POLSON - Jore Corp. has asked a Lake County district judge to prevent printing contractor John Rasberry of Polson from speaking publicly about the breach-of-contract suit Rasberry filed against the company in 1998.

The motion for a gag order comes at a sensitive time for the power-tool-accessory manufacturer based in Ronan.

Jore Corp. recently filed notice with the federal Securities and Exchange Commission that it intends to become a publicly traded corporation later this summer, and sell stock in the company on the NASDAQ exchange.

Jore lawyers claim Rasberry has used "threats of statements to news media in an attempt to extract (monetary) settlement" of the suit from Jore. Jore lawyers claim Rasberry has called brokerage firm D.A. Davidson, a Missoulian reporter and possibly others to discuss the litigation, jeopardizing Jore's right to a fair trial.

In a written statement provided the Missoulian on Thursday, Jore attorney David Cotner of Missoula said: "Based on statements by Mr. Rasberry's counsel, Mr. Rasberry's continued efforts of contacting the Missoulian and other individuals is designed to coerce a settlement from Jore. The comments are improper and defamatory. Jore has no intention of acquiescing to Mr. Rasberry's efforts to coerce a settlement."

Earlier this week, a D.A. Davidson official said in a court affidavit that Rasberry's public discussion of the litigation has the potential "to damage the reputation of Jore Corp. and the success of its initial public offering" of stock. D.A. Davidson & Co., a brokerage firm based in Great Falls, is handling the stock offering for Jore.

The SEC requires that a company seeking to sell shares publicly must disclose any litigation that potentially could have an adverse material impact on the company's financial health. This requirement protects investors, helping to assure they will have full knowledge of all the risks involved in buying a company's shares in an initial public offering of stock.

The Jore prospectus has not been published yet, and will not be until the stock offering is approved by the SEC later this summer.

But in Jore's Form S-1 filing with the SEC May 13, in which the company announced its intention to sell shares publicly, no mention was made of the suit, although there is a section of the document devoted to disclosure of such legal proceedings.

Rasberry claims his lawsuit is material to the company's financial health, and that potential investors have the right to know about it.

Rasberry said he believes Jore owes him in excess of $300,000 in bills, plus damages. He said his now-bankrupt business, Montana Industrial Printing Inc., was totally dependent on Jore Corp. orders, and in fact was formed specifically to serve Jore Corp. printing needs, and financed on the strength of Jore's promise of business. Rasberry printed labels for Jore products from 1993 until 1997. He said he borrowed some $350,000 on the strength of Jore's promised business to buy special equipment specifically to print Jore's tool packaging. When Jore backed out of the contract in 1997, Rasberry was forced into bankruptcy, and the equipment was sold to pay the debt, Rasberry said.

According to a court document, Rasberry suggested to D.A. Davidson that the lawsuit may involve sums exceeding $10 million. Rasberry did not cite a specific sum in his interview with the Missoulian. But he suggested the amount at issue was substantially more than the $300,000 he claims Jore Corp. owes him in unpaid bills alone. He said Jore had offered to settle the suit out of court but the offer was for substantially less than $80,000 and was unacceptable.

"We feel it's a large enough sum (at issue in the lawsuit), they should have mentioned the contract or the lawsuit so that potential shareholders have a way of evaluating the stock offering," Rasberry said.

Jore's attorney Cotner responded: "In preparing its disclosure, Jore was accurate, complete and truthful in representations made. That includes the representation that Jore is not a party to any material legal

proceeding. 'Materiality' is defined under the regulations which govern disclosures under the Securities Act of 1933. Mr. Rasberry's claim does not fit that definition."

D.A. Davidson executive Madsen said in his court affidavit: "The (S-1) Registration Statement as filed with the SEC does not yet make the company a public company, and the (Rasberry) suit was not disclosed after consideration of its materiality by the company and its counsel."

According to Bruce Budge, chairman of the accounting and finance department at the University of Montana, the question of the "materiality" of a lawsuit is a difficult judgment call. There is no formula or generally accepted rule that applies to all cases.

Materiality is "something that would affect an investor's decision," he said.

Accountants, being a conservative lot, tend to err on the side of caution by disclosing litigation risks rather than not, he said.

An S-1 filing is a preliminary document, and investors should not rely on it for making decisions about a company's investment risks, Budge said. Investors should await the prospectus, he said. This may be available in July.

The lawsuit involves a dispute over a printing services agreement signed in 1996 between Rasberry and Matthew Jore as president of Jore Corp. The document was drafted by David H. Bjornson, then a Missoula lawyer representing Jore, and now chief financial officer of Jore Corp.

Jore's attorneys claim the contract with Rasberry and his now-defunct company as terminated because of poor quality control and unsatisfactory performance. Rasberry claims the company never legally terminated the agreement, that the agreement remains in effect, and that Jore never followed dispute-resolution provisions of the agreement.

Jore claims the contract was legally terminated, and that it has not been in force since 1997.

"Jore has strong and valid defenses to Mr. Rasberry's claims and is confident that a favorable outcome will result from the litigation," Cotner said.

Rasberry has continued to bill Jore Corp. $6,000 a month since February 1997, as provided for in the printing agreement. With 7 percent a month interest Rasberry tacks on for bills unpaid over 30 days, the bill now totals some $300,000, Rasberry said. Jore has not made a payment since February 1997, Rasberry said.

In June, Jore Corp. asked presiding Judge C.B. McNeil for a summary judgment, dismissing the suit because it has no merit. The Jore attorneys cited a variety of legal reasons. Rasberry's attorney responded to that motion on Tuesday, saying the lawsuit should not be dismissed because there are significant facts at issue for a jury to decide.

Judge McNeil has yet to schedule a hearing on any of the matters pending in the lawsuit, including the request for a gag order.

McNeil was out of town last week, so information on the scheduling of the litigation was not immediately available.

Monday - 6/28/99

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