-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IcGlkcotH9h/IKsYAXEcHLkHVAM4cXyJ7e1puPYLptv4eQkrcTpBiuzuhzddQtOC VQCTgitL0WM2jb9qBfKXFg== 0000740664-01-000010.txt : 20010326 0000740664-01-000010.hdr.sgml : 20010326 ACCESSION NUMBER: 0000740664-01-000010 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010323 FILER: COMPANY DATA: COMPANY CONFORMED NAME: R F INDUSTRIES LTD CENTRAL INDEX KEY: 0000740664 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 880168936 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13301 FILM NUMBER: 1577463 BUSINESS ADDRESS: STREET 1: 7610 MIRAMAR RD STREET 2: BLDG 6000 CITY: SAN DIEGO STATE: CA ZIP: 92126 BUSINESS PHONE: 6195496340 MAIL ADDRESS: STREET 1: 7620 MIRAMAR RD #4100 STREET 2: 7620 MIRAMAR RD #4100 CITY: SAN DIEGO STATE: CA ZIP: 92126-4202 FORMER COMPANY: FORMER CONFORMED NAME: CELLTRONICS INC DATE OF NAME CHANGE: 19910204 10QSB 1 0001.txt FIRST QUARTER REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB Quarterly Report Under Section 13 or 15 (d) of Securities Exchange Act of 1934 for Quarter ended January 31, 2001 Commission File Number 0-13301 RF INDUSTRIES, LTD. (Exact name of registrant as specified in its charter) Nevada 88-0168936 (State of Incorporation) (I.R.S. Employer Identification No.) 7610 Miramar Road., Bldg. 6000, San Diego, California 92126-4202 (Address of principal executive offices) (Zip Code) (858) 549-6340 FAX (858) 549-6345 (Issuer's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None. Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No State the number of shares outstanding of each of the issuer's classes of common stock at the latest practicable date. As of January 31, 2001, the registrant had 3,403,054 shares of Common Stock, $.01 par value, issued and outstanding. Transitional small business disclosure format Yes No X PART I. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS RF INDUSTRIES, LTD. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET January 31 October 31 2001 2000 ------------ ----------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents ........................ $ 212,812 $ 557,923 Investments in available-for-sale securities ..... 1,714,420 2,208,558 Trade accounts receivable, net of allowance for doubtful accounts of $42,000 ................. 978,670 1,313,935 Notes receivable ................................. 12,000 12,000 Inventories ...................................... 5,064,567 4,165,242 Other current assets ............................. 196,248 174,779 Deferred tax assets .............................. 166,000 166,000 ---------- ---------- TOTAL CURRENT ASSETS ........................ 8,344,717 8,598,437 PROPERTY AND EQUIPMENT Furniture and tooling ............................ 936,373 733,150 Furniture and office equipment ................... 192,048 190,867 ---------- ---------- Fixed assets, at cost ....................... 1,128,421 924,017 Less accumulated depreciation ............... 630,334 605,164 ---------- ---------- NET FIXED ASSETS ............................ 498,087 318,853 Intangible assets ................................ 174,698 0 Less amortization reserve ........................ 1,941 0 ---------- ---------- NET INTANGIBLE ASSETS ....................... 172,757 0 Note receivable from stockholder ................. 70,000 70,000 Deferred tax assets .............................. 94,000 94,000 Other assets ..................................... 11,471 11,471 ---------- ---------- TOTAL ASSETS ................................ $9,191,032 $9,092,761 ========== ========== See Notes to Condensed Consolidated Unaudited Financial Statements 2 RF INDUSTRIES, LTD. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET January 31 October 31 2001 2000 ------------ ----------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------- CURRENT LIABILITIES Accounts payable ............................... $ 213,909 $ 403,530 Line of credit and notes payable ............... 167,902 0 Accrued expenses ............................... 383,628 513,186 ----------- ----------- TOTAL LIABILITIES ........................ 765,439 916,716 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common Stock - authorized 10,000,000 shares of $.01 par value; 3,403,054 and 3,402,054, respectively shares issued ......... 34,031 34,021 Additional paid-in capital ..................... 4,687,712 4,686,161 Retained earnings .............................. 3,914,101 3,668,867 Unearned compensation .......................... (94,032) (117,546) Accumulated other comprehensive loss ........... (61,651) (40,890) Receivables from sale of stock ................. (1,715) (1,715) Treasury stock, at cost - 29,400 shares ........ (52,853) (52,853) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY ................ 8,425,593 8,176,045 ----------- ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ................... $ 9,191,032 $ 9,092,761 =========== =========== See Notes to Condensed Consolidated Unaudited Financial Statements 3 ITEM 1: FINANCIAL STATEMENTS (continued) RF INDUSTRIES, LTD. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) Three Months Ended January 31 ------------------------ 2001 2000 ----------- ---------- INCOME: Net Sales .......................................... $ 2,348,601 $ 1,760,526 Cost of Sales ...................................... 1,220,164 845,255 ---------- ---------- Gross profit ..................................... 1,128,437 915,271 ---------- ---------- Operating expenses: Engineering ..................................... 115,729 65,481 Selling and general ............................. 651,555 508,726 ---------- ---------- Totals .................................... 767,284 574,207 ---------- ---------- Operating income ................................... 361,153 341,064 ---------- ---------- Other income: Commissions ................................... 18,073 0 Interest ...................................... 31,508 30,559 ---------- ---------- Totals .................................. 49,581 30,559 ---------- ---------- Income before provision for income tax ............. 410,734 371,623 Provision for income tax ........................... 165,500 150,000 ---------- ---------- Net income ......................................... $ 245,234 $ 221,623 ========== ========== Basic earnings per share ........................... $ 0.07 $ 0.07 ========== ========== Diluted earnings per share ......................... $ 0.06 $ 0.06 ========== ========== Basic weighted average shares outstanding .......... 3,402,554 3,148,648 ========== ========== Diluted weighted average shares outstanding ........ 4,027,473 3,707,526 ========== ========== COMPREHENSIVE INCOME: Net income ......................................... $ 245,234 $ 221,623 Unrealized loss on available-for-sale securities ... 20,761 0 ---------- ---------- Total comprehensive income ................... $ 265,995 $ 221,623 ========== ========== See Notes to Condensed Consolidated Unaudited Financial Statements 4 ITEM 1: FINANCIAL STATEMENTS (continued)
RF INDUSTRIES, LTD. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended January 31 ------------------------ 2001 2000 --------- --------- OPERATING ACTIVITIES Net income ....................................................... $ 245,234 $ 221,623 Adjustments to reconcile net income to net cash provided by (used in) operations Inventory deposit write-offs ................................ 30,294 0 Depreciation and amortization ............................... 27,111 14,149 Amortization of unearned compensation ....................... 23,514 23,514 Changes in operating assets and liabilities, net of acquisition payment: Trade accounts receivable .............................. 381,308 62,895 Inventories ............................................ (859,369) (216,061) Other assets ........................................... (6,734) 2,610 Accounts payable ....................................... (217,607) 93,653 Accrued expenses ....................................... (129,602) 87,278 ----------- ----------- Net cash provided by (used in) operating activities ........ (505,851) 289,661 ----------- ----------- INVESTING ACTIVITIES Proceeds from sale of (investment in) securities ........... 473,377 (14,592) Capital expenditures ....................................... (16,548) (48,431) Payment for acquisition, net of cash acquired .............. (147,078) 0 ----------- ----------- Net cash provided by (used in) investing activities ........ 309,751 (63,023) ----------- ----------- FINANCING ACTIVITIES Payments on loans payable .................................. (150,572) 0 Proceeds from exercise of common stock options ............. 1,561 0 ----------- ----------- Net cash used in financing activities ...................... (149,011) 0 ----------- ----------- Net increase in cash and cash equivalents ..................................... (345,111) 226,638 Cash and cash equivalents at the beginning of the period .................................. 557,923 1,100,816 ----------- ----------- Cash and cash equivalents at the end of period .............. $ 212,812 $ 1,327,454 =========== =========== SUPPLEMENTARY CASH FLOW DATA: Taxes paid .................................................. $ 255,000 0 Noncash investing and financing activities: Fair value of assets acquired ............................... $ 496,504 Liabilities assumed ......................................... (207,341) Seller financing ............................................ (139,163) ----------- Cash paid ................................................... $ 150,000 ===========
See Notes to Condensed Consolidated Unaudited Financial Statements 5 RF INDUSTRIES, LTD. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Unaudited interim financial statements: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended January 31, 2001 are not necessarily indicative of the results that may be expected for the year ending October 31, 2001. The unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended October 31, 2000. Note 2 - The merger and other matters On December 1, 2000, the Company acquired all the outstanding stock of Bioconnect, Inc. for a total consideration of $289,163, of which $89,163 was financed by seller. The acquisition has been accounted for pursuant to the purchase method and, accordingly, the net assets acquired were recorded at estimated fair values on the date of acquisition. A summary of the allocation of the cost of the acquisitions to the net assets acquired follows: Cash ................................. $ 2,922 Accounts receivable .................. 76,337 Inventory ............................ 39,956 Property and equipment ............... 187,855 Intangibles and other assets ......... 189,434 --------- Total assets acquired ................ 496,504 Accounts payable and other liabilities (207,341) --------- Net assets acquired .................. $ 289,163 ========= The condensed consolidated financial statements include the accounts of RF INDUSTRIES, LTD. (the "Parent") and its wholly-owned subsidiary, Bioconnect, Inc. (collectively, the "Company"). All significant intercompany accounts and 6 transactions are eliminated in consolidation. Note 3 - Components of inventory January 31 October 31 2001 2000 ---------- ---------- (Unaudited) (Audited) Raw material and supplies... $ 876,170 $ 559,786 Finished goods ............. 4,188,397 3,605,456 ---------- ---------- TOTAL ..................... $5,064,567 $4,165,242 ========== ========== Note 4 - Earnings (loss) per share: Effective October 31, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 128, Earnings per Share, which requires the presentation of "basic" and "diluted" earnings (loss) per common share, as further explained in Note 1 of the notes to the audited financial statements of the Company, included in Form 10-KSB for the fiscal year ended October 31, 2000. Basic earnings per share is computed by dividing net earnings by the weighted average number of common stock outstanding during the period. Diluted earnings per share is computed by dividing net earnings by the weighted average number of shares of common stock increased by the effects of assuming that other potentially dilutive securities (such as stock options) outstanding during the period had been exercised. Note 5 - Segment Information Net sales and income (loss) before provision for income taxes for the three months ended January 31, 2001 and 2000 follows:
Common/ Connector Neulink Bioconnect Corporate Total ----------- ---------- ------------ ----------- --------- 2001 - ------ Net sales ................ $ 2,053,276 $ 245,254 $ 50,071 $ 2,348,601 Income (loss) before provision for income taxes ................. 624,042 (141,294) (67,328) $ (4,686) 410,734 2000 - ------ Net sales ................ $ 1,614,266 $ 146,260 $ 1,760,526 Income (loss) before provision for income taxes ................ 434,313 (62,690) 371,623
