-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EP+gIApvMtDpwoIEYckwDymUtStUwL/yFivjJMjJb+FXThiw7tsxC30iS6ntbzhK SE8MbUuRGhMi0lnaidzQSg== 0001021771-00-000138.txt : 20001212 0001021771-00-000138.hdr.sgml : 20001212 ACCESSION NUMBER: 0001021771-00-000138 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20001211 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CONOLOG CORP CENTRAL INDEX KEY: 0000023503 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 520853566 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-18454 FILM NUMBER: 786945 BUSINESS ADDRESS: STREET 1: 5 COLUMBIA RD CITY: SOMERVILLE STATE: NJ ZIP: 08876 BUSINESS PHONE: 9087228081 MAIL ADDRESS: STREET 1: 5 C0LUMBIA ROAD CITY: SOMERVILLE STATE: NJ ZIP: 08876-3588 FORMER COMPANY: FORMER CONFORMED NAME: DSI SYSTEMS INC DATE OF NAME CHANGE: 19751218 FORMER COMPANY: FORMER CONFORMED NAME: DATA SCIENCES INC DATE OF NAME CHANGE: 19751218 FORMER COMPANY: FORMER CONFORMED NAME: MICROSEARCH SYSTEMS INC DATE OF NAME CHANGE: 19690115 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CLOG II LLC CENTRAL INDEX KEY: 0001129716 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 64 SHELTER LANE CITY: ROSLYN STATE: NY ZIP: 11577 BUSINESS PHONE: 5166217411 MAIL ADDRESS: STREET 1: 64 SHELTER LANE CITY: ROSLYN STATE: NY ZIP: 11577 SC 13D 1 0001.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 SCHEDULE 13D (Rule 13d-101) Under the Securities Exchange Act of 1934 Conolog Corporation (Name of Issuer) Common Stock, $.01 Par Value (Title of Class of Securities) 208254 40 9 (CUSIP Number) Fred S. Skolnik, Esq. Certilman Balin Adler & Hyman, LLP 90 Merrick Avenue, East Meadow, NY 11554 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 29, 2000 (Date of Event Which Requires Filing of This Statement) If the Filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1 (b)(3) or (4), check the following box [ ] *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP No. 208254 40 9 Page 2 of 8 Pages 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Clog II LLC ("Clog II") I.R.S. Identification Number: Application pending Warren Schreiber ("Schreiber") 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[ ] (b)[ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS* N/A 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [X] 6 CITIZENSHIP OR PLACE OF ORGANIZATION Clog II - State of New York Schreiber - United States of America NUMBER OF SHARES 7 SOLE VOTING POWER Clog II - 0 Schreiber - 25,000 BENEFICIALLY OWNED BY 8 SHARED VOTING POWER Clog II - 3,000,000 Schreiber - 3,007,390 (includes amounts owned by Clog II) EACH REPORTING 9 SOLE DISPOSITIVE POWER Clog II - 0 Schreiber - 25,000 PERSON WITH 10 SHARED DISPOSITIVE POWER Clog II - 3,000,000 Schreiber - 3,007,390 (includes amounts owned by Clog II) 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Clog II - 3,000,000 Schreiber - 3,032,390 (includes amounts owned by Clog II) 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Clog II - 24.9% Schreiber - 25.1% (includes percentage owned by Clog II) 14 TYPE OF REPORTING PERSON* CO, IN 3 Item 1. Security and Issuer. The Reporting Persons are making this statement in reference to shares of Common Stock, par value $.01 per share (the "Common Stock"), of Conolog Corporation, a Delaware corporation ("Conolog" or the "Issuer"). The address of Conolog's principal executive offices is 5 Columbia Road, Somerville, NJ 08876. Item 2. Identity and Background. The Reporting Persons are making this statement pursuant to Rule 13d-1(a). (a) Names: Clog II LLC ("Clog II") Warren Schreiber (b) Residence or business address: Clog II: ------- 64 Shelter Lane Roslyn, New York 11577 Warren Schreiber ---------------- 64 Shelter Lane Roslyn, New York 11577 (c) Warren Schreiber is employed as Chairman and President of The Skyes Corporation, a corporation primarily engaged in the business of consulting and investing, of which Mr. Schreiber is the sole shareholder. Clog II is a limited liability company established for the sole purpose of investing in the Issuer. Mr. Schreiber the manager of Clog II. (d) On or about September 2, 1999, seven individuals (including Mr. Schreiber) and three brokerage firms were indicted in the United States District Court - Southern District of New York on various counts relating to securities. On September 8, 2000, Mr. Schreiber pled guilty to eight counts of securities fraud as well as conspiracy to commit securities fraud, mail fraud, wire fraud and make false statements in public offerings. Mr. Schreiber has not yet been sentenced. (e) On September 7, 1995, the Market Surveillance Committee of the National Association of Securities Dealers (the "NASD") (the "MSC") issued a decision in which Mr. Schreiber was censured, fined $100,000, barred from association with any NASD member in any capacity, and assessed costs of $22,104. This decision, which