As filed with the Securities and Exchange Commission on March 26, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Conolog Corporation
(Name of issuer in its charter)
Delaware 3679 52-0853566
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of organization) Classification Code No.) Identification No.)
5 Columbia Road
Somerville, NJ 08876
(908) 722-8081
(Address and telephone number of principal executive offices)
Robert S. Benou, President
Conolog Corporation
5 Columbia Road
Somerville, NJ 08876
(908) 722-8081
(Name, address and telephone number of agent for service)
Copies to:
Arnold N. Bressler, Esq.
Milberg Weiss Bershad Hynes & Lerach LLP
One Pennsylvania Plaza
New York, NY 10119
(212) 594-5300
(212) 868-1229 (Fax)
<PAGE>
Approximate date of proposed sale to the public: As soon as reasonably
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis, pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================
Proposed Proposed
Title of Each Maximum Maximum Amount of
Class of Amount to be Offering Aggregate Registration
Securities to be Registered Price per Offering Price Fee
Registered Security(1)
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<S> <C> <C> <C> <C>
Common Stock,
$1.00 par value
per share, issuable 2,000,000 $1.625 $3,250,000 $ 903.50
upon conversion
of Convertible
Debentures
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Common Stock,
$1.00 par value
per share, issuable 1,057,143 $1.625 $1,717,857 $ 477.56
under Consulting
Agreement
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Total Registration 3,057,143 $1.625 $4,967,857 $1,381.06
and Fee
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</TABLE>
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(1) Estimated solely for purposes of calculating registration fee pursuant to
Rule 457 under the Securities Act of 1933. The proposed maximum offering
price was
<PAGE>
calculated based upon the average of the high and low price of the
Company's Common Stock on the Nasdaq SmallCap Market for March 22, 1999.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
i
<PAGE>
We will amend and complete the information in this prospectus. Although we are
permitted by US federal securities laws to offer these securities using this
prospectus, these securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any jurisdiction where the offer or sale is not
permitted.
SUBJECT TO COMPLETION - March 26, 1999
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Prospectus
March , 1999
Conolog Corporation
3,057,143 Shares of Common Stock
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The Company:
o Conolog Corporation is an engineering company with two lines of business.
We provide short- and long-term engineering and technical staff, through
our Atlas Design subsidiary. We also design and manufacture small
electronic components for military and commercial applications.
o Conolog Corporation
5 Columbia Road Somerville,
NJ 08876
(800) 526-3984
o Conolog common stock is listed on the Nasdaq SmallCap symbol CNLG.
The Offering:
o This is an offering of shares of common stock of Conolog Corporation.
o Holders of convertible debentures of Conolog are offering these shares,
which they will own upon conversion of their notes. Shares issued to a
consultant pursuant to a Consulting Agreement are also being offered.
Conolog will not receive any proceeds from the shares sold by the selling
stockholders.
o On ________, 1999, the last reported sale price for the Common Stock on
the Nasdaq SmallCap Market was $_____ per share.
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Investing in the common stock involves certain risks. See "Risk Factors"
beginning on page 8.
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<PAGE>
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL ONLY THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES
AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.............................................................4
Risk Factors...................................................................8
Recent Developments...........................................................14
Disclosure of SEC Position on
Indemnification for Securities Act Liabilities..............................14
Selling Stockholders and Plan of Distribution.................................15
Validity of Capital Stock.....................................................17
Experts.......................................................................17
Available Information.........................................................17
Incorporation of Certain Documents by Reference...............................18
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<PAGE>
PROSPECTUS SUMMARY
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about Conolog and our
industry. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including all
the risks discussed in "Risk Factors" and elsewhere in this prospectus. Conolog
undertakes no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.
THIS SUMMARY HIGHLIGHTS SOME INFORMATION FROM THIS PROSPECTUS. YOU SHOULD
ALSO READ THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS
AND THE NOTES TO THOSE STATEMENTS APPEARING IN OTHER PARTS OF THIS PROSPECTUS OR
INCORPORATED BY REFERENCE.
CONOLOG CORPORATION
We are an engineering company with two lines of business. Our
non-manufacturing business recruits and places professionals, primarily in the
engineering fields, for a variety of businesses. Our manufacturing business
designs and manufactures small electronic and electromagnetic components. Our
products are used in radio and other transmissions, telephones and telephone
exchanges, air and traffic control, automatic transmission of data for by
electric utilities in monitoring power transmission lines for faults and/or
failures.
OUR HISTORY
We were originally incorporated in Delaware in 1968 as DSI Systems, Inc.
We changed our name to Conolog Corporation in 1971. Our principal executive
offices are located at 5 Columbia Road, Somerville, New Jersey 08876. Our
telephone number is (908) 722-8081.
THE OFFERING
Common Stock offered by the selling stockholders ......................3,057,143
Common Stock to be outstanding after the offering ..............7,314,916 shares
Use of proceeds .................................. We will not receive any of
the proceeds of the sale
from the shares sold by the
selling stockholders
Nasdaq SmallCap Market Symbol ..............................................CNLG
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<PAGE>
The 7,314,916 shares of common stock to be outstanding after this offering
assumes the conversion in full of the $2 million principal amount of the
convertible debentures that may be issued to a selling stockholder. Also
includes the issuance of 1,057,143 shares under a consulting agreement with
another selling stockholder.
In addition, the shares to be outstanding after this offering includes
8,776 shares held in the Company's treasury and excludes:
o 105,000 shares of common stock issuable upon exercise of options
outstanding under the Company's 1995 and 1996 Stock Option Plans at
a weighted average exercise price of $0.6875 per share;
o 5,135,750 shares of common stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of $6.00
per share.
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<PAGE>
SUMMARY FINANCIAL DATA
Set forth below is our summary financial data for the years ended July 31, 1998,
1997, 1996, 1995 and 1994, which are derived from our audited consolidated
financial statements. Also set forth below is the summary financial data for the
six months ended January 31, 1999 and 1998, which are derived from our unaudited
financial statements. The unaudited financial statements include all adjustments
consisting of normal recurring accruals, which Conolog considers necessary for a
fair presentation of the financial position and results of operations for these
periods.
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Year Ended July 31,
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Operations Summary:
Net sales and other income $ 746 $ 1,123 $ 1,924 $ 2,091 $ 2,045
Net income (loss)
from continuing operations (1,765) (3,810) 292 (537) (1,183)
Income (loss) from continuing
operations per primary share (.54) (2.41) 0.28 (0.12) (0.27)
Income (loss) from continuing
operations after giving retroactive
effect to a 1-for-100 reverse stock -- -- -- (12.36) (27.22)
split on August 16, 1995
Balance Sheet Summary:
Total assets 4,819 4,340 3,928 3,882 3,739
Long-term debt and capitalized
lease obligations -- -- 5 34 3,830
</TABLE>
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<PAGE>
(in thousands, except per share amounts)
FOR THE SIX MONTHS ENDED
JANUARY 31
(unaudited)
1999 1998
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Operations Summary:
Net sales and other income $ 354 $909
Net (loss) (641) (194)
from continuing operations
before extraordinary item
Extraordinary item-- Gain 411 0
on sale of building
net of taxes
Net (loss) (230) (194)
Income (loss) per (.05) (.06)
primary share
Balance Sheet Summary:
January 31, 1999
(unaudited)
Cash $969
Total Current Assets 4,683
Total Assets 4,934
Total Current Liabilities 185
Total Stockholders' Equity 4,749
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<PAGE>
RISK FACTORS
We have a history of operating losses and we may not become profitable.
Our continued existence is dependent upon us successfully expanding our
business and attaining profitable operations. We reported losses of $508,698 for
the quarter ended January 31, 1999, and losses of $1,765,390 and $3,810,736 for
the years ended July 31, 1998 and 1997, respectively. The loss for the quarter
ended January 31, 1999 was attributable to the issuance of bonus shares to
officers, key employees of the Company and consultants and an increase in
selling, general and administrative expenses. We may not become profitable.
We only began our placement services business in September 1998, so your basis
for evaluating us is limited.
We only entered the placement services business in September 1998 when we
acquired the operating assets of Atlas Design. None of our officers have any
prior experience in that business. We cannot assure you that we will be
successful in operating that business.
Our placement services business is a substantial burden on our limited cash.
On January 31, 1999, we had approximately $969,000 in cash. We pay the
personnel we place through our Atlas Design subsidiary on a weekly basis.
However, our customers are invoiced when we pay the employees and typically take
30 days or more to pay their bills. As our placement services business expands,
this has created a cash flow problem for us. We may not have sufficient
financing capital to allow us to support the placement services business.
We have many competitors and we may not be able to compete effectively against
them.
The placement services industry is intensely competitive and highly
fragmented, with few barriers to entry by potential competitors at the local
level. We compete for both clients and qualified personnel with other firms
offering such placement services. The majority of our competitors are
significantly larger than we are and have greater marketing and financial
resources than we do. Many clients use more than one placement services company
and it is common for a client to use several placement services companies at the
same time. We also face the risk that our clients may decide to provide similar
services internally or use independent contractors.
