SEPARATE ESCROW ACCOUNT AGREEMENT
THIS SEPARATE ESCROW ACCOUNT AGREEMENT (the "Agreement") is made and
entered into as of the ______ day of ___________, 2000 by and between Mountain
States Capital, Inc., an Arizona corporation ("MOUNTAIN STATES"), Heritage West
Securities, Inc., an Arizona Corporation ("HERITAGE WEST"), and Wells Fargo
Bank, National Association, ("ESCROW AGENT").
WHEREAS, MOUNTAIN STATES intends to make an offer of rescission and an
offer of investment in certain debt securities to (the "Offering"), and raise
cash funds from, investors ("the Investors") pursuant to their election forms
which are more specifically described in MOUNTAIN STATES' Registration Statement
on Form SB-2 as filed with the Securities and Exchange Commission (the
"Registration Statement") which is attached hereto as Exhibit B.
WHEREAS, MOUNTAIN STATES desires to deposit funds contributed by the
Investors into a bank account that will serve as a separate escrow account (the
"Separate Account") to be administered by the ESCROW AGENT for the benefit of
MOUNTAIN STATES; and
WHEREAS, MOUNTAIN STATES intends to offer, pursuant to the Offering, not
less than $2,200,000 (the "Minimum Amount") of MOUNTAIN STATES' 18% 12-month
unsecured promissory notes (the "New Notes") for which each Investor will pay a
minimum of $5,000 with additional amounts in $1,000 increments, of which each
note shall have a face value equal to the payment made;
WHEREAS, it has been determined that the proceeds to be received from the
Offering should be placed in the Separate Account by HERITAGE WEST, an NASD
registered broker-dealer overseeing the distribution of the Offering, until such
time as the Minimum Amount has been met,
WHEREAS, the ESCROW AGENT is willing to accept appointment as ESCROW AGENT
of the Separate Account for only the expressed duties, terms and conditions
outlined herein; and
NOW, THEREFORE, in consideration of the promises and agreements set forth
herein, the parties hereto agree as follows:
1. PROCEEDS TO BE DEPOSITED TO THE SEPARATE ACCOUNT. All funds received
from Investors ("Investors Funds") pursuant to their Offering election forms
will be (i) wired into the Separate Account in accordance with the instructions
contained in Section 10 hereof, or (ii) forwarded by mail or courier for deposit
into the Separate Account by noon on the next business day following the day
upon which check proceeds are received by HERITAGE WEST, and shall be retained
by the ESCROW AGENT in the Separate Account and invested as stated herein. Check
proceeds received by HERITAGE WEST for deposit into the Separate Account will be
mailed or couriered to:
IPS-MTU Check Processing, MAC N9303-122, 608 2nd Avenue South, Minneapolis,
MN 55479
During the term of this Agreement, HERITAGE WEST shall cause all checks
received by it in payment for the New Notes to be made payable to and endorsed
in favor of:
Mountain States Capital, Inc. - Separate Escrow Account
In the event that any checks deposited in the Separate Account prove
uncollectable after the funds represented thereby have been released by the
ESCROW AGENT to MOUNTAIN STATES, then MOUNTAIN STATES shall promptly reimburse
the ESCROW AGENT for any and all reasonable cost incurred for such, upon
request, and the ESCROW AGENT shall deliver the returned checks to MOUNTAIN
STATES.
2. IDENTITY OF INVESTORS. HERITAGE WEST shall furnish to the ESCROW AGENT
and MOUNTAIN STATES with each delivery of funds, as provided in Section 1
hereof, a list of the persons who have paid money for the purchase of the New
Notes showing the name, address, amount of New Notes subscribed for and the
amount of money paid. All proceeds so deposited shall remain the property of the
Investors and shall not be subject to any liens or charges by MOUNTAIN STATES,
or HERITAGE WEST, or the ESCROW AGENT or judgments or creditors' claims against
MOUNTAIN STATES, until released to MOUNTAIN STATES as hereinafter provided.
1
<PAGE>
ESCROW AGENT will not use the information provided to it by MOUNTAIN STATES for
any purpose other than to fulfill its obligations as ESCROW AGENT. Regardless,
ESCROW AGENT will treat this formation as confidential.
3. MINIMUM AMOUNT. For the purpose of this Agreement, the Minimum Amount
is equivalent to the $2,200,000 minimum offering amount described in the
MOUNTAIN STATES Registration Statement. When determining whether the $2,200,000
Minimum Amount threshhold has been met for the purpose of the disbursement of
funds from the Separate Account, the ESCROW AGENT shall combine the (i) total of
the cash proceeds deposited in the Separate Account in connection with the
Offering, and (ii) the total of the Outstanding Notes, as confirmed by HERITAGE
WEST in a notarized statement, that are returned for cash to be applied to the
purchase of New Notes.
