FORM 10 Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to __________
Commission file number 0-8174
Conolog Corporation
(exact name or registrant as specified in its charter)
Delaware 52-0853566
(State or other jurisdiction or (I.R.S. Employer Identification
organization) No.)
5 Columbia Road, Somerville, NJ 08876
(Address of principal executive offices and zip code)
(908) 722-8081
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (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 report(s), and (2) has been subject to
such filing requirement for the past 90 days.
YES X NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
YES NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $1.00 per share 2,443,973(inclusive of Treasury Stock)
CONOLOG CORPORATION
BALANCE SHEETS
ASSETS April 30, 1997 July 31, 1996
Current Assets: (Unaudited) (Audited)
Cash $ 93,660 $ 178,213
Accounts Receivable, less allowances 166,827 304,020
of $14,000 and $10,000 respectively
Inventories 3,232,580 2,937,780
Other Current Assets 56,923 43,517
___________ ___________
TOTAL CURRENT ASSETS $ 3,549,990 $ 3,463,530
Property, Plant and Equipment, less
accumulated depreciation of $1,923,272 $ 405,763 $ 433,906
and $1,880,408 respectively
Other Assets $ 23,383 $ 30,398
___________ ___________
TOTAL ASSETS $ 3,979,136 $ 3,927,834
=========== ===========
LIABILITITES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 74,735 $ 1,012,500
Accounts Payable 95,400 280,629
Accrued Payroll 115,778 41,716
Accrued Interest 6,133 64,699
Other Accrued Expenses 120,976 115,723
Current Maturity of Capitalized
Lease Obligations 8,184 33,282
Bridge Loans 200,000 0
____________ ___________
TOTAL CURRENT LIABILITIES $ 621,206 $ 1,548,549
Capitalized Lease Obligations, less $ 0 $ 4,973
Current Maturity
___________ ___________
TOTAL LIABILITIES $ 621,206 $ 1,553,522
Conolog Corporation
Balance Sheets
April 30, 1997 July 31, 1996
(Unaudited) (Audited)
Stockholders' Equity
Preferred stock, par value $.50; Series A; $ 77,500 $ 77,500
4% cumulative; 162,000 shares authorized;
155,000 shares issued and outstanding
Preferred stock, par value $.50; Series B; 598 598
$.90 cumulative; 50,000 shares authorized;
issued and outstanding 1,197 shares
Common Stock, par value $1.00; 6,000,000 2,443,973 1,035,186
shares authorized; issued 2,443,973 shares
including 8,776 shares held in Treasury
Additional Paid-In Capital 4,124,013 4,401,635
Retained Earnings (deficit) (3,156,420) (3,008,873)
Treasury shares at cost ( 131,734) ( 131,734)
____________ ___________
Total Stockholders' Equity $ 3,357,930 $ 2,374,312
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,979,136 $ 3,927,834
=========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
CONOLOG CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
APRIL 30, APRIL 30,
1997 1996 1997 1996
TOTAL REVENUES $ 111,393 $ 529,802 $ 978,979 $1,519,975
COST OF GOODS SOLD 52,153 183,536 528,498 957,435
_______ ________ _______ ________
GROSS MARGIN $ 59,240 $ 346,266 $ 450,481 $ 562,540
SELLING, GENERAL AND 140,466 214,019 518,944 653,571
ADMINISTRATIVE EXPENSES
_______ _________ ________ __________
OPERATING INCOME
/(LOSS) $( 81,226) $ 132,247 $( 68,463) $( 91,031)
INTEREST EXPENSE 17,080 35,000 69,199 118,371
INCOME/(LOSS) BEFORE ________ _________ _________ ________
TAXES ON INCOME AND
EXTRAORDINARY ITEMS $( 98,306) $ 97,247 $(137,662) $( 209,402)
PROVISION FOR TAXES 9,884 0 9,884 100
_________ __________ __________ __________
INCOME/(LOSS) BEFORE $(108,190) $ 97,247 $(147,546) $( 209,502)
EXTRAORDINARY ITEMS
EXTRAORDINARY ITEMS
(Net of Tax Benefit 0 0 0 740,376
of $492,392)
__________ __________ __________ __________
NET INCOME/(LOSS) $(108,190) $ 97,247 $(147,546) $ 530,874
========== ========== ========== ==========
EARNINGS/(LOSS) PER SHARE
PRIMARY $(.04) $ .10 $(.06) $ .51
========= ========== ========== =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
CONOLOG CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED) FOR THE NINE MONTHS
ENDED APRIL 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
Net Income (Loss) $(147,546) $ 530,874
Adjustments to Net Income to Reconcile to
Net Cash Provided by Operating Activities:
Depreciation and amortization $ 42,864 $ 46,347
(Increase)/Decrease in Accounts Receivable 137,193 (208,304)
(Increase)/Decrease in Inventories (294,800) (257,374)
(Increase)/Decrease in Other Current Assets ( 6,387) ( 5,941)
Increase/(Decrease) in Accounts Payable (185,229) ( 81,359)
Increase/(Decrease) in Accrued Expenses and 20,744 (618,819)
other liabilities
Net Cash Provided/(Used) in Operating Activities$(433,161) $ (594,576)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Property, Plant and Equipment $( 14,721) ( 23,284)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase from Public Stock Offering $ 0 $4,409,839
Increase/(Decrease) in Due to Officers 0 (161,705)
Bridge-Loans(Repayments)Borrowings 200,000 (200,000)
Repayments of Long-term Borrowings (1,012,500) (2,785,500)
Dividends Paid (384,903)
Change in Capital Lease Obligations ( 30,071) 12,353
Issuance of Common Stock 1,408,787 0
Additional Paid in Capital (277,622) 0
From Investors 74,735 0
Net Cash Provided/(Used) by Financing Activities $363,329 $ 890,084
========== ============
NET INCREASE/(DECREASE) IN CASH $(84,553) $ 272,224
CASH AT BEGINNING OF YEAR $178,213 $ 27,577
CASH AT END OF PERIOD $ 93,660 $ 299,801
Supplemental disclosures of Cash Flow Information:
Cash Paid during the Period for;
Interest $12,365 $ 9,564
Income Taxes 17,324 0
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
CONOLOG CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
NOTE 1 - Computation of Earnings Per Share:
For the Nine Months Ended
April 30,
1997 1996
Weighted Average Number of Shares
Outstanding: 2,443,973 1,032,639
COMMON STOCK
Reserve for Conversion:
Series A Preferred Stock* 155,000
Series B Preferred Stock (1 to 20
conversion factor) 0 1,790
Common Stock Equivalents (Warrants)** 235,750 235,750
_________ _________
Total 2,679,723 1,270,179
Gain/(Loss) Per Share:
Total Gain/(Loss) $ (147,546) $ 530,874
Pro-rata Dividends on Preferred
Stock Series A & B 3,135 3,572
Net Gain/(Loss) available for
Common Stock $ (150,681) $ 527,302
__________ _________
Average Number of Shares of Common Stock 2,443,973 1,032,639
========== =========
Primary Gain/(Loss) Per share $ (.06) $ .51
========== ==========
*Each share of Series A Preferred Stock may be exchanged for one share of
Common Stock upon surrender of the Preferred Stock and payment of $1200 per
share. In view of the large difference between the current market value of
the stock and the conversion rate, these shares have not been added to the
total common shares used in computing the net earnings per share.
**Each Warrant may be exchanged for one share of Common Stock at an
exercise price of $6.00 per share. In view of the large difference between
the current market value of the stock and the exercise price, these shares
have not been added to the total common shares used in computing the net
earnings per share.
Fully diluted earnings per share, assuming conversion of Series A and Series
B Preferred Stock, has not been reflected as the effect would be either
anti-dilutive or not material.
NOTES TO INTERIM STATEMENTS - CONTINUED
NOTE 2 -LONG-TERM DEBT
On August 16, 199
5, the Bank exchanged debt obligations for (a)$250,000 cash;
(b) $1,025,000 Five-year term loan and (c) 375,000 shares of Common stock.
The five-year term loan of $1,025,000 bears interest at the Bank's refinance
rate, plus 1 1/4% to be amortized as follows:
- - eight (8) quarterly payments of $12,500, beginning October 1995 through
July 1997;
- - eight (8) quarterly payments of $25,000, beginning October 1997 through
July 1999;
- - three (3) quarterly payments of $28,125, beginning October 1999 and ending
April 2000;
- - a balloon payment of $640,625, due July 2000.
As a result of the above transactions, the Company realized a $1,232,728 gain
on debt compromise. In addition, the Bank released the existing guarantees
of Messrs. Benou and Havasy on the Closing Date.
On September 11, 1996, the Company entered into an Allonge agreement with the
bank whereby the bank may at any time before April 15, 1997 convert the then
unpaid amount of principal and interest due under the Amended and Restated
Term Note dated as of August 2, 1995 in the original principal amount of
$1,025,000 into 1,400,000 shares of the Company's Common Stock (the "Notes
Shares").
