INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "AGREEMENT") is entered into as of August
__, 1999, by Xxxxxxx X. Xxxx, Xxxxxxx X. Xxxx, Xxxxx X. Xxxx, the Xxxxxxx Xxxx
Family Trust, the Xxxxxxx Xxxx Family Trust and the Xxxxx and Xxxx Xxxx Family
Trust (collectively the, "INDEMNITORS"), in favor of Jore Corporation, a
Montana corporation (the "COMPANY"), with reference to the following facts:
A. The Company is undertaking an initial public offering (the "OFFERING")
of its common stock (the "COMMON STOCK") pursuant to which the Company expects
to enter into an underwriting agreement with X.X. Xxxxxxxx & Co., Xxxxxx
Xxxxxxxxxx Xxxxx LLC, and First Security Xxx Xxxxxx as representatives of the
several underwriters of the Offering (the "Underwriters").
B. The Company is undertaking the Offering to, among other things,
provide liquidity to the current shareholders of the Company, including the
Indemnitors.
C. On August 16, 1999 Xxxx X. Block and Xxxx X. Block each filed a
complaint and demand for jury trial in the Fourth Judicial District Court in
Missoula County, Montana (the "COMPLAINTS") against the Company, Xxxxxxx X. Xxxx
individually and d/b/a Jore Enterprises, Xxxxxxx X. Xxxx and Xxxxx X. Xxxx.
D. In order to induce the Company to undertake the Offering and enter
into the proposed underwriting agreement, the Indemnitors have agreed to
indemnify and hold the Company and the Underwriters harmless from any claim,
demand, action, cause of action, suit, loss, cost, damage, fine, expense,
liability, judgment, settlement, proceeding or any injury that in any way may
arise out of, be connected with, or relate to any actions brought by or on
behalf of Xxxx X. Block and Xxxx X. Block against the Company.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants contained herein, the parties agree as follows:
1. INDEMNIFICATION; REIMBURSEMENT OF EXPENSES.
(a) The Indemnitors, severally, in proportion to their relative ownership
of the Company's Common Stock at the time of this Agreement, as set forth in
SCHEDULE A hereto, shall defend, indemnify, and hold the Company, each
Underwriter, the officers, directors, agents, and affiliates of the Company and
each Underwriter, and the successors and assigns of the foregoing persons (all
such persons being referred to herein individually as an "INDEMNITEE" and
collectively as "INDEMNITEES") harmless against any claim, demand, action, cause
of action, suit, loss, cost, damage, fine, expense, liability, judgment,
settlement,
proceeding or any injury which in any way arise out of, are connected with or
relate to any actions brought by or on behalf of Xxxx X. Block and Xxxx X.
Block, or either of them, against an Indemnitee ("CLAIMS"), including but not
limited to those asserted in the Complaints. Notwithstanding the foregoing,
however, the Company shall pay all court costs, investigation costs and
attorneys' fees of the Indemnitors in connection with the Claims until final
resolution of the Claims pursuant to a definitive judgment rendered by a court
of competent jurisdiction, a binding arbitral determination or award, or a
definitive agreement of settlement or compromise (a "Final Determination").
Within sixty (60) days of a Final Determination, Indemnitors shall reimburse the
Company for all of such costs and expenses.
(b) If, upon motion by or on behalf of Xxxx X. Block and Xxxx X. Block, or
either of them, a court of competent jurisdiction orders the Offering to be
enjoined prior to its completion, and such order is not immediately vacated upon
appeal, then within sixty (60) days of such order Indemnitors shall reimburse
the Underwriters for all documented expenses, including without limitation legal
fees and expenses of their counsel, travel and road show expenses, and other
out-of-pocket expenses, reasonably incurred thereby in connection with the
Offering. Notwithstanding the foregoing, however, if the Company undertakes the
Offering within one (1) year of any such injunction, with the Underwriters, all
of such documented expenses shall be repaid to the Indemnitors by the
representatives of the Underwriters, with the exception of expenses associated
with the road show, which shall be reimbursed only if the Company undertakes the
Offering within ninety (90) days of such injunction.
2. ISSUANCES OF COMMON STOCK.
(a) If Xxxx X. Block or Xxxx X. Block, or either of them, becomes entitled
to any shares of Common Stock from the Company pursuant to a Final
Determination, then the Indemnitors shall deliver to the Company, in accordance
with its instructions, stock certificates (duly endorsed for transfer or with
separate stock powers attached) evidencing that number of shares of Common Stock
to which Xxxx X. Block or Xxxx X. Block, or either of them, has become entitled.
The relative number of shares of Common Stock delivered to the Company by each
Indemnitor shall be in proportion to the number of shares of Common Stock owned
by each such Indemnitor as of the date of this Agreement. In such circumstances,
the Indemnitors shall take such further action and execute such other
instruments as the Company may request to effect the transfer, assignment, and
conveyance of all of their right, title, and interest in and to such shares of
Common Stock to Xxxx X. Block or Xxxx X. Block, or either of them.
