THIS OPTION AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR, AT THE
OPTION OF THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED, OR UNLESS SOLD PURSUANT TO AN
EXEMPTION TO SUCH ACT.
COMMON STOCK PURCHASE OPTION
JORE CORPORATION
THIS CERTIFIES that, for value received, William M. Steele, Trustee of
the Steele Family Trust, a Revocable Living Trust, or registered assigns, is
entitled, upon the terms and subject to the conditions hereinafter set forth,
at any time on or after the date hereof and at or prior to 11:59 p.m.,
Pacific time, on February 10, 2004 (the "Expiration Time"), but not
thereafter, to acquire from Jore Corporation, a Montana corporation (the
"Company"), 720 fully paid and nonassessable shares of common stock, or its
equivalent, however designated, of the Company ("Option Stock"), the Exercise
Price Per Share is $2,000.00 based on managements' valuation of all issued
and outstanding stock of the Company as of the Date of Grant, subject to
increase based on a pending valuation of the Company currently being
conducted by Brueggeman and Johnson, P.C. (The Board of Directors of the
Company approved the option grant at fair market value and authorized an
independent valuation to confirm its valuation at the Date of Grant). (the
"Exercise Price) Such number of shares of Option Stock, type of security and
the price per share of capital stock represented by the Exercise Price are
subject to adjustment as provided herein, and all references to "Option
Stock" and "Exercise Price" herein shall be deemed to include any such
adjustment.
1. EXERCISE OF OPTION. The purchase rights represented by this Option are
exercisable by the registered holder hereof, at any time and from time to
time at or prior to the Expiration Time by the surrender of this Option and
the Notice of Exercise form attached hereto duly executed to the principal
corporate offices of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company),
and upon payment of the Exercise Price for the shares thereby purchased (by
cash or by check or bank draft payable to the order of the Company or by
cancellation of indebtedness of the Company to the holder hereof, if any, at
the time of exercise in an amount equal to the purchase price of the shares
thereby purchased); whereupon the holder of this Option shall be entitled to
receive from the Company a stock certificate in proper form representing the
number of shares of Option Stock so purchased.
2. RIGHT TO CONVERT OPTION. The registered holder hereof shall have the
right (but not the obligation) to require the Company to convert this Option,
in whole or in part, at any time and from time to time at or prior to the
Expiration Time, by the surrender of this Option and the Notice of Conversion
form attached hereto duly executed to the office of the Company at the
address set forth in Section 1 hereof (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company),
into shares of Option Stock as provided in this Section 2. Upon exercise of
this conversion right (and without
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payment by the holder of the Exercise Price), the holder hereof shall be
entitled to receive that number of shares of Option Stock of the Company equal
to the quotient obtained by dividing [(A - B)(X)] by (A), where:
A = the Fair Market Value (as defined below) of one share
of Option Stock on the date of conversion of this Option;
B = the Exercise Price for one share of Option Stock under
this Option; and
X = the number of shares of Option Stock being surrendered
pursuant to the executed Notice of Conversion.
If the above calculation results in a negative number, then no shares of
Option Stock shall be issued or issuable upon conversion of this Option.
"Fair Market Value" of a share of Option Stock shall mean:
(a) if the conversion right is being exercised in connection with a
transaction specified in Section 9 hereof, the value of the consideration
(determined, in the case of non-cash consideration, in good faith by the
Board of Directors of the Company) to be received pursuant to such
transaction by the holder of one share of Option Stock;
(b) if the conversion right is being exercised after the occurrence of
an initial public offering of common stock of the Company ("Common Stock"),
the average of the high and low trading prices of a share of Common Stock as
reported by the NASDAQ National Market (or equivalent recognized source of
quotations) for the three trading days prior to the surrender of this Option
for conversion in accordance with the terms hereof; or
(c) in all other cases, the fair value as determined in good faith by
the Board of Directors of the Company.
Upon conversion of this Option in accordance with this Section 2, the
registered holder hereof shall be entitled to receive a certificate for the
number of shares of Option Stock determined in accordance with the foregoing.
