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Tii Network Technologies, Inc. – ‘PRER14A’ on 2/25/99

As of:  Thursday, 2/25/99   ·   Accession #:  910680-99-91   ·   File #:  1-08048

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Revised Preliminary Proxy Solicitation Material   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PRER14A     Tii Industries Preliminary Proxy                      45    122K 

Document Table of Contents

PRER14A
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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:                                                      

[X] Preliminary Proxy Statement                                                 
[ ] Confidential, for Use of the Commission Only (as permitted by Rule          
14a-6(e)(2))                                                            
[ ] 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                                                         

[ ]     Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 

    1) Title of each class of securities to which transaction applies:

 2) Aggregate number of securities to which transaction applies:

         3) Per unit price or other  underlying  value of  transaction  computed
            pursuant  to  Exchange  Act Rule 0-11 (Set forth the amount on which
      the filing fee is calculated and state how it was determined):

4) Proposed maximum aggregate value of transaction:           

5) Total fee paid:                                            

[ ]      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:                              

2)       Form, Schedule or Registration Statement No.:        

3)       Filing Party:                                        

4)       Date Filed:                                          

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TII INDUSTRIES, INC.

 1385 Akron Street
Copiague, New York 11726
------------------

 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
 TO BE HELD APRIL 20, 1999
------------------

To the Stockholders of                                                          
TII Industries, Inc.:                                                           

         NOTICE IS HEREBY GIVEN that a Special  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 Tuesday, April
20, 1999 at 10:30 a.m., New York time, at which the following  matters are to be
presented for consideration:                                                    

         1.    A proposal to approve the Stock  Purchase  Agreement  dated as of
               December  31,  1998  between  the  Company  and  Alfred J.  Roach
               pursuant  to which the  Company  proposes  to acquire  all of the
               issued and  outstanding  capital  stock of PRC  Leasing,  Inc. in
              exchange for 1,176,213 shares of the Company's Common Stock; and

         2.    Such other matters as may properly come before the meeting or any
adjournments or postponements thereof.            

         The close of  business  on March 8, 1999 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,

                                    /s/  Dorothy Roach

                                          Dorothy Roach,
                                         Secretary
March 12, 1999                                                                  

         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 IS NEEDED IF MAILED IN
THE ENCLOSED ENVELOPE IN THE UNITED STATES.                                     

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TII INDUSTRIES, INC.
 1385 Akron Street
Copiague, New York 11726
--------------------

 PROXY STATEMENT
 For Special Meeting of Stockholders
To be Held on April 20, 1999
------------------------

         This Proxy  Statement,  to be mailed to stockholders of TII Industries,
Inc., a Delaware  corporation  (the  "Company"),  on or about March 12, 1999, 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
a Special Meeting of  Stockholders  of the Company to be held on Tuesday,  April
20, 1999 at 10:30 a.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 March 8, 1999 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 8,375,132 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  to be voted on at the  Meeting.  The  Meeting  has been  called to
consider a proposal to approve the Stock Purchase Agreement dated as of December
31, 1998  between the Company and Alfred J. Roach  pursuant to which the Company
proposes  to  acquire  all of the issued and  outstanding  capital  stock of PRC
Leasing,  Inc. in exchange for 1,176,213  shares of the  Company's  Common Stock
(the "Proposal"). Under the Company's Bylaws, business that may be transacted at
any special  meeting of stockholders is limited to the purposes set forth in the
Notice of Meeting.  Therefore, except for motions related thereto, including any
motion to adjourn the  Meeting,  only the  Proposal  will be  considered  at the
Meeting.                                                                        

         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,  in favor of the Proposal. The Board of Directors does not intend
to bring  before the Meeting any matters or motions  other than those  described
above. If any other matters,  including 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. Proxies submitted which contain
abstentions  or broker  non-votes  will 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.  Therefore,  abstentions will effectively be votes against the Proposal,
while  broker  non-votes  will have no effect on the  outcome of the vote on the
Proposal.  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.     

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SECURITY HOLDINGS OF CERTAIN
 STOCKHOLDERS AND MANAGEMENT

         The following table sets forth information, as of the Record Date, 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 own more than 5% of the
outstanding  shares of the  Company's  Common  Stock,  (ii) each director of the
Company,  (iii) the Company's Chief Executive  Officer and each of the four most
highly compensated persons who were serving as executive officers of the Company
at the end of the Company's  fiscal year ended June 26, 1998 exceeded  $100,000,
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.                                                                          

                                                   Percent
                             Shares                 of
Beneficial Owner                          Owned              Class (1)          
----------------                          -----              ---------          

Alfred J. Roach                         751,600 (2)             8.9%            
Route 2-Kennedy                                                                 
Avenue, Guaynabo,                                                               
Puerto Rico 00657                                                               
Dorothy Roach                            51,744 (3)             *               
Route 2-Kennedy                                                                 
Avenue, Guaynabo,                                                               
Puerto Rico 00657                                                               
Timothy J. Roach                        511,013 (4)             6.1%            
1385 Akron Street                                                               
Copiague, NY 11726                                                              
George S. Katsarakes                     20,000                 *               
C. Bruce Barksdale                        7,998 (5)             *               
James R. Grover, Jr.                     83,600 (6)             1.0%            
Joseph C. Hogan                          89,330 (7)             1.1%            
William G. Sharwell                      90,000 (8)             1.1%            
Dare P. Johnston                              0                 *               
James A. Roach                           18,488 (9)             *               
All executive officers and            1,628,773 (10)           18.8%            
directors as a group                                                            
(12 persons)                                                                    
----------------                                                                

(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 (to the extent exercisable on or within 60 days
         after  the  Record  Date)  held by such  persons  but  (except  for the
         calculation  of  beneficial  ownership  by all  executive  officers and
directors as a group) by no other person or entity.           

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(2)      Includes  40,360  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)      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).              

(5)      Includes 78 shares owned by Mr. Barksdale's children.                  

(6)      Includes  80,000  shares  subject  to  options held under the Company's
Stock Option Plans.                                           

(7)      Includes  89,250  shares  subject  to  options held under the Company's
Stock Option Plans.                                           

(8)      Includes  89,400  shares  subject  to  options held under the Company's
Stock Option Plans.                                           

(9)      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).              

(10)     Includes 299,010 shares subject to options.                            

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PROPOSAL

PROPOSAL TO APPROVE STOCK PURCHASE AGREEMENT
 BETWEEN THE COMPANY AND ALFRED J. ROACH

General                                                                         

         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 and  presently  the  beneficial
owner (as determined  under Section  13(d)(3) of the Securities  Exchange Act of
1934) of 9.0% of the Company's  Common Stock (see "Security  Holdings of Certain
Holders and  Management").  The only activity of PRC is leasing equipment to the
Company.  On July 18, 1991, as an inducement to the Company's  then bank lenders
to  restructure  the Company's  long-term  bank loan,  among other  things,  the
Company  acquired  certain  equipment  from PRC and replaced  its then  existing
leases with PRC with a new lease with PRC. The equipment lease (as  subsequently
amended, the "Equipment Lease") 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 beginning of the next scheduled
renewal  period) and provides for rentals at the rate of $200,000 per year.  The
Company  believes that the rentals  charged by PRC are comparable to the rentals
that  would  have been  charged  by  unrelated  leasing  companies  for  similar
equipment.                                                                      

         In November 1998, the Company  determined  that, since it would require
the  equipment  then  subject to the  Equipment  Lease (the  "Equipment")  for a
long-term,  instead of  continuing  to lease the  Equipment,  it would be in the
Company's  best interests to purchase the  Equipment.  Accordingly,  the Company
commissioned  an  appraisal of the  Equipment  from a certified  appraiser,  who
calculated the fair market value of the Equipment to be $2.2 million.           

         As a result, the Company entered into a Stock Purchase Agreement, dated
as of December 31, 1998,  with Alfred J. Roach  ("Agreement")  to acquire all of
the  outstanding  shares of capital stock of PRC in exchange for the issuance by
the Company of an aggregate of 1,176,213  shares of the  Company's  Common Stock
(the "Shares"), being equal to the $2.2 million appraised value of the Equipment
divided by the $1.875  closing price of the  Company's  Common Stock on December
31, 1998 on The Nasdaq Stock Market's National Market.                          

         The Company's entering into the Agreement was unanimously authorized by
both  the  Audit  Committee  of the  Board  of  Directors  and the  full  Board.
Completion of the  transactions is subject to, among other things,  the approval
by the Company's stockholders.                                                  

The Agreement                                                                   

         The following is a brief summary of certain provisions of the Agreement
and is qualified in its entirety by reference to the full text of the Agreement,
a copy  of  which  is  attached  as  Annex  I to  this  Proxy  Statement  and is
incorporated  herein by reference.  Capitalized terms used and not defined below
have the meanings given to them in the Agreement.                               

