To: J_W who wrote (186 ) 3/13/2000 2:29:00 PM From: J_W Respond to of 325
OPMR legal proceeding from the filing: Legal Proceedings In each of 1995 and 1996, we received a demand letter from the same claimant alleging that U-Scan Express infringes upon the claimant's patent. In July 1999, this claimant filed a civil action in the United States District Court for the District of Utah against us and PSC, the current assembler of U-Scan Express, alleging patent infringement. A second party also sent a demand letter to us alleging a different patent infringement. Although after consultation with counsel, we believe that the former claimant should not prevail in its lawsuit and that the latter claimant should not prevail if a lawsuit is brought to assert its claim, and that these claims will not have a material adverse effect on our business or prospects, no assurance can be given that a court will not find that the system infringes upon one or both of such claimants' rights. Kroger has also been sued by the same claimant in the State of Utah based upon the same issues underlying the suit filed against us in July. At our expense, our counsel is also defending Kroger in such action. Furthermore, we are contractually bound to indemnify Kroger for any damages that it may incur in connection with such suit. Enforceability of Civil Liabilities It may not be possible for shareholders to effect service of process within the United States upon our directors and officers and the experts named herein, who are residents of Canada, or upon all or a substantial portion of their assets and substantially all of our assets, which are located in Canada. It may also not be possible to enforce against them judgments of U.S. courts under any U.S. securities laws. There is doubt as to the enforceability in Canada of civil liabilities predicated upon the U.S. securities laws. See "Risk Factors."