NON-QUALIFIED STOCK OPTION

NON-QUALIFIED STOCK OPTION

TII NETWORK TECHNOLOGIES, INC.

2008 EQUITY COMPENSATION PLAN

NON-QUALIFIED STOCK OPTION CONTRACT

THIS NON-QUALIFIED STOCK OPTION CONTRACT (this “ Contract ”) is entered into as of _________________________ between TII NETWORK TECHNOLOGIES, INC., a Delaware corporation (the “ Company ”), and ___________________________________ (the “ Optionee ”).

W I T N E S S E T H :

1.       The Company, in accordance with the allotment made by the Compensation Committee of the Company’s Board of Directors (the “ Committee ”) and subject to the terms and conditions of the 2008 Equity Compensation Plan of the Company (the “ Plan ”), grants to the Optionee an option (this “ Option ”) to purchase an aggregate of _______ shares (subject to adjustment and provided in the Plan), of the Common Stock, $.01 par value per share, of the Company (“ Common Stock ”) at an exercise price of $_____ per share (subject to adjustment and provided in the Plan), being at least equal to the Fair Market Value of such shares of Common Stock on the date hereof. This Option is not intended to constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”). Terms used, but not defined in this Contract, shall have the meaning ascribed to them in the Plan.

2.       This Option shall expire at 5:00 p.m. Eastern Time on _______ ___, subject to earlier termination as provided in the Plan. However, this Option shall not be exercisable until __________________________, at which time it shall become exercisable as to _______ shares of Common Stock, and as to an additional _______ shares of Common Stock on each of the next _________ anniversaries of the date thereof. 1 The right to purchase shares of Common Stock under this Option shall be cumulative, so that if the full number of shares purchasable in a period shall not be purchased, the balance may be purchased at any time or from time to time thereafter, but not after the expiration of this Option.

3.       This Option shall be exercised by giving written notice to the Company stating that the Optionee is exercising the option hereunder, specifying the number of shares being purchased and accompanied by payment in full of the aggregate exercise price therefor due on exercise [(i)] in cash and/or by certified or bank cashier’s check, [(ii) [with the authorization of the Committee,] with previously acquired shares of Common Stock having an aggregate Fair Market Value (as defined in the Plan) on the date of exercise equal to the exercise price of options being exercised, (iii) [with the authorization of the Committee,] with a concurrent sale of shares being acquired upon such exercise to the extent permitted by the Plan, and in accordance with, or (iv) some combination of the foregoing; provided , however, that in no case may shares be tendered if such tender would require the Company to incur a charge against its earnings for financial accounting purposes]. The Company shall not be required to issue any shares of Common Stock pursuant to the exercise of this Option until the required payment of the exercise price with respect thereto has been made. In no event may this Option be exercised at any time for less than 100 shares of Common Stock (or the remaining shares subject to this Option which are then exercisable if less than 100 shares) nor may a fraction of a share of Common Stock be purchased under this Option.

_________________________

¹  be modified for varying vesting and/or performance criteria.

4.       The Company and/or any Subsidiary may withhold cash and/or shares of Common Stock to be issued to the Optionee in the amount which the Company determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the grant or exercise of this Option or the disposition of the underlying shares of Common Stock. Alternatively, the Company may require the Optionee to pay the Company such amount in cash promptly upon demand, including as condition to the exercise of this Option.

5.       (a)  It is a condition to the exercise of this Option, and the sale by Optionee of any shares of Common Stock acquired upon exercise of this Option, that either (i) a Registration Statement under the Securities Act of 1933, as amended (the “ Securities Act ”), shall be effective and current at that time with respect to such exercise or sale of shares of Common Stock in such transaction or (ii) there is an exemption from registration under the Securities Act with respect to such exercise or sale of shares of Common Stock in such transaction. Nothing herein shall be construed as requiring the Company to register shares subject this Option under the Securities Act or to keep any Registration Statement effective or current.

          (b)  The Committee may require, as a condition to the issuance of shares of Common Stock upon any exercise of this Option, and the sale by the Optionee of any shares acquired upon exercise of this Option, that the Optionee execute and deliver to the Company such Optionee’s representations, warranties, covenants and documents, in form, substance and scope satisfactory to the Committee, as the Committee may determine to be necessary or appropriate to facilitate the perfection of an exemption from the registration requirements of the Securities Act, applicable state securities laws or other legal requirements with respect to such transaction, but the Committee may require Optionee, in claiming such exemption with respect to any sale or other disposition by the Optionee of any shares acquired upon exercise of this Option, prior to any offer of sale or sale of such shares of Common Stock, to provide the Company with a favorable written opinion of counsel satisfactory to the Company, in form, substance and scope satisfactory to the Company, as to the applicability of such Securities Act exemption to the proposed sale or distribution.

