SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
CONOLOG CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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CONOLOG CORPORATION
5 Columbia Road
Somerville, New Jersey 08876
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 12, 2000
To the Shareholders of
CONOLOG CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
CONOLOG CORPORATION (the "Company"), a Delaware corporation, will be held at
the offices of Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsylvania
Plaza, New York, New York 10119, on Thursday, October 12, 2000, at 5:00 p.m.,
local time, for the following purposes:
1. To elect five directors to serve, subject to the provisions of the By-laws,
until the next Annual Meeting of Shareholders and until their respective
successors have been duly elected and qualified;
2. To consider and act upon a proposal to approve an amendment to the
Certificate of Incorporation to increase the total number of
authorized shares of all classes of stock from 22,000,000 to 165,000,000
shares of which 15,000,000 shares will be classified as Preferred Stock
having a par value of $.50 per share and 150,000,000 shares will be
classified as Common Stock having a par value of $.01 per share;
3. To consider and act upon a proposal to approve the 2000/2001 Stock Option
Plan;
4. To consider and act upon a proposal to approve a Summary Financing
Proposal between the Company and Crescent International Ltd.;
5. To consider and act upon a proposal to approve an amendment to
the Certificate of Incorporation to give effect to a one-for-four reverse
stock split of the Common Stock of the Company;
6. To consider and act upon a proposal to approve the selection of
Rosenberg Rich Baker Berman & Company as the Company's independent
auditors for the 2001 fiscal year; and
7. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on August
16, 2000 as the record date for the meeting and only holders of shares of
record at that time will be entitled to notice of and to vote at the Annual
Meeting of Shareholders or any adjournment or adjournments thereof.
By order of the Board of Directors.
ROBERT S. BENOU
President
Somerville, New Jersey
September 7, 2000
IMPORTANT
IF YOU CANNOT PERSONALLY ATTEND THE MEETING, IT IS
REQUESTED THAT YOU INDICATE YOUR VOTE ON THE ISSUES
INCLUDED ON THE ENCLOSED PROXY AND DATE, SIGN AND MAIL
IT IN THE ENCLOSED SELF-ADDRESSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES
CONOLOG CORPORATION
5 Columbia Road
Somerville, New Jersey 08876
P R O X Y S T A T E M E N T
for
ANNUAL MEETING OF SHAREHOLDERS
to be held October 12, 2000
September 7, 2000
The enclosed proxy is solicited by the Board of Directors of
Conolog Corporation, a Delaware corporation (the "Company") in connection with
the Annual Meeting of Shareholders to be held at the offices of Milberg Weiss
Bershad Hynes & Lerach LLP, One Pennsylvania Plaza, New York, New York 10119
On Thursday, October 12, 2000, at 5:00 p.m., local time, and any adjournments
thereof, for the purposes set forth in the accompanying Notice of Meeting.
Unless instructed to the contrary on the proxy, it is the intention of the
persons named in the proxy to vote the proxies in favor of (i) the election as
directors of the nominees listed below to serve until the next Annual Meeting
of Shareholders; (ii) the amendment to the Certificate of Incorporation to
increase the total number of authorized shares of all classes of stock; (iii)
approval of the 2000/2001 Stock Option Plan; (iv) approval of the Summary
Financing Proposal between the Company and Crescent International Ltd.;
(v) amendment to the Certificate of Incorporation to give effect to a one-for-
four reverse split of the Common Stock of the Company; and (vi) approval of
the selection of Rosenberg Rich Baker Berman & Company as the Company's
independent auditors for the 2001 fiscal year. The record date with respect
to this solicitation is the close of business on August 16, 2000 and only
shareholders of record at that time will be entitled to vote at the meeting.
The principal executive office of the Company is 5 Columbia Road, Somerville,
New Jersey 08876, and its telephone number is (908) 722-8081. The shares
represented by all validly executed proxies received in time to be taken to
the meeting and not previously revoked will be voted at the meeting. This
proxy may be revoked by the shareholder at any time prior to its being voted by
filing with the Secretary of the Company either a notice of revocation or a
duly executed proxy bearing a later date. This proxy statement and the
accompanying proxy were mailed to you on or about September 7, 2000.
OUTSTANDING SHARES; QUORUM; REQUIRED VOTE
The number of outstanding shares entitled to vote at the meeting is
9,063,959.50 common shares, par value $.01 per share, not including 8,813
common shares held in treasury. Each common share is entitled to one vote.
The presence in person or by proxy at the Annual Meeting of the holders of a
majority of such shares shall constitute a quorum. There is no cumulative
voting. Assuming the presence of a quorum at the Annual Meeting: directors
shall be elected by a plurality of the votes cast and the affirmative vote of
a majority of the common shares present at the meeting and entitled to vote on
each matter is required for the approval of the Company's 2000/2001 Stock
Option Plan and the approval of the Company's auditors, Rosenberg Rich Baker
Berman & Company, as the Company's auditors for fiscal 2001. The affirmative
vote of the holders of a majority of the total outstanding common shares is
necessary to approve the amendment to the Certificate of Incorporation to
increase the total number of authorized shares of all classes of stock and to
give effect to a one-for-four reverse stock split of the Common Stock of the
Company.
