Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
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CONOLOG CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 52-0853566
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification
Number)
5 Columbia Road, Somerville, New Jersey 08876
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(Address of Principal Executive Offices) (Zip Code)
Warren Schreiber
Consulting Agreement
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(Full Title of the Plans)
Arnold N. Bressler, Esq.
Milberg Weiss Bershad Hynes & Lerach LLP
One Pennsylvania Plaza
New York, New York 10119/0165
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(Name and address of agent for service)
(212) 594-5300
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(Telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public:
As Soon As Practicable After Registration Statement Becomes
Effective.
Page 1 of 31 Pages
Exhibit Index Begins on Page
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(Facing Page Continued on the Following Page)
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(Continuation of Facing Page)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share (1) Price (1) Fee
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<S> <C> <C> <C> <C>
Common Shares, 100,000 $4.8125 (2) $481,250.00 $165.95
par value $1.00 shares
per share
</TABLE>
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(1) Estimated solely for the purpose of calculating the
registration fee.
(2) Based upon the average of the high and low sales prices of the Common
Shares on the National Association of Securities Dealers Automated
Quotation Systems, Inc. on February 17, 1998 of $4.8125 per share.
Pursuant to Rule 416(c) under the Securities Act of 1933, as amended,
this Registration Statement also covers such additional indeterminate
number of shares as may become issuable pursuant to anti-dilution and
adjustment provisions of any options to purchase shares registered
hereby.
EXPLANATORY NOTE
As provided in Instruction C to Form S-8, any prospectus that
is to be used for reoffers and resales of restricted securities must be filed as
a part of a Registration Statement on Form S-8 in accordance with the applicable
requirements of Part I of Form S-3. Accordingly, the Prospectus that is to be
used for reoffers and resales of shares of Common Stock acquired under the
Warren Schreiber Consulting Agreement prior to the effective date of this
Registration Statement has been filed as a part of this Registration Statement.
PROSPECTUS
100,000 Shares
Conolog Corporation
Common Stock
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This prospectus relates to 100,000 shares (the "Shares) of
Common Stock, par value $1.00 per share (the "Common Stock"), of Conolog
Corporation (the "Company") that may be offered for sale for the account of a
certain shareholder of the Company as stated herein under the heading "Selling
Shareholder."
The Selling Shareholder has advised the Company that sales of
the Shares offered hereunder by him, or by his pledges, donees, transferees or
other successors in interest, may be made from time to time in the
over-the-counter market, through negotiated transactions or otherwise, at market
prices prevailing at the time of the sale or at negotiated prices. The Shares
may be sold by one or more of the following methods: (a) a block trade in which
the broker or dealer so engaged will attempt to sell the Shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; and (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
Sales may be made pursuant to this Prospectus to or through broker-dealers who
may receive compensation in the form of discounts, concessions or commissions
from the Selling Shareholder or the purchasers of Common Stock for whom such
broker-dealer may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). One or more supplemental prospectuses will be filed
pursuant to Rule 424 under the Securities Act of 1933, as amended (the
"Securities Act"), to describe any material arrangements for the sale of the
Shares offered hereunder when such arrangements are entered into by the Selling
Shareholder and any other broker-dealers that participate in the sale of the
Shares.
The Selling Shareholder and any broker-dealers or other
persons acting on his behalf in connection with the sale of Common Stock
hereunder may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profit realized by
them on their sale of Common Stock as principals may be deemed to be
underwriting commissions under the Securities Act. As of the date hereof, there
are no special selling arrangements between any broker-dealer or other person
and the Selling Shareholder.
No period of time has been fixed within which the Shares may
be offered or sold. None of the proceeds from the sale of the Shares will be
received by the Company. The Company will pay all expenses with respect to this
offering, except for brokerage fees and commissions and transfer taxes for the
Selling Shareholder, which will be borne by the Selling Shareholder.
The shares of Common Stock offered hereby involve certain
risks. See "Risk Factors" beginning on page 7 of this Prospectus.
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The Company's Common Stock is traded on the Nasdaq SmallCap
Market under the Symbol "CNLG." On February 17, 1998, the last sale price of the
Common Stock on the Nasdaq SmallCap Market was $5.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 23, 1998.
No person has been authorized to give any information or to
make any representations not contained or incorporated by reference in this
Prospectus in connection with the offer described in this Prospectus and, if
given or made, such information and representations must not be relied upon as
having been authorized by the Company or the Selling Shareholder. Neither the
delivery of this Prospectus nor any sale made under this Prospectus shall under
any circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state or any
person to whom it is unlawful to make such offer in such state.
THE COMPANY
Conolog Corporation, a Delaware corporation (the "Company" or
"Conolog") was organized in 1968 and is engaged in the design, manufacture
(directly or through subcontractors) and distribution of small electronic and
electromagnetic components and subassemblies for use in telephone, radio and
microwave transmission and reception and other communication areas that are used
in both military and commercial applications. The Company's products are used
for transceiving various quantities, data and protective relaying functions in
industrial, utility and other markets.
The Company is engaged in the design and manufacture of (i)
transducers, which are electro-magnetic devices which convert electrical energy
into mechanical and other forms of physical energy, or conversely convert
mechanical and other forms of physical energy into electrical energy; (ii)
digital signal processing (DSP) systems and electromagnetic wave filters for
differentiation among discreet audio and radio frequencies; (iii) audio
transmitters and modulators, for the transmission over telephone lines,
microwave circuits, or satellite, of electrical signals obtained from
transducers, data generated in electronic
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code form or by computers or other similar equipment (not manufactured by the
Company); (iv) audio receivers and demodulators which are small systems which
receive and decode the signals from the audio transmitters and convert them into
digital codes for input into computers, teletypes or other similar equipment
(not manufactured by the Company) or convert such signals into mechanical or
other form of energy, such as opening or closing valves, or starting or stopping
a motor; (v) magnetic "networks" which are devices that permit the matching or
coupling of different types of communication equipment together or many
identical or similar equipment together or onto telephone or other transmission
lines so as not to cause interference; and (vi) analog transmitters and
receivers, which permit the coding/transmission and receiving/decoding of a
constantly variable data, such as the water level in a tank, pressure in a pipe
or temperature, by actually displaying the exact information at the receiving
end in digital form for storing in a computer or other devices, or by physically
displaying the information in a visual fashion such as a numerical readout or
meter.