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

          (d)  The Company may affix appropriate legends upon the certificates for shares of Common Stock to be issued upon exercise of this Option and may issue such “stop transfer” instructions to its transfer agent in respect of such shares as it determines, in its discretion, to be necessary or appropriate to (a) prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act and (b) implement the provisions of the Plan or this Contract or any other agreement between the Company and the Optionee with respect to such shares of Common Stock.

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6.       All notices and other communications required or permitted under this Contract shall be in writing and may be given by any of the following methods: (x) personal delivery; (y) United States certified or registered mail return receipt requested; or (z) nationally recognized overnight delivery service, in each case with delivery charges, if any, prepaid. Notices shall be addressed as follows (or to such other address for such party as shall be specified by notice given pursuant to this provision):

All notices and communications given in accordance with this Section 6 shall be deemed given and effective upon (i) in the case of personal delivery, actual receipt thereof by the addressee; (ii) in the case of United States certified or registered mail, five (5) business days after mailing, as evidenced by the postmark; and (iii) in the case of nationally recognized overnight delivery service, on the scheduled date of delivery.

7.       Nothing in the Plan or herein shall confer upon the Optionee any right to continue in the employ of the Company, any Parent or any Subsidiary, or interfere in any way with any right of the Company, any Parent or any Subsidiary to terminate such employment at any time for any reason whatsoever without liability to the Company, any Parent or any Subsidiary.

8.       The Company and the Optionee agree that they will both be subject to and bound by all of the terms and conditions of the Plan, receipt of a copy of which is acknowledged by the Optionee and is made a part hereof. In the event of a conflict between the terms of this Contract and the terms of the Plan, the terms of the Plan shall govern.

9.       This Option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

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

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

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

13.     The Optionee agrees that the Company may amend the Plan and the options granted to the Optionee under the Plan, subject to the limitations contained in the Plan.

14.     Section 409A of the Code (“ Section 409A ”) imposes certain restrictions on amounts deferred under nonqualified deferred compensation plans and a 20% excise tax on the Optionee on amounts that are subject to, but do not comply with, Section 409A. Section 409A includes a broad definition of nonqualified deferred compensation plans, which includes certain types of equity incentive compensation. It is intended that this Option will comply with an exemption from the requirements of Section 409A and the treasury regulations promulgated thereunder (and any subsequent notices or guidance issued by the Internal Revenue Service). The Company shall not be liable to the Optionee or any other person if this Option is subject to Section 409A or the Optionee or any other person is subject to any additional tax, penalty or interest under Section 409A. The Optionee is solely responsible for the payment of any tax, penalty or interest (other than Company withholding obligations) that may result from this Option.

IN WITNESS WHEREOF, the parties hereto have executed this Contract as of the day and year first above written.

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INCENTIVE STOCK OPTION

TII NETWORK TECHNOLOGIES, INC.

2008 EQUITY COMPENSATION PLAN

INCENTIVE STOCK OPTION CONTRACT

THIS INCENTIVE STOCK OPTION CONTRACT (this “ Contract ”) is entered into as of _________________________ between TII NETWORK TECHNOLOGIES, INC., a Delaware corporation (the “ Company ”), and ________________________________________ (the “ Optionee ”).

W I T N E S S E T H :

1.      The Company, in accordance with the allotment made by the Compensation Committee of the Company’s Board of Directors (the “ Committee ”) and subject to the terms and conditions of the 2008 Equity Compensation Plan of the Company (the “ Plan ”), grants to the Optionee an option (this “ Option ”) to purchase an aggregate of _______ shares (subject to adjustment and provided in the Plan) of the Common Stock, $.01 par value per share, of the Company (“ Common Stock ”) at an exercise price of $_____ per share (subject to adjustment and provided in the Plan), being at least equal1 to the Fair Market Value of such shares of Common Stock on the date hereof. This Option is intended to constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “ Code ”), although the Company makes no representation or warranty as to such qualification. Terms used, but not defined in this Contract, shall have the meaning ascribed to them in the Plan.