4. SEPARATE ACCOUNT DATES. The "Minimum Amount Date" shall be the end of
the ninety (90) day period following the start of the MOUNTAIN STATES' offer of
rescission (with the "start" date being the date of the Registration Statement).
The "Termination Date" for this Agreement shall either be (i) the date the
ESCROW AGENT disburses the Minimum Amount or (ii) the date the ESCROW AGENT
refunds to each of the Investors all sums paid by the Investors in the event the
Minimum Amount is not obtained prior to the Minimum Amount Date. In all events
this Agreement shall terminate upon the one year anniversary from the date of
this Agreement.
5. DISBURSEMENT OF FUNDS.
a. From time to time, and at the end of the third business day following
the Minimum Amount Date (as defined in paragraph 4 hereof), the ESCROW AGENT
shall notify MOUNTAIN STATES AND HERITAGE WEST of the amount of Investors Funds
received hereunder. If the Minimum Amount or more, as defined herein, is
obtained at any time prior to the Minimum Amount Date, then the ESCROW AGENT
shall pay out the Separate Account funds and all earnings thereon when and as
directed by MOUNTAIN STATES.
b. If the Minimum Amount has not been obtained prior to the Minimum Amount
Date, the ESCROW AGENT shall, within a reasonable time following the Minimum
Amount Date, but in no event more than thirty (30) days after the Minimum Amount
Date, refund to each of the Investors at the address appearing on the list of
Investors, or at such other address as shall be furnished to the ESCROW AGENT
via HERITAGE WEST by the Investors in writing, all sums paid by the Investors
pursuant to their subscription agreements for New Notes, without any interest
earned therefrom, and shall then notify MOUNTAIN STATES in writing of such
refunds. Interest earned on Investor Funds placed in the Separate Account shall
be paid to MOUNTAIN STATES.
6. DUTY AND LIABILITY OF ESCROW AGENT. The sole duty of the ESCROW AGENT,
other than as herein specified, shall be to receive said funds and hold them
subject to release, in accordance herewith, and the ESCROW AGENT shall be under
no duty to determine whether MOUNTAIN STATES or HERITAGE WEST are complying with
requirements of this Agreement in tendering to the ESCROW AGENT said proceeds
from the sale of the Offering. The ESCROW AGENT may conclusively rely upon and
shall be protected in acting upon any statement, certificate, notice, request,
consent, order or other document believed by it to be genuine and to have been
signed or presented by the proper party or parties. The ESCROW AGENT shall have
no duty or liability to verify any such statement, certificate, notice, request,
consent, order or other document, and its sole responsibility shall be to act
only as expressly set forth in this Agreement. The ESCROW AGENT shall be under
no obligation to institute or defend any action, suit or proceeding in
connection with this Agreement unless first indemnified to its satisfaction. The
ESCROW AGENT may consult counsel in respect of any question arising under this
Agreement and the ESCROW AGENT shall not be liable for any action taken or
omitted in good faith upon advice of such counsel.
7. ESCROW AGENT'S FEE. The ESCROW AGENT shall be entitled to compensation
for its services as stated in the fee schedule attached hereto as Exhibit A,
which compensation shall be paid by MOUNTAIN STATES. The fee agreed upon for the
services rendered hereunder is intended as full compensation for the ESCROW
AGENT's services as contemplated by this Agreement; provided, however, that in
the event that the conditions for the disbursement of funds under this Agreement
are not fulfilled, or the ESCROW AGENT renders any material service not
contemplated in this Agreement, or there is any assignment of interest in the
subject matter of this Agreement, or any material modification hereof, or if any
material controversy arises hereunder, or the ESCROW AGENT is made a party to
any litigation pertaining to this Agreement, or the subject matter hereof, then
the ESCROW AGENT shall be reasonably compensated for such extraordinary services
and reimbursed for all costs and expenses, including reasonable attorney's fees,
occasioned by any delay, controversy, litigation or event, and the same shall be
recoverable from MOUNTAIN STATES.
2
<PAGE>
8. INVESTMENT OF PROCEEDS. All funds held by the ESCROW AGENT pursuant to
this Agreement shall constitute trust property for the purposes for which they
are held. The ESCROW AGENT shall invest all funds received from Investors in the
Wells Fargo Funds - 100% Treasury.
9. ISSUANCE OF CERTIFICATES. Until the terms of the Agreement with respect
to the Minimum Amount have been met and the funds hereunder received from
subscriptions for the Offering have been released to MOUNTAIN STATES, MOUNTAIN
STATES may not issue any certificates or other evidence of an Offering
investment, except subscription agreements.