Votes shall be counted by one or more persons who shall serve as
the inspectors of election. The inspectors of election will canvas the
shareholders present in person at the meeting, count their votes and count the
votes represented by proxies presented. Abstentions and broker nonvotes are
counted for purposes of determining the number of shares represented at the
meeting, but are deemed not to have voted on the proposal. Broker nonvotes
occur when a broker nominee (which has voted on one or more matters at the
meeting) does not vote on one or more other matters at the meeting because it
has not received instructions to so vote from the beneficial owner and does
Not have discretionary authority to so vote.
ELECTION OF DIRECTORS
The five persons named below, all of whom are presently directors
of the Corporation, have been nominated for re-election to serve until the
Annual Meeting of Shareholders and until their respective successors have been
elected and qualified.
Positions Number of
with Date of Shares
Company Initial Beneficially
and/or Election Owned as of Percent
Principal as a August 16, of
Name (age) Occupation Director 2000 Class
------------------ ------------- ----------- ------------ ---------
Robert S. Benou (66) President 1968 714,400 7.9%
and
Director
Arpad J. Havasy (63) Executive 1968 68,625 0.8%
Vice
President,
Secretary,
Treasurer
and
Director
Louis S. Massad (62) Vice 1995 22,500 0.2%
Marc R. Benou (32) Vice 1995 142,000 1.6%
President,
Assistant
Secretary
and
Director
Edward J. Rielly (32) Director 1998 21,500 0.2%
Each officer holds office at the pleasure of the Board of
Directors. The Company has no "significant" employees other than the
executive officers. There are no arrangements or understandings pursuant to
which either the directors or officers was selected as such.
Robert S. Benou has served as President and a Director of the
Company since 1968. Mr. Benou is responsible for new product development and
supervision of sales and marketing. Mr. Benou is a graduate of Victoria
College and holds a BS degree from Kingston College, England and a BSEE from
Newark College of Engineering, in addition to industrial management courses
at Newark College of Engineering. Robert S. Benou is the father of Marc R.
Benou.
Arpad J. Havasy has served as the Company's Executive Vice
President and Director since 1968 and is responsible for manufacturing of
both components and hardware operations. Mr. Havasy is a graduate of
Electromos E's Gepeszeti Technikum (Hungary) and the University of Budapest.
In addition, Mr. Havasy has attended courses at both Rutgers University and
the American Management Association. Mr. Havasy is on total disability.
Louis S. Massad has been a Director of the Company since April
1995. Mr. Massad has been Vice President, Chief Financial Officer and
Director of Computer Power Inc. since 1986. Mr. Massad holds a BS and MS
degree from Cairo University (Egypt) and an MBA from Long Island University,
New York.
Marc R. Benou joined the Company in 1991 and is responsible for
material, purchasing and inventory control. In March 1995, he was elected as
Vice President, Assistant Secretary and a Director. Mr. Benou attended
Lehigh and High Point University and holds a BS degree in Business
Administration and Management. Marc R. Benou is the son of Robert S. Benou,
the Company's President.
Edward J. Rielly has been a Director of the Company since January
1998. Mr. Rielly is a Senior Consultant with Esavio Corporation. From
February 1998 to February 2000, Mr. Rielly was an Application Developer with
Chubb Corporation. From 1993 to 1998, Mr. Rielly was an Application
Developer with the United States Golf Association. Mr. Rielly is a graduate
of Lehigh University and holds a BS in Computer Science.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended July 31, 2000, the Board of
Directors held ten meetings. All of the directors attended all of the
meetings of the Board of Directors.
The Company has an Audit Committee, which consists of
Messrs. Marc Benou, Massad and Rielly. The Audit Committee reviews the
financial reporting and internal controls of the Company and meets with
appropriate financial personnel of the Company, as well as its independent
auditors, in connection with these reviews. The Audit Committee also
recommends to the Board the firm which is to be presented to the shareholders
for designation as independent auditors to examine the corporate accounts of
the Company for the current fiscal year.
The Company does not have a standing compensation or nominating
committee.
EXECUTIVE OFFICERS
The executive officers of the Company are Robert S. Benou,
President, Arpad J. Havasy, Executive Vice President, Secretary and
Treasurer, Marc R. Benou, Vice President and Assistant Secretary, information
as to each of whom is set forth above and Thomas R. Fogg, Vice President -
Engineering. Mr. Fogg joined the Company in 1976 as Chief Engineer
responsible for analog and guidance projects. Since 1986, when he became
Vice President-Engineering, he led the design team in the development of the
Company's commercial products. Mr. Fogg holds a BSEE degree from Lafayette
College and a MSEE degree from Rutgers University. Mr. Fogg is a fellow of
the Institute of Electrical and Electronic Engineers and has published
articles on delay equalization and the use of crystal resonators.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation (consisting
entirely of salary) paid (or accrued for) by the Company to its President,
the only executive officer whose aggregate remuneration exceeded $100,000 in
each of the Company's last three fiscal years ended July 31, 2000, 1999 and
1998:
Summary Compensation Table
Annual Compensation
-------------------
Other
Name and Annual
Principal Fiscal Com-
Position Year-End Salary Bonus pensation
------------- -------- ------- ----- ---------
Robert Benou, 2000 $210,000
President
1999 $190,000
1998 $170,000
Long-Term Compensation
----------------------
Awards Payouts
------ -------
Name and Restricted All Other
Principal Fiscal Stock Options LTIP Com-
Position Year-End Awards /SARS Payouts pensation
---------- ---------- --------- -------- ---------- ----------
Robert Benou, 2000 620,000 0
President
1999 85,000 5,000
1998 250,000 30,000
EMPLOYMENT AGREEMENTS
The Company entered into a five-year employment agreement,
commencing June 1, 1997 and ending May 31, 2002, with Robert S. Benou. Under
his employment agreement, Mr. Benou will receive an annual base salary of
$150,000 for the first year of employment with an increase of $20,000
beginning November 1997 and every year thereafter. In addition, Mr. Benou is
entitled to an annual bonus equal to 6% of the Company's annual "income
before income tax provision," as stated in its annual Form 10-K. The
employment agreement also entitled Mr. Benou to the use of an automobile and
to employee benefit plans, such as life, health, pension, profit sharing and
other plans.
