<center><h1>SEABIRD SAILING CLUB, LTD.</h1> <h2> FREQUENTLY ASKED QUESTIONS (FAQ) </h2></center> </head> <body>   <dl><DT><center>Updated 3/2/99</center> <dd> There are some questions which need to be answered before proceeding with an investigation of this project. It is our intention that this project will start off and continue as a win-win situation for all concerned. However, it is sometimes difficult to get that concept to jump off the pages. So, in order to clarify our intent, our purpose and our business methods, we have prepared these answers to actual questions posed by critics and potential investors. We have been asked some direct questions by Venture Company attorneys. We understand that attorneys are not risk takers. It seems that their primary function is to mitigate as much risk as possible for their client/investor. However, this type of investing is risky and the investor must decide what level of risk is acceptable. We, as entrepreneurs, must decide how much we are willing to yield to obtain that funding. Shared control and very high return, a return appropriate to the risk is our objective. The attorney's questions are good, to the point and tough. We want them addressed first. On to the attorney's and other Venture Capitalist's questions. </DL> <HR> <dl> <dt>30. How long will it take to realize a cash flow? <dd> That's the best part of this project. It will take 90 days to set up the operation. At the most conservative estimates, once the doors are open and customers are being serviced, cash flow will immediately exceed operating costs. No long wait as with product or real estate development. Immediate returns. <dt>29. Is there any way an investor can participate with a lower capital investment amount? <dd> Yes. We are organizing a Limited Liability Company in Hawaii to serve as a holding and member owned investment company. We will accept Letters of Intent for smaller amounts, around $150k to $300k. When the LLC has enough investment commitments to invest in a Seabird unit, arrangements will be made to lawfully transfer funds from that company over to Seabird. <dt>28. How much of the Venture Partner's capital is actually at risk? <dd> $1.5 million requested. About $320 at risk. The estimated start up costs are shown as $693k. Assuming estimates are 20% low, costs run at about $831k. The balance of $668k is cash reserve and, by agreement, will not be used without agreement by both Management and Venture Partner. And, of the start up costs, $509k is used to pay deposits or purchase capital assets which are held by contract or UCC-1 by the Venture Partner leaving a total of $322k, or 21% of the investment, which is actually at risk. Regardless of amount at risk, the return will be calculated on the total amount committed by the Venture Partner. <dt>27. How do you know it will work? <dd> Its funny that over a period of ten years no one has asked that question before. And, it is probably the most difficult to answer. Well, because I know it will, of course. But, how can I quantify such a statement? First, I've got the experience with the tourists and chartering. I've walked with them on the streets of Waikiki and have talked with them about vacations, recreation and costs. Most are really searching for something to do that is truly symbolic of a vacation in Paradise, and few find it. Most are very eager to receive a free award of a ride on a major attraction like the "Star of Honolulu" where they will receive excellent food, be entertained and can cruise the coast of Oahu to visit the "Arizona Memorial" and the "Mighty Mo". Secondly, the tourists are concentrated into a small geographical area and access to the tourist customers is readily available through proven in-place advertising media. And, finally, I have seen the results of time-share sales methodology. It works. We are using that sales technique except we are upping the technology and making the purchase as easy as signing one's name. That's it. Can't be easier. The customers are here, wanting something free and purchasing is easy, even painless. <dt>26. Do you expect the Equity Partner to put up all the money while you put up nothing? <dd>Most of it. We do not have the equity to start this business. We are investing 10% including initial development costs of approx. $100K and $50,000 cash to be deposited at the time of start up. We need a partner who can fund the balance. Management has worked to make the repayment, the return and exit advantageous to the Equity Partner's position. We have deferred Management's return expectations until that commitment has been satisfied. We consider the projected return of 800% reasonable. Our understanding is that investors prefer easy in, easy exit deals. This one is so structured. We are amenable to other plans and will consider other agreeable options. <dt>25. Many investors fear being taken by a management team they do not know. Would you agree to a joint check signing arrangement to assure the investor that the money will be spent as planned. <dd> This is agreeable to Management if there is no delay in work progress. It might be more desirable for the Investor to provide his/her own Comptroller to work on-site on the project who will be responsible to sign all checks relating to the Investor's funds and returns. We have to hire someone for this task. The Investor's representative could serve both duties. <dt> 24. A most difficult issue in this matter is the fact that you expect the Equity Partner to put up all the cash while you invest little. It is much easier when the founder believes enough in the project to put something at risk also. <dd> As far as risk is concerned, once the project is funded I will leave my employment which would provide me with a comfortable retirement income if I worked another five years. At age 60, I really don't have time to start over and am risking having to work the rest of my life without a retirement income. <dt> 23. Your personal financial statement shows a $75,000 asset for the business plan. Is this a receivable which you intend to collect from the company once funded? <dd> I do