Since the 1980's, Conolog has been an active participant in
providing electromagnetic wave filters for major military programs, such as the
Patriot Missile, Hawk Missile and Sea Sparrow Missile. In addition to these
projects, Conolog components are currently used by the military in tanks, the
Apache helicopters and the MK-50 torpedoes.
During 1987, the Company made the strategic decision to
redirect the Company's focus from military to commercial markets. Since that
time, the Company has refocused on manufacturing and marketing its products for
the commercial marketplace rather than depend on the military and defense
related markets. The effort has included the introduction of new products, the
redesign of existing products and increased advertising and marketing efforts,
as permitted by its limited financial resources. The percentage of revenues
attributed to products manufactured for use in commercial applications increased
from approximately 4% of sales in 1981 ($171,000) to approximately 85% of sales
in 1997 ($900,000). The decision to embark on this program entailed a major
design effort, including the coordination of outside engineering consultants to
develop a complete line of products aimed at the Company's target markets. The
emphasis was on products for electric utilities, cogeneration of power, gas and
water companies, traffic control for departments of transport (DOT) and airports
utilizing DSP (Digital Signal Processing) technology. DSP designs have long term
stability with minimum or no maintenance, allowing the Company to offer
customers a product line with a 12 year warranty - a first on the market.
Testing of the Company's first commercial product group, the
Teleprotection Series PTR-1000, was under way in the latter part of 1992 by
Bonneville Power Administration. This detailed test permitted the Company to
"fine tune" the product for power transmission applications. In March 1994, the
PTR-
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1000 was approved for use by such utility and thereafter by other utilities and
municipalities. To date, the Company has sold and delivered over 800 PTR-1000
sets to 18 utilities and 5 municipalities, most of which are installed and in
service.
Following the PTR-1000, in 1993, the Company introduced its
"98 Series" Tone Products for water, gas, telephone and oil companies,
waste-water, traffic control and airports. In 1994 the Company unveiled the
Power Supply Series (allowing the various utilities to power-up the equipment
from any power source), the "40 Series" for transmission of analog variable data
(i.e., water levels, gas pressures, and temperature) and the Multiplexer Series
which permits the transmission of up to 900 separate data points, again using a
telephone line, microwave link, or satellite. In 1994 the Company also
introduced the "68 Series" tone products. This series is the "98 Series"
repackaged mechanically specifically for customers with older systems wanting to
upgrade to DSP technology without the expense of a complete mechanical
installation. The "68 Series" offers the entire line offered by the "98 Series".
In 1995 the Company introduced a stand alone "98 Series" transmitter and
receiver for field installations and a wide range fiber optic interface for the
Iniven products. The fiber optic interface is also available as a stand alone
coupling device. In 1996 the Company launched its industrial grade 1200 Baud
Modem for data transmission/communication and completed the PTR-1000 System
options. Through 1997, the Company designed and is in the process of completing
and building the PTR-1500 Quad System, Protection Equipment, exclusively for the
General Electric Company ("GE"), to be labeled GE-NS50 Series, for worldwide
sales as detailed in the agreement between GE and Conolog dated April 1, 1997.
Due to the end of the cold war and the downsizing of the
American military, the Company experienced unexpected sharp reductions of
military contracts in fiscal 1993 (the Company's fiscal year end is July 31)
resulting in a 50% decline in the Company's sales for that year, down to
$1,486,298 from $2, 997,308 in fiscal 1992. The sales of new products could not
replace the decrease in military sales. The Company, however, continued to
pursue sales as aggressively as its available resources would permit. Sales in
fiscal 1994 increased to $2,044,860, a 37% increase over fiscal 1993. Sales in
fiscal 1995 were $2,090,933 a 2% increase over fiscal 1994. Sales in fiscal 1996
were $1,924,466 an 8% decrease from fiscal 1995. Sales in fiscal 1997 were
$1,123,390, a 42% decrease from fiscal 1996. Revenues from the Company's
military product sales represented approximately 60%, 30%, 23% and 10% of sales
of the Company in fiscal 1994, 1995, 1996 and 1997, respectively, reflecting the
Company's emphasis on commercial sales and markets.
The Company's products are used in radio and other
transmissions, telephones and telephone exchanges, air and
traffic control, automatic transmission of data for utilities,
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teleprinting of transmitted data such as news and stock market information and
for use by electric utilities in monitoring power transmission lines for faults
and/or failures. The Company's products may be used independently or in
combination with other products to form a system type configuration, whereby the
Company's equipment is pre-assembled in a large cabinet with other equipment in
a configuration that would provide the end user with protection as well as
operational status displays.
The Company is presently engaged and focused in two basic
market areas: (1) Military sales via direct contract sales to the military, as
subcontractor to systems producers and to foreign governments; and (2)
Commercial sales (under the tradename "INIVEN" (A Division of Conolog)) via
direct sales to end users, sales to system assemblers and sales to
contractors/installers.
On August 16, 1995, the Company completed an underwritten
offering ("1995 Offering") of its securities by selling 235,750 Units ("Units"),
each Unit consisting of two (2) shares of Common Stock and one (1) Redeemable
Class A Warrant ("Class A Warrant" or "Warrant") at a price of $10.00 per Unit.
The Company received net proceeds of $1,853,025. On January 21, 1998, the
Company completed an underwritten public offering ("1998 Offering") of its
securities by selling 700,000 Units ("1998 Units") consisting of one (1) share
of Common Stock and four (4) Redeemable Class A Warrants at a price of $5.00 per
1998 Unit. The Company received net proceeds of approximately $2,750,000.
The Company's executive offices are located at 5 Columbia
Road, Somerville, New Jersey 08876, telephone
(908) 722-8081.