was appealed to the Securities and Exchange Commission (the "Commission"), found that Mr. Schreiber (i) knowingly participated at various times in the unregistered distribution of securities of a company (unrelated to the Issuer) in violation of Article III, Section 1 of the NASD's Rules of Fair Practice ("Conduct Rule 4 2110"); (ii) knowingly employed manipulative and deceptive practices in connection with the acquisition of securities to obtain control of a company (unrelated to the Issuer) in violation of Conduct Rule 2110, Article III, Section 18 of the NASD's Rules of Fair Practice, Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder; (iii) recommended and effected the purchase of stock of a company (unrelated to the Issuer) while in possession of material, non-public information, in violation of Conduct Rules 2110 and 2120, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; (iv) engaged in securities transactions with or on behalf of customers without disclosing that Castleton, Rhodes, Inc. (the "Firm") and the company (unrelated to the Issuer) were under common control, in violation of Conduct Rule 2110, and Article III, Section 13 of the NASD's Rules of Fair Practice; and (v) engaged in an improper distribution of equity securities issued by an affiliate of the Firm in violation of Conduct Rule 2110 and Schedule E of the NASD's By-Laws. The Commission found that the NASD's MSC made generalized findings as to the credibility of a key witness and Mr. Schreiber, and that the MSC's decision did not reflect whether the factfinder considered substantial evidence that contradicted these findings. The Commission determined that it could not complete its review function in this manner until the NASD had provided the Commission with clarification of the basis of its credibility determinations. The Commission's remand will permit the NASD to discuss explicitly the record evidence bearing on witness credibility. In ordering the remand, the Commission expressed no view on the outcome of this proceeding. The Commission remanded the proceeding to the NASD and ordered that the sanctions imposed by the NASD be vacated. On July 22, 1999, the Review Subcommittee of the National Adjudicatory Council of the NASD ordered the NASD Office of Hearing Officers to conduct an evidentiary hearing on the issues raised in the Commission's remand order. On May 23 and 24, 2000, an evidentiary hearing was held in New York, New York. On December 1, 2000, the proceeding was ordered stayed. To date, no decision has been issued. (f) Clog II was organized under the laws of the state of New York. Mr. Schreiber is a citizen of the United States. Item 3. Source and Amount of Funds or Other Consideration. The Reporting Persons do not currently know the source of funds that will be used in connection with any exercise of the option described in Item 4 hereof. As of the date hereof, Clog II does not have any assets. Item 4. Purpose of Transaction. Effective November 29, 2000, Clog II and the Issuer entered into an option agreement, pursuant to which Clog II was granted the irrevocable option and right to immediately purchase up to $2,040,000 of the convertible debentures of the Issuer (the "Option Agreement"). The option terminates on November 29, 2002 and may not be exercised for less than $25,000 at any one time. Any convertible debentures issued pursuant to an exercise of the option will mature one year after the date of issuance. The principal amount of any convertible debentures issued will be immediately convertible into shares of Common Stock of the Issuer at a conversion price of $.68 per share (or an aggregate of 3,000,000 shares of 5 Common Stock). Subject to and depending upon the availability of prices deemed favorable by them, the Reporting Persons may choose to exercise the option to acquire the convertible debentures, convert the convertible debentures into shares of Common Stock, and/or purchase additional shares of Common Stock from time to time in the open market, in privately negotiated transactions with third parties, or otherwise. Depending upon prevailing conditions and their evaluation of the factors described above, the Reporting Persons may also determine to dispose of shares of Common Stock held by them in the open market, in privately negotiated transactions with third parties, or otherwise. The Reporting Persons have no present plans or intentions which would result in or relate to any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. (a) Based on its right to acquire shares as described in Item 4 hereof, Clog II beneficially owns 3,000,000 shares of Common Stock, which represent 24.9% of the total shares of Common Stock outstanding as of November 29, 2000. Based upon Clog II's right to acquire shares as described above and Schreiber's position as manager of Clog II, Schreiber beneficially owns the 3,000,000 shares of Common Stock beneficially owned by Clog II. Schreiber's beneficial ownership of shares of Common Stock of the Issuer also includes 7,390 shares of Common Stock owned by Clog LLC, a New York limited liability company ("Clog"), of which Schreiber is a member and the manager. The 3,032,390 shares of Common Stock beneficially owned by Schreiber represent 25.1% of the total shares of Common Stock outstanding as of November 29, 2000. The percentage for the Reporting Persons was calculated using as the denominator the sum of (i) the 3,000,000 shares of Common Stock issuable as described in Item 4 hereof and (ii) the 9,063,959 outstanding shares of Common Stock as of October 27, 2000, based upon the Annual Report on Form 10-KSB filed by Conolog for the fiscal year ended July 31, 2000. (b) Clog II has shared voting and dispositive power with respect to the 3,000,000 shares of Common Stock of the Issuer beneficially owned by it. Schreiber has shared voting and dispositive power with respect to the 3,007,390 shares of Common Stock of the Issuer beneficially owned by Clog II (3,000,000) and Clog (7,390) and sole voting and dispositive power with respect to 25,000 shares of Common Stock of the Issuer owned by Schreiber individually. 6 (c) The following is a summary of the transactions in the Common Stock of the Issuer made by Clog in the last sixty days:
Number of Shares Approximate Price Date of Transaction Type of Transcation of Common Stock Per Share ------------------- ------------------- --------------- --------- November 14, 2000 Open Market Sale 4,700 $.625 November 14, 2000 Open Market Sale 300 $.656 November 14, 2000 Open Market Sale 5,000 $.686 November 14, 2000 Open Market Sale 1,000 $.625 November 15, 2000 Open Market Sale 6,500 $.625 December 7, 2000 Open Market Sale 5,000 $.855 December 7, 2000 Open Market Sale 10,000 $.855
(d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. The Option Agreement provides that Clog II shall vote any shares of Common Stock acquired pursuant to the terms thereof in the same proportion as votes are cast by the other stockholders of Conolog. The Option Agreement further provides that, on or before January 10, 2001, Conolog has agreed to use its best efforts to file a registration statement (the "Registration Statement") with the Commission covering the 3,000,000 shares of Common Stock described in Item 4 hereof. Conolog has agreed to 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 3,000,000 shares of Common Stock described in Item 4 hereof and registered pursuant to the Registration Statement shall have been sold or otherwise transferred. Item 7. Material to be Filed as Exhibits. (1) Agreement among the Reporting Persons. (2) Option Agreement, dated as of November 29, 2000, between Clog II and the Issuer. 7 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: December 11 , 2000 ---- Clog II LLC By: /s/ Warren Schreiber ---------------------------------------- Warren Schreiber, Manager /s/ Warren Schreiber --------------------------------------- Warren Schreiber 8 EXHIBIT 1 The undersigned agree that the Schedule 13D to which this Agreement is attached is filed on behalf of each one of them. Dated: December 11, 2000 Clog II LLC By: /s/ Warren Schreiber ------------------------------------ Warren Schreiber, Manager /s/ Warren Schreiber ------------------------------------ Warren Schreiber 9 EX-2 2 0002.txt OPTION AGREEMENT 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 II LLC, a New York limited liability company, having an address at 64 Shelter Lane, Roslyn, New York 11577 (the "Optionee"), dated as of the 29th day of November, 2000. 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, in consideration of one dollar and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, 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 $2,040,000, 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 $100,000 principal amount of Convertible Debentures, (i) the provisions of Sections 1 and 3 of the Form of Convertible Debenture attached hereto as Exhibit A shall not be included therein; and (ii) the issuance or sale by the Company of 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 the current market price per share (as defined in Section 2.4(c) of the form Convertible Debenture) shall constitute an Event of Default unless used to repay such $100,000 Convertible Debenture including accrued interest in full, provided, however, the Company can issue up to 500,000 bonus shares to its employees during any 12-month period. 