SIR Royalty Income Fund, SIR Corp. and Lembit Janes Announce Settlement of Proxy Contest

̶   Fund recommends that Unitholders vote FOR election of Stephen Dewis, Michael Fisher, Lembit Janes, Sandra Levy, Norm Mayr, William Rogers and Kim van Nieuwkoop   ̶

BURLINGTON, ON, June 14, 2021 /CNW/ - SIR Royalty Income Fund (TSX: SRV.UN) (the "Fund"), SIR Corp. and Lembit Janes today announced that they (together with certain parties related to Lembit Janes) have entered into a settlement agreement (the "Settlement Agreement") relating to the ongoing proxy contest in respect of the Fund's board of trustees (the "Board").

As part of the Settlement Agreement, Lembit Janes, the Fund and SIR Corp. agreed that the size of the Board to be elected at the upcoming annual general meeting of the holders of units of the Fund ("Units"), which is scheduled to be held on June 29, 2021 (the "2021 Meeting"), will be fixed at seven (7).  The seven (7) nominees for election as trustees ("Trustees") will be Stephen Dewis, Michael Fisher, Lembit Janes, Sandra Levy, Norm Mayr, William Rogers and Kim van Nieuwkoop (the "New Slate").

Lembit Janes, the Fund and SIR Corp. recommend that all holders of Units vote in favour of each of the members of the New Slate as Trustees by completing the Fund's GOLD form of proxy.  Douglas Buchanan, Peter Fowler and John McLaughlin have withdrawn as nominees for election as Trustees at the 2021 Meeting.  Accordingly, any votes cast in favour of any of them for election as Trustees will be disregarded.

ACCORDINGLY, THE FUND WITHDRAWS ITS RECOMMENDATION IN ITS MANAGEMENT INFORMATION CIRCULAR DATED JUNE 1, 2021 (THE "INFORMATION CIRCULAR") AND ALSO SET OUT IN ITS PROXY AND VOTING INSTRUCTION FORM ACCOMPANYING THE INFORMATION CIRCULAR (TOGETHER WITH THE INFORMATION CIRCULAR, THE "MEETING MATERIALS") WITH RESPECT TO THE ELECTION OF TRUSTEES AND RECOMMENDS THAT UNITHOLDERS VOTE YOUR GOLD PROXY FOR THE ELECTION OF STEPHEN DEWIS, MICHAEL FISHER, LEMBIT JANES, SANDRA LEVY, NORM MAYR, WILLIAM ROGERS AND KIM VAN NIEUWKOOP AS TRUSTEES, AND NOT VOTE FOR OR WITHHOLD WITH RESPECT TO DOUGLAS BUCHANAN, PETER FOWLER AND JOHN MCLAUGHLIN. THIS CHANGE IN RECOMMENDATION AS SET OUT IN THIS PRESS RELEASE SHALL BE DEEMED TO AMEND AND RESTATE THE MEETING MATERIALS.

MR. JANES ALSO WITHDRAWS HIS RECOMMENDATION IN HIS INFORMATION CIRCULAR DATED JUNE 4, 2021 (THE "JANES CIRCULAR") AND ALSO SET OUT IN HIS PROXY AND VOTING INSTRUCTION FORM ACCOMPANYING THE JANES CIRCULAR (TOGETHER WITH THE JANES CIRCULAR, THE "JANES MEETING MATERIALS") WITH RESPECT TO THE ELECTION OF TRUSTEES AND RECOMMENDS THAT UNITHOLDERS VOTE YOUR GOLD PROXY FOR THE ELECTION OF STEPHEN DEWIS, MICHAEL FISHER, LEMBIT JANES, SANDRA LEVY, NORM MAYR, WILLIAM ROGERS AND KIM VAN NIEUWKOOP AS TRUSTEES, AND NOT VOTE FOR OR WITHHOLD WITH RESPECT TO DOUGLAS BUCHANAN, PETER FOWLER AND JOHN MCLAUGHLIN. THIS CHANGE IN RECOMMENDATION AS SET OUT IN THIS PRESS RELEASE SHALL BE DEEMED TO AMEND AND RESTATE THE JANES MEETING MATERIALS. Mr. Janes will vote all BLUE proxies previously submitted in accordance with the instructions provided therein, but recommends that unitholders complete the GOLD proxy.

