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EXHIBIT 1.2
CASTLE SECURITIES CORP.
00 Xxxxxx Xxxxxx, Xxxxx #00
Xxxxxxxx, Xxx Xxxx 00000
______
(000) 000-0000
EXHAUST TECHNOLOGIES, INC.
(a Washington corporation)
Up to 550,000 Units
and
1,000,000 Class A Common Stock Purchase Warrants
SELECTED DEALER'S AGREEMENT
CASTLE SECURITIES CORP., as Underwriter for EXHAUST
TECHNOLOGIES, INC., a Washington corporation (the "Company"),
invite your participation as a Selected Dealer ("Selected Deal-
er") in an offering of up to 550,000 Units at $5.10 per Unit and
1,000,000 Class A Common Stock Purchase Warrants ("Additional
Warrants") at $.10 per Warrant. Each Unit shall consist of one
(1) share of Common Stock, $.00001 par value per share, and one
(1) Class A Common Stock Purchase Warrant. Each Class A Warrant
included in the Units as well each Additional Warrant shall
entitle the holder thereof to purchase one share of Common Stock,
par value $.00001 per share, at a price of $7.00 exercisable at
any time from the Separation Date (as hereinafter defined)
through ______________ , 2001 ("Exercise Period One") and at a
price of $9.00 from _____________, 2001 to _______________, 2002
("Exercise Period Two"). Moreover, the respective exercise
prices may be adjusted pursuant to the anti-dilution provisions
contained therein. In addition, the Class A Common Stock Purchase
Warrants shall be callable at any time solely during the exercise
period at $.01 per Warrant on at least thirty (30) days' written
notice and provided that the closing bid price for the Common
Stock of the Company on each day during the thirty (30) trading
days immediately preceding the date of the notice during Exercise
Period One is at least $10.00 per share and is at least $15.00
per share during Exercise Period Two. None of the Class A Common
Stock Warrants shall be exercisable, detachable or transferable
until the "Closing Date" which date shall be the time and date
set for payment and delivery of the offered Units and Additional
Warrants. Furthermore, Each initial purchaser of the Units who
shall retain the shares of Common Stock included in the Units for
a period of one (1) year after the Closing Date of the offering,
as hereinafter defined, shall be entitled to receive from the
Company, without cost, one (1) share for each such share retained
(Loyalty Shares). The date on which the Class A Common Stock
Purchase Warrants shall become detachable is referred to herein
as the "Separation Date". The Underwriter is offering the Units
and the Additional Warrants pursuant to a Registration Statement
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filed under the Securities Act of 1933, as amended ("the 33
Act"), subject to the terms of (a) its Underwriting Agreement
with the Company, (b) this Agreement and (c) the Underwriter's
instructions which may be forwarded to the Selected Dealers from
time to time. This invitation is made by the Underwriter only if
the Units may be lawfully offered by dealers in your state. The
terms and conditions of this invitation are as follows:
1. Acceptance of Orders. Orders received from the Selected
Dealers will be accepted only at the price, in the amounts and on
the terms which are set forth in the Company's current Prospec-
tus.
2. Selling Concession. All Selected Dealers will be allowed on
all Units sold by them, a commission of _______________ of the
total sales prices, respectively (_____________ of the full 10%
commission, respectively, or ____________ per Unit or per
Additional Warrant, respectively) as shown in the Company's
current Prospectus.
3. Selected Dealers Sales. The Selected Dealer shall purchase
the Units and/or Additional Warrants for its customers only
through the Underwriter, and all such purchases shall be made
only upon orders already received by the Selected Dealer from its
customers. No Units and/or Additional Warrants may be purchased
for the account of the Selected Dealer or its principals. In all
sales of the Units and/or Additional Warrants to the public, the
Selected Dealer shall confirm as agent for another.