Under the employment agreement, employment terminates upon death
or disability of the employee and employee may be terminated by the Company
for cause.
The Company entered into a five-year employment agreement,
commencing June 1, 1997 and ending May 31, 2002, with Marc R. Benou. Under
his employment agreement, Mr. Benou will receive an annual base salary of
$55,000 for the first year of employment, with an increase of $6,000
beginning November 1997 and every year thereafter.
Mr. Benou is entitled to an annual bonus equal to 3% of the
Company's annual "income before income tax provision," as stated in its
annual Form 10-K. The employment agreement also entitles him to the use of
an automobile and to employee benefit plans, such as life, health, pension,
profit sharing and other plans. Under the employment agreement, employment
terminates upon death or disability of the employee and employee may be
terminated by the Company for cause.
COMPENSATION OF DIRECTORS
No director of the Company receives any cash compensation for his
services as such. Currently, the Company has two directors who are not
employees, Mr. Massad and Mr. Rielly.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The full Board of Directors made all decisions concerning
executive compensation during fiscal 2000. During fiscal 2000, no executive
officers of the Company served as a member of the compensation committee or
board of directors of another entity.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of August 16, 2000, certain
information concerning stock ownership of the Company by (i) each person who
is known by the Company to own beneficially more than 5% of the outstanding
common shares of the Company, (ii) each of the Company's directors and (iii)
all current directors and officers of the Company as a group. Except as
otherwise indicated, all such persons have both sole voting and investment
power over the shares shown as being beneficially owned by them.
Name and Address of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
-------------------- ----------------------- ---------
Robert S. Benou (1) 714,400 7.9%
Arpad J. Havasy (1) 68,625 0.8%
Marc R. Benou (1) 142,000 1.6%
Louis Massad (1) 22,500 0.2%
Thomas Fogg (1) 60,000 0.7%
Edward J. Rielly (1) 21,500 0.2%
All Executive Officers
and Directors as a Group
(6 Persons) 1,029,025 11.4%
(1) The address for these individuals is c/o Conolog Corporation, 5 Columbia
Road, Somerville, New Jersey 08876.
CERTAIN TRANSACTIONS
The Company has adopted a policy that transactions with
affiliated entities or persons will be on terms no less favorable than could
be obtained from unrelated parties and that all transactions between the
Company and its officers, directors, principal shareholders and affiliates
will be approved by a majority of the Company's Board of Directors.
PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION TO INCREASE THE TOTAL NUMBER
OF AUTHORIZED SHARES OF ALL CLASSES OF STOCK
The Board of Directors is recommending that the shareholders
approve the amendment to the Corporation's Certificate of Incorporation to
increase the total number of shares of all classes of stock which the Company
is authorized to issue from twenty-two million (22,000,000) shares of which
twenty million (20,000,000) shares are classified as Common Stock and two
million (2,000,000) shares are classified as Preferred Stock to one hundred
sixty-five million (165,000,000) shares of which one hundred fifty million
(150,000,000) shares will be classified as Common Stock and fifteen million
(15,000,000) shares will be classified as Preferred Stock. The increase in
capital stock will enable the Company to facilitate the transactions
described herein and provide the Company's Board of Directors with the
ability to use the Corporation's stock as incentive compensation to employees
and for general corporate purposes without the necessity of soliciting
further shareholder approval. Except as set forth in the Proposal to Approve
the Summary Financing Proposal, the Company currently has no understandings,
arrangements or agreements contemplated that would require the issuance of
additional shares of Common Stock. The authorized shares will, however, be
used from time to time in connection with future acquisitions, capital
raising and other stock requirements of the company. While the increase in
authorized Common Stock will not change substantially the rights of holders
of the Company's Common Stock, the issuance of additional shares of the
Company's Common Stock may have a dilutive, and therefore depressive, effect
on the market price of the Common Stock.
If the amendment is approved by the Company's stockholders, the
Company will file an amendment to its Certificate of Incorporation with the
Secretary of State of Delaware promptly after the Meeting. The increase in
authorized capital stock will become effective on the filing of the amended
Certificate of Incorporation. The proposed amendment is set forth in Exhibit
A.
