EFTA01122372.pdf

\ I I SLAND GLOBAL \MMIM YACHTING INVESTMENT COMMITTEE MEMORANDUM (UPDATED FROM SEPTEMBER 14, 2006) ACQUISITION OF SUN RESORTS INTERNATIONAL, INC., SUN RESORTS MANAGEMENT, INC. AND INVESTMENT INTERESTS IN MARINA PROPERTIES January 5, 2007 Island Global Yachtin Ltd. • • Fort Lauderdale, FL 33301 Tcl: • Fax: • www.islecap.com EFTA01122372  SLAND G LOBAL NIS YACHTING TABLE OF CONTENTS I. ExEcutvE SUMMARY 1 IL DESCRIPTION OF SRI AND ITS OPERATIONS 6 III. SUMMARY TRANSACTION TERMS 11 IV. INTEGRATION PLAN 25 V. VALUATION ANALYSIS AND FINANCIAL ROLLUP OF PROPERTY ASSETS 26 VI. Risxs 30 VII. CONCLUSION 31 ATTACHMENTS Attachment A — Consideration (First and Second Closing) Attachment B — Simpson Bay Property Description and Annotations to Financial Projections Attachment C — Simpson Bay: Financial Projections Attachment D — BVI Properties: Property Descriptions and Annotations to Financial Projections Attachment E — Virgin Gorda: Financial Projections Attachment F — Village Cay: Financial Projections Attachment G — AYH: Property Description and Annotations to Financial Projections Attachment H — AYH: Financial Projections Attachment I - Portfolio Financial Roll up Attachment.) ATM Executive Summaries Attachment K — Post-Closing Structure Charts Island Global Yachtin Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islccap.com EFTA01122373  WLAND SLOBAL NOME= YACHTING I. EXECUTIVE SUMMARY Island Global Yachting Ltd. ("JGY") is seeking investment committee approval and ratification of a proposed transaction (the "Transaction") with Sun Resorts International, Inc. ("Mr), Sun Resorts Management, Inc. ("SRM") and their principal controlling stockholders, John D. Powers ("Powers') Ronald W. Rhoades ("Rhoades") and Michael S. Olszewski ("Olszewski" and, together with Powers and Rhoades, the "Principals"). SRI seeks to make strategic investments in marina properties that provide stable initial returns with the opportunity to enhance yields through diligent and efficient management and comprehensive operational strategies. SRI, through its investment entities, currently has a portfolio of 11 marinas located in Texas and the Caribbean (the "$R1 Asset Portfolio'). All of the properties owned or controlled by SRI or its investment entities are operationally managed by SRM. On September 15, 2006, Island Global Yachting Facilities Ltd. ("IGY Facilities") and Island Global Yachting Services Ltd. ("IGY Services") executed a Purchase, Sale and Contribution Agreement (the "Purchase Agreement") with the Principals to acquire (1) all of the outstanding capital stock of SRI, a company based in Dallas, Texas that owns direct and indirect controlling interests in the SRI Asset Portfolio, (2) all of the outstanding capital stock of SRM, a company based in Dallas, Texas that provides property and marina management services to the SRI Asset Portfolio and (3) all of the equity interests held directly or indirectly by the Principals in eight marina assets(excluding AYH) controlled by SRI and managed by SRM (the "Principal Equity Interests"). The assets are located in St. Maarten (Simpson Bay Marina), the British Virgin Islands (Virgin Gorda Yacht Harbour and Village Cay Marina), Lake Travis, Texas (Yacht Harbor Marina, Hurst Harbor Marina and Lakeway Marina) and Canyon Lake, Texas (Canyon Lake Marina and Crane's Mill Marina). The closing of the Transaction is subject to, among other things, IGY's completion of its due diligence and the Principals obtaining all required third party consents. On October 23, 2006, Island Global Yachting Acquisition Ltd. executed a Purchase and Sale Agreement (the "AYH Purchase Agreement") with MOF VI Limited Partnership, a company controlled by SRI and the Principals ("Sun-AYH") to acquire approximately 2.12 acres of fee simple land and a 128-slip fixed dock marina facility known as American Yacht Harbor in St. Thomas, USVI ("AYH") for a gross purchase price of $25.5 (net price of $25,312,500 after a credit of $187,500), and prior to standard prorations and adjustments (the "Arairran,sartioe). The AYH Transaction is subject to, among other things, IGY having completed its due diligence no later than November 30, 2006 (which it has done) and the receipt of local government approval of a CZM application filed by IGY and Sun-AYH for the transfer of the properties. The CZM hearing is expected to take place on Friday, January 12, 2007. IGY entered into the AYH Transaction separately from the Transaction because AYH is 90% owned and basically controlled by the Steere Group, which is one of the largest investors in the SRI partnerships. Island Global Yachtin Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122374  I SLAND 2 fl LOBAL `la YACHTING After completing its due diligence investigation of the SRI Asset Portfolio and AYH, IGY has determined to purchase the assets of AYH and investment interests in 3 of the 11 marinas comprising the SRI Asset