PIZZA PIZZA ROYALTY CORP. ANNUAL INFORMATION FORM For the year ended December 31, 2012 March 28, 2013 - 2 - TABLE OF CONTENTS GLOSSARY OF TERMS ............................................................................................................ 5 EXPLANATORY NOTES ......................................................................................................... 11 COMPANY STRUCTURE ........................................................................................................ 11 The Company ........................................................................................................................ 11 Organizational Structure ..................................................................................................... 12 The Fund ................................................................................................................................. 13 The Trust ................................................................................................................................. 13 The Partnership ..................................................................................................................... 13 Pizza Pizza GP Inc. ............................................................................................................... 13 Pizza Pizza Limited ............................................................................................................... 13 GENERAL DEVELOPMENT OF THE BUSINESS .............................................................. 14 Three Year History ............................................................................................................... 14 DESCRIPTION OF THE BUSINESS ....................................................................................... 16 The Company ........................................................................................................................ 16 The Partnership .................................................................................................................... 16 The Pizza Pizza Rights .................................................................................................... 17 The Pizza 73 Rights ......................................................................................................... 17 Term Facility ...................................................................................................................... 18 BUSINESS OF PPL................................................................................................................... 19 Overview ................................................................................................................................. 19 Restaurant Format................................................................................................................ 19 Restaurant Locations .......................................................................................................... 19 System Sales ......................................................................................................................... 20 Same Restaurant Sales Growth ....................................................................................... 21 Pizza Pizza Brand ................................................................................................................. 23 Pizza 73 Brand ...................................................................................................................... 24 Competitive Strength ........................................................................................................... 24 Growth Strategy in Existing and New Markets .............................................................. 25 Pizza Pizza Franchise Operations ................................................................................... 25 Franchising Operations and Structure ........................................................................ 25 Relationship with Franchisees ...................................................................................... 26 Franchise Agreement ...................................................................................................... 26 Pizza 73 Ownership Structure ........................................................................................... 28 Marketing and Advertising ................................................................................................. 29 Suppliers ................................................................................................................................. 29 Competition ............................................................................................................................ 30 Directors and Officers of PPL ............................................................................................ 30 Personnel ........................................................................................................................... 31 Government Regulation ................................................................................................. 31 DESCRIPTION OF THE COMPANY ...................................................................................... 32 Common Shares ................................................................................................................... 33 - 3 - Exchangeable Securities .................................................................................................... 33 Preferred Shares ................................................................................................................... 33 Dividends ................................................................................................................................ 33 The Fund’s Distributions .................................................................................................... 33 Takeover Bids ........................................................................................................................ 35 Book-Entry Only System .................................................................................................... 35 Company Administration .................................................................................................... 35 DESCRIPTION OF THE PARTNERSHIP ............................................................................... 36 Partners and Partnership Securities ................................................................................ 36 Distributions .......................................................................................................................... 36 Allocation of Net Income and Loss .................................................................................. 38 Exchange Rights ................................................................................................................... 38 LICENCE AND ROYALTY ........................................................................................................ 39 The Licence ............................................................................................................................ 39 The Pizza Pizza and Pizza 73 Royalty .............................................................................. 39 Security for the Royalty ...................................................................................................... 40 Security ............................................................................................................................... 40 Negative Covenants ......................................................................................................... 40 Certain Remedies ............................................................................................................. 41 Operating Covenants of PPL in the Pizza Pizza and Pizza 73 Licence and Royalty Agreements ............................................................................................................................ 42 Adjustments to the Royalty Pools and Payments Made Under the Licence and Royalty Agreements ............................................................................................................ 43 Adjustments to the Pizza Pizza Royalty Pool ............................................................ 43 Adjustments to the Pizza 73 Royalty Pool .................................................................. 46 MANAGEMENT AND CORPORATE GOVERNANCE OF PIZZA PIZZA GP .................. 49 Capital of Pizza Pizza GP .................................................................................................... 50 Management and Control of Pizza Pizza GP .................................................................. 50 Restrictive Covenants ......................................................................................................... 50 Restrictions on the Transfer of Partnership Securities............................................... 51 Rights of Offer ....................................................................................................................... 51 Other Matters ......................................................................................................................... 53 MARKET FOR SECURITIES ................................................................................................... 55 DIRECTORS AND MANAGEMENT .......................................................................................