The market for our manufactured products is also very competitive. We are
an insignificant factor in the industry. There are several companies which
manufacture products of the type we produce, most of which are substantially
larger and have substantially greater name recognition, financial resources and
personnel. Competition is expected to continue and intensify.
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<PAGE>
Our success depends on keeping up with rapid technological changes.
The market for our manufactured products is characterized by rapid
technological changes and advances. Our failure to introduce new products in a
timely or cost effective manner or our failure to improve our existing products
or remain price competitive, would materially adversely affect our operating
results.
We are dependent on a few large customers.
Our new placement services business currently has fewer than 20 customers.
Most of the sales of our manufactured products are also to a few major
customers. Our dependence on major customers subjects us to significant
financial risks in the operation of our business if a major customer were to
terminate, for any reason, its business relationship with us.
An economic downturn in the New York City area would adversely affect us.
A majority of our revenues derived from placement services are generated
within the New York City metropolitan area. An economic downturn in that area
could have a material adverse effect on our results of operations or financial
condition. During such downturns, the use of temporary and contract employees
usually is curtailed, the recruitment of permanent employees is reduced and we
may face increased competitive pricing pressures. As economic activity
increases, temporary and contract employees often are added to the workforce
before permanent employees are hired. During periods of increased economic
activity and generally higher levels of employment, the competition among
placement services firms for qualified personnel becomes even greater. During
these periods we may not be able to recruit the personnel necessary to fill our
clients' needs.
We may not be able to attract the qualified personnel we need to succeed.
Because of the technical nature of our business, we are dependent upon our
ability to attract and retain technologically qualified personnel. Competition
for individuals with proven professional or technical skills is intense, and
demand for such individuals is expected to remain very strong for the
foreseeable future. We may not be successful in attracting qualified personnel.
We may make acquisitions that are not successful.
We are seeking to expand into new markets and may do so by acquiring
businesses, which may or may not be related to our existing businesses. Our
strategy of making acquisitions is subject to the following risks:
o We may not be able to identify suitable acquisition candidates.
o If the purchase price includes cash, we may need to use all or a
portion of our available cash.
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<PAGE>
o Even if we do identify such suitable candidates, we may not be able
to make such acquisitions on commercially reasonable terms.
o We may not be able to consummate any acquisition or successfully
integrate the acquired services, products and personnel of any
acquisition into our operations.
o Acquisitions may cause a disruption in our ongoing business,
distract our management and drain our other resources.
o We may not be able to retain key employees of the acquired companies
or maintain good relations with its customers or suppliers.
o We may be required to incur additional debt.
o We may be required to issue equity securities, which may be dilutive
to existing shareholders, to pay for acquisitions.
o We may have to incur significant accounting charges, such as for
goodwill, which may adversely affect our results of operations.
Our minimal staff may have difficulty managing our operations.
We only employ about 20 people on a full time basis. Approximately half of
our full time employees are involved in production. Our success is dependent
upon the services of our current management, particularly Robert S. Benou, our
President. Mr. Benou has entered into an employment agreement with us pursuant
to which he will be employed through May 31, 2002. However, if the employment of
Mr. Benou terminates, or he is unable to perform his duties, we may be
materially and adversely affected.
We are dependent on component manufacturers to provide us with the parts we
need.
We are dependent on outside suppliers for all of the subcomponent parts
and raw materials we need to manufacture our products. A shortage, delay in
delivery, or lack of availability of a part could lead to manufacturing delays,
which could reduce sales. We also purchase some custom parts, primarily printed
circuit boards. The failure of a supplier of one of these customized components
could cause a lengthy delay in production, resulting in a loss of revenues.
Year 2000 problems may disrupt our business.
The Year 2000 issue is a result of computer programs being written using
two digits rather than four to define the applicable year. In other words, date
sensitive software may recognize the date using "00" as the year 1900 rather
than the year 2000. This could result in systems failures or miscalculations
causing disruptions of normal business activities.
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<PAGE>
We have contracted with a Year 2000 solution provider to review our
mainframe computer system for Year 2000 compliance and to upgrade the computer
system to be Year 2000 compliant. We anticipate that the upgrade will be
completed by fiscal year end July 31, 1999 and estimate the cost of our Year
2000 compliance program will be $5,000. However, we cannot assure you that such
review and upgrade can be completed on schedule or within estimated costs or
will successfully address our Year 2000 compliance issues.
We are also in the process of contacting all of our major suppliers to
request representations that their systems are or will be Year 2000 compliant.
We are in the process of determining the impact, if any, that third parties who
are not Year 2000 compliant may have on our operations.
If our present efforts to address Year 2000 compliance issues are not
successful, or if suppliers and other third parties do not successfully address
such issues, our business, financial condition and results of operations could
be materially and adversely affected.
Investigations involving one of our market makers, Fairchild Capital, Inc.,
could adversely affect our stock price.
Fairchild Capital, Inc., formerly named VTR Capital, Inc., has
underwritten offerings for us in the past and currently makes a market in our
securities. We have been advised by Fairchild that the Securities and Exchange
Commission (SEC) has issued an order directing a private investigation by the
staff of the SEC. An unfavorable resolution of the SEC investigation concerning
the sales and trading activities and practices of Fairchild could have the
effect of limiting Fairchild's ability to make a market in our securities in
which case the market for and liquidity of our securities may be adversely
affected. The SEC order empowers the SEC staff to investigate whether, from June
1995 to the present, Fairchild 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 securities law. These
acts or practices include whether Fairchild and certain other brokers or dealers
effected transactions or induced transactions by making untrue statements of
material fact and whether Fairchild and certain others have engaged in
manipulative, deceptive or other fraudulent devices. As of March 1, 1999, we
understand that the SEC investigation is ongoing. We cannot predict whether this
investigation will result in any type of enforcement action against Fairchild.
We may not be able to remain on Nasdaq, which may make it more difficult to
dispose of our stock.
Our common stock and class A warrants are currently listed on the Nasdaq
SmallCap Market. 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 we are unable to satisfy the requirements for continued quotation on
Nasdaq, trading, if any, in our common stock 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, you may find it
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<PAGE>
more difficult to dispose of, or to obtain accurate quotations as to the price
of, our common stock. These rules may materially adversely affect the liquidity
of the market for our common stock.
If we are delisted from the Nasdaq SmallCap market, you may find it more
difficult to trade our common stock due to "penny stock" rules.
In the event that our shares are delisted, we anticipate that they will
continue to be traded on the Electronic Bulletin Board. In that event, trading
in our shares would be covered by "penny stock" rules promulgated for non-Nasdaq
and non-exchange listed securities. Under these rules, any broker/dealer who
recommends our shares to persons other than prior customers and investors
meeting certain financial requirements, must, prior to sale, make a special
written suitability determination for the purchaser and receive the purchaser's
written agreement to a transaction. Securities are exempt from these rules if
the market price is at least $5.00 per share.
The SEC has adopted regulations that generally define a penny stock to
be an equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks associated
with trading in the penny stock market.
If our shares become subject to the regulations on penny stocks, the price
and ability to sell our shares would be severely affected because the shares
could only be sold in compliance with the penny stock rules. We cannot be sure
that our securities will not be subject to the penny stock regulations or other
regulations that would negatively affect the market for our securities.
The issuance and sale of a significant number of authorized and unissued shares
in the public market may adversely affect prevailing market prices of our common
stock.
We are authorized to issue 20,000,000 shares of our common stock, of
which:
5,314,916 shares of common stock are issued and outstanding (including
treasury stock).
5,240,750 shares of common stock are reserved for issuance upon the
exercise of warrants and options to purchase common stock.
155,239 has been reserved for conversion of all of our outstanding
preferred stock.
2,000,000 shares of common stock are reserved for issuance upon the
conversion of the convertible debentures.
In addition, we are authorized to issue 2,000,000 shares of Preferred
Stock, of which 156,197 are outstanding.
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<PAGE>
The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of common stock in the
market after this offering, or the perception that these sales may occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate.
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<PAGE>
RECENT DEVELOPMENTS
In November 1998, we issued 468,000 shares as a bonus to our officers and
key employees. We also issued options to purchase 105,000 shares to officers and
key employees at an exercise price of $.6875 per share, the fair market value on
the date of grant.
See "Selling Stockholders and Plan of Distribution" for description of the
Option Agreement between Clog LLC and Conolog, dated as of December 22, 1998 and
the Consulting Agreement between Nybor Group Inc. and Conolog dated as of
December 22, 1998.
In December 1998, Conolog was named in two related litigations pending,
one in the United States District Court for the Southern District of New York
and the other in Superior Court of New Jersey. The first of the pending
litigations was commenced in 1993. The litigations relate to a dispute
concerning real property acquired in 1984. While the property is near real
property formerly owned by Conolog, Conolog was not a party to that transaction.
The claim made against Conolog alleges that Conolog contributed to environmental
contamination of the property acquired in 1984. The litigation is in its early
stages, insofar as Conolog is concerned. However, Conolog believes that it has
no liability and intends to vigorously defend itself.