(b) Except for the 300,000 shares of Common Stock to be sold by Xxxxx Xxxx
in the Offering, until the earlier of the entry of a definitive order from a
court of competent jurisdiction, the issuance of a binding and non-appealable
arbitral award, or the effective date of a final agreement of settlement or
compromise pursuant to which order, award or agreement the Claims are determined
and the Complaints are dismissed, Indemnitors will not, directly or indirectly,
without the prior written consent of a committee consisting of independent
directors
of the Company (the "BOARD COMMITTEE"), offer or contract to sell, sell, grant
any option for the sale or purchase of, grant a security interest in, pledge,
hypothecate, or otherwise dispose of that number of shares of Common Stock that
would cause the aggregate number of shares of Common Stock beneficially owned by
Indemnitors to be less than 25% of the sum of (x) the total number of shares of
Common Stock issued and outstanding and (y) the total number of shares issuable
upon exercise or conversion of outstanding options, warrants, and other
derivative securities. For purposes of this Agreement, an "independent
director" means any director who is a "non-employee director" in accordance with
Rule 16b-3 under the Securities Exchange Act, as amended, and an "outside
director" in accordance with Section 162(m) of the Internal Revenue Code, as
amended.
(c) Notwithstanding the foregoing, Matthew, Michael, or Xxxxx Xxxx may
make any bona fide gift or transfer to his immediate family or to a trust for
the benefit of such Indemnitor, his immediate family, or both, PROVIDED,
HOWEVER, that, as a condition of any such transfer, the transferor shall provide
the Board Committee ten days' advance written notice thereof and each transferee
shall agree to be bound by the terms of this Agreement and shall execute an
agreement substantially in the form hereof which the transferor shall cause to
be delivered to the Board Committee.
(d) The Indemnitors agree and consent to the entry of stop transfer
instructions with the Company's registrar and transfer agent and to the
placement of a restrictive legend on the stock certificates representing their
shares of Common Stock to prevent the transfer of shares of Common Stock
beneficially owned by the Indemnitors except in compliance with this Agreement.
3. NOTICE OF ACTIONS.
(a) The Indemnitors shall give prompt written notice to the Company if any
Indemnitor receives notice or otherwise becomes aware of any proceeding,
inquiry, notice, or other communication regarding any Claim which is or may
become subject to this Agreement.
(b) Promptly upon receipt of the same, the Indemnitors shall deliver to
the Company copies of any and all Claims, and any and all orders, notices,
applications, reports, and other communications, documents, and instruments
pertaining to the Claims.
(c) The Company shall, at its own expense, have the right to join and
participate in, as a party if it so elects, any legal proceedings or actions in
connection with any Claims.
4. PROCEDURES RELATING TO INDEMNIFICATION.
(a) Any losses, claims, damages, costs, expenses, fines or liabilities for
which an Indemnitee is entitled to indemnification hereunder shall be paid by
the Indemnitor as such
losses, claims, damages, costs, expenses, fines or liabilities are incurred,
except as otherwise provided in Sections 1(a), 1(b), 3(c), and 4(d).
(b) All amounts required to be paid or reimbursed to any Indemnitee
hereunder shall bear interest from the later of the date of payment by such
Indemnitee or the date of written demand to the Indemnitors hereunder, until
paid to such Indemnitee, at a rate of 8% per annum.
(c) In any circumstance in which the Indemnitors, individually or
collectively, are not performing his, its or their obligations hereunder to the
Company's reasonable satisfaction, the Company may, but shall not be obligated
to, employ its own legal counsel and consultants to investigate, prosecute,
negotiate, or defend any Claims against the Company and the Company shall have
the right to compromise or settle the same without the necessity of showing
actual liability therefor, and without the consent of Indemnitors. Indemnitors
shall reimburse the Company monthly, upon demand, for all fees and costs
incurred by the Company in investigating, prosecuting, negotiating, or defending
any such Claims.
(d) The Indemnitors shall not, without the prior written consent of the
Company, (i) settle or compromise any action, suit, proceeding, or claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the delivery by the claimant to the Company of (x) a full and
complete written release of the Company (in form, scope and substance
satisfactory to the Company in its sole discretion) from all liability in
respect of such action, suit or proceeding and (y) a dismissal with prejudice of
such suit, action or proceeding; or (ii) settle or compromise any action, suit,
proceeding, or claim in any manner that may adversely affect the Company as
determined by the Company in its sole discretion.
5. SEVERAL OBLIGATIONS; BINDING EFFECT.
The obligations of the Indemnitors under this Agreement shall be several.
This Agreement shall be binding upon the Indemnitors, their successors and
permitted assigns and shall inure to the benefit of the Indemnitees and their
successors and assigns. The obligations of the Indemnitors under this Agreement
shall not be assigned without the prior written consent of the Board Committee,
which consent may be given or withheld in the sole discretion thereof.