RISK FACTORS
In making comparisons with other investments or in considering
the success of other investments, one should bear in mind that the success of
any investment depends upon many factors including opportunity, general economic
conditions, experience and competence of management. There is no representation
that the same positive factors are present in this Company which have been
present in like ventures that have been successful.
Any person who is considering the purchase of the Securities
offered herein should carefully consider the adverse factors described below.
Any one or more of these factors could have a negative effect on the Company of
such impact as to cause the value of the Company's securities to be greatly
diminished.
1. Working Capital; Stockholders' Equity; Prior
Periods' Losses and Profits. At October 31, 1997, the Company
had working capital of $2,297,213 and stockholders' equity of
$2,678,198. The Company's continued existence is dependent upon
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it successfully expanding its business and attaining profitable operations. The
Company reported losses of $173,198, $3,810,736, income of $291,754 and losses
of $537,290 for the quarter ended October 31, 1997, and the years ended July 31,
1997, 1996 and 1995, respectively. The profit in 1996 was only due to the debt
extinguishment of $1,232,728, which after the deferred tax asset of $492,352
resulted in extraordinary income of $740,376. The profits (losses) reported
included inventory write-offs of $28,101, $50,281 and $656,248, for years 1997,
1996 and 1995, respectively. In addition, reported interest expense for October
31, 1997 was $13,350, and $81,025, $131,854, and $253,686 for the years 1997,
1996 and 1995, respectively.
2. Working Capital; Cash Flow; Backlog. At October 31, 1997,
the Company had working capital of $2,297,213. At July 31, 1997, the Company had
working capital of $2,456,122. For the periods ended October 31, 1997 and July
31, 1997 cash flow used in operations amounted to $298,345 and $654,214. The
Company has no material cash commitments for the current period other than
consistent with supporting existing orders, new orders and contracts. Funds to
support said commitments will be provided for from cash on hand, new receivables
and, if necessary, borrowings. As of July 31, 1997 the Company had a backlog of
$2,900,000. Of such backlog, $2,800,000 relate to the Company's PTR-1000 series
of products which are subject to the terms of the blanket-contracts with certain
of its largest customers. See "Risk Factors-Dependence on Large Customers." The
terms of such contracts are not binding and only represent potential purchases,
whereby the Company sets certain prices for its products for the duration of the
contract.
3. Risks Attendant to Expansion. The Company intends to
utilize a portion of the net proceeds of the 1998 Offering to hire employees,
complete the PTR-1500 designing and testing of mainframe, design, build and test
of the option modules and event recorders, complete the radio interface for the
Company's tone and multiplex products and market the Company's products. The
Company anticipates using approximately $600,000 to complete this task and have
marketable products by March 1998. Like any business enterprise operating in a
specialized and competitive market, the Company is subject to many business
risks which include, but are not limited to, unforeseen marketing and
promotional expenses, unforeseen negative publicity and competition. Many of the
risks inherent in the Company's business may be unforeseeable or beyond the
control of management. There can be no assurance that the Company will
successfully market the Company's products or develop new products in a timely
or effective manner, which would materially adversely affect the Company's
operating results.
4. Minimal Sales Staff. The Company employs only 2 marketing
executives. In 1995, the Company elected a Vice President of Marketing and Sales
who introduced a comprehensive advertising campaign for the major product lines
in water/waste water and utility publications appearing monthly. In addition,
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the Company has signed up to attend the major shows pertaining to water, waste
water and power utilities. Although the response to these efforts have shown
promise, the success of the Company's future marketing efforts will depend on
the market environment and the needs of the economy.
5. Reliance on Component Manufacturers. The Company is
dependent on outside suppliers for all of the subcomponent parts and raw
materials necessary to manufacture the Company's products. A shortage, delay in
delivery, or lack of availability of a given part could lead to manufacturing
delays, which could reduce sales until the problem is remedied. All electrical
components of the Company's products are standard stock items for which a
replacement vendor can be readily obtained. The Company is not dependent upon
any single supplier. The Company purchases some custom parts, primarily printed
circuit boards. The failure of a vendor of one of these customized components
could cause a lengthy delay in production, resulting in a loss of revenues.
6. Dependence on Present Management. The success of the
Company is dependent upon the services of its current management, particularly
Robert S. Benou, its President, and its key engineers. Mr. Benou has entered
into an employment agreement with the Company pursuant to which Mr. Benou will
be employed by the Company through May 31, 2002, however, if the employment of
Mr. Benou by the Company terminates, or he is unable to perform his duties, the
Company may be substantially affected. The Company intends to obtain key man
insurance on the life of Mr. Benou in the amount of $1,000,000, to be payable to
the Company. If the Company were to lose the services of any of its other key
employees, there is no assurance that the Company would be able to locate and
retain a qualified replacement. The prolonged lack of availability of any
current member of senior management, whether as a result of death, disability or
otherwise, could have an adverse effect upon the business of the Company.
7. Competition: Rapid Technological Change. The market for the
Company's products is very competitive. There are several companies engaged in
the manufacture of products of the type produced by the Company, most of which
are substantially larger and have substantially greater name recognition and
greater financial resources and personnel. The principal elements of competition
in the Company's markets include product quality and reliability, price, service
and delivery. Competition is expected to continue and intensify. The market is
also characterized by rapid technological changes and advances. The Company is
an insignificant factor in the industry. There can be no assurance that the
Company will be able to develop or acquire new products to keep the Company
competitive or stay competitive in general. Lack of market acceptance for the
Company's existing or new products, the Company's failure to introduce new
products in a timely or cost effective manner or its failure to increase
functionability of existing products or remain price competitive, would
materially adversely affect the
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Company's operating results. There can be no assurance that the Company will be
successful in its product development efforts.
