MISSION STATEMENT

In a continuing effort to serve the Pacific Northwest yachting community SHIP HARBOR YACHT CHARTERS has developed a comprehensive yacht lease program bringing professional yacht management services to quality yacht owners for the prime purpose of bareboat and crewed yacht charters.

OBJECTIVES

Provide the charter party with a high level of complete, friendly and courteous services aboard fully outfitted, properly maintained, safe and dependable yachts so they may enjoy a relaxed and satisfying cruise.

Through advertising, promotion and reputation bring the owners' yachts and our services to a broad market of qualified charterers thus enabling the yacht owner an opportunity to meet his financial objective.

ADVERTISING

Through planned professionally prepared national and regional advertising, boat shows, seminars and other promotional programs, we will expose your yacht and our services to the broadest possible market. Our internet web site gives our fleet worldwide exposure through expert web site management. The Ship Harbor Yacht Charters' (SHYC) web site is registered with commonly used internet search engines. See us at www.shipharboryachts.com.

SPECIFICATION SHEETS

When a yacht is placed in our charter service, Ship Harbor Yacht Charters will develop a Specification Sheet which provides potential charter customers with details of the yacht. SHYC and the yacht owner will produce a set of interior and exterior photos, as well as a floor plan, to be used in all aspects of marketing.

Through our internet web site, www.shipharboryachts.com, each yacht in the fleet will be individually listed with information similar to the Specifications Sheets. Potential charterers can download information directly from the SHYC web site. Each vessel listed will include a variety of pictures to help promote the boat.

YACHTS AND EQUIPMENT

Nationally advertised, quality-built yachts in top operating condition with accommodations providing maximum privacy are best suited for chartering. New yachts are most desirable. However, well-maintained used boats will also be successful. For long-term maintenance costs, diesel powered yachts are preferable over gasoline powered yachts.

Our fleet selection is based on our knowledge and experience with vessels that are most sought after by charterers. Boats from reputable builders will always be more popular.

The equipment required before entering the charter service is listed at the end of this Service Summary.

YACHT SELECTION BY CHARTERER

All yachts in our fleet will be offered to prospective charterers without prejudice. Yachts will be accurately described as to size, type, accommodations, equipment and condition in our brochures, rate sheets, and displays. We will aid the charterer in their yacht selection based upon their desires as to size and type, accommodations and equipment needed, rate and availability.

CHARTER RATES

The charter rates will be set by mutual agreement between the owner and SHYC taking into consideration known competitive rates for yachts of similar size and type, age and condition, with similar equipment. SHYC will contact the owner in the fall to establish the coming year's charter rate. Typically, the lease rates increase approximately 3% a year.

This is a three-tier rate structure consisting of a full rate in the Summer/High Season, a 12.5% discount in the Early and Late Summer/Shoulder Season and a Spring and Fall/Off-Season rate with a 25% discount. In the Shoulder and Off-Seasons, we feature special reduced rate charters and 4-day charters. Four day/three night charters will be offered at 65% of the Summer Season weekly rate. (See fee schedules.)

For extended charters of two-weeks or more, a discount of 10% to 25% may be offered on the gross charter rate. SHYC management and the yacht owners may modify rates when in the best interest of both parties. Rates are adjusted for charterers reserving multiple vessels or for periods beyond four weeks to match competitors' rate structures and special promotions. Discounts are given to repeat customers and for other promotional marketing. 3% is included in all fleet boat charter rates to allow SHYC to discount for cash charter contract payments, while the full charter rate is charged for credit card purchases or other full price contracts. Please see "Specials" on the web site. Rates are adjusted annually.

CHARTER PARTY QUALIFICATION

SHYC will obtain from the charter party a boating experience resume describing their experience and training, including the operation and use of vessels of similar size and type in waters and under conditions normally experienced within the cruising limits of our fleet.

SHYC will determine, before departure, that the charterer has the skills and knowledge required to safely maneuver and navigate the chartered vessel. The charterer must have the knowledge and ability to treat the vessel and its equipment, operating systems and appointments with care and consideration.

Upon arrival, the charterer will be met by a SHYC representative who will familiarize him with the vessel and its use and operation including all systems and equipment, docking and maneuvering, use of charts and tables, and familiarity with the planned cruising area.

During the charter check-out, we occasionally find the charter boat captain is not fully qualified. At this time, SHYC will either send a training skipper until such time the charterer can meet all of SHYC's bareboat qualifications or the training skipper may, if necessary, remain aboard for the entire charter.