3. ISSUANCE OF SHARES; NO FRACTIONAL SHARES OR SCRIP. Certificates for
shares purchased hereunder or issuable upon conversion hereof shall be
delivered to the holder hereof by the Company's transfer agent at the
Company's expense within a reasonable time after the date on which this
Option shall have been exercised or converted in accordance with the terms
hereof. Each certificate so delivered shall be in such denominations as may
be requested by the holder hereof and shall be registered in the name of such
holder or, subject to applicable laws, other name as shall be requested by
such holder. If, upon exercise or conversion of this Option, fewer than all
of the shares of Option Stock evidenced by this Option are purchased prior to
the Expiration Time, one or more new Options substantially in the form of,
and on the terms in, this Option will be issued for the remaining number of
shares of Option Stock not purchased upon exercise or conversion of this
Option. The Company hereby represents and warrants that all shares of Option
Stock which may be issued upon the exercise or conversion of this Option
will, upon such exercise or conversion, be duly and validly authorized and
issued, fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issuance thereof (other than liens or charges
created by or imposed upon the holder of the Option Stock). The Company
agrees that the shares so
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issued shall be and be deemed to be issued to such holder as the record owner
of such shares as of the close of business on the date on which this Option
shall have been surrendered for exercise or conversion in accordance with the
terms hereof. No fractional shares or scrip representing fractional shares
shall be issued upon the exercise or conversion of this Option. With respect
to any fraction of a share called for upon the exercise or conversion of this
Option, an amount equal to such fraction multiplied by the then current price
at which each share may be purchased hereunder shall be paid in cash to the
holder of this Option.
4. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of
Option Stock upon the exercise or conversion of this Option shall be made
without charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the holder of this Option or in such name or
names as may be directed by the holder of this Option; PROVIDED, HOWEVER,
that in the event certificates for shares of Option Stock are to be issued in
a name other than the name of the holder of this Option, this Option when
surrendered for exercise or conversion shall be accompanied by the Assignment
Form attached hereto duly executed by the holder hereof.
5. NO RIGHTS AS SHAREHOLDERS. This Option does not entitle the holder
hereof to any voting rights or other rights as a shareholder of the Company
prior to the exercise or conversion hereof.
6. EXCHANGE AND REGISTRY OF OPTION. This Option is exchangeable, upon the
surrender hereof by the registered holder at the above-mentioned office or
agency of the Company, for a new Option of like tenor and dated as of such
exchange. The Company shall maintain at the above-mentioned office or agency
a registry showing the name and address of the registered holder of this
Option. This Option may be surrendered for exchange, transfer, exercise or
conversion, in accordance with its terms, at such office or agency of the
Company, and the Company shall be entitled to rely in all respects, prior to
written notice to the contrary, upon such registry.
7. LOSS, THEFT, DESTRUCTION OR MUTILATION OF OPTION. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Option, and in case of loss, theft or
destruction of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Option, if mutilated, the Company
will make and deliver a new Option of like tenor and dated as of such
cancellation, in lieu of this Option.
8. SATURDAYS, SUNDAYS AND HOLIDAYS. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
9. MERGER, SALE OF ASSETS, ETC. If at any time the Company proposes to
merge or consolidate with or into any other corporation, effect any
reorganization, or sell or convey all or substantially all of its assets to
any other entity, in a transaction in which the shareholders of the Company
immediately before the transaction will own immediately after the transaction
less than a majority of the outstanding voting securities of the entity (or
its parent) succeeding to the business of the Company, then the Company shall
give the holder of this Option sixty (60) days' prior written notice of the
proposed effective date of such transaction, and if this Option has not been
exercised or converted by or on the effective date of such transaction, it
shall terminate.
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10. SUBDIVISION, COMBINATION, RECLASSIFICATION, CONVERSION, ETC. If the
Company at any time shall, by subdivision, combination, reclassification of
securities or otherwise, change the Option Stock into the same or a different
number of securities of any class or classes, this Option shall thereafter
entitle the holder to acquire such number and kind of securities as would
have been issuable in respect of the Option Stock (or other securities which
were subject to the purchase rights under this Option immediately prior to
such subdivision, combination, reclassification or other change) as the
result of such change if this Option had been exercised in full for cash
immediately prior to such change. The Exercise Price hereunder shall be
adjusted if and to the extent necessary to reflect such change. If the Option
Stock or other securities issuable upon exercise or conversion hereof are
subdivided or combined into a greater or smaller number of shares of such
security, the number of shares issuable hereunder shall be proportionately
increased or decreased, as the case may be, and the Exercise Price shall be
proportionately reduced or increased, as the case may be, in both cases
according to the ratio which the total number of shares of such security to
be outstanding immediately after such event bears to the total number of
shares of such security outstanding immediately prior to such event. The
Company shall give the holder prompt written notice of any change in the type
of securities issuable hereunder, any adjustment of the Exercise Price for
the securities issuable hereunder, and any increase or decrease in the number
of shares issuable hereunder.