2.      This Option shall expire at 5:00 p.m. Eastern Time on _______ ___,2 subject to earlier termination as provided in the Plan. However, this Option shall not be exercisable until __________________________, at which time it shall become exercisable as to _______ shares of Common Stock, and as to an additional _______ shares of Common Stock on each of the next _________ anniversaries of the date thereof. 3 The right to purchase shares of Common Stock under this Option shall be cumulative, so that if the full number of shares purchasable in a period shall not be purchased, the balance may be purchased at any time or from time to time thereafter, but not after the expiration of this Option.

3.      This Option shall be exercised by giving written notice to the Company stating that the Optionee is exercising the option hereunder, specifying the number of shares being purchased and accompanied by payment in full of the aggregate exercise price therefor due on exercise [(i)] in cash and/or by certified or bank cashier’s check, [(ii) [with the authorization of the Committee,] with previously acquired shares of Common Stock having an aggregate Fair Market Value (as defined in the Plan) on the date of exercise equal to the exercise price of options being exercised, or (iii) some combination of the foregoing; provided , however, that in no case may shares be tendered if such tender would require the Company to incur a charge against its earnings for financial accounting purposes]. The Company shall not be required to issue any shares of Common Stock pursuant to the exercise of this Option until the required payment of the exercise price with respect thereto has been made. In no event may this Option be exercised at any time for less than 100 shares of Common Stock (or the remaining shares subject to this Option which are then exercisable if less than 100 shares) nor may a fraction of a share of Common Stock be purchased under this Option.

_________________________

¹  For ISOs to be granted to an Optionee who owns, or is deemed to own, more than 10% of the combined voting power of the Company, the Company’s Subsidiaries and the Company’s Parents, insert “110% of.”

2   For ISOs to be granted to an Optionee who owns, or is deemed to own, more than 110% of the combined voting power of the Company, the Company’s Subsidiaries and the Company’s Parents, limit to five years.

3   To be modified for varying vesting and/or performance criteria.

4.      The Company and/or any Subsidiary may withhold cash in the amount which the Company determines is necessary to satisfy its obligation to withhold taxes or other amounts incurred by reason of the disposition of the underlying shares of Common Stock. Alternatively, the Company may require the Optionee to pay the Company such amount in cash promptly upon demand, including as condition to the exercise of this Option.

5.      In the event of any disposition of the shares of Common Stock acquired pursuant to the exercise of this Option within two years from the date hereof or one year from the date of transfer of such shares to him, the Optionee shall notify the Company thereof in writing within 30 days after such disposition. In addition, the Optionee shall provide the Company on demand with such information as the Company shall reasonably request in connection with determining the amount and character of the Optionee’s income, the applicable deduction and the obligation to withhold taxes or other amount incurred by reason of such disqualifying disposition, including the amount thereof. The Optionee shall pay the Company and/or the Subsidiary, as the case may be, in cash on demand the amount, if any, which the Company determines is necessary to satisfy such withholding obligation.

6.      (a)  It is a condition to the exercise of this Option, and the sale by Optionee of any shares of Common Stock acquired upon exercise of this Option, that either (i) a Registration Statement under the Securities Act of 1933, as amended (the “ Securities Act ”), shall be effective and current at that time with respect to such exercise or sale of shares of Common Stock in such transaction or (ii) there is an exemption from registration under the Securities Act with respect to such exercise or sale of shares of Common Stock in such transaction. Nothing herein shall be construed as requiring the Company to register shares subject this Option under the Securities Act or to keep any Registration Statement effective or current.

         (b)  The Committee may require, as a condition to the issuance of shares of Common Stock upon any exercise of this Option, and the sale by the Optionee of any shares acquired upon exercise of this Option, that the Optionee execute and deliver to the Company such Optionee’s representations, warranties, covenants and documents, in form, substance and scope satisfactory to the Committee, as the Committee may determine to be necessary or appropriate to facilitate the perfection of an exemption from the registration requirements of the Securities Act, applicable state securities laws or other legal requirements with respect to such transaction, but the Committee may require Optionee, in claiming such exemption with respect to any sale or other disposition by the Optionee of any shares acquired upon exercise of this Option, prior to any offer of sale or sale of such shares of Common Stock, to provide the Company with a favorable written opinion of counsel satisfactory to the Company, in form, substance and scope satisfactory to the Company, as to the applicability of such Securities Act exemption to the proposed sale or distribution.

