PRH Pearl River Holdings Limited

Prime Restaurants Royalty Income Fund (TSX:EAT.UN) (the "Fund") announced today
that the Fund has reached an agreement in principle with Prime Restaurants of
Canada Inc. ("PRC"), PRC's sole shareholder, Prime Restaurant Holdings Inc.
("PRH") and PRC Trademarks Inc. ("TradeMarkCo") regarding the principal terms of
a proposed transaction (the "Combination Transaction") to combine and form a
new, publicly-traded corporation to be named Prime Restaurants Inc. ("Amalco").


PRC also announced that an operational restructuring plan designed to improve
its business of operating and franchising restaurants is being implemented.


Under the existing structure, TradeMarkCo receives licensing royalties generated
by the Prime Restaurants. The Combination Transaction will consolidate ownership
of the intellectual property for the Prime Restaurants (which is currently owned
by TradeMarkCo) and the franchising business currently operated by PRC. The
conversion to a corporation in conjunction with the Combination Transaction will
also provide certainty to the unitholders of the Fund ("Unitholders") with
respect to the 2011 effective date of tax legislation affecting income trusts
and will simplify the structure of the combined business.


"We believe our unitholders will benefit from the combination of the Prime
Restaurants and the related intellectual property, together with an early
conversion to a corporation" said Steven Sharpe, Chairman of the Fund. "The
combination will enable investors to more easily value our operations, our
brands and our growth potential. The trustees of the Fund and the principals and
management team at PRC believe that the interests of all parties are best served
by a corporate structure that provides greater transparency, oversight of the
operating business and access to financing. The proposed combination will result
in a corporate structure that provides enhanced accountability to investors, and
a more direct correlation between the performance of the operating business and
the results and prospects of the public company. Under the proposed new
structure, the current 'vend-in' formula for new restaurant additions to the
royalty pool will be eliminated and the benefits of growth in the Prime
Restaurant system will accrue to all investors. In conjunction with the
operational restructuring well under way at Prime, we believe the future is
bright for the combined businesses."


Principal Terms of the Proposed Combination Transaction

The new entity, Amalco, will be the result of the combination of PRC and
TradeMarkCo. The Fund will be dissolved as part of the transaction and
Unitholders will receive shares in Amalco. The definitive terms of the
transaction are to be reflected in a combination agreement to be negotiated
among the parties.


PRC has been in default of its royalty payment obligations under the license and
royalty agreement between PRC and TradeMarkCo since October 2009, which resulted
in a reduction of monthly distributions to Unitholders. The Combination
Transaction will include the resolution of this default and all deferred amounts
under current arrangements between the parties.


PRH's current indirect fully-diluted interest in the Fund (after the exercise of
certain exchange rights by PRC) is approximately 36.7%. Amalco will have three
classes of shares: (i) a class that is planned to be listed on the TSX and which
will be held by PRH and the Unitholders (the "Public Shares"), (ii) a class held
by PRH only and convertible into Public Shares if certain financial targets are
met (the "B Shares") and (iii) a class held by PRH only, that is non-voting and
non-participating and which is also convertible into the Public Shares if
certain financial targets are met (the "C Shares"). Immediately after the
completion of the Combination Transaction, PRH's interest in Amalco will be
approximately 25% of the shares outstanding at closing (prior to factoring in
the C Shares) and PRH will own approximately 7% of the Public Shares. The
agreement in principle provides that PRH may convert its B Shares and C Shares
into Public Shares if certain financial targets are met by Amalco (in whole or
in part) over the next three to five years. If the financial targets are met in
full by Amalco, PRH's interest in Amalco could grow to as much as 30% (taking
into consideration the possible conversion of the C Shares). If the financial
targets are not met, PRH's interest in Amalco could drop to as low as 23% of the
shares outstanding. Immediately after the completion of the Combination
Transaction, Unitholders of the Fund other than PRC will receive Public Shares,
representing approximately 75% of shares outstanding on closing (prior to
factoring in the C Shares) and approximately 93% of the Public Shares. All of
the foregoing percentages are calculated prior to the implementation of a
long-term incentive plan for employees and directors of Amalco which will have a
dilutive effect on all shareholders.