8. Dependence on Large Customers. Sales to the Company's two
major customers during fiscal 1997 (General Electric and Bonneville Power
Administration) totalled $255,500 and $200,000, respectively (22% and 18%,
respectively of all sales). Sales to the Company's major customer in fiscal 1996
(B.C. Hydro-Canada ) totaled $401,000 (20% of all sales). Sales to the Company's
major customer in fiscal 1995 (United States Government) totaled $424,849 (20%
of net sales). During fiscal 1994, sales to the Company's only major customer
(Westinghouse Electric Corp. - Naval Systems Division) totaled $597,000 (29% of
net sales). The Company has three (3) ongoing contracts, in addition to existing
open orders. These may continue to produce revenue past the date of this
prospectus, namely from the General Electric Company and Bonneville Power
Administration. However, these contracts are blanket contracts, are not binding
and only represent potential purchases, whereby the Company sets certain prices
for its products for the duration of the contract. Thus, there are no guaranteed
future purchases under such contracts. The loss of General Electric and
Bonneville Power Administration would have a material adverse effect upon the
Company. None of such customers has or had any material relationship other than
business with the Company.
The dependence on major customers subjects the Company to
significant financial risks in the operation of its business should a major
customer terminate, for any reason, its business relationship with the Company.
In such event the financial condition of the Company may be adversely affected
and the Company may be required to obtain additional financing, of which there
can be no assurance. The Company has taken into account the decreasing military
budget of the United States. Currently less than 50% of the Company's revenues
are derived from the military and are expected to diminish as a percentage of
sales.
9. Defense Industry Downsizing - Historical Dependence on
Government Contracts. Recent world events have resulted in a decreased demand
for defense related products causing a general downsizing of the American
defense industry. These factors, along with federal budget constraints, have
caused the Company to realize order cancellations in the amount of $650,000
since 1990 and for another $600,000 placed on a production hold pending specific
releases. The Company's ability to continue to attract and retain orders from
defense contractors, which as a group accounted for $150,000 in fiscal 1997 or
13% of the Company's total revenue of $1,123,390 has been affected. The
Government shutdown during the last half of 1995 and early 1996 seriously
aggravated an already deteriorating situation impairing overall sales level
growth. While the Company has changed its strategy for growth by a conversion to
primarily commercial business, there can be no assurance that it will be
completely successful in this objective.
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10. Lack of Price Stability. The Company's sales to
defense-related contractors and manufacturers have historically occurred in a
relatively stable price environment. Pressure in defense spending may adversely
affect prices and profit margins in that market. While the Company believes that
its planned expansion in the commercial market will help it to better manage
such a change in the defense market, there can be no assurance that it will be
completely successful in this objective.
11. Investigations Involving VTR Capital, Inc.
SEC Investigation. The Company has been advised by VTR Capital
Inc., ("VTR") one of the underwriters of the 1998 Offering that the Securities
and Exchange Commission ("SEC") has issued an order directing a private
investigation by the staff of the SEC. Such order empowers the SEC staff to
investigate whether, from June 1995 to the present, VTR and certain other
persons and/or entities may have engaged in fraudulent acts or practices in
connection with the purchase or sale of securities of certain companies in
violation of Sections 10(b) and 15(c)(1) of the Securities Act of 1934, as
amended (the "Exchange Act") and Section 17(a) of the Securities Act of 1933, as
amended. These acts or practices include whether VTR and certain other brokers
or dealers effected transactions or induced transactions by making untrue
statements of material fact and whether VTR and certain others have engaged in
manipulative, deceptive or other fraudulent devices. The formal order also
concerns whether VTR and certain others who have agreed to participate in a
distribution have violated Rule 10b-6 of the Exchange Act by having bid for or
purchased securities for accounts in which it had a beneficial interest or which
is the subject of such distribution. As of January 7, 1998, VTR understands that
the SEC investigation is ongoing and that there are presently no allegations of
wrongdoing and no actual findings. The Company has been advised that VTR has in
the past made a market in the Company's Common Stock and Class A Warrants and
intends to continue to do so subject to compliance with Regulation M of the
Exchange Act. An unfavorable resolution of the SEC investigation concerning the
sales and trading activities and practices of VTR could have the effect of
limiting VTR's ability to make a market in the Company's securities in which
case the market for and liquidity of the Company's securities may be adversely
affected.
NASD Investigation. The Company has also been advised by VTR
that during 1996 and 1997, the staff of the NASD conducted an inquiry into the
trading and sales practices of securities of another company in and around April
1995. In connection with the inquiry, the NASD staff obtained documents from VTR
and conducted on-the-record interviews of, among others, VTR's Chief Executive
Officer, Head Trader and Chief Financial Officer. In late 1997, the NASD staff
advised VTR's counsel that it had completed its investigation and that it
intended to recommend that a formal disciplinary proceeding be instituted
against VTR, its Chief Executive Officer and Head Trader, as well as certain
other individuals not affiliated with VTR for fraudulent market
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manipulation in connection with a purported unregistered distribution as well as
for violation of VTR's restriction agreement. As of January 7, 1998, to VTR's
knowledge, no complaint has been issued in this matter. An unfavorable
resolution of the NASD investigation could have the effect of limiting VTR's
ability to make a market in the Company's securities in which case the market
for and liquidity of the Company's securities may be adversely affected.
12. Redemption of Redeemable Warrants. The Class A Warrants
are subject to redemption by the Company commencing the earlier of (i) January
21, 2000 or (ii) January 21, 1999, with the consent of IAR Securities Corp., the
lead underwriter of the Company's 1998 Offering ("Representative"), at a price
of $.05 per Warrant if the closing bid price for the Common Stock equals or
exceeds $7.20 per share for any 20 trading days ending no earlier than the
fifteenth trading day prior to the date of the notice of redemption. In the
event that the Warrants are called for redemption by the Company, Warrantholders
will have thirty (30) days during which they may exercise their rights to
purchase shares of Common Stock. If holders of the Warrants elect not to
exercise them upon notice of redemption thereof, and the Warrants are
subsequently redeemed prior to exercise, the holders thereof would lose the
benefit of the difference between the market price of the underlying Common
Stock as of such date and the exercise price of such Warrants, as well as any
possible future price appreciation in the Common Stock. As a result of an
exercise of the Warrants, existing Stockholders may be diluted and the market
price of the Common Stock may be adversely affected.