On September 12, 1996 the bank entered into an option and purchase, sale and
assignment agreement (the "Option Agreement") with CNL Holdings, Inc. (CNL)
whereby the bank would sell the Note Shares referred to above, along with
the 375,000 Common Stock shares of the Company it currently owns (the "Bank
Shares") for $1.5 million to CNL.
On September 12, 1996 CNL entered into an agreement with the Company whereby
the Company would use its best efforts to file a Registration Statement
with the Securities and Exchange Commission covering the 375,000 Bank Shares
and the 1,400,000 Note Shares (collectively the "Acquired Shares"). Such
Registration Statement shall be declared effective as soon as possible after
the filing thereof, and kept current and effective for a period of two years
or until such time as all shares registered pursuant therewith have been sold
or otherwise transferred. The proceeds of the sales of the Acquired Shares
shall be applied as follows: The first $1,500,000 shall be paid to reimburse
CNL for payments made to the bank pursuant to the Option Agreement. Fifty
percent of the balance of the proceeds, not to exceed $2,500,000, shall be
loaned to the Company by CNL. The balance of the proceeds belong to CNL.
The amounts loaned by CNL to the Company shall be evidenced by notes which
shall be due twelve months after making such loan and shall bear interest at
the rate of 4% per annum. At maturity of the loans, the Company will have
the option to repay the loan balance and accrued interest by issuing a new
Series C Preferred Stock (the "Preferred Stock") valued at $5.00 per share.
The Preferred Stock will be non-voting and will carry a cumulative dividend
of 8% per annum, which may be payable by the issuance of shares of Common
Stock valued at $5.00 per share up to a maximum of 40,000 shares per annum.
NOTE 2 - CONTINUED
On January 31, 1997, The bank and Conolog entered into Amendment No. 1 to the
Option and Purchase, Sale and Assignment Agreement dated September 12, 1996.
The amended Option Agreement now provides that on or before February 5, 1997,
CNL will purchase from the Bank for an aggregate purchase price of $600,000,
no less than (i) 133,333 shares of Common Stock for $399,999, subject to the
approval of I.A. Rabinowitz, Inc. and (ii) $200,001 of the Debt claim
represented by the note. CNL thereafter may exercise the remainder of the
option on or before April 15, 1997. In addition, CNL may purchase from the
Bank additional shares of Common Stock owned by the Bank at the price of
$3.00 per share and portions of the Debt Claim from time to time. On
February 3, 1997, CNL paid the Bank $600,000 consummating the purchase of
the above 200,000 shares. On January 31, 1997, $200,001 of the Debt
to the Bank was adjusted resulting in all accrued interest in the amount
of $106,298 being reduced and the remaining being applied to principal.
On March 26, 1997, CNL completed the exercise of the "Option Agreement"
with the bank effectively eliminating all debts and liens with the bank.
As of April 30, 1997, CNL has loaned the Company a total of $74,735, in
accordance with the agreement detailed above.
NOTE 3-CAPITALIZED LEASE OBLIGATIONS
April 30, 1997 July 31, 1996
Leases Payable $ 8,184 $ 38,255
less - Current Portion 8,184 33,282
$ 0 $ 4,973
Maturities on Capitalized Leases, subsequent to April 30, 1997 are
1997 - $8,184
NOTE 4-TAXES
At April 30, 1997 the Company has a net operating loss carryforward of
approximately $2,968,000 for financial reporting purposes and approximately
$3,025,000 for tax purposes which is available to offset future Federal
taxable income. For Federal purposes, $490,000 of the carryforward
expires in 2003, $346,000 expires in 2008, $1,232,000 expires in 2009 and
$957,000 expires in 2010. For State purposes the carryforward is
approximately $2,187,000; $57,000 expires in 2000, $1,232,000 expires in
2001 and $898,000 expires in 2002. Also, at April 30, 1997, the Company
has unused tax credits available of approximately $103,300 of which $12,100
expires in 2000, $26,300 in 2001, and $64,900 in 2002.
Taxable income differs from financial statement income due to the effect
of non-deductible permanent tax differences. These permanent tax differences
include officer's life insurance premiums & non-deductible entertainment
expenses.
At April 30, 1997 no deferred income taxes have been provided for per
SFAS No 109 - Accounting for Income Taxes since management estimated that
temporary differences due to operating losses & tax credit carry forwards
will not be absorbed by future taxable income.
NOTE 5 - BRIDGE LOAN
The Company received $200,000 in net proceeds from several investors in a
private placement. Each investor received two Promissory Notes. The first
Promissory Note is payable on the earlier of December 31, 1997 or the
closing of the Company's next public offering; (the "First Note") and the
second Note(the "Second Note"), plus accrued interest for the First Note,
is payable on the earlier of December 31, 1997 or the closing of the
Company's next public offering, or convertible at the option of the holder
into Preferred Stock Purchase Warrants to purchase shares of Series D
Preferred Stock, which are new Preferred Stock securities contemplated to be
offered in the next public offering. At the time the next registration
statement is declared effective by the Securities and Exchange Commission,
the Bridge Loan holders may exercise their respective option to convert the
Second Note into Preferred Stock Purchase Warrants. If all the noteholders
elect to convert the Second Note, the Company is obligated to issue
Preferred Stock Purchase Warrants to purchase 1.2 million shares of
Series D Preferred Stock. The Company has agreed to register the underlying
Bridge Loan Warrants along with the new Series D Preferred Stock to be
registered in the public offering. The interest rate for the First Note
is eight percent (8%) per annum.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
QUARTER ENDED APRIL 30, 1997
A summary of income, costs and expenses for the current quarter and
corresponding quarter of the previous year follows:
For the Quarter For the Nine Months
Ended April 30, Ended April 30,
1997 1996 1997 1996
Revenues $ 111,393 $ 529,802 $ 978,979 $1,519,975
Costs and Expenses 219,583 432,555 1,126,525 1,729,477
_________ _________ --------- ----------
Net Income/(loss)
after Taxes, before $(108,190) $ 97,247 $(147,546) $ (209,502)
extraordinary item ========== ========== ========== ===========
Revenues for the quarter ended April 30, 1997 totaled $111,393, representing
a decrease of 79% or $418,409 from the $529,802 reported for the same quarter
a year ago. Revenues decreased largely to a sharp decrease expected release
of several orders from the various major power companies as well as the
absence of new commercial orders and releases against existing military
contracts by the US Government.
Gross margin for the quarter totaled $59,240 representing 53% of revenues
as compared to a $346,266 or 65% of revenues for the quarter ended April 30,
1996. The decrease in gross margin primarily attributed to the labor
inefficiences resulting from reduced levels of factory utilization. The
Company was able to partially offset some of these losses by shifting its
internal resources to new product development. Prior to this quarter the
Company engaged outside contractors almost exclusively to complete its
product development. During the current quarter the company used to a greater
extent its captive resources including design, engineering and production.
Historically, the Company has used part time, temporary factory personnel and
outside contractors to adjust its workforce for large changes in production
demands.
Selling, general and administrative expenses decreased from $214,019 to
$140,466 for the quarter, representing a decrease of $73,553 as compared to
1996. These savings are the direct result of downsizing initiatives to offset
the decreased production levels experienced during the quarter.
Interest expense decreased from $35,000 to $17,080 or $17,920 for the quarter
ended April 30, 1997 over the same period of 1996.
As a result of the foregoing, the Company reported a net loss of $(108,190),
or $(0.04) per share for the quarter compared to net income of $97,247
or $0.10 per share.
NINE MONTHS ENDED APRIL 30, 1997
Revenues for the nine months ended April 30, 1997 totaled $978,979 versus
$1,519,975 for the same period last year. The lower revenues were
attributable to continued delays in the release of certain commercial
orders, including The Bonneville Power Administration and the
absence in new orders and releases from the US Government. The order backlog
for Bonneville was $1.3 million at April 30, 1997. The Company believes that
the delay in release of certain PTR-1000 series orders were due to the
forthcoming release of a new PRT-1500 Series Tone Protection product being
developed for the General Electric Company to private label and market
worldwide. The new product was originally scheduled to be released during
the Summer of 1997. As a result of limited financial resources, this program
was delayed by approximately six months; the expected release date for the
PTR-1500 is early 1998.
Gross margin for the period totaled $450,481 as compared to $562,540 for the
period ended April 30, 1996, representing 46% and 37% of revenues,
respectively. Gross margins improved as a result of generally higher
pricing for special items requiring limited quantities and fast turnaround.
Selling, general and administrative expenses totaled $518,944 as compared
to $653,571. This decline of $134,627 results from cost cutting initiatives
to reduce administrative and general expenses, especially with respect to
headcount reductions and downsizing.