2. Term of Option; Exercise. (a) The Option shall terminate on November 29, 2002 subject to extension by the Company. The Option shall be exercisable in whole or in part, as determined by the Optionee, provided, however, that no exercise shall be permitted for less than $25,000 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 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 January 10, 2001, 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 3,000,000 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 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 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 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 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 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 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 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 agreement of the Optionee contained in or contemplated by, this Agreement. (c) The Optionee acknowledges that it and each of its members 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 members 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 transaction 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 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 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. This Agreement has been duly authorized by all necessary corporate action, including, without limitation, Board of Directors approval, and no other corporate approval, including, without limitation, approval by the shareholders of the Company, is required in connection therewith. (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, including, without limitation, the Nasdaq Stock Market, 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. The par value of the shares of Common Stock of the Company is $.01 per share. (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 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. 8. Agreement of the Optionee Concerning Voting. While the Optionee holds any Conversion Shares, it agrees to vote such shares in the same manner and proportion as the other shareholders of the Company (e.g., if a shareholder vote on a proposal is required and, of the votes cast, 60% vote for, and 40% vote against the proposal, the Conversion Shares will be voted 60% for, and 40% against the proposal). 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, 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, 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. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and year first above written. CONOLOG CORPORATION By: /s/ Robert S. Benou ----------------------------- Robert S. Benou, President CLOG II LLC By: /s/ Warren Schreiber ----------------------------- Warren Schreiber, Manager Exhibit A 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 CLOG II LLC (the "Payee"), with its principal business address at 64 Shelter Lane, Roslyn, New York 11577, the principal amount of ______________________________ ____________ 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, Payee 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 cumulative dividend of 8% per annum, which may be payable by the issuance of additional shares of Series C Preferred Stock valued at $5.00 per share. The Preferred Stock will be convertible into common stock at the rate of Exhibit A 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 Twenty-five Thousand Dollars ($25,000), 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 $ 0.68 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 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 Exhibit A 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) immedi ately 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, Etc. 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 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 Exhibit A 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 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 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. Exhibit A 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, reclassification, 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 Exhibit A 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 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. Exhibit A 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 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 November 29, 2000, 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 March 10, 2001 (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 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. Exhibit A 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: CONOLOG CORPORATION By: ----------------------------------------- Robert S. Benou, President Exhibit A 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 $25,000) 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: ________________ CLOG II LLC By:_________________________________ Warren Schreiber, Managing Member Address: 64 Shelter Lane Roslyn, New York 11577 Taxpayer Identification No.: -------------------------------------------------- Amount to be Converted: $ --------------------------- -----END PRIVACY-ENHANCED MESSAGE-----