         If the Agreement is approved and the other  conditions to completion of
the  transactions  contemplated by the Agreement are satisfied,  it is currently
anticipated  that the sale of PRC to the Company  will be  completed  as soon as
practicable following the Meeting.                                              

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Conditions to Closing                                                           

         In addition to obtaining the  stockholder  vote being requested in this
Proxy  Statement,  it is a condition to the  obligations of the Company  (unless
waived by the Company) that, at the time of the closing, the representations and
warranties of Mr. Roach made in the Agreement continue to be true and correct in
all material  respects;  that Mr.  Roach shall have  performed  all  obligations
required  to be  performed  by him;  that the  Equipment  shall  not  have  been
adversely  affected in any material way,  including,  without  limitation,  as a
result of any fire, accident or other casualty,  whether insured against or not;
that no  preliminary  or permanent  injunction  or other order that prevents the
consummation  of the  transactions  contemplated  by the  Agreement  shall be in
effect nor shall any lawsuit  have been  brought  therefor;  that all  documents
required to be delivered by Mr.  Roach shall have been  delivered;  and that all
requisite  consents and approvals that the Company  reasonably  deems  necessary
shall have been obtained.                                                       

         In addition to obtaining the  stockholder  vote being requested in this
Proxy  Statement,  it is a condition to the  obligations  of Mr.  Roach  (unless
waived by Mr. Roach) that, at the time of the closing,  the  representations and
warranties of the Company made in the Agreement  continue to be true and correct
in all material respects;  that the Company shall have performed all obligations
required to be  performed  by it;  that there shall be no adverse  change in the
condition  (financial  or  otherwise,  properties,  assets or  prospects  of the
Company and its subsidiaries  taken as a whole; that no preliminary or permanent
injunction or other order that  prevents the  consummation  of the  transactions
contemplated by the Agreement shall be in effect nor shall any lawsuit have been
brought  therefor;  that all  documents  required to be delivered by the Company
shall have been  delivered;  and that all requisite  consents and approvals that
Mr. Roach requires shall have been obtained.                                    

Representations and Warranties                                                  

         Mr.  Roach  and the  Company  have  made  certain  representations  and
warranties  in the Agreement to induce the other to enter into the Agreement and
consummate the transactions contemplated by the Agreement.                      

         The  representations  of the Company relate to, among other things, its
organization; good standing; power and authority to enter into the Agreement and
perform the  obligations to be performed by it under the Agreement;  the binding
effect of the Agreement on it;  required  third party  consents;  the absence of
conflicts  with  corporate  documents,  agreements  and laws  applicable  to the
Company; that the Company has not incurred any liability for finders', brokerage
or agents' fees or commissions in connection with the Agreement;  its compliance
with the rules of, and accuracy of the filings with, the Securities and Exchange
Commission; and as to its financial statements.                                 

         The  representations  of Mr. Roach relate to, among other  things,  the
organization,  good-standing  and  capitalization  of PRC; Mr. Roach's power and
authority  to  enter  into the  Agreement  and  perform  the  obligations  to be
performed by him under the  Agreement;  the binding  effect of the  Agreement on
him; and the absence of conflicts with documents, agreements and laws applicable
to Mr.  Roach  and  PRC;  required  third  party  consents;  PRC's  title to the
Equipment;  that  neither  Mr.  Roach nor PRC has  incurred  any  liability  for
finders',  brokers'  or  agents'  fees or  commissions  in  connection  with the
Agreement; as to the financial statements of PRC for the year ended December 31,
1998 and the interim  financial  statements  to be delivered to the Company with
respect to 1999;  the  completeness  of PRC's books and records;  the absence of
undisclosed  liabilities and certain events,  including a covenant that PRC will
not  conduct  any  business  other than  leasing  the  Equipment  to the Company
pursuant to the Equipment Lease;  the absence of litigation  against PRC and its
assets; that PRC has paid all taxes                                             

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applicable to it; and that PRC is in  compliance  in all material  respects with
all applicable laws, rules and regulations.                                     

Indemnification                                                                 

         Mr. Roach has agreed to indemnify  and hold the Company  harmless  from
any  liabilities or  obligations of PRC other than those  reflected on financial
statements  of PRC or otherwise  disclosed in the  Agreement and with respect to
any material breach of any representation or warranty or other agreement made by
him in the  Agreement.  The Company has agreed to  indemnify  and hold Mr. Roach
harmless from  liabilities  and  obligations of PRC reflected on PRC's financial
statements or otherwise disclosed to the Company in the Agreement,  with respect
to PRC's  business  subsequent  to the closing and with  respect to any material
breach of any  representation  or other  agreement  made by the  Company  in the
Agreement.                                                                      

Registration Rights                                                             

         The  Company  has  agreed  to  register  the  Shares,  on up  to  three
occasions, subject to certain limitations,  under the Securities Act of 1933, as
amended (the "Securities  Act"), in order to permit the offer and sale from time
to time of the Shares  covered by the applicable  registration  statement by the
holders thereof while the registration  statement is in effect and current.  The
registration  rights  afforded  cease as to any of the  Shares  upon  their sale
pursuant to a registration statement or Rule 144 under the Securities Act ("Rule
144") or at such time as they may, in the opinion of counsel to the Company,  be
sold by the holder  thereof under Rule 144 without regard to the volume or other
limitations of Rule 144. The Company has agreed to bear all expenses incurred in
connection with the registration of the Shares,  including the fees and expenses
of the  Company's  counsel  and  accountants,  expenses in  connection  with the
preparation  and  filing  of the  registration  statement  and  registration  or
qualification of the Shares under applicable state securities laws, and the fees
and  disbursements  of one counsel  selected by the holders of a majority of the
Shares to review the registration statement. The holders are to bear all selling
discounts,  commissions  and  brokerage  commissions.  The Company has agreed to
indemnify and hold harmless each holder of Shares  against  liabilities to which
such  holder may become  subject  by reason of any untrue  statement  or alleged
untrue  statement of a material  fact,  or the  omission or alleged  omission to
state a material  fact, in a  registration  statement,  except in certain cases,
including if the liability  arises out of, or is based upon and made in reliance
and conformity with,  information provided by the holder specifically for use in
connection with the registration statement, in which case, the applicable holder
is to so indemnify and hold harmless the Company.                               

Reasons for Seeking Stockholder Approval                                        

         The Shares  will  represent,  based upon the number of shares of Common
Stock  outstanding  on the Record  Date,  approximately  12.3% of the  Company's
outstanding  Common Stock after giving effect to the issuance of the Shares. Mr.
Roach  currently owns  approximately  8.5% of the Company's  outstanding  Common
Stock on the Record  Date and,  including  the  portion  of options to  purchase
Common Stock exercisable within 60 days after the Record Date, beneficially owns
approximately  8.9% of the Company's Common Stock. If the Agreement is approved,
and the transactions  contemplated by the Agreement are  consummated,  Mr. Roach
would own approximately  19.8% of the Company's Common Stock and, including such
portion of options,  would  beneficially own 20.2% of the Company's Common Stock
(assuming no other  shares of Common Stock were issued by the Company  after the
Record Date).                                                                   

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         The rules of the Nasdaq  Stock  Market  requires  the Company to obtain
stockholder  approval  of the Stock  Purchase  Agreement  since Mr.  Roach is an
officer,  director,  officer  and has a greater  than 5% interest in PRC and the
transaction  involves  the  issuance  by the Company of 5% or more of its Common
Stock. If the Agreement is not approved by stockholders, or the other conditions
to closing are not fulfilled or waived, the Stock Purchase Agreement will not be
consummated  and the  Equipment  Lease will remain in full force and effect (see
"--Effect on the Equipment Lease").                                             

Effect on the Equipment Lease                                                   

         The Agreement  provides  that the Equipment  Lease is to remain in full
force and effect,  except that no rental payments need by made for periods after
December  31,  1998  unless  the  stockholder  approval  is  not  obtained.   If
stockholders do not approve the Agreement,  the Company is to pay all rental and
other  payments it would  otherwise  have been required to make in a lump sum no
later than 10 days after the  earlier  of (i) the date  stockholders  shall have
voted against such  approval,  (ii) the Company shall have abandoned any attempt
to obtain stockholder approval or (iii) June 30, 2000.                          

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
the  Proposal  is  required  to approve  the  Proposal.  The Board of  Directors
recommends a vote FOR approval of the 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,  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  1999
Annual  Meeting of  Stockholders  must be  received  by July 9,  1999.  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
Management's  proxy  statement and form of proxy for the  Company's  next Annual
Meeting,  the proxies named in the  Management's  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 22, 1999.  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.                    

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                                                                     

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& 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.          

                                       By Order of the Board of Directors,

                              /s/  Dorothy Roach

                                    Dorothy Roach,
                               Secretary
March 12, 1999                                                                  

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PROXY                                                                      PROXY

TII INDUSTRIES, INC.

Proxy for Special Meeting of Stockholders - April 20, 1999
 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 Tuesday,  April 20, 1999, at 10:30
a.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 THE
PROPOSAL  AND WILL BE DEEMED TO GRANT  AUTHORITY  TO VOTE ON SUCH OTHER  MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY  ADJOURNMENTS OR POSTPONEMENTS
THEREOF.                                                                        

PLEASE SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)

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TII INDUSTRIES, INC.
 PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. |_|

A vote FOR the Proposal is recommended by the Board of Directors.               