6. SUCCESSIVE ACTIONS.
A separate right of action hereunder shall arise upon each occurrence of
any matter indemnifiable by the Indemnitors under this Agreement. Separate and
successive actions may be brought hereunder to enforce any of the provisions
hereof at any time and from time to time. No action hereunder shall preclude
any subsequent action, and the Indemnitors hereby
waive and covenant not to assert any defense in the nature of splitting of
causes of action or merger of judgments.
7. SEVERABILITY.
If any provision of this Agreement shall be determined to be unenforceable
in any circumstances by a court of competent jurisdiction, then the balance of
this Agreement shall be enforceable nonetheless, and the subject provision shall
be enforceable in all other circumstances. If such unenforceable provision is
material to the purpose of this Agreement, the parties shall promptly negotiate
in good faith an enforceable provision addressing the applicable subject matter
of the unenforceable provision and amend this Agreement to reflect the terms of
such enforceable provision.
8. WAIVER.
The failure of any party hereto at any time to require performance of the
other party or parties, or to enforce any terms of this Agreement, shall in no
way affect that party's right to require such performance or enforce such terms,
nor shall the waiver by any party of any breach of any term of this Agreement be
taken or held to be a waiver of any further breach of the same term. No waiver
will be effective unless in writing signed by the party against whom the waiver
is asserted.
9. NOTICES.
All notices, consents, approvals, elections and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by personal service, by registered or certified mail, return receipt
requested and postage prepaid, or by United States Express Mail or commercial
courier service, to the parties at the addresses set forth below (or at such
other addresses as shall be given in writing by any party to the others pursuant
to this Section 9) and shall be deemed complete upon receipt or refusal to
accept delivery.
IF TO THE COMPANY:
Jore Corporation
00000 Xxxxxxx 00 Xxxxx
Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
IF TO THE INDEMNITORS:
Xxxxxxx X. Xxxx Xxxxxxx X. Xxxx
c/x Xxxx Corporation c/o Jore Corporation
00000 Xxxxxxx 00 Xxxxx 00000 Xxxxxxx 00 Xxxxx
Xxxxx, XX 00000 Xxxxx, XX 00000
Xxxxx X. Xxxx The Xxxxxxx Xxxx Family Trust
c/o Jore Corporation The Xxxxxxx Xxxx Family Trust
00000 Xxxxxxx 00 Xxxxx The Xxxxx and Xxxx Xxxx Family Trust
Xxxxx, XX 00000 c/o Jore Corporation
00000 Xxxxxxx 00 Xxxxx
Xxxxx, XX 00000
10. ATTORNEYS' FEES.
In the event that any Indemnitee brings or otherwise becomes a party to any
suit or other proceeding (including, without limitation, any administrative
proceedings) with respect to the subject matter or enforcement of this
Agreement, such Indemnitee shall, in addition to such other relief as may be
awarded, be entitled to recover from the Indemnitors the Indemnitees' reasonable
attorneys' fees, expenses and costs of investigation as are actually incurred
(including, without limitation, attorneys' fees, expenses and costs of
investigation incurred in any appellate or bankruptcy proceeding or costs
incurred in establishing the right to indemnification).
11. GOVERNING LAW.
This Agreement and the rights and obligations of the parties hereunder
shall in all respects be governed by, and construed and enforced in accordance
with, the laws of the State of Montana.
12. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement represents the entire agreement between the Company and the
Indemnitors relating to the subject matter hereof and supersedes all prior
representations, discussions, negotiations and agreements, whether written or
oral. No amendment to this Agreement shall be effective unless it is in
writing, refers to this Agreement, and is signed on behalf of the Company and
the Indemnitors.
13. COUNTERPARTS.
This Agreement may be executed in multiple counterparts and any counterpart
may be executed by one or more of the parties hereto with the same effect as if
all parties had executed the same counterpart.
14. THIRD-PARTY BENEFICIARIES.
The parties to this agreement agree and acknowledge that the Underwriters
and the individual members of the Board of Directors of the Company are intended
third party beneficiaries of the representations, warranties, covenants and
other agreements of the Indemnitors set forth in this Agreement, and, as such
shall have the right to assert any and all claims or other causes of action
against Indemnitors, including, those arising out of a breach by Indemnitors of
any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
THE COMPANY:
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
By: Xxxxx X. Xxxxxxxx
Title: Chief Financial Officer
and General Counsel
INDEMNITORS:
/s/ Xxxxxxx X. Xxxx /s/ Xxxxxxx X. Xxxx
--------------------------------- ---------------------------------
XXXXXXX X. XXXX XXXXXXX X. XXXX
/s/ Xxxxx X. Xxxx
---------------------------------
XXXXX X. XXXX
THE XXXXXXX XXXX FAMILY TRUST THE XXXXXXX XXXX FAMILY TRUST
/s/ Xxxxxxx X. Xxxx /s/ Xxxxxxx X. Xxxx
--------------------------------- ---------------------------------
By: Xxxxxxx X. Xxxx, Trustee By: Xxxxxxx X. Xxxx, Trustee
THE XXXXX AND XXXX XXXX FAMILY TRUST
/s/ Xxxxxxx X. Xxxx
---------------------------------
By: Xxxxxxx X. Xxxx, Trustee