place value on the business plan. I have invested a great deal of sweat equity in its preparation. It was over ten years in the making, well over 1500 hours at $50/hr. I am contributing it to the business as a portion of the initial development costs. I will not collect anything for it's preparation, nor will I receive any reimbursement for the costs of publishing, distribution or any other costs incurred in the development of the project prior to its funding. <dt> 22. And, how do we know that your artwork is worth what is listed? Your personal assets are limited. Are you willing to invest your personal assets in this project? <dd> As for the artwork, I have a modest collection, all certifiable as far as value is concerned, a record of which may be made available to any interested potential Equity Partner. And, yes, my personal assets are limited. We have already spent a considerable sum and dedicated much effort and time to the development of this project. In addition, at the time of implementation, both Jon and I will contribute $25,000 each to fund the project. <dt> 21. You have stated that the returns are derived from the net proceeds. What is the net and what will keep Management from expensing anything they may please against the net? <dd> Management has published a Profit/Loss spread sheet within the business plan and intend to strictly follow that plan. In fact, that plan will become a part of the Agreement between the Equity Partner and Management including management of expenses as indicated. Any necessary deviation from this spending plan will only be with full agreement between both parties. <dt> 20. Can you lease the vessels to reduce the required start up capital? <dd> There may be a variety of measures which could be taken to address the start up capital requirements. We are amenable to a consideration of any such option. The product of the Company is a Lifetime Membership in a Sailing Club including club ownership of a vessel. To that end we must have a vessel available to deed to the Club. We could lease in lieu of purchase so long as the vessel is purchased and deeded to the Club in a timely manner. If we proceed in this manner, we will need an angel with the credit line to allow the Company to make such a lease. I estimate that $350,000 of start up funds could be deferred with this strategy. <dt> 19. How are you going to market this business. How do you know that there is a market? <dd> The essential key to success for this business is a concentration of tourists in a small and accessible area. We will draw the customers with a very attractive and desirable incentive. While there is considerable competition for the tourist dollar, we are offering a major free gift for attending our one hour sales program. Incentives of a much lesser value have been successful in attracting customers to the local time share sales offices for over twenty years. We are realistically expecting a market penetration of only 4/10ths of one percent (0.04%) of the visitor count. There are numerous sources for our entry into the customer stream and we will be taking advantage of the most profitable among them <dt> 18. Most business plans do not provide enough for marketing. Your plan has very little for marketing. It should be 40% to 60% of operating costs. <dd> This is true for most start up companies. Our projected monthly advertising and incentives costs are approx. $79,000. The total monthly operation budget is $270,000. Our advertising cost is about 30%. Additionally, the State of Hawaii spends annually over $65 million to bring customers to us. That is why it is so important to locate the sales operation in an area where there is a high concentration of vacationing tourists. They are the ones who constitute our market. Tried and proven marketing tools such as hotel in-room TV and free advertising magazines stands located on virtually every street corner are already in place which reach the total market population. <dt> 17. How can the Equity Partner know that the Management Team has the necessary skills to start up and run this business profitably? <dd> The principal players are all seasoned and highly experienced in their own areas. The CEO is a planner and implementor with years of entrepreneurial, engineering and construction management experience. The CFO has a range of international business and construction development experience which is well suited for the needs of the Company. The District General Managers are men who have a breadth of experience including many years of successful day to day operations experience and international and military connections to provide access to our customers. The brief descriptions of the Management Team is shown in the business plan. <dt> 16. What protection does this plan provide for the investor. Are any of the assets used for collateral? <dd> The capital expenditures shown in the spread sheets include lease, fixtures, furniture and improvements of the sales and reception office. All of these assets are to remain the property of the Equity Partner. In addition, the vessel will be encumbered with a UCC-1 in favor of the equity partner to provide access to that asset in the event of a business failure. Everything of a tangible value purchased and retained by the Company will remain as the equity partner's property until the initial investment is repaid. Then, these assets will revert to the Company or Club as may be appropriate. <dt> 15. Will you consider selling shares of stocks to a number of investors to allow investment in your project at lower increments? <dd> We are not skilled in the business of selling securities nor do we wish to be regulated by the SEC in this endeavor. We are looking for a Venture Partner who is interested in performing as the financial backing for this very lucrative business. If others wish to put together a group of their client investors, that's fine. We will be amenable to that situation. However, we prefer to do business with only one entity from that group. <dt> 14. Wouldn't you rather have a number of investors rather than one Venture Partner so you could have