TORONTO, Feb. 10 /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
formally served on PPL and certain of its associates by Lawrence Austin, a
former consultant to PPL. In the claim, Mr. Austin asserts 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 advised the Fund that Mr. Austin has not been involved in the affairs
of PPL for approximately 10 years and that it does not currently have, nor did
it have at the time of the Fund's IPO, a contractual relationship with Mr.
Austin, and Mr. Austin had no involvement in the Fund's IPO.
PPL has advised the Fund it believes the demand to be without merit and
it will vigorously defend the claim. 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.
ABOUT 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.
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 a 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