13. Restrictions on Marketmaking Activities During Warrant
Solicitation. To the extent that the Representative solicits the exercise of
Class A Warrants, the Representative may be prohibited pursuant to the
requirements of Regulation M under the Exchange Act from engaging in
marketmaking activities during such solicitation and for a period of up to five
days preceding such solicitation. As a result, the Representative may be unable
to continue to provide a market for the Company's securities during certain
periods while the Class A Warrants are exercisable. The Representative is not
obligated to act as a marketmaker.
14. Nasdaq Listing and Continued Listing Requirements. The
Company's Common Stock and Class A Warrants are currently listed on the Nasdaq
SmallCap Market, Inc. ("Nasdaq"). For continued listing on Nasdaq, a company,
among other things, must have $2,000,000 in net tangible assets, 500,000 shares
in the public float, $1,000,000 in market value of public float and a minimum
bid price of $1.00 per share. If the Company is unable to satisfy the
requirements for continued quotation on Nasdaq, trading, if any, in the Common
Stock and Warrants would be conducted in the over-the-counter market in what are
commonly referred to as the "pink sheets" or on the NASD OTC Electronic Bulletin
Board. As a result, an investor may find it more difficult to dispose of, or to
obtain accurate quotations as to
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the price of, the securities offered hereby. The above-described rules may
materially adversely affect the liquidity of the market for the Company's
securities.
15. "Penny Stock" Regulations; Risk of Low-Priced Securities.
The Securities and Exchange Commission (the "Commission") has adopted
regulations which generally define "penny stock" to be an equity security that
has a market price (as defined in the regulations) of less than $5.00 per share,
subject to certain exceptions. If the Securities offered hereby are removed from
Nasdaq, the Company's securities may become subject to rules that impose
additional sales practice requirements on broker-dealers. In most instances,
unless the purchaser is either (i) an institutional accredited investor, (ii)
the issuer, (iii) a director, officer, general partner or beneficial owner of
more than 5% of any class of equity security of the issuer of the penny stock
that is the subject of the transaction, or (iv) an established customer of the
broker-dealer, the broker-dealer must make a special suitability determination
for the purchaser of such securities and have received the purchaser's prior
written consent to the transaction. Additionally, for any transaction involving
a penny stock, unless exempt, the rules require the delivery, prior to the
transaction, of a disclosure schedule prepared by the Commission relating to the
penny stock market. The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and, if the broker-dealer is the sole market- maker, the
broker-dealer must disclose this fact and the broker- dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell the Company's securities and may
affect the ability of purchasers in the offering to sell the Company's
securities in the secondary market.
16. Restricted Shares of Common Stock Eligible for Future
Sale. Immediately prior to the issuance and sale of the Shares hereunder, the
Company had an aggregate 3,516,126 shares of its Common Stock issued and
outstanding, 315,356 of which are "restricted securities," which may be sold
only in compliance with Rule 144 under the Securities Act of 1933, as amended.
Rule 144 provides, in essence, that a person holding restricted securities for a
period of one year after payment therefor may sell, in brokers' transactions or
to market makers, an amount not exceeding 1% of the outstanding class of
securities being sold, or the average weekly reported volume of trading of the
class of securities being sold over a four-week period, whichever is greater,
during any three-month period. (Persons who are not affiliates of the Company
and who have held their restricted securities for at least two years are not
subject to the volume or transaction limitations.) Any such sales could have a
material
13
<PAGE>
adverse effect on the market price for the Common Stock, should a trading market
develop.
17. No Common Stock Dividends. The Company has not paid any
dividends on its Common Stock and does not anticipate paying dividends on its
Common Stock in the foreseeable future. The future payment of dividends is
directly dependent upon future earnings of the Company, its financial
requirements and other factors to be determined by the Company's Board of
Directors. For the foreseeable future, it is anticipated that any earnings which
may be generated from the Company's operations will be used to finance the
growth of the Company even if the Company's operations are profitable.
18. Governmental Regulation. The Company's manufacturing
facilities, in common with those of the industry generally, are subject to
numerous existing and proposed Federal and state regulations designed to protect
the environment, establish occupational safety and health standards and many
other matters. The Company believes that its operations are in compliance with
existing regulations and does not believe that said compliance has had or will
have any material effect upon its capital expenditures, earnings or competitive
position.
19. Dependence on Qualified Personnel. Because of the
technological nature of the Company's business, the Company is dependent upon
its ability to attract and retain technologically qualified personnel. There is
significant competition for technologically qualified personnel and the Company
may not be successful in recruiting such qualified personnel.
20. Additional Authorized Shares Available for Issuance May
Adversely Affect the Market. The Company is authorized to issue 20,000,000
shares of its Common Stock, $1.00 par value. As of the date hereof there are a
total of 3,516,126 shares of Common Stock issued and outstanding (not including
treasury stock). However, the total number of shares of Common Stock issued and
outstanding does not include the exercise of up to 1,135,750 Class A Warrants to
purchase up to 1,135,750 shares of the Company's Common Stock issued in 1995,
the 1995 Public Offering Underwriter's option to purchase up to 41,000 shares of
Common Stock and 20,500 Class A Warrants to purchase 20,500 shares of Common
Stock the exercise of up to 2,800,000 Class A Warrants included in the 1998
Units offered to investors in the 1998 Offering to purchase 2,800,000 shares of
Common Stock, the Representative's option to purchase up to 70,000 shares of
Common Stock and 280,000 Class A Warrants to purchase 280,000 shares of Common
Stock, the Representative's Over-Allotment Option of 105,000 Units consisting of
105,000 shares of Common Stock and 420,000 Class A Warrants to purchase 420,000
shares of Common Stock and the 1,200,000 shares of Common Stock issuable upon
exercise of the 1,200,000 Class A Warrants being offered by certain Selling
Securityholders (assuming the Selling Securityholders exercise their right to
convert the Convertible Bridge Notes. After reserving a total of 6,072,250
shares of
14
<PAGE>
Common Stock for issuance upon the exercise of all the warrants to purchase
Common Stock, the Company will have at least 10,427,626 shares of authorized but
unissued capital stock available for issuance without further shareholder
approval (of which 155,239 has been reserved for conversion of all of the
Company's Series A and Series B Preferred Stock outstanding). In addition, the
Company is authorized to issue 2,000,000 shares of Preferred Stock (of which
156,197 is outstanding. The Company's officers, directors, and principal
stockholders have agreed not to sell any of their shares of capital stock until
June 21, 1999 without the prior written consent of the Representative. Also, the
Company has agreed not to issue any additional securities until January 21, 2000
without the prior written consent of the Representative other than in certain
circumstances. The sale of a significant number of these shares in the public
market may adversely affect prevailing market prices of the Company's securities
following this offering.