As a result of the foregoing, operating loss totaled $(68,463) as compared to
$(91,031).
Interest expense for the nine months totaled $69,199 as compared to $118,371
for the prior nine month period.
As a result of the foregoing, the Company realized a net loss of $(147,546)
or $(.06) per share as compared to net income of $530,874 or $.51 per share.
The net income for the nine months ended April 30, 1996 included $740,376,
net of tax benefit of $492,392, in extraordinary items, representing $.72
per share.
LIQUIDITY AND FINANCIAL CONDITION
On August 16, 1995, the Company offered 235,750 Units at a
price of $10.00 per Unit. Each Unit consisted of two (2) shares of
Common Stock, par value $1.00 per share (Common Stock), and one (1)
Redeemable Class A Warrant for Common Stock (Class A Warrant). The
Common Stock and Class A Warrant are detachable and trade separately.
Each Class A Warrant entitles the holder to purchase one share of the
Company's Common Stock, at an exercise price of $6.00, subject to adjustment,
from August 17, 1996 through August 16, 1998. The Class A Warrants (the
Warrants) are subject to redemption by the Company at anytime after
August 17, 1996 on not less than 30 days notice at $.05 per warrant,
provided the average closing price of the Common Stock for 20 consecutive
trading days ending within 15 days prior to the notice exceeds $7.20 per
share.
The results of the offering were $1,853,025, net of offering costs.
Inventories increased $294,800 from July 31, 1996, including approximately
$258,734 for the PTR-1500 Series product.
Accounts receivable decreased $137,193 to $166,827 reflecting lower sales
during the current quarter.
Working Capital at April 30, 1997 was $2,928,784 compared to $1,914,981
at July 31, 1996.
The Company received $200,000 in net proceeds from a private placement.
The private placement was evidenced by two promissory notes executed by each
investor that aggregated $150,000 (Note 1) and $50,000 (Note 2), respectively.
Note 1 is payable on the earlier of December 31, 1997 or upon closing of the
next public offering. Note 2 contains the same terms as with respect to
Note 1, or at the investors option is convertible into shares of Preferred
Stock Purchase Warrants (See Notes to the Financial Statements for additional
description on the full terms of the conversion option). The funds received
from the private placement were used to reduce overdue payables and resume
the product development of the PTR-1500 Series Project.
During the quarter ended April 30, 1997 the Company received $74,735 in
loans from CNL Holdings, Inc. The Company plans to use these additional funds
to complete the development of the PTR-1500 and deliver the first prototypes
to the General Electric Co. for testing and approvals and to improve its
financial condition to better prepare for an anticipated increase in business
in the latter part of 1997. Additional loans are expected from CNL to
complete the product development schedule for the PTR-1500. The loans will be
repaid plus accrued interest twelve months from the date received or converted
to Series C Preferred Stock. In the event additional loans from CNL or other
sources of capital are not secured on a timely basis, the release of new
products and future sales would be adversely affected.
LIQUIDITY AND FINANCIAL-CONTINUED
The Company anticipates additional backlog releases from the Bonneville
Power Administration and the US Government as well as other key customers.
This should generate additional sales and resulting cash flow to support an
expanded operating level in fiscal 1998 versus fiscal 1997. In the event
that additional financing and future backlog releases are not forthcoming,
fiscal 1997 sales would be adversely impacted.
The Company presently meets its cash requirements through existing cash
balances, cash generated from operations, and loans secured in private
transactions.
SUBSEQUENT EVENT
During the month of May 1997, CNL has loaned the Company an additional
$561,000 for a total of $635,735 to date. (See Note 2)
Management Representation
The information furnished reflects all adjustments which management considers
necessary to a fair statement of the results of the period.
As of April 30, 1997 the Registrant's backlog of orders totaled $2.6
million, representing a mix of military and commercial telecommunication
products. The company anticipates its commercial revenue to grow as a
percentage of total sales for the foreseeable future.
Statement Regarding Present Operations
There was no material change in the nature of the operations of Registrant
during the three months ended April 30, 1997 from the information contained
in the Registrant's annual report of Form 10-K for the fiscal year ended
July 31, 1996.
Part II - Other Information
CONOLOG CORPORATION
1. Legal Proceedings - No material proceedings pending April 30, 1997
2. Changes in Securities - See Management's Discussion
3. Defaults upon Senior Securities -None
4. Submission of Matters to a Vote of Security Holders - None
5. Other Materially Important Events - See Management's Discussion
6. No reports on Form 8-K have been filed during the quarter.
Exhibits-Agreement with General Electric Company dated April 1, 1997.
PAGE 1 OF 14
PURCHASE AGREEMENT
THIS AGREEMENT IS DATED AND EFFECTIVE AS OF APRIL 1, 1997, BY AND BETWEEN
GENERAL ELECTRIC COMPANY, A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE
OF NEW YORK, HAVING A PLACE OF BUSINESS AT 205 GREAT VALLEY PARKWAY, MALVERN,
PA (HEREINAFTER REFERRED TO AS "GE") AND CONOLOG CORP., A CORPORATION
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE, HAVING A PLACE OF
BUSINESS AT 5 COLUMBIA ROAD, SOMERVILLE, NJ (HEREINAFTER REFERRED TO AS
"CONOLOG").
WHEREAS, GE IS IN THE BUSINESS OF MANUFACTURING AND SELLING PROTECTIVE
RELAYS AND ASSOCIATED COMMUNICATION EQUIPMENT FOR USE IN THE ELECTRIC UTILITY
INDUSTRY; AND
WHEREAS, CONOLOG HAS DEVELOPED A PTR-1500 PROTECTIVE RELAYING COMMUNICATIONS
CHANNEL EQUIPMENT FOR AUDIO TONE, FIBER OPTIC, OR DIGITAL APPLICATIONS; AND
WHEREAS, CONOLOG MANUFACTURES AND SELLS UTILITY COMMUNICATIONS EQUIPMENT AND
GE RECOGNIZES THAT CONOLOG DESIRES TO SELL A MAXIMUM AMOUNT OF SAID PRODUCTS
INTO THE UNITED STATES AND THE INTERNATIONAL MARKET; AND
WHEREAS, GE IS DESIROUS OF PURCHASING THE AFOREMENTIONED PTR-1500
COMMUNICATIONS EQUIPMENT DESCRIBED BY THE SPECIFICATION OF EXHIBIT A ATTACHED
HERETO FROM CONOLOG, FOR RESALE BY GE UNDER A GE BRAND NAME, TO THE ELECTRIC
UTILITY AND OTHER INDUSTRIES WORLDWIDE, AND
WHEREAS, CONOLOG AGREES TO SELL TO GE ALL OF GE'S REQUIREMENTS FOR THE
AFOREMENTIONED PTR-1500 COMMUNICATIONS EQUIPMENT IN ACCORDANCE WITH THE TERMS
OF THIS AGREEMENT.
NOW THEREFORE, UPON THESE PREMISES AND IN CONSIDERATION OF THE PROMISES AND
MUTUAL COVENANTS HEREINAFTER SET FORTH, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 AS USED IN THE AGREEMENT:
A. "EFFECTIVE DATE" MEANS THE DATE FIRST APPEARING HEREIN.
B. "PRODUCT(S)" MEANS THE PRODUCTS DESCRIBED IN EXHIBIT A, TO BE SOLD BY
CONOLOG TO GE FOR RESALE BY GE AS WELL AS ASSOCIATED SPARE PARTS FOR
SUCH PRODUCTS.
C. "TERM" HAS THE MEANING ASCRIBED THERETO IN ARTICLE 3 BELOW.
2. PURCHASE OF PRODUCTS
2.1 CONOLOG AGREES TO SELL RPODUCTS TO GE IN ACCORDANCE WITH THE PRICES
LISTED IN EXHIBIT A AND IN SUCH QUANTITIES AS GE SHALL, FROM TIME TO
TIME, ORDER FROM CONOLOG PURSUANT TO PARAGRAPH 5.
2.2 PRODUCTS SOLD TO GE PURSUANT TO PARAGRAPH 2.1 SHALL BE SOLD IN ACCORDANCE
WITH AND SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE
TERMS AND CONDITIONS OF THIS AGREEMENT SHALL CONSIST OF THE CONTRACT
PROVISIONS OF THE MAIN BODY OF THIS AGREEMENT (CONTRACT PROVISIONS), THE
PRODUCT DESCRIPTIONS AND PRICING (EXHIBIT A), THE CONDITIONS OF PURCHASE
SHOWN IN EXHIBT B AND THE WARRANTY SUPPORT SERVICES (EXHIBIT C). IN THE
EVENT OF CONFLICT BETWEEN THE CONTRACT PROVISIONS, EXHIBIT A, EXHIBIT B,
OR EXHIBIT C, THE ORDER OF PRECEDENCE THAT WILL PREVAIL IS AS FOLLOWS:
I. CONTRACT PROVISIONS
II. CONDITIONS OF PURCHASE (EXHIBIT B)
III. PRODUCT DESCRIPTION AND PRICING (EXHIBIT A)
IV. NON-WARRANTY SUPPORT SERVICES (EXHIBIT C)
2.3 CONOLOG SHALL ACCEPT EACH ORDER OR AMENDMENT THERETO ISSUED BY GE IN
ACCORDANCE WITH THE AGREED UPON TERMS AND CONDITIONS CONTAINED HEREIN BY
ISSUING ITS ACKNOWLEDGMENT WITHIN (5) WORKING DAYS OF RECEIPT OF SUCH
ORDER OR AMENDMENT.
