1. Structuring a Leveraged Buy-out Using A Mortgage Instrument Aubrey K. Mutale, CEO www.unicapitalsa.com Presentation to the Southern Africa Round Table May 7-9 2007, Zambezi Sun Livingstone Zambia

2. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 2 Leveraged Buy-out Equity like Investments in public or privately owned companies utilizing leverage or borrowed funds to purchase a significant portion or majority control of their ownership.

3. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 3 Mortgage Method of using property as security for the payment of a debt. Refers to a legal device used in securing the property Commonly used to refer to debt secured by the mortgage.

4. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 4 Fundamentals of a Mortgage LEGAL ASPECTS: There are essentially two types of legal mortgage. Mortgage by Demise Creditor becomes the owner of the mortgaged property until the loan is repaid in full (Known as redemption).

5. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 5 Fundamentals Of A Mortgage Cont.. Mortgage by Legal Charge Debtor remains the legal owner of the property, but the creditor gains sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it.

6. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 6 Transaction – Unicapital S.A. Unicapital secured financing from three international banks who had agreed to provide financing subject to company B providing a warranty against any liability arising from financing asbestos related transactions. Although the target company was profitable the banks felt that it was risky to provide acquisition finance and end up with undefined environmental liabilities

7. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 7 Mortgage Financing Structure Acquiring Company A Target Company B Sale/Purchase Agreement (SPA) Shares Loan/Cash Bank

8. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 8 Transaction Creditor Company B had legal rights to the debt secured by the mortgage and made a loan of $30 to company A, the debtor, of the purchase money for the company Typically creditors are banks, insurers or other financial institutions who are sometimes referred to as mortgagee or lender

9. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 9 Transaction Debtor Company A as a debtor was required to meet its obligations under SPA imposed by the creditor in order to avoid the creditor (Company B) enacting provisions of the mortgage to recover the debt. Typically debtors will be individual home owners, landlords or businesses who are purchasing property by way of loan. Sometimes referred to as mortgagor, borrower or obligor

10. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 10 Amortization of Capital & Interest In the case of company A, mortgage repayments were monthly payments containing a capital element and an interest element. Target company was valued at US$30m in form of stocks and debtors of stock Proceeds for the ring fenced debtors and stocks were used to pay the creditor In the event that company A did not make good on its obligations, the creditor would reposes the shares

11. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 11 CHALLENGES OF STRUCTURING AN LBO/MORTGAGE INSTRUMENT Financial illiteracy Limited access to finance Lack of trust among participants Political interference in some African Countries Lack of origination

12. Presentation to the Southern Africa Round Table - Zambezi Sun Livingstone Zambia - May 7-9 2007 12 Conclusion The rights and obligations of company A (The Acquiring Company) are not in any way different from the rights and obligations of a homeowner under a simple mortgage structure. African governments must encourage or empower locals to participate in investment through deliberate polices i.e. BEE or AA in RSA X amount shares be accrued to locals Financial institutions should invest in staff training in Corporate Finance Financial institutions should come with more innovative transactions than generic ones The secret about wealth creation lies in originating