DDC Dawnay Day

    RNS Number : 9712Z
  Dawnay, Day Carpathian PLC
  28 July 2008
   

    Date: 28 July 2008
    On behalf of: Dawnay, Day Carpathian PLC
    Embargoed until:  0700hrs

    Dawnay, Day Carpathian PLC
    ("Carpathian" or the "Company")

    *     Proposed change of name to "Carpathian plc"
    *     Acquisition of assets from Dawnay, Day Structured Finance Limited and other companies and the Administrators
    *     New Portfolio Management and Development Management Agreements and related fee arrangements
    *     50 per cent interest in Carpathian Asset Management Limited
    Carpathian, (AIM: DDC) the retail property investment company established to invest in Central and Eastern Europe, further to the
announcement of 14 July 2008, confirms it has finalised the contractual documentation giving effect to the formation of a new property
manager and has entered into a new management agreement. The finalisation of the contractual documentation ensures the continuity of the
management team and severs the final links with the Dawnay, Day Group ("DDG"). The Company is intending to change its name to Carpathian
plc, and a circular will be sent to shareholders shortly to approve this.

    The newly-incorporated management company, Carpathian Asset Management Limited ("CAM") is now formed. Carpathian will now own 50 per
cent of the share capital of CAM, higher than the original 9.9 per cent mentioned in the announcement of 14 July 2008. This enlarged
shareholding enables Carpathian to benefit from a corresponding share of future profits or surpluses. The remaining 50 per cent will be
owned by a newly-incorporated company ("UK REM"), which is owned by the two of the principals of Dawnay, Day PanTerra ("DDPT"), Carpathian's
former property investment adviser, namely Paul Rogers and Massimo Marcovecchio (the "Principals").

    In addition, the Company has been successful in securing the acquisition of the management assets formerly owned by DDPT from the
administrators ("Administrators") of certain members of DDG for �250,000. CAM is being funded as to �100,000 by the Principals and as to the
remainder by the Company. These acquired assets include computers, servers, files and two 75 per cent holdings in Atrium companies. These
are development companies funded and set up in Hungary and Romania by DDPT with whom Carpathian had a development agreement. Additionally,
CAM will acquire 100 per cent of DDPT's Polish subsidiary Vidius Investments Sp. z o.o. ("Vidius"), which operates DDPT's Warsaw office and
Central and Eastern European ("CEE") asset management operations.

    In addition the employees of DDG engaged in managing the Company's portfolio are transferring to CAM. 

    Carpathian has also signed a new portfolio management agreement and a new development management agreement with CAM. Under the new
contracts Carpathian will pay for all the ongoing running costs of CAM, the Atrium companies and Vidius so far as they relate to the
management of the Carpathian portfolio. These new contracts replace the previous portfolio management and development management agreements
which were terminated on 14 July 2008. Under the previous portfolio management agreement Carpathian paid 0.4% of the gross asset value of
the portfolio per annum to the manager. Under the previous development management agreement Carpathian agreed to pay the manager at a rate
of up to 5% of the construction costs of each development project. Most of the development projects were sub-contracted to Atrium.

    As originally disclosed in the admission document, dated 20 July 2005, the performance fee structure (the "Promote") sits outside of the
management agreement and was not terminated on 14 July 2008. The Principals, who own 40% of the Promote, have agreed to allocate at least
10% of their interest for the benefit of CAM employees engaged on Carpathian activities. Negotiations with a view to acquiring the balance
of the Promote not held by the Principals are expected to commence although finalisation of these negotiations could take many weeks.

    Commenting on the acquisition, Rupert Cottrell, Chairman of Dawnay, Day Carpathian PLC said:

    "We are delighted with the deal set out in today's announcement which we feel is structured to give, in our view, the best value to our
shareholders. This new portfolio management agreement is very positive indeed and we look forward to continue working with our existing team
headed by Paul Rogers and Massimo Marcovecchio. 

    "The employees of Carpathian Asset Management have a track record of being one of the leading property teams focused in the CEE region
with their ability to deliver in a marketplace that presents significant opportunities and I am confident that the team will continue to add
value for the shareholders of Carpathian. It is business as usual for the Company."

    -Ends-

    The assets have been acquired from DDG, which is a related party of the Company. The new management agreements are with CAM, which is
50% owned by UK REM, which is owned by the Principals, who are also related parties of the Company. Accordingly these are related party
transactions under the AIM Rules. The Directors consider, having consulted with Numis Securities, the Company's nominated adviser, that the
terms of the transactions are fair and reasonable insofar as shareholders are concerned. 


    Enquiries: 

    Dawnay, Day Carpathian PLC: 01624 825002 
    Rupert Cottrell 

    Carpathian Asset Management: 020 7834 8060
    Paul Rogers 

    Numis Securities Limited: 020 7260 1000 
    Nominated Adviser
    Nick Westlake 

    Corporate Broking
    Charlie Farquhar 

    Redleaf Communications: 020 7822 0200
    ddc@redleafpr.com 
    Emma Kane 
    Adam Leviton 
    Henry Columbine

    Notes: 

    The Change of Name

    It is proposed that the name of the Company be changed to "Carpathian plc". Shareholder approval is required and a circular convening an
extraordinary general meeting to consider and, if thought fit, pass the appropriate resolution will be posted in due course. 