8 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements. These statements relate to future events or the Company's future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "except," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other person, assumes responsibility for the accuracy and completeness of the forward-looking statements. The Company is under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report on Form 10-QSB to conform such statements to actual results or to changes in its expectations. The following discussion should be read in conjunction with the Company's financial statements and the related notes and other financial information appearing elsewhere in this Form 10-QSB. Readers are also urged to carefully review and consider the various disclosures made by the Company which attempt to advise interested parties of the factors which affect the Company's business, including without limitation the disclosures made under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the caption "Risk Factors," and the audited financial statements and related notes included in the Company's Annual Report filed on Form 10-KSB for the year ended October 31, 2000 and other reports and filings made with the Securities and Exchange Commission. Liquidity and Capital Resources Management believes that cash generated from operations will be sufficient to fund the anticipated growth of the Company in fiscal 2001. Management believes that any financing requirements can be met through a combination of cash and investments held as of January 31, 2001, internally generated cash flow and advance payments from customers. The Company does not currently have any commercial banking arrangements providing for loans, credit facilities or similar matters. The Company does not believe it will need material additional capital equipment in fiscal 2001. In the past, the Company has financed some of its fixed asset requirements through capital leases. No additional capital equiment purchases have been currently identified that would require significant additional leasing or capital obligations during fiscal 2001. Management also believes that based on the Company's financial condition at January 31, 2001, the absence of outstanding bank debt and recent operating results, the Company would be able to obtain bank loans to finance its expansion, if necessary, although there can be no assurance any bank loan would be obtainable, or if obtained, would be on favorable terms or conditions. 9 Net cash used in operating activities for the first three months of fiscal 2001 was $505,851 whereas cash provided by operating activities for the first quarter ended January 31, 2000 was $289,661. Non cash outlays for inventory deposit write-offs, depreciation and amortization, and amortization of unearned income for the first three months of 2001 were $80,919 compared to $37,664 the previous year, an increase of $43,255. Inventories increased $889,663, and other assets increased $6,734 in the first quarter of 2001. Trade accounts receivable decreased by $381,308. Accounts payable and accrued expenses increased by $347,209. Net cash provided by investing activities was $309,751 during the first quarter ended January 31, 2001, compared to $63,023 used in the previous year. Current year investing activities included capital expenditures of $16,548 and payment for acquisition of Bioconnect of $147,078. Proceeds from sale of securities was $473,377. Net cash used in financing activities was $149,011 for the first quarter ended January 31, 2001, and consisted of proceeds from exercise of stock options of $1,561 and payments on loans payable of $150,572. As of Janurary 31, 2001 the Company had $212,812 in cash and cash equivalents and $1,714,420 in investments, as compared to $557,923 in cash and cash equivalents and $2,208,558 in investments at October 31, 2000. Three Months 2001 vs. Three Months 2000 Net sales increased 33%, or $588,075, to $2,348,601 from $1,760,526 in the first three months of fiscal 2001. RF Connectors sales increased 27% to $2,053,276, compared to $1,614,266 for the same period last year, due to continuing strong order rates for coax connectors and cable assemblies. Sales at RF Neulink increased 68% to $245,254 compared to $146,260 last year. This increase can be attributed to stronger sales in new application areas. Bioconnect's first quarter sales were $50,071. Cost of sales increased 44%, or $374,909 to $1,220,164 from $845,255 last year. The increase is due to the increased sales. Engineering expenses increased $50,248, or 77%, from $65,481 last year. This increase can be attributed to added personnel and expenses associated with the expansion of our engineering departments to meet the increased business demands. Selling and general expenses increased 28% or $142,829, to $651,555 from $508,726 last year. The increase is due to increased travel, advertising, and insurance expenses. As a percent of sales, selling and administrative expenses declined to 28% from 29% due to the increase in sales. Net interest income increased $949 to $31,508 from $30,559 the previous year. Commissions for the Neulink divisions sales were $18,073. This is the first time we have earned any income from commissions. 10 MATERIAL CHANGES IN FINANCIAL CONDITION: Cash decreased $345,111 to $212,812 compared to the October 31, 2000 fiscal year balance of $557,923. Cash and investments are $1,927,232 at January 31, 2001. Trade accounts receivable decreased $335,265, or 26% to $978,670 compared to the October 31, 2000 balance of $1,313,935. This decrease is due to the continued collection efforts. Inventories increased $889,663 compared to October 31, 2000 inventory levels. This increase is in response to the current demand and the anticipated backlog requirements, and includes $37,500 in Bioconnect inventory. Other current assets, including prepaid expenses and deposits, increased $21,469, to $196,248, from $174,779 on October 31, 2000. This increase is due the annual invoice for accounting expenses that is expensed throughout the year, but is invoiced in the first quarter as a prepaid expense. There are also the added Bioconnect deposits for their building and equipment. PART II. OTHER INFORMATION Item 1. Legal Proceedings In August 2000, the Company was notified that the Securities and Exchange Commission ("SEC") issued a formal order of investigation to determine whether violations of certain aspects of the federal securities laws may have occurred in connection with matters related to the Company. The formal order of investigation indicates that the SEC is examining the conduct of persons or entities, including the Company, who may have made improper statements regarding the Company's order backlog, manufacturing and design capabilities, and ownership of the Company's stock. The SEC is also examining whether the Company's filings with the SEC may have contained improper statements concerning, among other things, the Company's financial condition and results of operations. The SEC has indicated that this investigation is a fact-finding inquiry and should not be construed as a conclusion by the SEC or its staff that any violation of law has occurred or that the SEC or its staff has a negative opinion of any person, entity or security. The Company is cooperating with the SEC in connection with this investigation and its outcome cannot yet be determined. Items 2-5 Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Description 2.1 Agreement of Purchase and Sale of Stock dated as of December 1, 2000 between the Company and Richard Roberts, Leonard Malena, Phillip Booker, and Richard R. Roberts, Inc.dba Bioconnect, Inc. 10.1 2000 Stock Option Plan 10.2 Terrie Gross Employment Agreement made as of November 5, 1999 (b) Reports on Form 8-K None 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RF INDUSTRIES, LTD. Dated: March 26, 2001 By: Howard F. Hill ----------------------------- Howard F. Hill, President Chief Executive Officer Dated: March 26, 2001 By: Terrie A. Gross ----------------------------- Terrie A. Gross Chief Financial Officer EX-27 2 0002.txt ART 5 FDS FOR 1ST QUARTER 10-QSB
5 3-MOS OCT-31-2000 NOV-01-2000 JAN-31-2001 212,812 1,714,420 978,670 42,000 5,064,567 8,344,717 1,128,421 630,334 9,191,032 765,439 0 0 0 34,031 8,391,562 9,191,032 2,348,601 2,366,674 1,220,164 1,987,448 0 0 (31,508) 410,734 165,500 245,234 0 0 0 245,234 .07 .06
EX-10.2 3 0003.txt TERRIE GROSS EMPLOYMENT AGREEMENT AGREEMENT Agreement made as of the 5th day of November, 1999 by and between: RF Industries, Ltd. 7610 Miramar Road, Bldg. #6000 San Diego, Ca 92126-4202 Federal Tax ID: 88-0168936 and, Terrie Gross 3543 Paul Jones Ave. San Diego, Ca 92117-5631 Social Security: ###-##-#### WITNESSETH Whereas, RFI desires to engage the services of Terrie Gross, and Terrie Gross desires to accept such engagement. Now, therefore, in consideration of the mutual covenants, conditions and agreements hereinafter set forth the parties hereto agree as follows: 1. Engagement. Subject to the terms and conditions of this agreement, RFI hereby engages the services of Terrie Gross, and Terrie Gross hereby accepts such engagement. 2. Term. The term of Terrie Gross agreement has commenced as of November 5, 1999 for a period of ten years. The agreement must be renewed annually, unless sooner terminated in accordance with the terms of section 6 hereof. 3. Position. The primary position to be held by Terrie Gross during his employment is: Chief Financial Officer and Corporate Secretary. She will report directly to RFI's President/CEO. 4a. Salary. Initial base salary will be $52,000 annualized and is payable weekly each Friday. Base salary may be increased only by RFI's President/CEO approval. Agreement RFI/Terrie Gross Page 2 4b. Salary Continuation During Disability. If Terrie Gross, for any reason whatsoever, becomes permanently or temporarily disabled, so that she is unable to perform her duties hereunder, RFI agrees to pay her sixty percent (60%) of his annual salary, payable in the same manner as her base salary, until such time as Terrie Gross begins to receive disability benefits, under any employer group disability or similar plan funded by insurance, whichever is first to occur (approximately 90 days). RFI agrees to provide Terrie Gross with a policy of disability insurance, which will pay Terrie Gross as disability payments thereunder, an amount equal to sixty percent (60%) of Terrie Gross's base salary after Terrie Gross becomes disabled and is unable to perform services under this agreement. 5. Executive Stock Option. The Board of Directors of RFI will grant Terrie Gross a stock option of 100,000 shares. The options are exercisable at $1.50 per share. The options will vest at 20% (20,000) shares per year for five (5) years to accomplish full 100% vesting. The options will expire upon termination. 6. Termination. Voluntary termination: Terrie Gross may terminate this agreement at any time, in writing. In the event of a voluntary termination by Terrie Gross, the terms and conditions of this agreement become null and void. Involuntary termination: RFI may terminate this agreement for the following reasons: (i) Terrie Gross's conviction of a crime that constitutes a felony in the jurisdiction involved, or (ii) "material breach" shall mean only a persistent or continuing failure or refusal by Terrie Gross to perform his material obligations to RFI, or (iii) conflicts between Terrie Gross and his peers or superiors, or actions in direct opposition to the charter, the goals, and the expectations of RFI and its shareholders (iv) a decision by the Board of Directors to terminate Terrie Gross . Upon written notice of material breach Terrie Gross will be paid one full year's salary. Terrie Gross must exercise stock option within one year of termination. Stock option shares may be sold to RFI at agreed upon prices and RFI will have first right of refusal to purchase option stock shares. RFI must submit to Terrie Gross in writing, intent to purchase stock option shares or refusal to purchase stock option shares within thirty (30) days of written request date from Terrie Gross. RFI must exercise option within sixty (60) days of written notice. RFI and Terrie Gross may agree on a payment schedule. 7. Death. In the event of Terrie Gross's death, all benefits payable under this Agreement, up to the time of death, shall be payable to Terrie Gross's estate, and such payments shall be reduced only by the proceeds received by Terrie Gross's estate from the Company's life insurance policy on the life of Terrie Gross. RFI will still retain first rights of refusal to purchase option stock shares from Terrie Gross's estate. Agreement RFI/Terrie Gross Page 3 8. Benefit Plans. Terrie Gross will be entitled to all employee benefit plans. (i) Medical insurance coverage (ii) Life insurance (approximately $50,000) (iii) 401K Plan (iv) Optional employee paid insurance plans (v) Disability insurance (vi) Exhibit A, RFI Incentive Stock Option Agreement (vii) Paid holidays (viii) Sick leave (ix) Paid vacation Terrie Gross will be entitled to any additions to the employee benefit plans during his employment and will comply to any changes. 9. Assignment. This Agreement shall bind and inure to the benefit of the parties and their respective successors and assigns provided that neither rights nor obligations shereunder may be assigned by Terrie Gross, and neither rights nor obligations may be assigned by RFI, except to a corporation succeeding to substantially all of the business of RFI, by sale, merger, assignment or otherwise. 