4. Delivery of Funds. The Selected Dealer shall promptly trans-
mit to the escrow agent no later than 12 noon of the day
subsequent to the receipt of funds all funds received from pur-
chasers and a confirmation or a record of each sale which shall
set forth the name, address and social security number of each
individual purchaser, the number of Units and/or Additional
Warrants purchased, and, if there is more than one registered
owner, whether the certificate or certificates evidencing the
securities comprising the Units as well as the Additional
Warrants purchased are to be issued to the purchaser in joint
tenancy or otherwise. Also, each Selected Dealer shall report,
in writing, to the Underwriter the number of persons in each such
state who purchase the Units and/or Additional Warrants from
Selected Dealers. Each sale may be rejected by the Underwriter;
and if rejected, the escrow agent will return to the purchaser
all funds paid by the purchaser which have been received by the
escrow agent.
5. Payment for Sales. Payment for the Company's Units and/or
Additional Warrants shall accompany all confirmations and appli-
cations and shall be in clearing house funds. All checks and
other orders for the payment of money shall be made payable to
the escrow agent for deposit into an escrow account maintained at
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HSBC Bank USA, 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, and entitled
"Escrow Account for the Benefit of Subscribers to EXHAUST
TECHNOLOGIES, INC.'s securities." Units and/or Additional
Warrants sold by the Selected Dealer will be available for
delivery at American Securities Transfer and Trust Co., Inc.,
unless other arrangements are made with the Underwriter for
delivery.
6. Deposit of Sales Proceeds. The proceeds from the sale of all
of the Units and/or Additional Warrants sold in the offering (the
"offering proceeds") will be deposited in the escrow account
mentioned in Paragraph 5 hereof. In the event that offering
proceeds in an amount of at least $5.10 and/or $.10 have not been
deposited and cleared within ninety (90) days from the date the
Company's Registration Statement is declared effective (unless
extended by mutual written consent for an additional ninety (90)
days) by the Securities and Exchange Commission, the full amount
paid will be refunded to the purchasers. No certificates
evidencing the securities comprising the Company's Units and/or
Additional Warrants will be issued unless and until offering pro-
ceeds in an amount of $5.10 and $.10, respectively have been
cleared and such funds have been released and the net proceeds
thereof delivered to the Company. If offering proceeds in an
amount set forth above are cleared within the time period provid-
ed above, all amounts so deposited will be delivered to the
Company, except that the Underwriter may deduct its underwriting
commissions from the proceeds of the offering prior to the
delivery of such proceeds to the Company. No commissions will be
paid by the Company or concessions allowed by the Underwriter
unless and until offering proceeds in a minimum amount set forth
above have been cleared and such funds have been released and the
net proceeds thereof delivered to the Company. However, it is
understood that if the required funds relating to at least one
(1) Unit and/or one (1) Additional Warrant are received and
deposited within the Escrow Account referred in Paragraph 4
hereof, but not cleared within the time set forth above, then up
to an additional five (5) business days shall be allowed for the
sole purpose of clearance of such funds and the Closing of the
offering.
7. Failure of Order. If an order is rejected or if a payment is
received which proves insufficient, any compensation paid to the
Selected Dealer shall be returned either by the Selected Dealer
in cash or by a charge against the account of the Selected
Dealer, as the Underwriter may elect.
8. Conditions of Offering. All sales will be subject to
delivery by the Company of certificates evidencing the securi-
ties.
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9. Selected Dealer's Undertakings. No person is authorized to
make any representations concerning the Company's Units and/or
the Additional Warrants except those contained in the Company's
then current Prospectus. The Selected Dealer will not sell the
Company's Units and/or the Additional Warrants pursuant to this
Agreement unless the Prospectus is furnished to the purchaser at
least forty-eight (48) hours prior to the mailing of the con-
firmation of sale, or is sent to such persons under such circum-
stances that it would be received by him 48 hours prior to his
receipt of a confirmation of the sale. The Selected Dealer
agrees not to use any supplemental sales literature of any kind
without prior written approval of the Underwriter unless it is
furnished by the Underwriter for such purpose. In offering and
selling the Company's Units and/or Additional Warrants, the
Selected Dealer will rely solely on the representations contained
in the Company's then current Prospectus. Additional copies of
the then current Prospectus will be supplied by the Underwriter
in reasonable quantities upon request.