PROPOSAL TO APPROVE THE 2000/2001 STOCK OPTION PLAN
At the Meeting, the Conolog Corporation 2000/2001 Stock Option
Plan will be submitted to the shareholders for approval. The Option Plan is
designed to permit the Company to grant either incentive stock options under
Section 422A of the Internal Revenue Code (the "Code") or nonqualified stock
options. Under the Option Plan, a Stock Option Committee (the "Option
Committee") of the Board is authorized to grant options to purchase up to
300,000 shares of stock to key employees, officers, directors and consultants
of the Corporation. The amount of shares reserved for issuance under the
Option Plan will not be adjusted to give effect to the one-for-four reverse
stock split. If any options granted under the Option Plan expire or
terminate for any reason without having been exercised in full, the
unpurchased shares shall become available for future options pursuant to the
Stock Option Plan. The Option Committee administers the Option Plan and
designates the optionees, the type of options to be granted (i.e., non
qualified or incentive stock options), the number of shares subject to the
options, and the terms and conditions of each option. The terms and
conditions include the exercise price, date of grant, and date of exercise of
each option. An employee may, at the discretion of the Option Committee, be
permitted to exercise an option and make payment by giving a personal note.
Incentive stock options may only be granted to employees of the
Company and not to directors or consultants who are not so employed. The
exercise price for incentive stock options must be at least 100% of the fair
market value of the Common Stock as determined by the Option Committee on the
date of grant. The Option Committee may, at its discretion, provide that the
fair market value shall be the lowest fair market value on any day up to
thirty days after the day of grant. If within that period, the fair market
value is less than on the date of grant, then the date on which the fair
market value is lowest will be deemed to be the date of grant. All incentive
stock options under the Option Plan must be granted within ten years from the
date of adoption of the Option Plan and each option must be exercised by an
optionee within three months after termination of the optionee's employment,
unless such termination is as a result of death or, disability. In the event
an optionee's employment is terminated as a result of death or disability,
such optionee or his designated beneficiary shall be entitled to exercise any
and all options for a period of twelve months after such termination.
Nonqualified stock options under the Option Plan are generally
subject to the same rules as discussed above. Nonqualified stock options
may, however, also be granted to directors and consultants, whether or not
such individuals are employees of the Corporation. The exercise price for
nonqualified stock options hall be determined and fixed by the Option
Committee at its discretion but shall not be less than eighty-five percent
(85%) of the fair market value of the shares on the date of grant. The date
of grant may be deemed to be the date, up to thirty days after the date of
grant on which the fair market value is the lowest, as described above for
the incentive stock options.
Payment for shares purchased upon exercise of options may be made
in full or in installments. If made in installments, the option holder is
required to make a cash payment of at least twenty percent of the total price
of the shares purchased and deliver a promissory note payable to the Company
for the balance. The promissory note shall bear interest at a rate
determined by the Option Committee, but shall not be less than the applicable
federal rate (as defined in the Internal Revenue Code of 1986, as amended),
and must pledge the purchased shares as security. The balance of the option
price shall be paid as provided in the promissory note, however, the option
holder shall make payments on account of the total option price equal to: (1)
at least forty percent of the total option price by the end of eighteen
months from the date of purchase, (ii) at least sixty percent of the total
option price by the end of three years from the date of purchase; (iii) at
least eight percent of the total option price by the end of four years from
the date of purchase; and (iv) the entire amount of the total option price by
the end of five years from the date of purchase.
An important consideration in submitting the Option Plan to
Stockholders for approval is the Corporation's desire to conform the Option
Plan to the requirements of Rule 16b-3 of the Exchange Act of 1934. Section
16(b) requires the disgorgement of profits realized by officers and directors
for purchases and sales within a six-month period. Compliance with Rule 16b-
3 will enable the Corporation's officers and directors to receive grants of
options without incurring Section 16(b) liability. If the Option Plan were
not in compliance with Section 16b-3, its usefulness to the Company in
attracting and keeping qualified officers and directors would be diminished
as it would no longer serve as an incentive. The proposed 2000/2001 Stock
Option Plan is set forth in Exhibit B.
The Company does not presently have any plans or proposals to
issue options in the event the Option Plan is approved.
PROPOSAL TO APPROVE THE SUMMARY FINANCING PROPOSAL
On July 30, 2000, the Company obtained a Summary Financing Proposal
(the "Proposal") from Crescent International Ltd. ("Crescent"), a Bermuda-
based investment company, which if approved by the Company and Crescent would
allow the Company to issue and sell and would require Crescent to purchase,
upon the Company's request, subject to certain terms and conditions, up to
$6,000,000 of the Company's Common Stock. The Company will receive
$6,000,000 minus applicable fees and expenses. Crescent is currently
awaiting the submission of due diligence material from the Company after
which it will decide upon the additional due diligence steps to be taken.
Assuming the Company and Crescent enter into an agreement, the Company
will file with the Securities Exchange Commission ("SEC") a
registration statement covering the shares issuable to Crescent (the
"Registration Statement"). Once the SEC declares the Registration
Statement effective, the Company will be able to require Crescent to
purchase an agreed upon amount of its Common Stock, subject to the
terms and conditions of the agreement between the Company and Crescent
(the "First Put"). Thereafter, the Company will be able to draw down
the balance of $ 6,000,000 provided certain terms and conditions are
met, which include a closing bid price for the Company's Common Stock
that is equal to or greater than $1.50 per share on each of the seven
trading days immediately preceding the applicable period and an average
daily trading value for the Common Stock for the 22 days preceding the
applicable period that is equal or greater than $200,000. The purchase
price per share of the Common Stock purchased by Crescent will be equal
to 92% of the average of the lowest three trading days preceding the
applicable date.
