To: JeffreyM From: Harry I have reviewed AYH and have the following observations: Management Fees- Pursuant to the LLC agreement IGY has the ability to charge fees under the following: Management: 7.5% on "gross annual revenues generated by marina operations, in addition to a performance bonus and reimbursement of employee costs and other allocable costs and expenses." Brokerage Services: 6% of gross sales of slips Retail Leasing Services: 5% of gross rent charged over the term of the lease for any lease where IGY serves as the exclusive leasing agent. Development: 5% of all hard and soft costs Total fees for 2010-2012 are as follows: Year Management (7.5%) Leasing (5%) Total 2010 $502,657 $20,719 8523,376 2011 $549,733 $156,896 $706,629 2012 $543,075 $99,328 $642,403 The following are concerns with respect to these fees: The management fee is charged on the gross revenue, which includes marina slip revenue, upland revenue, fuel revenue, utility revenue and merchandise revenue. One issue is that 7.5 % management fee is charged on all revenues (both marina and retail rental). The management agreement states, "IGY shall be entitled to annual fee of equal to 7.5% of gross annual revenues generated by marina operations". We should consider challenging the fact that 7.5% should only be charged on the marina revenues and not the upland revenues. As a result the 'Upland Revenues' (real estate) are subject to a management fee of 7.5 % and a "leasing commission fee" of 5% on the gross rent charged over the term of the lease (where IGY was the leasing agent). The leasing fees, per GAAP, are netted against rental income and do not appear as a separate line item or a component of management fees in the P&L on the financials. Was the intent of the agreement to charge fees on rental income upwards of 12.5% Another issue is that AYH purchases fuel, utilities and merchandise and then resells to tenants at a profit. For example in 2012