Portfolio. These 3 assets (the "Target Assets") are comprised of one marina property in St. Maarten (Simpson Bay Marina), and two marina properties in the British Virgin Islands (Virgin Gorda Yacht Harbour and Village Cay Marina). IGY has elected not to purchase investment interests in the Texas-based assets, although it would manage such assets upon completion of the Transaction by reason of its acquisition of SRM. Upon completion of its due diligence, IGY's estimated value for the Texas assets was approximately 35% less than the amount projected by the Principals. The Sun Resorts Purchase Agreement permits IGY to "kick out" any asset with which it is not satisfied, but still proceed with the Transaction so long as it intends to acquire the Caribbean assets. IGY notified the Principals of this decision in mid-December 2006. Transaction Structure The Purchase Agreement provides for the Transaction to occur in two stages, as follows: In the first stage (the "First Closing"), • IGY Services would acquire 100% of the outstanding capital stock of SRM for a purchase price equal to $3,000,000 (the "SRM Consideration"). • IGY Facilities would acquire 100% of the outstanding capital stock of SRI for a purchase price equal to $3,000,000 (the "SRI Consideration:). • IGY Facilities would acquire all of the direct and indirect general and limited partner interests in the entities that own the Target Assets (collectively, the "Sun Partnership() held by the Principals (collectively, the "Principal Interests') for a purchase price that is derived from an agreed upon valuation for the Target Assets (the "Principal Interest Consideration"). These valuations are discussed in more detail in Sections III and specifically listed in Attachment A hereto. The Principal Interest Consideration would be payable 20% in cash and 80% in Class B non-voting shares of IGY ("IGY Shares') valued at $15 per share. • Each of the Principals would be employed by IGY Services for a one-year term following the First Stage Closing, subject to continued employment thereafter on an at- will basis. In the second stage (the "Second Closing"), • Within 180 days of the First Closing, IGY Facilities would agree to commence a series of tender offers (the "Tender Offer() to acquire the limited partner interests in the Sun Partnerships (the "Third Party Interests") for a purchase price that is based on the same property valuation as used in computing the Principal Interest Consideration (the `"fender Offer Consideration"). Island Global Yachtin • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122375  "anSLAND 3 GLOBAL YACHTING • The Tender Offer Consideration would be payable 30% in cash and 70% in Class B non- voting shares of IGY valued at $15 per share. However, the per share valuation would be increased if IGY completes an equity financing at a higher per share valuation prior to the Second Closing, in which case the limited partners would have the option to receive 100% cash. It is anticipated that IGY Class B non-voting shares would be valued at $20 per share at the time of the Tender Offers and therefore Attachment A hereto reflects this value for the Third Party Interests calculations. The First Closing is conditioned upon (1) IGY completing its due diligence investigation of the Target Assets and (2) SRI and the Principals obtaining all third party consents required to effect the First Closing, including from the limited partners in and lenders to each of the Sun Partnerships. If IGY is not satisfied with its due diligence of any asset, or consent is not obtained, then IGY would not acquire any Principal Interests or Third Party Interests in such asset. IGY may terminate the Purchase Agreement and abandon the Transaction if it is unwilling (following due diligence) or unable (due to failure of consents being obtained) to acquire any of SRI's Caribbean assets. As indicated previously, this does not include American Yacht Harbor, which will be purchased separately. Valuations and Structutivitiatters Set forth below is a table containing the list of Target Assets, locations, agreed upon valuations for the calculation of the Principal Interest Consideration and ownership stakes held by the Sun Partnerships: Target Assets Ann Location Valuation SRI Entity Controlling Party Simpson Bay Sint Maarten $ 10,000,000 MOF Simpson Bay, LP SRI Virgin Gorda Virgin Gorda, BVI $ 16,000,000 Virgin Gorda YH (MOF III) LP (1) BVI Investment Club Village Cay Tortola, BVI $ 13,000,000 Village Cay (MOF III ) LP (2) BVI Investment Club American Yacht Harbor St. Thomas, IJSVI $ 25)12,500 MOF VIM. SRI Nona (I) Owns 25% of Virgin Yacht Harbour Holdings Limited, a BVI company that owns the asset (2) Owns 33.3% of Village Cay Marina Enterprise Limited, a BVI company that owns the asset " Note — American Yacht Harbor would be purchased pursuant to a separate transaction expected to occur just prior to the First Closing, and is included above for information purposes only. At the First Closing, IGY Facilities would acquire 100% of SRI, which in turn is the sole general partner of Marina Opportunity Fund III, LP. CMOF Iu"). SRI also is the sole general partner of Marina Opportunity Fund II, LP., but this entity does not own any interests in the Target Assets and thus would be restructured out of SRI prior to the First Island Global Yachtin • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122376  I SLAND 4 NIMIMIMIGLOBAL -YACHTING Closing. Additionally, any asset not part of the Transaction (including the Texas assets) would be restructured such that neither SRI nor any of its subsidiaries would be the general partner of such asset following the First Closing. The structure for the acquisition of Principal Interests is described below and Attachment J contains a chart illustrating the ownership interests to be acquired by IGY pursuant to the Transaction. Marina Opportunity Fund III, LP. (`MOF III") MOF III is an upper tier Texas limited partnership that owns limited partner interests in the entities that own Simpson Bay Marina, Virgin Gorda Yacht Harbour and Village Cay Marina. These limited partner interests include "capital" and "profits" (or promoted) interests in each of the underlying partnerships (characterized as "Class A" and "Class B" limited partner interests, respectively). SRI is the sole general partner of and owns a 0.5% economic interest in MOF III. MOF III raised money from the Principals, their friends, family and other investors. The capital partners of MOF III received "Class A" limited partner interests and arc entitled to receive 100% of distributions until their capital has been returned. Thereafter, the Class A limited partners receive 39.18% of the profits. The "Class B" limited partners of MOF III represent the "promoted" interests and are entitled to receive 60.82% of the profits distributed by the MOF III, after return of capital to the Class A limited partners. IGY Facilities would acquire 5.42% of the Class A interests in MOP III held by Powers, Rhoades and Olszewski (1.860%, 3.394%, and 0.163% respectively). IGY Facilities would also acquire 77.61% of the Class B interests in MOF III held by each of Powers, Rhoades and Olzewski (25.87% each). Simpson Bay Marina, St. Maarten IGY would acquire the Principal Interests based on an asset valuation of $10 million, which is equal to the amount contemplated by the Purchase Agreement. Simpson Bay Marina is 100% owned by MOF Simpson Bay, LP, which is a Texas limited partnership ("MOT? Simpson Bay"). SRI is the sole general partner of and owns a 0.5% economic interest in MOF Simpson Bay. MOF Simpson Bay is structured like MOF III, such that the capital partners received "Class A" limited partner interests and MOF III received all of the "Class B" limited partner interests as a promoted interest. In addition to the interests acquired through MOF III (as described above), IGY Facilities would acquire a 1.51% "Class A" limited partner interest in MOP Simpson Bay held by Olzewski. Virgin Gorda Yacht Harbour, British Virgin Island, IGY would acquire the Principal Interests based on an asset valuation of $16 million, which is equal to the amount contemplated by the Purchase Agreement. Virgin Gorda Yacht Harbor is 100% owned by Virgin Yacht Harbour Holdings Limited, a BVI company ("VG Property Owner"). VG Property Owner is owned 75% by Sage Yacht Harbour Enterprises Limited (sometimes referred to as the "BVI Investment Club"), a BVI entity that is a Island Global Yachtin Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122377  I SLAND 5 -YACHTING "belonger" for local ownership purposes and which is unaffiliated with SRI or the Principals, and 25% by Virgin Gorda YH (MOP III), LP, a Texas limited partnership ("NflThVtgin Gorda"). Sun MOF III GP, LLC, a Texas limited liability company, is the direct general partner of MOF Virgin Gorda, and it is owned 100% by MOF III, which is controlled by SRI (as noted above). SRI therefore indirectly controls the 25% minority interest in VG Property Owner that is owned by the Sun Partnerships. MOF Virgin Gorda is structured like MOF III, such that the capital partners received "Class A" limited partner interests and MOF III received all of the "Class B" limited partner interests as a promoted interest. MOF III owns an 18.42% Class A interest in MOF Virgin Gorda. IGY Facilities would acquire the Principal Interests in Virgin Gorda through its acquisition of the interests in MOF III described above. Village Cay Marina, British Virgin Islands IGY would acquire the Principal Interests based on an asset valuation of $13 million, which is $1 million less than the amount contemplated by the Purchase Agreement. This price reduction was negotiated with SRI following IGY's completion of its due diligence. Village Cay is 100% owned by Village Cay Marina Enterprise Limited, a BVI company MC Property Owner"). VC Property Owner is owned 66.7% by Sage Investment Club and 33.3% by Village Cay (MOF III), LP, a Texas limited partnership ("MOF Village Cay"). Sun MOF III GP, LLC, a Texas limited liability company, is the direct general partner of MOF Village Cay, and it is owned 100% by MOF III, which is controlled by SRI (as noted above). SRI therefore indirectly controls the 33.3% minority interest in VC Property Owner that is owned by the Sun Partnerships. MOF Village Cay is structured like MOF III, such that the capital partners received "Class A" limited partner interests and MOF III received all of the "Class B" limited partner interests as a promoted interest. MOF III owns an 8.43% Class A interest in MOP Village Cay. IGY Facilities would acquire the Principal Interests in Village Cay through its acquisition of the interests in MOF III described above. Attachment A contains a summary analysis of the consideration and other amounts payable by IGY at the First Closing and the Second Closing (using various assumptions for amounts tendered). Attachments contain property descriptions, pro forma projections and annotations for each of Simpson Bay, Virgin Gorda, Village Cay and American Yacht Harbor, respectively. Attachment I contains a summary rollup of Simpson Bay, Virgin Gorda, Village Cay and American Yacht Harbor. Attachment 1 contains the executive summary from each property condition report prepared by ATM in connection with IGY's due diligence investigation. Island Global Yachtin Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122378  6 YACHTING H. DESCRIPTION OF SRI AND ITS OPERATIONS SRI Overview SRI is a marina investment company founded in 1996 that makes strategic investments in quality marina properties throughout the world that satisfy a particular market niche. The primary investment strategy is to make investments that provide stable initial returns with the opportunity to enhance yields through diligent and efficient management and comprehensive operational strategies. SRI, through its investment entities, currently has a portfolio of 11 marinas located in Texas and the Caribbean. These marinas have over 3,000 boat slips that include wet slips, dry slips, covered slips, and uncovered slips. SRI marinas can accommodate boats ranging from small ten foot boats to mega yachts over 200 feet in length. Key Personnel IGY has agreed to purchase SRI and its affiliated companies from its founders and key principals. The three Principals are Johnny Powers, Ron Rhoades and Michael Olszewski. John D. Powers, JD Managing Director Mr. Powers currently serves as Managing Director of SRI and President of SRM. Johnny Powers was also one of three founding members of Harvard Property Trust Inc., which was a Texas-based private real estate investment trust. From 1996 through 1998, Harvard acquired over $200,000,000 of suburban office buildings located in Texas and Minnesota. Mr. Powers has been responsible for over $300,000,000 of acquisitions for Harvard Property Trust, SRI and related entities. Mr. Powers and his partners have also been responsible for raising over $100,000,000 of equity capital for Harvard Property Trust, SRI and related entities. Mr. Powers has developed and maintained outstanding relationships with numerous accredited individual investors, who have invested in various ventures in which he is a principal. Mr. Powers also has strong relationships with institutional equity investors and lenders. Mr. Powers received his Juris Doctor in 1992 from the University of Texas. Prior to attending law school, he graduated magna cum laude from Southern Methodist University obtaining a Bachelor of Business Administration degree in Real Estate and Urban Land Economics and Finance. Mr. Powers has also completed 30 hours towards his Masters of Business Administration degree from Southern Methodist University. Mr. Powers is a member of the Texas State Bar Association, National Marine Manufacturers Association, Marina Operators Association of America, and the International Marine Island Global Yachtin • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122379  I SLAND 7 NIMIIIMMNIGLOBAL -YACHTING Institute. Mr. Powers is also a member of the Young Entrepreneuis Organization and the Bent Tree Bible Church. He is also a graduate of the Transformational Leadership Program. Ron W. Rhoades, CPA Managing Director Ron Rhoades is a managing director and was one of the founders of SRI. He currently is primarily responsible for all financial and operational activities for the Companies and its subsidiaries, providing strategic financial and structural analysis for the Companies as they grow. Since the formation of SRI, he has been responsible for placing over $50,000,000 in loans for acquisitions and refinancings. He has also developed an investment structure for the various acquisitions that utilizes preferred and common equity at the individual entity level and investor lines of credit at parent company level. Previously, Mr. Rhoades was one of the founders of Harvard Property Trust, a private Real Estate Investment Trust formed in 1996 where he served as CFO/COO and on the Board of Directors. He directed all the financial activities for the Company and its sponsored investments and had primary responsibility for the placement of $125,000,000 in loans, including bank debt, syndicated lines of credit, and securitized loans. Additionally he had primary responsibility for the placement of $55,000,000 in private and institutional equity into the Company. From 1987 until joining Harvard Property Trust, L.P., he operated his own independent accounting and financial consulting firm. This firm specialized in providing CFO functions for various companies including the numerous Harvard Property Trust, L.P. sponsored investments and Linx Data Terminals, Inc. (LINX) a company engaged in various facets of the computer industry. Prior to this, he served as Vice President Operations of three restaurant companies where he was responsible for initial opening and all day-to-day operations of multiple restaurants in three states. Prior to this time, Mr. Rhoades was a loan officer for Continental Mortgage Investors (CMI), a mortgage REIT, where he was one of the leading loan producers for CMI for the Southwestern region. Mr. Rhoades has a master's degree from the University of Texas where he graduated with honors; Mr. Rhoades was in the top 10 of his graduating class. He is a Certified Public Accountant and currently holds a Texas Insurance License and a Texas Real Estate License. He previously held both a Certified Financial Planner license and a Registered Investment Advisor license. He is married to Connie and has two children, Bill and Stephanie. Michael S. Olszewski, CMC Managing Director Mr. Olszewski currently serves as one of the Managing Directors of SRI and President & Chief Operating Officer of SRM. He currently is responsible for the overall leadership of the company, including overseeing marina operations; research, development and quality assurance; marketing, sales and member services; and administrative activities performed by SRM. He also participates in the strategic planning regarding the growth of the company and Island Global Yachtin Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122380  I SLAND 8 SLOBAL _YACHTING expanding its base of operations through the exploration of new ventures and acquisitions for investment by SRI. Prior to joining SRI in January, 2005, Mr. Olszewski spent twenty-four years in the practice of management consulting for Price Waterhouse, PricewaterhouseCoopers, and IBM Business Consulting. He was a partner at Price Waterhouse for over sixteen years practicing business process improvement and information technology consulting in a wide variety of industries including government travel and leisure, transportation, consumer products, and energy. He served as Managing Partner of the firm's North America Energy practice for over 6 years and has been responsible for leading substantial growth in a number of practices over the course of his career. He has participated in numerous business and technology improvement implementation projects resulting in substantial efficiencies for large complex organizations. Prior to joining Price Waterhouse, Mr. Olszewski held Assistant City Manager and Community Development specialist positions in St. Louis County, Missouri. Mr. Olszewski retired from IBM Business Consulting Services in December 2004 in order to contribute his substantial business management expertise to Sun Resorts International's growth. Mr. Olszewski received his bachelor and masters' degrees in Business and Public Administration from the University of Missouri; and, holds past accreditations from the Institute of Management Consulting (Certified Management Consultant - CMC) and the Association for Systems Management. He is a member of St. Cecilia Catholic Community in Houston, where he is active as a member of the parish's Stewardship Committee, as well as various other parish and community activities along with his wife. He and his wife Cindy currently reside in Houston with their two daughters, Pamela and Katherine. He is a long time recreational and charter boater and has taken a variety of U.S. Power Squadron, U.S. Coast Guard Auxiliary, and American Sailing Association training courses. Financial Results and Asset Evaluation SRI conducts its operations primarily through SRM, which functions as the entity that performs all day-to-day operations for the SRI Asset Portfolio. SRI acts as the general partner of some of the asset-level partnerships, and in other cases owns a controlling interest in the "Marina Opportunity Funds" ("MOF Entities'). The MOT? Entities own limited partner interests and general partner interests in the asset-level partnerships. There are three primary MOP Entities — MOF I, MOF II and MOF III. The MOP Entities raised equity from friends and partners. These funds sponsor partnerships that own property and pay a promoted interest to the Principals in the form of Class B partner interests (typically 60-70% after a 12% return). 'Ihe MOF Entities typically would contribute 10%-20% of the equity toward an asset and the substantial investors would put up the balance. Typical promote structures are provided in the property partnerships Island Global Yachtin • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122381  I SLAND 9 '4I GLOBAL YACHTING (300/0 after a 10% return). The MOF Entities receive a promoted interest in addition to their direct investment interest in the asset-level partnership. The SRI Asset Portfolio is located primarily in the northeast Caribbean and Lake Travis, Texas. The two concentrated areas allows for economics of management. Personnel in the two major areas are charged to the properties, and travel by home office personnel to the properties are allocated to the properties. The Principals own SRI, SRM and equity interests approximating $6 million in all of the MOF Entities. Without American Yacht Harbor, as contemplated by the Transaction, the equity interests held by the Principals in the Target Assets would be approximately $1.05m. In 2005, SRM generated approximately $100,000 after bonuses of about $350,000. SRM is a "C" corporation in which the Principals try to keep $100,000 working capital and pay out the balance in bonuses. However, it does more than management — about $600,000 in revenues in 2005 consisted of acquisition fees and refinance fees. SRM pays the salary and bonuses of the Principals and also functions as profit vehicle from the fees it generates in new acquisitions. The Principals do not control the two British Virgin Island entities — Virgin Gorda and Village Cay. These are controlled by Sage Investment Club (a BVI Investment Company), and SRI and the MOF Entities hold a collective 25% and 33.3% minority interest, respectively, in these entities. For various reasons, these properties must remain majority owned by BVI nationals. MOF I controls American Yacht Harbor, which is controlled by the Steere Group. IGY Facilities has entered into the AYH Purchase Agreement to acquire this asset directly for a net purchase price of $25,312,500, excluding proration. The gross purchase price is $25,500,000, but the Principals have agreed to repay IGY Facilities $187,500 at the closing (i.e., this price reduction is paid for by the general partner only). MOF III has the minority interests in the BVI properties, the controlling interest in Simpson Bay located in St Maarten, and the Canyon Lake and VIP properties on Lake Travis. IGY has determined not to acquire VIP or Canyon Lake due to limited cash flow potential. SRM is the primary operating entity for the SRI Asset Portfolio that handles all day-to-day operations of the enterprise. While the operation is profitable, the Principals must generate acquisition and refinance fees to generate meaningful profits and bonuses. Subtracting each Principal's salaries of $300,000 per year (the same amount payable by IGY in the Transaction) from 2006 budget, historical results of operations for 2003, 2004 and 2005, and budgeted results for 2006 are as follows: Island Global Yachtin Ltd. • • Fon Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122382  I SLAND 10 eLOBAL YACHTING Actual/Budget* Actual Actual Actual 2006 2005 2004 2003 Revenue .. Mgt Fees $ 756,573 S693,688 $528,850 $522,132 Asset Mgt Fees S 137,861 $113,903 $96,106 $81,396 Admen Fees $ 220,000 $240,000 $240,000 $230,580 Accounting $24,000 $78,250 $52,750 Acquisition Fees S 91,250 $497,055 $50,000 Construction Mgt Fees Finance Fees $ 63,750 $107,000 $30,000 Other $ 9,821 5188,319 Set up Fees $25,000 Interest Income $2,340 $1,485 Total Revenue $ 1,279,255 $1,891,305 $993,206 $918,313 Payroll $ 628,033 S 815,052 S 664,943 Operating Expenses $ 234,242 $ 1,793,505 $ 321,223 S 180,319 Depreciation 14,808 S 14,802 $ 14,802 Federal Taxes 11,000 $ 194 $ 10,763 Total Operating Expenses $ 888,083 $ 1,793,505 $ 1,151,271 $ 870,827 Net Income $ 391,172 S 97,800 $ (158,065) S 47,516 • Actual January through June and Budget July through December. Principal salaries of $900,000 have been deducted from 2006 payroll. I I Island Global Yachting Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122383  I SLAND 11 lIaLOBAL \SEM YACHTING III. SUMMARY TRANSACTION TERMS Acquirers: Island Global Yachting Facilities Ltd. ("ICY &cilides") and Island Global Yachting Services Ltd. ("IGY Service() Sellers: John D. Powers, Jr. ("Powers"), Ronald W. Rhoades ("Rhoades") and Michael S. Olszewski ("Olszewski") Transaction: Acquisition of: (1) All of the issued and outstanding capital stock of Sun Resorts International, Inc. ("agr), a Texas corporation; (2) AU of the issued and outstanding capital stock of Sun Resorts Management, Inc. ("Mkt), a Texas corporation; (3) All of the general partner interests in the partnerships (the "Sun Partnerships") that own the targeted assets (the "Target Assets')• (4) All of the limited partner interests in the Sun Partnerships that own the Target Assets which are owned by the Principals (together with the general partner interests in number (3), the "Principal Interests")• and (5) Subject to acceptance of the terms offered by IGY pursuant to tender offers, the limited partner interests in the Sun Partnerships that owns the Target Assets which are owned by third parties (the "Thjul Party Interests"). Staged The Transaction would be dosed in two stages. In the first stage, (1) Closings: IGY Facilities would acquire SRI, (2) IGY Services would acquire SRM and (3) IGY Facilities would acquire the Principal Interests (the "First Closing"). In the second stage, IGY Facilities would seek to acquire the Third Party Interests (the "Second Closing"). IGY Facilities would be obligated to commence the second stage within 180 days following the first stage dosing. Consideration: SRI and SRM would be acquired for an aggregate cash payment of $6.0 million. This cash payment would be decreased by the net current liabilities on the SRI and SRM balance sheet at the dosing date, or increased by the net current assets of each company as of such date. It is contemplated that both companies would be transferred with zero net working capital. For tax allocation purposes, the parties have Island Global Yachtin • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122384  I SLAND 12 NSLOBAL YACHTING agreed to allocate the purchase price $3.0 million to SRI (the "al Consideration") and $3.0 million to SRM (the "SRM Consideration"). The Principals would be responsible for delivering all of the outstanding capital stock of each of SRI and SRM that is held by third party shareholders. The sale of SRM and SRI would each be on a "net zero" balance sheet basis. Prior to the First Closing, the Principals would prepare a Working Capital Statement showing net working capital of zero. An amount equal to any net negative working capital balance would be paid to IGY Services at the First Closing from the proceeds deposited into the escrow account described below, and the balance would be paid to the Principals in equal one-third portions. The Working Capital Statement would be subject to further adjustment at or prior to March 31, 2007 to correct for any deficiencies not known at the First Closing. Any adjustments in IGY's favor would be subject to an indemnity claim and funded from the Seller Indemnity Escrow (as described below). The consideration for the Principal Interests would be determined by the net equity interests derived from the valuation for each property that IGY elects to acquire following due diligence. The valuation for each of the Target Assets has been agreed as follows: Property Debt at Property Valuation Rec. 31.2006 Simpson Bay 10,000,000 (3,355,447) Village Cay 13,000,000 (6,418,336) Virgin Gorda J6.000.000 (9.235.0001 Totals S 39,000,000 (19,644,797) Net Equity S 19,991,217 For example purposes only. Assuming IGY acquires all of the Target Assets, the total net equity value in the assets is $19,991,217 based upon estimated property-level debt through December 31, 2006 (i.e., including scheduled payments made in the beginning of December) and waterfall provisions in each of the partnership agreements. At the First Closing, the total consideration in respect to the Principal Interests (the "Principal Interest Consideration") would be approximately $1,051,508, of which approximately $210,302 would be paid in cash (200/0) and the balance in IGY Class B non-voting shares ("JGY Shares"), or approximately 56,080 shares at $15/share. Using the same assumptions, the total consideration payable at the Second Closing in respect to the Third Party Interests with 100% tendering (the "'hada Island Global Yachtin Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122385  I SLAND 13 `RI GLOBAL YACHTING Offer Consideration") would be approximately $9,475,989, of which approximately $2,842,797 would be paid in cash (30°A.) and the balance in IGY Shares, or approximately 331,660 shares at $20 share (vs $15) as it is anticipated the IGY stock would be at a higher value prior to the Tender Offers. Prior to the First Closing, the Principals would also prepare a dosing statement for each of the underlying partnerships relating to the Principal Interests to be acquired by IGY Facilities. These closing statements would show all current assets (including cash, collectible AIR not more than 90 days past due, prepaid expenses and useable inventory) ("Credits") and current liabilities (including A/P, accrued expenses and prorated bonuses and known contingent liabilities). In addition to current liabilities, the closing statements would show the remaining unexpended portion of budgeted 2006 capital expenditures, and any principal debt incurred after signing (together with the current liabilities, "DebitA"). If Credits exceed Debits at the First Closing, as agreed by IGY, then SRI or the Sun Partnership will be permitted to distribute excess cash to the limited partners. Each closing statement would be subject to further adjustment and correction on or prior to March 31, 2007, and any discrepancy in favor of IGY would be subject to an indemnity claim and funded from the Seller Indemnity Escrow and Tender Escrow (as defined below). The amounts distributable in respect to the Principal Interests were estimated based upon the property valuations and placed on a schedule attached to the Purchase Agreement at execution in September. If there have been any permitted distributions to equity holders or scheduled or unscheduled principal payments on outstanding debt between signing and the First Closing (in each case, as approved by IGY), then amounts distributable to the Principals would be adjusted based on the waterfall distribution provisions of each applicable organization document. Escrow: IGY and each of the Principals has deposited certain items into an escrow account until the conditions to closing have been satisfied. The Principals have entered into binding agreements with the minority shareholders of SRI and SRM to redeem the shares held by them at the First Closing. The Principals have deposited the following into escrow: stock certificates for all SRM shares; redemption agreements signed by the minority shareholders of SRM, to be effective at the First Closing; Island Global Yachting Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • waislecap.corn EFTA01122386  I SLAND 14 aL0BAL YACHTING stock certificates for all SRI shares; and (iv) a redemption agreement from the one minority shareholder of SRI, to be effective at the First Closing. IGY Services has deposited $3.0 million in the escrow account. All interest earned on these funds are for IGY's account. The date upon which the items above are deposited with the escrow agent is referred to as the "Escrow Deposit Date". Representations Each Principal would severally and not jointly make certain and Warranties representations as to the shares of SRM and SRI and Principal Interests of Principals: (the "Equity Interests") held by him: (a) Unencumbered and lien-free ownership of the Equity Interests; and (b) Full legal right, power and authority to enter into the Purchase Agreement and perform the obligations. The Principals would collectively make the following representations and warranties, on a joint and several basis, as to each of SRI, SRM and each partnership and real property asset underlying the Principal Interests to be acquired by IGY: (a) Organization, good standing and qualification to do business in each applicable jurisdiction; (b) Record ownership of the Equity Interests and the absence of any options, rights or other agreements to acquire the interests in any of the subject companies; (c) List of all subsidiaries and valid issuance of securities held in any subsidiary; (d) True, accurate and complete copies of financial statements for each company for 2003, 2004, 2005 and the six-month period ended June 30, 2006; (e) True, accurate and complete list of all outstanding debt for each company; (f) True, accurate and complete list of all accrued fees payable to each company; (g) No material changes to the business or liabilities since the date of the June 30 financial statements; (h) Filing of tax returns, timely payment of taxes and absence of audits; (i) lien-free tide to personal property; 6) List of any owned and leased properties cm addition to marinas); (k) No knowledge of material maintenance or repairs not fully budgeted for any company; (1) Delivery of all materials in their possession to enable IGY to conduct its due diligence. Island Global Yachtin Ltd. • • Fort Lauderdale, FL 33301 Tel: • Fax: • www.islecap.com EFTA01122387  I SLAND 15 SLOBAL -YACHTING (m) Accounts receivable in the ordinary course; (n) Lack of material inventory or supplies; (o) True and correct list of insurance policies and absence of cancellation or intent not to renew such policies; (p) Possession of permits and licenses; (q) Material contracts and commitments; (r) No changes in policies of customers or suppliers; (s) Labor, Benefits and Employment Agreements; (t) No conflicts or breach of statutes or documents; (u) Compliance with laws; (v) Litigation; (w) Intellectual property; (x) Bank accounts (y) Compliance with environmental laws and no known violations, to sellers' knowledge; (z) No improper payments or bribes; and (aa) Investment intent with respect to IGY shares All representations as they relate to Village Cay and Virgin Gorda, neither of which are controlled by the Principals, are made with knowledge of sellers (in respect to their investment interests and in their capacity as a manager of the property). Representations IGY ha