 shares of Common Stock having a par value of $.01 per share, and
1,000,000 shares of Preferred Stock having a par value of $1.00 per share.
The powers, preferences and the relative, participating, optional
and other rights and the qualifications, limitations and restrictions of each
class of stock, and the express grant of authority to the Board of Directors to
fix by resolution the designations and the powers, preferences and rights of
each share of Preferred Stock and the qualifications, limitations and
restrictions thereof, which are not fixed by this Restated Certificate of
Incorporation, are as follows:
A. Common Stock
I. Dividends, etc.
Subject to the rights of the holders of
Preferred Stock, and subject to any other provisions of this Restated
Certificate of Incorporation, as amended from time to time, holders of Common
Stock shall be entitled to receive such dividends and other distributions in
cash, stock or property of the corporation as may be declared thereon by the
Board of Directors from time to time out of assets or funds of the corporation
legally available therefor.
A-1
II. Voting
At every meeting of the stockholders each
holder of Common Stock shall be entitled to one (1) vote in person or by proxy
for each share of Common Stock standing in his name on the transfer books of the
corporation.
III. Liquidation Rights
In the event of any dissolution, liquidation
or winding up of the affairs of the corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and other
liabilities of the corporation, the holders of each series of Preferred Stock
shall be entitled to receive out of the net assets of the corporation, an amount
for each share equal to the amount fixed and determined by the Board of
Directors in any resolution or resolutions providing for the issuance of any
particular series of Preferred Stock, plus an amount equal to all dividends
accrued and unpaid on shares of such series to the date fixed for distribution,
and no more, before any of the assets of the corporation shall be distributed or
paid over to the holders of Common Stock. After payment in full of said amounts
to the holders of Preferred Stock of all series, the remaining assets and funds
of the corporation shall be divided among and paid ratably to the holders of
Common Stock. If upon such dissolution, liquidation or winding up, the assets of
the corporation distributable as aforesaid among the holders of Preferred Stock
of all series shall be insufficient to permit full payment to them of said
preferential amounts, then such assets shall be distributed among such holders,
first in the order of their respective preferences, and second, as to such
holders who are next entitled to such assets and who rank equally with regard to
such assets, ratably in proportion to the respective total amounts which they
shall be entitled to receive as provided in this Section III. A merger or
consolidation of the corporation with or into any other corporation or a sale or
conveyance of all or any part of the assets of the corporation (which shall not
in fact result in the liquidation of the corporation and the distribution of
assets to stockholders) shall not be deemed to be a voluntary or involuntary
liquidation or dissolution or winding up of the corporation within the meaning
of this Section III.
B. Preferred Stock
The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of this subsection C, to
provide for the issuance of the Preferred Stock in series, and by filing a
certificate pursuant to the General Corporation Law, to establish the number of
shares to be included in each such series, and to fix the designation,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of the shares of each such series.
The authority of the Board with respect to each series shall include, but not be
limited to, determination of the following:
(1) the number of shares constituting that
series and the distinctive designation of that series;
A-2
(2) whether the holders of shares of that
series shall be entitled to receive dividends and, if so, the rates, conditions
and times of such dividends, any preference of any such dividends to, and the
relation to, the dividends payable on any other class or classes of stock or any
other series of the same class and whether dividends shall be cumulative or
noncumulative;
(3) whether the holders of that series shall
have voting rights in addition to the voting rights provided by law and, if so,
the terms of such voting rights;
(4) whether shares of that series shall be
convertible into, or exchangeable for, at the option of either the holder or the
corporation or upon the happening of a specified event, shares of any other
class or classes or of any other series of the same or other class or classes of
stock of the corporation and, if so, the terms and conditions of such conversion
or exchange, including provision for adjustment of the conversion or exchange
rate in such events as the Board of Directors may determine;
(5) whether shares of that series shall be
redeemable and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) whether shares of that series shall be
subject to the operation of a retirement or sinking fund and, if so subject, the
extent to and the manner in which it shall be applied to the purchase or
redemption of the shares of that series, and the terms and provisions relative
to the operation thereof;
(7) the rights of shares of that series in
the event of voluntary or involuntary liquidation, dissolution or winding up of
the corporation and any preference of any such rights to, and the relation to,
the rights in respect thereto of any other class or classes of stock or any
other series of the same class; and
(8) whether shares of that series shall be
subject or entitled to any other preferences, and the other relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of shares of that series.