In December 1998, Conolog issued 235,000 shares in the aggregate to three
consultants for the performance of various services. Conolog will register the
resale of such shares with the SEC.
In February 1999, Conolog reported completing tests of its first
production units for non GE frequencies. The successful completion of Conolog's
new advanced PTR1500 tone protection testing, for the standard frequencies,
permitted Conolog to introduce the first production units to U.S. and Canadian
west coast utilities, ahead of schedule. The Company intends to later introduce
the PTR1500 to other utilities across the U.S. and Canada.
In February 1999, Conolog agreed, in principle, to acquire another
placement services business for a total purchase price of $1,625,000, of which
$700,000 is payable at the closing and the balance is payable over 2 1/2 years.
The transaction is subject to a number of conditions, including completion of
due diligence review and the execution of a definitive agreement, which have not
yet been satisfied.
DISCLOSURE OF SEC POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Article Eighth of Conolog's Certificate of Incorporation provides that the
Company shall, to the full extent permitted by Section 145 of the Delaware
General Corporation Law, as amended from time to time, indemnify all persons
whom it may indemnify pursuant thereto.
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<PAGE>
Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation to provide indemnification to a director, officer,
employee or agent of the corporation, including attorneys' fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred by him in
connection with such action, suit or proceeding, if such party acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful as
determined in accordance with the statute, and except that with respect to any
action which results in a judgment against the person and in favor of the
corporation the corporation may not indemnify unless a court determines that the
person is fairly and reasonably entitled to the indemnification.
Section 145 further provides that indemnification shall be provided if the
party in question is successful on the merits.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the Securities Act) may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, Conolog has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by Conolog of expenses incurred or paid by a
director, officer or controlling person in connection with the securities being
registered) Conolog 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 Securities Act and will be governed by the final
adjudication of such issue.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The Registration Statement of which this prospectus is a part relates to
the offer and sale of (i) 2,000,000 shares of common stock by Clog LLC and (ii)
1,057,143 shares of common stock by Nybor Group Inc. Nybor and Clog together are
referred to as the selling stockholders.
Conolog and Clog entered into an Option Agreement, dated as of December
22, 1998. Under the Option Agreement, Conolog granted an option to Clog to
purchase convertible debentures having an aggregate principal amount of up to
$2,000,000. Clog has exercised its option to purchase a convertible note in the
principal amount of $200,000. Clog's option may be exercised at any time prior
to October 31, 1999.
Each convertible debenture is convertible into common stock of Conolog at
a conversion rate of $1.00 per share. If Clog were to exercise its option for
all $2,000,000 of convertible debentures, it would have the right to convert
those notes into 2,000,000 shares of common stock, which would represent
approximately 27.3% of the outstanding common stock of Conolog. The Option
Agreement provides that the voting power of any common stock owned by Clog may
be exercised by Conolog's President.
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Each convertible debenture bears interest at the rate of 8% per annum and
is due 12 months from the date such note is issued, subject to acceleration
under certain circumstances. At maturity, except with respect to the initial
$200,000 loaned, Conolog will have the option to pay each debenture, together
with all accrued interest thereon, by issuing shares of a new Series C preferred
stock having a value of $5.00 per share for purposes of such repayment.
The Series C preferred will be non-voting and 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. The Series C preferred will be convertible into
common stock at the rate of one share of common stock for each share of Series C
preferred and have a liquidating preference of $5.00 per share. The Series C
preferred may be redeemed by Conolog at any time by paying $5.00 in cash
therefor.
The Agreement also provides that, for the one-year period commencing on
the issuance of any shares of Series C preferred (the "Registration Period")
Clog may elect to include its Series C preferred in any post-effective amendment
to the Registration Statement or any new registration statement under the
Securities Act of 1933, as amended. In addition, the Agreement also provides
that, during the Registration Period, Clog may give notice to the Company to the
effect that it desires to register its shares under the Act for public
distribution, in which case the Company will file a post-effective amendment to
a then current registration statement or a new registration statement.
Conolog and Nybor have entered into a Consulting Agreement, dated as of
December 22, 1998. Under the Consulting Agreement, Nybor agrees to provide the
services of its President to Conolog for management and financial consulting
services through October 31, 1999. As compensation, Nybor received 1,057,143
shares of common stock. The Consulting Agreement provides that the voting power
of any common stock owned by Nybor may be exercised by Conolog's President.
The securities offered hereby may be sold from time to time directly by
the selling stockholders. Alternatively, the selling stockholders may from time
to time offer such securities through underwriters, brokers, dealers or agents.
The distribution of securities by the selling stockholders may be effected in
one or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealer for resale of such securities as
principals, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the selling
stockholders in connection with such sales of securities. The selling
stockholders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Act with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation.
At the time a particular offer of securities is made by or on behalf of
the selling stockholders, to the extent required, a prospectus will be
distributed which will set forth the number of securities being offered and the
terms of the offering, including the name or
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<PAGE>
names of any underwriters, dealers or agents, if any, the purchase price paid by
any underwriter for securities purchased from the selling stockholders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers,
and the proposed selling price to the public.
Under the Exchange Act, and regulations thereto, any person engaged in a
distribution of the securities of the Company offered by the selling
stockholders may not simultaneously engage in market-making activities with
respect to such securities of the Company during the applicable "cooling off"
period (nine days) prior to the commencement of such distribution. In addition,
and without limiting the foregoing, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, in connection with
transactions in such securities, which provisions may limit the timing of
purchase and sales of such securities by the selling stockholders.
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 Conolog for each of the three years in the
period ended July 31, 1998, 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
Conolog 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
Conolog is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports, proxy
statements and other information with the SEC. The public may read and copy any
materials we file with the SEC at the SEC's Public Reference Room at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers, such as
Conolog, that file electronically with the SEC. The address of the site is
http://www.sec.gov
Conolog has filed with the SEC a Registration Statement on Form S-3 under
the Securities Act. This prospectus does not contain all of the information,
exhibits and
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<PAGE>
undertakings set forth in the Registration Statement, certain portions of which
are omitted as permitted by the Rules and Regulations of the SEC. Copies of the
Registration Statement and the exhibits are on file with the SEC and may be
obtained, upon payment of the fee prescribed by the SEC, or may be examined,
without charge, at the offices of the SEC 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 Conolog with the SEC (File No. 0-8174)
are incorporated by reference in this prospectus:
(1) Annual Report on Form 10-K for the year ended July 31, 1998.
(2) Quarterly Report on Form 10-Q for the quarter ended October 31,
1998.
(3) Quarterly Report on Form 10-Q for the quarter ended January 31,
1999.
(4) Proxy Statement for the Annual Meeting of Stockholders, held on
August 11, 1998.
(5) Report on Form 8-K, filed October 8, 1998.
(6) All other reports filed by Conolog pursuant to Sections 13 or 15(d)
of the Exchange Act since July 31, 1998.
(7) The description of Conolog'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 Conolog 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.
Conolog will provide, without charge, to each person (including any
beneficial owner) 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.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with this offering are as follows:
SEC filing fee.....................................................$ 2,124.13
Nasdaq filing fee..................................................$17,500
NASD filing fee....................................................$ -0-
Printing and engraving*............................................$ 5,000
Transfer Agent Fees*...............................................$ -0-
Legal fees and expenses*...........................................$30,000
Accounting fees and expenses*......................................$20,000
Blue Sky fees and expenses*........................................$
Miscellaneous expenses*............................................$18,000
Total.....................................................$92,624.13
- ----------
* Indicates expenses that have been estimated for the purpose of filing.
Item 15. Indemnification of Officers and Directors
The Company's Certificate of Incorporation requires Conolog 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 Conolog's Certificate of Incorporation applies
to all actions and proceedings including those brought by or in the right of
Conolog. Directors and officers remain liable for acts and omissions not in good
faith or which involve intentional misconduct and transactions from which such
officer or director derives improper personal benefit.
Item 16. Exhibits
Exhibit
Number Description
- ------ -----------
4* Specimen certificate for shares of common stock
II-1
<PAGE>
5 Opinion of Milberg Weiss Bershad Hynes & Lerach LLP
23(a) Consent of Rosenberg Rich Baker Berman & Company
(b) Consent of Milberg Weiss Bershad Hynes & Lerach LLP, contained
in its opinion under Exhibit 5
99(a) Option Agreement between Clog LLC and Conolog, dated as of
December 22, 1998
(b) Form of Convertible Debenture to be issued upon exercise of
options under the Option Agreement between Clog LLC and
Conolog, dated as of December 22, 1998
(c) Consulting Agreement between Nybor Group Inc. and Conolog
dated as of December 22, 1998
* Incorporated by reference to Conolog's Registration Statement on Form S-1
(File No. 33- 92424) filed with the Commission on May 17, 1995.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) 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.
(2) To deliver or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report, to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-2
<PAGE>
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-3 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 26th day of March, 1999.
