Priszm Income Fund (Re), 2012 ONSC 6144

COURT FILE NO.: CV-11-9375-00CL

DATE: 20121221

SUPERIOR COURT OF JUSTICE – ONTARIO

(COMMERCIAL LIST)

RE: IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED

AND:

IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF PRISZM INCOME FUND, PRISZM CANADIAN OPERATING TRUST, PRISZM INC. AND KIT FINANCE INC., Applicants

BEFORE: MORAWETZ J.

COUNSEL: S. Graff, I. Aversa and F. Myers, for Scott’s REIT

B. Gray, for Sysco

P. Shea, for Prudential Insurance Company of America et al.

M. Wasserman, for Duff & Phelps Canada Restructuring Inc.

ENDORSEMENT

BACKGROUND

[1] Defined terms have been taken from the parties’ factums.

[2] Scott’s Real Estate Investment Trust (now known as KEYreit) (“Scott’s REIT”) (Scott’s REIT and its subsidiaries and affiliates being collectively referred to as “Scott’s”) is an unincorporated open-ended real estate investment trust. As at June 20, 2012, Scott’s REIT managed a portfolio of 229 retail properties.

[3] Priszm Income Fund, Priszm Canadian Operating Trust, Priszm Inc., Kit Finance Inc., and Priszm Limited Partnership (collectively, “Priszm”) are related to Scott’s REIT through common ownership and control. Priszm has been a significant tenant of Scott’s properties for a number of years.

[4] Priszm operated retail establishments under the names “KFC”, “Pizza Hut” and “Taco Bell” (collectively, “Restaurants”) out of properties leased by Priszm from Scott’s REIT. Priszm was Scott’s REIT’s largest and most important tenant, leasing 86% (188 of 220 retail properties) of Scott’s REIT’s portfolio.

[5] After unsuccessful attempts to refinance or restructure, in March 2011, Priszm commenced proceedings under the Companies’ Creditors Arrangement Act (“CCAA”). FTI Consulting Canada Inc. (the “Monitor”) was appointed as monitor.

[6] Prior to commencement of the CCAA proceedings, Priszm had been negotiating a transaction for Restaurants in Ontario and British Columbia with Soul Restaurants Canada Inc. (“Soul”); both parties ultimately executed an agreement in December 2010. This agreement was amended after CCAA proceedings were commenced and, pursuant to court order dated May 30, 2011, approval was granted for a final agreement between Priszm and Soul, pursuant to which Soul acquired substantially all of the Restaurants situated in Ontario and British Columbia (the “Soul Transaction”).

[7] The proceeds from the Soul Transaction were initially paid to the Monitor, but are now held by Duff & Phelps Canada Restructuring Inc. (the “Receiver”) in its capacity of receiver of Priszm’s property (the “Receiver”). The Receiver was appointed by court order dated May 18, 2012.

[8] Pursuant to court order dated September 14, 2011, approval was granted for a transaction (the “FMI 1 Transaction”) to sell Restaurants situated in Nova Scotia and New Brunswick to FMI Atlantic Inc. (“FMI”). The proceeds from the FMI 1 Transaction were initially paid to the Monitor, but are now held by the Receiver.

[9] Pursuant to court order dated May 18, 2012, approval was granted for a transaction between the Receiver and Hi-Flyer Food (Canada) Inc. (“HFFI”) involving the sale of Restaurants situated in Manitoba and Alberta (the “HFFI Transaction” and, together with the Soul Transaction and the FMI 1 Transaction, the “Transactions”). Sale proceeds of the HFFI Transaction are presently being held by the Receiver.

[10] The Transactions involve the assignment of leases between Scott’s REIT and Priszm with respect to the Restaurants that were subject to the Transactions (the “Leases”, which encapsulate the “Consent Leases” and “Conditional Notice Leases”). In each case, the Leases were (or are to be) assigned to Soul, FMI and HFFI, with Soul, FMI and HFFI assuming Priszm’s obligations to Scott’s REIT under the Leases.

[11] The Prudential Insurance Company of America, Pruco Life Insurance Company and Prudential Retirement Insurance and Annuity Company (collectively, “Prudential”) are secured creditors of Priszm. The Monitor obtained independent opinions that suggest, subject to certain assumptions and qualifications, Prudential’s security is valid and enforceable in accordance with its terms. Prudential is owed in excess of $75 million by Priszm and claims all of the sale proceeds emanating from the Transactions. Scott’s disputes the position taken by Prudential.

THE MOTION

[12] Scott’s brings this motion (the “Lease Consideration Motion”) seeking an order requiring, inter alia, that the sale proceeds emanating from the Transactions to be paid to Scott’s. Scott’s argues that this relief accords with the Leases’ provisions that require Priszm to pay to Scott’s an amount equal to any cash consideration for the transfer of the Leases (“Lease Consideration”) that Priszm received from Soul, FMI or HFFI. Scott’s asserts that its claim against Priszm has priority over Prudential’s secured claim as a result of a number of agreements amongst Scott’s, Priszm and Prudential. These agreements provide Scott’s consent to certain leasehold charges (the “Leasehold Charges”) granted to Prudential over the Leases and deal with Prudential’s right to enforce those Leasehold Charges (the “Leasehold Charge Consent(s)”).

[13] At the time the secured loan to Priszm was negotiated and funded, Priszm represented and warranted to Prudential that Prudential had “first-priority” security over Priszm’s property subject only to specific interests, which did not include any claim by Scott’s REIT.

[14] Prudential opposes the Lease Consideration Motion and asserts that there was no Lease Consideration paid by Soul, FMI or HFFI and, regardless, Prudential’s security ranks in priority to any rights Scott’s might have to be paid by Priszm an amount equal to any Lease Consideration.

[15] The parties submitted an Agreed Statement of Facts, which is attached as Schedule “A”.

[16] During argument, it became apparent that the record was such that there could be no quantification of Lease Consideration.

[17] The parties subsequently agreed that the following issues would be the subject of this endorsement:

(a) Does Scott’s have a proprietary (property) interest under section 21.03 of the Consent Leases or Conditional Notice Leases in and to any cash consideration received, if any, by Priszm from Soul, FMI or HFFI (and any future purchaser of the Quebec Leases or Leased Premises relating thereto) for a Transfer of the Leases and Leased Premises relating thereto; and

(b) Has Prudential subordinated its security interest, in favour of Scott’s, in and to any cash consideration received, if any, by Priszm from Soul, FMI or HFFI (and any future purchaser of the Quebec Leases or Leased Premises relating thereto) for a Transfer of the Leases and Leased Premises relating thereto.

[18] The parties concurrently agreed that the issue of whether any cash consideration was received, if any, by Priszm from Soul, FMI or HFFI (and any future purchaser of Quebec Leases or Leased Premises relating thereto) for a Transfer of the Leases and Leased Premises relating thereto will be litigated on a future pending date.

ARGUMENT

[19] Scott’s argues that its entitlement to the Lease Consideration is two-fold:

(a) First, it has a proprietary entitlement to the Lease Consideration which cannot be fettered or interpreted away by any security granted by Priszm to its creditors. Scott’s submits that it simply owns these proceeds; and

(b) Second, and in any event, Priszm’s only secured creditor, Prudential, has expressly subordinated its rights, priority position and claims vis-à-vis Priszm’s indebtedness to it to the extent of Scott’s entitlement to the Lease Consideration.

[20] Accordingly, Scott’s submits that it is entitled to the Lease Consideration, whether it is as a result of its propriety entitlement to such consideration, or as a result of Prudential’s express acknowledgement of, and subordination to, Scott’s entitlement.

[21] Scott’s submits that it owns the Lease Consideration, and therefore, such consideration is not collateral to which Prudential’s security interests attach; similarly, Priszm, Prudential, or Scott’s never intended for Prudential to obtain a security interest in such consideration.

[22] Scott’s submits that its proprietary entitlement arises from the plain language contained in the Leases, as acknowledged in the Leasehold Charge Consents to which each of Scott’s, Priszm and Prudential are parties.

[23] Each of the Leases includes a Lease Consideration Clause (the “Lease Consideration Clauses”) which states:

…If the Tenant receives from any Transferee, either directly or indirectly, any consideration other than rent and additional rent for such Transfer, either in the form of cash, goods or services (other than the proceeds of any bona fide financing as a result of a Transfer involving a mortgage, charge or similar security interest in this Lease) the Tenant shall forthwith pay to the Landlord an amount to such consideration.

[24] A Transfer, as defined in each of the Leases, is effected, according to Scott’s, when Priszm, among other things, assigns, transfers, mortgages, charges, hypothecates, or creates any security interest in, or parts with possession of, “all or any part of the Leased Premises or of the Lease” (a “Transfer”).

