Cascade Designs, Inc. - Page 17




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          brought an action in Federal District Court seeking a declaratory           
          judgment as to the validity of Cascade's patents.  In 1989,                 
          Cascade filed a counterclaim against the Taiwanese manufacturer             
          and its U.S. distributor, and a complaint with the International            
          Trade Commission, claiming that the Taiwanese version of the                
          mattress infringed upon Cascade's patents.                                  
               In 1990, Cascade and Lea agreed to suspend the corporation's           
          obligation to make payments to Lea pending the resolution of the            
          litigation with the Taiwanese manufacturer.  In 1991, at the                
          request of Cascade, the litigation was dismissed.  As a result of           
          the dismissal, the Taiwanese manufacturer was allowed to continue           
          manufacturing the mattresses and to sell them in the United                 
          States, and Cascade's patents retained their presumption of                 
          validity.  In 1992, Cascade paid Lea the amounts that had been              
          suspended pending the outcome of the litigation.                            
               The 1982 agreement was amended on three occasions to reduce            
          the amount payable to Lea.  Recognizing that the litigation with            
          the Taiwanese manufacturer had weakened, but not invalidated, the           
          patents, Cascade and Lea agreed in November 1992 to reduce the              
          payments from 5 to 4 percent of the gross selling price of the              
          products using the technology covered by those patents.  In                 
          January 1993, upon reassessment of the value of the patents after           
          the settlement of the lawsuit, Cascade and Lea agreed to reduce             
          the payments from 4 to 2.5 percent of the gross selling price of            






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