Highlights of Operational Restructuring

PRC operates and franchises casual dining restaurants and premium pubs. In
response the challenging economic conditions facing its corporate and franchised
restaurants and pubs, PRC has implemented a restructuring plan designed to
improve operations and financial results. The highlights of the operational
restructuring include:




1.  reductions to office overhead and expenses; 
2.  centralizing brand management and key support services for all brands,
    resulting in a unified operating methodology and processes; and 
3.  introduction of key internal and external operating metrics, focusing on
    restaurant audits, mystery shoppers and web-based guest feedback. 



Distributions

In anticipation of the Combination Transaction, the Fund also announced today
that monthly distributions to Unitholders are expected to remain at $0.04 per
Unit effective until the distribution payable in April 2010 to Unitholders of
record on March 31, 2010.


If the Arrangement receives all necessary approvals and is implemented, it is
anticipated that Amalco will adopt a dividend policy to pay dividends on a
quarterly basis on the Public Shares. It is currently anticipated that the
amount of such quarterly dividend will initially be $0.12 per Public Share. The
dividend policy will be subject to the discretion of the board of directors of
Amalco and may vary depending on, among other things, Amalco's operating cash
flow, financial requirements, restrictions under future credit facilities, the
satisfaction of solvency tests imposed by the corporate legislation for the
declaration of dividends and other conditions existing at such future time. As a
result, no assurance can be given as to whether Amalco will pay dividends, or
the frequency or amount of any such dividend.


Board of Directors and Management Team

The initial directors of Amalco will be Steven Sharpe, Paul Haggis and Michael
Aronovici, current trustees of Prime, as well as John Rothschild and Sidney
Horn, both of whom are currently directors of PRC and TradeMarkCo. Messrs.
Sharpe, Haggis and Aronovici will all be independent directors of Amalco. Mr.
Rothschild, currently the Chief Executive Officer of PRC, will be Chief
Executive Officer of Amalco. The current management team at PRC will move to
Amalco and continue to guide operations.


Approvals and Closing of the Transaction

Additional details of the Combination Transaction will be announced by way of
news release and filings on SEDAR (www.sedar.com) in the coming weeks. The
Combination Transaction will be implemented through a plan of arrangement. Prime
expects to mail an information circular to Unitholders in respect of the
Combination Transaction and other business in early March 2010. The Unitholder
vote in respect of the Combination Transaction will take place at the Annual and
Special Meeting of the Fund, which is currently scheduled to be held on March
30, 2010. The record date for determining Unitholders entitled to vote on the
Combination Transaction is expected to be February 26, 2010. The Combination
Transaction is subject to, among other customary conditions, execution of
definitive agreements and other required documentation, receipt by the trustees
of the Fund of a satisfactory formal valuation and fairness opinion, approval by
the Ontario Superior Court of Justice of the plan of arrangement by which the
transaction will be implemented and a positive vote in favour of the Combination
Transaction by the holders of at least 66 2/3% of Prime's voting units
represented at the meeting (including a majority of the voting units held by
disinterested Unitholders). If approved, the Combination Transaction is
scheduled to close on or about April 5, 2010.


The trustees of the Fund have engaged Capital Canada Limited to prepare a formal
valuation of PRC and the Fund as well as a fairness opinion on the Combination
Transaction.


The Combination Transaction and listing of the Public Shares of Amalco are
subject to all necessary regulatory approvals, including approval of the TSX.


About Prime Restaurants Royalty Income Fund

The Fund, through TradeMarkCo, is entitled to receive top-line royalties of
3.25% of the gross food and beverage revenue from pooled restaurants under the
terms of a 99-year licence agreement between TradeMarkCo and PRC.


About PRC and the Fund

PRC operates and franchises a diversified portfolio of leading brands of casual
dining restaurants and premium pubs in Canada. As a pioneer in the Canadian
casual dining industry since 1980, it is considered an important innovator in
the development of strong brands, and today has three core brands: East Side
Mario's, Casey's and Fionn MacCool's. PRC and its franchisees employ over 12,000
people across the country.