10. Integration. This Agreement constitutes the entire agreement among the parties relating to thee subject matter shereof. It cannot be altered or amended except by a writing duly executed by the party against whom such alteration or amendment is sought to be enforced. 11a. Governing Law. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of California applicable to contracts made and to be performed entirely within such state. Agreement RFI/Terrie Gross Page 4 11b. Arbitration. Any controversy between the parties shereto, including the construction or application of any of the terms, covenants or conditions of this Agreement, shall on written request of one party served upon the other, be submitted to arbitration and be governed by the California Arbitration Act as set forth in the California Code of Civil Procedure. The arbitration shall take place in the city of San Diego, California. The parties may agree upon one arbitrator, but in the event they cannot agree there shall be three, one named in writing by each of the parties within ten (10) days after demand for arbitration is given and a third chosen by the two so appointed; provided that the third shall be a retired judge; provided further that is the two appointed cannot agree on the choice of a retired judge, then the third arbitrator shall be designated by the then Presiding Judge of the San Diego Superior Court. The cost of such arbitration, including reasonable attorney's fees, shall be borne by the losing party or in such proportions as the arbitrator(s) shall decide. Arbitrations shall be the exclusive remedy of Employee and Employer and the award of the arbitrator(s) shall be final and binding upon the parties. In witness wshereof, the parties shereto have caused this Agreement to be duly executed by their respective officers shereunto duly authorized as of the date first above written. RF INDUSTRIES, LTD. Date: November 5, 2001 By: /s/ Howard F. Hill ------------------------------------ Howard F. Hill, President/CEO Date: November 5, 2001 By: /s/ Terrie A. Gross ------------------------------------ Terrie A. Gross, CFO EX-2.1 4 0004.txt AGREEMENT OF PURCHASE AND SALE OF STOCK AGREEMENT OF PURCHASE AND SALE OF STOCK This Agreement is made as of December 1, 2000 (the "Effective Date"), among RF INDUSTRIES, LTD., a Nevada corporation, having its principal office at 7610 Miramar Road, San Diego, California (referred to herein as "Buyer"); and RICHARD ROBERTS, LEONARD MALENA, and PHILLIP BOOKER (collectively referred to herein as "Shareholders"), and RICHARD R. ROBERTS, INC. , doing business as BIOCONNECT, INC., a California corporation (referred to herein as "Corporation"), having its principal office at 541-A Birch Street, Lake Elsinore, California. Shareholders and Corporation are collectively referred to in this Agreement as "Selling Parties." Recitals A. Shareholders represent that they own all outstanding shares of the Corporation's stock, in the following amounts and proportions: Richard Roberts: 850 shares (85%) Leonardo Malena: 100 shares (10%) Phillip Booker: 50 shares (5%) B. Shareholders' respective spouses have been informed of the transfers contemplated by this Agreement and consent to those transfers and terms and conditions of this Agreement by executing the Spousal Consents attached hereto. C. Buyer desires to purchase from Shareholders and Shareholders desire to sell to Buyer all of the outstanding stock of Corporation (the "Shares"); and Corporation desires that this transaction be consummated. Agreement In consideration of the mutual covenants, agreements, representations, and warranties contained in this Agreement, the parties agree as follows: 1. Sale, Sales Price, and Terms of Payment. ---------------------------------------- 1.01.Sale and Transfer of Shares. Subject to the terms and conditions set forth in this Agreement, on the Closing Date (as defined in Section 2.01 herein), Shareholders will transfer and convey the shares to Buyer, and Buyer will acquire the shares from Shareholders. 1.02. Consideration for Sale and Transfer of Shares. As consideration for the transfer of the shares by Shareholders to Buyer, Buyer shall deliver, in the aggregate, the following: (a) At Closing, the sum of One Hundred Fifty Thousand Dollars ($150,000.00). (b) On January 1, 2001, the sum of Fifty Thousand Dollars ($50,000.00). (c) On January 1, 2002, the sum of Fifty Thousand Dollars ($50,000.00). (d) On January 1, 2003 the sum of Fifty Thousand Dollars ($50,000.00). The sums payable under this Section 1.02 shall be paid by checks drawn on Buyer's corporate account payable to the Shareholders in proportion to their respective ownership interests in the Corporation, as set forth in Recital A hereof. 1.03. Liability of Note of $100,000.00 to Rhoda Roberts . RF Industries will assume the note of $100,000.00 USD at the time of the Bioconnect Inc. acquisition closing as a liability. 2. Closing. 2.01. Time and Place of Closing. The transfer of the shares by Shareholders to Buyer (the "Closing") shall take place at the Corporation's office at 7610 Miramar Rd., San Diego, California at 10:00 a.m., on December 1, 2000, or at such other time and place as the parties may agree to in writing. That date, or such other date on which the Closing shall occur, is referred to herein as the "Closing Date." 2.02. Selling Parties' Obligations at Closing. At the Closing, Shareholders shall deliver to Buyer the following instruments and documents, in form and substance satisfactory to Buyer and its counsel: (a) Certificates representing the Shares, respectively registered in the names of the Shareholders, each duly endorsed by the respective Shareholder for transfer. On submission of those certificates to Corporation for transfer, Corporation shall issue to Buyer a new certificate representing the cumulative shares, registered in the name of Buyer; (b) The stock books, stock ledgers, minute books, and corporate seals of Corporation; (c) The certificate of the Shareholders and the Corporation, executed by the Corporation's president and treasurer referenced in Section 7.01(d); (d) The statement of seller as provided in Section 7.01(e); (e) The letter confirming the Corporation's financial condition as of not more than five (5) business days prior to Closing, as provided in Section 7.01(g); (f) Except as otherwise specified by Buyer, the written resignations of all the officers and directors of Corporation; (g) Employment agreements between Shareholders and Corporation, dated the Closing Date, in the form set forth in Exhibit 2; (h) Certificate executed by the Selling Parties (including a certificate of the Corporation signed by its president or vice president and secretary or treasurer), dated the Closing Date, certifying that their respective representations and warranties in this Agreement are true and correct at and as of the Closing Date, as though each representation and warranty had been made on that date; and (i) A general release in the form set forth in Exhibit 3, in favor of Corporation, executed by each Shareholder, and dated the Closing Date. 2.03. Buyer's Obligations at Closing. At the Closing, Buyer shall deliver to Shareholders the following instruments and documents: (a) Checks payable to each Shareholder in the proportionate amounts specified in Section 1.02(a), above; (b) The One Hundred Thousand Dollar ($100,000.00) loan described in Section 1.03, above; (c) An opinion of Buyer's counsel, dated the Closing Date, as provided for in Section 8.01(c); (d) Certified resolution of Buyer's board of directors, in form satisfactory to counsel for Selling Parties, authorizing the execution and performance of this Agreement and all actions to be taken by Buyer under this Agreement; and (e) A certificate executed by the president or vice president and the secretary or treasurer of Buyer certifying that all Buyer's representations and warranties under this Agreement are true as of the Closing Date, as though each of those representations and warranties had been made on that date. 3. SELLING PARTIES' REPRESENTATIONS AND WARRANTIES. ------------------------------------------------- 3.01. Selling Parties' Representations and Warranties. Selling Parties, jointly and severally, represent and warrant that: (a) Corporation is a corporation duly organized, validly existing, and in good standing under the laws of the State of California, has all necessary corporate powers to own its assets and to carry on its business as now owned and operated by it, and neither the ownership of its assets nor the nature of its business requires Corporation to be qualified in any jurisdiction other than the state of its incorporation. (b) The authorized capital stock of Corporation consists of 10,000 shares of common stock. 1,000 shares are issued and outstanding. All the Shares are validly issued, fully paid, and nonassessable. There are no outstanding subscriptions, options, rights, warrants, convertible securities, or other agreements or commitments obligating the Corporation to issue or to transfer from treasury any additional shares of its capital stock of any class. (c) Shareholders are the owners, beneficially and of record, of all the Shares, free and clear of all liens, encumbrances, security agreements, equities, options, claims, charges, and restrictions. Shareholders each have full power to transfer the shares to Buyer without obtaining the consent or approval of any person or governmental authority. (d) Corporation has no subsidiaries and does not own, directly or indirectly, any interest or investment (whether equity or debt) in any corporation, partnership, business, trust, or other entity. (e) The Corporation's financial statements provided to Buyer have been prepared in accordance with buyer's approval and generally accepted accounting principles consistently followed by Corporation throughout the periods indicated, and fairly present the financial position of Corporation as of the respective dates of those statements, and the results of the Corporation's operations for the respective periods indicated. (f) Corporation does not have any debt, liability, or obligation of any nature, whether accrued, absolute, contingent, or otherwise, and whether due or to become due, that is not reflected in Corporation's financial statements provided to Buyer or otherwise disclosed in writing to Buyer. All debts, liabilities, and obligations incurred after the date of the financial statements provided to Buyer were incurred in the ordinary course of business, and are usual and normal in amount both individually and in the aggregate. (g) Within the times and in the manner prescribed by law, Corporation has filed all federal, state, and local tax returns required by law and has paid all taxes, assessments, and penalties due and payable. There are no present disputes as to taxes of any nature payable by Corporation. (h) The Corporation's lease of its principal office at 541-A Birch Street, Lake Elsinore, California is valid and in full force, and there does not exist any default or event that with notice or lapse of time, or both, would constitute a default under that lease. (i) Selling Parties, and each of them, have no knowledge of any hazardous waste liabilities of the business as encompassed in 42 U.S.C. ss. 9601, et seq. or any other relevant state or federal statute, nor do the premises of the business contain any underground storage tanks, asbestos building materials, or any other hazardous substances that require or may require removal or other remedial attention. (j) The Corporation's inventories of raw materials, work in process, and finished goods (collectively called "inventories") consist of items of a quality and quantity useable and salable in the ordinary course of the Corporation's business. Except for sales made in the ordinary course of business, all the inventories are the property of Corporation. No items are subject to security interest, except as otherwise disclosed in writing to Buyer. (k) Exhibit 4 to this Agreement is a complete and accurate schedule describing all automobiles, machinery, equipment, furniture, supplies, tools, and all other tangible personal property owned by, in the possession of, or used by Corporation in connection with its business, except inventories of raw materials, work in process, and finished goods. The property listed in Exhibit 4 constitutes all such tangible personal property necessary for the operation by Corporation of its business as now conducted. (l) Except as stated in Exhibit 5, no personal property used by Corporation in connection with its business is held under any lease, security agreement, conditional sales contract, or other title retention or security arrangement, or is located other than in Corporation's possession. (m) Exhibit 6 to this Agreement is a complete and accurate schedule of the Corporation's accounts receivable as of October 31, 2000, together with an accurate aging of these accounts. These accounts receivable, and all accounts receivable of Corporation created after that