Exhibit 4.9

                             FUNDS ESCROW AGREEMENT

      This  Agreement is dated as of the 26th day of April,  2004 among  Conolog
Corporation, a Delaware corporation (the "Company") and Laurus Master Fund, Ltd.
(the "Purchaser"), and Dechert LLP (the "Escrow Agent"):

                              W I T N E S S E T H:
                              - - - - - - - - - -

      WHEREAS,  the Company and the  Purchaser  have  entered  into a Securities
Purchase  Agreement  ("Purchase  Agreement")  for the sale by the Company to the
Purchaser  of a secured  convertible  term note ("Term  Note") and issuance of a
common stock purchase warrants  ("Warrants") to the Purchaser,  in the aggregate
principal amounts and in the denominations set forth on Schedule A hereto; and

      WHEREAS,  the  parties  hereto  require  the  Company to deliver the notes
against  payment  therefor,  with such notes and payment to be  delivered to the
Escrow Agent to be held in escrow and released by the Escrow Agent in accordance
with the terms and conditions of this Agreement; and

      WHEREAS,  the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement;

      NOW THEREFORE, the parties agree as follows:

                                    ARTICLE I

                                 INTERPRETATION

      1.1.  Definitions.  Whenever used in this  Agreement,  the following terms
shall have the meanings  set forth below.  Terms not  otherwise  defined  herein
shall have the meaning set forth in the Purchase Agreement.

            (a)   "Agreement"  means  this  Agreement  and all  amendments  made
                  hereto and thereto by written agreement between the parties.

            (b)   "Company  Documents" means the Securities  Purchase Agreement,
                  the Term Note, Term Note Registration  Rights Agreement,  Term
                  Note

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                  Warrant,   the  Company   Security   Agreement,   the  Company
                  Subsidiary Security Agreement,  the Subsidiary Guaranty, Stock
                  Pledge Agreement, the Legal Opinion and the Closing Payment.

            (c)   "Closing Payment " means the fees to be paid to Laurus Capital
                  Management LLC set forth on Schedule A hereto.

            (d)   "Disbursement  Letter" means that certain letter  delivered to
                  the  Escrow  Agent by each of the  Purchaser  and the  Company
                  setting  forth wire  instructions  and amounts to be funded at
                  the Closing.

            (e)   "Company  Security  Agreement"  means  that  certain  Security
                  Agreement  delivered by the Company pursuant to the Securities
                  Purchase Agreement.

            (f)   "Company  Subsidiary  Security  Agreement"  means that certain
                  Subsidiary   Security  Agreement   delivered  by  the  Company
                  pursuant to the Securities Purchase Agreement.

            (g)   "Company  Subsidiary  Guaranty " means that certain Subsidiary
                  Guaranty  delivered  by  each of the  Company's  subsidiairies
                  pursuant to the Securities Purchase Agreement.

            (h)   "Escrowed Payment" means $1,200,000.

            (i)   "Legal  Opinion"  means  the  original  signed  legal  opinion
                  of___________.

            (j)   "Purchaser   Documents"  means  the  Escrowed   Payment,   the
                  Securities Purchase  Agreement,  Term Note Registration Rights
                  Agreement and the Disbursement Letter.

            (k)   "Term  Note"  means the  convertible  term note of the Company
                  issued to the  Purchaser  in the amount of  $1,200,000  in the
                  form  of  Exhibit  A  annexed  to  the   Securities   Purchase
                  Agreement.

            (l)   "Term Note  Registration  Rights Agreement" means that certain
                  registration  rights agreement executed and delivered pursuant
                  to the Securities Purchase Agreement.

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<PAGE>

            (m)   "Term Note Warrant" means the common stock purchase warrant of
                  the Company to purchase up to 270,0000 shares of the Company's
                  common stock,  issued to Purchaser in connection with the Term
                  Note.

            (n)   "Stock  Pledge  Agreement"  means that  certain  stock  pledge
                  agreement  dated as of the date hereof between the Company and
                  the Purchaser.

      1.2. Entire  Agreement.  This Agreement  constitutes the entire  agreement
between the  parties  hereto with  respect to the matters  contained  herein and
pertaining to the Company  Documents and Purchaser  Documents and supersedes all
prior agreements,  understandings,  negotiations and discussions of the parties,
whether  oral or written.  There are no  warranties,  representations  and other
agreements  made by the parties in  connection  with the subject  matter  hereof
except as specifically set forth in this Agreement.

