KEN Dulieu, the Company’s Chairman, has asked us to reply on his behalf to the Open Letter Regarding Refinancing Proposal by SISU dated 26 October 2007 which was addressed to him.

We regret that you are unwilling now to meet with us to discuss the points raised in your letter, particularly as you invited us to meet and because we believe a meeting would be the most efficient way of answering your questions as fully as possible.

A meeting would also provide us with the opportunity to discuss with you the extremely depressing prospects for the Company in the event that new investment is not secured soon.

We do not know whether you have all seen SISU’s letter of 16 October 2007 addressed to Seymour Pierce which contains details of the indicative terms (the ‘Proposal’) on which SISU Capital Limited, for and on behalf of the SISU Capital Private Equity Funds (‘SISU’), would be prepared to make an investment in Southampton Leisure Holdings Plc (the ‘Company’).

It is worth noting that the proposed investment by SISU has been made in good faith following extensive negotiations with both the Company and its advisers, Seymour Pierce.

We understand that SISU would not continue with the transaction in a hostile manner and, accordingly, the support of the shareholders of the Company is critical to the successful conclusion of any investment proposed by SISU.

The Proposal will provide £12m (gross) investment into the Company and up to £4m for existing shareholders to realise all or part of their holdings.

In order for SISU to proceed with the Proposal, it requires irrevocable undertakings from shareholders representing not less than 14,200,000 shares to vote in favour of the placing resolutions and to tender not less than 2,150,000 existing ordinary shares.

This would result in SISU holding not less than 55 per cent of the enlarged issued share capital of the Company.

The Proposal would require shareholders to vote on a special resolution to allot new shares and vote in favour of the Rule 9 ‘whitewash’.

In addition, shareholders would be asked to vote their approval of the suggested bonuses payable to the senior management team in recognition of the value they have generated in sourcing additional investment for the Company.

We did attempt to speak to Mr Wilde and Mr Lowe about the Proposal but Mr Lowe declined to be made an insider and Mr Wilde did not return calls.

As a director of the Company, Mr Crouch is already in possession of much if not all of the information you requested in your Open Letter of 26 October.

We will take your points in order: a) From the £12m placing of new shares professional advisers’ fees (principally financial advisers and legal costs) amounting to approximately £1m should be deducted, thus approximately £11m will be available to the Company. The costs associated with the placing and tender offer will be allowable for the purposes of taxation.

b) If you tell us that you are in favour of the Proposal and are willing to provide irrevocable undertakings, we will enter into negotiations to agree the terms of an inducement fee with SISU.

This fee would be payable in the event that, for any reason other than the withdrawal of SISU, the Proposal does not complete, e.g. if another, higher offer were to be received by the Company and recommended by the board of directors.

It is proposed that this fee would be for the sum of £150,000 which is approximately 1 per cent of the Company’s market capitalisation.

It would be entirely normal in the case of a recommended transaction for the offeree company to enter into an inducement fee arrangement.

The Panel would be required to approve the inducement fee.

c) It has been agreed with Aviva (the bond holder) they will forgo any makewhole amount if the bond is redeemed.

SISU has not had any contact with Aviva regarding the proposed re-financing but has previously stated that it is its intention to refinance the debt under new terms with Aviva or from its own or third party resources.

The composition of these resources is yet to be determined.

d) It has been agreed with Aviva that the change of control clause in the bond documentation will not be invoked in the case of the Proposal or another transaction which completes before 31 March 2008.

e) SISU has stated it is a long-term investor. It has stated that ‘as a new and supportive investor, (it) has further funds available to invest in new players and football related activities’.

f) If we are not able to procure sufficient irrevocable undertakings the Proposal will not proceed.

It was felt that some shareholders may wish to sell all or part of their holdings. If some shareholders undertake NOT to tender their shares then other shareholders will be able to tender more.

g) Shareholders are not being offered the opportunity to participate in the placing.

Shareholders will be asked to vote on the Proposal.

If they are not in favour the Proposal will not go ahead.

The Company will retail its listed status and once SISU holds greater than 50 per cent of the issued share capital of the Company, it will be free to buy shares in the market as the Takeover Code contains no restrictions upon majority shareholders buying shares.

Similarly, individual shareholders will be able to buy or sell shares in the market post the transaction.

SISU has previously indicated a willingness to explore potential purchases of a shareholder’s stake in the Company post the Proposals on a case by case basis.

h) We do not believe that the current share price reflects the financial condition of the Company ... (it) is artificially high following the speculation about Paul Allen’s interest in April.

Moreover, we are of the opinion that if SISU was to withdraw its interest, then the share price would drop very substantially and most probably below the tender price proposed by SISU.

It would be usual for a placing of new shares to take place at a discount to the current share price.

i) SISU is authorised and regulated by the Financial Services Authority. We cannot comment on the content of press articles or other unsubstantiated sources.

The Proposal is not ‘take it or leave it’ but, in the absence of any indication from you as to what is acceptable, it would be unrealistic to expect that SISU would consider varying any of the terms of the Proposal.

It would be helpful in our attempts to secure investment in the Company and to secure its future and give the club the best chance of returning to the Premiership if you would each let us know what you would accept, or alternatively how much you can invest.

The Proposal could work as follows, depending on individual shareholder requirements: if we assume that Mr Crouch, Mr Wilde and the Corbett holdings do NOT wish to tender their shares then the entire Lowe holding of 8,377,745 could be tendered for consideration of approximately £3.4 million.

This would allow another 1,622,255 shares to be tendered by other shareholders.

We believe that SISU will withdraw the Proposal if the current situation persists and refer you to the Company’s trading statement of 2 November 2007 which indicated the directors’ concerns about the financial condition of the Company should no investment of funds into the Company be received.

We remain ready and willing to meet with you to discuss matters and to review with you the extremely difficult prospects for your Company in the event that new investment is not secured in the very near future.

Roger Clement (Seymour Pierce)