21. Lack of Patent Protection or Proprietary Rights. Other
than as set forth below, the Company currently does not have any patent or
trademark applications pending. However, the Company may file patent or
trademark applications relating to certain of the Company's products. If patents
or trademarks were to issue, there can be no assurance as to the extent of the
protection that will be granted to the Company as a result of having such
patents or trademarks or that the Company will be able to afford the expenses of
any complex litigation which may be necessary to enforce their proprietary
rights. Except as may be required by the filing of patent or trademark
applications, the Company will attempt to keep all other proprietary information
secret and to take such actions as may be necessary to insure the results of its
development activities are not disclosed and are protected under the common law
concerning trade secrets. Such steps will include the execution of nondisclosure
agreements by key Company personnel and may also include the imposition of
restrictive agreements on purchasers of the Company's products and services.
There is no assurance that the execution of such agreements will be effective to
protect the Company, that the Company will be able to enforce the provisions of
such nondisclosure agreements or that technology and other information acquired
by the Company pursuant to its development activities will be deemed to
constitute trade secrets by any court of competent jurisdiction.
The Company uses the trademark INIVEN for its commercial
products. The Company believes that its prospects are dependent primarily upon
its ability to offer its customers high quality, reliable products at
competitive prices rather than on its ability to obtain and defend patents and
trademarks. The Company does not believe that its INIVEN trademark is of
material importance to the Company's business.
SELLING SHAREHOLDER
15
<PAGE>
This Prospectus relates to the offering of 100,000 shares of
Common Stock of the Company by the Selling Shareholder, Warren Schreiber, which
were acquired pursuant to the Consulting Agreement.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will
be passed upon for the Company by Milberg Weiss Bershad Hynes & Lerach LLP.
EXPERTS
The Financial statements of the Company as of April 30, 1997
and 1996, and for each of the three years in the period ended July 31, 1997,
incorporated by reference in this Prospectus, have been audited and reported
upon by Rosenberg Rich Baker Berman & Company, independent accountants. Such
financial statements have been incorporated by reference in this Prospectus in
reliance upon the report of Rosenberg Rich Baker Berman & Company, incorporated
by reference herein, and upon the authority of such firm as experts in
accounting and auditing. To the extent that Rosenberg Rich Baker Berman &
Company audits and reports on the financial statements of the Company issued at
future dates and consents to the use of their report thereon, such financial
statements also will be incorporated by reference in this Prospectus in reliance
upon their report and said authority.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company pursuant to the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a Website at http://www.sec.gov that
contains reports, proxy and information statements, registration statements and
other information that has been or will be filed by the Company.
The Company has filed with the Commission a Registration
Statement on Form S-8 under the Securities Act.
16
<PAGE>
This Prospectus does not contain all of the information, exhibits and
undertakings set forth in the Registration Statement, certain portions of which
are omitted as permitted by the Rules and Regulations of the Commission. Copies
of the Registration Statement and the exhibits are on file with the Commission
and may be obtained, upon payment of the fee prescribed by the Commission, or
may be examined, without charge, at the offices of the Commission set forth
above. For further information, reference is made to the Registration Statement
and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission (File No. 0-8174) are incorporated by reference in this Prospectus:
(1) the Company's Annual Report on Form 10-K/A for the year ended July 31, 1997;
(2) the Company's Quarterly Report on Form 10-Q for the quarter ended October
31, 1997; (3) all other reports filed by the Company pursuant to Sections 13 or
15(d) of the Exchange Act since July 31, 1997; and (4) the description of the
Company's Common Stock contained in its Registration Statement on Form S-1 (No.
333-35489), including any amendments or reports filed for the purpose of
updating such description.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering hereunder shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document all or any portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to
whom this Prospectus is delivered, upon written or oral request, a copy of any
or all of the foregoing documents (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the information
that this Prospectus incorporates). Requests should be directed to Conolog
Corporation, 5 Columbia Road, Somerville, New Jersey 08876, telephone (908)
722-8081.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Commission (File No.
0-8174) pursuant to the Securities Exchange Act of 1934 are incorporated by
reference into this Registration Statement.
(1) The Company's Annual Report on Form 10-K/A for the fiscal year ended
July 31, 1997.
(2) The Company's quarterly report on Form 10-Q for the quarter ended
October 31, 1997.
(3) The description of the Company's Common Stock contained
in its Registration Statement on Form S-1 (Registration No. 333-
35489).
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934,
prior to the filing of a post-effective amendment which indicates that all the
securities offered have been sold or which deregisters all the securities then
remaining unsold, shall be deemed to be incorporated by reference in the
Registration Statement and to be part thereof from the date of filing of such
documents.
Item 4. Description of Securities.
Incorporated by reference into this Registration Statement as
described in Item 3 above.
Item 5. Interest of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Officers and Directors.
The Company's Certificate of Incorporation requires the
Company to indemnify its officers, directors and employees to the fullest extent
permitted by law, including full or partial indemnification for any judgment,
settlement or related expense. In addition, advances of expenses to officers and
directors are permitted upon an undertaking by the person to be indemnified to
repay all such expenses if he or she is ultimately found not to be entitled to
indemnification. The indemnification provision in the Company's Certificate of
Incorporation applies to all actions and proceedings including those brought by
or in the right of the Company. Directors and officers remain liable for acts
and omissions not in good faith or which involve intentional
II-1
<PAGE>
misconduct and transactions from which such officer or director derives improper
personal benefit.