Pursuant to the Proposal, the Company will also issue Crescent a five-
year warrant to purchase a number of shares of the Company's Common
Stock equal to $ 6,000,000 divided by the purchase price of the First
Put shares of the Company's Common Stock at an exercise price of 150%
of the purchase price of the First Put. At its sole option, Crescent
may effect a cashless exercise of this warrant.
The Board of Directors is recommending that the Company's
shareholders approve the Summary Financing Proposal which will permit
the Company to proceed with this transaction in the event the Company
and Crescent enter into a definitive agreement.
PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO GIVE EFFECT TO A ONE-FOR-FOUR REVERSE STOCK SPLIT
OF THE COMMON STOCK OF THE COMPANY.
The Board of Directors is recommending that the shareholders approve
the amendment to the Company's Certificate of Incorporation to give effect
to a one-for-four reverse stock split of shares of the Common Stock of the
Company (the "Reverse Stock Split"). The Reverse Stock Split will not change
substantially the rights of holders of the Company's Common Stock.
As of August 17, 2000, there was only one class of Common Stock, of
which there were approximately 843 holders. The number of shares which will
result in fractional interests cannot be precisely predicted as the Company
cannot determine in advance the number of stockholders whose total holdings
are not evenly divisible by four; however, it is not anticipated that a
substantial number of shares will be required to be cashed out. The Reverse
Stock Split is a transaction rather than the first step in a series of
transactions and will not cause the Company's Common Stock to be held of
record by less than 300 persons.
The shares of Common Stock of the Company have traded infrequently and
at very low prices for some years. The Board of Directors has authorized the
Reverse Stock Split to reduce the number of outstanding shares with the
expectation that each share will trade at a higher price.
The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock. There will
be no change in the number of authorized capital stock as a result of the
Reverse Stock Split. However, there will be a change in the number of
authorized capital stock if the proposal to amend the Certificate of
Incorporation to increase the total number of authorized shares of all
classes of capital stock is approved. The number of issued and outstanding
shares will be reduced from 9,063,959 to 2,265,989 (not including treasury
shares). Consequently, the number of authorized but unissued common shares
and treasury shares will increase from 10,944,854 to 17,742,824.
If the amendment is approved by the Company's stockholders, and if the
Board of Directors still believes at that time that the Reverse Stock Split
is in the best interests of the Company and its stockholders, the Company
will file an amendment to its Certificate of Incorporation with the
Secretary of State of Delaware promptly after the Meeting. The Reverse Stock
Split will become effective on the filing date of the amended Certificate of
Incorporation (the "Filing Date") and the stockholders will be notified on or
after the Filing Date that the Reverse Stock Split has been affected. The
Corporation's transfer agent will act as its exchange agent (the "Exchange
Agent") to act for holders of Common Stock in implementing the exchange of
their certificates.
As soon as practicable after the Filing Date, stockholders will be
notified and requested to surrender their certificates representing shares of
Common Stock to the Exchange Agent in exchange for certificates representing
New Common Stock. One share of New Common Stock will be issued in exchange
for each four (4) presently issued and outstanding shares of Common Stock.
For holders of multiple certificates, the Company will aggregate the shares
and divide by the split ratio. In the case of street name holders, the
Company's transfer agent will convert the certificates in accordance with
instructions from the street name holders. To the extent a stockholder holds
a number of shares not evenly divisible by four, the Company will pay cash
for fractional interests.
Stockholders who ostensibly would be entitled to receive fractional
shares because they hold a number of shares of Common Stock not evenly
divisible by four will be entitled, upon surrender to the Exchange Agent of
certificates representing such shares, to a cash payment in lieu thereof at a
price equal to the average of the closing bid and ask prices of the Company's
Common Stock as reported on Nasdaq SmallCap Market on the day prior to the
Filing Date for each such share of Common Stock held prior to the Filing
Date. The number of shares which will result in fractional interests cannot
be precisely predicted as the Company cannot determine in advance the number
of stockholders whose total holdings are not evenly divisible by four. It is
not anticipated that a substantial number of shares will be required to be
cashed out and the Company does not believe the cash out of fractional shares
will result in a material expenditure. The proposed amendment is set forth
in Exhibit A
SELECTION OF AUDITORS
The Board of Directors recommends the selection of Rosenberg Rich Baker
Berman & Company as independent auditors to examine its financial statements
for the fiscal year ending July 31, 2001.
Representatives of Rosenberg Rich Baker Berman & Company are expected
to be present at the annual meeting of shareholders with the opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
mentioned above to be presented to the meeting.
SHAREHOLDER PROPOSALS
Proposals by any shareholders intended to be presented at the next
Annual Meeting of Shareholders must be received by the Company for inclusion
in material relating to such meeting not later than May 15, 2001.
EXPENSES
All expenses in connection with solicitation of proxies will be borne
by the Company. Officers and regular employees of the Company may solicit
proxies by personal interview and telephone and telegraph. Brokerage houses,
banks and other custodians, nominees and fiduciaries will be reimbursed for
out-of-pocket and reasonable expenses incurred in forwarding proxies and
proxy statements.