date, arose from valid sales in the ordinary course of business. These accounts have been collected in full since that date, or are collectible at their full amounts. If following the Closing, any of such accounts, or any accounts receivable arising between October 31, 2000 and the Closing, to the extent then remaining unpaid, are not paid in full on demand when due, the Selling Parties, immediately upon notice from the Buyer to that effect, will pay the full amount thereof to the Corporation or, if the Buyer so specifies, to the Buyer, in exchange for delivery to the Selling Parties of an assignment of the defaulted account or accounts. (n) Exhibit 7 to this Agreement is a schedule of all trade names, trademarks, service marks, and copyrights and their registrations, owned by Corporation or in which Corporation has any rights or licenses, together with a brief description of each. To the best of seller's knowledge the Corporation has not infringed, and is not now infringing, on any trade name, trademark, service mark, or copyright belonging to any other person, firm, or corporation. Except as set forth in Exhibit 7, Corporation is not a party to any license, agreement, or arrangement, whether as licensor, licensee, or otherwise, with respect to any trademarks, service marks, trade names, or applications for them, or any copyrights. Corporation owns or holds adequate licenses or other rights to use, all trademarks, service marks, trade names, and copyrights necessary for its business as now conducted, and such use does not, and will not, conflict with, infringe on, or otherwise violate any rights of others. (o) Exhibit 8 to this Agreement is a complete schedule of all patents, inventions, industrial models, processes, designs, and applications for patents owned by Corporation or in which it has any rights, licenses, or immunities. The patents and applications for patents listed in Exhibit 8 are valid and in full force and effect and are not subject to any taxes, maintenance fees, or actions falling due within ninety (90) days after the Closing Date. Except as otherwise disclosed to Buyer in writing, there have not been any interference actions or other judicial, arbitration, or other adversary proceedings concerning the patents or applications for patents listed in Exhibit 8. The manufacture, use, or sale of the inventions, models, designs, and systems covered by the patents and applications for patents listed in Exhibit 8 do not violate or infringe on any patent or any proprietary or personal right of any person, firm, or corporation; and Corporation has not infringed and is not now infringing on any patent or other right belonging to any person, firm, or corporation. Except as otherwise disclosed to Buyer in writing, Corporation is not a party to any license, agreement, or arrangement, whether as licensee, licensor, or otherwise, with respect to any patent, application for patent, invention, design, model, process, trade secret, or formula. Corporation has the right and authority to use such inventions, trade secrets, processes, models, designs, and formulas as are necessary to enable it to conduct and to continue to conduct all phases of its business in the manner presently conducted, and that use does not, and will not, conflict with, infringe on, or violate any patent or other rights of others. (p) Exhibit 9 to this Agreement is a true and complete list, without extensive or revealing descriptions, of Corporation's trade secrets, including all customer lists, processes, drawings, specifications, know-how and other technical data. The specific location of each trade secret's documentation, including its complete description, specifications, charts, procedures, and other material relating to it, is also set forth with it in that exhibit. Each trade secret's documentation is current, accurate, and sufficient in detail and without reliance on the special knowledge or memory of others. Corporation is the sole owner of each of these trade secrets, free and clear of any liens, encumbrances, restrictions, or legal or equitable claims of others. Corporation has taken all reasonable security measures to protect the secrecy, confidentiality, and value of these trade secrets. Any of Corporation's employees and any other persons who, either alone or in concert with others, developed, invented, discovered, derived, programmed, or designed these secrets, or who have knowledge of or access to information relating to them, have been put on notice and, if appropriate, have entered into agreements (as disclosed on Exhibit 9 hereto) that these secrets are proprietary to Corporation and are not to be divulged or misused. All these trade secrets are presently valid and protectible, and are not part of the public knowledge or literature, nor to Selling Parties' knowledge have they been used, divulged, or appropriated for the benefit of any past or present employees or other persons, or to the detriment of Corporation. (q) All real property and tangible personal property of Corporation that are necessary to the operation of its businesses are in good operating condition and repair, ordinary wear and tear excepted. (r) Exhibit 10 to this Agreement is a list of all employment contracts and all pension, bonus, profit-sharing, stock option, or other agreements or arrangements providing for employee remuneration or benefits to which Corporation is a party. To the best of Selling Parties' knowledge, Corporation is not in default under any of these agreements. (s) Exhibit 11 to this Agreement is a description of all insurance policies held by Corporation concerning its business, including any products liability or "key man" policies. All these policies are in the respective principal amounts set forth in Exhibit 11. Corporation has maintained and now maintains (1) insurance on all its assets and businesses of a type customarily insured, covering property damage and loss of income by fire or other casualty, and (2) adequate insurance protection against all liabilities, claims, and risks against which it is customary to insure. (t) Corporation has complied with, and is not in violation of, applicable federal, state, or local statutes, laws, and regulations affecting the operation of its business. (u) Except as disclosed to Buyer in writing, there is no suit, action, arbitration, or legal, administrative, or other proceeding, or governmental investigation pending, or, to the best knowledge of Shareholders or Corporation, threatened against or affecting Corporation or its business, assets, or financial condition. Corporation is not in default with respect to any order, writ, injunction, or decree of any federal, state or local court, agency or instrumentality. (v) The consummation of the transactions contemplated by this Agreement will not result in or constitute any of the following: (1) a breach of any term or provision of this Agreement; (2) a default or an event that, with notice or lapse of time or both, would be a default, breach, or violation of the articles of incorporation or by-laws of Corporation, or any lease, license, promissory note, conditional sales contract, commitment, indenture, mortgage, deed of trust, or other agreement, instrument, or arrangement to which any Shareholder or Corporation is a party or by which any of them or the property of any of them is bound; (3) an event that would permit any party to terminate any agreement or to accelerate the maturity of any indebtedness or other obligation of Corporation; or (4) the creation or imposition of any lien, charge, or encumbrance on any of the Corporation's assets. (w) Selling Parties have the right, power, legal capacity, and authority to enter into and perform their respective obligations under this Agreement, and no approvals or consents of any persons other than Selling Parties are necessary in connection with it. The execution and delivery of this Agreement by Corporation has been duly authorized by its board of directors. (x) Selling Parties have furnished to Buyer for its examination (1) copies of the Corporation's articles of incorporation and by-laws; (2) the Corporation's minute book containing all proceedings, consents, actions, and meetings of the Corporation's Shareholders and board of directors; and (3) the Corporation's stock transfer book setting forth all transfers of any capital stock. 3.02. Statement of Full Disclosure For Buyer. None of the foregoing representations and warranties made by Shareholders or Corporation, or made in any certificate or memorandum furnished or to be furnished by any of them, or on their behalf, contains or will contain any untrue statement of a material fact, or omit any material fact the omission of which would be misleading. 4. Buyer's Representations and Warranties. 4.01. Buyer's Representations and Warranties. Buyer represents and warrants that it is a corporation duly organized, existing, and in good standing under the laws of the State of Nevada and is duly qualified to do business in the State of California. The execution and delivery of this Agreement and the consummation of this transaction by Buyer have been duly authorized by Buyer's board of directors, and no further corporate authorization is necessary on the part of Buyer. 5. Selling Parties' Obligations Before Closing. 5.01. Selling Parties' Pre-Closing Covenants. Selling Parties covenant that from the Effective Date of this Agreement until the Closing: (a) Buyer and its counsel, accountants, and other representatives, shall, after the execution hereof, have full access during normal business hours to all assets, books, accounts, records, contracts, and documents of, or relating to, the Corporation. Selling Parties shall furnish or cause to be furnished to Buyer and its representatives all data and information concerning the business, finances, and assets of Corporation that may reasonably be requested. (b) Corporation shall carry on its business and activities diligently and in substantially the same manner as they previously have been carried out, and shall not make or institute any unusual or novel methods of manufacture, purchase, sale, lease, management, accounting, or operation that will vary materially from those methods used by Corporation as of the Effective Date of this Agreement. (c) Corporation will use its best efforts (without making any commitments on behalf of Buyer) to preserve its business organization intact, to keep available to Corporation its present officers and employees, and to preserve its present relationships with suppliers, customers, and others having business relationships with them. (d) Corporation will not:(i) amend its articles of incorporation or by-laws, (ii) issue any shares of its capital stock, (iii) issue or create any warrants, obligations, subscriptions, options, convertible securities, or other commitments under which any additional shares of its capital stock of any class might be directly or indirectly authorized, issued, or transferred from treasury, or (iv) agree to do any of the acts listed above. (e) Corporation will continue to carry its existing insurance, subject to variations in amounts required by the ordinary operations of its business. At the request of Buyer and at Buyer's sole expense, the amount of insurance against fire and other casualties that, at the Effective Date of this Agreement, Corporation carries on any of its properties or in respect of its operations shall be increased by such amount or amounts as Buyer shall specify. Buyer will cause loss payable endorsements to be added to all of the insurance policies listed on Exhibit 11, the cost, if any, of such endorsements to be borne by the Buyer. (f) Corporation will not do, or agree to do, any of the following acts: (i) grant any increase in salaries payable or to become payable by it, to any officer, employee, sales agent, or representative; or (ii) increase benefits payable to any officer, employee, sales agent, or representative under any bonus or pension plan or other contract or commitment. (g) Corporation will not, without Buyer's written consent, do or agree to do any of the following acts: (i) enter into any contract, commitment, or transaction not in the usual and ordinary course of its business; (ii) enter into any contract, commitment, or transaction in the usual and ordinary course of business involving an amount exceeding $0, individually, or $0 in the aggregate; (iii) make any capital expenditure in excess of $0 for any single item or $0 in the aggregate, or enter into any leases of capital equipment or property under which the annual lease charge is in excess of $0; or (iv) sell or dispose of any capital assets with a net book value in excess of $0 individually, or $0 in the aggregate. (h) Corporation will not: (i) declare, set aside, or pay any dividend or make any distribution in respect of its capital stock; (ii) directly or indirectly purchase, redeem, or otherwise acquire any shares of its capital stock; or (iii) enter into any agreement obligating it to do either of the foregoing acts. (i) Corporation will not do, or agree to do, any of the following acts: (i) pay any obligation or liability, fixed or contingent, other than current liabilities; (ii) waive or compromise any right or claim; or (iii) cancel, without full payment, any note, loan, or other obligation owing to Corporation. (j) Corporation will not modify, amend, cancel, or terminate any of its existing contracts or agreements, or agree to do any of those acts. (k) At the request of Buyer, Corporation will document and describe any of its trade secrets, processes, or business procedures specified by Buyer, in form and content satisfactory to Buyer, subject to the provision of Section 6.01, below. 