CONOLOG CORPORATION
By /s/ Robert S. Benou
-----------------------
Robert S. Benou
President and Chief
Executive Officer
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: March 26, 1999 /s/ Robert S. Benou
-----------------------
Robert S. Benou
President,
Chief Executive Officer
and Director
Date: March 26, 1999 /s/ Arpad J. Havasy
-----------------------
Arpad J. Havasy
Executive Vice
President, Secretary,
Treasurer and Director
Date: March 26, 1999 /s/ Marc R. Benou
-----------------------
Marc R. Benou
Vice President,
Assistant Secretary and
Director
Date: March 26, 1999 /s/ Louis S. Massad
-----------------------
Louis S. Massad
Director
Date: March 26, 1999 /s/ Edward J. Rielly
-----------------------
Edward J. Rielly
Director
<PAGE>
Exhibit Index
Exhibit
Number Description
- ------ -----------
4* Specimen certificate for shares of common stock
5 Opinion of Milberg Weiss Bershad Hynes & Lerach LLP
23(a) Consent of Rosenberg Rich Baker Berman & Company
(b) Consent of Milberg Weiss Bershad Hynes & Lerach LLP, contained
in its opinion under Exhibit 5
99(a) Option Agreement between Clog LLC and the Company, dated as of
December 22, 1998
(b) Form of Convertible Debenture to be issued upon exercise of
options under the Option Agreement between Clog LLC and the
Company, dated as of December 22, 1998
(c) Consulting Agreement between Nybor Group Inc. and the Company,
dated as of December 22, 1998
* Incorporated by reference to Conolog's Registration Statement on Form S-1
(File No. 33- 92424) filed with the Commission on May 17, 1995.
Exhibit 5
MILBERG WEISS BERSHAD HYNES & LERACH LLP
March 26, 1999
Conolog Corporation
5 Columbia Road
Somerville, New Jersey 08876
Re: Conolog Corporation
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel for Conolog Corporation, a Delaware corporation
("Conolog"), in connection with the preparation and filing by Conolog of a
registration statement (the "Registration Statement") on Form S-3, under the
Securities Act of 1933, relating to the sale of (i) 2,000,000 shares of
Conolog's Common Stock, par value $1.00 per share (the "Common Stock") by Clog
LLC and (ii) 1,057,143 shares of Conolog's common stock by Nybor Group Inc.
We have examined the Certificate of Incorporation and the By-Laws of
Conolog, the minutes of the various meetings and consents of the Board of
Directors of Conolog, forms of certificates evidencing the Common Stock,
originals or copies of such records of Conolog, agreements, certificates of
public officials, certificates of officers and representatives of Conolog 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 genuineness 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>
As to various questions of fact material to this opinion, we have relied
upon statements and certificates of officers and representatives of Conolog and
others.
Based on the foregoing, we are of the opinion that the 3,057,143 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 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our
report (and to all references to our firm) included in or made part of this
registration statement.
ROSENBERG RICH BAKER
BERMAN & COMPANY
Maplewood, New Jersey
March 26, 1999
Exhibit 99(a)
OPTION AGREEMENT
OPTION AGREEMENT between CONOLOG CORPORATION, a Delaware corporation,
having an address at 5 Columbia Road, Somerville, New Jersey, 08876 (the
"Company"), and Clog LLC, a New York limited liability company, having an
address at 64 Shelter Lane, Roslyn, New York 11577 (the "Optionee"), dated as of
the 22nd day of December, 1998.
WHEREAS, the Company desires to grant the Optionee the irrevocable right
and option to purchase the Company's convertible debentures, and the Optionee is
willing to accept such irrevocable right and option, on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, it is hereby agreed as follows: 1. Grant of Option. The
Company hereby grants the irrevocable right and option (the "Option") to
purchase the Company's convertible debentures in the form and having the terms
and conditions set forth in Exhibit A attached hereto (the "Convertible
Debentures"), from time to time as hereinafter provided, in the principal amount
of up to $2,000,000, the face amount of each such Convertible Debenture being
equal to the purchase price paid by the Optionee for such Convertible Debenture
hereunder. Notwithstanding the foregoing, with respect to the initial $200,000
principal amount of Convertible Debentures, (i) the provisions of Sections 1 and
3 of the Form of Convertible Debenture attached hereto as an exhibit shall not
be included therein and (ii) the issuance or sale by the Company of
<PAGE>
any shares of Common Stock, or any securities exchangeable for or convertible
into shares of Common Stock, or any option, right or warrant to acquire shares
of Common Stock or such exchangeable or convertible securities at a price (or
effective exchange or conversion price) less than fair market value (as defined
in Section 2.4(c) of the form Convertible Debenture) shall constitute an Event
of Default unless used to repay such $200,000 Convertible Debenture including
accrued interest in full.
2. Term of Option; Exercise.
(a) The Option shall terminate on October 26, 1999. The Option shall be
exercisable in whole or in part, as deter mined by the Optionee, provided,
however, that no exercise shall be permitted for less than $100,000 at any one
time.
(b) The Option is exercisable in full as of the date hereof. The Option
shall be exercised by written notice to the Secretary or Treasurer of the
Company at its then principal office. The notice shall specify the principal
amount of the Convertible Debenture as to which the Option is being exercised
and shall be accompanied by payment in full of the purchase price for such
Convertible Debenture. The option price shall be payable in United States
dollars, and may be paid by bank or certified check drawn on a United States
bank or by wire transfer of immediately available funds to an account specified
by the Company. Each Convertible Debenture will be executed and delivered by the
Company to the Optionee concurrently with the funding of the exercise of the
Option. Alternatively, if the
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<PAGE>
Optionee notifies the Company that it desires to simultaneously convert the
Convertible Debenture into Common Shares of the Company, the Company instead
will deliver to the Optionee the shares of Common Stock concurrently with the
funding of the exercise of the Option.
3. Registration of Shares Being Acquired.
(a) On or before March 26, 1999, the Company will use its best efforts to
file a registration statement (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") covering the 2,000,000 shares of
common stock into which the Convertible Debentures are convertible
(collectively, the "Conversion Shares"). The Company will use its best efforts
to have the Registration Statement declared effective as soon as possible after
the filing thereof, and to keep the Registration Statement current and effective
for a period of one year or until such earlier date as all of the Conversion
Shares registered pursuant to the Registration Statement shall have been sold or
otherwise transferred.
(b) The Company shall supply prospectuses and such other documents as the
Optionee may request in order to facilitate the public sale or other disposition
of the Conversion Shares, use its best efforts to register and qualify any of
the Conversion Shares for sale in such states as the Optionee designates
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or execute a general consent to service of
process in any
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<PAGE>
jurisdiction in any action and do any and all other acts and things which may be
reasonably necessary or desirable to enable the Optionee to consummate the
public sale or other disposition of the Conversion Shares. The Optionee will pay
its own legal fees and expenses and any underwriting discounts and commissions
on the Conversion Shares sold by the Optionee but shall not be responsible for
any other expenses of such registration.
(c) The Company will notify the Optionee immediately, and confirm the
notice in writing: (i) when the Registration Statement or any post-effective
amendment thereto becomes effective and (ii) of the receipt of any comments or
communications from the Commission regarding the Registration Statement (and
shall furnish copies of same to the Optionee) or of the receipt of any stop
order or of the initiation, or to the best of the Company's knowledge, the
threatening, of any proceedings for that purpose.
(d) If at any time when a prospectus relating to the Conversion Shares is
required to be delivered under the Securities Act of 1933, as amended (the
"Act"), any event shall have occurred as a result of which, in the reasonable
opinion of counsel for the Company or counsel for the Optionee, the Registration
Statement as then amended or supplemented, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if, in the reasonable opinion
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<PAGE>
of either such counsel, it is necessary at any time to amend the Prospectus to
comply with the Act, the Company will notify the Optionee promptly and prepare
and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Act and will furnish the Optionee copies
thereof.
4. Indemnification.
(a) Whenever pursuant to this Agreement or the Convertible Debentures a
registration statement is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless the Optionee (hereinafter called the
"Distributing Holder"), and each person, if any, who controls (within the
meaning of the Act) the Distributing Holder, and each underwriter (within the
meaning of the Act) of such securities and each person, if any, who controls
(within the meaning of the Act) any such underwriter, against any and all
losses, claims, damages, expenses or liabilities, joint or several, to which the
Distributing Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any such registration statement or any preliminary prospectus
or final prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
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<PAGE>
necessary to make the statements therein not misleading or arise out of or are
based upon any violation or alleged violation by the Company of the Act, the
Securities and Exchange Act of 1934, as amended, any other applicable securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Conversion Shares; and will reimburse the Distributing Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
expense, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage, expense
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in said registration
statement, said preliminary prospectus, said final prospectus, or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder, for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed said registration
statement and such amendments and supplements thereto, each person, if any, who
controls the Company (within the meaning of the Act) against any losses, claims,
damages, expenses, or liabilities, joint and several, to which the Company or
any such director, officer, or controlling
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<PAGE>
person may become subject, under the Act or otherwise, insofar as such losses,
claims, damages, expenses, or liabilities arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus, or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder for use in the preparation thereof; and
will reimburse the Company or any such director, officer, or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, expense, liability, or
action.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party under this
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<PAGE>
Section except to the extent that the indemnifying party is actually prejudiced
in its ability to defend such action.