      1.3.  Extended  Meanings.  In this Agreement  words importing the singular
number include the plural and vice versa;  words importing the masculine  gender
include  the  feminine  and  neuter  genders.  The  word  "person"  includes  an
individual,  body  corporate,  partnership,  trustee or trust or  unincorporated
association, executor, administrator or legal representative.

      1.4.  Waivers and  Amendments.  This  Agreement may be amended,  modified,
superseded,  cancelled, renewed or extended, and the terms and conditions hereof
may be waived,  only by a written  instrument signed by all parties,  or, in the
case  of a  waiver,  by the  party  entitled  to  the  benefit  thereof  waiving
compliance. Except as expressly stated herein, no delay on the part of any party
in exercising any right, power or privilege  hereunder shall operate as a waiver
thereof,  nor shall any waiver on the part of any party of any  right,  power or
privilege  hereunder  preclude any other or future  exercise of any other right,
power or privilege hereunder.

      1.5.  Headings.  The division of this Agreement  into articles,  sections,
subsections  and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or  interpretation  of this
Agreement.

      1.6. Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles  of conflicts of laws.  Any action  brought by any party  against any
other party concerning the transactions  contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Each of the parties hereto and the individuals  executing
this Agreement and other  agreements on behalf of the Company agree to submit to
the  jurisdiction  of such courts and waive trial by jury. The prevailing  party
shall be entitled to recover from the other party its reasonable attorney's fees
and  costs.  In the event  that

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<PAGE>

any provision of this Agreement or any other  agreement  delivered in connection
herewith is invalid or  unenforceable  under any  applicable  statute or rule of
law, then such provision  shall be deemed  inoperative to the extent that it may
conflict  therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or  unenforceable  under
any law shall not affect the validity or  enforceability  of any other provision
of any agreement.

      1.7. Consent to Jurisdiction.  Subject to Section 1.6 hereof,  each of the
Company,  the Escrow Agent and the Purchaser  hereby  waives,  and agrees not to
assert  in any  such  suit,  action  or  proceeding,  any  claim  that it is not
personally  subject to the jurisdiction of such court,  that the suit, action or
proceeding  is brought in an  inconvenient  forum or that the venue of the suit,
action or proceeding is improper.  Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.

      1.8.  Construction.   Each  party  acknowledges  that  its  legal  counsel
participated  in the  preparation of this Agreement and,  therefore,  stipulates
that the rule of construction  that  ambiguities are to be resolved  against the
drafting party shall not be applied in the  interpretation  of this Agreement to
favor any party against any other.

                                   ARTICLE II

                         DELIVERIES TO THE ESCROW AGENT

      2.1.  Delivery of Company  Documents to Escrow Agent. On or about the date
hereof,  the Company  shall  deliver to the Escrow  Agent the Company  Documents
executed by the Company to the extent it is a party thereto.

      2.2 Delivery of Purchaser  Documents to Escrow Agent. On or about the date
hereof, the Purchaser shall deliver to the Escrow Agent the Purchaser  Documents
executed by the Purchaser.

      2.3.  Intention to Create  Escrow Over  Company  Documents  and  Purchaser
Documents.  The  Purchaser,  the Company  intend that the Company  Documents and
Purchaser Documents shall be held in escrow by the Escrow Agent pursuant to this
Agreement for their benefit as set forth herein.

      2.4.  Escrow Agent to Deliver Company  Documents and Purchaser  Documents.
The Escrow  Agent shall hold and release the  Company  Documents  and  Purchaser
Documents only in accordance with the terms and conditions of this Agreement.

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<PAGE>

                                   ARTICLE III

              RELEASE OF COMPANY DOCUMENTS AND PURCHASER DOCUMENTS

      3.1.  Release of Escrow.  Subject to the  provisions  of Section  4.2, the
Escrow  Agent shall  release  the  Company  Documents  and  Purchaser  Documents
pursuant to (a), (b) or (c) below, as follows:

            (a) Upon  receipt by the Escrow Agent of the Company  Documents  and
the  corresponding  Purchaser  Documents,  the Escrow Agent will  simultaneously
release the Company  Documents to the  Purchaser  and release the  corresponding
Purchaser  Documents to the Company except that (i) the Closing  Payment will be
delivered to the fund managers;  and (ii) the reasonable  legal fees for counsel
to the Purchaser, which shall be paid pursuant to Section 2(c) of the Securities
Purchase  Agreement,  will be released to the  Purchaser.  At the request of the
Escrow  Agent,  the Company  each will  provide  written  facsimile  or original
instructions to the Escrow Agent as to the  disposition of all funds  releasable
to the Company.