5.02. Truth of Representations and Warranties. All representations and warranties of Selling Parties set forth in this Agreement and in any written statements delivered to Buyer by Selling Parties under this Agreement will also be true and correct as of the Closing Date as if made on that date. 6. Buyer's Obligations Before Closing. ----------------------------------- 6.01. Information to Be Held in Confidence. Whether or not the Closing shall take place, Selling Parties waive any cause of action, right, or claim arising out of the access of Buyer or its representatives to any trade secrets or other confidential business information of Corporation from the Effective Date of this Agreement until the Closing Date, except for the intentional competitive misuse by Buyer or its representatives of such trade secrets or other confidential business information if the Closing does not take place. Notwithstanding the foregoing, Buyer agrees that unless and until the Closing has been consummated, it and its officers, directors, and other representatives will use their best efforts to hold in strict confidence, and not use to the detriment of any Shareholder or the Corporation, all data and information obtained in connection with this transaction or Agreement with respect to the Corporation's business. If the transactions contemplated by this Agreement are not consummated, Buyer will return to Selling Parties all the data and information that Selling Parties may reasonably request, including, but not limited to, worksheets, test reports, manuals, lists, memoranda, and other documents prepared by or made available to Buyer in connection with this transaction. 7. Conditions Precedent to Buyer's Performance. ------------------------------------------- 7.01. Conditions Precedent. The obligations of Buyer to purchase the Shares under this Agreement are subject to the satisfaction, at or before the Closing, of all of the following conditions set forth in paragraphs (a) to (m). Buyer may waive any or all of these conditions in whole or in part without prior notice; provided, however, that such waiver shall be in writing and that no such waiver of a condition shall constitute a waiver by Buyer of any of its other rights or remedies, at law or in equity, if any Shareholder or the Corporation is in default of any of their representations, warranties, or covenants under this Agreement. (a) Except as otherwise permitted by this Agreement, all representations and warranties by each of the Selling Parties in this Agreement or in any written statement that shall be delivered to Buyer by any of them under this Agreement shall be true on and as of the Closing Date as though made at that time. (b) Selling Parties shall have performed, satisfied, and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by them, or any of them, on or before the Closing Date. (c) Until the Closing Date, there shall not have been any material adverse change in the financial condition or the results of operations of Corporation and the Corporation shall not have sustained any material loss or damage to its assets, whether or not insured, that materially affects its ability to conduct its business. (d) Buyer shall have received a certificate, dated the Closing Date, signed and verified by each Shareholder and by the Corporation's president and treasurer certifying, in such detail as Buyer and its counsel may reasonably request, that the conditions specified in paragraphs (a) through (c) have been fulfilled. (e) Buyer shall have received from Selling Parties, a statement dated the Closing Date, in form and substance satisfactory to Buyer, that: (i) Corporation is a corporation duly organized and validly existing and in good standing under the laws of the State of California and has all necessary corporate power to own its assets as now owned and operate its business as now operated; (ii) The authorized capital stock of Corporation consists of 10,000 shares of common stock --, of which 1,000 shares, and no more, are issued and outstanding. All outstanding shares are validly issued, fully paid, and nonassessable. To the best knowledge and belief of counsel, there are no outstanding subscriptions, options, rights, warrants, convertible securities, or other agreements or commitments obligating Corporation to issue or transfer from treasury any additional shares of its capital stock. Corporation does not have any subsidiaries and does not own, directly or indirectly, any equity security of any corporation; (iii)This Agreement has been duly and validly authorized and, when executed and delivered by all Selling Parties, will be valid and binding on each of them and enforceable in accordance with its terms, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally; (iv) Shareholders are the owners, beneficially and of record, of all the issued and outstanding shares of the capital stock of Corporation, free and clear of all liens, encumbrances, equities, options, claims, charges, and restrictions and each Shareholder has full power to transfer such shares to Buyer without obtaining the consent or approval of any other person or governmental authority; (v) Except as otherwise disclosed to Buyer in writing, such counsel does not know of any suit, action, arbitration, or legal, administrative, or other proceeding or governmental investigation pending or threatened against or affecting Corporation or its business or assets, or financial or other condition; (vi) Neither the execution nor delivery of this Agreement nor the consummation of the transaction contemplated in this Agreement, will constitute: (a) a default under or violation or breach of Corporation's articles of incorporation, by-laws, or any indenture, license, lease, franchise, mortgage, instrument, or other agreement to which any of Selling Parties is a party, or by which they or the Corporation's assets may be bound; (b) an event that would permit any party to any agreement or instrument to terminate it or to accelerate the maturity of any indebtedness or other obligation of Corporation, or (c) an event that would result in the creation or imposition of any lien, charge, or encumbrance on any asset of Corporation; (vii)Corporation has good and marketable title to all of its assets and properties, including those described in the exhibits to this Agreement, free and clear of all liens, encumbrances, equities, conditional sales contracts, security interests, charges, and restrictions, except as set forth in this Agreement or its exhibits. In rendering their opinion, counsel for Selling Parties may rely on certificates of officers and directors of Corporation as to factual matters. (f) No action, suit, or proceeding before any court or any governmental body or authority pertaining to the transaction contemplated by this Agreement or to its consummation shall have been instituted or threatened on or before the Closing Date. (g) Buyer shall have received from Corporation's President or Corporation's independent public accountant, a letter, dated the Closing Date, that on the basis of a limited review (not an audit) of the latest available accounting records of Corporation, consultations with other responsible officers of Corporation and the Shareholders, and other pertinent inquiries that they deem necessary, they have no reason to believe that during the period ending October 31, 2000 to a specified date, there was any change in the financial condition or results of the Corporation's operations, except changes incurred in the ordinary and usual course of its business during that period that in the aggregate are not materially adverse, and other changes or transactions, if any, contemplated by this Agreement. (h) The execution and delivery of this Agreement by Corporation, and the performance of its covenants and obligations under it, shall have been duly authorized by all necessary corporate action, and Buyer shall have received copies of all resolutions pertaining to that authorization, certified respectively by the Corporation's secretary. (i) Buyer shall have received a tax clearance certificate for the Corporation, as of a date not more than ten (10) days before the Closing Date, from the State of California Franchise Tax Board. (j) Buyer shall have received a Certificate of Release from the State of California Employment Development Department stating that, as of a date not more than ten (10) days before the Closing Date, no contributions, interest, or penalties are due that department from Corporation. (k) All necessary agreements and consents of any parties to the consummation of the transactions contemplated by this Agreement, or otherwise pertaining to the matters covered by it, shall have been obtained by Selling Parties and delivered to Buyer. (m) Employment agreements in the form set forth in Exhibit 2, dated the Closing Date, shall have been executed and delivered by each Shareholder to Buyer. (n) Except as otherwise requested by Buyer, Selling Parties shall have delivered to Buyer the written resignations of all the officers and directors of Corporation. Selling Parties will cause any other action to be taken with respect to these resignations that Buyer may reasonably request. (o) The form and substance of all certificates, instruments, opinions, and other documents delivered to Buyer under this Agreement shall be satisfactory in all reasonable respects to Buyer and its counsel. 8. Conditions Precedent to Selling Parties' Performance. ---------------------------------------------------- 8.01. Conditions Precedent. The obligations of Shareholders to sell and transfer the Shares under this Agreement are subject to the satisfaction, at or before the Closing, of all the following conditions: (a) All representations and warranties by Buyer contained in this Agreement or in any written statement delivered by Buyer under this Agreement shall be true on and as of the Closing as though such representations and warranties were made on and as of that date. (b) Buyer shall have performed and complied with all covenants and agreements, and satisfied all conditions that it is required by this Agreement to perform, comply with, or satisfy, before or at the Closing. (c) Buyer shall have furnished Selling Parties with an opinion, dated the Closing Date, of Lagerlof, Senecal, Bradley, Gosney & Kruse, LLP, counsel for Buyer, in form and substance satisfactory to Selling Parties and their counsel, to the effect that: (i) Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, and has all requisite corporate power to perform its obligations under this Agreement; (ii) All corporate proceedings required by law or by the provisions of this Agreement to be taken by Buyer on or before the Closing Date, in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement, have been duly and validly taken; (iii)Buyer has the corporate power and authority to acquire the shares for the consideration set forth in Section 1.02, above; (iv) Every consent, approval, authorization, or order of any court or governmental agency or body that is required for the consummation by Buyer of the transactions contemplated by this Agreement has been obtained and will be in effect on the Closing Date; (v) The consummation of the transactions contemplated by this Agreement does not violate or contravene any of the provisions of any charter, by-law, or resolution of Buyer or of any indenture, agreement, judgment, or order to which Buyer is a party or by which Buyer is bound. In rendering their opinion, counsel for Buyer may rely on certificates of governmental authorities and on opinions of associate counsel. (d) The board of directors shall have duly authorized and approved the execution and delivery of this Agreement and all corporate action necessary or proper to fulfill the obligations of Buyer to be performed under this Agreement on or before the Closing Date. 9. Selling Parties' Obligations After Closing. ------------------------------------------ 9.01. Seller's Indemnity. Selling Parties, and each of them, shall indemnify, defend, and hold harmless Buyer from and against any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries, and deficiencies, including interest, penalties, and reasonable attorneys' fees, that it may incur or suffer, which arise, result from, or relate to any breach of, or failure by Selling Parties to perform, any of their representations, warranties, covenants, or agreements in this Agreement or in any schedule, certificate, exhibit, or other instrument furnished or to be furnished by Selling Parties under this Agreement, including Selling Parties' failure to disclose any liabilities payable by the Corporation. 