In addition, the Settlement Agreement provides that, among other things:

• At the 2022 annual general meeting of the holders of Units of the Fund (the "2022 Meeting"), Lembit Janes and certain parties related to him (collectively, the "Janes Holders") and SIR Corp. will take any and all steps and actions necessary to cause the Trustees to set a Board size of seven (7) and to nominate the New Slate (which may include substitute Trustees in certain circumstances in accordance with the Settlement Agreement).
• The chair of the Board and the members of each of the committees of the Board will be selected by the New Slate, provided that at least one of Stephen Dewis, Michael Fisher and Lembit Janes will be on each Board committee and that Mr. Dewis will be the chair of the Fund's audit committee.
• The Janes Holders will be subject to a customary standstill in respect of the Fund, pursuant to which they will agree not to (among other things): (i) acquire or offer to acquire additional Units or increase their voting rights, except in connection with a take-over bid for all Units in accordance with applicable law; (ii) publicly propose any merger or reorganization of the Fund, subject to certain exceptions; (iii) requisition or call any meeting of holders of Units or propose any amendments to the Fund's declaration of trust; and (iv) solicit proxies from any holders of Units or otherwise participate in a proxy consent in respect of the Fund.  Notwithstanding the standstill obligations, the Janes Holders would be permitted to acquire, in aggregate, up to an additional 1% of Units and to enter into customary "soft" lock-up agreements with an unsolicited arm's length third party proposing to make a formal take-over bid to acquire Units.  In addition, the standstill obligations will terminate in the event that a person that is at arm's length to the Janes Holders pursues a transaction for the purchase of 20% or more of the Units or 20% or more of the consolidated net revenues of the Fund or if the Fund or SIR Corp. breach their obligations under the Settlement Agreement (unless the breach is capable of being cured in which case the breaching party would have ten business days to cure the breach).
• The Settlement Agreement will terminate on the earlier of the date that is eighteen months following the date of the Settlement Agreement and the termination of the standstill obligations noted above.
• The Janes Holders will not take, or seek to cause the Fund or the SIR Royalty Limited Partnership to take, any steps to interfere with the current contractual arrangements with SIR Corp.'s bank lender prior to the maturity of the loan, and not seek to acquire the bank loan or any interest therein prior to the maturity of the loan.
• The Janes Holders and SIR Corp. will support and vote in favour of the New Slate at the 2021 Meeting and the 2022 Meeting, and the Janes Holders will not further solicit proxies at the 2021 Meeting or the 2022 Meeting.
• The Janes Holders, SIR Corp. and the Fund mutually release each other with respect to all matters occurring up to the date of the Settlement Agreement.

"This Settlement Agreement is good news for the Fund and its unitholders," said Peter Fowler, Chief Executive Officer of SIR Corp. "It removes uncertainty with respect to the future of the Fund, which will enable SIR Corp. to focus 100% on capitalizing on the recent easing of operating restrictions on restaurants  in the markets in which we operate. This, in turn, is expected to lead to the resumption of distributions to unitholders in the short term. Following unitholder approval of the New Slate, the complement of the board of Trustees will accurately reflect the ownership of the Fund, which now has two significant unitholders. I am confident that this new Board size and complement of trustees will effectively represent all Fund unitholders."

"I look forward to working with the other trustees and the SIR Corp. team to enhance unitholder value," said Lembit Janes.

A copy of the Settlement Agreement will be posted to the Fund's SEDAR profile at www.sedar.com.