C. Authorized Shares of Capital Stock
Except as may be provided in the terms and conditions
fixed by the Board of Directors for any series of Preferred Stock, and in
addition to any other vote that may be required by statute, stock exchange
regulations, this Restated Certificate of Incorporation or any amendment hereof,
the number of authorized shares of any class or classes of stock of the
corporation may be increased or decreased by the affirmative vote of the holders
of a majority of the voting power of the outstanding shares of capital stock of
the corporation entitled to vote.
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5. The corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter or repeal the By-laws of the corporation, except that the affirmative vote
of the holders of at least 75% of the outstanding shares of capital stock of the
corporation entitled to vote in the election of directors (considered for this
purpose as one class) shall be required to make, alter or repeal, or to adopt
any provision inconsistent with, Sections 6, 10 or 11 of the Certificate of
Incorporation or Sections 1 or 2 of Article V or Article XII of the By-laws of
the corporation.
7. Meetings of stockholders may be held within or without
the State of Delaware, as the by-laws may provide. The books of the corporation
may be kept (subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated from time to time
by the board directors or in the by-laws of the corporation. Elections of
directors need not be by written ballot unless the by-laws of the corporation
shall so provide.
8. Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
9. The corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
10. The number of directors which shall constitute the Board
of Directors shall be not less than five (5) nor more than nine (9). The exact
number of directors within the maximum and minimum limitation specified herein
shall be fixed from time to time by resolution of the Board of Directors. The
directors shall be classified with respect to the time during which they shall
severally hold office by dividing them into three classes, each class consisting
of one-third of the number of directors constituting the entire Board, as
authorized by resolution of the Board of Directors, and all
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directors of the corporation shall hold office until their successors shall be
elected and shall qualify or until their earlier resignation or removal.
However, in instances where the total number of directors constituting the
entire Board, as authorized by resolution of the Board of Directors, is a number
other than an integral multiple of three, the number of directors to be elected
each year shall reasonably approximate the number which would have been elected
had the total number of directors constituting the whole Board been an integral
multiple of three, as determined by the Board of Directors. At the meeting of
the stockholders of the corporation held for the election of the first such
classified Board, the directors of the first class (designated Class I) shall be
elected for a term of one year, the directors of the second class (designated
Class II) for a term of two years, and the directors of the third class
(designated Class III) for a term of three years, and, in each instance, until
their respective successors are elected and qualified. At each annual meeting of
stockholders held thereafter, the successors to the class of directors whose
term shall expire that year shall be elected to hold office for a term of three
years, so that the term of office of one class of directors shall expire in each
year. Any newly created directorships or any decrease in directorships, as
authorized by resolution of the Board of Directors, shall be so apportioned
among the classes as to make all classes as nearly equal in number as possible.
The directors shall have the power, from time to time,
to increase or decrease their own number, within the maximum and minimum
limitations specified therein, by resolution of the Board of Directors.
Directors may not be removed from office except for cause by the affirmative
vote or not less than a majority of the shares entitled to vote at an election
of directors.
Newly created directorships resulting from an increase
in the number of directors and all vacancies occurring in the Board, including
vacancies occurring in the Board by reason of the removal of directors, may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors, and directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen, and until their successors shall be elected and qualified.
11. (a) Except as otherwise expressly provided in
subparagraph (c) of this Section 11, the affirmative vote of the holders of at
least 75% of the outstanding shares of capital stock of the corporation entitled
to vote thereon shall be required to authorize: (i) any merger, combination,
amalgamation or consolidation, of the corporation or any of its subsidiaries
with or into any other corporation or entity; or (ii) any sale, lease or
exchange by the corporation of property or assets constituting all or
substantially all of the property and assets of the corporation and its
subsidiaries taken as a whole to or with any other corporation, person or other
entity; or (iii) the dissolution of the corporation if, in the case of (i) or
(ii) above, as of the record date for the determination of stockholders entitled
to notice thereof and to vote thereon, such other corporation, person or entity
is the beneficial owner, directly or indirectly, of 10% or more of the
outstanding shares of capital stock of the corporation entitled to vote in the
election of directors (considered for the purposes of this Section 11 as one
class). Such affirmative vote shall be required notwithstanding the fact that
some lesser percentage may be specified in any agreement or contract to which
the corporation is a party (including, but not limited to, any agreement with
any stock exchange on which any of the
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corporation's capital stock may be listed) and shall be in addition to any class
or series vote to which any class or series of stock of the corporation may be
entitled.