[25] The Lease Consideration Clauses appear in each of the Conditional Notice Leases, which permit the assignment of such Leases by Priszm on notice to Scott’s, provided, inter alia, that Priszm “shall remain liable for its covenants under this Lease”. Such “covenants” include Priszm’s obligation to pay Scott’s all Lease Consideration arising from the Transfer of the Conditional Notice Leases or the Leased Premises (as defined in the Leases) governed thereby.

[26] Scott’s submits that to further protect its entitlement to all Lease Consideration, each of the Leases contains a provision which, on a plain language reading contained therein, expressly requires Priszm, and any Transferee (as defined in the Leases), to enter into an agreement with Scott’s to give effect to the Lease Consideration Clauses:

…If the Tenant receives from any Transferee, either directly or indirectly, any consideration other than rent and additional rent or such Transfer, either in the form of cash, goods or services (other than the proceeds of any bona fide financing as a result of a Transfer involving a mortgage, charge or similar security in this Lease) the Tenant shall forthwith pay to the Landlord an amount equivalent to such consideration. The Tenant and the Transferee shall execute any agreement required to give effect to the foregoing term. (emphasis added; the emphasized portion of the provision being hereinafter referred to as the “Landlord Protection Clause”).

[27] Scott’s takes the position that there would be no commercial purpose for the Landlord Protection Clause to require that the Transferee be party to such an agreement, unless the intention of the Landlord Protection Clause was to ensure that the Lease Consideration be paid directly to Scott’s by the Transferee to avoid it being intercepted by any of Priszm’s creditors.

[28] Scott’s submits that the intention of each of Priszm, Prudential and Scott’s is set out in the plain language of the fifth and sixth Recital to the Leasehold Charge Consents:

AND WHEREAS the Tenant intends to mortgage and charge the Leases by way of security to and in favour of the Leasehold Mortgagee pursuant to collateral charges and deeds of hypothecs, as the case may be, granted in favour of the Leasehold Mortgagee (the “Charges”), copies of which shall be contemporaneously delivered to the Landlord;

AND WHEREAS the parties have agreed to enter into this Agreement in order to provide for certain direct rights and obligations between the parties hereto;

[29] Scott’s also references paragraphs 10 and 11 of the Leasehold Charge Consents where, it submits, Prudential and Priszm expressly acknowledge Scott’s entitlement to the Lease Consideration, as preserved by the Lease Consideration Clauses:

10. Nothing contained in this (the Leasehold Charge Consents) shall release, or be deemed to release, the Tenant from any one or more of its covenants or obligations under any of the Leases, unless the Landlord specifically consents in writing to such release.

11. Nothing contained in this (the Leasehold Charge Consents) or in any assignment and assumption agreement shall: … (ii) be deemed or otherwise construed to be a waiver of, or subordination of, any rights of the Landlord against any personal and/or property on or in the leased premises…; or (iii) be deemed or otherwise construed to be a waiver of, or subordination of, any rights of the Landlord under the Leases or at law…

[30] Finally, to further safeguard Scott’s proprietary entitlement to the Lease Consideration, Scott’s submits that each of the Leases require Scott’s consent prior to Priszm being able to create any security interest in all or any part of the Lease or Leased Premises. Scott’s submits that as Prudential and Priszm did not obtain such consent from Scott’s until January 31, 2006, being four months after the execution of the Leases by Priszm, Scott’s submits that it was never the parties’ expectations that Prudential’s security could attach to the Lease Consideration.

[31] Scott’s also points out that the Lease Consideration Clauses are favourable to Scott’s proprietary entitlement, as a “Transfer” includes the assignment or Transfer of “all or any part of the Leased Premises or of the Lease”; “Leased Premises” is defined to include “each of the Lands and Buildings” and “Building” is defined as including “the building and the other fixtures and improvements on each of the lands”.

[32] Counsel also submits that, as the Lease Consideration Clauses protect and enforce Scott’s proprietary entitlement to such consideration flowing from a Transfer, Priszm ought to have taken steps to amend the language of the Lease Consideration Clauses given the extent that it wished to retain certain of the proceeds of the Transfer (i.e. the proceeds for its leaseholds and fixtures).

[33] Scott’s also submits that Priszm turned its mind to, and understood the meaning of, the Lease Consideration Clauses; by extension, Priszm recognized Scott’s contractual entitlement thereunder to retain the “proceeds of any bona fide financing as a result of a Transfer involving mortgage, charge, or similar security in this Lease”. Scott’s points out that with the exception of the foregoing, the Lease Consideration Clauses do not otherwise contain a proviso which would allow Priszm to retain consideration which it received for Transfer without having to pay it to Scott’s.