2.4 BY ACCEPTANCE OF ANY ORDER OR AMENDMENT THERETO ISSUED IN ACCORDANCE
WITH THIS AGREEMENT, CONOLOG AGREES TO BE BOUND BY AND COMPLY WITH ALL OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT AND OF SUCH ORDER INCLUDING
ANY SUPPLEMENTS THERETO WHICH ARE CONSISTENT WITH THIS AGREEMENT AS WELL
AS ANY OTHER MUTUALLY AGREED UPON SPECIFICATIONS AND OTHER DOCUMENTS.
2.5 CHANGES OR MODIFICATIONS TO PRODUS DESIGN OR MANUFACTURE SHALL NOT BE
MADE BY CONOLOG WITHOUT THE EXPRESS WRITTEN AUTHORIZATION OF GE.
2.6 CONOLOG SHALL NOTIFY GE PROMPTLY OF ANY DEFECTS IN PRODUCTS WHICH AFFECT
THE PERFORMANCE, SAFETY OR OPERATION OF PRODUCTS.
3.0 TERM OF AGREEMENT
3.1 UNLESS EARLIER TERMINATED PURSUANT TO PARAGRAPH 12, THE TERM OF THIS
AGREEMENT (THE "TERM") SHALL BE FOR A FIVE (5) YEAR PERIOD FROM THE
EFFECTIVE DATE HEREOF.
3.2 IF THIS AGREEMENT IS TERMINATED, CONOLOG WILL DELIVER PRODUCTS TO GE FOR
ORDERS RECEIVED FROM GE PRIOR TO THE TERMINATION DATE, AND GE WILL REMIT
PAYMENT FOR SUCH PRODUCTS TO CONOLOG IN ACCORDANCE WITH PARAGRAPH 11
HEREOF.
4. MARKETING BY GE
4.1 GE MAY SELL, LEASE, RENT, DISTRIBUTE, MARKET, AND OTHERWISE USE AND
DISPOSE OF THE PRODUCTS UNDER SUCH GE TRADEMARKS AND TRADE NAMES AS IT
SHALL DETERMINE IN ITS ABSOLUTE DISCRETION. THE PARTIES AGREE THAT IN
ORDER TO PROVIDE PRODUCTS WHICH HAVE AN APPEARANCE AND INTERFACING
OPTIONS DESIRED BY GE, CONOLOG WILL DESIGN AND MAKE REASONABLE
MODIFICATIONS TO THE PRODUCT IN ACCORDANCE WITH GE REQESTS. THE PATIES
WILL NEGOTIATE, IN GOOD FAITH, AN AMOUN TO BE PAID BY GE TO CONOLOG FOR
SUCH MODIFICATIONS MADE AT GE'S REQUESTS.
4.2 PRODUCTS SOLD TO GE HEREUNDER WILL BE DELIVERED BY CONOLOG TO GE WITH
SUCH TRADEMARKS AFFIXED THERETO AS GE SHALL REQUEST. GE WILL PROVIDE TO
CONOLOG LABELS OR SIMILAR IDENTIFICATION MEDIA CONTAINING THE TRADEMARKS
AND TRADE NAMES TO BE USED ON OR IN CONNECTION WITH THE PRODUCTS, AND
THEIR PACKAGING.
4.3 GE WILL UNDERTAKE VARIOUS ACTIVITIES WHICH PROMOTE THE MARKETING AND SALE
OF PRODUCTS MANUFACTURED BY CONOLOG AND SOLD TO GE HEREUNDER. IN ORDER
FOR GE TO RECEIVE THE BENEFITS OF ITS MARKETING AND SALES PROMOTION OF
PRODUCTS, CONOLOG AGREES:
A. NOT TO SELL OR OTHERWISE USE OR DISPOSE OF PRODUCTS BEARING ANY GE
TRADEMARK TO ANY ENTITY OTHER THAN GE, AND
B. NOT TO SELL PRODUCTS O ANY OTHER COMMUNICATIONS CHANNEL EQUIPMENT
PRODUCT WHICH IS SUBSTANTIALLY SIMILAR TO PRODUCTS (EMBODIES 75% OF
HE FUNCTIONS IN PRODUCTS), FOR THE LIFE OF THIS AGREEMENT AND FOR TWO
(2) YEARS THEREAFTER, TO ANY ENTITY OTHER THAN GE. THE PROHIBITION OF
SELLING PRODUCTS ON EQUIPMENT SUBSTANTIALLY SIMILAR TO PRODUCTS TO ANY
ENTITY OTHER THAN GE FOR TWO YEARS AFTER THE TERM OF THIS AGREEMENT
SHALL BE CONTINGENT ON THE EXERCISE BY GE OF ITS OPTION TO PURCHASE
SPARE PARTS WITHIN ONE YEAR AFTER THE TERM OF THIS AGREEMENT IN
ACCORDANCE WITH ARTICLE 14.2 OF THIS AGREEMENT.
C. IN THE EVENT THAT CONOLOG WERE TO PRODUCE ENHANCED PRODUCTS OR PRODUCT
DERIVATIVES WHICH DO NOT MEET THE CRITERIS OF THIS ARTICLE 4.3.B. OF
BEING SUBSTANTIALLY SIMILAR TO PRODUCTS, GE SHALL HAVE THE RIGHT OF
FIRST REFUSAL ON SUCH ENHANCED PRODUCTS OR PRODUCT DERIVATIVES BEFORE
CONOLOG COULD SELL THEM TO ANY ENTITY OTHER THAN GE. SUCH ENHANCED
PRODUCTS OR PRODUCT DERIVATIVES SHALL BE OFFERED TO GE BY CONOLOG AT
PRICES CONSISTENT WITH PRODUCTS COVERED BY THIS AGREEMENT, AND GE
SHALL INDICATE THEIR INTENTIONS TO CONOLOG REGARDING THE PURCHASE OF
SUCH ENHANCED PRODUCTS OR PRODUCT DERIVATIVES UNDER THE TERMS OF THIS
AGREEMENT WITHIN 60 DAYS OF NOTIFICATION BY CONOLOG.
D. CONOLOG'S EXISTING PTR-1000 PRODUCTS SHALL BE EXEMPT FROM THE
PROVISIONS OF THIS ARTICLE 4.3B AND 4.3.C FOR A PERIOD OF A MAXIMUM OF
ONE YEAR FROM THE EFFECTIVE DATE OF THIS AGREEMENT, BY WHICH TIME THE
PTR-1000 PRODUCT MUST BE OFFERED TO GE UNDER THE TERMS OF THIS
AGREEMENT.
CONOLOG'S OBLIGATIONS UNDER THIS APRAGRAPH 4.3B SHALL CONTINUE ONLY FOR SO
LONG AS GE MEETS ITS ANNUAL MINIMUM QUANTITY PURCHASE OBLIGATIONS SET FORTH IN
PARAGRAPH 5.3 HEREOF.
4.4 AS USED IN THIS PARAGRAPH, THE TERM "TECHNICAL INFORMATION" SHALL MEAN
TECHNICAL INFORMATION RELATING TO PRODUCTS WHICH IS DISCLOSED BY CONOLOG
TO GE IN WRITTEN FORM AND WHICH BEARS A LEGEND OR OTHER MARKING
INDICATING IT IS THE PROPRIETARY OR CONFIDENTIAL PROPERTY OF CONOLOG.