(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, provided, however, that any indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the employment thereof at the
indemnifying party's expense has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (iii) the
indemnifying party has failed to assume the defense of such
-8-
<PAGE>
action and employ counsel reasonably satisfactory to the indemnified party, in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action on behalf of such indemnified party, it being understood, however,
that the indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (plus
separate local counsel, if retained by the indemnified party) at any time for
all such indemnified parties.
(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is a party and indemnity could have
been sought hereunder by such indemnified party, unless such settlement is for
money damages only and includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
5. Shares to be Fully Paid; Reservation of Shares; Etc. The Company
covenants and agrees that the Conversion Shares, Preferred Stock and all shares
of common stock which may be issued pursuant to the terms of the Preferred Stock
will, upon
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<PAGE>
issuance, be duly and validly issued, fully paid and nonassessable. The Company
further covenants and agrees that so long as any Convertible Debentures are
outstanding, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the conversion of
the Convertible Debentures and the Preferred Stock and that it will have
authorized and reserved a sufficient number of shares of Common Stock for
issuance upon conversion of the Convertible Debentures and the Preferred Stock.
The Company agrees to use its best efforts to cause all Conversion Shares to be
listed on Nasdaq and each securities exchange, if any, on which similar
securities issued by the Company are then listed. 6. Representations and
Warranties of the Optionee. The Optionee hereby represents and warrants to the
Company as follows:
(a) The Optionee has the full right, power and authority to enter into
this Agreement and to carry out and consummate the transactions contemplated
herein. This Agreement constitutes the legal, valid and binding obligation of
the Optionee.
(b) No authorization or approval of, or filing with, or compliance with
any applicable order, judgment, decree, statute, rule or regulation of, any
court or governmental authority, or approval, consent, release or action of any
third party, is required in connection with the execution and delivery by the
Optionee of, or the performance or satisfaction of any
-10-
<PAGE>
agreement of the Optionee contained in or contemplated by, this Agreement.
(c) The Optionee acknowledges that it and each of its shareholders has
received and reviewed all publicly filed documents concerning the Company and
has had an opportunity to meet with and ask questions of the management of the
Company.
(d) The Optionee and each of its shareholders is an accredited investor
within the meaning of Rule 501 of the Commission under the Securities Act, has
the financial ability to bear the economic risk of its or his investment, can
afford to sustain a complete loss of such investment and has adequate means of
providing for its or his current needs and personal contingencies, and has no
need for liquidity in its or his investment in the Company; and the amount
invested in the Company by the Optionee does not constitute a substantial
portion of its or his net worth.
(e) The Optionee is acquiring the Convertible Debentures for investment
and not with a view to the sale or distribution thereof, for its own account and
not on behalf of others and has not granted any other person any right or option
or any participation or beneficial interest in any of the securities. The
Optionee acknowledges its understanding that the Conversion Shares constitute
restricted securities within the meaning of Rule 144 of the Commission under the
Act, and that none of such securities may be sold except pursuant to an
effective registration statement under the Act or in a trans-
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<PAGE>
action exempt from registration under the Act, and acknowledges that it
understands the meaning and effect of such restriction. The Optionee has
sufficient knowledge and experience in financial and business matters so that it
is capable of evaluating the risks and merits of the purchase of the Conversion
Shares. The Optionee is aware that no Federal or state regulatory agency or
authority has passed upon the sale of the Conversion Shares or any of the terms
of the Preferred Stock or the terms of the sale or the accuracy or adequacy of
any material provided to the Optionee and that the price of the Conversion
Shares was negotiated between the Optionee and the Company and does not
necessarily bear any relationship to the underlying assets or value of the
Company and that the terms of the Preferred Stock was negotiated between the
Optionee and the Company and does not necessarily bear any relationship to the
underlying assets or value of the Company. THE OPTIONEE UNDERSTANDS THAT AN
INVESTMENT IN THE SHARES BEING PURCHASED BY IT INVOLVES A HIGH DEGREE OF RISK.
(f) THE OPTIONEE UNDERSTANDS THAT IN CONNECTION WITH ITS EVALUATION OF THE
COMPANY, THE OPTIONEE HAS BEEN OR MAY HAVE BEEN PROVIDED WITH ACCESS TO CERTAIN
INFORMATION CONCERNING THE COMPANY WHICH HAS NOT BEEN PUBLICLY DISCLOSED. THE
OPTIONEE FURTHER UNDERSTANDS THAT ANY TRADING BY IT IN SECURITIES OF THE COMPANY
USING NON-PUBLIC INFORMATION COULD CONSTITUTE A VIOLATION OF FEDERAL AND STATE
SECURITIES LAWS AND/OR OTHER LAWS AND MAY SUBJECT IT TO CRIMINAL AND/OR CIVIL
PENALTIES AND LIABILITY. In
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<PAGE>
view of the foregoing, the Optionee agrees not to (i) purchase or sell,
including a short sale, any of the Company's securities or rights to purchase or
sell such securities as long as the Optionee is in possession of material
non-public information or (ii) disclose any non-public information to any other
person.
(g) There is no finder's fee or brokerage commission payable with respect
to the purchase by the Optionee of the Convertible Debentures or the
consummation of the transactions contemplated by this Agreement and the Optionee
agrees to indemnify and hold harmless the Company from and against any and all
cost, damage, liability or expense (including fees and expenses of counsel)
arising out of or relating to claims for such fees or commissions, except to the
extent that any such fees or commissions have been directly incurred by the
Company.
7. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Optionee as follows:
(a) The Company has the full right, power and authority to enter into this
Agreement and to carry out and consummate the transactions contemplated herein.
This Agreement constitutes the legal, valid and binding obligation of the
Company.
(b) No authorization or approval of, or filing with, or compliance with
any applicable order, judgment, decree, statute, rule or regulation of, any
court or governmental authority, or approval, consent, release or action of any
third
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<PAGE>
party, is required in connection with the execution and delivery by the Company
of, or the performance or satisfaction of any agreement of the Company contained
in or contemplated by, this Agreement.
(c) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power, legal right and authority to conduct its business and own,
lease and operate its properties as and in the places where such business is now
conducted and such properties are now owned, leased or operated.
(d) The Company is not in violation of, breach of or default under, and no
event (including, without limitation, execution of and consummation of the
transactions provided for in this Agreement) has occurred which with the passage
of time or notice from or action by any party thereto or otherwise could result
in a violation of or default under its certificate of incorporation or by-laws,
any indenture, mortgage, security, loan, lease or other material agreement to
which the Company is a party or by which it is bound or result in the creation,
imposition or acceleration of any material lien of any nature in favor of any
other person.
(e) No representation, warranty or statement, written or oral, made by the
Company in this Agreement or in any schedule, exhibit, certificate or other
document furnished or to be furnished to the Optionee, including any and all
documents filed with the Securities and Exchange Commission within the past
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<PAGE>
12 months, pursuant hereto or otherwise, in connection with the transactions
contemplated hereby, has contained, contains or will contain at the closing date
any untrue statement of a material fact or has omitted, omits or will omit at
the closing date a material fact required to be stated therein or necessary to
make the statements contained therein not misleading. Without limiting the
generality of the foregoing, the Company is current in all filings required
under the Exchange Act.
(f) There is no finder's fee or brokerage commission payable with respect
to the sale by the Company of the Convertible Debentures or the consummation of
the transactions contemplated by this Agreement and the Company agrees to
indemnify and hold harmless the Optionee from and against any and all cost,
damage, liability or expense (including fees and expenses of counsel) arising
out of or relating to claims for such fees or commissions, except to the extent
that any such fees or commissions have been directly incurred by the Optionee.
(g) The Company meets the requirements for the use of Form S-3 for
registration of the sale by the Optionee of the Conversion Shares and the
Company shall file all reports required to be filed with the SEC in a timely
manner so as to maintain such eligibility for the use of Form S-3. All financial
statements required to be included in, or incorporated by reference into, the
Form S-3 have been previously filed by the Company with the SEC.
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<PAGE>
8. Agreement of the Optionee Concerning Voting. While the Optionee holds
any Conversion Shares, it agrees to vote such shares as recommended by the
President of the Company. In furtherance of the foregoing, the Optionee is
delivering to the Company an Irrevocable Proxy in substantially the form of
Exhibit B attached hereto.
9. Further Assurances. From and after the date of this Agreement and the
date of Closing, each party hereto shall from time to time, at the request of
the other party and without further consideration, do, execute and deliver, or
cause to be done, executed and delivered, all such further acts, things and
instruments as may be reasonably requested or required more effectively to
evidence and give effect to the transactions provided for in this Agreement.
10. Notices. All notices, requests, demands and other communications
required or permitted 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 parties at their respective addresses set forth on the first
page of this Agreement, with copies to their respective counsel, Milberg Weiss
Bershad Hynes & Lerach LLP, Att: Arnold N. Bressler, Esq., One Pennsylvania
Plaza, New York, New York 10119, in the case of the Company, and Certilman Balin
Adler & Hyman, LLP, Att: Fred S. Skolnik, Esq., 90 Merrick Avenue, East Meadow,
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<PAGE>
New York 11554, in the case of the Optionee, or to such other person or address
as may be designated by like notice hereunder.