(b) For the purposes of this Section 11, any corporation,
person or other entity shall be deemed to be the beneficial owner of any shares
of capital stock of the corporation (i) which it has the right to acquire, hold
or vote pursuant to any agreement, or otherwise, or (ii) which are beneficially
owned, directly or indirectly (including shares deemed owned through application
of clause (i) above), by any other corporation, person or entity (A) with which
it or its "affiliate" or "associate" (as those terms are defined in Rule 12b-2
of the General Rules and Regulations under the Securities Exchange Act of 1934
as in effect on December 1, 1979) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
capital stock of the corporation, or (B) which is its "affiliate" or
"associate". For the purpose of this Section 11, the outstanding shares of any
class of capital stock of the corporation shall include shares deemed owned
through the application of clauses (i) and (ii) above but shall not include any
other shares which may be issuable pursuant to any agreement, or upon exercise
of conversion rights, warrants, options or otherwise.
(c) The provisions of this Section 11 shall not apply to (i)
any transaction referred to in clauses (i) and (ii) of subparagraph (a) of this
Section 11 with any corporation of which a majority of the outstanding shares of
all capital stock entitled to vote in the election of directors (considered for
this purpose as one class) is owned beneficially by the corporation or its
subsidiaries if such transaction is not being carried out to circumvent the
requirements of this Section 11; or (ii) any transaction referred to in
subparagraph (a) of this Section 11 if the Board of Directors of the corporation
shall by resolution have approved, in the case of clause (iii) of subparagraph
(a) of this Section 11, such dissolution proposed by, or suggested on behalf of,
or approved a memorandum of understanding with such other corporation, person or
other entity with respect to, and substantially consistent with, a transaction
described in clauses (i) or (ii) of subparagraph (a) of this Section 11, with
any corporation, person or entity prior to the time such other corporation,
person or entity (except any person, corporation or entity who as of December 3,
1979 was the beneficial owner of at least 10% of the outstanding shares of stock
of the Company entitled to vote in the election of directors) became the owner
of 10% or more of the outstanding shares of capital stock of the corporation
entitled to vote in the election of directors (considered for this purpose as
one class).
(d) The Board of Directors of the corporation shall have the
power and duty to determine for the purposes of this Section 11, on the basis of
information then known to it, whether and when (i) any corporation, person or
other entity beneficially owns 10% or more of the outstanding shares of capital
stock of the corporation entitled to vote in the election of directors
(considered for this purpose as one class), and/or is an "affiliate" or
"associate" of another; (ii) any proposed sale, lease, exchange or other
disposition involves all or substantially all of the assets of the corporation
and its subsidiaries taken as a whole; (iii) any transaction referred to in
subparagraph (a) of this Section 11 with any corporation of which a majority of
the outstanding shares of all capital stock entitled to vote in the election of
directors (considered for this purpose as one class) is owned beneficially by
the corporation or its subsidiaries is being carried out to circumvent the
requirement
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of this Section 11; and (iv) any memorandum of understanding referred to in
subparagraph (c) of this Section 11 is substantially consistent with the
transaction to which it relates. Any such determination by the Board shall be
conclusive and binding for all purposes of this Section 11.
12. No director of the corporation shall be personally
liable to the corporation or any of its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
Delaware General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation, in addition to the limitation of personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Delaware Corporation Law. Any repeal or modification of this Article by the
stockholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
corporation existing at the time of such repeal or modification.
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TII INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 4, 1996
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 4, 1996, at
4:00 p.m., New York time, at the Huntington Hilton, 598 Broad Hollow 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. 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.
A VOTE FOR EACH NOMINEE AND FOR PROPOSALS 2 AND 3 IS RECOMMENDED BY
THE BOARD OF DIRECTORS.
(continued and to be signed on reverse side)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY, [_]
1. ELECTION OF DIRECTORS [_] [_]
(check one box only) FOR EACH WITHHOLD
NOMINEE AUTHORITY
LISTED BELOW to vote
Except as for all
marked to the nominees
INSTRUCTIONS: To withhold contrary below listed below
authority to vote for any nominee,
mark the "FOR" box AND print that
nominee's name below.
Timothy R. Graham,
James R. Grover, Jr. and Dorothy Roach
- ------------------------------
FOR AGAINST ABSTAIN
2. To adopt proposed amendments to, [_] [_] [_]
and restatement of, the Company's
Certificate of Incorporation.
4. To ratify the selection of Arthur [_] [_] [_]
Anderson LLP as independent public
accountants for the Company.
NOTE: Please sign your name or names exactly
as set forth hereon. If signing as attorney,
executor, administrator, trustee or
guardian, please indicate the capacity in
which you are acting. Proxies executed by
corporations should be signed by a duly
authorized officer and should bear the
corporate seal.
Dated ________ , 1996
____________________________________________
Signature of Stockholder
____________________________________________
Signature of Stockholder
PLEASE DATE AND SIGN THIS PROXY AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE