EXHIBIT 10.4

CONOLOG CORPORATION

SELLING AGENT AGREEMENT

Dated as of July 15, 2005

First Montauk Securities Corp.

Parkway 109 Office Center

328 Newman Springs Road

Red Bank, New Jersey 07701

Gentlemen:

Conolog Corporation (the “Company”) proposes to offer for sale (the “Offering”)
in a private offering pursuant to Regulation S promulgated under the Securities
Act of 1933, as amended (the “Act”) up to an aggregate of up to $1,500,000 of
its shares of common stock and common stock warrants (collectively, the
“Securities”). This letter agreement shall confirm our agreement concerning
First Montauk Securities Corp. acting as exclusive selling or placement agent
(the “Selling Agent” or “FMSC”) 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 First
Montauk Securities Corp. as exclusive selling agent/placement agent for a period
beginning on the date hereof and terminating on July 29, 2005 (unless terminated
sooner pursuant to the terms hereof) and grants to FMSC 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, FMSC
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 up to 1,200,000 shares of the Company’s
Common stock, par value $.001 per share. The Company will also issue to the
Subscribers one warrant to purchase a shares of the Company’s Common Stock for
each share of common stock that is sold to the Subscribers. The Offering is
being made on a “best efforts” basis with no minimum offering amount of
subscriptions, which must be received prior to July 22, 2005, unless extended to
July 29, 2005. In the event a subscription is not accepted, such rejected
subscription funds will be returned to the subscriber without interest or
deduction.

 

 

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(b)        The Company has prepared a Securities Purchase Agreement and Form of
Warrant to be delivered to all prospective investors. 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 5:00 p.m., New York time, on July 22, 2005, 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.

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 S 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 gross subscription proceeds
received by the Company through subscriptions made by investors introduced by
FMSC.

(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

 

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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 sold
in the Offering, with an exercise price of 103% of the average closing bid price
of the Company’s Common Stock as reported on the Nasdaq SmallCap Market on the
date prior to the Initial Closing (as defined in the Purchase Agreement)
(“Selling Agent Warrants”). The Selling Agent Warrants shall be exercisable
beginning on January 20, 2006 and continuing for a period of five (5) years
thereafter 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
compliance with applicable security laws, which shall include, without
limitation, a legal opinion from the Selling Agent’s counsel that such issuance
to FMSC’s employees and/or affiliates is exempt from the registration
requirements of applicable securities laws and that such issuance to FMSC’s
employees and affiliates will not result in a public distribution of the
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 SEC Reports (as defined in the
Documents), 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 as described in the Documents
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

 

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threatened, with respect to the Company, or its respective operations,
businesses, properties, or assets, except as described in the Documents or such
as 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 the Purchase Agreement and the consummation of the
transactions contemplated hereby and thereby.

(vi)        The Securities and 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 S.

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.

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.

 

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(b)        All proceedings taken in connection with the issuance, sale, and
delivery of the Securities shall be satisfactory in form and substance to FMSC
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

 

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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 promptly to 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, the Documents, or any application.

(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

 

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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 FMSC. 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 FMSC, 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

 

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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, warranties, covenants,
and agreements, 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 and 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 October 25, 2004 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 in
connection with the Offering.

14.

Warrants Issued to First Montauk Securities Corp.

(a)        Pursuant to the October 25, 2004 Selling Agent Agreement between the
Company and FMSC, the Company issued the Selling Agent a warrant to purchase
273,871 shares of its common stock (Warrant No. 2005-010). Subsequently, the
Selling Agent transferred an aggregate of 242,138 of warrants to its employees
and/or affiliates (the “First Montauk Transferees”) and was issued a warrant to
purchase 31,733 shares of the company’s Common stock (Warrant No. 2005-011),
representing the balance of Warrant No. 2005-010 (the “First Montauk Warrant”).
The Company hereby agrees that the purchase price of the First Montauk Warrant
as this term is defined in the First Montauk Warrant shall be reduced to $1.25
per share.

(b)        FMSC hereby agrees that notwithstanding anything to the contrary, the
First Montauk Warrant shall not be exercisable until January 20, 2006.

(c)        The Company shall also reduce the purchase price of the warrants
issued to the First Montauk Transferees to $1.25 per share, provided the First
Montauk Transferees agree in writing in a document reasonably acceptable to the
Company that the warrants will not be exercisable until January 20, 2006.

 

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15.

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: First Montauk Securities
Corp., Parkway 109 Office Center, 328 Newman Springs Road, Red Bank, New Jersey
07701, Attention: Ernest Pellegrino, with a copy to Goldstein & DiGioia LLP, 45
Broadway, New York, New York 10006, Attention: Brian C. Daughney, Esq.; Conolog
Corporation, 5 Columbia Road, Somerville, New Jersey 07701, Attention: Robert
Benou, with a copy to Milberg Weiss Bershad & Schulman LLP, One Pennsylvania
Plaza, New York, New York 10119 Attention: Arnold N. Bressler, Esq.

16.

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.

17.

Construction.

This Agreement shall be construed in accordance with the laws of the State of
New York, without giving effect to conflict of laws.

18.

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:

 

 

 

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Accepted as of the date

first above written:

 

FIRST MONTAUK SECURITIES CORP.

 

 

By:

 

Name:

 

Title:

 

 

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EXHIBIT A

TO THE SELLING AGENT AGREEMENT

Between Conolog Corporation and First Montauk Securities Corp.

Dated July 19, 2005

 

 

DKR SoundShore Oasis Holding Fund Limited

18 Church Street

Skandia House

Hamilton HM11

Bermuda

 

Excalibur Limited Partnership

33 Prince Arthur Avenue

Toronto, Ontario

Canada M5R 1B2

Attention: Will Hechter

 

Omicron Master Trust

c/o Winchester Global Trust Company

Williams House

20 Reid Street

Hamilton HM 11

Bermuda

 

Stonestreet Limited Partnership

33 Prince Arthur Avenue

Toronto, Ontario M5R 1B2

Attention: Michael Finkelstein

 

Whalehaven Capital Fund Limited

3rd Floor, 14 Par-Laville Road

Hamilton, Bermuda HM08

Attention: Evan Schemenauer

 

AGREED TO BY:

CONOLOG CORPORATION

FIRST MONTAUK SECURITIES CORP.

By:      By:      Name:     Name:     Title:     Title:    

 

 

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