[34] Scott’s secondary argument is that Prudential has nevertheless subordinated its rights, priority position and claims vis-à-vis Priszm’s indebtedness to it to the extent of Scott’s entitlement to the Lease Consideration.

[35] Scott’s takes the position that Prudential subordinated its priority position and claims under its security in favour of Scott’s entitlement by operation of the plain language contained in section two of the Leasehold Charge Consents:

2. The Landlord in granting its consent to the Charges does not hereby acknowledge or approve of any of the terms of the Charges as between the Tenant and the Leasehold Mortgagee except for the granting itself of the Charges and except as aforesaid, the Landlord shall not be bound by nor deemed to have knowledge of any of the terms of the Charges. The Leasehold Mortgagee acknowledges that, subject to the terms throughout, the Charges are subject to and subordinate to all conditions and covenants of the Leases and to the rights of the Landlord thereunder. (emphasis added)

[36] Scott’s submits that the Leases’ plain language, the fifth and sixth Recitals, and sections 2, 10 and 11 of the Leasehold Charge Consents, viewed concurrently, demonstrate the intention of each of Scott’s, Priszm and Prudential that Prudential subordinate its rights, priority position, and claim under its security vis-à-vis Priszm’s indebtedness to the extent of Scott’s entitlement to the Lease Consideration.

[37] Prudential’s counsel refutes Scott’s argument that paragraph two of the Leasehold Charge Consents constitutes a broad waiver, postponement and subordination of Prudential’s claims and security to Scott’s unsecured claim against Priszm; to be effective, a waiver by Prudential of its priority security vis-à-vis Priszm’s property requires:

(a) the language used be clear and unequivocal; and

(b) Prudential having full knowledge of the circumstances and be demonstrated to have had the unequivocal intention to relinquish its rights vis-à-vis Priszm’s property.

[38] Prudential’s counsel submits that the fact that a provision in an agreement may be capable of being interpreted as subordination is insufficient, as the intention to subordinate must be clear, unequivocal and capable of only one interpretation. In support, counsel relies on Sun Life Assurance Co. of Canada v. Royal Bank (1995), 37 C.B.R. (3d) 89 (Ont. Gen. Div.); Bank of Montreal v. Kimberley Brewing Co., 1999 CanLII 2191 (BC SC), 12 C.B.R (4th) 10 (B.C. S.C.) and Federal Business Development Bank v. Steinboch Development Corp. (1983), 42 A.R. 231 (C.A.).

[39] Prudential’s counsel submits that the use of the phrase “subject to and subordinate to all conditions and covenants” does not constitute a waiver, subordination or postponement of Prudential’s “first priority” security over Priszm’s property as taken in context; rather, the phrase relates to the operation of the Leasehold Charges, if enforced by Prudential, vis-à-vis the Leases and “subordinates” and makes Prudential’s enforcement rights under the Leasehold Charges “subject to” Scott’s rights as Landlord under the Leases in any enforcement by Prudential of the Leasehold Charges.

[40] Prudential’s counsel further points out that there is no reference in the Leasehold Charge Consents to:

(a) the respective claims that Prudential and Scott’s have against Priszm;

(b) Prudential’s security over Priszm’s property, aside from Priszm’s interest in the Lease; or

(c) any reference to “rank” or “priority”, or to any disposition of proceeds from Priszm’s property subject to Prudential’s “first priority” security.

[41] In a broader sense, Prudential’s counsel submits that interpreting the Leasehold Charge Consents in the way proposed by Scott’s would result in a material inconsistency with the express priority provisions in the Loan Agreement and in the context of a $75 million secured loan transaction; more aptly, no reasonable person would contemplate that the secured lender would subordinate security over the borrower’s property in favour of a related party’s unsecured claim pursuant to one sentence in the Leasehold Charge Consents. Thus, counsel submits that interpretation of the Leasehold Charge Consents would not accord with sound commercial principles and good business sense, amounting to commercial absurdity.

[42] To further its argument, Priszm’s counsel references the following paragraphs 60 to 78 of its factum:

60. SREIT takes the position that, pursuant to the Leasehold Charge Consent, Prudential subordinated its “rights, priority position and claims as against Priszm to the extent of [SREIT]’s entitlement” to Lease Consideration. However the provision of the Leasehold Charge Consents – paragraph 2 – actually provides:

…The Leasehold Mortgagee acknowledges that, subject to the terms hereof, the Charges are subject to and subordinate to all conditions and covenants of the Leases and to the rights of the Landlord thereunder.