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

         (d)  The Company may affix appropriate legends upon the certificates for shares of Common Stock is to be issued upon exercise of this Option and may issue such “stop transfer” instructions to its transfer agent in respect of such shares as it determines, in its discretion, to be necessary or appropriate to (a) prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act, (b) implement the provisions of the Plan or this Contract or any other agreement between the Company and the Optionee with respect to such shares of Common Stock or (c) permit the Company to determine the occurrence of a “disqualifying disposition,” as described in Section 421(b) of the Code, of the shares of Common Stock transferred upon the exercise of this Option.

7.      All notices and other communications required or permitted under this Contract shall be in writing and may be given by any of the following methods: (x) personal delivery; (y) United States certified or registered mail return receipt requested; or (z) nationally recognized overnight delivery service, in each case with delivery charges, if any, prepaid. Notices shall be addressed as follows (or to such other address for such party as shall be specified by notice given pursuant to this provision):

8.      Nothing in the Plan or herein shall confer upon the Optionee any right to continue in the employ of the Company, any Parent or any Subsidiary, or interfere in any way with any right of the Company, any Parent or Subsidiary to terminate such employment at any time for any reason whatsoever without liability to the Company, any Parent or any Subsidiary.

9.      The Company and the Optionee agree that they will both be subject to and bound by all of the terms and conditions of the Plan, receipt of a copy of which is acknowledged by the Optionee and is made a part hereof. In the event of a conflict between the terms of this Contract and the terms of the Plan, the terms of the Plan shall govern.

10.    This Option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee.

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

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

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

14.      The Optionee agrees that the Company may amend the Plan and the options granted to the Optionee under the Plan, subject to the limitations contained in the Plan.

15.      Section 409A of the Code (“ Section 409A ”) imposes certain restrictions on amounts deferred under nonqualified deferred compensation plans and a 20% excise tax on the Optionee on amounts that are subject to, but do not comply with, Section 409A. Section 409A includes a broad definition of nonqualified deferred compensation plans, which includes certain types of equity incentive compensation. It is intended that this Option will comply with an exemption from the requirements of Section 409A and the treasury regulations promulgated thereunder (and any subsequent notices or guidance issued by the Internal Revenue Service). The Company shall not be liable to the Optionee or any other person if this Option is subject to Section 409A or the Optionee or any other person is subject to any additional tax, penalty or interest under Section 409A. The Optionee is solely responsible for the payment of any tax, penalty or interest (other than Company withholding obligations) that may result from this Option.

IN WITNESS WHEREOF, the parties hereto have executed this Contract as of the day and year first above written.

STOCK APPRECIATION RIGHT

TII Network Technologies, INC.
2008 Equity Compensation PLAN

STOCK APPRECIATION RIGHT CONTRACT

THIS STOCK APPRECIATION RIGHT CONTRACT (this “ Contract ”) is entered into as of __________________________ between TII NETWORK TECHNOLOGIES, INC., a Delaware corporation (the “ Company ”), and _________________________________ (the “ Awardee ”).

W I T N E S S E T H :

1.      The Company, in accordance with the allotment made by the Compensation Committee of the Company’s Board of Directors (the “ Committee ”) and subject to the terms and conditions of the 2008 Equity Compensation Plan of the Company (the “ Plan ”) and this Contract, grants to the Awardee a stock appreciation rights award (“ SAR Award ”) with respect to an aggregate of _______ shares (subject to adjustment as provided in the Plan) of the Common Stock, $.01 par value per share, of the Company (“ Common Stock ”) at a Base Value of $_______ per share (subject to adjustment as provided in the Plan), being at least equal to the Fair Market Value of such shares of Common Stock on the date hereof. One SAR represents the right to receive the excess, if any, of the Fair Market Value over the Base Value for one share of Common Stock, payable at the time and in the form provided herein. Terms used, but not defined in this Contract, shall have the meaning ascribed to them in the Plan.

2.      This SAR Award shall expire at 5:00 p.m. Eastern Time on ____________, subject to earlier termination as provided in the Plan. However, this SAR Award shall not be exercisable until ________________________________, at which time it shall become exercisable as to _______ SARs, and as to an additional _______ SARs on each of the next __________ anniversaries of the date thereof. ¹ The right to exercise the SARs shall be cumulative, so that if the full number of SARs exercisable in a period shall not be exercised, the balance may be exercised at any time or from time to time thereafter, but not after the expiration of the SAR Award. The number of SARs referenced in thi