SHYC CHARTER PARTY SERVICES

The following services are available to each charter party:

• Provisioning - staples and preplanned meals. (See "Essentials Kit" on web site under Forms")
• Bedding and Linens are provided free of charge to the charterer. This service is charged to the turn fee.
• Maps, Charts and Tide Tables
• Island Sample Cruise Itineraries
• Restaurant and Hotel recommendations
• Rental Equipment such as fishing poles.
• Instruction as required
• Early Sleep Aboard

Our objective is to provide the charter party with a complete cruising vacation. They may bring as much as they wish or come with only their duffel bag and we will supply the rest.

Daily Insurance Fee

Ship Harbor Yacht Charters will obtain from each charter party a fee based on the declared value of the yacht. This non-refundable fee will go into a fund, which will cover any hull and machinery damage up to the published deductible for the various vessels in the fleet. SHYC will administer this fund and repair or replace lost or damaged equipment beyond normal wear and tear attributable to charter usage.

P&I Insurance is charged to each charter providing Indemnity (Liability) Insurance. These policies name the charterer, the vessel owner and SHYC, all as additional insured for the duration of the individual charter.

TURNAROUND SERVICE CHARTER FLEET MANAGER

Each charter party will be instructed in the use and operation of the vessel and become familiarized with the planned cruising area. This will be done on-board the vessel with a SHYC Fleet Manager as part of the checkout process. An on-board chart review and briefing highlights areas of danger and concern. Check-out is typically a 3-5 hour process.

When the vessel is returned, the inventory will be checked and the boat will be inspected for proper operation of all mechanical equipment and for hull and equipment damage. The boat will be inspected underwater, at the expense of the owner, by a qualified independent diver before its first charter and after each charter is completed.

Our Fleet Managers are experienced boatmen who are familiar with our cruising waters. They are assigned to a limited number of yachts, trained to our standards, and familiar with their assigned vessels.

The "Turn Fee" expense is shared by the Yacht Owner and SHYC with a 70/30 split each time a charter is completed. The fees charged for turnaround services are also listed in the attached fee schedule. These services for each charter include: Fleet manager check-out and check-in, interior and exterior cleaning, free linens to all charter guests, dinghy outboard oil and fuel, and cleaning. SHYC may request boat owners perform some of these services on his own boat. In this case partial turn fees will be credited; however, the owner must use SHYC forms and procedures. Owners doing any portion of the turnaround service will be given credit for the portion they perform based on the following percentage of the total turnaround fee.

Check-Out includes: Yacht preparation (touch-up cleaning, and filling water tanks), Hull Condition report, Inventory review, systems briefing and Sea Trial.

4-5 hours: 30%

Check-In includes: Hull Condition report, Inventory review, Charter debriefing, Ships' systems inspection and basic maintenance:

2 to 3 hours: 20%

Cleaning includes: Yacht exterior, interior, dinghy, rugs/carpets and fueling dinghy and propane tanks: 35%

Linens and cleaning supplies includes: Replacement and laundering of sheets, pillow cases, pillows, blankets, bath towels, hand towels, wash cloths, dish towels, rags, toilet paper, and all cleaning supplies: 15%

YACHT AVAILABILITY/OWNERS' USE

For maximum income and overall best results, owners should make their yachts available for chartering between March and November. We recognize that owners wish to access their yachts for pleasure and maintenance. However, during the Summer Season the owner should attempt to minimize personal use.

SHYC acts as the Lessee, and subsequently subleases each boat on behalf of the Boat Owner. Sales tax is collected and paid directly to the State of Washington by SHYC, again on behalf of the owner. SHYC will also provide each Boat Owner with the necessary information required to file their Business & Occupation Tax. However, with the Small Business Tax Credit, it would be unusual for an owner to have any tax obligation associated with the revenue derived from leasing their yacht to SHYC.

If, during the time the yacht is in Anacortes, the owner wishes to remove it from its usual moorage for any reason, even for one day, the owner is required to notify SHYC in advance. A dive inspection will be scheduled upon the owner's return and prior to the next charter. We advise our boat owners to perform the same yacht review and checkout procedures our charterers complete prior to departure. This assures our boat owners the complete yacht inventory is aboard and all systems are in proper working order.