FOR THE LIFE OF THIS AGREEMENT AND FOR TWO (2) YEARS THEREAFTER, GE WILL
TAKE ALL REASONABLE CARE TO INSURE THAT TECHNICAL INFORMATION RECEIVED
FROM CONOLOG SHALL NOT BE DISCLOSED TO THIRD PARTIES NOR USED, EXCEPT IN
ACCORDANCE WITH THE SALE OF PRODUCTS UNDER THIS AGREEMENT, AND EXCEPT
INSOFAR AS SUCH TECHNICAL INFORMATION IS EITHER:
A. NECESSARILY DISCLOSED SOLELY BY ITS USE IN PRODUCTS MANUFACTURED AND
SOLD BY GE;
B. MADE PUBLIC BY CONOLOG;
C. ESTABLISHED TO BE IN THE PUBLIC DOMAIN OTHERWISE THAN AS A CONSEQUENCE
OF A BREACH OF THE OBLIGATION HEREIN UNDERTAKEN NOT TO DISCLOSE THE
INFORMATION;
D. NECESSARILY DISCLOSED TO BONA FIED SUBCONTRACTORS OF GE SOLELY TO
PERMIT THEM TO PERFORM THEIR CONTRACTS WITH GE, PROVIDED THAT GE SHALL
REQUIRE SUCH SUBCONTRACTORS TO MAINTAIN SUCH INFORMATION IN CONFIDENCE
TO THE EXTENT OF THE FOREGOING REQUIREMENTS OF THIS PARAGRAPH AND TO
USE SUCH INFORMATION SOLELY TO PERMIT THEM TO PERFORM THEIR CONTRACTS
WITH GE; OR
E. MUST REASONABLE BE DISCLOSED BY GE TO ITS CUSTOMERS OR USERS OF
PRODUCTS IN CONNECTION WITH GE'S SALES, MARKETING, PRODUCT SERVICE,
MAINTENANCE SERVICE OR MAINTENANCE ACTIVITIES; OR
F. IS INDEPENDENTLY GENERATED BY EMPLOYEES, AGENTS, CONTRACTORS OR
CONSULTANTS OF GE NOT HAVING ACCESS TO TECHNICAL INFORMATION; OR
G. DISCLOSED TO GE BY THIRD PARTIES; OR
H. KNOWN TO GE PRIOR TO DISCLOSURE THEREOF BY CONOLOG.
5. ORDERS AND ORDER SCHEDULE
5.1 WITHIN THIRTY (30) WORKING DAYS OF GE'S RECEIPT OF ALL PRODUCT PROTOTYPES
AND PRODUCT DOCUMENTATION NECESSARY TO CONDUCT FINAL ACCEPTANCE TYPE
TESTS, GE SHALL PERFORM SUCH ACCEPTANCE TYPE TESTS. IF CONOLOG CHANGES
IN PRODUCT PROTOTYPES ARE REQUIRED TO PASS FINAL ACCEPTANCE TYPE TEST, GE
SHALL AGAIN PERFORM SUCH ACCEPTANCE TYPE TESTS WITHIN THIRTY (30) WORKING
DAYS OF RECEIVING THE MODIFIED PRODUCT PROTOTYPES FROM CONOLOG. WITHIN
THIRTY (30) DAYS AFTER ALL SUCH PROTOTYPES SUCCESSFULLY PASS SUCH FINAL
ACCEPTANCE TESTS, GE WILL PLACE AN ITIAL ORDER WITH CONOLOG FOR FIFTEEN
(15) MARKETING SAMPLE PRODUCTS AT THE PRICES SET FORTH IN EXHIBIT A.
CONOLOG WILL DELIVER THE INITIAL SAMPLE UNITS WITHIN EIGHT (8) WEEKS TO
SUPPORT A GLOBAL PRODUCT INTRODUCTION.
5.2 AFTER THE INITIAL ORDER SET FORTH IN PARAGRAPH 5.1, GE MAY, AT ANY TIME,
PLACE ADDITIONAL ORDERS WITH CONOLOG FOR DELIVERY WITHIN SIX (6) WEEKS.
GE WILL COOPERATE WITH CONOLOG TO OPTIMIZE FACTORY LOADING AND INVENTORY
LEVELS THROUGH REGULAR COMMUNICATIONS TO IDENIFY AND SCHEDULE ORDERS AND
ACTIVE PROPOSALS FOR PRODUCTS. SUCH SCHEDULING MEETINGS OR
TELECONFERENCES WILL BE HELD ON A LEAST A MONTHLY BASIS.
5.3 EXCEPT FOR THE INITIAL ORDER DESCRIBED IN PARAGRAPH 5.1, GE SHALL HAVE NO
OBLIGATION UNDER THIS AGREEMENT TO PURCHASE PRODUCTS FROM CONOLOG.
HOWEVER, GE RIGHTS UNDER PARAGRAPH 4.3B SHALL TERMINATE IF GE FAILS TO
PURCHASE A MINIMUM QUANTITY OF PRODUCTS IN ACCORDANCE WITH THE FOLLOWING
SCHEDULE:
(A) 400 UNITS DURING THE SECOND 12 MONTH PERIOD AFTER THE DATE OF THE
INITIAL FIRM ORDER REFERRED TO IN PARAGRAPH 5.1.
(B) 700 UNITS DURING THE THIRD 12 MONTH PERIOD AFTER THE DATE OF THE
FIRM ORDER REFERRED TO IN PARAGRAPH 5.1.
(C) 900 UNITS DURING THE FOURTH 12 MONTH PERIOD AFTER THE DATE OF THE
INITIAL FIRM ORDER REFERRED TO IN PARAGRAPH 5.1.
(D) 1000 UNITS DURING THE FIFTH 12 MONTH PERIOD AFTER THE DATE OF THE
INITIAL ORDER REFERRED TO IN PARAGRAPH 5.1.
FOR PURPOSES OF THIS PARAGRAPH 5.3, QUANTITIES PURCHASED BY GE IN EXCESS
OF THE MINIMUM QUANTITIES SET FORTH IN THIS PARAGRAPH 5.3 FOR ANY GIVEN
PERIOD MAY BE APPLIED TO ANY SUBSEQUENT 12 MONTH PERIOD. IF QUANTITIES
PURCHASED BY GE FALL BELOW THE MINIMUM QUANTITIES SET FORTH IN THIS
PARAGRAPH 5.3 FOR ANY 12 MONTH PERIOD, GE AND CONOLOG AGREE TO APPLY ANY
RESULTING EXCESS INVENTORY TO PRODUCTS PRODUCED FOR GE DURING THE
SUBSEQUENT 12 MONTH PERIOD IN ACCORDANCE WITH CURRENT SCHEDULES.
5.4 FIRM PURCHASE AND SALE COMMITMENTS SHALL BE MADE ONLY THROUGH PURCHASE
ORDERS ISSUED BY GE TO CONOLOG. PURCHASE ORDERS ARE ISSUED FOR THE
PURPOSE OF REQUESTING TIMES AND QUANTITIES, ORDERING EQUIPMENT,
SPECIFYING SHIP TO ADDRESSES AND METHODS OF SHIPMENT, IDENTIFYING
CONFIGURATIONS OF PRODUCTS, AS WELL AS SPECIAL FACTORY-WITNESSED TESTING.
THE CONDITIONS OF PURCHASE OF EXHIBIT B SHALL APPLY TO AND CONTROL ALL
PRODUCTS ORDERS. WHERE, HOWEVER, THE CONTRACT PROVISIONS SHALL BE
CONTROLLING TO THE EXTENT OF SUCH CONFLICT. THIS AGREEMENT SHALL ALSO
CONTROL ALL INVOICING AND ORDER ACKNOWLEDGMENTS AND ANY ADDITIONAL OR
DIFFERENT TERMS AND CONDITIONS CONTAINED IN OR ON THESE DOCUMENTS ARE OF
NO FORCE OR EFFECT.
6. TERMS OF DELIVERY
6.1 ALL DELIVERIES OF PRODUCTS WILL BE MADE, IN ACCORDANCE WITH GE'S
DIRECTION, BY CONOLOG FOB CONOLOG'S DOCK AT THEIR MANUFACTURING LOCATION
IN SOMERVILLE, NJ. TITLE AND RISK OF LOSS OR DAMAGE SHALL PASS WHEN
DELIVERED BY CONOLOG TO THE CARRIER.
6.2 GE SHALL PAY ALL FREIGHT CHARGES FOR DELIVERY OF PRODUCT EXCEPT WHEN
CONOLOG HAS MISSED ITS DELIVERY SCHEDULE. IF CONOLOG MISSES ITS DELIVERY
SCHEDULE, CONOLOG SHALL PAY ANY PREMIUM AIR FREIGHT CHARGES.
6.3 CONOLOG SHALL USE CARRIERS DESIGNATED BY GE. GE WILL FURNISH CONOLOG
GE'S ACCOUNT NUMBERS AND CONOLOG SHALL INSTRUCT CARRIERS TO BILL GE
DIRECTLY.
7. PRICES
7.1 THE PRICES FOR ANY PRODUCTS OFFERED BY GE AND DELIVERED BY CONOLOG SHALL
BE THOSE SPECIFIED AT THE TIME OF ORDER IN EXHIBIT A, UNLESS OTHERWISE
AGREED BY BOTH PARTIES.
7.2 PRICES REFERRED TO IN EXHIBIT A MAY BE ADJUSTED ANNUALLY ON THE
ANNIVERSARY OF THIS AGREEMENT UPON MUTUAL AGREEMENT OF CONOLOG AND GE.
