Michael D. Allweiss * 100 - 2nd Ave. S. Suite 704S * St. Petersburg, FL 33701 * 727-821-2722 MAllweiss@APBAOffshore.com www.apbaoffshore.com 0October
3, 2003
Fred Kiekhaefer President Mercury Racing N7480 County Road UU Fond du Lac, WI 54935 Re: APBA Offshore Dear Fred: For the past several months APBA Offshore has been attempting to resolve the differences between our two companies. To that end we 0had Ted Zoli attempt to resolve contract differences 0with Tony Esposito. We did that to remove what might have been personality conflicts between Tony and me0, not because the matter was not of utmost importance.0 As we pointed out in our letter to you of July 11, 2003, a copy of which is attached for your review and recollection, we share thousands of the same customers who want to see the APBA Offshore & Mercury relationship continue. We want to see the relationship continue. Indeed, we believe that APBA Offshore Racing is the perfect sales, marketing and promotional platform not only for Mercury Racing but all of the Brunswick companies and their largest power source vendor, General Motors. With GM Powertrain and GMC solidly behind our series through at least the 2005 season a perfect opportunity exists to for all of us to work together in a positive cooperative way. Together we can promote the “boating experience� as a true lifestyle to millions of people and thus expand the current market of potential boat and truck customers. The ultimate goal of such an effort
would be simple: sell more cars, trucks, and boats. If we work together we can create a winning situation for all of us.0 0
During the last few months of “limbo” with respect to an agreement with Mercury racing,0, 0we produced our events and television, paid the prize purses and even continued to deliver on the Mercury sponsorship. Indeed, over the past 3 years APBA Offshore has helped promote Mercury Racing but more importantly, we have helped sell Mercury Racing product. For example, we have contributed mightily to HP 500 sales, Bravo sales, and XR sales. We have helped move a significant amount of Mercury Racing propellers. We have helped sell dozens of #6 drives just in the racing arena alone. We created classes such as Factory and the Super Light classes that up until this year have used exclusively Mercury Racing engine and drive packages, and showcased the reliability and toughness of those products in the harshest environment possible. 0We have even approved new competition and technical rules that promoted additional Mercury Racing product sales without any quid pro quo. Three years ago, moreover, after Mercury Racing had been eliminated as a player in the premier racing classes, we created Super Cat, which since has yielded numerous race wins, a World Championship, a World Speed record, and several million dollars in engine sales for Mercury. Moreover, every year we have given Mercury Racing dozens of additional television commercials worth tens of thousands of dollars as a bonus to show our appreciation for your continued support. Last year we even named Mercury Racing as the Presenting Sponsor for our entire national series at no additional cost to you, and provided numerous additional benefits worth several hundred thousand dollars, “as a demonstration of our gratitude for your long term commitment to APBA Offshore Racing.” Furthermore, for months we tried to convince Tony that our primary interest in a General Motors relationship was the opportunity to demonstrate our ability as a marketing and promotional company for the non-marine industry. We knew that if we could successfully market, sell and promote the select GM vehicles and brands, our ability to do more for our marine clients like the Brunswick companies would improve dramatically. 0 We have settled our legal disputes with Fred Hauenstein and his group and will remain as the exclusive offshore racing sanctioning authority for APBA for many years to come. 0 0Tony is gone. We recently renegotiated our sponsorship with GM so that it is purely promotional and media oriented now. Our new arrangement with GM de-emphasizes the hardware aspects of
the relationship which hopefully paves the way for Mercury to work directly with GM without us as an obstacle. Again we want to do everything we can to demonstrate our good faith desire to continue this relationship. We need to focus on what is in the best interest of our common customers. Accordingly, we propose the following outline for a new arrangement that should work for everyone: 1. 2.
3. 4.
00Offshore
will designate the SSM #6 drive as the exclusive stern drive of Super Cat for the next 3 years; Offshore will designate Mercury Racing as the only other Super Cat engine supplier along with Sterling Performance for the next three years – subject to a commercially reasonably arrangement with Sterling which currently holds an exclusive license for the engines. They have indicated a willingness to agree to such a deal; Offshore will waive any and all claims to monies owed to us for 2003 and start fresh with a new 3 year agreement commencing in 2004 – terms to be negotiated. Offshore will designate Mercury Racing as the Presenting Sponsor of every event on the 2004 GMC Pro Grade Championship Series.
0I
am enclosing a copy of the last agreement I have on file for your review in hopes that it can serve as a framework for a new agreement incorporating the above terms. Time is of the essence since we are finalizing our rulebook for the 2004-5 seasons. I look forward to hearing from you soon. Sincerely, APBA Offshore Power Boat Racing, LLC Michael D. Allweiss Michael D. Allweiss Chairman
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