            (b) Upon receipt by the Escrow Agent of joint  written  instructions
("Joint Instructions") signed by the Company and the Purchaser, it shall deliver
the Company  Documents and Purchaser  Documents in accordance  with the terms of
the Joint Instructions.

            (c) Upon receipt by the Escrow  Agent of a final and  non-appealable
judgment,  order, decree or award of a court of competent jurisdiction (a "Court
Order"),  the Escrow Agent shall  deliver the Company  Documents  and  Purchaser
Documents  in  accordance  with  the  Court  Order.  Any  Court  Order  shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which  opinion shall be  satisfactory  to the Escrow Agent) to
the effect that the court issuing the Court Order has competent jurisdiction and
that the Court Order is final and non-appealable.

      3.2.  Acknowledgement of Company and Purchaser;  Disputes. The Company and
the  Purchaser  acknowledge  that the only terms and  conditions  upon which the
Company  Documents and  Purchaser  Documents are to be released are set forth in
Articles 3 and 4 of this Agreement. The Company and the Purchaser reaffirm their
agreement to abide by the terms and conditions of this Agreement with respect to
the release of the Company Documents and Purchaser  Documents.  Any dispute with
respect to the release of the Company Documents and Purchaser Documents shall be
resolved  pursuant  to  Section  4.2  or by  agreement  among  the  Company  and
Purchaser.

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<PAGE>

                                   ARTICLE IV

                           CONCERNING THE ESCROW AGENT

      4.1. Duties and  Responsibilities  of the Escrow Agent. The Escrow Agent's
duties  and  responsibilities  shall  be  subject  to the  following  terms  and
conditions:

            (a) The  Purchaser  and the Company  acknowledge  and agree that the
Escrow  Agent  (i) shall not be  responsible  for or bound by,  and shall not be
required to inquire into whether either the Purchaser or the Company is entitled
to receipt of the Company  Documents  and  Purchaser  Documents  pursuant to any
other  agreement or otherwise;  (ii) shall be obligated only for the performance
of such duties as are specifically  assumed by the Escrow Agent pursuant to this
Agreement; (iii) may rely on and shall be protected in acting or refraining from
acting upon any written notice, instruction,  instrument,  statement, request or
document  furnished  to it  hereunder  and  believed by the Escrow Agent in good
faith to be genuine and to have been signed or presented by the proper person or
party,  without being required to determine the  authenticity  or correctness of
any fact stated  therein or the  propriety  or validity or the service  thereof;
(iv) may assume that any person  purporting to give notice or make any statement
or execute any document in connection  with the provisions  hereof has been duly
authorized to do so; (v) shall not be responsible for the identity, authority or
rights of any person, firm or corporation  executing or delivering or purporting
to execute or deliver this Escrow Agreement or any document deposited  hereunder
or any endorsement  thereon or assignment  thereof;  (vi) shall not be under any
duty to give the property held by Escrow Agent  hereunder any greater  degree of
care than Escrow  Agent gives its own  similar  property;  and (vii) may consult
counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and
complete  authorization and protection in respect of any action taken,  suffered
or omitted by Escrow Agent  hereunder in good faith and in  accordance  with the
opinion of such counsel.

            (b) The Purchaser and the Company  acknowledge that the Escrow Agent
is acting  solely as a  stakeholder  at their  request and that the Escrow Agent
shall not be liable  for any  action  taken by  Escrow  Agent in good  faith and
believed  by  Escrow  Agent to be  authorized  or  within  the  rights or powers
conferred  upon Escrow Agent by this  Agreement.  The Purchaser and the Company,
jointly and severally, agree to indemnify and hold harmless the Escrow Agent and
any of Escrow Agent's partners,  employees,  agents and  representatives for any
action  taken or omitted to be taken by Escrow  Agent or any of them  hereunder,
including the fees of outside  counsel and other costs and expenses of defending
itself against any claim or liability under this  Agreement,  except in the case
of gross  negligence or willful  misconduct on Escrow  Agent's part committed in
its capacity as Escrow Agent under this Agreement.  The Escrow Agent shall owe a
duty only to the  Purchaser  and Company  under this  Agreement  and to no other
person.