By Order of the Board of Directors,
Robert S. Benou
President
Exhibit A
Certificate of Amendment
of
Certificate of Incorporation
of
CONOLOG CORPORATION
_________________________________________________________________
Under Section 242 of the
Delaware General Corporation Law
_________________________________________________________________
Conolog Corporation, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation") hereby certifies as
follows:
1. The Certificate of Incorporation of the Corporation is
hereby amended by changing the article thereof numbered fourth so that, as
amended, said Article FOURTH shall be and read as follows:
"FOURTH: The total number of shares of all
classes of stock which the Corporation is authorized
to issue is one hundred sixty-five million
(165,000,000) shares of which fifteen million
(15,000,000) shares having a par value of $.50 per
share are to be classified as Preferred Stock and one
hundred fifty million (150,000,000) shares, having a
par value of $.01 per share are to be classified as
Common Stock.
Each four (4) shares of the Corporation's
Common Stock, par value $.01 per share, issued and
outstanding as of the close of business on August 16,
2000 shall be converted and reclassified into one (1)
share of the Corporation's Common Stock, par value
$.01 per share, so that each share of the
Corporation's Common Stock $.01 par value per share,
issued and outstanding is hereby converted and
reclassified. No fractional interests resulting from
such conversion shall be issued, but in lieu thereof,
the Corporation will pay cash for each currently
issued and outstanding share of Common Stock, par
value $.01 per share, representing such fractional
interest at a price equal to the average of the
closing bid and ask prices of the Corporation's
Common Stock as reported on the Nasdaq SmallCap
Market on the day prior to the filing date of this
Amendment."
2. The foregoing amendment has been duly adopted in accordance
with the provisions of Section 242 of the General Corporation law of the
State of Delaware by the vote of a majority of each class of outstanding
stock of the Corporation entitled to vote thereon.
IN WITNESS WHEREOF, we have signed this Certificate this ____ day
of October, 2000.
__________________________
Robert S. Benou, President
ATTEST:
__________________________
Arpad J. Havasy, Secretary
Exhibit B
2000/2001 STOCK OPTION PLAN
OF
CONOLOG CORPORATION
Adopted by the Board of Directors
October 2000
1. Purpose.
The purpose of this Conolog 2000/2001 Incentive Stock Option Plan
(the "Plan") is to reward directors, officers, key employees and consultants
for their best efforts on behalf of the Company, to induce such employees to
remain in the employ of the Company, to attract talented individuals to join
the Company, to motivate such employees to exert their best efforts on behalf
of the Company, and to encourage such employees to secure or increase their
stock ownership in the Company.
As used in the Plan, the term "incentive stock options" means
options which are intended to qualify as incentive stock options within the
meaning of section 422A of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"), and which are designated as incentive stock
options in the Option Agreement. The term "nonqualified stock options" means
options which are not intended to qualify as incentive stock options, and
which are designated as nonqualified stock options in the Option Agreement.
2. Stock Subject to the Plan.
The stock to be issued upon exercise of options granted under the
Plan shall consist of authorized but unissued shares (or of reacquired
shares) of the Common Stock, $.01 par value, of the Company. The maximum
number of shares for which options may be granted under the plan is 300,000
and further subject to adjustments as provided in Section 6.
If any options granted under the Plan expire or terminate for any
reason without having been exercised in full, the unpurchased shares shall
become available for further options pursuant to the Plan.
3. Eligibility of Optionees.
Options may be granted only to officers, key employees, directors
or consultants of the Company or any subsidiary (all references in this Plan
to officers, key employees, directors or consultants of the Company shall
also refer to and include officers, key employees, directors or consultants
of the Company or any subsidiary of the Company). For purposes of this Plan,
an individual shall be deemed to be a consultant if the individual performs
services for the Company in a capacity other than as employee or director.
More than one option may be granted to any optionee.
In no event shall an option be granted to any person who, at the
time of grant, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its parent
or subsidiary corporations; provided, however, that this restriction shall
not apply if at the time of grant the option price is not less than 110% of
the fair market value of the stock subject to the option and such option is
not exercisable after the expiration of five (5) years from the date of
grant.
4. Administration.
The Plan shall be administered by a Stock Option Committee of the
Board of Directors of the Company (the "Committee") which shall be composed
of at least two (2) members of the Board. No member of the Committee shall
be eligible to participate nor shall have been eligible to participate in the
Plan for a period of at least one (1) year prior to his or her election to
serve on the Committee.
Subject to the express provisions of the Plan, the Committee
shall have full authority (a) to determine, in its discretion, the
individuals to whom, and the times at which, options shall be granted,
whether the option granted shall be an "incentive stock option" or a
"nonqualified stock option", the number of shares subject to each option, the
price or prices at which such shares may be purchased from the Company, and
the provisions of the respective option agreements (which need not be
identical), including provisions concerning the time or times, when, and the
extent to which, the options may be exercised, the conditions of exercise
(including non-competition with the Company after termination of employment)
and the effect of approved leaves of absence on continuity of service; (b) to
prescribe, amend and rescind rules and regulations relating to the Plan; (c)
to interpret the Plan and the respective option agreements; and (d) to make
all other determinations necessary or advisable for administering the Plan.
All determinations and interpretations by the Committee shall be binding and
conclusive upon all parties.
5. Terms and Conditions of Options.
Subject to the following provisions, all options granted under
this Plan shall be in such form and upon such terms and conditions as the
Committee, in its discretion, may from time to time determine:
(a) Option Price.