The Selected Dealer understands that during the ninety (90) day
period after the first date upon which the Company's Units and/or
Additional Warrants are bona fide offered to the public, all
dealers effecting transactions in the Company's Units and/or
Additional Warrants may be required to deliver the Company's
current Prospectus to any purchaser thereof prior to or
concurrent with the receipt of the confirmation of sale.
Additional copies of the then current Prospectus will be supplied
by the Underwriter in reasonable quantities upon request.
10. Representations and Agreements of Selected Dealers. By
accepting this Agreement, the Selected Dealer represents that
either (a) it is registered as a broker-dealer under the Securi-
ties and Exchange Act of 1934, as amended; is qualified to
act as a dealer in the states or other jurisdictions in which it
offers the Company's Units and/or Additional Warrants; is a mem-
ber in good standing with the National Association of Securities
Dealers, Inc. ("NASD"), and will maintain such registrations,
qualifications and memberships throughout the term of this
Agreement or (b) is a foreign bank, dealer or institution not
eligible for membership in the NASD which agrees to make no sales
in the United States, its territories or possessions or to
persons who are citizens thereof or residents therein, and in
making other sales to comply with XXXX's interpretation with re-
spect to rewriting and withholding. Further, the Selected Dealer
agrees to comply with all applicable Federal laws, the laws of
the states or other jurisdictions concerned and the Rules and
Regulations of the NASD, and in particular the Selected Dealer
agrees that in connection with any purchase or sale of the
Company's Units and/or Additional Warrants wherein a selling
concession, discount or other allowance is received or granted
(1) that it will comply with the decisions of Conduct Rule 2420
of the NASD or (2) if a non-NASD member, broker or dealer in a
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foreign country, it will also comply with the provisions of the
successor Conduct Rules to Sections 8 and 36 of Article III of
the NASD's Rules of Fair Practice thereof as though it were a
NASD member and with the provisions of Conduct Rule 2420
Subsection (c) thereof as such applies to a non-NASD member,
broker or dealer in a foreign country. Further, the Selected
Dealer agrees that it will not offer to sell the Company's Units
and/or Additional Warrants in any state or jurisdiction except
the states in which it is licensed as a broker-dealer under the
laws of such states. The Selected Dealer shall not be entitled
to any compensation during any period in which it has been
suspended or expelled from membership in the NASD.
11. Selected Dealer's Employees. By accepting this Agreement,
the Selected Dealer has assumed full responsibility for proper
training and instruction of its representatives concerning the
selling methods to be used in connection with the offer and sale
of the Company's Units and/or Additional Warrants, giving special
emphasis to the principles of suitability and full disclosure to
prospective investors and prohibitions against "free-riding and
withholding."
12. Indemnification. The Company has agreed in the Underwriting
Agreement to indemnify and hold harmless the Underwriter
(including within the definition of Underwriter, any member of
the Selected Dealer group) and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the 33 Act
or under any other statute or at common law and will reimburse
the Underwriter and each such person specified as above for any
legal or other expenses (including the cost of any investigation
and preparation) reasonably incurred by them or any of them in
connection with any litigation or claim whether or not resulting
in any liability, but only insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or any
post-effective amendment thereto or in any Blue Sky application
or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein necessary to make the statements therein not misleading,
all as of the date when the Registration Statement or such post--
effective amendment, the filing of any such Blue Sky application
as the case may be, becomes effective or any untrue statement or
alleged untrue statement of a material fact contained in any pre-
liminary prospectus or final prospectus (as amended or as
supplemented thereto), or arise out of or are based upon the
omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, not
misleading; provided however, that the indemnity agreement
contained in this paragraph 12 shall not apply to amounts paid in
settlement of any such litigation if such settlement is effected
without the consent of the Company nor shall it extend to any
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Underwriter or any person controlling the Underwriter in respect
of any such losses, claims, damages, liabilities or actions of
any such losses, claims, damages, liabilities or actions arising
out of, or based upon any such untrue statement or alleged untrue
statement, or any such omission, if such statement or omission
was made in reliance upon and in conformity with written infor-
mation furnished to the Company by the Underwriter on behalf of
such Underwriter specifically for use in connection with the
preparation of the Registration Statement, the Prospectus or any
such amendment thereof or supplement thereto or Blue Sky applica-
tion.