MOORAGE

SHYC makes every effort to procure suitable Skyline Marina moorage leases for vessels joining the fleet. Generally new fleet members will obtain a subleased slip until an annual lease can be arranged. One month's written notice is necessary prior to vacating your slip. It is highly desirable to have the vessel moored in Anacortes on a year-round basis for maximum exposure to prospective clients and to streamline the charter logistics.

VESSEL CONDITION

The owner will deliver the yacht to Anacortes insured for charter, properly licensed, registered and/or documented, including the necessary State of Washington and U.S. Customs Service decals. The vessel will be fully prepared with all systems in good working order, clean and equipped in accordance with the SHYC Equipment List.

Our basic objective is to assure that all yachts are maintained in operating condition, available for use during the charter season, and ready on schedule for the next charter party.

SHYC CRUISING GUARANTEE

Ship Harbor Yacht Charters guarantees that if a charterer experiences a breakdown during charter, repairs will be completed within four hours of notification, or the charterer will be compensated for any lost time.

REPAIRS

Prior to the start of the season, SHYC will select qualified boat repair yards in our usual cruising area and arrange for them to perform repairs as needed on a priority basis at their regular rates.

When a boat is on active charter or at our charter base in Anacortes, SHYC will spend up to a maximum of $350.00 without prior notification to the owner. These expenditures will be for necessary repairs or maintenance to prepare the boat for its next charter or so that the boat can be brought to a safe harbor or continue to the conclusion of its present charter.

SHYC will make every reasonable attempt to contact the owner before authorizing expenditures against the owner's account. If contact with the owner cannot be made, the Fleet Operations Manager may use his best judgment to go ahead with repairs and then notify the owner at the first opportunity.

All other repairs and maintenance will be authorized or initiated by the owner before the work is done. The owner has three options for service; to have the work performed by SHYC and/or have SHYC act as his agent, select a boat yard for repair service of his choice, or do the work himself.

INSPECTION SERVICES

Each vessel will undergo a Pre-Season inspection, system check, and underwater dive inspection. The charges for these services are shown on the owner's fee schedule. The normal time required is 3-4 hours. Any questions will be reviewed with the owner with a request for any changes before the vessel goes out on its first charter.

At the conclusion of each charter and before the yacht leaves on its next charter, your SHYC charter representative will inspect the vessel above the waterline. Deficiencies will be reported and corrected. At the same time, an independent diver will do an underwater inspection providing a continuing underwater condition report.

Minor damages which are the responsibility of the charterer and which need not be repaired immediately will be estimated. The estimated cost will be withheld from the Daily Insurance Fee account. If necessary, an insurance claim will be filed with Mariners General Insurance Group. Repairs will be scheduled at the earliest time.

CLEANING SERVICES

SHYC maintains cleaning and maintenance crews whose services are available to charterers and owners.

Normally, the owner is responsible for the general upkeep and cleanliness of the yacht. The Owner should plan to deliver the vessel to the fleet at the beginning of each season in a thoroughly clean condition. SHYC does not require the charter party to thoroughly clean the yacht for the next charter; rather the turn-around cleaning fee covers this cleaning service. However, most of our charter guests leave the boat in clean and tidy condition.

MANAGEMENT FEES

SHYC's base fee is 30% of the net charter rate, which is the charter rate earned less the turnaround service fees. Other fees, such as inspection and service fees are shown on the "Owners Fee Schedule."

"Early Sleep Aboard" for the charters, is available for those clients wanting to arrive the afternoon prior to the beginning of their charter for yacht checkout and spending the night aboard. SHYC charges the client 5% of the Summer season weekly charter rate for this service. This income is split 33.3% to the yacht owner and 66.6% to SHYC. When the yacht owner "greets" charters for the early sleep aboard, the income is split 66.6% to the yacht owner and 33.3% to SHYC.

If an owner obtains a charter for his boat the SHYC fee will be 20% provided the owner notifies SHYC in writing at the time of the booking.

CANCELLED CHARTERS

If a charter must cancel, the following terms will apply:

1. # of Days Prior to Departure Date: ______________________________
2. 120 days or more: All collected funds are refunded less $250 service fee
3. 60-119 days: 30% of charter fees are retained
4. 0-59 days: All charter fees are retained

All fees, less the $250 processing fee, will be returned if SHYC successfully rebooks the originally reserved yacht. A pro-rated refund is given if a partial rebooking occurs.

The service fees are retained by SHYC. Any forfeited reservation deposits are split between SHYC and the owner on a 30/70 basis and credited on the boat owner's statement.