1.   To approve the Stock Purchase Agreement,     FOR        AGAINST     ABSTAIN
   dated as of December 31, 1998 between the    |_|          |_|         |_|
Company and Alfred J. Roach.                                          

2.   To vote upon such other matters that may      AUTHORITY       AUTHORITY    
properly come before the meeting               GRANTED        WITHHELD
                                               |-|             |-|

                    Dated  _____  , 1999

            Signature(s)
                                        ----------------------------------------

                                        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.

--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
 YOUR VOTE IS IMPORTANT.
 PLEASE SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

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                                                                         ANNEX I

STOCK PURCHASE AGREEMENT

         AGREEMENT  made as of the 31st day of December,  1998, by and among TII
INDUSTRIES,  INC., a Delaware corporation having an office at 1385 Akron Street,
Copiague,  New York 11726  ("Buyer")  and ALFRED J. ROACH,  residing at Route 2,
Kennedy Avenue, Guaynabo, Puerto Rico 00657 ("Seller").                         

W I T N E S S E T H:

         WHEREAS,  Buyer desires to purchase from Seller,  and Seller desires to
sell to  Buyer,  all of the  issued  and  outstanding  shares of  capital  stock
(the"PRC Shares") of PRC Leasing,  Inc.  ("PRC"),  upon the terms and conditions
hereinafter set forth.                                                          

         NOW THEREFORE,  in  consideration  of the mutual covenants and promises
herein  contained and upon the terms and conditions  hereinafter set forth,  the
parties hereto, intending to be legally bound, agree as follows:                

1.    PURCHASE AND SALE OF THE PRC SHARES.                    

         1.1.  Purchase  and   Sale.   Upon   the   terms  and conditions herein
contained,  at the  Closing (as  hereinafter  defined),  Seller  agrees to sell,
transfer,  assign  and  deliver  the PRC  Shares to Buyer  and  Buyer  agrees to
purchase and accept the PRC Shares from  Seller,  in each case free and clear of
all liens, claims, pledges,  restrictions,  obligations,  security interests and
encumbrances of any kind, nature and description.                               

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2.    CONSIDERATION.                                          

         2.1.  Purchase Price. In consideration  for the sale of the PRC Shares,
Buyer shall  issue and deliver to Seller an  aggregate  of  1,176,213  shares of
Common Stock, $.01 par value per share, of Buyer ("Buyer's Common Stock").      

3.    CLOSING.                                                

         3.1.  Time and  Place  of  Closing.  The  closing  of the  transactions
contemplated by this Agreement (the  "Closing")  shall take place at the offices
of Buyer at 10:00 a.m.,  local time,  on the fifth  business day  following  the
obtaining  of the  stockholder  approval  required  by  Section  8.1(e)  of this
Agreement,  or, if the  conditions  stated in Article 8 are not  satisfied on or
prior  to the  aforesaid  date and  hour,  and  neither  party  terminates  this
Agreement  pursuant to Section 10.1,  then at such other date,  hour or place as
Buyer and Seller shall  hereafter  agree in writing (the date the closing occurs
is herein referred to as the "Closing Date").                                   

         3.2.  Deliveries  by  Seller at Closing.  At  the Closing, Seller shall
deliver to Buyer the following:                                                 

      (a) the PRC Shares, duly endorsed for transfer to Buyer;

               (b) the  certificate  described  in  Sections  8.1(a)  and 8.1(b)
hereof;                                                                         

               (c) a good standing  certificate  confirming  that PRC is in good
standing  under the laws of the  Commonwealth  of Puerto Rico,  certified by the
Secretary of the  Commonwealth of Puerto Rico, such  Certificate to be of a date
not more than 10 days prior to the Closing Date;                                

               (d) copies of the Certificate of Incorporation of PRC,  including
all amendments thereto, certified by the Secretary of the Commonwealth of Puerto
Rico as of a date not more than 10, days prior to the Closing Date;             

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               (e) a copy of the By-Laws of PRC, as  amended,  certified  by the
Secretary of PRC as of the Closing Date;                                        

               (f)  unaudited  financial  statements  of PRC as of a date within
five  business days prior to the Closing Date and for the period from January 1,
1999  through  such  date  (the  "1999  Interim  Financial  Statements"),  which
financial  statements  shall  be in form  and of  quality  similar  to the  1998
Year-End Financial  Statements (as defined in Section 4.7) heretofore  delivered
by Seller to Buyer.                                                             

               (g) a written  certification  by Seller  stating  that PRC's only
assets are the Equipment set forth on Exhibit "A" hereto (the "Equipment"), that
certain  Lease  dated July 18,  1991,  as  amended,  between  PRC and Buyer (the
"Lease") and any payments due under the Lease and that PRC has no liabilities of
any nature,  whether  accrued,  absolute,  contingent or  otherwise,  including,
without limitation, tax liabilities due or to become due.                       

         3.3.  Deliveries  by   Buyer  at  Closing.  At the Closing, Buyer shall
deliver the following:                                                          

(a) 1,176,213 shares of Buyer's Common Stock;     

               (b) the  certificate  described  in  Sections  8.2(a)  and 8.2(b)
hereof;                                                                         

               (c) a good standing  certificate  confirming  the Buye is in good
standing under the laws of the State of Delaware,  certified by the Secretary of
State of Delaware as of a date not more than 10 days prior to the Closing  Date;
and                                                                             

               (d) a  Certificate  of  Incumbency  as to each  officer  of Buyer
authorized to execute this Agreement and the documents to be delivered  pursuant
hereto.                                                                         

         4.    REPRESENTATIONS AND  WARRANTIES OF SELLER AND PRC.  Seller hereby
represents and warrants to Buyer as follows:                                    

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         4.1.  Status.  PRC is, and at the Closing will be, a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
Commonwealth  of  Puerto  Rico  and it is not  required  to be  qualified  to do
business in any other  jurisdiction in order to conduct its business  operations
in such  jurisdiction.  PRC has,  and at the  Closing  will have,  the power and
authority to conduct all of the activities conducted by it.                     

         4.2.  Capitalization and Stock Ownership. The authorized capital of PRC
consists  solely of 1,000 shares of Common Stock,  $1.00 par value per share, of
which all 1,000 shares are, and at the Closing only such shares (which  comprise
the PRC Shares) will be, issued and  outstanding.  Seller is, and at the Closing
will be, the record and beneficial  owner of 100% of the issued and  outstanding
capital  shares of PRC,  free and  clear of all  liens,  charges,  encumbrances,
security interests, obligations or other claims. All of the PRC Shares have been
duly authorized and, on the Closing Date will be, validly issued, fully paid and
non-assessable,  and were offered and sold in accordance with applicable federal
and state securities laws or applicable exemptions thereunder. There are no and,
at the Closing there will be no, outstanding options,  warrants,  rights, calls,
puts,  agreements,  commitment,  plans,  other arrangements or understandings to
issue or transfer any PRC Shares or any  authorized  but unissued  shares of the
capital stock of PRC or obligating PRC or Seller to grant,  extend or enter into
any such option, warrant, right, call, put, agreement,  commitment,  plan, other
arrangement or understanding. Neither PRC nor Seller is subject to any agreement
limiting,  restricting  or effecting the rights of PRC or, which would affect or
restrict  Buyer's rights,  with respect to the PRC Shares or other capital stock
of PRC, including, without limitation, voting rights, rights to transfer such   

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shares  or rights to  dividends  or other  distributions  with  respect  to such
shares. PRC has no, and on the Closing Date, will have no, subsidiaries.        

         4.3.  Authority.  Seller  has,  and  at  the  Closing  will  have,  all
necessary  corporate  power and  authority to enter into this  Agreement  and to
perform  the  obligations  to be  performed  by  each of  them  hereunder.  This
Agreement is, and at the Closing will be, valid and legally  binding upon Seller
and PRC,  enforceable  in  accordance  with  its  terms,  except  only as may be
affected by (i) bankruptcy,  insolvency,  reorganization,  moratorium or similar
laws affecting  creditors' rights generally,  (ii) general equitable  principles
affecting the enforcement of obligations generally, whether at law, in equity or
otherwise,  and (iii) the  discretion  of the court before which any  proceeding
therefor may be brought.  The execution  and delivery of this  Agreement and the
consummation of the transactions  contemplated hereby do not, and at the Closing
will not, (i) violate any law, or any rule or regulation  of any  administrative
agency or any governmental body, or any order, writ, injunction or decree of any
court , administrative  agency or governmental body applicable to Seller or PRC,
or the  Certificate  of  Incorporation  or By-Laws of PRC,  as  amended,  or any
indenture,  loan agreement,  lease, mortgage,  franchise,  permit,  undertaking,
contract  or  other  instrument  to which  Seller  or PRC is a party or by which
Seller or PRC or any of their  assets is bound or (ii) result in the creation of
any lien,  charge or encumbrance  upon the assets of Seller or PRC. PRC is not a
party to any agreement,  lease mortgage,  undertaking or contract other than the
Lease.                                                                          

         4.4.  Third Party  Consents.  Except for consents  that may be required
from the  Secretary  of State of Puerto Rico of the change in control of PRC for
the continued effectiveness of PRC's tax exemption decree and notice required to
the Commissioner of Financial Institutions, no consent, authorization,  order or
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person is required  for the  execution  and  delivery of this  Agreement  or the
consummation by Seller or PRC of any of the transactions contemplated hereby.   

