FORM OF
CONOLOG CORPORATION
SELLING AGENT AGREEMENT
Dated as of January 18, 2006
_________________________
_________________________
_________________________
_________________________
Gentlemen:
Conolog Corporation (the "Company") proposes to offer for sale (the
"Offering") in a private offering (or two separate private offerings) pursuant
to Regulation D promulgated under the Securities Act of 1933, as amended (the
"Act") (i) promissory notes in the principal amount of up to $5,000,000, which
are convertible into shares of the Company's common stock at a conversion price
of $1.25 per share (the "Notes") and (ii) common stock purchase warrants
(collectively, the "Securities"). This letter agreement shall confirm our
agreement concerning ____________________________ acting as exclusive selling
or placement agent (the "Selling Agent" or ______) in connection with the sale
of the Securities.
1. Appointment of Selling Agent.
On the basis of the representations and warranties contained herein,
and subject to the terms and conditions set forth herein, the Company hereby
appoints _______________________________ as exclusive selling agent/placement
agent for a period beginning on the date hereof and terminating on January 27,
2006 (unless terminated sooner pursuant to the terms hereof) and grants to ____
the right to offer, as its agent, the Securities pursuant to the terms of this
Agreement. On the basis of such representations and warranties, and subject to
such conditions, ____ hereby accepts such appointment and agree to use its
reasonable best efforts to secure subscribers to purchase subscriptions for the
Securities. The Company understands that the Selling Agent is being retained to
obtain subscriptions on a "best efforts" basis and has not guaranteed the sale
of any Securities.
2. Terms of the Offering.
(a) The Offering shall consist of (i) Notes and (ii) common stock
purchase warrants ("Warrants"). The Offering is being made on a "best efforts"
basis with no minimum offering amount of subscriptions, and the parties shall
use their reasonable efforts to consummate an initial closing of subscriptions
prior to January 20, 2005 with a final closing on or before January 27, 2006.
In the event a subscription is not accepted, such rejected subscription funds
will be returned to the subscriber without interest or deduction.
(b) The Company has prepared a Securities Purchase Agreement and
Form of Warrant to be delivered to all prospective investors (the "Securities
Purchase Agreement"). The
Securities Purchase Agreement, and form of Warrant, including all supplements,
exhibits and appendices thereto and documents delivered therewith, are referred
to herein as the "Documents" and shall include any supplements or amendments in
accordance with this Agreement. The Offering shall commence on the date hereof,
and shall expire at 3:00 p.m., New York time, on January 27, 2006, unless
extended as provided above. Such period, as same may be so extended, shall
hereinafter be referred to as the "Offering Period."
(c) Each prospective investor ("Prospective Investor") who desires
to purchase Securities shall deliver to the Selling Agent the Securities
Purchase Agreement and immediately available funds in the amount necessary to
purchase the amount of Securities such Prospective Investor desires to purchase.
The Selling Agent shall not have any obligation to independently verify the
accuracy or completeness of any information contained in any Purchase Agreement
or the authenticity, sufficiency, or validity of any check delivered by any
Prospective Investor in payment for Securities. Purchasers in the Offering shall
be "accredited investors" as determined in accordance with Regulation D.
3. Closing/Release of Funds.
The closing ("Closing") shall be held at such time as the conditions as
provided in the Securities Purchase Agreement have been satisfied. References
herein to the actual closing date thereof shall be referred to as a "Closing
Date."
4. Representations and Warranties of the Selling Agent.
The Selling Agent represents and warrants to the Company as follows:
(a) The Selling Agent is duly incorporated and validly existing and
in good standing under the laws of its State of incorporation.
(b) The Selling Agent is, and at the time of each Closing will be, a
member in good standing of the NASD.
(c) Offers and sales of Securities by the Selling Agent will be made
only in accordance with this Placement Agreement and in compliance with the
provisions of Regulation D and the Selling Agent will furnish to each investor a
copy of the Documents prior to accepting any subscription for the Securities.
5. Compensation.
(a) The Selling Agent shall be entitled, on the Closing Date, as
compensation for its services as Selling Agent under this Agreement, to selling
Commissions payable in cash equal to 10% of the aggregate amount of the Notes
sold in the Offering, provided the Company has actually received the proceeds of
such sales, through subscriptions made by investors introduced by ____ to the
Company.
(b) In addition to the compensation payable to the Selling Agent set
forth in clause (a) above, the Company shall grant the Selling Agent (or its
assigns, subject to compliance with the terms and conditions of this Section)
warrants to purchase a number of shares of Common Stock equal to 20% of the
shares of Common Stock which would be issued if the Notes sold in the Offering
(based
upon a conversion price equal to 103% of the closing bid price of the Company's
common as reported on the Nasdaq Capital Market as reported by Bloomberg L.P.
for the trading day proceeding the Closing Date (the "Warrant Exercise Price"))
were converted with an exercise price equal to the Warrant Exercise Price
("Selling Agent Warrants"). The Selling Agent Warrants shall be exercisable at
any time after the sooner of 180 days from the that the Warrant is issued (the
"Issue Date") or the date the Company obtains the Approval as defined in Section
9 (r) of the Subscription Agreement if the Approval is required by the
applicable NASD Market Place Rules and/or Nasdaq's corporate governance rules,
until 5:00 p.m., E.S.T. on the fifth (5th) anniversary of the Issue Date and the
Selling Agent shall be entitled to registration rights with respect to the
shares of Common Stock underlying the Selling Agent Warrants on the same terms
and conditions as provided to investors in the Offering. The Selling Agent
Warrants may be issued to up to ten employees and/or affiliates of the Selling
Agent in such amounts as the Selling Agent shall notify in writing the Company
prior to the Closing, provided the Selling Agent provides the Company with
evidence reasonably satisfactory to the Company demonstrating its compliance
with applicable security laws, which shall include, without limitation, a legal
opinion from the Selling Agent's counsel that such issuance to ______ employees
and/or affiliates is exempt from the registration requirements of applicable
securities laws and that such issuance to ______ employees and affiliates will
not result in a public distribution of the Selling Agent Warrant.
6. Representations and Warranties of the Company.
(a) The Company represents and warrants to, and agrees with, the
Selling Agent that:
(i) No Documents or information provided by the Company to the
Subscribers, including, without limitation the Reports (as defined in the
Purchase Agreement), shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein in light of circumstances made therein not
misleading.
(ii) The Company is, and at all times during the period from the
date hereof to and including the Closing Date will be, a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, with full corporate power and authority, and has obtained all
necessary consents, authorizations, approvals, orders, licenses, certificates,
and permits and declarations of and from, and has made filings with, all
federal, state and local authorities, to own, lease, license, and use its
properties and assets and to conduct its business as presently conducted and/or
in any such case where the failure to have any of the foregoing would not have a
material adverse effect on the Company's presently conducted business. As of the
date hereof, the Company is, and at all times during the period from the date
hereof to and including the Closing Date, duly qualified to do business and is
in good standing in every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of its business makes
such qualification necessary except where the failure to be so qualified would
not have a material adverse effect on the Company's business.
(iii) As of the date hereof, except as disclosed in the Documents
or the or the Reports as this term is defined in the Securities Purchase
Agreement, there is no, and as of the Closing Date there shall not be any,
litigation, arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending or to the Company's knowledge threatened,
with respect to the
Company, or its respective operations, businesses, properties, or assets, except
as described in the Purchase Agreement, the Reports or which individually or in
the aggregate do not now have and will not in the future have a material adverse
effect upon the operations, business, properties, or assets of the Company.
(iv) The Company is not in violation or breach of, or in default
with respect to, any material term of its Certificate of Incorporation or
By-Laws.
(v) The Company has all requisite corporate power and authority
to execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby. All necessary corporate proceedings of the
Company have been duly taken to authorize the execution, delivery, and
performance by the Company of this Agreement and (subject to the Approval ( as
defined in the Purchase Agreement), if the Approval is required by the
applicable NASD Market Place Rules and/or Nasdaq's corporate governance rules)
the Purchase Agreement and the consummation of the transactions contemplated
hereby and thereby.
(vi) The Selling Agent's Warrants, when issued and delivered
pursuant to the terms of the Offering shall be duly authorized, validly issued,
fully paid and non-assessable, without any personal liability attaching to the
ownership thereof solely by being such holder and shall not have been issued in
violation of any preemptive rights of stockholders.
(vii) Neither the Company nor any of its officers, directors, or
affiliates, has engaged or will engage, directly or indirectly, in any act or
activity that may jeopardize the status of the offering and sale of the
Securities as an exempt transaction under Regulation D of the Securities Act of
1933, as amended.
7. Covenants of the Company.
The Company covenants that it will:
(a) Deliver without charge to the Selling Agent such number of
copies of the Documents and any supplement or amendment thereto as may
reasonably be requested by the Selling Agent.
(b) Notify you promptly of rejection of any subscription. The
Company shall not (i) accept subscriptions from, or make sales of
Securities to, any Subscribers who are not, to the Company's knowledge,
accredited investors, or (ii) unreasonably reject any subscription for
Securities.
(c) The Company shall cause, at its cost and expense, all "blue sky"
filings related to the Offering and required by applicable law to be made in due
and proper form and substance and in a timely manner as required under the laws
of the states in which Securities are sold ("Blue Sky Filings"). In addition,
the Company shall cause, at its cost and expense, a Form D related to the
Offering to be filed with the Securities and Exchange Commission ("SEC") in due
and proper form and substance and in a timely manner. The Company shall deliver
true and correct copies of all Blue Sky Filings and the Form D, as filed with
the SEC, to the Selling Agent within 15 days of the final closing date.
8. Conditions of Closing.
The obligations of the Selling Agent pursuant to this Agreement shall
be subject, in its discretion, to the continuing accuracy of the representations
and warranties of the Company contained herein and in each certificate and
document contemplated under this Agreement to be delivered to the Selling Agent,
as of the date hereof and as of the Closing Date, with respect to the
performance by the Company of its obligations hereunder, and to the following
conditions:
(a) At the Closing, the Selling Agent and the Company shall have
executed documents in form and substance reasonably acceptable to them.
(b) All proceedings taken in connection with the issuance, sale, and
delivery of the Securities shall be satisfactory in form and substance to ___
and the Company.
9. Termination.
This Agreement may be terminated by the Selling Agent (i) at anytime in
the event the Selling Agent has determined, in good faith, that the Documents
fail to contain a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) upon three days written
notice. The Company may not terminate this Agreement in the absence of a
material breach of any covenant, representation or warranty contained in this
Agreement made by the Selling Agent.
10. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Selling
Agent, its officers, directors, partners, employees, agents, and counsel, and
each person, if any, who controls the Selling Agent within the meaning of
Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against any and all loss, liability, claim,
damage, and expense whatsoever (which shall include, for all purposes of this
Section 10, but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained in the Documents, or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company as stated in Section 10(b) with respect to
the Selling Agent expressly for inclusion in the Documents or (ii) any breach of
any representation, warranty, covenant, or agreement of the Company contained in
this Agreement. The foregoing agreement to indemnify shall be in addition to any
liability the Company may otherwise have, including liabilities arising under
this Agreement.
If any action is brought against the Selling Agent or any of its
officers, directors, partners, employees, agent, or counsel, or any controlling
persons of the Selling Agent (an "indemnified party"), in respect of which
indemnify may be sought against the Company pursuant to the foregoing paragraph,
such indemnified party or parties shall promptly notify the Company (the
"indemnifying party") in writing of the institution of such action (but the
failure so to notify shall not relieve the indemnifying party from any liability
it may have other than pursuant to this Section 10(a)) and the indemnifying
party shall promptly assume the defense of such action, including the employment
of
counsel (reasonably satisfactory to such indemnified party or parties) and
payment of expenses. Such indemnified party shall have the right to employ its
own counsel in any such case, but the fees and expense of such counsel shall be
at the expense of such indemnified party unless the employment of such counsel
shall have been authorized in writing by the indemnifying party in connection
with the defense of such action or the indemnifying party shall not have
promptly employed counsel satisfactory to such indemnified party or parties to
have charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be one or more legal defenses
available to it or them or to other indemnified parties which are different from
or additional to those available to one or more of the indemnifying parties, in
any of which events such reasonable fees and expenses of one such counsel shall
be borne by the indemnifying party and the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties. Anything in this paragraph to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any such claim or
action effected without its written consent. The Company agrees to promptly
notify the Selling Agent of the commencement of any litigation or proceedings
against the Company or any of its officers or directors in connection with the
sale of the Securities or the Documents.
(b) The Selling Agent agrees to indemnify and hold harmless the
Company, its officers, directors, employees, agents, and counsel, and each other
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Selling Agent in Section 10(a), with respect
to any and all loss, liability, claim, damage, and expense whatsoever (which
shall include, for all purposes of this Section 10, but not be limited to,
attorneys' fees and any and all expense whatsoever incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim whatsoever and any and all amounts paid in settlement of any claim or
litigation) as and when incurred arising out of, based upon, or in connection
with (i) statements or omissions, if any, made in the Documents in reliance upon
and in conformity with written information furnished to the Company with respect
to the Selling Agent expressly for inclusion in the Documents, and (ii) or any
breach of any representation, warranty, covenant or agreement of the Selling
Agent contained in this Agreement. If any action shall be brought against the
Company or any other person so indemnified based on the Documents and in respect
of which indemnity may be sought against the Selling Agent pursuant to this
Section, the Selling Agent shall have the rights and duties given to the
indemnifying party, and the Company and each other person so indemnified shall
have the rights and duties given to the indemnified parties, by the provisions
of Section 10(a) hereof.
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 10(a) or
10(b) hereof but it is found in a final judicial determination, not subject to
further appeal, that such indemnification may not be enforced in such case, even
though this Agreement expressly provides for indemnification in such case, or
(ii) any indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any officer, director, employee, agent, or
counsel of the Company, or any controlling person of the Company), on the one
hand, and the Selling Agent (including for this purpose any contribution by or
on behalf of an indemnified party), on the other hand, shall contribute to the
losses, liabilities, claims, damages, and expenses whatsoever to which any of
them may be subject, in such proportions as are appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Selling
Agent, on the other hand; provided, however, that if applicable law does not
permit such allocation, then other
relevant equitable considerations such as the relative fault of the Company and
the Selling Agent in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered. The
relative benefits received by the Company, on the one hand, and the Selling
Agent, on the other hand, shall be deemed to be in the same proportion as (x)
the total proceeds from the Offering (net of compensation payable to the
Placement Agent pursuant to Section 5(a) hereof but before deducting expenses)
received by the Company, and (y) the compensation received by the Selling Agent
pursuant to Section 5(a) hereof.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission, or alleged omission
relates to information supplied by the Company or by the Selling Agent, and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and the Selling Agent agree that it would be unjust and
inequitable if the respective obligations of the Company and the Selling Agent
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 10(c). In no case shall the Selling Agent by responsible for
a portion of the contribution obligation in excess of the compensation received
by it pursuant to Section 5(a) hereof. No person guilty of a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 10(c),
each person, if any, who controls the Selling Agent within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partners, employee, agent, and counsel of the Selling Agent, shall
have the same rights to contribution as the Selling Agent, and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, employee, agent,
and counsel of the Company, shall have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 10(c). Anything
in this Section 10(c) to the contrary notwithstanding, no party shall be liable
for contribution with respect to the settlement of any claim or action effected
without its written consent.