61. SREIT’s argument that paragraph 2 of the Leasehold Charge Consents constitute a broad subordination, postponement and subordination of Prudential’s claims and security to SREIT’s unsecured claim against Priszm is untenable. To be effective, a waiver by Prudential of its priority security vis-à-vis Priszm’s property: (a) the language used must be clear and unequivocal; and (b) Prudential must have had full knowledge of the circumstances and be demonstrated to have had the unequivocal intention to relinquish its right vis-à-vis Priszm’s property. The fact that a provision in an agreement may be capable of being interpreted as a subordination is not sufficient. The intention to subordinate must be clear, unequivocal and capable of only one interpretation.

Sun Life Assurance Co. of Canada v. Royal Bank ( 1995), 37 C.B.R. ( 3d) 89 (Gen. Div.); Bank of Montreal v. Kimberley Brewing Co., 1999 CarswellBC 2466 (S.C.); Federal Business Development Bank v. Steinbock Development Corp. Ltd. (1993), 42 A.R. 231 (C.A.).

62. The use of the phrase “subject to and subordinate to all conditions and covenants” does not constitute a waiver, subordination or postponement of a Prudential’s “first-priority” security over Priszm’s property. Taken in context, the phrase clearly relates to the operation of the Leasehold Charge, if enforced by Prudential, vis-a-vis the Leases and “subordinates” and makes Prudential's enforcement rights under the Leasehold Charges “subject to” SREIT’s rights as landlord under the Leases in any enforcement by Prudential of the Leasehold Charges. There is no reference in the Leasehold Charge Consents to: (a) the respective claims that Prudential and SREIT have against Priszm; (b) Prudential’s security over Priszm’s property, aside from Priszm’s interest in the Leases; or (c) any reference to “rank” or “priority”, or to any distribution of proceeds from Priszm’s property subject to Prudential’s “first-priority” security.

63. Interpreting the Leasehold Charge Consent in the way proposed by SREIT would result in a materials inconsistency with the express priority provisions in the Loan Agreement that “reasonable people cannot be supposed to have contemplated under the circumstances”. In the context of a complicated $75 million secured loan transaction, no reasonable person would contemplate that the secured lender would subordinate its security over the borrower’s property in favour of a related-party’s unsecured claim pursuant to one sentence in a leasehold charge consent. That interpretation of the Leasehold Charge Consent would not accord with sound commercial principles and good business sense, and would be a commercial absurdity.

Toronto (City) v. W.H. Hotel Ltd., 1966 CarswellOnt 59 (S.C.C.); Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254 (C.A.)

64. The Leasehold Charge Consents have to be interpreted in light of the purpose and intent of the Leasehold Charges and the Leasehold Charge Consents in the context of the broader secured loan transaction between Priszm and Prudential.

65. The Leasehold Charges are intended to give Prudential the option, should it choose to exercise its remedies under the Leasehold Charges, to occupy the Leased Premises and assign Priszm’s interest in the Consent Leases. The Leasehold Charge Consents are intended to balance the interests and rights of Prudential and Priszm in the context of the enforcement of the Leasehold Charges by Prudential.

66. The Leasehold Charges are “standard” security leasehold assignments in that they “reserve” the last day of the Consent Leases and require that the last day be held in trust by Priszm for Prudential. The Leasehold Charges do not, as a result, result in an absolute assignment of the Consent Leases to Prudential with Prudential becoming the tenant in the place of Priszm, which would not be Prudential’s intention as a secured creditor of Priszm.

See Goldman v. 682980 Ontario Ltd., 2002 CanLII 20987 (ON CA). See also Royal Bank of Canada v. Sun-X Properties Ltd., 2007 MBQB 167.

67. SREIT’s (meaning Scott’s REIT) commercial interest, as the landlord under the Consent Leases, is that Prudential, in exercising its rights under the Leasehold Charges be liable for the covenants of the Consent Lease. This is, of course, not in Prudential’s commercial interest as a secured creditor. SREIT cannot force Prudential to take “complete” assignment of the Consent Leases and thereby become liable on the covenant of the Consent Leases. SREIT can, however, restrict Priszm’s right to assign the Consent Leases as security without SREIT’s consent thereby require that Prudential enter into the Leasehold Charge Consents to balance the interests of Prudential and SREIT vis-à-vis any enforcement of the Leasehold Charges by Prudential.