9.02. Notice Regarding Seller's Indemnity. Buyer shall promptly notify Selling Parties of the existence of any claim, demand, or other matter to which indemnification under Section 9.01 would apply, and shall give Selling Parties a reasonable opportunity to defend the same at Selling Parties' own expense and with counsel of Selling Parties' own selection; provided that Buyer shall at all times also have the right to fully participate in the defense at its own expense. If Selling Parties shall, within a reasonable time after this notice, fail to defend, Buyer shall have the right, but not the obligation, to undertake the defense of, and to compromise or settle (exercising reasonable business judgment), the claim or other matter on behalf, for the account, and at the risk of Selling Parties. If the claim is one that cannot by its nature be defended solely by Selling Parties (including, without limitation, any federal or state tax proceeding), then Buyer shall make available and cause Corporation to make available all information and assistance that Selling Parties may reasonably request. 9.03. Liquidated Damages. It is agreed that in the event of intentional and significant misrepresentation of the warranties known by the seller and set forth in Section 3.01 of this Agreement for which it would be impracticable or extremely difficult to fix the actual damages resulting to the Buyer from such breach, and, therefore, the Selling Parties, jointly and severally, agree to pay to Buyer, as liquidated damages, and not as a penalty, all amounts paid by Buyer to the Selling Parties until the date such breach is discovered, which amount represents a reasonable effort by the parties hereto to estimate a fair compensation for the foreseeable losses that might result from such a breach. In the event of an intentional misrepresentation of the aforesaid representations and warranties by the Selling Parties, the Buyer shall be entitled to set off against any sums that are owing or may become owing to the Selling Parties, whether by reason of the terms of this Agreement, or otherwise, the aforesaid liquidated damages. 9.04. Non-Competition; Confidentiality. Each Shareholder agrees that if he or she resigns they will not at any time within the two-year period immediately following the Closing Date, directly or indirectly, engage in, or have any interest in any person, firm, corporation, or business (whether as an employee, officer, director, agent, security holder, creditor, consultant, or otherwise) that engages in, any activity that is the same as, similar to, or competitive with any activity now engaged in by Corporation (or any successor thereto) in any of those counties so long as Buyer or Corporation engages in such activity in such counties. The parties intend that the covenant contained in the preceding portion of this section shall be construed as a series of separate covenants, one for each county specified. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in the preceding paragraph. If, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants deemed included in this section, then the unenforceable covenant shall be deemed eliminated from these provisions for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants to be enforced. Each Shareholder further agrees not to divulge, communicate, use to the detriment of Buyer or Corporation or for the benefit of any other person or persons, or misuse in any way, any confidential information or trade secrets of Corporation, including personnel information, secret processes, know-how, customer lists, recipes, formulas, or other technical data. Each Shareholder acknowledges and agrees that any information or data he or she has acquired on any of these matters or items was received in confidence and as a fiduciary of Corporation. 10. Buyer's Obligations After Closing. --------------------------------- 10.01. Continuation of Employee Benefits. Buyer acknowledges that Selling Parties have advised Buyer of the employee benefits Corporation provides to its employees, including pension plan, annual vacations, and annual discretionary bonuses. Buyer understands that the discontinuance of any of these employment benefits might have a detrimental effect on employment relationships and on the business being acquired, but Buyer reserves the right after Closing to provide such employee benefits to Corporation's employees as it deems appropriate in its sole discretion. 11. Termination; Default. ------------------- 11.01. Conditions Permitting Termination. Either party may terminate this Agreement on the Closing Date without liability to the other if: (a) Any bona fide action or proceeding is pending against either party on the Closing Date that could result in an unfavorable judgment, decree, or order that would prevent or make unlawful the carrying out of this Agreement; or (b) The legality and sufficiency of all steps taken and to be taken by the parties and their shareholders in carrying out this Agreement shall not have been approved by counsel as required by this Agreement; or (c) Any condition precedent of either party, as set forth herein, has not been satisfied or waived. 11.02. Defaults Permitting Termination. If either Buyer or Selling Parties materially default in the due and timely performance of any of its or their warranties, covenants, or agreements under this Agreement, the non-defaulting party or parties may on the Closing Date give notice of termination of this Agreement, in the manner provided in Section 12.11. The notice shall specify with particularity the default or defaults on which the notice is based. The termination shall be effective three (3) days after the Closing Date, unless the specified default or defaults have been cured on or before this effective date for termination. 11.03. Specific Performance and Waiver of Rescission Rights. Each party's obligation under this Agreement is unique. If any party should default in its obligations under this Agreement, the parties each acknowledge that it would be extremely impracticable to measure the resulting damages. Accordingly, the non-defaulting party, in addition to any other available rights or remedies, may sue in equity for specific performance, and the parties each expressly waive the defense that a remedy in damages will be adequate. Notwithstanding any breach or default by any of the parties of any of their respective representations, warranties, covenants, or agreements under this Agreement, if the purchase and sale contemplated by it shall be consummated at the Closing, each of the parties waives any rights that it, he or she, may have to rescind this Agreement or the transaction consummated by it; provided, however, this waiver shall not affect any other rights or remedies available to the parties under this Agreement or under the law. 12. Miscellaneous. ------------- 12.01. Costs of the Transaction. Each of the parties shall pay all costs and expenses it incurs or will incur in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement, including all attorneys' fees, accountants' fees and fees of any consultants any party may engage. 12.02. No Broker. Each of the parties represents and warrants that it has dealt with no broker or finder in connection with any of the transactions contemplated by this Agreement, and, insofar as it knows, no broker or other person is entitled to any commission or finder's fee in connection with any of this transaction. Each party agrees to indemnify the other parties against and hold the other parties harmless from any brokerage or finder's fees arising from this transaction. 12.03. Headings. The subject headings of the paragraphs and subparagraphs of this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of its provisions. 12.04. Entire Agreement; Modification; Waiver. This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by all the parties. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 12.05. Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 12.06. Parties in Interest. Nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over against any party to this Agreement. 12.07. Assignment. This Agreement shall be binding on, and shall inure to the benefit of, the parties to it and their respective heirs, legal representatives, successors, and assigns; provided, however, Buyer may not assign any of its rights under it, except to a wholly owned-subsidiary corporation of Buyer. No such assignment by Buyer to its wholly owned-subsidiary shall relieve Buyer of any of its obligations or duties under this Agreement. 12.08. Arbitration. Any controversy or claim arising out of, or relating to, this Agreement, or the making, performance, or interpretation thereof, shall be settled by arbitration in San Diego, California in accordance with the Commercial Rules of the American Arbitration Association then existing, and judgment on the arbitration award may be entered in any court having jurisdiction over the subject matter of the controversy. Arbitrators shall be persons experienced in negotiating and making and consummating acquisition agreements. 12.09. Attorneys' Fees. If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' and accountants' fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled. 12.10. Nature and Survival of Representations and Obligations. All representations, warranties, covenants, and agreements of the parties contained in this Agreement, or in any instrument, certificate, opinion, or other writing provided for in it, shall survive the Closing. 12.11. Notices. All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given or on the third (3rd) day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed as follows: To Selling Parties at: Bioconnect 541-A Birch St. Lake Elsinore, CA 92530 To Buyer at: RF INDUSTRIES, LTD. 7610 Miramar Rd. San Diego, CA 92126-4202 Telephone: (858) 549-6340 Facsimile: (858) 549-6345 E-Mail: rfi@rfindustries.com Any party may change its address for purposes of this paragraph by giving the other parties written notice of the new address in the manner set forth above. 12.12. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of California. 12.13. Severability. In the event any paragraph, or paragraphs of this Agreement shall be declared to be illegal, unenforceable, or otherwise surplusage, then, nevertheless, all the remaining provisions of this Agreement shall remain in full force and effect. 12.14. Preparation of Agreement. The parties have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. 12.15. Press Releases and Public Announcements. No party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to Closing without the prior written consent of the other, which consent shall not be unreasonably conditioned, withheld or delayed; provided, however, that any party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing party will use its reasonable best efforts to advise the other parties prior to making the disclosure). In witness whereof, the parties to this Agreement have duly executed it on the day and year first above written. "Corporation" "Buyer" BIOCONNECT, INC. RF INDUSTRIES, LTD. a California corporation a Nevada corporation By: /s/ Richard Roberts By: /s/ Howard F. Hill ---------------------------- -------------------------- Richard Roberts, President Howard F. Hill, President/CEO By: /s/ Leonard Malena By: /s/ Terrie Gross ---------------------------- --------------------------- Leonard Malena, Secretary Terrie Gross, Secretary By: /s/ Richard Roberts ------------------------------- Richard Roberts, Individually By: /s/ Leonard Malena ------------------------------ Leonard Malena, Individually By: /s/ Phillip Booker ----------------------------- Phillip Booker, Individually SPOUSAL CONSENT The undersigned acknowledges that she has read the foregoing Agreement for Purchase and Sale of Stock and that she knows and approves of its contents. She is aware that by the terms of the Agreement, her husband's interest, and any community property interest she may possess, in the Shares conveyed thereunder will be transferred to the Buyer. The undersigned hereby consents to the transfer of the Shares owned by her husband to the aforementioned Buyer in accordance with the terms and conditions of the foregoing Agreement. Dated: November 25, 2000 By: /s/ M. Catherine Malena ------------------------------ M. Catherine Malena EX-10.1 5 0005.txt 2000 STOCK OPTION PLAN RF INDUSTRIES, LTD. 2000 STOCK OPTION PLAN AS ADOPTED EFFECTIVE MAY 5, 2000 TABLE OF CONTENTS Page ----- ARTICLE 1. INTRODUCTION...................................................... 1 ARTICLE 2. ADMINISTRATION.................................................... 1 2.1 Committee Composition......................................... 1 2.2 Powers of the Committee........................................ 1 2.3 Committee for Non-Officer Grants .............................. 2 ARTICLE 3. SHARES AVAILABLE FOR GRANTS........................................2 3.1 Basic Limitation............................................... 2 3.2 Annual Increase in Shares ..................................... 3 3.3 Additional Shares ............................................. 