THE TARGETED ANNUAL PRICE CHANGE WILL BE A DECREASE OF AT LEAST FIVE (5)
PERCENT. THE BASIS FOR DECREASING PRICES IS THE EXPECTATION BY BOTH
PARTIES THAT THE COST OF PRODUCING PRODUCT WILL DECREASE AS A RESULT OF
INCREASED VOLUME, IMPROVED SOURCING, PRODUCTVITY AND IMPROVEMENTS IN
FABRICATION AND TEST METHODS. GE WILL COOPERATE WITH CONOLOG IN
ACHIEVING THIS RESULT.
7.3 PRICES QUOTED IN EXHIBIT A ARE NET EACH FOR EQUIPMENT SUPPLIED FOB AT
CONOLOG'S DOCK.
7.4 WHEN GE'S ORDER RATE REACHES 60 UNITS PER MONTH, BASED ON A ROLLING 6
MONTHS AVERAGE, THE PRICES IN EXHIBIT A WILL BE REDUCED BY TWO (2)
PERCENT. WHEN GE'S ORDER RATE REACHES 100 UNITS PER MONTH, THE PRICES
IN EXHIBIT A WILL BE REDUCED BY AN ADDITIONAL THREE (3) PERCENT.
8. INFORMATION XCHANGE
8.1 CONOLOG AND GE WILL ENDEAVOR TO MEET AT INTERVALS, APPROXIMATELY ONCE
EVERY SIX (6) MONTHS, TO EXCHANGE INFORMATION RELATING TO THE SUBJECT
MATTER OF THIS AGREEMENT. SUCH MEETINGS SHALL BE HELD AT THE OFFICES OF
GE OR CONOLOG, OR AT SUCH OTHER DATE OR PLACE AS THE PARTIES MAY FROM
TIME TO TIME HEREAFTER MUTUALLY AGREE TO.
8.2 CONOLOG SHALL MAKE AVAILABLE TO GE COPIES OF THE CONOLOG APPLICATION
NOTES, SALES AIDS, AND OTHER RELATED MATERIALS AS SET OUT FOR THE
PRODUCTS IN EXHIBIT A TO ENABLE GE TO EFFECTIVELY MARKET PRODUCTS AND
PERFORM RELATED ACTIVITIES.
9. WARRANTY
9.1 SUBJECT TO THE PROVISIONS BELOW, CONOLOG WARRANTS THE PRODUCTS OF ITS
MANUFACTURE TO BE FREE FROM DEFECTS IN MATERIAL AND WORKMANSHIP AND IN
CONFORMANCE WITH ALL APPLICABLE DRAWINGS AND SPECIFICATIONS OF EXHIBIT A
AND TO BE FIT FOR THE PURPOSE INTENDED FOR A PERIOD OF 10 YEARS, OR AS
OTHERWISE SPECIFIED, FROM THE DATE OF DELIVERY OF PRODUCTS BY GE TO ITS
CUSTOMER, BUT NOT EXCEEDING 11 YEARS FROM THE DATE OF SHIPMENT FROM
CONOLOG TO GE.
9.2 THIS WARRANTY DOES NOT APPLY IF PRODUCTS ARE IMPROPERLY STORED OR
HANDLED, EXPOSED TO WEATHER ELEMENTS (WHERE NOT SO INTENDED), ABUSED,
IMPROPERLY APPLIED, INSTALLED, OPERATED OR MAINTAINED CONTRARY TO
CONOLOG'S INSTRUCTIONS, APPROPRIATE CODES, REGULATIONS AND GOOD PRACTICE
WITHIN THE LIMITS OF RATED CAPACITY AND NORMAL USE.
9.3 WARRANTY CLAIMS SHALL BY NOTICE IN WRITING GIVEN TO CONOLOG. FOR VALID
WARRANTY CLAIMS CONOLOG SHALL, PROMPTLY, AT ITS OPTION AND EXPENSE,
REPAIR RETURNED PRODUCT, HAVE REPAIRED, OR REPLACE PRODUCTS FREE OF
CHARGE.
9.4 THE WARRANTY PROVISIONS OF THIS ARTICLE 9 SHALL SURVIVE THE LIFE OF THIS
AGREEMENT, AND CONOLOG ACCEPTS RESPONSIBILITY FOR WARRANTY CLAIMS FOR THE
DURATION OF THE WARRANTY ON EACH PRODUCT FOR THE WARRANTY PERIOD SHOWN IN
PARAGRAPH 9.1 ABOVE.
10. NON WARRANTY SUPPORT
10.1 CONOLOG SHALL SUPPLY GE AND ITS CUSTOMERS WITH NON WARRANTY SUPPORT
SERVICES AS SET FORTH IN, AND AT THE PRICE SET OUT IN, EXHIBIT C.
11. INVOICES, PAYMENT TERMS, TAXES
11.1 PAYMENT TERMS ARE ONE AND ONE HALF (1.5) PERCENT DISCOUNT IF PAID
WITHIN TEN (10) DAYS AFTER RECEIPT OF INVOICE, NET DUE FORTY-FIVE (45)
DAYS AFTER RECEIPT OF INVOICE.
11.2 ALL PRICES PROVIDED HEREIN ARE EXCLUSIVE OF FEDERAL, STATE AND LOCAL
EXCISE, SALES, USE, PROPERTY AND SIMILAR TAXES WHICH, WHEN APPLICABLE,
WILL BE AUTHORIZED ON PURCHASE ORDERS AND WILL APPEAR AS SEPARATE ITEMS
ON CONOLOG'S INVOICE.
12. TERMINATION
12.1 THIS AGREEMENT MAY BE TERMINATED BY EITHER PARTY UPON ONE (1) DAY PRIOR
WRITTEN NOTICE IF THE OTHER PARTY BECOMES THE SUBJECT OF BANKRUPTCY,
WINDING UP, RECEIVERSHIP, LIQUIDATION OR SIMILAR PROCEEDINGS.
12.2 THIS AGREEMENT MAY BE TERMINATED BY EITHER PARTY UPON WRITTEN NOTICE TO
THE OTHER PARTY, IF THE OTHER PARTY IS IN A SUBSTANTIAL AND MATERIAL
BREACH OF ANY PROVISION OF THIS AGREEMENT AND AFTER WRITTEN NOTICE
THEREOF SUCH BREACH IS NOT CURED WITHIN SIXTY (60) DAYS FROM THE DATE OF
SUCH NOTICE.
13. PERSONNEL ASSISTANCE
13.1 CONOLOG WILL MAKE AVAILABLE TO GE, AT NO CHARGE PER DIEM, QUALIFIED
ENGINEERING PERSONNEL AS ARE NECESSARY TO TRAIN GE PERSONNEL REGARDING
THE OPERATION OF PRODUCTS AND THEIR TESTING, REPAIR, SERVICING AND
MAINTENANCE. SUCH SERVICES SHALL BE MADE AVAILABLE AFTER REQUEST BY
GE AND SHALL BE LIMITED TO AN AGGREGATE OF SIX (6) MAN DAYS (IN NO MORE
THAN THREE (3) TRIPS) DURING THE FIRST TWELVE (12) MONTHS OF THIS
AGREEMENT AND NO MORE THAN THREE (3) MAN DAYS DURING THE NEXT SUBSEQUENT
TWELVE (12) MONTH PERIOD. TRAVEL TIME SHALL NOT BE COUNTED AS MAN DAYS
OF SERVICE. GE SHALL PAY DOCUMENTED AND REASONABLE TRAVEL AND LODGING
COST (CONSISTENT WITH GE PRACTICES AND POLICIES) OF ENGINEERING
PERSONNEL SUPPLIED BY CONOLOG UNDER THIS PARAGRAPH.
13.2 IN ADDITION TO THE SERVICES PROVIDED FOR IN PARAGRAPH 13.1, CONOLOG WILL
MAKE AVAILABLE QUALIFIED ENGINEERING PERSONNEL FOR THE SAME PURPOSES AND
ON THE SAME CONDITIONS AS SET FORTH IN PARAGRAPH 13.1, BUT AT A PER DIEM
RATE OF $500 PER DAY FOR AN ENGINEER AND $400 PER DAY FOR A TECHNICIAN.