Item 7. Exemption from Registration Claimed.
The shares to be reoffered or resold pursuant to this
Registration Statement were issued without registration under the Securities Act
in reliance on Section 4(2) of the Securities Act, which provides an exemption
for transactions not involving a public offering. In determining that such
exemption was available, the Company relied on the fact that, as an offering
only to consultants of the Company, the shares were being issued through direct
communication only to a limited number of investors having both knowledge of and
access to the most relevant information regarding the Company and that the
certificates evidencing such shares bear a legend restricting transfer in
non-registered transactions.
Item 8. Exhibits.
Exhibit
Number Description
5 Opinion of Milberg Weiss Bershad Hynes & Lerach
LLP
10 Consulting Agreement by and between the Company
and Warren Schreiber, dated as of February 6,
1998
23 Consent of Rosenberg Rich Baker Berman & Company
Item 9. Undertakings.
(1) The undersigned Registrant hereby undertakes:
(a) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any facts
or events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement;
and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement; provided, however, that paragraphs (a)(1)(i)
and (a)(i)(ii) do not apply to information required to be included in
a post-effective amendment by those paragraphs which are contained in
periodic reports filed by the undersigned Registrant pursuant to
Section 13 or 15(d) of
II-2
<PAGE>
the Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement;
(b) that, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof;
(c) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in
the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered
therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Somerville, State of New Jersey, on
this 23rd day of February, 1998.
CONOLOG CORPORATION
By /s/
------------------------------
Robert S. Benou
President and Director
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Date: February 23, 1998 /s/
-----------------------------
Robert S. Benou
President and Director
Date: February 23, 1998 /s/
--------------------------------
Arpad J. Havasy,
Executive Vice President,
Secretary, Treasurer and
Director
Date: February 23, 1998 /s/
----------------------------------
Marc R. Benou
Vice President, Assistant
Secretary and Director
Date: February 23, 1998 /s/
------------------------------------
Louis S. Massad,
Director
Date: February 23, 1998 /s/
-------------------------------------
Edward J. Reilly,
Director
II-5
Exhibit 5
MILBERG WEISS BERSHAD HYNES & LERACH LLP
February 23, 1998
Conolog Corporation
5 Columbia Road
Somerville, New Jersey 08876
Re: Conolog Corporation
Registration Statement on Form S-8
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel for Conolog Corporation, a Delaware
corporation (the "Company"), in connection with the preparation and filing by
the Company of a registration statement (the "Registration Statement") on Form
S-8, under the Securities Act of 1933, relating to the sale of 100,000 shares of
the Company's Common Stock, par value $1.00 per share (the "Common Stock") by
Warren Schreiber.
We have examined the Certificate of Incorporation and the
By-Laws of the Company, the minutes of the various meetings and consents of the
Board of Directors of the Company, forms of certificates evidencing the Common
Stock, originals or copies of such records of the Company, agreements,
certificates of public officials, certificates of officers and representatives
of the Company and others, and such other documents, certificates, records,
authorizations, proceedings, statutes and judicial decisions as we have deemed
necessary to form the basis of the opinion expressed below. In such examination,
we have assumed the genuiness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to originals of all
documents submitted to us as copies thereof.
<PAGE>
Conolog Corporation
February , 1998
Page 2
As to various questions of fact material to this opinion, we
have relied upon statements and certificates of officers and representatives of
the Company and others.
Based on the foregoing, we are of the opinion that the 100,000
shares of Common Stock will, upon sale thereof in the manner contemplated by the
Registration Statement, be legally issued, fully paid and nonassessable.
We hereby consent to be named in the Registration Statement
and the Prospectus as attorneys who have passed upon legal matters in connection
with the offering of the securities offered thereby under the caption "Legal
Matters."
We further consent to your filing a copy of this opinion as an
Exhibit to the Registration Statement.
Very truly yours,
/S/MILBERG WEISS BERSHAD
HYNES & LERACH LLP
EXHIBIT 10
CONSULTING AGREEMENT
AGREEMENT made as of the 6th day of February, 1998 between
CONOLOG CORPORATION (the "Company"), a Delaware Corporation having an office at
5 Columbia Road, Somerville, New Jersey 08876 and WARREN SCHREIBER, residing at
430 Chestnut Drive, Roslyn, New York 11576 ("Consultant").
W I T N E S S E T H:
WHEREAS, the Company desires to secure the consulting services
of Consultant and Consultant desires to provide such services to the Company, on
the terms and conditions hereinafter set forth:
NOW THEREFORE, in consideration of the mutual promises
contained herein, the parties agree as follows:
1. TERM AND PERFORMANCE. During the term of this Agreement,
Consultant hereby agrees that he will render to the Company such consulting
services as the Board of Directors or the President of the Company shall
request. The services provided by Consultant (the "Consulting Services") shall
consist of management and financial consulting services and shall include,
attendance at meetings of the Board or Committee thereof, if requested by the
President.
2. COMPENSATION AND RELATED MATTERS.
As sole compensation for the performance of the
Consulting Services, the Company:
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<PAGE>
(a) hereby grants to Consultant a stock bonus consisting of
75,000 shares of common stock of the Company, par value $1.00 (the "Bonus
Shares").
(b) shall, during the term of this Agreement, grant to
Consultant a stock bonus consisting of 25,000 shares of common stock of the
Company, par value $1.00 per share, on the last day of March, June, September
and December (the "Additional Shares" and together with the Bonus Shares,
collectively, the "Securities").