10. NOTICES. All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
(a) on the date of service if served personally on the party to whom notice is
to be given, (b) on the day of transmission if sent by facsimile transmission to
the facsimile number given below, and telephonic confirmation of receipt is
obtained promptly after completion of transmission, (c) on the day after
delivery to Federal Express or similar overnight courier or the Express Mail
service maintained by the United States Postal Service, or (d) on the fifth day
after mailing, if mailed to the party to whom notice is to be given, by first
class mail, registered or certified, postage prepaid, and properly addressed,
return receipt requested, to the party as follows:
If to MOUNTAIN STATES:
Mountain States Capital, Inc.
Attn.: Chad Collins
1407 E. Thomas Rd.
Phoenix, Arizona 85014
Fax: (602) 954-0123
If to HERITAGE WEST:
Heritage West Securities, Inc.
Attn.: Paul Arutt or Byron Jolly
3550 North Central Avenue, Suite 1800
Phoenix, Arizona 85012
Fax: (602) 279-1414
If to ESCROW AGENT:
Wells Fargo Bank, National Association
Attention: Kimberly Vann
707 Wilshire Blvd., 17th Floor
Los Angeles, CA 90017
Fax: (213) 614-3355
Wires to the ESCROW AGENT should be directed to the following:
Wells Fargo Bank, National Association
ABA #________________
Cr: Corporate Trust Clearing
Account #00001038377
For Credit to: Mountain States Capital, Inc. - Separate Account;
Account # _________
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
11. INDEMNIFICATION OF THE ESCROW AGENT: MOUNTAIN STATES hereby indemnifies
and holds harmless the ESCROW AGENT from and against, any and all loss,
liability, cost, damage and expense, including, without limitation, reasonable
counsel fees, which the ESCROW AGENT may suffer or incur by reason of any
action, claim or proceeding brought against the ESCROW AGENT arising out of or
relating in any way to this Agreement or any transaction to which this Agreement
relates unless such action, claim or proceeding is the result of the actions or
omissions of the ESCROW AGENT. The ESCROW AGENT may consult counsel in respect
of any question arising under the Agreement and the ESCROW AGENT shall not be
liable for any action taken or omitted in good faith upon advice of such
counsel.
3
<PAGE>
12. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this Agreement,
no party hereto shall assign this Agreement or any rights or obligations
hereunder without the prior written consent to the other parties hereto and any
such attempted assignment without such prior written consent shall be void and
of no force and effect. This Agreement shall inure to the benefit of and shall
be binding upon the successors and permitted assigns of the parties hereto.
13. GOVERNING LAW; JURISDICTION. This Agreement shall be construed,
performed, and enforced in accordance with, and governed by, the internal laws
of the State of Arizona, without giving effect to the principles of conflicts of
laws thereof. Each party hereby consents to the personal jurisdiction and venue
of Maricopa County Superior Court.
14. SEVERABILITY. In the event that any part of this Agreement is declared
by any court or other judicial or administrative body to be null, void, or
unenforceable, said provision shall survive to the extent it is not so declared,
and all of the other provisions of this Agreement shall remain in full force and
effect.
15. AMENDMENTS; WAIVERS. This Agreement may be amended or modified, and any
of the terms, covenants, representations, warranties, or conditions hereof may
be waived, only by a written instrument executed by the parties hereto, or in
the case of a waiver, by the party waiving compliance. Any waiver by any party
of any condition, or of the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, in any one or more
instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation, or warranty of this Agreement.
16. ENTIRE AGREEMENT. This Agreement and the B-D Agreement contain the
entire understanding among the parties hereto with respect to the Separate
Account contemplated hereby and supersede and replace all prior and
contemporaneous agreements and understandings, oral or written, with regard to
such escrow.
17. SECTION HEADINGS. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
18. COUNTERPARTS. This agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute the same
instrument.
19. TIME OF ESSENCE. Time is of the essence of this Agreement.
20. RESIGNATION. The ESCROW AGENT may resign upon 30 days advance written
notice to MOUNTAIN STATES. If a successor ESCROW AGENT is not appointed within
the 30-day period following such notice, the ESCROW AGENT may petition any court
of competent jurisdiction to name a successor ESCROW AGENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first set forth above.
MOUNTAIN STATES CAPITAL, INC.
By:
-------------------------------------
Chad Collins, President
HERITAGE WEST SECURITIES, INC.
By:
-------------------------------------
Paul F. Arutt, President
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
-------------------------------------
Its:
------------------------------------
4