(I) Incentive Stock Options. The purchase price per share
under each Incentive Stock Option shall be determined by the Committee. In
no event, however, shall the price per share under each Incentive Stock
Option be less than 100% of the fair market value of the Common Stock on the
date of grant.
The Committee may, at its discretion, provide that the fair
market value shall be the lowest fair market value on any day up to thirty
days after the date of grant. If within that period of up to thirty days the
fair market value of the Common Stock is less than the fair market value on
the date of grant, then the date in that period on which the fair market
value is lowest will be deemed to be the date of grant. In any case, the
fair market value shall be determined in the manner chosen by the Committee
as permitted by the Code.
(II) Nonqualified Stock Options. The option price per share
under each Option granted under the Plan as a nonqualified option shall be
determined and fixed by the Committee in its discretion, but shall not be
less than eighty-five percent (85%) of the fair market value of such Shares
on the date of grant of such Option (determined as provided in subsection
(a)(i) above.
(b) Term. Each option granted under the Plan shall terminate no
later than ten years after the date on which it was granted, but the
Committee in its discretion may prescribe a shorter period for any individual
option or options.
(c) Offset Provisions. If the Committee so determines and the
applicable instrument or instruments evidencing the option so provide, the
exercise of all or any part of an option granted under this Plan may result
in the reduction or termination of another option granted under this Plan to
the extent so determined and provided.
(d) Exercise. An option shall be exercised by written notice of
such exercise, in the form prescribed by the Committee, to the Secretary or
Treasurer of the Company, at its principal office. The notice shall specify
the number of shares for which the option is being exercised (which number,
if less than all of the shares then subject to exercise, shall be 50 or a
multiple thereof) and shall be accompanied by payment in full of the purchase
price of such shares. No shares shall be delivered upon exercise of any
option until all laws, rules and regulations which the Board of Directors or
the Committee may deem applicable have been complied with. If a registration
statement under the Securities Act of 1933 is not then in effect with respect
to the shares issuable upon such exercise, it shall be a condition precedent
that the person exercising the option give to the Company a written
representation and undertaking, satisfactory in form and substance to the
Board of Directors or the Committee, that he is acquiring the shares for his
own account, for investment and not with a view to the distribution thereof.
(e) Payment. Payment for shares purchased upon exercise of an
option shall be made either in full or installments, as shall be determined by
the Committee and provided in the applicable instrument or instruments
evidencing such option. If payment is made in installments, the option holder
shall be required to make a down payment in cash of an amount equal to at least
20 percent of the total option price of the shares purchased and to deliver to
the Company his or her promissory installment note payable to the Company for
an amount equal to the difference between the total option price of the
shares then being purchased and the amount of such down payment. Such note
shall bear interest at such rate as the Committee shall determine of not less
than the applicable federal rate (as defined in the Internal Revenue code of
1986, as amended, and must pledge the shares purchased as security. The
option holder shall pay the balance of the option price as provided in such
note and subject to such terms and conditions as may be provided in the
applicable instrument or instruments evidencing the option; in any event, he
or she shall make such payments as may be necessary to make the aggregate
payments on account of the total option price equal to:
(1) at least 40 percent of the total option price of the shares
purchased by the end of 18 months from the date of purchase,
(2) at least 60 percent of the total option price by the end of three
years from the date of purchase,
(3) at least 80 percent of the total option price by the end of four
years from the date of purchase and
(4) the entire amount of the total option price by the end of the
five years from the date of purchase.
Dividends on partly paid shares issued to such option holder
(other than dividends in stock of the Company) shall be declared and paid
only upon the basis of the percentage of the total option price actually
received thereon by the Company, and any such dividends paid prior to final
payment for the shares shall be applied by the Company against unpaid
installments of the promissory members evidencing the option holder's
indebtedness for the option price in the order of their maturity.
Certificates for partly paid shares shall be registered in the name of the
option holder and shall, immediately upon issue, be delivered to the Company,
endorsed in blank by the option holder or accompanied by a separate stock
power so endorsed, in pledge as security for the payment of the unpaid
balance of the option price. The certificates issued to represent party paid
shares shall state thereon the total amount of the consideration to be paid
therefor and the amount paid thereon.
(f) The person exercising an option shall not be considered a
record holder of the stock so purchased for any purpose until the date on
which he is actually recorded as the holder of such stock upon the stock
records of the Company.
(g) The Company shall pay all original issue and transfer taxes
with respect to the issue and transfer of shares of Common Stock of the
Company pursuant hereto and all other fees and expenses necessarily incurred
by the Company in connection therewith.
(h) The aggregate fair market value (determined as of the date
an Incentive Stock Option is granted) of the stock with respect to which an
Incentive Stock Option is exercisable for the first time by any employee
during any calendar year under all plans of the Company (and parent and
subsidiary corporations) shall not exceed $100,000.
(i) No holder of any option under the Plan shall, by virtue of
holding such option, be entitled to any rights of a stockholder in the
Company.
(j) Termination of employment. Upon the termination of an
option holder's employment for any reason other than death, disability or
termination for cause his or her option privileges shall be limited to the
shares which were immediately purchasable by him at the date of such
termination, and such option privileges shall expire unless exercised within
three months after the date of such termination, but not later than the date
of expiration of the option. If an option holder's employment is terminated
for cause, all rights under his or her option shall expire immediately upon
the giving to the option holder of the notice of such termination.