         4.5.  Title to Assets. PRC has, and at the Closing will have,  good and
marketable  title to all of its assets,  including,  all of the Equipment and to
all payments  under the Lease and, at the Closing,  such assets will be free and
clear of all liens,  charges,  security interests or other  encumbrances  except
liens for current taxes not yet due.                                            

         4.6.  Finder's  Fees.  Neither  Seller  nor PRC has, and at the Closing
Date neither will have, incurred any liability for finder's or brokerage fees or
agent's  commissions  in  connection  with this  Agreement  or the  transactions
contemplated herein.                                                            

         4.7.  Financial  Statements. Buyer has received copies of the unaudited
financial statements of PRC as of and for the year ended December 31, 1998 ( the
"1998 Year End Financial  Statements").  The 1998 Year End Financial  Statements
are, and 1999 Interim Financial  Statements to be delivered to Buyer pursuant to
Section 3.2(f) and 8.1(b) will be, consistent with the books and records of PRC;
prepared in accordance with generally  accepted  accounting  principles  (except
that they do not  include  footnotes),  on a  consistent  basis  throughout  the
periods  indicated;  and present fairly the financial  position of PRC as of the
dates thereof and the results of operations of PRC for the periods indicated.   

         4.8.  Books and Records. Except with respect to taxes not yet assessed,
the  underlying  books and records of PRC reflect all of the debts,  liabilities
and  obligations  of any nature  (whether  absolute,  accrued or otherwise,  and
whether due or to become due) of PRC.  PRC has not given any  guarantees  of the
obligations of any other person or entity.                                      

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         4.9.  Undisclosed  Liabilities.  As  of the date hereof PRC has, and at
the Closing will have, no liabilities of any nature, whether accrued,  absolute,
contingent  or  otherwise,  for any period  prior to such date or arising out of
transactions  entered into, or any state of facts existing,  at or prior to such
date, except as reflected on the 1998 Year-End  Financial  Statements and except
for liabilities for taxes which are not yet assessed or accrued. Seller does not
know or have reasonable  grounds to know of any basis for the assertion  against
PRC of any  liability  of any  nature or in any amount  not fully  reflected  or
reserved against in the financial statements delivered to Buyer or the books and
records of PRC.                                                                 

         4.10. Events Since 1998 Year-End Financial  Statements.  Since the date
of the 1998 Year- End Financial  Statements PRC has not, and through the Closing
PRC will not,  (i)conduct  business other than leasing the Equipment pursuant to
the Lease;  (ii) suffer any material  adverse change in the business,  condition
(financial  or otherwise) or in assets or  liabilities  of PRC;  (iii) incur any
debts,  liabilities or obligations,  whether  accrued,  absolute,  contingent or
otherwise  and  whether  due or to become  due,  other  than for taxes  directly
attributable to its ownership of the Equipment and amounts received or due under
the Lease, and (iv) become a party to any agreement.                            

         4.11. Litigation.  There  is no   litigation,  action,  suit  or  other
proceeding pending or, to the best of Seller's knowledge, threatened against PRC
or  the  assets  of  PRC  or  which  could  adversely  affect  the  transactions
contemplated by this Agreement.                                                 

         4.12. Taxes. PRC has duly filed, and will duly file for all periods for
which  returns  are due  prior  to the  Closing,  all tax  reports  and  returns
(federal, state, Puerto Rico and local income,  corporate,  franchise and other)
required by it to be filed.  These  returns and reports are and will be true and
correct  in all  material  respects  and all taxes due from PRC have been  paid.
Copies of all                                                                   

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such tax returns have been  provided to Buyer.  The provision for taxes shown in
the 1998 Year End Financial Statements are, and the provision to be shown in the
1999 Interim Financial  Statements will be, adequate for taxes due or accrued as
of the  dates  thereof.  PRC  has not  received  notice  of any  tax  deficiency
outstanding,  proposed or assessed against it, nor has it executed any waiver of
any statute of limitations on the assessment or collection of any tax. There are
no tax  liens  upon,  pending  against,  or to the  best  knowledge  of  Seller,
threatened against any of the assets of PRC.                                    

         4.13. Compliance  with  Laws. The business of PRC has been, and through
the Closing Date will be, conducted in compliance in all material  respects with
all laws, federal,  state, Puerto Rico or local, and all provisions of all rules
and  regulations of any federal agency,  authority,  board,  commission,  or the
like,  or any  state  or  local  government,  or any  authority,  agency  board,
commission,  or the like having  jurisdiction over such business.  PRC possesses
all material  licenses,  permits and governmental  approvals and  authorizations
which are  required  to own its assets and conduct  its  business as  heretofore
conducted.                                                                      

         4.14. Employees.  PRC has no, and through  the  Closing   will have no,
employees  and since the date of its  incorporation,  PRC has never  maintained,
sponsored  or  contributed  to any  employee  benefit  plan,  including  without
limitation any incentive,  severance,  bonus,  deferred  compensation or similar
benefit  plans or  arrangements.  PRC has never  been a party to any  collective
bargaining agreement.                                                           

         4.15. Officers and  Directors.  Seller is, and on the Closing Date will
be, the sole director and officer of PRC.                                       

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         4.16. Finder's  Fees.  Neither  Seller  nor PRC has,  and  through  the
Closing neither will have, incurred any liability for finder's or brokerage fees
or agent's  commissions in connection  with this  Agreement or the  transactions
contemplated in this Agreement.                                                 

         4.17. Accuracy.  The  representations,  warranties   and  statements of
Seller and PRC contained in this Agreement,  or in any certificate  delivered by
Seller or PRC pursuant to this  Agreement,  are true and correct in all material
respects and do not omit to state a material fact necessary in order to make the
representations,  warranties  or  statements  contained  herein or  therein  not
misleading.                                                                     

         5.    REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer  hereby represents
and warrants to Seller as follows:                                              

         5.1.  Status.  Buyer /is,  and at  the Closing  will  be, a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Delaware.                                                              

         5.2.  Authority. Buyer has, and at the Closing will have, all necessary
corporate  power and  authority to enter into this  Agreement and to perform the
obligations  to be  performed by it  hereunder.  This  Agreement  is, and at the
Closing will be, valid and legally binding upon Buyer, enforceable in accordance
with its terms,  except only as may be affected by (i)  bankruptcy,  insolvency,
reorganization, moratorium or similar laws affecting creditors rights generally;
(ii) general  equitable  principles  affecting the  enforcement  of  obligations
generally,  whether at law, in equity or otherwise  and (iii) the  discretion of
the court before which any proceeding therefor may be brought. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby do not,  and at the  Closing  will not,  violate  any law, or any rule or
regulation of any                                                               

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administrative  agency or any governmental body, or any order, writ,  injunction
or decree of any court, administrative agency or governmental body applicable to
Buyer, or the Certificate of Incorporation  or By-Laws of Buyer, as amended,  or
any indenture, loan agreement, lease, mortgage,  franchise, permit, undertaking,
contract or other  instrument to which Buyer is a party or by which Buyer or any
of its assets is bound.                                                         

         5.3.  Third Party  Consents.  Other than  Buyer's  compliance  with its
reporting  obligations under the Securities  Exchange Act of 1934 (the "Exchange
Act") and consents under Buyer's loan  arrangements with BNY Financial Corp. and
Overseas Private Investment  Corporation,  no consent,  authorization,  order or
approval of, or filing or registration with, any governmental authority or other
person is required  for the  execution  and  delivery of this  Agreement  or the
consummation by Buyer of any of the transactions contemplated in this Agreement.

         5.4.  Finder's  Fees.  Buyer has not,  and at the Closing Date will not
have,  incurred  any  liability  for  finder's  or  brokerage  fees  or  agent's
commissions in connection with this Agreement or the  transactions  contemplated
in this Agreement.                                                              

         5.5.  SEC  Documents.  Buyer has  delivered  to Seller true and correct
copies of Seller's  Annual Report on Form 10-K for the year ended June 26, 1998,
Quarterly Report on Form 10-Q for the quarter ended September 25, 1998 (together
with the reports to be delivered by Buyer to Seller pursuant to Section 6.3, the
"SEC  Documents"),  each as filed by Buyer  with  the  Securities  and  Exchange
Commission (the "SEC"). As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Exchange Act and the rules
and  regulations  of the  SEC  promulgated  thereunder  applicable  to  the  SEC
Documents,  and none of the SEC Documents,  at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted               

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to state a material fact required to be stated  therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  As of their respective dates, the financial statements of
Buyer included in the SEC Documents complied as to form in all material respects
with applicable accounting  requirements and the published rules and regulations
of the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles,  consistently applied,
during the periods  involved  (except (i) as may be otherwise  indicated in such
financial  statements  or the notes  thereto,  or (ii) in the case of  unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of Buyer as of the dates thereof and the results of its  operations and
cash  flows  for the  periods  then  ended  (subject,  in the case of  unaudited
statements, to normal year-end audit adjustments).                              