more control over the project? <dd> As I mentioned, I have no desire to redirect my focus to the selling of stocks. I have learned that focus on one's own purpose is the most valuable asset in any endeavor. Also, I have no concern about the involvement of a Venture Partner. I fully understand the implementation of this project and I always welcome input, expertise and support. A Venture Partner would have a vested interest in seeing the project become a success. We would certainly have a common purpose. <dt> 13. If your business is so lucrative, why wouldn't a Venture Partner wish to remain as a stock holder? <dd> It is our understanding that Venture Capitalists are interested in obtaining a considerable profit on the front end and then exiting. We have carefully smithed a leveraged structure which will provide a considerable profit for our Venture Partner. Providing that profit is our job and our commitment. Our plan is structured to provide that profit quickly while Management defers its returns. The VC can take his profit and proceed to the next opportunity and is not hindered by a long term, slow pay arrangement. No one cares for marriage. <dt> 12. How many projects do you plan to implement and how many Venture Partners do you want? <dd> The program will best sell if we can provide a wide variety of resort sites where our customers can enjoy exchange privileges. Additionally, we want to develop a market presence as soon as possible to protect our market share. Relying on revenues from the projects proceeds will take time. With the roll over feature of our program, each Venture Partner will immediately reinvest upon repayment of the initial capital. We project that within five years we will be able to implement six units with each Venture Partner. Targeting a minimum of 48 sites world wide within that same five years indicates the need for at least eight Venture Partner project streams. <dt> 11. Your Business Plan shows implementation of your business in Hawaii. Why Hawaii and where else do you plan to expand? <dd> The founder has resided in Hawaii for the past 15 years and has first hand knowledge of the area. Study has shown that it has a high probability of success. The businesses may be placed anywhere where there is a concentration of tourists, ocean or lakes for sailing, good year round weather, developed tourist facilities and potential incentive attractions. Other sites being considered include Newport, California; Freeport, Bahamas; Lahiana on the island of Maui, Hawaii; Cancun, Mexico; Mazatlan, Mexico; Cabo San Lucas, Mexico; Ft. Lauderdale, Florida; and Bermuda to list only a few. The potential in the Mediterranean, South Pacific, Australia, South America and the Far East is limitless. The Plan presently reflects installation in Hawaii. Future plans will follow the same format but will be adjusted to the local conditions. <dt> 10. Your spreadsheets indicate a need for $800K. Why are you asking for $1.5 million? <dd> The spreadsheet projections are very thorough and reflect every possible cost and consideration which we have been able to predict. Furthermore, we have undergone many professional reviews of every phase of the economic development of the plan. Even the best advisors can not predict catastrophe. If we were to be impacted by some condition which we could not anticipate, without a capital reserve, we could not react to preserve the Equity Partner's capital and all would be lost. Hurricanes, airline strikes and just plain poor business environment could devastate the project if not adequately capitalized. With adequate reserves we could recover, even relocate if indicated. Management is interested in working only with an Equity Partner capable of taking on an investment of this amount as an easy and doable venture. <dt> 9. Then, will only $800K of the capital be at risk? <dd> Well, provided that all goes as projected. However, we consider the reserve to be as important to the success of the project as the capital used for implementation. Under- capitalization can be as devastating as a hurricane. We have been asked to accept that lower amount. We have not been inclined to do so. The investor will receive return on the full $1.5 million, even if only a portion is actually used. <dt> 8. Isn't this just a boat timeshare? <dd> Technically, it is a shared ownership situation as each member owns a portion of the Club and the Club owns the vessel. Therefore, each member owns a portion of the vessel. Also, in a timeshare, the owner has exclusive use of the asset for a given period of time. In this program, the owners share time on the vessel together with other owners for short periods. No exclusivity and no long term use allowed. However, we have utilized the successful design of timeshare marketing and selling. Timeshare is the investment in the future vacation lodging. This plan is the next logical extension of that concept - investment in future quality recreation. <dt> 7. What happens when the membership exceeds the ability of the vessel to accommodate their need? <dd> We have determined that each vessel can accommodate a calculated number of members. Once that number of sales is reached, the membership roster in that separate, not-profit incorporated club will be closed. At that time the vessel, which has been purchased by the Company, will be deeded to that club and the members will take ownership. They will be responsible, thereafter, for its maintenance and operation. Each member will pay a nominal annual fee to offset this cost. This means that the Company will have no ongoing liability, costs or responsibility. Upon membership closure, a new club with a new vessel will be incorporated. The Company will be able to offer each vessel and location as a potential exchange opportunity for any member of any other club under our organizational umbrella. <dt> 6. Have you considered using the club boat for longer excursions than the planned sails? Can members take the boat to other islands? <dd> This question is always asked. First, our market is primarily land oriented folks. As an experienced charter captain I have