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<PAGE>

            (c) The  Purchaser and the Company  jointly and  severally  agree to
reimburse the Escrow Agent for its reasonable  out-of-pocket expenses (including
counsel fees)  incurred in  connection  with the  performance  of its duties and
responsibilities hereunder.

            (d)  The  Escrow  Agent  may at any  time  resign  as  Escrow  Agent
hereunder by giving five (5) days prior  written  notice of  resignation  to the
Purchaser and the Company.  Prior to the effective  date of the  resignation  as
specified in such  notice,  the  Purchaser  and Company will issue to the Escrow
Agent a Joint  Instruction  authorizing  delivery of the Company  Documents  and
Purchaser  Documents to a substitute  Escrow Agent selected by the Purchaser and
the Company. If no successor Escrow Agent is named by the Purchaser and Company,
the Escrow Agent may apply to a court of competent  jurisdiction in the State of
New York for appointment of a successor Escrow Agent, and to deposit the Company
Documents and Purchaser Documents with the clerk of any such court.

            (e) The Escrow Agent does not have and will not have any interest in
the Company  Documents  and Purchaser  Documents,  but is serving only as escrow
agent, having only possession thereof.

            (f) The Escrow  Agent  shall not be liable  for any action  taken or
omitted  by it in good  faith and  reasonably  believed  by it to be  authorized
hereby or within  the  rights or powers  conferred  upon it  hereunder,  nor for
action taken or omitted by it in good faith,  and in  accordnace  with advice of
counsel (which counsel may be of the Escrow Agent's own choosing), and shall not
be  liable  for any  mistake  of fact or error of  judgement  or for any acts or
omissions of any kind except for its own willful misconduct or gross negligence.

            (g) This Agreement sets forth  exclusively  the duties of the Escrow
Agent  with  respect to any and all  matters  pertinent  thereto  and no implied
duties or obligations shall be read into this Agreement.

            (h) The Escrow  Agent shall be  permitted  to act as counsel for the
Purchaser  or the  Company,  as the  case  may  be,  in  any  dispute  as to the
disposition  of the Company  Documents  and  Purchaser  Documents,  in any other
dispute among the Purchaser and the Company,  whether or not the Escrow Agent is
then holding the Company Documents and Purchaser  Documents and continues to act
as the Escrow Agent hereunder.

            (i) The provisions of this Section 4.1 shall survive the resignation
of the Escrow Agent or the termination of this Agreement.

      4.2. Dispute Resolution:  Judgments.  Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:

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<PAGE>

            (a) If  any  dispute  shall  arise  with  respect  to the  delivery,
ownership,  right of  possession  or  disposition  of the Company  Documents and
Purchaser Documents,  or if the Escrow Agent shall in good faith be uncertain as
to its duties or rights hereunder, the Escrow Agent shall be authorized, without
liability  to anyone,  to (i)  refrain  from  taking  any  action  other than to
continue to hold the Company  Documents and Purchaser  Documents pending receipt
of a Joint  Instruction  from the  Purchaser  and  Company,  or (ii) deposit the
Company   Documents  and  Purchaser   Documents  with  any  court  of  competent
jurisdiction  in the State of New York,  in which  event the Escrow  Agent shall
give written notice thereof to the Purchaser and the Company and shall thereupon
be  relieved  and  discharged  from all  further  obligations  pursuant  to this
Agreement.  The Escrow  Agent may,  but shall be under no duty to,  institute or
defend any legal proceedings which relate to the Company Documents and Purchaser
Documents. The Escrow Agent shall have the right to retain counsel if it becomes
involved in any disagreement, dispute or litigation on account of this Agreement
or otherwise determines that it is necessary to consult counsel.

            (b) The Escrow Agent is hereby  expressly  authorized to comply with
and obey any Court  Order.  In case the Escrow  Agent obeys or  complies  with a
Court Order,  the Escrow Agent shall not be liable to the  Purchaser and Company
or to  any  other  person,  firm,  corporation  or  entity  by  reason  of  such
compliance.

                                    ARTICLE V

                                 GENERAL MATTERS

      5.1.  Termination.  This escrow shall terminate upon the release of all of
the Company Documents and Purchaser  Documents or at any time upon the agreement
in writing of the Purchaser and Company.

