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Imvescor Restaurant Group Inc.

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Refinancing and Recapitalization Transactions: Imvescor Announces Rights Offering and Support of Largest Shareholder


MONCTON, NB, Oct. 21, 2011 /CNW Telbec/ - Imvescor Restaurant Group Inc. ("Imvescor" or the "Company") (TSX: IRG) announced today an offering to the Company's existing shareholders of rights (the "Rights") to subscribe for additional common shares of the Company (the "Shares") at an exercise price of approximately $0.44 per Share for gross proceeds of up to $15 million (the "Rights Offering").

The Rights Offering is part of the previously announced refinancing and recapitalization transactions (the "Refinancing Transactions") intended, among other things, to recapitalize the Company by repaying all of its existing 7.75% convertible extendible unsecured subordinated debentures maturing on December 31, 2011 (the "Convertible Debentures").

In accordance with the subscription agreement entered into with Fairfax Financial Holdings Limited ("Fairfax") as of October 14, 2011 (the "Subscription Agreement"), should the gross proceeds from the Rights Offering amount to less than $15 million, a private placement of Shares to Fairfax (the "Private Placement") shall take place at a price of approximately $0.56 per Share, so that the combined gross proceeds of the Rights Offering and the Private Placement amount to $15 million. The Rights Offering and, as applicable, the Private Placement will complement the $10 million private placement to Fairfax of 5-year 10% senior unsecured debentures and warrants to purchase 15,384,000 Shares (the "Warrants") previously announced as part of the Refinancing Transactions.

The Company also announced today that General Financial Corporation Ltd. ("GFC"), the Company's largest shareholder, and the Imbeault family have formally agreed with Fairfax to support the Refinancing Transactions. GFC is a holding company controlled by Mr. Bernard Imbeault, the Company's founder and Founding Chair Emeritus, and holds 2,661,067 Shares of the Company representing approximately 28.2% of the Shares issued and outstanding. Mr. Imbeault and members of his immediate family own a further 76,950 Shares for total ownership of 2,738,017 Shares of the Company, representing approximately 29.0% of the Shares issued and outstanding.

"The rights offering provides Imvescor shareholders the ability to maintain their participation in the Company as it looks towards a promising future. Allowing our existing shareholders to participate meaningfully in our refinancing and recapitalization transactions is of utmost importance to us. We are also extremely pleased to see GFC endorse such transactions and to have obtained this vote of confidence from the Imbeault family" said Denis Richard, President and Chief Executive Officer of Imvescor.

The agreement entered into by GFC and the Imbeault family with Fairfax provides that GFC shall vote its Shares in favour of all resolutions necessary to effect the Refinancing Transactions at the special meeting of shareholders to be held on or about November 21, 2011 (the "Special Meeting"), including all required approvals under the Toronto Stock Exchange ("TSX") rules and the Company's shareholder rights plan (the "Rights Plan"). GFC and the Imbeault family have also agreed not to increase their aggregate ownership of Shares pursuant to the Rights Offering to more than their current percentage holding.

Description of the Rights Offering
Pursuant to the Rights Offering, each shareholder shall receive, for each Share held as of the record date for the Rights Offering, one right to subscribe for additional Shares at a subscription price of approximately $0.44 per Share, equal to the volume weighted average trading price on the TSX for the 5 trading day period prior to the announcement of the Refinancing Transactions, as determined through negotiation of the Subscription Agreement with Fairfax. The Company will not grant an additional subscription privilege under the Rights Offering. Further details on the Rights Offering will be provided in the preliminary short form prospectus in connection therewith. The Rights are expected to be listed for trading on the TSX and will be exercisable for 21 days following the date of mailing to shareholders of the final short form prospectus for the Rights Offering.

No standby commitment has been provided by Fairfax to purchase Shares not otherwise acquired by the Company's existing shareholders under the Rights Offering. However, Fairfax has committed to acquire, as required under the Private Placement, at a price of approximately $0.56 per Share (equal to the volume weighted average trading price on the TSX for the 20 trading day period prior to the announcement of the Refinancing Transactions) the number of Shares required so that the combined gross proceeds of the Rights Offering and the Private Placement amount to $15 million.

