December 2, 1998 Dear Retailer: We understand that competitor Mathews, Inc. has issued a letter to its retailers regarding a lawsuit filed by Mathews in the Minnesota District Court against Precision Shooting Equipment, Inc.PSE believes such matters should be decided in Court, and not aired in the trade.  Nonetheless, the decision by Mathews to send a notice to its retailers necessitates that PSE defend itself against the statements that have been circulated by Mathews. The complaint filed by Mathews in such lawsuit alleges that certain bows sold by PSE infringe U.S. Patent No. 5,809,982 issued on September 22, 1998 to Mathew A. McPherson, and entitled "Compound Bow With Counteracting Weight".  The complaint also alleges that certain bows sold by PSE infringe upon purported "trade dress" rights of Mathews.  Mathews filed its complaint against PSE without any prior notification to PSE of the claims set forth therein. PSE's 1999 catalogs depicted two cams that initially included counteracting weights, namely, the Orion One-Cam cam and the Bull Whip One-Cam cam.  Upon receiving notice of the aforementioned lawsuit, PSE stopped offering such cams with the counteracting weights.  PSE believes that the current Orion One-Cam and the current Bull Whip One-Cam cams, which omit any supplemental counteracting weight, offer virtually the same performance characteristics as previously provided by the prior weight Orion One-Cam and the prior weighted Bull Whip One-Cam cams, respectively. PSE has filed an Answer in response to the Mathews' complaint.  Within its Answer, PSE has denied any liability for infringement of the '982 patent.  In addition, PSE has alleged within its Answer that the cams currently offered by PSE do not incorporate a "counteracting weight" within the meaning of the '982 patent.  Finally, PSE's Answer denies that Mathews' bows have any distinctive trade dress, and denies that any dealers, distributors or archers are likely to be confused as to the source or origin of PSE's bows. It is the policy of PSE to respect the valid intellectual property rights of its competitors, once receiving notice thereof.  PSE will continue, as it has for over 25 years, to develop and market innovative archery products at a reasonable price.  We believe that the PSE Carrera and Durango bows currently offered by PSE are superior to the Mathews' products against which they compete. PSE will continue to offer such products, and allow consumers to choose between the two. Incidentally, PSE has been contacted by at least one retailer who received a letter from Mathews regarding the aforementioned litigation, and who expressed concern to PSE over possible liability that such retailer could incur to Mathews if the retailer continued to sell PSE products.  PSE is proud to stand behind its products, and PSE's policy is to indemnify its retailers against any claims by a third party that bows supplied by PSE infringe upon the rights of such third party. Sincerely, PRECISION SHOOTING EQUIPMENT, INC. Jim Jordan Vice President of Sales and Marketing