6.    COVENANTS.                                              

         6.1.  Pre-Closing Covenants of Seller.  During the period from the date
hereof to and including the Closing Date, Seller will cause PRC:                

               (a) to use its best efforts to (i) maintain its  business,  carry
on its business  practices  and keep its books of account,  records and files in
substantially the same manner as heretofore,  (ii) preserve its good will, (iii)
pay and perform all agreements,  contracts and other  commitments which are part
of its  business  (including  the  Lease)  in  accordance  with  the  terms  and
provisions thereof,  and (iv) comply in all material respects with all laws that
may be applicable to the operation of its business;                             

               (b) not to take any action  which  would  cause or  constitute  a
material breach,  or would, if it had been taken  immediately  prior to the date
hereof, have caused or constituted a material breach,                           

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of any of the  representations  and warranties set forth in Article 4 hereof; in
the event of, and promptly  after the  occurrence of, or promptly after becoming
aware of the  occurrence  of, or the impending or threatened  occurrence of, any
event which  would cause or  constitute  a material  breach or would,  if it had
occurred  immediately  prior to the date hereof,  have caused or  constituted  a
material breach of any of the  representations  and warranties set forth in said
Article 4, to give detailed notice thereof to Buyer; and to use its best efforts
to prevent or promptly remedy any such breach;                                  

               (c) to use its best efforts to (i)  effectuate  the  transactions
contemplated  in  this  Agreement,  (ii)  fulfill  the  conditions  to  Seller's
obligations  under  this  Agreement,  and (iii)  cause the  transactions  hereby
contemplated in this Agreement to be effectuated in a smooth and orderly manner;
and                                                                             

               (d)  upon  reasonable  notice,  give to Buyer  and its  officers,
employees, attorneys, consultants,  accountants and other representatives access
during  normal  business  hours to all books,  contracts,  documents and records
relating to the business and the assets of PRC, and shall  furnish to Buyer such
information  as Buyer may at any time and from time to time  reasonably  request
with respect to PRC, its business and assets.                                   

         6.2   Stockholders'   Meeting.  Buyer,  acting  through  its  Board  of
Directors,  shall,  in accordance  with  applicable law, use its best efforts to
take all steps  necessary  to duly call and give notice of,  convene and hold, a
special or annual meeting of its stockholders or to solicit written consents for
the  purpose of  approving  the  transactions  contemplated  by this  Agreement,
including,  without limitation,  preparing and filing a proxy statement and form
of proxy and filing  same with the  Securities  and  Exchange  Commission.  Such
meeting shall be held no later than December 31, 1999.                          

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         6.3.  Delivery by Buyer of Future SEC Documents. Buyer shall deliver to
Seller,  promptly  following  their filing with the SEC,  copies of all periodic
reports filed by Buyer with the SEC pursuant to Section 13 of the Exchange Act. 

         6.4.  Further  Assurances.  Each party shall  execute and deliver  (and
Seller shall prior to Closing  cause PRC to execute and  deliver) all  documents
and instruments  and do all other acts which may be reasonably  requested by the
other as necessary or desirable to more effectively  carry out the intentions of
this Agreement, all without further consideration. After the Closing, each party
shall provide to the other, upon request and without charge, such information as
either requires (a) to prepare its financial statements,  (b) to prepare its tax
returns,  (c) to  perform  any other  acts  reasonably  related to the change in
control of and  responsibility  for the business of PRC and the Buyer's purchase
of such  business,  and (d) for any  litigation  that  may be  brought  by third
parties related to the transaction contemplated in this Agreement.              

7.    REGISTRATION RIGHTS                                     

         7.1   Investment  Representation.   Seller  acknowledges   that   he is
Chairman  of the Board and a  director  of Buyer;  that,  except as set forth in
Article 5, neither  Buyer nor any persons or parties  associated  with Buyer has
made any  representations  or  warranties  of any kind,  nature  or  description
relating  to the  issuance  to him of the  shares of the  Buyer's  Common  Stock
hereunder and is relying solely on an independent  investigation  by it of Buyer
and its  prospects;  that Seller has received a copy of Buyer's Annual Report on
Form 10-K for the year ended June 26, 1998 and Buyer's  Quarterly Report on Form
10-Q for the  quarter  ended  September  25,  1998,  each as filed  with the SEC
Commission;  and that he has had an  opportunity  to obtain all such  additional
information  necessary  to verify the accuracy of any  information  set forth in
such Reports. Seller represents and warrants                                    

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that he has such  knowledge and  experience  in financial  and business  matters
sufficient to enable him to evaluate the risks of his  investment in the Buyer's
Common Stock being issued hereunder; and that he is acquiring the Buyer's Common
Stock being  issued to him for  investment  and not for resale or  distribution.
Certificates evidencing the shares will contain a restrictive legend.           

         7.2   Certain   Definitions.  As  used  in this Section,  the following
capitalized terms shall have the following meanings:                            

               "Holder"  shall  mean the  holder of any  Registrable  Securities
including Seller or any transferee of Registrable Securities from Seller.       

               "Person"  shall mean any  individual,  partnership,  corporation,
business trust, joint venture stock company,  trust,  limited liability company,
unincorporated association,  joint venture, nation or government, state or other
political   subdivision   thereof  (or  other   entity   exercising   executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government) or other entity of whatever nature.                              

               "Registrable Securities" shall mean Buyer's Common Stock issuable
pursuant to this Agreement and, in accordance  with Rule 416  promulgated  under
the Securities Act, any additional  shares thereof issuable by reason of a stock
dividend, stock split or similar transaction;  provided that any such securities
shall cease to be Registrable Securities (i) upon any sale thereof pursuant to a
registration statement or Rule 144 under the Securities Act or (ii) at such time
as they may, in the                                                             

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opinion of counsel to Buyer, be sold by the Holder thereof pursuant to paragraph
(k) of Rule 144 under the Securities Act.                                       

               "Registration  Expenses"  shall  mean all  expenses  incident  to
Buyer's  performance of or compliance  with the  registration  requirements  set
forth in this Section  including,  without  limitation,  the following:  (i) the
fees,   disbursements  and  expenses  of  Buyer's  counsel  and  accountants  in
connection  with  the  registration  of the  Registrable  Securities;  (ii)  all
expenses  in  connection  with  the  preparation,  printing  and  filing  of the
registration statement, any preliminary prospectus or final prospectus,  and any
amendments and  supplements  thereto;  (iv) all expenses in connection  with the
registration  or  qualification  of  the  Registrable   Securities  under  state
securities laws in which Buyer is obligated hereunder to register or qualify the
Registrable Securities, including the fees and disbursements of counsel to Buyer
in  connection  with such  qualification;  (v) the filing  fees  incident to any
listing or review of the Registrable Securities or the transactions contemplated
by this Agreement with or by any securities  exchange upon which the Registrable
Securities are listed or with the National  Association  of Securities  Dealers,
Inc. and (vi) the fees and disbursements of one counsel, selected by the Holders
of a  majority  of  the  Registrable  Securities,  to  review  the  Registration
Statement Notwithstanding the foregoing, Registration Expenses shall not include
discounts, commissions, brokerage commissions.                                  

               "Securities  Act"  shall  mean the  Securities  Act of  1933,  as
amended,  or any similar federal  statute,  and the rules and regulations of the
SEC thereunder, all as the same shall be in effect                              

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from time to time,  and a reference to a  particular  section  thereof  shall be
deemed to include a reference  to the  comparable  section,  if any, of any such
similar federal statute.                                                        

         7.3   Filing of Registration Statements.  On  up to three (3) occasions
in the aggregate,  at any time following the issuance of Registrable Securities,
the Holders of a majority of the  Registrable  Securities  not then subject to a
Registration  Statement (as defined below),  may demand that Buyer file with the
SEC a registration  statement  under the Securities  Act, on Form S-3 or, if not
available to Buyer, on another  appropriate form, pursuant to Rule 415 under the
Securities Act (each a  "Registration  Statement") to register any (but not less
than 50,000 shares) or all theretofore remaining Registrable Securities in order
to permit the offer and sale of the Registrable  Securities from time to time by
such Holders while each Registration  Statement is effective and current.  Buyer
will comply with such demand within ninety (90) days.                           

         7.4   Continued  Effectiveness of  Registration  Statements. Subject to
Section  7.7 below,  Buyer shall use its best  efforts to have the  Registration
Statement  declared  effective as soon as practicable  after its filing and keep
such  registration   statement  continuously  effective  until  all  Registrable
Securities included therein cease to be Registrable Securities.                 

