TORONTO, June 8 /CNW/ - Pizza Pizza Royalty Income Fund (the "Fund")
(TSX:PZA.UN) announced today it has received an update from Pizza Pizza
Limited ("PPL") regarding a potential claim disclosed in the Fund's 2005
initial public offering ("IPO") prospectus and PPL's subsequent financial
statement filings.
The claim - which does not name the Fund or its subsidiaries - was served
on PPL and certain of its associates by Lawrence Austin, a former consultant
to PPL. In the claim, Mr. Austin asserted a right to $45 million in damages
and other amounts, including entitlements to a portion of the proceeds of the
Fund's IPO that were directly or indirectly received by PPL and its
associates. PPL has advised the Fund it believes the demand to be without
merit and it will vigorously defend the claim.
PPL advised the Fund the Ontario Superior Court of Justice has granted an
order striking two of the three claims - based on alleged oppression and
breaches of fiduciary duty - asserted by Mr. Austin against PPL and certain of
its associates. The third claim, asserting a contractual right to the amounts
described above, was not struck, and may proceed to a full hearing. The
Court's order remains subject to appeal.
The Fund notes that Michael Overs, the Chairman and CEO of PPL, has
agreed in an indemnity agreement to indemnify PPL and the Fund against any
liabilities they may incur in this matter.
As the matter is before the courts, PPL will issue no further comments at
this time but will provide updates on material developments as they arise.
The Fund
The Fund is a limited purpose, open-ended trust established under the
laws of Ontario to indirectly acquire certain trademarks and trade names used
by Pizza Pizza in its restaurants. The trademarks are licensed to Pizza Pizza
for 99 years, for which Pizza Pizza pays the Fund a royalty equal to 6% of the
system sales of its 501 Pizza Pizza restaurants in Canada as at January 1,
2006 (the "Royalty Pool").
A key attribute of the Fund is that it is based on top-line, system sales
of the Royalty Pool restaurants and not on the profitability of either Pizza
Pizza or the restaurants in the Royalty Pool. The success of the Fund depends
primarily on the ability of Pizza Pizza to maintain and increase system sales
of the Royalty Pool and to meet its royalty obligations.
The Company
Pizza Pizza Limited, a privately-held Canadian corporation, is one of
Canada's most successful players in the quick service restaurant industry.
Founded in 1967, Pizza Pizza is guided by a mission to provide the "best food,
made especially for you" and focus on quality ingredients, customer service,
community-contribution and continual innovation.
The Fund's trust units are listed on the Toronto Stock Exchange under the
symbol PZA.UN.
%SEDAR: 00022262EF
