According to the Company’s FORM 10-Q For The Period Ended March 31, 1999, in March 1997, a shareholder filed a lawsuit against the Company and four of its current or former officers and directors, styled MURRAY V. RIDE, INC. ET AL. The lawsuit alleges violations of certain federal securities laws and state laws, and purports to seek unspecified monetary damages on behalf of a class of shareholders who purchased the Company's common stock during the period of August 10, 1995 through December 30, 1996. In August 1998, the Company, together with the individually named defendants, entered into a Memorandum of Understanding with the plaintiffs in the lawsuit, wherein the parties have agreed to settle the lawsuit upon the following principal terms: (1) a settlement fund will be created consisting of: (a) $3,000,000 cash paid by the Company's insurance carrier; and (b) warrants to purchase 600,000 shares of the Company's Common Stock, exercisable for a four year period ending December 31, 2002 at a price of $3.00 per share; and (2) the dismissal of the lawsuit against all named defendants with prejudice. The Memorandum of Understanding has been reduced to a Stipulation of Settlement, which received final approval of the Court on March 8, 1999.

The original Complaint brings claims under the Federal Securities Laws (Section 10 (b), Rule 10b-5 and Section 20 (a), State Securities Laws (RCW 21.10.010 et seq.) Consumer Protection Law (RCW 19.86.020 et seq.) and State Common Law (Negligent Misrepresentation). Specifically, the complaint alleges that during the class period, the defendants Ride and certain of its officers and directors issued incorrect financial and business information about Ride, through material misstatements and omissions of material facts about Ride, its finances, performance, and future business prospects. The complaint further alleges that this caused the market price of Ride common stock to be artificially inflated, and caused purchasers to pay too much for Ride common stock.