7.5   Registration Procedures.  Buyer shall:                  

               (a) notify each Holder  promptly:  (i) when the prospectus or any
prospectus  supplement or  post-effective  amendment has been filed with the SEC
and, with respect to the                                                        

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registration statement or any post-effective amendment, when the same has become
effective;  (ii) of the  issuance  by the SEC of any stop order  suspending  the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose; (iii) of the receipt by Buyer of any notification with respect
to the  suspension  of the  registration  or  qualification  of the  Registrable
Securities for sale in any  jurisdiction or the initiation or threatening of any
proceeding for such purpose;  and (iv) of the happening of any event which makes
any statement made in the registration statement, the prospectus or any document
incorporated  therein by reference  untrue and which  requires the making of any
changes  in  the  registration   statement,   the  prospectus  or  any  document
incorporated  therein by reference in order to make the  statements  therein not
misleading;                                                                     

               (b) cause the prospectus contained in the registration  statement
to be  supplemented  by any  required  prospectus  supplement,  and  cause  such
supplement or prospectus,  as so supplemented,  to be filed pursuant to Rule 424
under the Securities Act;                                                       

               (c) upon the  occurrence  of any event  contemplated  by  Section
7.4(a)(iv)  above,  prepare a  supplement  or  post-effective  amendment  to the
registration  statement,  the related  prospectus  or any document  incorporated
therein by reference or file any other required  document so that, as thereafter
delivered to the purchasers of the Registrable  Securities,  the prospectus will
not contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading;                   

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               (d) furnish to each Holder,  without  charge,  at all times while
Buyer shall be required  under the provisions  hereof to cause the  registration
statement  to remain  current,  such  number of  copies  of any  prospectus  and
prospectus  supplement as each Holder may reasonably  request in order to effect
the offering and sale of the Registrable Securities;                            

               (e) make reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement;                     

               (f) cause all securities covered by the registration statement to
be listed on each  securities  exchange  or market on which  similar  securities
issued by Buyer are then listed;                                                

      (g) take such action as shall be reasonably necessary to
register  or qualify the  Registrable  Securities  covered by such  registration
under such blue sky or other  state  securities  laws in the  United  States for
offer and sale as a Holder shall reasonably request;  provided,  however,  that,
unless it has  already  done so,  Buyer shall not be  obligated  to qualify as a
foreign  corporation to do business under the laws of any  jurisdiction in which
it shall  not be then  qualified  or in which it would be  required  to file any
general consent to service of process,  and nothing herein shall be construed as
requiring  Buyer to register or qualify the Registrable  Securities  outside the
United States; and                                                              

               (h) make generally  available to Buyer's security holders as soon
as practicable  but no later than 16 months  following the effective date of the
registration  statement,  in accordance with Section 11(a) of the Securities Act
and Rule 158 thereunder, an earnings statement in reasonable                    

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detail and covering a period of at least 12 months beginning after the effective
date of the registration statement.                                             

         7.6   Registration  Expenses. Buyer  will  pay all of the  Registration
Expenses incurred in connection with the registration of Registrable  Securities
pursuant to this Section. Each Holder shall bear all discounts,  commissions and
brokerage commissions related to the sale or transfer of Registrable Securities,
as well as the fees and  expenses  of counsel and  accountants  retained by such
Holder.                                                                         

         7.7   Permissible Delays.  Notwithstanding anything  in this  Agreement
to the contrary:                                                                

               (a)  Buyer  shall be  entitled  to  postpone  the  filing  of any
registration  statement  otherwise  required to be  prepared  and filed by it or
suspend  keeping  any  registration   statement  or  prospectus  current  and/or
effective without  suspending such  effectiveness by instructing each Holder not
to sell any Registrable  Securities included in any such registration  statement
(i)  during any period up to 60 days  reasonably  necessary  in order to prepare
annual financial statements of Buyer required to be included in the registration
statement for the fiscal period then most recently  ended,  (ii) for a period up
to 60 days (but no longer  than the reason  for  non-disclosure  continues),  if
Buyer would be required to disclose in such registration  statement any material
business  situation,  transaction or negotiation  not otherwise  disclosed as to
which Buyer's Board has determined,  in good faith, that valid,  significant and
material  business  reasons  exist that  warrant  that such  information  not be
disclosed,  or (iii)  during the ten-day  period prior to, and during the 90-day
period beginning on, the                                                        

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effective  date of a  registration  statement  covering an  underwritten  public
offering by Buyer of any Common  Stock or any  securities  of Buyer  convertible
into or exchangeable or exercisable for Common Stock; and                       

               (b) Buyer shall not be obligated to file a registration statement
covering a Holder's Registrable Securities unless and until the Holder furnishes
to Buyer in writing the  information  regarding such Holder and the  Registrable
Securities required to prepare the disclosures  required by Sections 507 and 508
of Regulation S-K  promulgated  under the Securities Act in connection with such
registration statement.                                                         

7.8   Indemnification and Contribution.                       

               (a) Buyer agrees to indemnify and hold a Holder,  and each person
who  controls  such Holder,  within the meaning of Section 15 of the  Securities
Act,  harmless  against any and all losses,  claims,  damages and liabilities to
which they or any of them may become  subject  under the  Securities  Act or any
other  statute  or  common  law or  otherwise,  and to  reimburse  them  for any
reasonable  legal  or  other  expenses  incurred  by  them  in  connection  with
investigating any claims and defending any action (the losses, claims,  damages,
and expenses to which Sections 7.8(a) and 7.8(b) pertain, being, collectively, a
"Loss"),  insofar as any such Loss shall arise out of or shall be based upon (i)
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement relating to the sale of such Registrable  Securities,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the                                      

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statements therein not misleading, or ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus (as amended
or supplemented if Buyer shall have filed with the SEC any amendment  thereof or
supplement  thereof) if used prior to the  effective  date of such  registration
statement,  or contained in the prospectus (as amended or  supplemented if Buyer
shall have filed with the SEC any amendment  thereof or  supplement  thereof) if
used  within  the  period  during  which  Buyer  shall be  required  to keep the
registration  statement to which such prospectus relates current pursuant to the
terms of this  Agreement,  or the omission or alleged  omission to state therein
(if so used) a material fact necessary in order to make the statements  therein,
in light of the  circumstances  under which they were made, not misleading  (the
matters  in  the  foregoing  clauses  (i)  and  (ii)  being,   collectively,   a
"Violation"); provided, however, that the indemnification agreement contained in
this  Section  7.8 shall not apply (A) to a Loss that  arises out of or is based
upon a  Violation  made in  reliance  upon and in  conformity  with  information
furnished to Buyer by the Holder  specifically  for use in  connection  with the
preparation  of the  registration  statement or any  preliminary  prospectus  or
prospectus contained in the registration statement or any such amendment thereof
or supplement thereto, (B) to a Violation made in any preliminary  prospectus or
the prospectus contained in the registration  statement in the form in which the
registration  statement  became effective or in the form filed by Buyer with the
SEC pursuant to Rule 424(b) under the Securities Act and the Holder was promptly
advised in writing not to use the incorrect preliminary prospectus or prospectus
and the Holder,  notwithstanding  such  advice,  used it; (C) to the extent such
Loss is based on a failure of the Holder to deliver or to cause the  preliminary
prospectus  or  prospectus  made  available  by  Buyer  to be  delivered  to the
purchaser of the Registrable Securities to the extent delivery is required under
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settlement is effected without the prior written consent of Buyer, which consent
shall not be unreasonably withheld.                                             

               (b) The Holder agrees,  in the same manner and to the same extent
as set forth in Section  7.8(a),  to indemnify and hold harmless  Buyer and each
person,  if any,  who  controls  Buyer,  within the meaning of Section 15 of the
Securities  Act, its directors and those officers of Buyer who shall have signed
any such  registration  statement  with  respect  to any Loss  arising  out of a
Violation  to which the  provisos  in Section  7.8(a)  apply to the  extent,  as
contemplated  by Section  7.8(a),  the Holder's  actions or inaction caused such
Loss.                                                                           

               (c) A Person entitled to be indemnified  under Sections 7.8(a) or
7.8(b) shall, promptly after receipt of notice of the commencement of any action
against such  indemnified  Person in respect of which  indemnity  may be sought,
notify  the  indemnifying  Person in writing of the  commencement  thereof.  The
omission of any indemnified  Person so to notify an  indemnifying  Person of any
such action  shall not relieve the  indemnifying  Person from any  liability  in
respect of such action which it may have to such  indemnified  Person on account
of the  indemnity  provided  in Sections  7.8(a) or 7.8(b),  as the case may be,
except to the extent the indemnifying  Person was materially  prejudiced by such
omission,  and in no event shall relieve the indemnifying  Person from any other
liability which it may have to such indemnified  Person. In case any such action
shall be brought against any indemnified  Person, the indemnifying  Person shall
be entitled to participate  therein and, to the extent that it may wish, jointly
with any other indemnifying Person, to assume the defense thereof,  with counsel
reasonably  satisfactory to the indemnified  Person,  and, after notice from the
indemnifying                                                                    