3. CONFIDENTIAL INFORMATION. Consultant shall not, at any time
during or following termination or expiration of the term of this Agreement,
directly or indirectly, disclose, publish or divulge to any person (except in
the regular course of Company's business), or appropriate, use or cause, permit
or induce any person to appropriate or use, any proprietary, secret or
confidential information of Company including, without limitation, knowledge or
information relating to its business, condition (financial or otherwise),
operations or prospects, all of which Consultant agrees are and will be of great
value to Company and shall at all times be kept confidential. Without limiting
the generality of the foregoing, Consultant shall not during the term of this
Agreement or at any time thereafter, directly or indirectly, use any such
confidential information in connection with the purchase or sale of any
securities of the Company. Upon termination or expiration of this Agreement,
Consultant shall promptly deliver or return to Company all materials of a
proprietary, secret or confidential nature
- 2 -
<PAGE>
relating to Company together with any other property of Company which may have
theretofore been delivered to or may then be in possession of Consultant. The
provisions of this Paragraph shall survive the expiration or the termination of
this Agreement for any reason.
4. TERMINATION. The Company and Consultant shall each have the
right to terminate this Agreement with or without cause at any time upon 60
days' prior written notice to the other party.
5. CONSULTANT'S REPRESENTATIONS. Consultant represents and
warrants to and agrees with the Company that:
(a) neither the execution nor performance by Consultant of
this Agreement is prohibited by or constitutes or will constitute, directly or
indirectly, a breach or violation of, or will be adversely affected by, any law,
rule or regulation of any governmental entity, any order or decree of any court
or administrative body, any written or other agreement to which Consultant is or
has been a party or by which he is bound.
(b) The Securities are being acquired and will be acquired for
the account of Consultant, for investment only and not with a view to the
distribution of any investment thereof within the meaning of the Federal
Securities Act of 1933, as amended (hereinafter, together with the rules and
regulations thereunder, collectively referred to as the "Act") and Consultant
does not intend to divide his participation with others or transfer or otherwise
dispose of all or any Securities except as hereinafter permitted. As herein used
the terms "transfer" and
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<PAGE>
"dispose" mean and include, without limitation, any sale, offer for sale,
assignment, gift, pledge or other disposition or attempted disposition.
(c) Consultant shall not directly or indirectly distribute or
participate in any distribution or public offering of any Securities in
violation of any applicable provisions of the Act or any applicable state "blue
sky" or securities laws. Without limiting the generality of the foregoing,
Consultant shall not at any time transfer or dispose of any Securities except
pursuant to either: (i) a registration statement under the Act which
registration statement has become effective as to Securities being sold or (ii)
a specific exemption from registration under the Act but only after Consultant
has first obtained either a "no action" letter from the Securities and Exchange
Commission following full and adequate disclosure of all facts relating to such
proposed transfer or a favorable opinion from, or acceptable to, counsel to the
Company that the proposed disposition complies with and is not in violation of
the Act or any applicable state "blue sky" or securities laws.
(d) Consultant understands that, in the opinion of the
Securities and Exchange Commission (the "SEC"), the Securities must be held by
him for an indefinite period unless subsequently registered under the Act or
unless an exemption from registration thereunder is available; that, under Rule
144 under the Act, after the applicable one or two year period from the date of
full payment for the Securities, certain public sales thereof (which may be
limited as to the number of shares) may be made in
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<PAGE>
accordance with and subject to the terms, conditions and restrictions of Rule
144, but only if certain reporting and other requirements thereunder have been
complied with; and that, should Rule 144 be inapplicable, registration or the
availability of an exemption under the Act will be necessary in order to permit
public distributions of any Securities.
(e) Consultant understands and agrees that: (i) all
certificates for Securities shall be appropriately endorsed with a legend to the
effect that Securities represented thereby have not been registered under the
Act and may not be disposed of in the absence of such registration or any
exemption therefrom under the Act and (ii) the Company and any transfer agent
for its common stock may refuse to recognize the validity of, and may refuse to
record on its or such transfer agent's books or records, any transfer of any
Securities in violation of the provisions of this Agreement, the Act or any
applicable state "blue sky" or securities laws.
(f) Consultant agrees that he is not an employee of the
Company and shall not be entitled to participate in any general pension, profit
sharing, life, medical, disability and any other insurance and employee plans
and programs at any time in effect for employees of the Company.
6. REGISTRATION. The Company hereby agrees to use
its best efforts to promptly register the Securities with the SEC
and, if necessary, the State of New York.
7. MISCELLANEOUS.
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<PAGE>
(a) Notices. Except as otherwise provided herein, all notices
under this Agreement shall be in writing and shall be deemed to have been duly
given if personally delivered against receipt or if mailed by first class
registered or certified mail, return receipt requested, addressed to the Company
or to Consultant at their respective addresses set forth on the first page of
this Agreement, or to such other person or address as may be designated by like
notice hereunder. Any such notice shall be deemed to have been given on the day
delivered, if personally delivered, or on the second day after the date of
mailing if mailed.
(b) Parties in Interest. This Agreement shall be binding upon
and inure to the benefit of an be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and, in the case of the
Company, assigns, but no other person shall acquire or have any rights under or
by virtue of this Agreement, and the obligations of Consultant under this
Agreement may not be assigned or delegated.
(c) Governing Law; Severability. This Agreement shall be
governed by and construed and enforced in accordance with the laws and decisions
of the State of New York applicable to contracts made and to be performed
therein without giving effect to the principles of conflict of laws.
(d) Entire Agreement; Modification; Waiver; Interpretation.
This Agreement contains the entire agreement and understanding between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations and oral
- 6 -
<PAGE>
understandings, if any. Neither this Agreement nor any of its provisions may be
modified, amended, waived, discharged or terminated, in whole or in part, except
in writing signed by the party to be charged. No waiver of any such provision or
any breach of or default under this Agreement shall be deemed or shall
constitute a waiver of any other provision, breach or default. All pronouns and
words used in this Agreement shall be read in the appropriate number and gender,
the masculine, feminine and neuter shall be interpreted interchangeably and the
singular shall include the plural and vice versa, as the circumstances may
require.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
CONOLOG CORPORATION
By /s/
--------------------------
Robert S. Benou, President
/s/
--------------------------
Warren Schreiber
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Conolog Corporation. on Form S-8 of our report dated October 13, 1997 and
December 11, 1997, appearing in the Annual Report on Form 10-K/A of Conolog
Corporation for the year ended July 31, 1997.
Rosenberg Rich Baker
Berman & Company
February 20, 1998