13.3 IN ADDITION TO THE SERVICES PROVIDED FOR IN PARAGRAPH 13.1 AND 13.2,
CONOLOG WILL MAKE QUALIFIED PERSONNEL AVAILABLE TO GE, FOR LOCATIONS
DESIGNATED BY GE, WITHIN 48 HOURS OF GE'S REQUEST FOR SUCH PERSONNEL
IN ORDER TO PROVIDE ASSISTANCE TO GE IN RESOLVING PROBLEMS ASSOCIATED
WITH PRODUCTS SOLD BY GE. TRAVEL AND LODGING COSTS SHALL BE TREATED IN
THE SAME MANNER AS SET FORTH IN PARAGRAPH 13.1. SERVICES UNDER THIS
PARAGRAPH SHALL BE RENDERED FREE OF ANY PER DIEM CHARGE IF RENDERED IN
CONNECTION WITH A VALID WARRANTY CLAIM WHICH CAN NOT PRACTICALLY BE
SATISFIED BY RETURNING PRODUCTS TO THE CONOLOG FACTORY. IF RENDERED FOR
PRODUCTS OUT OF WARRANTY THE PER DIEM RATES SPECIFIED IN PARAGRAPH 13.2
SHALL APPLY. SERVICES REQUIRED HEREUNDER SHALL BE SUBJECT TO AVAILABLE
SPACE ON COMMERCIAL AIRLINES AND OTHER SERVICES REQUIRED BY GE. CONOLOG
ENGINEERS SHALL BE ESCORTED BE GE PERSONNEL.
14. MAINTENANCE
14.1 GE MAY MAINTAIN AND SERVICE THE PRODUCTS IN SUCH MANNER AND TO SUCH
SPECIFICATION AS GE DETERMINES. CONOLOG SHALL PROVIDE GE WITH ALL
SERVICE MANUALS AND INSTRUCTIONS, EXISTING AND ACCESSIBLE TO CONOLOG AT
THE TIME OF NEED, NECESSARY TO MAINTAIN, SERVICE, REPAIR OR TEST
PRODUCTS. ANY ADDITIONAL INFORMATION REQUIRED BY GE FOR THIS PURPOSE
SHALL BE PROVIDED BY CONOLOG AND AT PER DIEM RATES SET OUT IN PARAGRAPH
13.2.
14.2 CONOLOG WILL PROVIDE TO GE AN ONGOING SPARE PARTS SUPPLY AS ORDERED BY
GE. CONOLOG'S OBLIGATION TO SUPPLY SPARE PARTS SHALL CONTINUE DURING
THE TERM OF THIS AGREEMENT AND THEREAFTER FOR A PERIOD OF FIVE (5) YEARS
FROM THE DATE OF THE LAST SHIPMENT OF PRODUCTS TO GE. CONOLOG HEREBY
GRANTS TO GE AN IRREVOCABLE OPTION, EXCERCISABLE, AT THE BEGINNING OF
THE YEAR AFTER SHIPMENT OF THE LAST PRODUCT, TO PLACE A FIRM IRREVOCABLE
ORDER AT CONOLOG'S THEN PREVAILING PRICES FOR REASONABLE QUANTITY OF
PARTS WHICH CONOLOG SHALL DELIVER WITHIN TWELVE (12) MONTHS OF THE DATE
OF SUCH ORDER.
15. INSURANCE
15.1 EACH PARTY SHALL MAINTAIN ADEQUATE AND PROPER INSURANCE AGAINST ALL
LIABILITIES WHICH IT MAY INCUR PURSUANT TO ITS ACTIVITIES UNDER THIS
AGREEMENT. CONOLOG SHALL MAINTAIN INSURANCE IN AN AMOUNT OF $3,000,000
PER OCCURANCE WITH A TOTAL OF $3,000,000.
16. TADEMARKS
16.1 GE SHALL HAVE NO RIGHT TO USE ANY OF CONOLOG'S TRADEMARKS OF TRADE NAMES
RELATED TO THE PRODUCTS.
17. ASSIGNMENT
17.1 THIS AGREEMENT MAY NOT BE ASSIGNED BY EITHER PARTY WITHOUT THE EXPRESS
WRITTEN CONSENT OF THE OTHER AND ANY ATTEMPT TO SO ASSIGN THIS AGREEMENT
WITHOUT SUCH PERMISSION OF THE OTHER PARTY SHALL BE NULL AND VOID AND OF
NO EFFECT WHATSOEVER.
18. PATENT INDEMNITY
18.1 CONOLOG WARRANTS THAT HARDWARE, FIRMWARE AND PROGRAM SOFTWARE COMPRISING
THE PRODUCTS FURNISHED PURSUANT TO THIS AGREEMENT WILL NOT INFRINGE ANY
VALID PATENT, TRADEMARK, COPYRGHT, INDUSTRIAL DESIGN OR TRADE SECRET.
CONOLOG WILL, AT ITS OWN EXPENSE, DEFEND ANY AND ALL ACTIONS, SUIT OR
CLAIMS CHARGING SUCH INFRINGEMENT.
18.2 NOTWITHSTANDING ANYTHING TO THE CONTRARY APPEARING IN THIS AGREEMENT,
CONOLOG SHALL DEFEND, INDEMNIFY AND SAVE HARMLESS GE, ITS OFFICERS,
AGENTS, EMPLOYEES, AFFILIATES, DEALERS AND CUSTOMERS AND THOSE FOR WHOM
GE MAY ACT AS AGENT IN THE PURCHASE OF SAID HARDWARE, FIRMWARE OR PROGRAM
SOFTWARE, FROM ANY AND ALL LOSS, EXPENSE, DAMAGE, LIABILITY, CLAIMS OR
DEMANDS EITHER AT LAW OR IN EQUITY, ARISING OUT OF ANY SUCH ACTUAL
INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT, INDUSTRIAL DESIGN OR
TRADE SECRET RIGHTS BY THE MANUFACTURE, PURCHASE, SALE OR USE OF ANY
SAID HARDWARE, FIRMWARE OR PROGRAM SOFTWARE FURNISHED IN CONNECTION WITH
THIS AGREEMENT.
18.3 IF THE PRODUCTS OR ANY PART THEREOF ARE HELD IN SUCH ACTION, SUIT OR
CLAIM TO CONSTITUTE AN INFRINGEMENT AND THE USE OF SUCH PRODUCTS OR PART
THEREOF IS OR SHALL BE ENJOINED, THEN CONOLOG SHALL, AT ITS OWN EXPENSE,
AND AT ITS OPTION, EITHER:
A. PROCURE FOR GE OR ITS CUSTOMERS THE RIGHT TO CONTINUE USING SUCH
PRODUCTS OR PART THEREOF, OR
B. REPLACE SUCH PRODUCTS OR PART THEREOF WITH NON INFRINGING PRODUCTS
ACCEPTABLE TO GE, OR
C. MODIFY SUCH PRODUCTS OR PART THEREOF SO THEY BECOME NON INFRINGING.
18.4 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS ARTICLE 18, THE
INDEMNITY OF THIS SECTION SHALL OT APPLY TO TRADEMARKS OR TRADENAMES
SELECTED BY GE OR TO ANY INFRINGEMENT CAUSED BY DESIGN MODIFICATIONS
REQUIRED BY GE.
19. CONFIDENTIALITY AND PROPRIETARY INFORMATION
19.1 SHOULD THE PARTIES HERETO NEED TO EXCHANGE INFORMATION WHICH IS
PROPRIETARY TO EITHER OF THEM, AND TO THE EXTENT THAT SUCH EXCHANGE IS
NOT COVERED BY ARTICLE 4.4 OF THIS AGREEMENT, SUCH EXCHANGE SHALL NOT
OCCUR UNLESS AND UNTIL AN AGREEMENT IS MUTUALLY AGREED TO IN WRITING
SETTING FORTH THE OBLIGATIONS OF THE RECEIVING PARTY REGARDING THE
CONFIDENTIAL TREATMENT OF SUCH INFORMATION.
20. QUALITY
20.1 CONOLOG SHALL USE ITS BEST EFFORTS TO ACHIEVE AND MAINTAIN A ZERO
DEFECTS/REJECT LEVEL IN PRODUCTS DELIVERED UNDER THIS AGREEMENT.
CONOLOG SHALL PROVIDE UPON REQUEST BY GE DEFECTS PER MILLION (DPM)
INFORMATION FOR CRITICAL TO QUALITY (CTQ) ITEMS. WHERE CTQ'S ARE NOT
SPECIFICALLY DEFINED, QUALITY REQUIREMENTS WILL BE MET BASED ON CURRENT
DOCUMENTATION, E.G., SPECIFICATIONS, DRAWINGS AND QUALITY PLAN.
20.2 CONOLOG WILL DEVELOP AND USE STATISTICAL PROCESS CONTROL (VARIABLES AND
ATTRIBUTES) AS AN INTEGRAL PART OF ITS PROCESSES TO PROVIDE THE
INFORMATION NESESSARY FOR CONTINUOUS IMPROVEMENT IN QUALITY AND
PRODUCTIVITY. CONOLOG WILL UTILIZE DATA FROM THE CONTROL CHARTS TO
IDENTIFY OPPORTUNITIES FOR CENTER THE PROCESS AND CONTINUALLY REDUCING
ITS VARIATION.