      5.2.  Notices.  All  notices,  request,  demands and other  communications
required or permitted  hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):

(a)   If to the Company, to:       Conolog Corporation
                                   5 Columbia Road
                                   Somerville, N.J. 08876

                                   Attn: Chief Financial Officer
                                   Fax:

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<PAGE>

      With a copy to:
                                   Fax:

(b)   If to the Purchaser, to:

                                   LAURUS MASTER FUND, LTD.
                                   c/o Ironshore Corporate Services Ltd.
                                   P.O. Box 1234 G.T., Queensgate House, South
                                   Church Street Grand Cayman, Cayman Islands
                                   Fax: 345-949-9877

(c)   If to the Escrow Agent, to:

                                   Dechert LLP
                                   30 Rockefeller Plaza
                                   New York, New York 10112
                                   Fax:  (212) 698-3599

or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.

      5.3.  Interest.  The  Escrowed  Payment  shall not be held in an  interest
bearing account nor will interest be payable in connection therewith.

      5.4. Assignment;  Binding Agreement.  Neither this Agreement nor any right
or  obligation  hereunder  shall be  assignable  by any party  without the prior
written consent of the other parties  hereto.  This Agreement shall inure to the
benefit of and be binding  upon the parties  hereto and their  respective  legal
representatives, successors and assigns.

      5.5.  Invalidity.  In the  event  that  any one or more of the  provisions
contained  herein,  or the  application  thereof  in any  circumstance,  is held
invalid,  illegal, or unenforceable in any respect for any reason, the validity,
legality and  enforceability of any such provision in every other respect and of
the  remaining  provisions  contained  herein  shall not be in any way  impaired
thereby,  it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

      5.6  Counterparts/Execution.  This Agreement may be executed in any number
of counterparts and by different  signatories  hereto on separate  counterparts,
each of which,  when so

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executed,  shall  be  deemed  an  original,  but  all  such  counterparts  shall
constitute  but one and the same  instrument.  This Agreement may be executed by
facsimile transmission.

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<PAGE>

      5.7.  Agreement.  Each of the  undersigned  states  that he has  read  the
foregoing Funds Escrow Agreement and understands and agrees to it.

                                      CONOLOG CORPORATION
                                      the "Company"

                                      By:___________________________________
                                      Name:
                                      Title:

                                      PURCHASER:

                                      LAURUS MASTER FUND, LTD.

                                      By:___________________________________
                                      Name:
                                      Title:

                                      ESCROW AGENT:

                                      DECHERT LLP

                                      By:___________________________________
                                      Name:
                                      Title:

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                      SCHEDULE A TO FUNDS ESCROW AGREEMENT

<TABLE>
<CAPTION>
_______________________________________________________________ ______________________________________________________
PURCHASER                                                       PRINCIPAL NOTE AMOUNT
_______________________________________________________________ ______________________________________________________
<S>                                                             <C>
LAURUS MASTER FUND, LTD.,                                       $1,200,000    Term Note
c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T.,
Queensgate House, South Church Street, Grand Cayman, Cayman
Islands
Fax: 345-949-9877

_______________________________________________________________ ______________________________________________________
TOTAL                                                           $1,200,000
_______________________________________________________________ ______________________________________________________


_______________________________________________________________ ______________________________________________________
FUND MANAGER                                                    CLOSING PAYMENT
_______________________________________________________________ ______________________________________________________
LAURUS CAPITAL MANAGEMENT, L.L.C.                               Closing payment payable in connection with
825 Third Avenue, 14th Floor                                    investment by Laurus Master Fund, Ltd. for which
New York, New York 10022                                        Laurus Capital Management, L.L.C. is the Manager.
Fax: 212-541-4434
_______________________________________________________________ ______________________________________________________
TOTAL                                                           $42,000
_______________________________________________________________ ______________________________________________________


WARRANTS


_______________________________________________________________ ______________________________________________________
WARRANT RECIPIENT                                               WARRANTS IN CONNECTION WITH OFFERING
_______________________________________________________________ ______________________________________________________
LAURUS MASTER FUND, LTD.                                        270,000   Term Note Warrants issuable in connection
A Cayman Island corporation                                     with investment by Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services Ltd.
P.O. Box 1234 G.T.
Queensgate House, South Church Street
Grand Cayman, Cayman Islands
Fax: 345-949-9877
_______________________________________________________________ ______________________________________________________
TOTAL                                                           270,000    Warrants
_______________________________________________________________ ______________________________________________________
</TABLE>

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