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RCL FOODS – exercise of put options

During 2013, RCL FOODS, through its wholly owned subsidiary, Rainbow Farms Investments (Pty) Ltd., entered into agreements with Zambeef Products PLC (“Zambeef”) regarding investments in its broiler business, Zam Chick Ltd. (“Zam Chick”), and a greenfield hatchery investment, Zamhatch Ltd. (“Zamhatch”).



RCL FOODS has a 49% interest in Zam Chick and a 51% interest in Zamhatch. Shareholders’ agreements were entered into between RCL FOODS and Zambeef in respect of Zam Chick on 1 February 2013 (“the Zam Chick Shareholders’ Agreement”) and Zamhatch on 29 May 2013 (“the Zamhatch Shareholders’ Agreement”) (collectively, “the Shareholders’ Agreements”). In terms of the Shareholders’ Agreements RCL FOODS, as a standard protection mechanism, was granted put options that would require Zambeef to acquire all of the ordinary shares held by RCL FOODS in Zam Chick (“the Zam Chick Option”) and Zamhatch (“the Zamhatch Option”) (collectively, “the Options”).



If the Zam Chick Option is exercised at any time, the value attributable to RCL FOODS’ interest in Zam Chick (49%) will be determined as the higher of the following amounts on the date that the Zam Chick Option is exercised:

* 49% of the consolidated earnings before interest, taxation, depreciation and amortisation (“EBITDA”) of Zam Chick at an exit enterprise value (“EV”) / EBITDA multiple of 7.5 times; or

* the original purchase price paid by RCL FOODS to Zambeef for the Zam Chick shares, expressed in US Dollars (“USD”).



Currently, RCL FOODS has no shareholder loan account claims against Zam Chick. If the Zamhatch Option is exercised within 3 years of the effective date (31 March 2013), the value attributable to RCL FOODS’ interest in Zamhatch (51%) will be determined as the higher of the following amounts on the date that the Zamhatch Option is exercised:

* 51% of the consolidated EBITDA of Zamhatch at an exit EV / EBITDA multiple of 7.5 times; or

* the invested USD amounts outstanding to RCL FOODS on capital and loan account.



General

RCL FOODS is aware that Zambeef management has been mandated by its board of directors to actively work towards reducing Zambeef’s current debt position. Over the past few months RCL FOODS has been in discussions with Zambeef management in respect of possible mechanisms to inject capital into Zambeef. The Board is of the view that should RCL FOODS become a shareholder in Zambeef, RCL FOODS would like to continue with these discussions. RCL FOODS is of the opinion that Zambeef is an attractive business that, pursuant to an injection of new capital, could materially improve its overall performance. RCL FOODS thus remains interested in considering opportunities that could lead to a more substantial transaction between RCL FOODS and Zambeef.