Business
Pizza Pizza Royalty Income Fund Provides Update on Third-Party Claim Against Pizza Pizza Limited
Pizza Pizza Royalty Income Fund Provides Update on Third-Party Claim Against Pizza Pizza Limited.
About this update from Pizza Pizza Royalty Corp.
[{"type":"text","content":"\n\n\n\n\nTORONTO, June 8 /CNW/ - Pizza Pizza Royalty Income Fund (the \"Fund\")\n(TSX:PZA.UN) announced today it has received an update from Pizza Pizza\nLimited (\"PPL\") regarding a potential claim disclosed in the Fund's 2005\ninitial public offering (\"IPO\") prospectus and PPL's subsequent financial\nstatement filings.\nThe claim - which does not name the Fund or its subsidiaries - was served\non PPL and certain of its associates by Lawrence Austin, a former consultant\nto PPL. In the claim, Mr. Austin asserted a right to $45 million in damages\nand other amounts, including entitlements to a portion of the proceeds of the\nFund's IPO that were directly or indirectly received by PPL and its\nassociates. PPL has advised the Fund it believes the demand to be without\nmerit and it will vigorously defend the claim.\nPPL advised the Fund the Ontario Superior Court of Justice has granted an\norder striking two of the three claims - based on alleged oppression and\nbreaches of fiduciary duty - asserted by Mr. Austin against PPL and certain of\nits associates. The third claim, asserting a contractual right to the amounts\ndescribed above, was not struck, and may proceed to a full hearing. The\nCourt's order remains subject to appeal.\nThe Fund notes that Michael Overs, the Chairman and CEO of PPL, has\nagreed in an indemnity agreement to indemnify PPL and the Fund against any\nliabilities they may incur in this matter.\nAs the matter is before the courts, PPL will issue no further comments at\nthis time but will provide updates on material developments as they arise.\n\nThe Fund\n\nThe Fund is a limited purpose, open-ended trust established under the\nlaws of Ontario to indirectly acquire certain trademarks and trade names used\nby Pizza Pizza in its restaurants. The trademarks are licensed to Pizza Pizza\nfor 99 years, for which Pizza Pizza pays the Fund a royalty equal to 6% of the\nsystem sales of its 501 Pizza Pizza restaurants in Canada as at January 1,\n2006 (the \"Royalty Pool\").\nA key attribute of the Fund is that it is based on top-line, system sales\nof the Royalty Pool restaurants and not on the profitability of either Pizza\nPizza or the restaurants in the Royalty Pool. The success of the Fund depends\nprimarily on the ability of Pizza Pizza to maintain and increase system sales\nof the Royalty Pool and to meet its ro...