(k) Death of option holder. Upon the death of an option
holder, his or her option privileges shall apply to those shares which were
immediately purchasable at the time of death and such privileges shall expire
unless exercised (by the executor or administrator of the option holder's
estate or by a person who acquired the right to exercise such option by
bequest or inheritance or by reason of the option holder's death) within (1)
12 months after the date of death, or (2) in the event of death following
termination of employment by reason of retirement pursuant to the terms of a
retirement program of the Company, the period in which the option privileges
may be exercised upon termination by reason of such retirement as provided by
the Committee in the applicable instrument or instruments evidencing the
option, whichever period terminates last, or such longer period as may be
permitted by the Committee in a special case, but in no event later than the
date of expiration of the option.
6. Adjustments Upon Changes in Capitalization.
The option agreements shall contain such provisions as the
Committee shall determine to be appropriate for the adjustment of the kind
and number of shares subject to each outstanding option, or the option
prices, or both, in the event of any changes in the outstanding Common Stock
of the Company by reason of stock dividends, stock splits, recapitalization,
reorganizations, mergers, consolidations, sales or exchanges of assets,
combinations or exchange of shares, offering of subscription rights or any
other type of change. In the event of any such change in the outstanding
Common Stock, the kind and aggregate number of shares available under the
Plan shall be appropriately adjusted by the Committee, whose determination
shall be conclusive.
7. Term of Plan.
The Board of Directors may terminate this Plan at any time.
Termination of the Plan will not affect rights and obligations theretofore
granted and then in effect. No options may be granted later than ten years
from the date listed on page one hereof as the date of the Plan's adoption by
the Board of Directors.
8. Transferability.
Options granted under this Plan shall provide that they will not
be transferable.
9. Amendment and Revocation.
The Board of Directors alone shall have the right to alter, amend
or revoke the Plan or any part thereof at any time and from time to time,
provided, however, that without the consent of the optionees, no change may
be made in any option theretofore granted which will impair the rights of
existing optionees; and provided further that the Board of Directors may not,
without the approval of the holders of a majority of the outstanding Common
Stock, make any alteration or amendment to the Plan which changes the
aggregate number of shares of Common Stock which may be issued, under the
plan, extend the term of the Plan or of options granted thereunder, reduce
the option price below that now provided for in the Plan, change the
conditions or exercise of options not provided for in the Plan, or change the
employees or class of employees eligible to receive options thereunder.
10. Ratification of the Plan.
This Plan shall be submitted to the stockholders of the Company
for approval at a meeting to be held within three months following its
adoption by the Board.
CONOLOG CORPORATION
PROXY
Annual Meeting of Shareholders - October 12, 2000.
The undersigned shareholder of Conolog Corporation (the
"Company") hereby appoints Robert S. Benou the attorney and proxy of the
undersigned, with full power of substitution, to vote, as indicated herein,
all the common shares of the Company standing in the name of the undersigned
at the close of business on August 16, 2000 at the Annual Meeting of
Shareholders of the Company to be held at the offices of Milberg Weiss
Bershad Hynes & Lerach LLP, One Pennsylvania Plaza, New York, New York 10119
at 5:00 p.m., local time, on 12th day, October, 2000, and at any and all
adjournments thereof, with all the powers the undersigned would possess if
then and there personally present and especially (but without limiting the
general authorization and power hereby given) to vote as indicated on the
proposals, as more fully described in the Proxy Statement for the meeting.
(Please fill in the reverse side and return promptly in the enclosed
envelope.)
Please mark boxes x or fill in with blue or black ink.
1. Election of Directors.
FOR all nominees __
WITHHOLD authority only for those nominees whose name(s) I
have written below __
WITHHOLD authority for ALL nominees __
Nominees for Directors are: Robert S. Benou
Arpad J. Havasy
Louis S. Massad
Marc R. Benou
Edward J. Rielly
2. Proposal to amend the Certificate of Incorporation to increase the
total number of authorized shares of all classes of stock.
For ___ Against ___ Abstain ___
3. Proposal to approve the 2000/2001 Stock Option Plan.
For ___ Against ___ Abstain ___
4. Proposal to approve the Summary Financing Proposal between the
Company and Crescent International Ltd.
For ___ Against ___ Abstain ___
5. Proposal to amend the Certificate of Incorporation to give effect to
a one-for-four reverse stock split of the common stock of the
Company.
For ___ Against ___ Abstain ___
6. Proposal to approve the selection of Rosenberg Rich Baker Berman &
Company as the Company's independent auditors for the fiscal year
ending July 31, 2001.
For ___ Against ___ Abstain ___
7. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment or adjournments thereof.
For ___ Against ___ Abstain ___
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE VOTED FOR THE
ELECTION OF THE PROPOSED DIRECTORS AND FOR THE ABOVE PROPOSALS UNLESS
OTHERWISE INDICATED.
[Sign, Date and Return the Proxy
Card Promptly Using the Enclosed
Envelope.]
SIGNATURE(S) should be exactly
as name or names appear on this
proxy. If stock is held
jointly, each holder should
sign. If signing is by
attorney, executor, adminis-
trator, trustee or guardian,
please give full title.
Dated _____________, 2000
________________________________________
Signature
________________________________________
Print Name
________________________________________
Signature
________________________________________
Print Name
August 25, 2000