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Person to such  indemnified  Person of its  election  so to assume  the  defense
thereof,  the indemnifying Person shall not be liable to such indemnified Person
for any legal or other expenses subsequently incurred by such indemnified Person
in  connection  with  the  defense  thereof  other  than  reasonable   costs  of
investigations;  provided,  however,  that an indemnified  Person shall have the
right to retain its own  counsel  with the fees and  expenses  to be paid by the
indemnifying  Person if, in the  reasonable  opinion of counsel  retained by the
indemnifying  Person,  the  representation  by such  counsel of the  indemnified
Person  and the  indemnifying  Person  would be  inappropriate  due to actual or
potential   differing   interests  between  such  indemnified   Person  and  the
indemnifying Person. Buyer shall pay reasonable fees for only one separate legal
counsel  for all  Persons it may be  obligated  to  indemnify  pursuant  to this
Agreement,  and such legal counsel shall be selected by the indemnified  Persons
holding a majority  in interest of the  Registrable  Securities  included in the
registration  statement to which the Loss relates.  The indemnified Person shall
cooperate fully with the indemnifying  Person in connection with any negotiation
or  defense  of any such  action or claim by the  indemnifying  Person and shall
furnish to the indemnifying Person all information  reasonably  available to the
indemnified  Person  which  relates  to the Loss.  The Person  whose  counsel is
retained  to  defend  the  action or  proceeding  shall  keep the other  Persons
reasonably  apprised  at all  times  as to the  status  of  the  defense  or any
settlement  negotiations with respect thereto.  No indemnifying  Person shall be
liable for any settlement of any action,  claim or proceeding  effected  without
its written consent,  provided,  however, that the indemnifying Person shall not
unreasonably  withhold,  delay or condition its consent.  No indemnifying Person
shall,  without the consent of the indemnified  Person,  consent to entry of any
judgment or enter into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified Person of a                                                         

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release  from all  liability in respect to such claim or  litigation.  Following
indemnification  as provided for  hereunder,  the  indemnifying  Person shall be
subrogated  to all rights of the  indemnified  Person with  respect to all third
parties,  firms or corporations relating to the matter for which indemnification
has been made.                                                                  

               (d) If the  indemnification  provided for in Sections  7.8(a) and
7.8(b) from the indemnifying  Person is unavailable to an indemnified  Person in
respect of any Loss referred to therein,  then the indemnifying  Person, in lieu
of indemnifying such indemnified Person,  shall contribute to the amount paid or
payable by such  indemnified  Person as a result of such Loss in such proportion
as is appropriate to reflect the relative fault of the  indemnifying  Person and
indemnified  Persons in connection  with the actions that resulted in such Loss,
as well as any other relevant  equitable  considerations.  The relative fault of
such  indemnifying  Person  and  indemnified  Persons  shall  be  determined  by
reference to, among other things, whether any action in question,  including any
Violation  has been  made by,  or  relates  to  information  supplied  by,  such
indemnifying  Person  or  indemnified   Persons,   and  their  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
action.  The amount paid or payable by a Person as a result of the Loss referred
to above  shall be  deemed  to  include  any  legal  or other  fees or  expenses
reasonably  incurred  by such Person in  connection  with any  investigation  or
proceeding.  The parties hereto agree that it would not be just and equitable if
contribution  pursuant  to this  Section  7.8(d)  were  determined  by pro  rata
allocation  or by any other method of  allocation  that does not take account of
the  equitable  considerations  referred to in this  Section  7.8(d).  No Person
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any                  

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Person   who  was  not   guilty  of  such   fraudulent   misrepresentation.   If
indemnification  is available under this Section 7.8, the  indemnifying  Persons
shall indemnify each  indemnified  Person to the full extent provided in Section
7.8(a)  and  7.8(b)  hereof  without  regard  to  the  relative  fault  of  said
indemnifying  Person or indemnified Person or any other equitable  consideration
provided for in this Section 7.8(d).                                            

         7.9   Report by Holder  of  Sales. In order to enable  Buyer to be in a
position to update the registration  statement,  including the prospectus,  from
time to time, if required,  and remove any unsold  shares from the  registration
statement  after the time all  Registrable  Securities  cease to be  Registrable
Securities,  the  Holder  agrees to notify  Buyer in writing as to the number of
Registrable  Securities  sold or  otherwise  disposed of by the Holder,  whether
pursuant to the  registration  statement filed by Buyer pursuant to this Section
7, under Rule 144  (including  paragraph (k)  thereunder)  or otherwise,  within
fifteen days after the end of each month in which a sale or other disposition of
Registrable   Securities   occurs  and  promptly   following  request  for  such
information from Buyer from time to time.                                       

8.    CONDITIONS PRECEDENT.                                   

         8.1.  Conditions  Precedent to Buyer's  Obligations. The obligations of
Buyer under this Agreement,  including without limitation, Buyer's obligation to
consummate   the   transactions   contemplated   hereby,   are  subject  to  the
satisfaction, at or prior to the Closing Date, of the following conditions:     

               (a) Representations and Warranties of Seller. The representations
and warranties of Seller set forth in this  Agreement  shall be true and correct
in all material respects as of the date of this                                 

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Agreement  and as of the  Closing  Date as though  made on and as of the Closing
Date,  and Buyer  shall  have  received a  certificate  signed by Seller to such
effect.                                                                         

               (b)  Performance  of  Obligations  of Seller.  Seller  shall have
performed all  obligations  required to be performed by him under this Agreement
at or prior to the Closing  Date,  and Buyer shall have  received a  certificate
signed by Seller to such effect.                                                

               (c)  No  Adverse  Change.  The  Equipment  shall  not  have  been
adversely  affected in any material way,  including,  without  limitation,  as a
result of any  fire,  accident  or other  casualty  or act of God or the  public
enemy, whether insured against or not.                                          

               (d) Litigation.  No preliminary or permanent  injunction or other
order by any  federal or state court in the United  States  which  prevents  the
consummation  of the  transactions  contemplated  by this Agreement  shall be in
effect nor shall any person  have  brought  suit to seek such an  injunction  or
order to prevent  the  consummation  of the  transactions  contemplated  by this
Agreement.                                                                      

               (e) Buyer's Stockholder Approval. The stockholders of Buyer shall
have  approved  the  transactions  contemplated  in this  Agreement  by the vote
required  under the Delaware  General  Corporation  Law to approve an interested
director  transaction and by vote required in order to fulfill the  requirements
for the Buyer's  listing of all of the Buyer's  Common Stock on The Nasdaq Stock
Market, Inc.                                                                    

               (f) Closing Documents. Buyer shall have received all documents to
be delivered pursuant to Section 3.2 hereof.                                    

               (g) Consents.  All consents and approvals  that Buyer  reasonably
deems  necessary  to  have  obtained  prior  to the  Closing  Date in  order  to
consummate the transactions contemplated by this                                

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Agreement  (including,  without  limitation,  those described in Section 4.4 and
5.3), shall have been obtained.                                                 

         8.2.  Conditions Precedent to Seller's  Obligations. The obligations of
Seller under this Agreement,  including without limitation,  Seller's obligation
to  consummate  the  transactions   contemplated  hereby,  are  subject  to  the
satisfaction, at or prior to the Closing Date, of the following conditions:     

               (a)  Representations and Warranties of Buyer. The representations
and warranties of Buyer set forth in this Agreement shall be true and correct in
all  material  respects as of the date of this  Agreement  and as of the Closing
Date as  though  made on and as of the  Closing  Date,  and  Seller  shall  have
received  a  certificate  signed  by an  officer  of Buyer to such  effect.     

               (b)  Performance  of  Obligations  of  Buyer.  Buyer  shall  have
performed all obligations required to be performed by it under this Agreement at
or prior to the  Closing  Date,  and Seller  shall have  received a  certificate
signed by an officer of Buyer to such effect.                                   

               (c) No Adverse  Change.  There shall be no adverse  change in the
condition (financial or otherwise), properties, assets or prospects of Buyer and
its subsidiaries taken as a whole.                                              

               (d) Litigation.  No preliminary or permanent  injunction or other
order by any  federal or state court in the United  states  which  prevents  the
consummation  of the  transactions  contemplated  by this Agreement  shall be in
effect nor shall any person  have  brought  suit to seek such an  injunction  or
order to prevent  the  consummation  of the  transactions  contemplated  by this
Agreement.                                                                      

               (e) Buyer's Stockholder Approval. The stockholders of Buyer shall
have  approved  the  transactions  contemplated  in this  Agreement  by the vote
required  under the Delaware  General  Corporation  Law to approve an interested
director transaction and by vote required in order to fulfill                   

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the  requirements  for the Buyer's listing of all of the Buyer's Common Stock on
The Nasdaq Stock Market, Inc.                                                   

               (f) Closing  Documents.  Seller shall have received all documents
to be delivered pursuant to Section 3.3 hereof.                                 