Additional Information

Lembit Janes exercises control or direction over 1,646,388 Units, representing approximately 19.66% of the issued and outstanding Units as at June 1, 2021 as reported in the Information Circular. The Units owned or controlled by Mr. Janes were acquired for investment purposes only. Depending on market conditions and other factors and subject to the provisions of the Settlement Agreement, Mr. Janes or his affiliates may in the future increase or decrease their control or direction over securities of the Fund through open market transactions, private agreements or otherwise.

Lembit Janes' address is c/o Janes Acquisition Corp., 181 Bay Street, Suite 4400, Brookfield Place, Toronto, Ontario, M5J 2T3. The Fund's principal and head office is located at 5360 South Service Road, Suite 200, Burlington, Ontario, L7L 5L1.

SIR Corp. has updated its early warning report dated February 1, 2021 to reflect the Settlement Agreement.

This press release is being issued, in part, pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issuers, which requires a report to be filed by Lembit Janes and SIR Corp. under the Fund's profile on SEDAR (www.sedar.com) containing additional information respecting the foregoing matters.

A copy Lembit Janes' report may be obtained by contacting Lembit Janes at the telephone number or email outlined below.   A copy of SIR Corp.'s report may be obtained by contacting Jeff Good, Chief Financial Officer of SIR Corp., at the address or telephone number below. 

About SIR Royalty Income Fund

The Fund is a trust governed by the laws of the province of Ontario that indirectly has interests in the trademarks used by SIR.

About SIR Corp.

SIR Corp. ("SIR") is a privately held Canadian corporation that owns a portfolio of 53 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill®, with 37 locations; Scaddabush Italian Kitchen & Bar® with nine locations; and Canyon Creek®, with two locations. SIR also operates one-of-a-kind "Signature" brands including Reds® Wine Tavern, Reds® Square One and The Loose Moose®. All trademarks related to the Concept and Signature brands noted above are used by SIR under a License and Royalty Agreement with SIR Royalty Limited Partnership. SIR also owns one Duke's Refresher® & Bar locations in downtown Toronto, and one seasonal Signature restaurant, Abbey's Bakehouse®, which are currently not in consideration to be part of the Royalty Pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit www.sircorp.com .

Caution concerning forward-looking statements

Certain statements contained in this report, or incorporated herein by reference, including the information set forth as to the impact of the terms of the Settlement Agreement and the election of Trustees at the 2021 Meeting and the 2022 Meeting, that are not current or historical factual statements may constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Statements concerning the objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of the Fund, SIR Holdings Trust, SIR Royalty Limited Partnership, SIR Corp. or industry results, are forward-looking statements. The words "may", "will", "should", "could", "would", "expect", "believe", "plan", "anticipate", "intend", "estimate" and other similar terminology and the negative of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from the anticipated results expressed or implied by such forward-looking statements. These statements reflect SIR Corp. management's ("Management") current expectations regarding future events and are based on information currently available to Management, Management's historical experience, perception of trends and current business conditions, expected future developments and other factors which Management considers appropriate. The forward-looking statements speak only as of the date hereof. Readers should not place undue importance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur, and readers should not rely upon this information as of any other date. By their nature, forward-looking statements involve known and unknown risks and uncertainties and other factors that could cause actual results to differ materially from those contemplated by such statements. Risks related to forward-looking statements include, among other things, assumptions related to compliance with the terms of the Settlement Agreement by the parties thereto. The list of factors is not exhaustive. The Fund and SIR Corp. expressly disclaim any obligation or undertaking to publicly disclose or release any updates or revisions to any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements are based on Management's current plans, estimates, projections, beliefs and opinions, and the Fund and SIR Corp. do not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as expressly required by applicable securities laws.

For more information concerning the Fund's risks and uncertainties, please refer to the Fund's annual information form dated March 31, 2021 for the period ended December 31, 2020, which is available under the Fund's profile at www.sedar.com.

All of the forward-looking statements made herein are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Fund or SIR Corp.

SOURCE SIR Royalty Income Fund