11. TRANSFERABILITY; COMPLIANCE WITH SECURITIES ACT
(a) Prior to the Expiration Time and subject to compliance with
applicable laws, this Option and all rights hereunder are transferable by the
holder hereof, in whole or in part, at the office or agency of the Company
referred to in Section 1 hereof. Any such transfer shall be made in person or
by the holder's duty authorized attorney, upon surrender of this Option
together with the Assignment Form attached hereto properly endorsed.
(b) Each certificate representing the Securities or other securities
issued in respect of the Securities upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
"These securities have not been registered under the securities act of
1933, as amended (the "act"), or any state securities laws. They may
not be sold, offered for sale, pledged, hypothecated or otherwise
transferred n the absence of a registration statement in effect with
respect to the securities under such act or, at the option of the
company, an opinion of counsel reasonably satisfactory to the company
that such registration is not required, or unless sold pursuant to an
exemption to such act."
12. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the holder hereof that:
(a) during the period this Option or the Option Stock issuable
hereunder is outstanding, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon conversion of the Option Stock issuable upon
exercise or conversion of this Option;
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(b) the issuance of this Option shall constitute full authority to
the Company's officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the shares
of Option Stock issuable upon exercise or conversion of this Option;
(c) the Company has all requisite legal and corporate power to
execute and deliver this Option, to sell and issue the Option Stock
hereunder, to issue the Common Stock issuable upon conversion of the Option
Stock and to carry out and perform its obligations under the terms of this
Option; and
(d) all corporate action on the part of the Company, its directors
and shareholders necessary for the authorization, execution, delivery and
performance of this Option by the Company, the authorization, sale, issuance
and delivery of the Option Stock and the Common Stock issuable upon
conversion of the Option Stock, the grant of registration rights as provided
herein and the performance of the Company's obligations hereunder has been
taken;
(e) the Option Stock and the Common Stock issuable upon conversion
of the Option Stock, when issued in compliance with the provisions of this
Option and the Articles, will be validly issued, fully paid and
nonassessable, and free of all taxes, liens or encumbrances with respect to
the issue thereof, and will be issued in compliance with all applicable
federal and state securities laws; and
(f) the issuance of the Option Stock and the Common Stock issuable
upon conversion of the Option Stock will not be subject to any preemptive
rights, rights of first refusal or similar rights.
13. COOPERATION. The Company will not, by amendment of its Articles or
through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Option and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of the Option
against impairment.
14. GOVERNING LAW. This Option shall be governed by and construed in
accordance with the laws of the State of Montana.
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IN WITNESS WBEREOF, the Company has caused this Option to be executed by
its duly authorized officers.
Dated: February 10, 1999 JORE CORPORATION, a Montana corporation,
By: /s/ Matt Jore
------------------------------------
Matt Jore, President
ACCEPTED:
/s/ William M. Steele
- ------------------------------------
William M. Steele, Trustee of the
Steele Family Trust, a Revocable
Living Trust
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NOTICE OF EXERCISE
To: JORE CORPORATION
(1) The undersigned hereby elects to purchase shares of common stock
(or equivalent capital stock, however designated) of Jore Corporation
pursuant to the terms of the attached Option, and tenders herewith payment of
the purchase price in full, together with all applicable transfer taxes, if
any.
(2) Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
_____________________________
(Name)
_____________________________
(Address)
(3) The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that
the undersigned has no present intention of distributing or reselling such
shares.
_____________________________ _____________________________
(Date) (Signature)
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NOTICE OF CONVERSION
To: JORE CORPORATION
(1) The undersigned hereby elects to convert the attached Option into
such number of shares of Jore Corporation as is determined pursuant to such
Option, which conversion shall be effected pursuant to the terms of the
attached Option.
(2) Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
_____________________________
(Name)
_____________________________
(Address)
(3) The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that
the undersigned has no present intention of distributing or reselling such
shares.
_____________________________ _____________________________
(Date) (Signature)
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ASSIGNMENT FORM
(To assign the foregoing Option, execute this form and supply required
information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Option and all rights evidenced
thereby are hereby assigned to
________________________________________________________________________
(Please Print)
whose address is _______________________________________________________
(Please Print)
Dated: ________________________________________
Holder's Signature: ___________________________
Holder's Address: _____________________________
_______________________________________________
Guaranteed Signature: _______________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Option, without alteration or enlargement or
any change whatever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign
the foregoing Option.
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