9.    INDEMNIFICATION.                                        

         9.1.  Survival of Representations. All such representations, warranties
and covenants of each party shall survive the Closing (and none shall merge into
any  instrument  of  conveyance),  regardless  of any  investigation  or lack of
investigation by either of the parties to this Agreement.                       

         9.2.  "Losses" Defined.  As used in this Agreement, "Losses" shall mean
all  damages,  losses,  liabilities,  costs  and  expenses  of a  party  seeking
indemnification  pursuant  to this  Agreement  (including,  without  limitation,
reasonable  attorneys'  fees and  disbursements  charged to or paid by the party
seeking indemnification) but excluding any punitive damages awarded against such
party seeking indemnification as a result of its own acts or omissions          

         9.3.  Indemnification  by Seller.  Seller hereby  indemnities and holds
harmless  Buyer,  its directors,  officers,  employees,  agents,  successors and
assigns,  and any person who controls  Buyer from and against any and all Losses
arising out of or resulting from (i) any and all  liabilities and obligations of
PRC,  other than those  reflected on the Closing Date Balance Sheet of PRC to be
delivered pursuant to Section 3.2(i) hereof, or otherwise  disclosed to Buyer in
this Agreement;  and (ii) any material breach of any  representation or warranty
or other  agreement of Seller  contained in this Agreement or in any certificate
delivered by Seller pursuant to this Agreement.                                 

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         9.4.  Indemnification  by Buyer.  Buyer  hereby  indemnities  and holds
harmless Seller, and his legal representatives,  heirs,  successors and assigns,
from and against all Losses arising out of or resulting from (i) liabilities and
obligations  of PRC  reflected on the Closing  Date  Balance  Sheet of PRC to be
delivered pursuant to Section 3.2(i) hereof, or otherwise  disclosed to Buyer in
this  Agreement;  (ii) Buyer's  operation of PRC's  business  subsequent  to the
Closing Date; and (iii) any material breach of any representation or warranty or
other  agreement  of Buyer  contained in this  Agreement  or in any  certificate
delivered by Buyer pursuant to this Agreement.                                  

         9.5.  Claims.  For the purposes of this Section 9.4 the party from whom
indemnification  is sought  under this  Agreement  shall be  referred  to as the
"Indemnitor" and the party who is seeking such indemnification shall be referred
to as the "Indemnitee". Should any claim be made by a person not a party to this
Agreement  with  respect  to any matter to which the  foregoing  indemnification
provisions relate or should any claim for indemnification  otherwise come to the
attention of the Indemnitee,  the Indemnitee  shall promptly give the Indemnitor
written notice of such claim,  and the  Indemnitor  shall  thereafter  defend or
settle any such claim,  at its sole  expense,  on its behalf and with counsel of
its choosing;  provided,  however,  that the Indemnitee's written consent to any
settlement or disposition  shall be a requirement  thereto,  which consent shall
not be  unreasonably  withheld.  In such defense or  settlement,  the Indemnitee
shall  cooperate  and assist the  Indemnitor  to the maximum  extent  reasonably
possible and the Indemnitee may participate  therein at its own expense and with
counsel of its own choosing.                                                    

10.   GENERAL.                                                

10.1. Termination.  This Agreement may be terminated:         

    (a) by the mutual written consent of Buyer and Seller;

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               (b) by Buyer,  in the event that any of the conditions  precedent
enumerated  in Section 8.1 to be performed by Seller have not been  satisfied or
waived by Buyer at or prior to the Closing, or cured by Seller within seven days
following written notice thereto;                                               

               (c) by Seller, in the event that any of the conditions  precedent
enumerated  in Section 8.2 to be performed  by Buyer have not been  satisfied or
waived by Seller at or prior to the Closing, or cured by Buyer within seven days
following written notice thereof; or                                            

               (d) by Seller,  in the event that the stockholders of Buyer shall
not  have  approved  the  transactions  contemplated  by this  Agreement  within
eighteen months after the date hereof.                                          

               In the event of termination of this Agreement as provided in this
Section 10.1,  this  Agreement  shall  forthwith  become null and void and there
shall be no liability or  obligation  on the part of Buyer or Seller,  except as
(i) set forth in or pursuant to Article 9, Section 10.3 and Section 10.4 hereof;
(ii)  that  any  termination  by  a  party  arising  out  of  a  breach  of  any
representation,  warranty  or  covenant  contained  in this  Agreement  shall be
without prejudice to the rights of the non-breaching party.                     

         10.2. Effect on Lease. The Lease shall remain in full force and effect,
except that no rental  payments need be made for periods after December 31, 1998
unless the stockholder  approval  required under Section 8.1(e) and 8.2(e) shall
not be obtained. If such stockholder approval is not to be obtained, Buyer shall
make all rental and other payments  which it would  otherwise have been required
to make for the period from  January 1, 1999 in a lump sum in cash no later than
ten days after the earlier of (i) the date stockholders shall have voted against
such  approval,  (ii) Buyer  shall have  abandoned  any  attempt to obtain  such
stockholders approval or (iii) eighteen months after the date hereof.           

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         10.3. Fees and Expenses.  Buyer  and Seller shall each bear its and his
own expenses  incurred in connection  with this  Agreement and the  transactions
contemplated  by this  Agreement  whether  or not  such  transactions  shall  be
consummated.                                                                    

         10.4. Counterparts.  This   Agreement  may be  executed  in two or more
counterparts,  each of which  shall be  deemed to be an  original,  and all such
counterparts shall constitute but one instrument.                               

         10.5. Notices. All notices and other communications  hereunder shall be
in  writing  and  shall  be  deemed  given  if (i)  delivered  personally  or by
nationally-recognized   overnight  courier  or  (ii)  mailed  by  registered  or
certified  mail,  return  receipt  requested,  postage  prepaid,  in each  case,
addressed to the parties at the  following  addresses  (or at such other address
for a party as shall be  specified by like  notice;  provided  that notices of a
change of address shall be effective only upon receipt thereof):                

                 If to Buyer:              1385 Akron Street
                                                  Copiague, New York 11726
                                               Attention:  President

                      If to PRC:                Route 2-Kennedy Avenue
                                                     Guaynabo, Puerto Rico 00657
                                               Attention:  President

Any  notice so  addressed  shall be deemed to be given (x) three  business  days
after being mailed by first-class,  registered or certified mail, return receipt
requested,  postage  prepaid and (y) upon  delivery,  if transmitted by personal
delivery or nationally-recognized overnight courier.                            

         10.6. Assignment.  This Agreement shall not be assigned by either party
without the express  written  consent of the other,  and if such  assignment  is
consented  to and made it shall be binding  upon,  and inure to the  benefit of,
such assignee.                                                                  

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10.7. Exhibits; Complete Agreement.                           

               (a) All Exhibits  referred to in and  attached to this  Agreement
are intended to be and are specifically made a part of this Agreement.          

               (b) This  Agreement  sets forth the entire  understanding  of the
parties  and  supersedes   all  prior   agreements,   covenants,   arrangements,
communications,  representations or warranties,  whether oral or written, by any
officer, employee or representative of either party.                            

         10.8. Interpretation,  Severability and  Construction.  The headings of
the Articles and Sections of this  Agreement are inserted for  convenience  only
and shall  not be deemed to  constitute  a part  hereof.  In the event  that any
provision of this  Agreement  shall finally be  determined to be,  unlawful by a
court or regulatory  authority  having  competent  jurisdiction,  such provision
shall be deemed to be severed from this Agreement;  but every other provision of
this Agreement  shall remain in full force and affect.  This Agreement  shall be
construed  in  accordance,  with,  and governed by, the laws of the State of New
York, except to the extent the laws of the State of Delaware  mandatorily govern
a particular provision.                                                         

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         10.9. Third Parties; Amendment.  Nothing herein expressed or implied is
intended or shall be  construed  to confer  upon or give to any person,  firm or
corporation,  other  than  the  parties  and  their  respective  successors  and
permitted assigns,  any rights or remedies under or by reason of this Agreement.
This  Agreement may be amended only by an instrument in writing duly executed by
the parties.                                                                    

         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
date first above written.                                                       

                                        TII INDUSTRIES, INC.

                                     By: /s/  Timothy J. Roach
                                                  ------------------------------
                                               Timothy J. Roach, President

                                       /s/ Alfred J. Roach
                                                  ------------------------------
                                                 Alfred J. Roach, Individually

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PRER14A’ Filing		Date		First		Last			Other Filings
		7/17/01		6
		6/30/00		9					10-K,  10-K/A
		12/31/99		24					10-Q
		9/22/99		9
		7/17/99		6
		7/9/99		9
		4/20/99		2		11			DEFS14A,  PRE 14A
		3/12/99		2		10			8-K
		3/8/99		2		3
Filed on:		2/25/99
		1/1/99		15		42
		12/31/98		2		42
		9/25/98		22		25			10-Q
		6/26/98		4		25			10-K,  10-K/A
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