In consideration for its commitment, Fairfax will be entitled to a fee (the "Commitment Fee"), representing approximately 3.5% of the combined gross proceeds of the Rights Offering and the Private Placement, payable in cash or, subject to agreement between Fairfax and the Company, in kind by the issue of additional Warrants. As previously disclosed, Fairfax will also be entitled, subject to certain conditions, to designate on the slate of nominated directors, at least 40% of the members of the Company's board of directors and the Chair of the board of directors, provided that there shall be at all times a majority of independent directors. Fairfax will be designating such individuals to join the board of directors immediately after closing of the Refinancing Transactions.

The number of Shares issuable under the Rights Offering represents approximately 78.3% of the Shares expected to be outstanding after the completion of the Rights Offering. If a shareholder elects not to exercise the Rights issued to him or her, or elects to sell or transfer those Rights, the value of the Shares currently held by that shareholder may be diluted as a result of the exercise of Rights by others.

Assuming that no Shares are issued pursuant to the Rights Offering and Fairfax is issued, under the Private Placement, Shares representing an aggregate purchase price of $15 million, Fairfax will beneficially own, or exercise control or direction over, directly or indirectly, 26,757,523 Shares, representing approximately 73.9% of the issued and outstanding Shares (on a fully-diluted basis) and, assuming the exercise of all Warrants issued to Fairfax as part of the Refinancing Transactions, 42,141,523 Shares, representing approximately 81.7% of the issued and outstanding Shares.

The Refinancing Transactions are conditional upon the satisfaction of certain conditions, including the Corporation receiving required approvals and consents, including shareholder approval. The Company will seek shareholder approval for a waiver of the Rights Plan in order to allow the acquisition by Fairfax of the securities issuable pursuant to the Refinancing Transactions, but the Rights Plan will otherwise remain in effect and will continue to apply.

About Imvescor Restaurant Group
Headquartered in Moncton, New Brunswick, Imvescor Restaurant Group owns franchised and corporate stores throughout Canada, under four brands: Pizza Delight® operates primarily in Atlantic Canada, where it dominates the family/mid-scale segment. Mikes® and Scores® restaurants operate primarily in Quebec in the family and casual dining segments and the take-out and delivery segments. Bâton Rouge® operates in Quebec, Ontario, and Alberta in the casual dining segment.

Cautionary Note Regarding Forward-Looking Statements
Certain information in this press release regarding the Company, including, but not limited to, the Company's business objectives, strategies and priorities, the generation of cash flows, the refinancing of the Convertible Debentures, the ability to secure the approvals and consents required to proceed with the Refinancing Transactions, including shareholders' approval and other statements that are not historical facts, are "forward-looking statements" within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. All such forward-looking statements are made pursuant to the "safe harbour" provisions of applicable securities laws. These statements are based on information currently available to the Company's management and on the current assumptions, intentions, plans, expectations and estimates of the management regarding the Company's future growth, results of operations, performance and opportunities as well as the economic environment in which it operates. Forward-looking statements involve known and unknown risks, uncertainties and other factors outside the Company's control. A number of factors could cause actual results of the Company to differ materially from the results discussed in the forward-looking statements, including, but not limited to: market conditions for financing, competitive conditions, whether related to new competitors or current competitors; change in the Company's or its competitors current pricing strategies; changes in demographic trends; changes in consumer preferences and discretionary spending patterns; changes in national and local business and economic conditions; risks associated with the closure of restaurants, costs associated with strategically exiting locations, the ability of the Company to pay dividends, the Company successfully offers new and innovative products and executes its strategies as planned; legislation and governmental regulation; changes in accounting policies, practices and standards; and the results of operations and financial condition of the Company and other factors referenced in the Company's continuous disclosure filings which are available on SEDAR at www.sedar.com. Although the forward-looking statements contained herein are based upon what the Company believes to be reasonable assumptions on the date of this press release, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. Certain assumptions underlying the forward-looking statements contained herein include assumptions related to the Company's ability to obtain financing on conditions favorable to the Company, future cash flows, market conditions, sales estimates, estimates relating to the Company's ability to settle and exit leases. Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release and, accordingly, are subject to change after such date. Forward-looking statements are provided herein for the purpose of giving information about the Company's current strategic priorities, expectations and plans, allowing investors and others to get a better understanding of the Company's business outlook and operating environment. Readers are cautioned, however, that such information may not be appropriate for other purposes. The Company assumes no obligation to update such forward-looking statements to reflect new information, future events or otherwise, except as required by applicable securities laws. Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other special items or of any transactions that may be announced or that may occur after the date of this press release. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. The Company therefore cannot describe the expected impact in a meaningful way or in the same way it presents known risks affecting the business. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement.

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