VESSEL INVENTORY

The attached standardized Inventory Form consists of a printed list of items found on most boats. An additional area provided is to allow the owner space to add other items of significant value unique to the vessel. Equipment and personal items that are not required should be removed from the boat.

A completed Standard Inventory Form itemizing required equipment as well as valuable gear specific to the vessel must be returned to SHYC as early as possible. This information is provided to prospective charterers as well as being used by SHYC staff to check quantity and condition of the ship's gear during the Check-In process.

BOAT MANUAL

Each owner is asked to prepare a Boat Operating Manual for his vessel. A sample format will be provided. The complete manual will be left on board and a copy will be retained in SHYC files. The owner should also retain a copy. We request digital or CD photos of exterior and interior views of your yacht. These will be used for advertising purposes. A picture of the boat underway is essential.

EXCLUSIVE LISTING

All yachts in our Charter Management Service are accepted only on the basis of an exclusive listing.

ACCOUNTING AND FINANCIAL TRANSACTIONS

Included in the owner program, we provide complete accounting including the receipt, deposit and disbursement of funds, collection and payment of Washington State Sales taxes, charter reservations, Daily Insurance Fees, repairs, and other fees. A monthly statement showing all activity on the account will be mailed on the 15 th day of the following month. Accompanying the statement will be our check for the net balance due to the owner or our invoice for the net balance due SHYC for services provided which are not covered by charter fees. Bills are due and payable prior to the last day of the month.

GROUP INSURANCE PROGRAM

Ship Harbor Yacht Charters has arranged a comprehensive charter insurance program for your yacht and has chosen Mariner's General insurance Group in Seattle as the administrator of this program.

Founded in 1959, Mariner's has specialized in yacht insurance for over 40 years and has five offices on the West Coast and Hawaii . Joe Cable, 206-281-8144, is your agent in the Seattle office. He will provide prompt, knowledgeable and personal service.

The charter yacht insurance program is underwritten by the Zurich Insurance Company, an "A" rated company that has been specializing in marine insurance for over a century. Zurich has a local claims department with an excellent reputation in the Puget Sound area for efficiency and fairness.

Each yacht accepted into the Ship Harbor Yacht Charters fleet is individually insured. You will have your own Agreed Value yacht policy that covers physical damage to you yacht and $1,000,000 Protection & Indemnity (third party liability). All the paperwork, including premium invoicing, is handled by your agents at Mariner's General.

REQUIRED EQUIPMENT LIST

Engine Equipment

• Audible engine alarm systems for high water temperature and low oil pressure
• Engine(s) fitted with throttle blocks if necessary to limit engine speed to cruise RPM
• Sea Strainer(s) - for engine(s) sea water cooling system
• Primary engine(s) fuel filters are to be Racor or equal with replacement elements
• Manual or electric engine lubricating oil pump-out system for quick oil changes
• Engine spares - all V-belts, water pump impellers and associated gaskets, zincs, etc.
• Hour meters for engine(s) and generator set(s)

Safety Equipment

• Life jackets - 2 more than sleeping capacity plus 2 children
• Flare Kit as required by current USCG and Canadian regulations
• One boat hook
• Life ring with line
• Bell (optional)
• Fog Horn
• First Aid Kit
• 7 x 50 Binoculars
• Charts of the Pacific Northwest Cruising Area

Vessel Equipment

• 2 Anchors with anchor rode and chain - 250' of chain and rode for primary anchor. Bruce or plow are recommended.
• 6-8 Fenders
• 6 or more Dock lines (5/8" or 3/4" laid line, 25'-30' long w/ spliced eye)
• VHF Radio - each station
• Compass - each station
• Approved marine toilet system(s) with holding tank(s) filled with electric waste pump or manual gusher pump, necessary wye-valves, and deck pump-out fitting
• Stove with oven, propane or non-pressurized alcohol
• Propane system must comply with American Boating & Yachting
• Council specification. System is to include a Marinetic switch and shut off solenoid. Full Propane bottles are to be stored in an approved enclosed and vented locker on Power and Sailboats.
• Dinghy with oars - dinghies to be identified with name and/or numbers inside & outside. Inflatable for sailboats recommended.
• Outboard motor for dinghy
• Basic tools in box
• Cabin heat: Diesel heat recommended
• Swim step or deck davits for powerboat dinghies
• Electric bilge pump(s) with automatic float switch
• Manual bilge pump(s) with strainer
• 110 Volt pigtail adapters (15 to 30) (20 to 30)
• Sight gauges on powerboat fuel tanks. Dipsticks or fuel gauges on sailboat fuel tanks. Dipsticks on powerboat tanks will be accepted when sight gauges are not available.
• Permanent labels or tags on all valves, thru-hulls and heads
• Spare head pump and rebuild kit for each type of head
• AM/FM Stereo CD System
• TV/DVD
• Outboard motor mounting bracket
• 12-volt outlet(s)