3 ARTICLE 4. ELIGIBILITY........................................................3 4.1 Incentive Stock Options........................................ 3 4.2 Other Grants................................................... 3 ARTICLE 5. OPTIONS............................................................3 5.1 Stock Option Agreement..........................................3 5.2 Number of Shares ...............................................3 5.3 Exercise Price..................................................4 5.4 Exercisability and Term.........................................4 5.5 Manner of Exercise..............................................4 5.6 Effect of Change in Control.....................................4 5.7 Modification or Assumption of Options...........................4 5.8 Buyout Provisions...............................................5 ARTICLE 6. PAYMENT FOR OPTION SHARES..........................................5 6.1 General Rule....................................................5 6.2 Surrender of Stock..............................................5 6.3 Exercise/Sale...................................................5 6.4 Exercise/Pledge.................................................5 6.5 Promissory Note.................................................6 6.6 Other Forms of Payment..........................................6 ARTICLE 7. PROTECTION AGAINST DILUTION........................................6 7.1 Adjustments.....................................................6 7.2 Dissolution or Liquidation......................................6 7.3 Reorganizations.................................................6 ARTICLE 8. AWARDS UNDER OTHER PLANS...........................................7 ARTICLE 9. LIMITATION ON RIGHTS...............................................7 9.1 Retention Rights................................................7 9.2 Stockholers' Rights.............................................7 9.3 Conditions Upon Issuance of Common Shares.......................7 ARTICLE 10. WITHHOLDING TAXES..................................................8 10.1 General.........................................................8 10.2 Share Withholding...............................................8 ARTICLE 11. FUTURE OF THE PLAN.................................................8 11.1 Term of the Plan................................................8 11.2 Amendment or Termination........................................8 11.3 Stockholder Approval............................................8 11.4 Effect of Amendment or Termination..............................8 ARTICLE 12. LIMITATION ON PARACHUTE PAYMENTS...................................8 12.1 Scope of Limitation.............................................8 12.2 Basic Rule......................................................9 12.3 Reduction of Payments...........................................9 12.4 Overpayments and Underpayments..................................9 12.5 Related Corporations...........................................10 ARTICLE 13. INDEMNIFICATION.................................................. 10 ARTICLE 14. PROVISION OF INFORMATION..........................................10 ARTICLE 15. DEFINITIONS.......................................................10 ARTICLE 16. EXECUTION.........................................................13 ii RF INDUSTRIES, LTD. 2000 STOCK OPTION PLAN ARTICLE 1. INTRODUCTION. The Plan was adopted by the Board effective May 5, 2000. The purpose of the Plan is to promote the long_term success of the Company and the creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long_range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Options (which may constitute incentive stock options or nonstatutory stock options). Terms defined herein shall have the meanings set forth in "Article 2 - Definitions." The Plan shall be governed by, and construed in accordance with, the laws of the State of Nevada (except their choice_of_law provisions). ARTICLE 2. ADMINISTRATION. 2.1Committee Composition . The Plan shall be administered by the Committee. The Committee shall consist exclusively of two or more directors of the Company, who shall be appointed by the Board. In addition, the composition of the Committee shall satisfy such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b_3 (or its successor) under the Exchange Act. 2.2 Powers of the Committee . Subject to the provisions of the Plan, and, subject to the specific duties delegated by the Board to such Committee, the Committee shall have the authority, in its discretion: (a) to determine the Fair Market Value of the Common Shares, in accordance with Section 15 of the Plan; (b) to select the Consultants and Employees to whom Awards may be granted hereunder; (c) to determine whether and to what extent Awards or any combination thereof are granted hereunder; 1 (d) to determine the number of Common Shares to be covered by each Award granted hereunder; (e) to approve forms of agreement for use under the Plan; (f) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting, acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Awards or the Common Shares relating thereto, based in each case on such factors as the Committee, in its sole discretion, shall determine; (g) to construe and interpret the terms of the Plan; (h) to prescribe, amend and rescind rules and regulations relating to the Plan; (i) to determine whether and under what circumstances an Award may be settled in cash instead of Common Shares or Common Shares instead of cash; (j) to reduce the exercise price of any Award; (k) to modify or amend each Award (subject to the Plan); (l) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Board; (m) to determine the terms and restrictions applicable to Awards; and (n) to make all other determinations deemed necessary or advisable for administering the Plan. 2.3 Committee for Non_Officer Grants . The Board may also appoint a secondary committee of the Board, which shall be composed of one or more directors of the Company who need not satisfy the requirements of Section 2.1. Such secondary committee may administer the Plan with respect to Employees and Consultants who are not considered officers or directors of the Company under section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and Consultants and may determine all features and conditions of such Awards. Within the limitations of this Section 2.3, any reference in the Plan to the Committee shall include such secondary committee. 2 ARTICLE 3. SHARES AVAILABLE FOR GRANTS. 3.1 Basic Limitation. Common Shares issued pursuant to the Plan may be authorized but unissued shares or treasury shares. The aggregate number of Options awarded under the Plan shall not exceed (a) 300,000 plus (b) the additional Common Shares described in Sections 3.2 and 3.3. The limitation of this Section 3.1 shall be subject to adjustment pursuant to Article 7. 3.2 Annual Increase in Shares. As of January 1of each year, commencing with the year 2001, the aggregate number of Options that may be awarded under the Plan shall automatically increase by a number equal to the lesser of (a) 4% of the total number of Common Shares then outstanding or (b) 10,000 Shares. 3.3 Additional Shares. If Common Shares issued upon the exercise of Options are forfeited, then such Common Shares shall again become available for Awards under the Plan. If Options are forfeited or terminate for any other reason before being exercised, then the corresponding Common Shares shall again become available for Awards under the Plan. The foregoing notwithstanding, the aggregate number of Common Shares that may be issued under the Plan upon the exercise of ISOs shall not be increased when Common Shares are forfeited. ARTICLE 4. ELIGIBILITY. 4.1 Incentive Stock Options. Only Employees who are common_law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the requirements set forth in section 422(c)(6) of the Code are satisfied. 4.2 Other Grants . Only Employees, Outside Directors and Consultants shall be eligible for the grant of NSOs under the Plan. ARTICLE 5. OPTIONS. 5.1 Stock Option Agreement . Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be granted in consideration of a reduction in the Optionee's other compensation. A Stock Option Agreement may provide that a new Option will be granted automatically to the Optionee when he or she exercises a prior Option and pays the Exercise Price in the form described in Section 6.2. 3 5.2 Number of Shares . Each Stock Option Agreement shall specify the number of Common Shares subject to the Option and shall provide for the adjustment of such number in accordance with Article 7. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 7. 5.3 Exercise Price . Each Stock Option Agreement shall specify the Exercise Price; provided that the Exercise Price under an ISO shall in no event be less than 100% of the Fair Market Value of a Common Share on the date of grant and the Exercise Price under an NSO shall in no event be less than 85% of the Fair Market Value of a Common Share on the date of grant. 5.4 Exercisability and Term . Each Stock Option Agreement shall specify the date or event when all or any installment of the Option is to become exercisable, which may include vesting requirements and/or performance criteria with respect to the Company and/or the Optionee. The Stock Option Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant. A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee's death, disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee's service. 5.5 Manner of Exercise . An Option shall be deemed exercised when the Company receives: (i) notice of exercise (in accordance with the Stock Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Common Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Stock Option Agreement. Common Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Common Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Shares subject to the Option, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Common Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Common Shares are issued, except as provided in Article 7 of the Plan. Exercising an Option in any manner shall decrease the number of Common Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Common Shares as to which the Option is exercised. 5.6 Effect of Change in Control . The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Common Shares subject to such Option in the event that a Change in Control occurs with respect to the Company, subject to the following limitation: 4 (a) In the case of an ISO, the acceleration of exercisability shall not occur without the Optionee's written consent. 5.7 Modification or Assumption of Options . Within the limitations of the Plan, the Committee may modify, extend or assume outstanding options or may accept the cancellation of outstanding options (whether granted by the Company or by another issuer) in return for the grant of new options for the same or a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair his or her rights or obligations determined pursuant to the Option Agreement representing such Option. 5.8 Buyout Provisions . The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish. ARTICLE 6. PAYMENT FOR OPTION SHARES. 6.1 General Rule . The entire Exercise Price of Common Shares issued upon exercise of Options shall be payable in cash or cash equivalents at the time when such Common Shares are purchased, except as follows: (a) In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Stock Option Agreement. The Stock Option Agreement may specify that payment may be made in any form(s) described in this Article 6. (b) In the case of an NSO, the Committee may at any time accept payment in any form(s) described in this Article 6. 6.2 Surrender of Stock . To the extent that this Section 6.2 is applicable, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Common Shares that are already owned by the Optionee. Such Common Shares shall be valued at their Fair Market Value on the date when the new Common Shares are purchased under the Plan. The Optionee shall not surrender, or attest to the ownership of, Common Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes. 6.3 Exercise/Sale . To the extent that this Section 6.3 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company to sell all or part of the Common Shares being purchased under the Plan and to deliver all or part of the sales proceeds to the Company. 6.4 Exercise/Pledge . To the extent that this Section 6.4 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to pledge all or part of the Common Shares being purchased under the Plan to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company. 6.5 Promissory Note . To the extent that this Section 6.5 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) a full_recourse promissory note. However, to the extent required by state corporation law, the par value of the Common Shares being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents. 6.6 Other Forms of Payment . To the extent that this Section 6.6 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid in any other form that is consistent with applicable laws, regulations and rules. ARTICLE 7. PROTECTION AGAINST DILUTION. 