    The Business Sale Agreement

    CAM, in which the Company owns 50 per cent of the share capital, has agreed to acquire assets from the administrators of Dawnay, Day
Structured Finance Limited, Dawnay, Day Europe Limited, Dawnay, Day PanTerra Consolidated Limited and Dawnay, Day Panterra Limited, which
are all in administration, to enable it to perform its obligations under the DMA and the PMA. The total consideration for the acquisition is
�250,000.

    The purchased assets include: computer software, intercompany loans made to the Atrium Centers companies, 75 per cent of the share
capital in the Atrium companies, the entire share capital of Vidius, goodwill, intellectual property and business information. 

    Pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006, the employment contracts of those employees of the
Sellers who were fully engaged in managing the Company's assets will automatically transfer to CAM. 

    The Portfolio Management Agreement (the "PMA")

    The Company and its subsidiaries have agreed exclusively to appoint Carpathian Asset Management Limited ("CAM"), a company incorporated
specifically for this purpose, to provide the portfolio management services (the "Portfolio Services") previously provided to the Company by
DDPT. 

    The PMA is on substantially the same terms as the Portfolio Management Agreement dated 20 July 2005, save that payment is calculated on
a cost basis rather than on a percentage of gross assets. Further, the fee is to be paid on the 15th day of each month, as opposed to in
arrears, as previously, as this protects CAM's cash flow and provides enhanced visibility of earnings during its first year of operation. At
the end of each year, there will be an adjustment to take into account any overpayments relative to the actual aggregate costs incurred by
CAM.

    The PMA commenced on signature on Friday 25 July and shall continue indefinitely until 26 July 2013 plus 12 months rolling notice either
way of such date and shall be automatically renewed after 26 July 2013 for a further period of 12 months unless otherwise terminated. There
are protections for the Company in the PMA in the event that CAM identifies commercial retail property located in Central and Eastern
Europe. The opportunity must first be presented by CAM to the board of the Company. CAM is only able to acquire the property so identified
for its own account once the Company has decided not to acquire it for itself. 

    The Development Management Agreement (the "DMA") 

    The DMA is in substantially the same form as the PMA, save that CAM is to provide development management services. It will terminate on
termination of the DMA. The DMA is on substantially the same terms as the Development Management Agreement dated 24 April 2007, save that
payment is calculated on a cost basis rather than on a percentage of contracted construction work.

    Carried Interest / Promote Arrangement

    In order to realign the carried interest arrangements relating to the performance of the Company's property and development portfolios,
it has been agreed that ten per cent of those interests shall be made available for employees of CAM. Further interests rising up to
fourteen per cent will be available where agreement is reached for CAM to acquire all the outstanding Promote save for those interests held
in the Promote by the Principals, with any balance being held by the Company. Where part only of those outstanding interests are acquired,
both PR and MM and DDC shall contribute part of the interests held or acquired so that CAM employees have a minimum 10 per cent
participation in the carried interests.

    There is a period of 72 weeks in which to agree terms for such acquisition.

    Articles and Investment Agreement

    The Company and UK REM each own 50 per cent of the share capital in CAM. As such, they have entered into agreements to regulate their
relationship, which are set out in the Articles and Investment Agreement. 

    The share capital of CAM is divided into A Ordinary Shares and B Ordinary Shares. The Company holds all of the B Ordinary Shares and has
subscribed �150,000 in cash. UK REM holds all of the A Ordinary Shares and has subscribed �100,000 in cash. 

    UK REM and the Company both have the right to appoint six directors to the board of CAM. It is the intention that UK REM will exercise
its entitlement in full. To save the Company from having to appoint its full entitlement of directors, there are provisions in the Articles
and Investment Agreement which provide that, no matter how many directors are appointed by the Company, those directors appointed will be
deemed to have 6 votes. As such, the interests of UK REM and the Company will always be equally represented on the board of CAM. 

    The Investment Agreement requires the Company and UK REM to procure that CAM runs its operations in certain ways, for example, holding
board meetings at regular intervals and ensuring that accounts are made available promptly. Each party has pre-emption rights on the
transfer of the other's shares. 

    The Investment Agreement lists a set of actions which cannot be carried out without the Company's consent. These include, for example,
the declaration of dividends, the issue of new shares, the acquisition of businesses and a sale of CAM. There are a similar set of consent
rights for the Company's appointed directors in terms of matters reserved for CAM's board, for example, appointing auditors, granting loans,
conducting litigation, creating a pension scheme and entering into property leases. 

    The Articles are in a form typical to such joint venture arrangements and include, for example, pre-emption rights on transfer and a
right for each party to request a tag-along on a sale of shares. There are, however, no drag-along rights in the Articles so one party is
not able to force the other party to sell its shares.

    The Loan Agreement

    As announced on July 14 Carpathian agreed to provide a loan facility of �500,000 to the Newco. The Company lent to CAM �118,496.99 on 18
July 2008, EUR50,000 on 17 July 2008 and �5,875.00 on 22 July 2008 (together the "Loan") and has entered into the Loan Agreement to regulate
its use and repayment. Pursuant to this agreement the facility has been capped at amount so drawn. 

    CAM is allowed to use the Loan only for paying permitted expenditure, which includes expenses incurred to fund working capital and
operational expenditure. The Company must consent in writing to any such expenditure above �2,000. The Loan is repayable in full, together
with accrued interest, on the third anniversary of the Loan Agreement. Interest accrues at a rate of 10 per cent per annum. The Loan is
secured by CAM entering into a debenture in favour of the Company which creates a fixed and floating charge over CAM's assets and business.




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