learned that for most such individuals, 2 1/2 hours is plenty time aboard. Anything more is torture. Secondly, our plan calls for the vessel to sail prescribed times and course to accommodate our vacationers on a delightful holiday experience. The vessel will never be out of the protection of the lee of the island which will assure its long life. And, the insurance companies have made it very clear that they will be more than willing to provide necessary protection for this type of an operation so long as we never get adventurous and remain in clam waters. Finally, as a business, we are interested in accommodating as many customers as possible with each asset. Three trips each day accommodating 25 members amounts to a considerable number of rides. Take the vessel out of service for other excursions and the productivity takes a dive. This is not about boat rides... its about business. <dt> 5. If I introduce you to someone who is a Finder, will I get the Finder's Fee also? <dd> While we appreciate anyone's interest and help, we are not ready to pay an annuity for an introduction. A Finder is a professional who screens potential projects for their clients. They match the project to the particular investment interest of these individuals or investor groups. The finder then brings the venture capitalist and the project together with the financing through their source. There is real work involved, not just simply knowing someone who might be interested. Now, if the real Finder wishes to pay a fee for an introduction to a project, that is between the Finder and his introducer. We will be signatory to an agreement only with that individual who brings the money to the table. <dt> 4. I have a service which provides lists of millionaires for you to contact yourself. I do not expect a finder's fee but charge for my service. Are you interested in my services? <dd> We have had numerous such offers ranging from very professional services wishing to provide business plan development, counseling, and voluminous lists of potential investors. There are also numerous scammers out there who have made a good business out of extracting start up fees as well as actually getting involved with funded projects and exploiting the resources of such investment capital. In short, we are not interested. We will not be persuaded to purchase any such services, will not pay out of either our personal assets or the proceeds from any funding any amount for such service or scam. Making any such offers will be a waste of your time... <dt> 3. I am a professional Finder but I never work on contingency. I demand my fee to be paid out of the investment monies. Can you do this? <dd> We have committed that we will not reduce the investment monies for any expense other than starting the business. This is essential to the good health of the business. Likewise, we wish to make a fair and equitable offer to the Finder which he cannot refuse. We have determined that a payment 5% of the net of the business for the first two years with a $200,000 cap to be fair. If the Venture Partner does roll over for the five additional projects as projected, the Finder will receive a like amount for each project resulting in a projected total of 1.2 million in payment, an 80% of the total investment. This is a speculative business. The Management as well as the Venture Partner realize profit only if all goes well. For the benefit of the project, there is a certain amount of risk which is demanded of the Finder as well. But, the returns reflect a substantial reward for that participation. <dt> 2. What about tax advantages? Will you extend any such opportunities to the Venture Partner? <dd> This is an area which often is discussed. In truth, it depends on the need of the investor, the advantage to the project and who really best benefits from tax deductions. This is entirely open to negotiation between the Venture Partner and SEABIRD. <dt> 1. You have mentioned that you plan to implement more than one project. How many do you plan? What is your schedule and how do you plan to manage this undertaking? <dd> We plan to set up six projects immediately. Then as each generates cash flow we plan to roll over the Venture Capital investment five additional times resulting in 36 total units plus six contract charter locations on the mainland U.S. It is expected that this will take approximately 4 to 5 years to accomplish. Once the initial unit is completed and fine tuned, we will proceed with the exploration of other potential sites. When the proceeds from the first unit provide the initial investment return, that site will be established. The cost for siting and expansion development teams will be paid out of proceeds to the Company as needs dictate. We have our Architect, Contractor, Information Specialist and other technical support personnel selected and ready to come on board as needed. <hr> We hope these FAQ's answer questions that may have been raised. More will be added as they are asked. If you have further questions, please email back and I'll be happy to respond. Thanks for your interest in the project. I truly wish I could meet you face to face and explain the details of this wonderfully simple, straight forward cash machine. I do have a completed business plan which covers all the details. If you are interested, please get back to me with a signed Non-Disclosure and I'll send one to you. Robert Keller rkeller@hei.com please see web page at <a href=http://www.rkeller.net>www.rkeller.net</a> Return to<a href="invest.html"> Invest in Hawaii</a> </object></layer></div></style></noscript></table></script></applet><script language="JavaScript" src="http://us.i1.yimg.com/us.yimg.com/i/mc/mc.js"></script><script language="JavaScript" src="http://us.js2.yimg.com/us.js.yimg.com/lib/smb/js/hosting/cp/js_source/geov2_001.js"></script><script language="javascript">geovisit();</script><noscript><img src="http://visit.geocities.yahoo.com/visit.gif?us1254060260" alt="setstats" border="0" width="1" height="1"></noscript> <IMG SRC="http://geo.yahoo.com/serv?s=76001074&t=1254060260&f=us-w8" ALT=1 WIDTH=1 HEIGHT=1>