20.3 CONOLOG MUST BE ISO9000 REGISTERED OR AGREE TO A GE AUDIT, UPON
REASONABLE NOTICE AND AT REASONABLE TIMES OF CONOLOG'S QUALITY AND
PROCESS CONTROL PROCEDURES AND DESIGN DOCUMENTATION FOR PRODUCT(S)
WITHIN THE SCOPE OF THIS AGREEMENT. CONOLOG AGREES TO MAKE THEIR BEST
EFFORT TO ACHIEVE AND MAINTAIN ISO9000 REGISTRATION.
21. NOTICES
21.1 ANY AND ALL NOTICES OR OTHER INFORMATION REQUIRED TO BE GIVEN BY ONE OF
THE PARTIES TO THE OTHER SHALL BE DEEMED SUFFICIENTLY GIVEN WHEN
FORWARDED BY PREPAID REGISTERED MAIL, BY FACSIMILE OR LIKE MEANS, BY
TELEGRAM OR BY HAND DELIVERY TO THE OTHER PARTY AT THE FOLLOWING
ADDRESS:
IF TO CONOLOG:
CONOLOG CORP. FAX NO. 1 (908) 722 5461
5 COLUMBIA ROAD
SOMERVILLE, NJ 08876
ATTENTION: PRESIDENT
IF TO GE:
GE POWER MANAGEMENT FAX NO. 1 (610) 251 7343
205 GREAT VALLEY PARKWAY
MALVERN, PA 19355
ATTENTION: OPERATIONS MANAGER
AND SUCH NOTICES SHALL BE DEEMED TO HAVE BEEN RECEIVED TEN (10) BUSINESS
DAYS AFTER MAILING IF FORWARDED BY MAIL, AND THE FOLLOWING BUSINESS DAY
IF FORWARDED BY FACSIMILE OR LIKE MEANS, TELEGRAM, OR HAND DELIVERY.
21.2 THE AFOREMENTIONED ADDRESS OF EITHER PARTY MAY BE CHANGED AT ANY TIME BY
THE GIVING OF PRIOR NOTICE THEREOF TO THE OTHER PARTY.
22. ENTIRE AGREEMENT
22.1 THIS AGREEMENT AND THE EXHIBITS ATTACHED HERETO CONSTITUTE THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES RESPECTING THE SUBJECT
MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS OR NEGOTIATIONS
REGARDING PRODUCT MADE AND CONDUCTED BETWEEN THEM. THIS AGREEMENT MAY
NOT BE MODIFIED OR AMENDED UNLESS IN WRITING SIGNED BY EACH OF THE
PARTIES HERETO. FAILURE OF EITHER PARTY AT ANY TIME TO REQUIRE
PERFORMANCE OF ANY PROVISIONS OF THIS AGREEMENT SHALL NOT AFFECT THE
RIGHT TO REQUIRE FULL PERFORMANCE AT ANY TIME THEREAFTER. ANY WAIVER
BY EITHER PARTY OF A BREACH OF ANY PROVISION SHALL NOT BE TAKEN OR HELD
TO BE A WAIVER OF ANY SUBSEQUENT BREACH HEREOF OR AS NULLIFYING THE
EFFECTIVENESS OF SUCH PROVISION.
23. GOVERNING LAW
23.1 THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
24. ARBITRATION
24.1 ANY CONTROVERSY OR CLAIM ARISING OUT OF, OR RELATED TO, THIS CONTRACT,
OR THE BREACH THEREOF, SHALL BE SETTLED BY ARBITRATION CONDUCTED IN THE
STATE OF NEW YORK IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION AND JUDGMENT UPON THE AWARD
RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION.
25. ESCROW OF TECHNICAL INFORMATION
25.1 CONOLOG AGREES, AT GE'S REQUEST AFTER SEPTEMBER OF 1997, TO PLACE IN
ESCROW A COPY OF ALL AVAILABLE AND ON HAND TECHNICAL INFORMATION AS
DEFINED IN THIS ARTICLE 25, TO THE EXTENT REQUIRED FOR PRODUCTION. THE
ESCROWED TECHNICAL INFORMATION SHALL BE TREATED UNDER THE TERMS OF AN
ESCROW AGREEMENT, A COPY OF WHICH IS ATTACHED TO THIS AGREEMENT, TO
WHICH CONOLOG HEREBY AGREES TO ASSENT. THE ESCROW AGREEMENT WILL
PROVIDE FOR THE RELEASE FOR THE RELEASE OF THE ESCROWED TECHNICAL
INFORMATION TO GE IN THE EVENT CONOLG BECOMES UNABLE TO SUPPLY PRODUCTS
PURSUANT TO THIS AGREEMENT FOR A CONTINUOUS PERIOD OF FORTY FIVE (45)
DAYS IN THE QUANTITIES REQUIRED. GE SHALL HAVE AUTHORIZATION TO USE
SUCH TECHNICAL INFORMATION FOR SO LONG AS CONOLOG REMAINS UNABLE TO
PERFORM ITS AFOREMENTIONED OBLIGATION. GE SHALL TAKE THE SAME STEPS IN
PROTECTING TECHNICAL INFORMATION AS GE TAKES IN PROTECTING ITS OWN
PROPRIETARY INFORMATION THAT GE DESIRES TO MAINTAIN PROPRIETARY. WHEN
CONOLOG AGAIN BECOMES CAPABLE OF SUPPLYING PRODUCTS, GE SHALL RETURN
TECHNICAL INFORMATION AND ALL COPIES THEREOF INTO EXCROW.
25.2 "TECHNICAL INFORMATION", AS USED HEREIN, MEANS: ALL INFORMATION
NECESSARY, EITHER VERBALLY OR IN WRITING, TO ENABLE MANUFACTURING OF
PRODUCTS, TO THE HIGHEST LEVEL OF QUALITY TO WHICH CONOLOG HAS
MANUFACTURED PRODUCTS, AND ALL AVAILABLE AND ON HAND TECHNICAL
INFORMATION OWNED OR CONTROLLED BY CONOLOG DURING THE TERM OF THIS
AGREEMENT RELATING TO THE DESIGN, MANUFACTURE, TESTING, PERFORMANCE,
OPERATION OR USE OF PRODUCTS, INCLUDING, WITHOUT LIMITATION, ALL
INFORMATION AVAILABLE AND ON HAND PERTAINING TO THE FOLLOWING:
A. ALL DAWINGS AND ENGINEERING DESIGN DATA FOR PRODUCS;
B. ALL SPECIFICATIONS OF ANY KIND FOR PRODUCTS INCLUDING, WITHOUT
LIMITATION, ALL FUNCTIONAL, PERFORMANCE, AND MATERIAL SPECIFICATIONS;
C. ALL INFORMATION RELATING TO ANY AND ALL PROCESSES OR METHODS USED IN
MANUFACTURING PRODUCTS;
D. ALL INFORMATION RELATING TO ANY AND ALL MACHINES, EQUIPMENT OR
APPARATUS USED IN THE MANUFACTURE OF PRODUCTS INCLUDING, WITHOUT
LIMITATION, ALL DRAWINGS AND SPECIFICATIONS RELATING TO SUCH
MACHINES, EQUIPMENT OR APPARATUS AND LISTS OF VENDORS WHO SUPPLY
SUCH MACHINES, EQUIPMENT OR APPARATUS;
E. ALL INFORMATION RELATING TO QUALITY AND QUALITY CONTROL, INCLUDING
WITHOUT LIMITATION, SPECIFICATIONS AND PROCEDURES RELATED THERETO;
F. ALL INFORMATION RELATING TO TEST SPECIFICATIONS AND TEST RESULTS FOR
PRODUCTS;
G. ALL INFORMATION RELATING TO EQUIPMENT OR APPARATUS USED IN TESTING
PRODUCTS OR SIMULATING THEIR OPERATION;
H. ALL INFORMATION RELATING TO ENVIRONMENTAL MATTERS RELATING TO
PRODUCTS OR THEIR MANUFACTURE;
I. ALL INFORMATION RELATING TO COMPUTER SOFTWARE USED IN DESIGNING,
MANUFACTURING, TESTING, OPERATION, OR USING PRODUCTS, INCLUDING,
WITHOUT LIMITATION, ALL SOFTWARE RELATED TO PLANNING AND COSTING
PROGRAMS FOR FACTORY SCHEDULING AND MANAGEMENT OF THE BUSINESS; AND
J. ALL INFORMATION RELATING TO THE FUNCTIONS AND USE OF NECESSARY
EQUIPMENT USED BY CONOLOG IN MANUFACTURING PRODUCTS;
K. ALL INFORMATION RELATING TO THE REPAIR OR MAINTENANCE OF PRODUCTS.
IN WITNESS THEREOF, EACH OF THE PARTIES HAVE CAUSED THIS AGREEMENT TO BE
SIGNED BY ITS DULY AUTHORIZED REPRESENTATIVE.
CONOLOG CORP. GENERAL ELECTRIC COMPANY
BY: BY:
TITLE: TITLE:
DATE: DATE:
