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ERM/SBL - ERM/Sable - Option agreement between ERM and Sable; further cautionary Enterprise Risk Management Limited Incorporated in the Republic of South Africa (Registration number: 1995/001603/06) Share code: ERM & ISIN: ZAE000037701 ("ERM") Sable Holdings Limited Incorporated in the Republic of South Africa (Registration number: 1968/010636/06) Share code: SBL & ISIN: ZAE000006383 ("Sable") OPTION AGREEMENT BETWEEN ERM AND SABLE FURTHER CAUTIONARY ANNOUNCEMENT 1. Introduction Further to the announcement dated 16 February 2007 ("the previous announcement"), shareholders are advised that ERM and Sable have, on 14 May 2007, signed an agreement in terms of which Sable has granted an option ("the option" or "the option agreement") to ERM to subscribe for further shares in Sable. 2. Background and update on the previous announcement Following the successful conclusion of the two transactions announced on 16 February 2007, the holding structure between ERM and Sable will result in ERM holding a 21.49% interest in Sable, which in turn will hold 100% of Amrich 58 Properties (Pty) Ltd ("Amrich"). Amrich is the holding company of Rotaflex Investments (Pty) Ltd ("Rotaflex"), which owns a portfolio of properties with a net value of approximately R95 million. ERM and Sable jointly acquired 34% of Rotaflex in November 2006 and the remaining balance was acquired in January 2007. Subsequent to this transaction, and in terms of two agreements signed on 16 February 2007 ("the sale of shares agreement" and "the subscription agreement") ERM agreed to sell its 50% holding in Amrich to Sable in exchange for an issue of 1 187 500 new Sable shares at R40.00 per share as well as to subscribe for an additional 392 500 shares at R40.00 per share to bring ERM`s holding in Sable to 21.49%. Shareholders are advised that the due diligence investigation referred to in the previous announcement, confirming the Sable share price, is still ongoing. Thereafter the companies will proceed with the process of satisfying the remaining conditions precedent as contained in the sale of shares agreement and the subscription agreement. 3. Salient terms of the option agreement Isdale Holdings BV ("Isdale") is currently the controlling shareholder of Sable holding 5 873 643 shares being 65.57% of the total issued share capital of Sable excluding treasury shares. In terms of the option agreement signed on 14 May 2007, Sable has granted an option to ERM to subscribe for 3 948 822 new shares in Sable, at a price of R40.00 per share, or so many newly issued shares in Sable as will bring the total holding of ERM equal to the total number of shares held by Isdale. The shares so issued will rank pari passu in all respects with the shares held by Isdale. The option may be exercised at any time prior to 16:00 on 30 November 2007. In the event that the option is exercised, ERM will make an offer to minority shareholders and Isdale has undertaken to take up so many of the shares on offer by the minority shareholders as will maintain parity in the shareholdings between ERM and Isdale. In the event that the option lapses, ERM and Sable have agreed that the sale of shares agreement and the subscription agreement referred to above shall be terminated and the parties shall take such steps as may be required to return them to the status existing prior to the signature of the sale of shares agreement and the subscription agreement. 4. Conditions precedent to the option agreement The option agreement is conditional upon inter alia: * Isdale providing an irrevocable written undertaking, within seven days of signature of the option agreement, that it will vote in favour of the Sable shareholder resolutions required to implement the option agreement; and * by no later than 17:00 on 31 October 2007; * Written confirmation by the ERM board that it is satisfied, in its sole discretion, that the subscription price for the Sable shares will be the price per share as approved by shareholders of both ERM and Sable`s shareholders at a general meeting to be held for the purpose of approving the sale of shares agreement and the subscription agreement; * The fulfilment or waiver of all the conditions of the sale of shares agreement and the subscription agreement; * The approval of the option agreement by the shareholders of Sable and ERM; * Sable shareholders approving an increase in the authorised share capital of the company to enable it to issue shares in terms of the option agreement; and * Regulatory approvals, including those of the JSE Limited, the Securities Regulation Panel and the Competition Authorities. 5. Rationale for the option agreement Further to the previous announcement, ERM and Sable have identified a synergistic association through which both companies wish to grow, expand and diversify their property activities. Both companies strongly believe that this synergy will unlock significant value for shareholders through consolidating many years of experience, management skills, financial and other resources. The new shareholding structure illustrated above will expose both companies to a well diversified and managed property portfolio. The main objective of this structure is to maximize returns and expand its property interests to a long term sustainable level, capable of effectively competing in the real estate industry. Shareholders will enjoy the benefits of a well diversified development and investment portfolio, where the risks are spread and returns maximized. Executive management of both companies wish to take advantage of the current phenomenal expansion in infrastructural spending in the real estate industry in South Africa. Keen investor interest and growth in the real estate industry will further enhance this process. 6. Categorisation and documentation In the event that the option is exercised, the transaction will be an affected transaction in terms of the Companies Act, 1973, as amended. Accordingly, should ERM exercise the option, it will be required to make an offer to the minority shareholders of Sable in terms of the Securities Regulation Code on Takeovers and Mergers. In terms of the JSE Listings Requirements, the option will be a category 1 transaction for ERM, which requires the posting of a circular and notice of a general meeting to ERM shareholders. The issue of shares by Sable for cash in terms of the option agreement will require the posting of a circular and notice of a general meeting to Sable shareholders. 7. Further cautionary announcement Further to the above, shareholders in both ERM and Sable are advised that they should continue to exercise caution when dealing in the respective companies` securities until a further announcement is made which will include the financial effects relating to both the sale of shares agreement and the option agreement. Randburg 15 May 2007 Corporate Adviser and Sponsor to ERM and Sable Sasfin Capital A division of Sasfin Bank Limited Legal Adviser to ERM and Sable Routledge Modise Attorneys Date: 15/05/2007 11:23:03 Supplied by www.sharenet.co.za Produced by the JSE SENS Department.
