Whilst Stellar Kayaks and Skis (China) is a wholly owned subsidiary of the Flying Eagle Boat Company it has no involvement in the Flying Eagle / Epic litigation. Both companies have taken legal action against one another however it must be pointed out that Epic does not have in place any legal action concerning the construction or design of Stellar craft.

Flying Eagle has taken legal action to protect itself and claim compensation for what it believes is stolen Intellectual Property, financial losses, breach of the CO-OP agreement and damage to its reputation.

Epics legal action is an attempt to secure the release of boat stock it believes is being held "Hostage" by Flying Eagle.

The following is Flying Eagle's account of the events leading to the litigation.

The Hangzhou Flying Eagle Boat Coy v's Epic - The story behind the litigation

Flying Eagle is one of China's oldest and most successful family owned composite boat manufacturers and believes it is important that the facts are known in regards to the current litigation between Hangzhou Flying Eagle Boat Company and Epic Skis and Kayaks.

For simplicity we will try to keep the sequence of events to point form however a more detailed summary can be made available on request. This summary is released as a result of misleading comments made by Mr. Greg Barton, president of Epic Kayaks Inc USA in person or on a number of websites.

Who is Flying Eagle

A private company established in 1985 specializing in the design and manufacture of rowing and kayak shells. We are the largest rowing boat manufacturer in the world. The company's products are sold worldwide and as a result of their reputation and experience they were officially appointed a Rowing Boat supplier by the Organising Committees for the 2004 and 2008 Olympic Games.

Flying Eagle owns the rights to a number of composite boat building technologies and know-hows developed by an experienced team of designers and workers based in the US, Germany and Australia - as such they have an established reputation across the world in the boat building industry.

Start Up of the Flying Eagle and Epic venture In November 2005 Mr. Oscar Chalupsky contacted Flying Eagle concerning the setting up of a kayak / ski partnership Co-Op . After a number of visits and meetings both parties finalized a business Co-Op intention. After the signing of this agreement Flying Eagle agreed to build a 3 story, nearly 10,000m2 working area especially for the building of Epic boats. Along with the factory, Flying Eagle invested significantly in plant and materials such as air compressors, humidity controllers, pressurized ovens, painting rooms – a total investment in China in excess of US$1.5 million.

Production started in February 2006 however at this point Flying Eagle identified that certain "refined technologies" that were to be provided by Epic as part of the partnership were not made available. As production was moved from Sth. Africa it quickly became obvious that Epic's processes, systems and manufacturing were all deficient in terms of what had been communicated.

As a result Flying Eagle made every effort to speedily transfer its already in place boat building systems and processes to the Epic partnership. Flying Eagle also passed on Intellectual Property that enabled Epic's building of their top two range of boats (known to Flying Eagle as A and AA construction) – up to this point Epic did not have access to this high end construction technology.

The encountering of these issues meant that the cost of manufacture had risen significantly for Flying Eagle as had the element of risk as confidential information was now openly being passed onto the Epic CO-OP partnership

At this point Flying Eagle felt that the original intention of the agreement could and should be maintained.

Prior to the Agreements failure At this point both parties openly agreed to proceed with the agreement – especially as product issues were now resolved and production capacity could be increased.

Shortly after this point Epic made the request to take over "Management of the Operation", previously the role of Flying Eagle. This was well outside the original CO-Op agreement terms that both parties had agreed to. After a number of discussions between the two parties and as a sign of goodwill and the way Flying Eagle likes to do business this change was finally agreed to – as such a new agreement was entered into called "Management Agreement for Epic Project" which was to take effect from 1st January 2008. It was agreed that this agreement would be for a period of 6 months at which point it would be reviewed by both parties. If the agreement failed to deliver any of the promised benefits then the original agreement would be re-instated.

After the initial 6 month period Flying Eagle identified the following (remembering that all Project Management during the 6 month trail agreement was to be carried out by Epic):

• There was no production control
• Material wastage had increased significantly
• No efficient stock inventory system was in place
• Rate of semi-finished boats was much higher than under the original agreement
• Pricing and Data was changed without Flying Eagles approval or involvement
• Agreed reporting to Flying Eagle on in-line R&D work was not provided

The above failings impacted Flying Eagle significantly when it came to cash flow , reputation, partnership interests. At this point Flying Eagle insisted that the original agreement be reinstated with Project Management Rights . Epic rejected this with no reasons being provided.

As a result in August 2008 the parties agreed to terminate the CO-OP.

After the Agreements Failure

After the apparent failure of the agreement Flying Eagle came to the conclusion the maintenance of the "Management of the Operations Agreement" resulted in Epic having access to:

• Flying Eagle Intellectual Property (and its subsequent appropriation)
• local production methods relating to material sourcing, staff in line, production and technology know how
• Setting up of a local manufacturing operation
• Again in the spirit of co-operation Flying Eagle adopted a policy regarding the parting of the two companies's known locally as "Happy Joining and Stable Separation". Even in this situation Flying Eagle found the engagement with Epic to be disappointing…..why
• It was agreed that Flying Eagle staff would be free to choose the company they worked for without enticements – It was found Epic adopted a predatory / poaching approach to this issue
• Mr. Greg Barton , President of Epic Kayak Inc, illegally sourced from Flying Eagle some confidential information relating to technology. Mr. Barton was immediately issued with a legal document. It was acknowledged by Mr. Barton's lawyers that a compensation payment of US$1 million would be made and that a proper "Project Termination Agreement " would be drawn up……….shortly after this agreement was reached Epic refused to sign the document claiming "conduct of extortion by Flying Eagle" – Mr. Greg Barton went on to publish this part of events on various websites. =
• At the beginning of November 2008 both parties were agreeing final settlement details relating to out – standing funds Epic owed Flying Eagle…….at the last minute prior to the signing of this document by both parties, Epic changed its position and rejected to pay any outstanding amounts. It is at this point events take a very unprofessional turn with Epic publicly making statements (in relevant industry media and via the internet)
• As Flying Eagle is still owed considerable money by Epic both parties agreed that Epic will only have the right to start moving goods out of Flying Eagles facility once Flying Eagle has been paid in full. As such Epics goods (stock etc) have remained on site at Flying Eagle's workshop…….these are the goods Epic refers to as a "hostage"

Summary

This is a complex matter between two parties….with two and a half years support we believe Epic was given the friendship and open cooperation such a Co-Op business relationship deserves. What we did not envisage was that through inappropriate business practices our company would suffer so much financial and professional pain.

We had:

• Built and fitted out substantial 10,000m2 premises
• Our key know how and technology information was removed inappropriately (we believe illegally) from our premises
• Millions of dollars remains owing for materials and labour
• Flying Eagles worldwide reputation has been seriously damaged – especially by Mr. Greg Barton's web site statements

Where things cannot be resolved through friendly negotiated discussions then we believe Flying Eagle had no other option than to proceed with legal action. We believe that through a proper legal process the truth will be revealed to the public, customers and our boating enthusiasts.

NOTE:

Disclaimer : The above is an extract from a release by Hangzhou Flying Eagle Boat Co, Ltd on 1st January 2009. This release was made as a result of what they believe to be incorrect and misleading statements and comments made by Epic Kayaks Inc's Mr. Greg Barton.

Stellar Kayaks and Skis has placed this information on its website to help clear up any confusion our customers may have regarding the Flying Eagle v's Epic litigation. We also take this opportunity to refer customers to the construction / design tab on our website (along with some of the professional write ups by Wesley Ecols etc) that demonstrates the Stellar range of Kayaks and Skis is in no way connected to Epic and were developed in conjunction with the Design and manufacture teams spread across the USA/ Germany and Australia.