13. Selected Dealer's Indemnification. The Selected Dealer
agrees to indemnify and hold harmless the Company, the
Underwriter, each of the Company's officers and directors who
signed the Registration Statement, and each person, if any, who
controls the Company and the Underwriter within the meaning of
Section 15 of the 33 Act, against any and all loss, liability,
claim, damage and expense (a) described in the indemnity
contained in Paragraph 12 of this Agreement, but only with
respect to untrue statements or omissions or alleged untrue
statements or omissions, made in the Registration Statement or
the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the
Company by such Selected Dealer expressly for use in the Regis-
tration Statement (or any amendment thereto) or the Prospectus
(or any amendment or supplement thereto) or (b) based upon
alleged misrepresentations or omissions to state material facts
in connection with statements made by the Selected Dealer or the
Selected Dealer's salesmen orally or by other means; and the
Selected Dealer will reimburse the Company, the Underwriter, each
of the Company's officers and directors who signed the
Registration Statement and each person, if any, who controls the
Company and the Underwriter within the meaning of Section 15 of
the 33 Act, for any legal or other expenses reasonably incurred
in connection with the investigation of or the defending of any
such action or claim.
14. Required Notices and Claims. Each indemnified party is
required to give prompt notice to each indemnifying party of any
action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party
shall not relieve it from any liability which it may otherwise
have on account of the indemnification provisions hereof. Any
indemnifying party may participate at its own expense in the de-
fense of such action. If it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with
any other indemnifying parties receiving such notice, may assume
the defense of such action with counsel chosen by it and approved
by the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the
ground that there may be legal defenses available to them which
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are different from or in addition to those available to such
indemnifying parties and shall not be liable for any fees and
expenses of counsel for the indemnified parties incurred there-
after in connection with such action. In no event shall the
indemnifying parties be liable for the fees and expenses of more
than one counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances.
15. Expenses. No expenses will be charged to Selected
Dealers. A single transfer tax, if any, on the sale of the Units
and/or Additional Warrants by the Selected Dealer to its
customers will be paid when such Units and/or Additional Warrants
are delivered to the Selected Dealer for delivery to its
customers. However, the Selected Dealer will pay its proportion-
ate share of any transfer tax or any other tax (other than the
single transfer tax described above) if any such tax shall be
from time to time assessed against the Underwriter and other
Selected Dealers.
16. Communications. All communications to the Underwriter
should be sent to the address shown in the first page of this
Agreement. Any notice to the Selected Dealer shall be properly
given if mailed or telephoned to the Selected Dealer at the ad-
dress given below. This Agreement shall be construed according
to the laws of the State of New York.
17. Assignment and Termination. This Agreement may not be
assigned by the Selected Dealer without the Underwriter's written
consent. This Agreement will terminate upon the termination of
the offering of the Units and/or Additional Warrants except that
either party may terminate this Agreement at any time by giving
written notice to the other.
CASTLE SECURITIES CORP.
By: _____________________________
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Date of Acceptance: ____________________________________________
Dealer Name: ___________________________________________________
Address: _______________________________________________________
Accepted: ______________________________________________________
Telephone No. __________________________________________________
IRS Employer I.D. No.: _________________________________________
Unit Allocation: _______________________________________________
Additional Warrant Allocation:
________________________________________________
