Prime Restaurants Inc.
TSX : EAT

Prime Restaurants Inc.

November 28, 2011 10:26 ET

Prime Restaurants Inc. Terminates Acquisition Agreement With Cara Operations Limited and Enters Into Acquisition Agreement With Fairfax Financial Holdings Limited

MISSISSAUGA, ONTARIO--(Marketwire - Nov. 28, 2011) - Prime Restaurants Inc. ("PRI" or the "Company") (TSX:EAT) announced today that it has terminated the acquisition agreement between Cara Operations Limited ("Cara") and PRI dated October 17, 2011 (the "Cara Agreement") and has entered into an acquisition agreement (the "Fairfax Agreement") with Fairfax Financial Holdings Limited ("Fairfax"). Additionally, the Company announced that it has entered into a settlement agreement with Cara, Fairfax, and certain executive officers of the Company pursuant to which the parties have agreed to a full and final mutual release of all obligations relating to the Cara Agreement and Cara's proposed acquisition of the issued and outstanding shares of PRI.

Pursuant to the Fairfax Agreement, Fairfax will acquire of all of the issued and outstanding class A limited voting shares (the "Shares") and restricted share units the Company by way of a plan of arrangement under Section 182 of the Business Corporations Act (Ontario) (the "Transaction"). Shareholders of PRI ("Shareholders") will receive $7.50 per Share in cash on the effective date from Fairfax. In addition, the Company is entitled to pay a special dividend to Shareholders on the effective date in an amount not to exceed $0.08 per Share. The amount of the special dividend to be paid, if any, will depend on the Company's anticipated cash position on the effective date, as determined by the Board. It is possible that no special dividend will be paid. The special dividend, if any, would be an eligible dividend for purposes of the Income Tax Act (Canada) and any applicable provincial taxing statutes. The transaction is expected to close by early 2012 and is not conditional on financing.

The $7.50 per Share to be received by Shareholders from Fairfax pursuant to the Transaction represents: (a) a 7.1% premium over the $7.00 per Share total amount to be received by Shareholders under the Cara Agreement, (b) a 54.6% premium over the closing price of PRI's Shares on the TSX on October 14, 2011 of $4.85 per Share, representing the final closing price of the Shares prior to the announcement of the Cara Agreement, and (c) a 63.4% premium over the volume weighted average price of the Shares over the 20 trading days ended October 14, 2011 of $4.59.

The Company's board of directors, based on the recommendation of a special committee of independent directors, has unanimously recommended that Shareholders vote in favour of the Transaction. The special committee made its recommendation with the benefit of input from its independent legal and financial advisors.

The Transaction provides for, among other things, a non-solicitation covenant on the part of the Company, subject to a customary "fiduciary out" provision, which entitles the Company to consider and accept a superior proposal, subject to the right of Fairfax to match the superior proposal and the payment to Fairfax of a termination payment of $3,500,000.

As a condition of the Transaction, John Rothschild (the Company's CEO), Nicholas Perpick (the Company's President) and Grant Cobb (the Company's Senior Vice President - Brand Management) have agreed to invest a portion of the proceeds of the Transaction each would receive into shares of the Company following closing. Additionally, Prime Restaurant Holdings Inc., which holds approximately 30% of the outstanding shares eligible to vote on the Transaction, has entered into a merger support agreement (the "Support Agreement") with Fairfax pursuant to which it has committed to vote its Shares in favour of the Transaction, subject to certain terms and conditions. The Support Agreement automatically terminates if the Fairfax Agreement is terminated.

The Transaction is subject to a number of conditions, including (a) approval of Ontario's Superior Court of Justice (the "Court"), (b) approval by the holders of at least 66 2/3% of the votes cast by Shareholders present in person or by proxy at a special meeting of Shareholders, (c) approval by a "majority of the minority" Shareholders, excluding the votes of John Rothschild, Nicholas Perpick and Grant Cobb, together with any parties related to, and any person acting jointly or in concert with, John Rothschild, Nicholas Perpick and Grant Cobb, including Prime Restaurant Holdings Inc., and (d) certain other customary conditions.

The Company will be appearing before the Court to seek an amendment to the Interim Order which was granted on November 10, 2011. Further details regarding the Transaction and timing will be included in an amendment to the Company's management information circular to be mailed to shareholders in due course. The Fairfax Agreement and the Support Agreement will be filed on SEDAR at www.sedar.com.

About Prime Restaurants Inc.

PRI franchises, owns and operates one of Canada's leading networks of casual dining restaurants and pubs. With such well-respected brands as East Side Mario's, Casey's, Fionn MacCool's, D'Arcy McGee's, Paddy Flaherty's, Tir nan Óg, and Bier Markt, Prime has been delivering quality, value and a superior guest experience for more than thirty years. Prime's class A limited voting shares are listed on the Toronto Stock Exchange under the symbol "EAT".

Forward-Looking Statements

The public communications of PRI 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, the completion of the Transaction in accordance with its terms, comments with respect to our objectives for 2011 and beyond, our strategies or planned future actions, and our targets or expectations for our financial performance and condition. All statements, other than statements of historical fact, contained in this news release are forward-looking statements, including, without limitation, statements regarding the future financial position and operations, business strategy, plans and objectives of or involving PRI. 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 believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

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, PRI does not undertake to update any forward-looking statement, whether written or oral, that may make or that may be made, from time to time.

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