11. Parties in Interest. This Agreement shall be binding upon, and shall
inure to the benefit of and be enforceable by, the parties hereto and their
respective legal representatives, successors and assigns, but no other person
shall acquire or have any rights under this Agreement.
12. Entire Agreement; Modification; Waiver. This Agreement (as below
defined) contains the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes all prior
negotiations and understandings, if any, and there are no agreements,
representations or warranties other than those set forth, provided for or
referred to herein. All exhibits and schedules to this Agreement are expressly
made a part of this Agreement as fully as though completely set forth herein,
and all references to this Agreement herein, in any of such writings or
elsewhere shall be deemed to refer to and include all such writings. Neither
this Agreement nor any provisions hereof may be modified, amended, waived,
discharged or terminated, in whole or in part, except in writing signed by the
party to be charged. Any party may extend the time for or waive performance of
any obligation of any other party or waive any inaccuracies in the
representations or warranties of any other party or compliance by any other
party with any of the provisions of this Agreement. No waiver of any such
provisions or of any breach of or default under this Agreement shall be deemed
or shall constitute a waiver of any other provisions,
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<PAGE>
breach or default, nor shall any such waiver constitute a continuing waiver.
13. Interpretation.
(a) This Agreement shall be governed and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed exclusively in that State without giving effect to the
principles of conflict of laws.
(b) 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. 14. Headings; Counterparts. The article
and section headings in this Agreement are for reference purposes only and shall
not define, limit or affect the meaning or interpretation of this Agreement.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date and year first above written.
CONOLOG CORPORATION
By_____________________________
Robert S. Benou, President
Clog LLC
By_____________________________
Warren Schreiber, President
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Exhibit 99(b)
THIS CONVERTIBLE DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED WITHOUT
REGISTRATION THEREUNDER EXCEPT IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED.
$
CONOLOG CORPORATION
CONVERTIBLE DEBENTURE DUE ___________ [One Year After Issuance]
FOR VALUE RECEIVED, the undersigned, CONOLOG CORPORATION, a corporation
duly organized and existing under the laws of the State of Delaware (the
"Payor"), with its principal business address at 5 Columbia Road, Somerville,
New Jersey 08876, hereby promises to pay to the order of
(the "Payee"), with its principal business address at ,
the principal amount of Dollars ($ ) on [one
year after issuance] (the "Maturity Date"), plus interest at the rate of 8% per
annum on the unpaid principal balance, such interest to be paid on the Maturity
Date, together with the repayment of the principal balance and with all charges,
amounts, sums and interest which have accrued and have not been paid. All
payments to be made pursuant to this Debenture shall be made in such coin or
currency of the United States of America which, at the time of payment, is legal
tender for the payment of public and private debts. All such payments shall be
made by electronic funds wire transfer in accordance with the wire transfer
instructions submitted by Payee as the first payment method option; however,
Payor may designate that payments may be made by bank or certified check, at the
offices of the Payee set forth above or such other place as the Payee shall
designate in writing to the Payor.
1. Repayment Option; The Preferred Stock. At maturity, the Company will
have the option to repay the Debenture, together with all accrued interest
thereon, by issuing a new Series C Preferred Stock (the "Preferred Stock"). For
purposes of such repayment, the shares of Preferred Stock shall be valued at
$5.00 per share. As more particularly described in Exhibit A hereto, the
Preferred Stock will be non-voting and will carry a
<PAGE>
cumulative dividend of 8% per annum, which may be payable by the issuance of
shares of common stock valued at $5.00 per share. The Preferred Stock will be
convertible into common stock at the rate of one share of common stock for each
share of Preferred Stock. The Preferred Stock will carry a liquidating
preference of $5.00 per share.
2. Conversion.
2.1 Right to Convert. The Payee shall have the right, one or more times at
its option, at any time and from time to time, to convert the principal amount
of this Debenture, or any portion of such principal which is at least One
Hundred Thousand Dollars ($100,000), into that number of fully-paid and
nonassessable shares of Common Stock of the Payor, obtained by dividing the
principal amount of the Debenture or portion thereof surrendered for conversion
by the conversion price of $1.00 per share.
2.2 Exercise of Conversion Privilege; Issuance of Common Stock on
Conversion; No Adjustment for Interest or Dividends. In order to exercise the
conversion privilege, the Payee shall surrender this Debenture to the Payor and
shall give written notice of conversion in the form provided herein to the Payor
that the Payee elects to convert this Debenture or the portion thereof specified
in said notice.
As promptly as practicable (but not more than two days) after the
surrender of this Debenture and the receipt of such notice as aforesaid, the
Payor shall issue and shall deliver to the Payee or designee, by overnight mail
or by hand, a certificate or certificates for the number of full shares issuable
upon the conversion of such Debenture or portion thereof in accordance with the
provisions of this Debenture and a check or cash in respect of any fractional
interest in respect of a share of Common Stock arising upon such conversion as
provided in Section 2.3 of this Debenture. In each case this Debenture shall be
surrendered for partial conversion, the Payor shall also promptly execute and
deliver to the Payee a new Debenture or Debentures in an aggregate principal
amount equal to the unconverted portions of the surrendered Debenture. In the
event the registration statement referred to in Section 4 hereof shall have
theretofore been declared effective by the Securities and Exchange Commission
(the "SEC"), all certificates representing shares of Common Stock issued upon
conversion of this Debenture shall be free of any restrictive legend thereon.
Each conversion shall be deemed to have been effected on the date on which
this Debenture shall have been surrendered and such notice shall have been
received by the Payor, as aforesaid, and the Payee shall be deemed to have
become on said date the holder of record of the shares issuable upon such
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<PAGE>
conversion; provided, however, that any such surrender on any date when the
stock transfer books of the Payor shall be closed shall constitute the Payee as
the record holder thereof for all purposes on the next succeeding day on which
such stock transfer books are open.
No adjustment of the number of shares to be issued upon conversion shall
be made for interest accrued on this Debenture prior to the date it is
surrendered or for dividends on any shares issued upon the conversion of this
Debenture prior to the date it is surrendered. Upon conversion of this
Debenture, the Payor's obligation with respect to accrued interest shall be
discharged in full.
2.3 Cash Payments in Lieu of Fractional Shares. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon
conversion of Debentures. If any fractional shares of stock would be issuable
upon the conversion of this Debenture, the Payor shall make a payout therefor in
cash at the current market value thereof. The current market value of a share of
Common Stock shall be the closing price of the day (which is not a legal
holiday) immediately preceding the day on which this Debenture (or specified
portions thereof) is deemed to have been converted and such closing price shall
be determined as provided in subsection (c) of Section 2.4.
2.4 Adjustment of Conversion Price. The conversion price shall be adjusted
from time to time as follows:
(a) Dividends. In case the Payor shall on any one or more occasions
after the date of this Debenture (i) pay a dividend or make a distribution
in shares of its capital stock (whether shares of Common Stock or of
capital stock of any other class), (ii) subdivide its outstanding Common
Stock, or (iii) combine its outstanding Common Stock into a smaller number
of shares, the conversion price in effect immediately prior thereto shall
be adjusted so that the holder of any Debenture thereafter surrendered for
conversion shall be entitled to receive the number of shares of capital
stock of the Payor which he would have owned or have been entitled to
receive after the happening of any of the events described above had this
Debenture been converted immediately prior to the happening of such event.
An adjustment made pursuant to this subsection (a) shall become effective
immediately after the record date.
(b) Other Distributions. The purpose of this subsection is to
provide a means to reduce the Payee's conversion price in the event the
assets of the Payor
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<PAGE>
are materially diluted through distributions to the Common Stockholders
and/or any other security holder of Payor. In case the Payor shall
distribute to all holders of its Common Stock evidence of its indebtedness
or assets (excluding cash dividends or distributions paid from retained
earnings of the Payor) or subscription rights or warrants, then in each
such case the conversion price shall be adjusted so that the same shall
equal the price determined by multiplying the conversion price in effect
immediately prior to the date of such distribution by a fraction of which
the numerator shall be the current market price per share (as defined in
subsection (c) of this Section 2.4) of the Common Stock on the record date
as set forth below less the then fair market value (as determined in good
faith by the Board of Directors) of the portion of the assets or evidences
of indebtedness so distributed applicable or of such rights or warrants to
one (1) share of Common Stock, and the denominator shall be the current
market price per share (as defined in subsection (c) below) of the Common
Stock. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(c) Conversion Price Adjustment. For the purpose of any computation
under this Section 2.4, the current market price per share of Common Stock
at any date shall be deemed to be the average of the daily closing prices
for the thirty consecutive trading days commencing thirty-five trading
days before the day in question. The closing price for each day shall be
(i) the last sale price of the Common Stock on Nasdaq or, if no sale
occurred on such date, the closing bid price of the Common Stock on Nasdaq
on such date or (ii) if the Common Stock shall be listed or admitted for
trading on the New York or American Stock Exchange or any successor
exchange, the last sale price, or if no sale occurred on such date, the
closing bid price of the Common Stock on such exchange, or (iii) if the
Common Stock shall not be included on Nasdaq or listed on any such
exchange, the closing bid quotation for Common Stock as reported by the
National Quotation Bureau Incorporated if at least two securities dealers
have inserted both bid and asked quotations for Common Stock on at least
five of the ten preceding days. If none of the conditions set forth above
is met, the closing price of Common Stock on any day or the average of
such closing prices for any period shall be the fair market value of
Common Stock as determined by a member firm of the New York Stock
Exchange, Inc. selected by
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<PAGE>
the Board of Directors, provided such firm shall be reasonably acceptable
to Payee.
(d) No Nominal Adjustments. No adjustment in the conversion price
shall be required unless such adjustment would require an increase or
decrease of at least two percent (2%) in such price; provided, however,
that any adjustments which by reason of this subsection (d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section shall be made
to the nearest cent or to the nearest one-hundredth (1/100th) of a share,
as the case may be.
(e) Conversion Price Adjustment Notice. Whenever the conversion
price is adjusted, as herein provided, the Payor shall prepare a notice of
such adjustment of the conversion price setting forth the adjusted
conversion price and the date on which such adjustment becomes effective
and shall mail such notice of such adjustment of the conversion price to
the Payee promptly.
2.5 Effect of Reclassification, Consolidation, Merger or Sale. If any of
the following events occur, namely (i) any reclassification or change of
outstanding shares of Common Stock issuable upon conversion of this Debenture
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), (ii)
any consolidation or merger to which the Payor is a party other than a
consolidation or merger in which the Payor is the continuing corporation and
which does not result in any reclassification of, or change (other than a change
in par value, or from par value to no par value, or from no par value to par
value or as a result of a subdivision or combination) in, outstanding shares of
Common Stock, or (iii) any sale or conveyance of the properties and assets of
the Payor as, or substantially as, an entirety to any other corporation; then
this Debenture shall be convertible into the kind and amount of shares of stock
and other securities or property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock issuable upon conversion of this Debenture immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance. The
above provisions of this Section shall similarly apply to successive
reclassifications, consolidations, mergers and sales.
2.6 Reservation of Shares; Shares to be Fully Paid. As of the date hereof,
the Payor has reserved, free from preemptive rights, out of its authorized but
unissued shares, or out of
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<PAGE>
shares held in its treasury, sufficient shares to provide for the conversion of
this Debenture. Before taking any action which would cause an adjustment
reducing the conversion price below the then par value, if any, of the shares of
Common Stock issuable upon conversion of this Debenture, the Payor shall
promptly take all corporate action which may be necessary in order that the
Payor may validly and legally issue shares of such Common Stock at such adjusted
conversion price. The Payor covenants that all shares of Common Stock which may
be issued upon conversion of Debentures will upon issue be fully paid and
nonassessable.
2.7 Notice to Payee Prior to Certain Actions. In case:
(a) the Payor shall declare a dividend (or any other distribution)
on its Common Stock (other than in cash out of retained earnings); or
(b) the Payor shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any share
of any class or any other rights or warrants; or
(c) of any reclassification of the Common Stock of the Payor (other
than a subdivision or combination of its outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value) or, of any consolidation or merger to which the Payor
is a party and for which approval of any shareholders of the Payor is
required, or of the sale or transfer of all or substantially all of the
assets of the Payor; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Payor;
the Payor shall give notice to the Payee in accordance with this Debenture, as
promptly as possible but in any event at least thirty days prior to the
applicable date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights
or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution
or rights are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution, reclassifi-
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<PAGE>
cation, consolidation, merger, sale, transfer, dissolution, liquidation or
winding up.
3. Preferred Stock Registration Rights.
3.1 Piggyback Registration Rights. During the period commencing on the
issuance of any shares of Preferred Stock to the Payee and ending on the second
anniversary thereof (the "Registration Period"), the Payor shall advise the
Payee by written notice at least 30 days prior to the filing of any new
registration statement or post-effective amendment thereto under the Securities
Act of 1933, as amended (the "Act") covering any securities of the Payor, for
its own account or for the account of others (other than a registration
statement on Form S-4 or S-8 or any successor forms thereto), and will include
in any such post-effective amendment or registration statement, such information
as may be required to permit a public offering of the shares of Preferred Stock
and all or any of the common stock then issuable under the terms of the then
outstanding shares of Preferred Stock (the "Registrable Securities"). The Payor
shall supply prospectuses and such other documents as the Payee may request in
order to facilitate the public sale or other disposition of the Registrable
Securities, use its best efforts to register and qualify any of the Registrable
Securities for sale in such states as the Payee designates provided that the
Payor shall not be required to qualify as a foreign corporation or a dealer in
securities or execute a general consent to service of process in any
jurisdiction in any action and do any and all other acts and things which may be
reasonably necessary or desirable to enable the Payee to consummate the public
sale or other disposition of the Registrable Securities. The Payor shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the Registrable Securities requested to be
included in the registration to include such securities in such underwritten
offering on the same terms and conditions as any similar securities of the Payor
included therein. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering advises the Payee that the total amount of
securities which it intends to include in such offering is such as to materially
and adversely affect the success of such offering, then the amount of securities
to be offered for the account of the Payee shall be eliminated, reduced, or
limited to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount, if any, recommended by such managing
underwriter or underwriters. The Payee will pay its own legal fees and expenses
and any underwriting discounts and commissions on the securities sold by the
Payee but shall not be responsible for any other expenses of such registration.
3.2 Demand Registration Rights. If the Payee shall give notice to the
Payor at any time during the Registration
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<PAGE>
Period to the effect that the Payee desires to register under the Act its shares
of Preferred Stock or any of the common stock then issuable under the terms of
the then outstanding shares of Preferred Stock under such circumstances that a
public distribution (within the meaning of the Act) of any such securities will
be involved, then the Payor will promptly, but no later than 60 days after
receipt of such notice, file a post-effective amendment to a then current
Registration Statement or a new registration statement pursuant to the Act, to
the end that such shares of Preferred Stock and such shares of common stock may
be publicly sold under the Act as promptly as practicable thereafter and the
Payor will use its best efforts to cause such registration to become and remain
effective for a period of 120 days (including the taking of such steps as are
reasonably necessary to obtain the removal of any stop order); provided that the
Payee shall furnish the Payor with appropriate information in connection
therewith as the Company may reasonably request in writing. The Payee may, at
its option, request the filing of a post-effective amendment to a then current
Registration Statement or a new registration statement under the Act with
respect to the Registrable Securities on only two occasions during the
Registration Period. All costs and expenses of such post-effective amendment or
new registration statement shall be borne by the Payor, except that the Payee
shall bear the fees of its own counsel and any underwriting discounts or
commissions applicable to any of the securities sold by it.
The Payor shall be entitled to postpone the filing of any registration
statement pursuant to this subsection (b) otherwise required to be prepared and
filed by it if (i) the Payor is engaged in a material acquisition,
reorganization, or divestiture, (ii) the Payor is currently engaged in a
selftender or exchange offer and the filing of a registration statement would
cause a violation of Regulation M or any other Rule under the Securities
Exchange Act of 1934, (iii) the Payor is engaged in an underwritten offering and
the managing underwriter has advised the Payor in writing that such a
registration statement would have a material adverse effect on the consummation
of such offering or (iv) the Payor is subject to an underwriter's lockup as a
result of an underwritten public offering and such underwriter has refused in
writing, the Payor's request to waive such lock-up. In the event of such
postponement, the Payor shall be required to file the registration statement
pursuant to this subsection (b), within 60 days of the consummation of the event
requiring such postponement.
The Payor will use its best efforts to maintain such registration
statement or post-effective amendment current under the Act for a period of at
least six months (and for up to an additional three months if requested by the
Payee) from the effective date thereof. The Payor shall supply prospectuses, and
such other documents as the Payee may reasonably request in order
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<PAGE>
to facilitate the public sale or other disposition of the Registrable
Securities, use its best efforts to register and qualify any of the Registrable
Securities for sale in such states as such holder designates, provided that the
Payor shall not be required to qualify as a foreign corporation or a dealer in
securities or execute a general consent to service of process in any
jurisdiction in any action.
4. Acceleration. In the event that (i) the Payor shall default in the due
and punctual payment of any installment of interest on this Debenture when and
as the same shall become due and payable or (ii) the Payor shall commence a
voluntary case concerning itself under any title of the United States Code
entitled "Bankruptcy" as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or (iii) in the event of the appointment of a custodian
(as defined in the Bankruptcy Code) for all or substantially all of the property
of the Payor; or (iv) in the event the Payor shall commence any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction,
whether now or hereafter in effect, relating to the Payor or in the event of the
commencement against the Payor of any such proceeding which remains undismissed
for a period of 30 days; or (v) if the Payor is adjudicated insolvent or
bankrupt; or (vi) if any order of relief or other order approving any such case
or proceeding is entered; or (vii) if the Payor shall allow any appointment of
any custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of 30 days; or (viii) if the
Payor shall make a general assignment for the benefit of creditors; or (ix) if
the Payor shall take action for the purpose of effecting any of the foregoing;
(x) there shall be a breach of any representation, warranty or covenant under
the Option Agreement dated as of December 22, 1998, between the Payor and the
Payee (the "Option Agreement"); or (xi) the registration statement covering the
Conversion Shares (as defined in and contemplated by the Option Agreement shall
not have been declared effective by the SEC by August __, 1999 (the foregoing
being hereinafter collectively referred to as "Events of Default") then, in any
such Event of Default and at any time thereafter while such Event of Default is
continuing, the Payee may, in addition to any other rights and remedies the
Payee may have hereunder or otherwise, declare this Debenture to be due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
5. Waivers.
5.1 In General. No forbearance, indulgence, delay or failure to exercise
any right or remedy with respect to this Debenture shall operate as a waiver nor
as an acquiescence in any default. No single or partial exercise of any right or
remedy
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<PAGE>
shall preclude any other or further exercise thereof or any exercise of any
other right or remedy.
5.2 Presentment, Etc.; Jury Trial Waived. The Payor hereby waives
presentment, demand, notice of dishonor, protest and notice of protest. The
Payor hereby waives all rights to a trial by jury in any litigation arising out
of or in connection with this Debenture.
5.3 Modifications. This Debenture may not be modified or discharged
orally, but only in writing duly executed by the Payee and the Payor.
6. Successors and Assigns. All the covenants, stipulations, promises and
agreements in this Debenture made by the Payor shall bind its successors and
assigns, whether so expressed or not.
7. Miscellaneous.
7.1 Headings. The headings of the various paragraphs of this Debenture are
for convenience of reference only and shall in no way modify any of the terms or
provisions of this Debenture.
7.2 Governing Law. This Debenture and the obligations of the Payor and the
rights of the Payee shall be governed by and construed in accordance with the
laws of the State of New York applicable to instruments made and to be performed
entirely within such State.
7.3 Collection Costs. The Payor shall pay all costs and expenses incurred
by the Payee to enforce its rights under this Debenture, including reasonable
counsel fees and other reasonable out-of-pocket expenses.
IN WITNESS WHEREOF, CONOLOG CORPORATION has caused this Debenture to be
signed in its corporate name by a duly authorized officer and to be dated as of
the day and year written below.
Dated: , 1999
CONOLOG CORPORATION
By_________________________________
(Title)
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<PAGE>
FORM OF CONVERSION NOTICE
TO: CONOLOG CORPORATION
The undersigned owner of this Convertible Debenture hereby irrevocably
exercises the option to convert this Debenture, or portion hereof (which is at
least $100,000) below designated, into shares of Common Stock of Conolog
Corporation in accordance with the terms of this Debenture and directs that the
shares issuable and deliverable upon the conversion, together with any check in
payment for fractional shares and any Debentures representing any unconverted
principal amount hereof, be issued and delivered to the registered holder hereof
or its designee as indicated below.
Dated:
[ ]
By_________________________
(Title)
Address:___________________
___________________
Taxpayer Identification
No.:_____________________
_____________________
Amount to be
Converted:_______________
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Exhibit 99(c)
CONSULTING AGREEMENT
AGREEMENT made as of the 22nd day of December, 1998 between CONOLOG
CORPORATION (the "Company"), a Delaware Corporation having an office at 5
Columbia Road, Somerville, New Jersey 08876 and NYBOR GROUP INC., having an
address at 64 Shelter Lane, Roslyn, New York 11577 ("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 it will provide to the Company the services of its President,
Warren Schreiber ("Schreiber") and that Schreiber will render to the Company
such consulting services as the Board of Directors or the President of the
Company shall reasonably request. The services provided by Consultant (the
"Consulting Services") shall consist of management and financial consulting
services.
2. Compensation and Related Matters. As sole compensation for the
performance of the Consulting Services, the Company hereby grants to Consultant
a stock bonus consisting of 1,057,143 shares of common stock of the Company, par
value $1.00 (the "Securities" or the "Shares").
<PAGE>
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 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. This Agreement shall terminate on October 31, 1999.
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<PAGE>
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 it 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
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 "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
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<PAGE>
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 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.
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<PAGE>
(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 it 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.
(a) On or before March 26, 1999, the Company will use its best efforts to
file a registration statement (the "Registration Statement") with the Securities
and Exchange Commission (the "Commission") covering the resale of the 1,057,143
Shares. The Company will use its best efforts to have the Registration Statement
declared effective as soon as possible after the filing thereof, and to keep the
Registration Statement current and effective for a period of one year or until
such earlier date as all of the Shares registered pursuant to the
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<PAGE>
Registration Statement shall have been sold or otherwise transferred.
(b) The Company shall supply prospectuses and such other documents as the
Consultant may request in order to facilitate the public sale or other
disposition of the Shares, use its best efforts to register and qualify any of
the Shares for sale in such states as the Consultant designates provided that
the Company shall not be required to qualify as a foreign corporation or a
dealer in securities or execute a general consent to service of process in any
jurisdiction in any action and do any and all other acts and things which may be
reasonably necessary or desirable to enable the Consultant to consummate the
public sale or other disposition of the Shares. The Consultant will pay its own
legal fees and expenses and any underwriting discounts and commissions on the
Shares sold by the Consultant but shall not be responsible for any other
expenses of such registration.
(c) The Company will notify the Consultant immediately, and confirm the
notice in writing: (i) when the Registration Statement or any post-effective
amendment thereto becomes effective and (ii) of the receipt of any comments or
communications from the Commission regarding the Registration Statement (and
shall furnish copies of same to Consultant) or of the receipt of any stop order
or of the initiation, or to the best of the Company's knowledge, the
threatening, of any proceedings for that purpose.
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<PAGE>
(d) If at any time when a prospectus relating to the Shares is required to
be delivered under the Securities Act of 1933, as amended (the "Act"), any event
shall have occurred as a result of which, in the reasonable opinion of counsel
for the Company or counsel for the Consultant, the Registration Statement as
then amended or supplemented, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if, in the reasonable opinion of either such counsel,
it is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Consultant promptly and prepare and file with the
Commission an appropriate amendment or supplement in accordance with Section 10
of the Act and will furnish the Consultant copies thereof.
7. Indemnification.
(a) Whenever pursuant to this Agreement a registration statement is filed
under the Act, amended or supplemented, the Company will indemnify and hold
harmless the Consultant (hereinafter called the "Distributing Holder"), and each
person, if any, who controls (within the meaning of the Act) the Distributing
Holder, and each underwriter (within the meaning of the Act) of such securities
and each person, if any, who controls (within the meaning of the Act) any such
underwriter, against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which the Distributing Holder, any such
controlling
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<PAGE>
person or any such underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such registration
statement or any preliminary prospectus or final prospectus constituting a part
thereof or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
or arise out of or are based upon any violation or alleged violation by the
Company of the Act, the Securities Exchange Act of 1934, as amended, any other
applicable securities law, or any rule or regulation thereunder relating to the
offer or sale of the Shares; and will reimburse the Distributing Holder and each
such controlling person and underwriter for any legal or other expenses
reasonably incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, expense, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
expense or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement in reliance upon and in conformity with written
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<PAGE>
information furnished by such Distributing Holder, for use in the preparation
thereof.
(b) The Distributing Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed said registration
statement and such amendments and supplements thereto, each person, if any, who
controls the Company (within the meaning of the Act) against any losses, claims,
damages, expenses, or liabilities, joint and several, to which the Company or
any such director, officer, or controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages, expenses, or
liabilities arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in said registration statement, said
preliminary prospectus, said final prospectus, or said amendment or supplement,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement in reliance
upon and in conformity with written information furnished by such Distributing
Holder for use in the preparation thereof; and will reimburse the Company or any
such director, officer, or controlling person for any legal or other expenses
reasonably incurred by them in
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<PAGE>
connection with investigating or defending any such loss, claim, damage,
expense, liability, or action.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party under this Section except to the extent that
the indemnifying party is actually prejudiced in its ability to defend such
action.
(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, provided, however, that any indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall be at the
expense of
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<PAGE>
such indemnified party unless (i) the employment thereof at the indemnifying
party's expense has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (plus separate local counsel, if
retained by the indemnified party) at any time for all such indemnified parties.
(e) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any
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<PAGE>
indemnified party is a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement is for money damages only and
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
8. Agreement of the Consultant Concerning Voting. While the Consultant
holds any Shares, it agrees to vote such shares as recommended by the President
of the Company. In furtherance of the foregoing, the Consultant is delivering to
the Company an Irrevocable Proxy in substantially the form of Exhibit B attached
hereto.
9. Miscellaneous.
(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,
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<PAGE>
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
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.
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<PAGE>
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
NYBOR GROUP INC.
By /s/__________________________________
Warren Schreiber, President
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