7.1 Adjustments . In the event of a subdivision of the outstanding Common Shares, a declaration of a dividend payable in Common Shares, a declaration of a dividend payable in a form other than Common Shares in an amount that has a material effect on the price of Common Shares, a combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a lesser number of Common Shares, a recapitalization, a spin_off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of: (a) The number of Options available for future Awards under Article 3; (b) The limitations set forth in Section 5.2; (c) The number of Common Shares covered by each outstanding Option; or (d) The Exercise Price under each outstanding Option. Except as provided in this Article 7, a Participant shall have no rights by reason of any issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. 7.2 Dissolution or Liquidation . To the extent not previously exercised or settled, Options shall terminate immediately prior to the dissolution or liquidation of the Company. 7.3 Reorganizations . In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement shall provide for: (a) The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation; (b) The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary; (c) The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards; (d) Full exercisability or vesting and accelerated expiration of the outstanding Awards; or (e) Settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards. ARTICLE 8. AWARDS UNDER OTHER PLANS. The Company may grant awards under other plans or programs. Such awards may be settled in the form of Common Shares issued under this Plan. Such Common Shares shall, when issued, reduce the number of Common Shares available under Article 3. ARTICLE 9. LIMITATION ON RIGHTS. 9.1 Retention Rights . Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain an Employee, Outside Director or Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate the service of any Employee, Outside Director or Consultant at any time, with or without cause, subject to applicable laws, the Company's certificate of incorporation and by_laws and a written employment agreement (if any). 9.2 Stockholders' Rights . A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Common Shares covered by his or her Award prior to the time when a stock certificate for such Common Shares is issued or, if applicable, the time when he or she becomes entitled to receive such Common Shares by filing any required notice of exercise and paying any required Exercise Price. No adjustment shall be made for cash dividends or other rights for which the record date is prior to such time, except as expressly provided in the Plan. 9.3 Conditions Upon Issuance of Common Shares . Common Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Common Shares shall comply with all relevant provisions of law, including, without limitation, the Securities Act, as amended, the Exchange Act, the securities laws of applicable states, the rules and regulations promulgated thereunder, applicable laws, and the requirements of any stock exchange or quotation system upon which the Common Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance. ARTICLE 10. WITHHOLDING TAXES. 10.1 General . To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be required to issue any Common Shares or make any cash payment under the Plan until such obligations are satisfied. 10.2 Share Withholding . The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Common Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Common Shares that he or she previously acquired. Such Common Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. ARTICLE 11. FUTURE OF THE PLAN. 11.1 Term of the Plan . The Plan, as set forth herein, shall become effective on May 5, 2000. The Plan shall remain in effect until it is terminated under Section 11.2, except that no ISOs shall be granted on or after the 10th anniversary of the later of (a) the date when the Board adopted the Plan or (b) the date when the Board adopted the most recent increase in the number of Common Shares available under Article 3 which was approved by the Company's stockholders. 11.2 Amendment or Termination . The Board may at any time amend, alter, suspend or terminate the Plan for any reason. 11.3 Stockholder Approval . The Company shall obtain stockholder approval of any Plan amendment to the extent requested by applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Shares are listed or quoted. Such stockholder approval, if required shall be obtained in such a manner and to such a degree as is required by the applicable laws, rules or regulations. 11.4 Effect of Amendment or Termination . No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company unless such amendment, alteration, suspension or termination is required to enable an Option designated as an Incentive Stock Option to qualify as a Nonqualified Stock Option or is necessary to comply with any applicable laws or government regulations. ARTICLE 12. LIMITATION ON PARACHUTE PAYMENTS. 12.1 Scope of Limitation . This Article 12 shall apply to an Award unless the Committee, at the time of making an Award under the Plan or at any time thereafter, specifies in writing that such Award shall not be subject to this Article 12. If this Article 12 applies to an Award, it shall supersede any contrary provision of the Plan or of any Award granted under the Plan. 12.2 Basic Rule . In the event that the independent auditors most recently selected by the Board (the "Auditors") determine that any payment or transfer by the Company under the Plan to or for the benefit of a Participant (a "Payment") would be nondeductible by the Company for federal income tax purposes because of the provisions concerning "excess parachute payments" in Section 280G of the Code, then the aggregate present value of all Payments shall be reduced (but not below zero) to the Reduced Amount. For purposes of this Article 12 the "Reduced Amount" shall be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code. 12.3 Reduction of Payments . If the Auditors determine that any Payment would be nondeductible by the Company because of Section 280G of the Code, then the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof and of the Reduced Amount, and the Participant may then elect, in his or her sole discretion, which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall advise the Company in writing of his or her election within 10 days of receipt of notice. If no such election is made by the Participant within such 10_day period, then the Company may elect which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall notify the Participant promptly of such election. For purposes of this Article 12 present value shall be determined in accordance with Section 280G(d)(4) of the Code. All determinations made by the Auditors under this Article 12 shall be binding upon the Company and the Participant and shall be made within 60 days of the date when a Payment becomes payable or transferable. As promptly as practicable following such determination and the elections hereunder, the Company shall pay or transfer to or for the benefit of the Participant such amounts as are then due to him or her under the Plan and shall promptly pay or transfer to or for the benefit of the Participant in the future such amounts as become due to him or her under the Plan. 12.4 Overpayments and Underpayments . As a result of uncertainty in the application of Section 280G of the Code at the time of an initial determination by the Auditors hereunder, it is possible that Payments will have been made by the Company that should not have been made (an "Overpayment") or that additional Payments that will not have been made by the Company could have been made (an "Underpayment"), consistent in each case with the calculation of the Reduced Amount hereunder. In the event that the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant that the Auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment shall be treated for all purposes as a loan to the Participant which he or she shall repay to the Company, together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant to the Company if and to the extent that such payment would not reduce the amount subject to taxation under Section 4999 of the Code. In the event that the Auditors determine that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to or for the benefit of the Participant, together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code. 12.5 Related Corporations . For purposes of this Article 12, the term "Company" shall include affiliated corporations to the extent determined by the Auditors in accordance with Section 280G(d)(5) of the Code. ARTICLE 13. INDEMNIFICATION. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Company and any Parent or Subsidiary, members of the Committee and any officers or employees of the Company and any Parent or Subsidiary to whom authority to act for the Board is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. ARTICLE 14. PROVISION OF INFORMATION. At least annually, copies of the Company's annual report or Form 10-KSB for the just-completed fiscal year shall be made available to each Participant and purchaser of Common Shares upon exercise of an Award. The Company shall not be required to provide such information to key employees whose duties in connection with the Company assure them access to equivalent information. A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction. 15.5 "Code" means the Internal Revenue Code of 1986, as amended. 15.6 "Committee" means a committee of the Board, as described in Article 2. 15.7 "Common Share" means one share of the common stock of the Company. 15.8 "Company" means RF Industries, Ltd., a Nevada corporation. 15.9 "Consultant" means a consultant or adviser who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor. Service as a Consultant shall be considered employment for all purposes of the Plan, except as provided in Section 4.1. 15.10 "Employee" means a common_law employee of the Company, a Parent, a Subsidiary or an Affiliate. 15.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 15.12 "Exercise Price" means the amount for which one Common Share may be purchased upon exercise of an Option, as specified in the applicable Stock Option Agreement. 15.13 "Fair Market Value" means with respect to each Common Share the last reported sale price of the Company's Common Shares sold on the principal national securities exchanges on which the Common Shares are at the time admitted to trading or listed, or, if there have been no sales of any such exchange on such day, the average of the highest bid and lowest ask price on such day as reported by the Nasdaq system, or any similar organization if the Nasdaq is no longer reporting such information, either (i) on the date which the notice of exercise is deemed to have been sent to the Company (the "Notice Date") or (ii) over a period of five (5) trading days preceding the Notice Date, whichever of (i) or (ii) is greater. If on the date for which the current fair market value is to be determined, the Common Shares are not listed on any securities exchange or quoted on the Nasdaq system or the over-the-counter market, the current fair market value of Common Shares shall be the highest price per share which the Company could then obtain from a willing buyer (not a current employee or director) for Common Shares sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of the Company, unless prior to such date the Company has become subject to a binding agreement for a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the current fair market value of the Common Shares shall be deemed to be the value to be received by the holders of the Company's Common Shares for each share thereof pursuant to the Company's acquisition. Such determination shall be conclusive and binding on all persons. 15.14 "ISO" means an incentive stock option described in Section 422(b) of the Code. 15.15 "NSO" means a stock option not described in Sections 422 or 423 of the Code. 15.16 "Option" means an ISO or NSO granted under the Plan and entitling the holder to purchase Common Shares. 15.17 "Optionee" means an individual or estate who holds an Option. 15.18 "Outside Director" shall mean a member of the Board who is not an Employee. Service as an Outside Director shall be considered employment for all purposes of the Plan, except as provided in Section 4.1. 15.19 "Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date. 15.20 "Participant" means an individual or estate who holds an Award. 15.21 "Plan" means this RF Industries, Ltd. 2000 Stock Option Plan, as amended from time to time. 15.22 "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. ARTICLE 16. EXECUTION. To record the adoption of the Plan by the Board, the Company has caused its duly authorized officer to execute this document in the name of the Company. RF Industries, Ltd. By: /s/ Terrie Gross ----------------------------------------- Terrie Gross, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----