11. Non-Solicitation.
The Company agrees that, for a period of 12 months from the date hereof
(the "Non-Solicitation Period"), it shall not solicit any offer to buy from or
offer to sell to any entity listed on Exhibit "A" any securities of the Company
or of any other entity, with any selling agent, placement agent, broker or
dealer other than ____. In the event that during the Non-Solicitation Period,
the Company or any of its affiliates, directly or indirectly, solicits, offers
to buy from or offers to sell to any entity listed on Exhibit "A" any such
securities from any other, placement agent, securities broker or dealer or
selling agent other than ____, the Company shall pay to the Selling Agent an
amount equal to 10% of the aggregate purchase price of such securities so
purchased by the purchasers thereof. Notwithstanding the foregoing, during the
Non-Solicitation Period, the Company shall not give the names of the subscribers
to any other broker dealer or selling or placement agent. Notwithstanding
anything to the contrary herein, it shall not be a violation of this Section if
the Company includes the names of the entities listed on Exhibit "A" in any
public filing made by the Company including but not limited to filings that the
Company makes with Securities and Exchange Commission. Upon receipt of written
request by the Selling Agent, the Company shall promptly deliver to the Selling
Agent the
names of any investors in any offering that the Company completes within 12
months from the date of the Closing.
12. Representations and Agreements to Survive Delivery for a Period of
Two Years from the Date Hereof.
All representations, warranties, covenants, and agreements contained in
this Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and, such representations and warranties shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of the Selling Agent or any indemnified person, or by or on
behalf of the Company or any person or entity which is entitled to be
indemnified under Section 10(b), and shall survive for a period of two years
from the date hereof. In addition, notwithstanding the foregoing and any
election hereunder or any termination of this Agreement, and whether or not the
terms of this Agreement are otherwise carried out, the provisions of Section 10
shall survive for a period of five years from the date hereof.
13. Waiver.
The Selling Agent hereby agrees that Section 11 of the Selling Agent
Agreement between the Selling Agent and the Company dated as of July 15, 2005
shall not apply to the Offering. Without limiting the generality of the
foregoing, the Selling Agent hereby waives the rights granted to it pursuant to
Section 11 solely in connection with the Offering.
14. Notices.
All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and shall be either (i) mailed by first
class mail in which case delivery shall be deemed to be made three days
following deposit in the United States mail; or (ii) sent by overnight courier
service in case delivery shall be deemed to be made upon receipt, to: ____
___________________________________________________________________________
_____________________, Attention: ____________________________ with a copy to
____________________________________________________________________________
Attention: _________________, Esq.; Conolog Corporation, 0 Xxxxxxxx Xxxx,
Xxxxxxxxxx, Xxx Xxxxxx 00000, Attention: Xxxxxx Xxxxx, with a copy to Xxxxxxx
Xxxxx Bershad & Xxxxxxxx LLP, Xxx Xxxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
15. Parties.
This Agreement shall inure solely to the benefit of, and shall be
binding upon, the Selling Agent and the Company and the persons and entities
referred to in Section 10 who are entitled to indemnification or contribution,
and their respective successors, legal representatives, and assigns (which shall
not include any purchaser, as such, of Securities), and no other person shall
have or be construed to have any legal or equitable right remedy, or claim under
or in respect of or by virtue of this Agreement or any provision herein
contained.
16. Construction.
This Agreement shall be construed in accordance with the laws of the
State of New York, without giving effect to conflict of laws.
17. Counterparts.
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement. This Agreement may be executed by facsimile signature and
delivered by facsimile transmission.
If the foregoing correctly sets forth the understanding between us,
please so indicate in the space provided below for that purpose, whereupon this
agreement shall constitute a binding agreement between us.
Very truly yours,
CONOLOG CORPORATION
By: ___________________________
Name:
Title:
Accepted as of the date first above written:
__________________________
By: _______________________________
Name:
Title:
