Confluence Dealer Letter sent December 2001 to retailers

Dear Dealer,

I’ve enjoyed seeing all of you at this
year’s OR Show, EORA and other regional shows. As we all know it’s been
a challenging year. The softening economy and unseasonable weather
patterns have depressed the paddesports market. As a company Confluence
Watersports has faced some trying times and difficult changes. We have
been tested at almost every turn, yet we have emerged smarter and
stronger than ever before in this company’s history.

The horrendous terrorist attacks on the World Trade Center and the
Pentagon test that new strength. The realization that our lives,
personally and professionally, will be forever altered; that our
children will grow up in a world vastly different from the one we’ve
know unsettles us. It is human nature to look inwardly during times of
great stress and sadness. And what I see in my mind, heart and soul is
that there are things in life that are much more important than our
daily business regimen.

Yes, our products are important. But far more important is that we all
work in an industry that transcends product. It’s a way of life, a
family, and we are fortunate. We need to work close as an industry to
protect our futures and to ensure that our future is one that still
offers our children and their children an opportunity to enjoy our
beautiful world and its incredible outdoors. We need to realize and
understand that our greatest competition is not each other, but other
sports in general. Our objective should be to unite, to grow our
industry, to build something of permanence so that those coming behind
us can have the opportunity to experience our business as we have known
it.

We are committed to this end and will do everything as a company in
pursuit of it. Through environmental stewardships, working with trade
associations, building exposure for paddlesports through events,
sponsorships and contests, we will do our part to ensure that
paddlesports remain a viable and successful sporting goods category for
generations to come. You have our word.

At Confluence, we plan to grow our business in a calculated and
analytical fashion, based on proven brand strategies and tactics. Ours
is s brand conscious society. We buy the names we know, sold by the
stores we trust. It’s true for cars, apparel, and other sporting goods
categories. It’s true for kayaks, too. Growing our brand, and your
business, depends on placing them in front of more consumers. It
depends on building brand loyalty early in the consumer’s kayaking
lifespan. To elevate our brand we need to have a presence where most
consumers shop: the “General Sporting Goods Stores.”

Look at sporting goods categories that offer multiple SKU’s aimed at
consumers of varying levels of expertise — snowboarding, snow skiing,
water skiing, wakeboarding, golf, or tennis, for instance. The model is
consistent: leading brands maintain a strong presence at the National
Sporting Goods Store level while reserving their premium SKU’s for
specialty retailers. Once the consumer buys into the category and
brand, they must visit specialty stores to step up in performance
levels. The more first time consumers we expose to the brand, the more
consumers you’ll have as they step up to premium products. It isn’t
brain surgery.

The volume at General Sporting Goods Stores will expose our brand to
wider audiences than ever before. By leveraging a handful of price
point boats at the General Sporting Goods Store level, we build
consumer awareness for our brand and, by extension, for our specialty
store retailers who carry our premium products.

We will be analytical, intelligent and selective in deciding how we
build our General Sporting Goods Stores’ business. Only General
Sporting Goods Store partners who elevate the brand based on sound
merchandising, pricing, positioning, and paddlesports commitment will
be selected. This way, everybody wins.

Awesome designs and exciting new models aren’t enough. It takes a
committed and outstanding network of dealers, and we’re glad you’re
part of it. We view our relationship with you as a partnership. Mutual
success ensures our healthy futures. The attached Dealer Agreement will
assist both of us in that goal. It protects you as a dealer and us as a
manufacturer. It enhances our partnerships based on open communication
— we will each know the status of one another’s interests in a
specific geographic area. We guarantee that you will always be apprised
of our expansion, and you may request updates whenever you deem it
necessary. We feel strongly about this commitment and are therefore
formalizing the policy.

We require that signed copies of the Dealer Agreement arrive at
Confluence Water Sports corporate offices no later than December 31,
2001. Failure to do so will suspend your 2002 shipments until closure
on this issue is reached.

We are thankful for your continued support. You, your staff, family and friends are forever in our thoughts and prayers.

Should you have questions, please feel free to drop me an e-mail or give me a call.

Peace.

See you on the water!

Kelley Woolsey, Senior Vice President of Sales and Marketing