The Fund is a limited purpose trust authorised to issue an unlimited number of
Trust Units and established to invest in TradeMarkCo. The source of revenue for
the Fund is through its ownership in, and debt instrument issued by,
TradeMarkCo. The Fund receives interest income on the TradeMarkCo Note which it
distributes to its Unitholders. TradeMarkCo owns certain trade-marks and
licenses their use to PRC which operates and franchises the restaurant and bar
business. In return, TradeMarkCo receives royalty income from the royalty pooled
restaurants operated and franchised by PRC. Additional information relating to
the Fund, including the Fund's financial statements, the Annual Information Form
of the Fund and PRC's MD&A and consolidated financial statements can be found at
www.sedar.com and the Fund's website at www.primeincomefund.ca


Forward-Looking Statements

The public communications of the Fund often include written or oral
forward-looking statements. Statements of this type are included in this news
release, and may be included in filings with Canadian securities regulators, or
in other communications. Forward-looking statements may involve, but are not
limited to, comments with respect to our objectives for 2010 and beyond, our,
PRC's and Amalco's strategies or planned future actions, our, PRC's and Amalco's
targets or expectations for our financial performance and condition, PRC's
ability to pay royalty payments and our ability to pay distributions or
dividends. All statements, other than statements of historical fact, contained
in this new release are forward-looking statements, including, without
limitation, statements regarding the future financial position and operations
(including estimated revenue from royalty pooled restaurants and the estimated
administrative and other operating expenses of the Fund), business strategy,
distributions, plans and objectives of or involving the Fund, PRC and Amalco.
Readers can identify many of these statements by looking for words such as
"believe", "expects", "will", "intends", "projects", "anticipates", "estimates",
"continues" and similar words or the negative thereof. Although management of
the Fund and PRC believe that the expectations represented in such
forward-looking statements are reasonable, there can be no assurance that such
expectations will prove to be correct.


By their nature, forward-looking statements require us to make assumptions and
are subject to inherent risks and uncertainties including those discussed in the
Fund's MD&A and the Fund's annual information form dated March 11, 2009, (the
"AIF") under "Narrative Description of the Business - Risk Factors" which are
available at www.sedar.com. There is significant risk that predictions and other
forward-looking statements will not prove to be accurate. We caution readers of
this news release not to place undue reliance on our forward-looking statements
because a number of factors could cause actual future results, conditions,
actions or events to differ materially from the targets, expectations, estimates
or intentions expressed in the forward- looking statements.


Assumptions and analysis about the performance of the Fund, PRC and Amalco and
the markets in which they operate are considered in forecasting the Fund's,
PRC's and Amalco's expected financial results, PRC's ability to pay royalty
payments and the Fund's ability to pay distributions and in making related
forward-looking statements. The key assumption in respect of the Fund's level of
distributions is that the cumulative distributable cash will be able to support
the Fund's current level of distributions. The Fund receives the cash it
distributes from TradeMarkCo. TradeMarkCo receives all of the cash it pays to
the Fund through a royalty from PRC. Accordingly, the ability of the Fund to pay
its distributions depends on PRC's financial performance and ability to pay the
royalty. In respect of the ability to maintain and grow the royalty pooled
revenue and PRC's financial performance, key assumptions include those relating
to the demand for the goods and services under the Prime trademarks and in
respect of the Canadian markets in which the royalty pooled restaurants operate.
Should any of these factors or assumptions vary, actual results may differ
materially from the forward-looking statements.


The information set forth in the MD&A and AIF identifies factors that could
affect the operating results and performance of the Fund and PRC. We caution
that the list of factors discussed in the MD&A and the AIF is not exhaustive,
and that, when relying on forward-looking statements to make decisions with
respect to the Fund, investors and others should carefully consider the factors
discussed, as well as other uncertainties and potential events, and the inherent
risks and uncertainties of forward-looking statements.


The forward-looking statements contained herein are expressly qualified in their
entirety by this cautionary statement. The forward-looking statements included
in this news release are made as of the date of this news release. Except as
required by applicable securities laws, the Fund does not undertake to update
any forward-looking statement, whether written or oral, that it may make or that
may be made, from time to time, on its behalf.

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