Cleaning Equipment

• Vacuum Cleaner - Canister for 110 volt circuit
• Metal Cleaner
• Glass Cleaner
• Sponge, deck mop, deck brush, bucket
• Soft Scrub and cleanser
• Bilge Cleaner
• Holding Tank Treatment

Galley Equipment

• 1 cutting board
• 3 mixing bowls
• 1 set of measuring cups
• 1 qt. Saucepan w/ lid
• 1 set measuring spoons
• 3 qt. Saucepan w/ lid
• 1 corkscrew
• 2 frying pans
• 1 can opener
• (Reverseware quality)
• 1 set salad tongs, 1 spatula
• 1 steamer kettle - (crab cooker)
• 1 juice container
• 2 serving spoons
• 1 percolator coffee pot
• 1 broiler/roaster pan (boats w/oven only)
• 3 knives (butcher, paring, fillet)
• Silverware - 8 place setting
• 1 paper towel rack
• Glasses - 8 place setting
• 2 potholders
• Dishes - 8 place setting
• 1 dish drainer
• (Corelle quality)
• 1 Tea Kettle

Miscellaneous

• Blankets, Pillows, sheets and pillow cases for each bed.
• American & Canadian Flags
• 2 deck chairs (powerboats only)
• 8 qts. - Spare oil for each engine
• 1 deck table (powerboats only)
• 2 spare oil filters for each engine
• First aid kit
• 2 spare fuel filters for each engine
• 2 qts. Auto Transmission Fluid, if used
• Crab ring and line
• Velux type blankets each bed
• Roll duct tape
• 2 flashlights & spare batteries
• Clothes hangers (10) each closet
• 2 fire extinguishers - 3 required on 40'-65' boats
• Parallel rulers & dividers
• 2 water pump impellers w/ gaskets for engines & genset
• 1 deck fitting tool
• Toilet chemical as required
• Wastebaskets, galley and heads
• Propane BBQ

Books and Papers

• Comprehensive inventory & operations manuals for engine, generator, pumps, stove, head, furnace and other manufacturer's
• Operating Manuals
• Ship's papers - Certificate of Documentation, State of Washington registration or personal property declaration
• Waggoner's Cruising Guide, Navigation charts ( San Juan , Gulf Island , & Desolation Chart Kits), Ports and Passes Tidebook, Canadian Current Tables and the Washburn Tables.

2008 FLEET OWNERS FEE SCHEDULE

1. Turnaround Service: $4.50/ft Sailboats, $4.75/ft Powerboats

2. Underwater Inspection Service: $35.00/ea

3. Cleaning

• Pre-season or at the request of the owner: $22.00/hr
• Buff & Wax: Materials + Labor: @ $22/hr
• Bright Work: $35.00/hr

4. SHYC Mechanic Labor Rate

• Shop Labor Rate: $45.00/hr
• Off-Season Project Rate: $39.00/hr
• Parts: Cost plus 15%
• Unskilled Labor Rate: $18.00/hr
• Mechanics Assistant: $29.00/hr

5. Outside contract repairs, services, and materials arranged through SHYC

• U.S. Repairs: Cost plus 15% fee
• Canadian Repairs: Same as above with CND Cost Exchanged at going rate to U.S. funds

6. Chase Boat (Includes operator and fuel): $125.00/hr

7. Pre and Post-Season Inspection and Systems Check:

• 1st two hours: No Charge
• Additional time: $30/hr

8. Winter Watch to Boat Owners in SHYC Fleet: $50.00/mo

9. Moorage:

• Annual Moorage - At marina rate, payable one month in advance.
• Seasonal Moorage - Negotiable

10. Yacht Owner's Operator's Manual Preparation: $30.00/hr

11. Marketing Fee/Internet Web Site Setup Fee: No Charge

12. Photographic Services: No Charge

13. Fire Extinguisher Inspection: $8.00 each