68. The purpose of the Leasehold Charge Consent is not to address priorities as between SREIT and Priszm vis-à-vis their broader claims against Priszm, but the exercise of Prudential’s rights vis-à-vis the Leases under Leasehold Charges in the event that the Leasehold Charges are enforced by Prudential. The Leasehold Charge Consents: require that, prior to enforcing its security against the Leases Prudential; (i) provide SREIT notice that it intends to enforce; and (ii) enter into an agreement with SREIT agreeing to cure any monetary defaults by Priszm that are capable of being cured and agreeing to perform all of Priszm's obligations under the Leases; permit Prudential to occupy and use the Leased Premises without agreeing to be bound by the Leases for up to 6 months for the purposes, inter alia, of assigning the Leases; and permit Prudential to realize on its security over the Leases by assigning the Leases with the consent of SREIT in accordance with the provisions of the Leases.

69. A single ambiguous sentence in the Leasehold Charge Consent that uses the phrase “subject to and subordinate to” cannot be reasonably interpreted, in the factual matrix of the transactions involving SREIT, Priszm and Prudential, as a broad subordination of Prudential’s security to SREIT’s unsecured claim against Priszm. It is telling that the Leasehold Charge Consent does not even use the language that SREIT argues in its Factum would constitute a subordination, but simply refers to the Leasehold Charge being “subordinate and subject to” the Leases.

70. There is no reference whatsoever in the Leasehold Charge Consent, or any other document: (a) to Prudential subordinating its secured claim against Priszm to SREIT's unsecured claim or postponing its recovery to SREIT; (b) to Prudential waiving its security against Priszm's assets, property and undertaking in favour of SREIT; or (c) dealing in any with the distribution of the proceeds from the sale of Priszm's property in an insolvency or enforcement.

71. There is no clear and unequivocal language in the Leasehold Consent that is capable of being interpreted as a waiver of Prudential's security or a subordination of its secured claim to SREIT’s unsecured claim. Prudential agreed that if it ever enforced the Leasehold Charges – which Prudential has not – it would do so in accordance with the Leases and would respect SREIT's rights under the Leases.

72. Priszm, SREIT and Prudential are all sophisticated parties who are not strangers to complex transactions and who are aware of the standard usage of leasehold charges, leasehold charge consents, inter-creditor agreements and other commercial arrangements in complex secured loan transactions. It would be absurd to think that, if the actual intention of Prudential, Priszm and SREIT was that Prudential, an unrelated third party lender, was to subordinate its “first-priority” security over Priszm’s property to the unsecured contingent claims of SREIT, an related-party landlord, the parties would have chosen to effect that result through the use of a single sentence contained in multiple “standard form” leasehold charge consents that apply not only to SREIT, but to other landlords as well. Priszm, SREIT and Prudential, would have negotiated a fulsome inter-creditor agreement.

73. It would make no commercial sense for Prudential, in the context of a $75 million secured financing involving premises leased by the borrower – Priszm – from a related-party landlord – SREIT – to subordinate its claim over its collateral to the claim of that landlord. SREIT, on the other hand, would have no expectation that a third-party lender – Prudential – making a $75 million secured loan to its affiliate – Priszm – would subordinate its security to SREIT. SREIT does not even attempt to provide a cogent rational as to why Prudential would subordinate its security and secured claim over Priszm’s property to SREIT’s unsecured claim.

74. Assuming that paragraph 2 of the Leasehold Charge Consent can be interpreted as a subordination by Prudential of its security in favour of SREIT, it is a very limited subordination and does not impact Prudential’s security over Priszm’s property, including the proceeds from the Soul, FMI 1 and HFFI Transactions, granted by the GSA’s.

75. The extent of any subordination by Prudential under the Leasehold Charge Consent is limited to the Leasehold Charges and the security created by the Leasehold Charges over Priszm’s interest in the Consent Leases. The definition of "Charge" in the Leasehold Charge Consent is limited to the collateral charges granted by Priszm to Prudential over the Consent Leases:

AND WHEREAS the Tenant intends to mortgage and charge the Leases by way of security to and in favour of the Leasehold Mortgagee pursuant to collateral charges and deeds of hypothecs, as the case may be, granted in favour of the Leasehold Mortgagee (the “Charges”), copies of which shall be contemporaneously delivered to the Landlord

76. The Leasehold Charge Consent does not anywhere refer to Prudential's broader security over Priszm’s property, which was granted by way of the GSA’s, or the priority or ranking of that security and does not constituted, and cannot possibly be interpreted as, a broad subordination, postponement and waiver as is argued by SREIT, especially considering: (a) the “factual matrix” surrounding Prudential’s secured loan to Priszm; (b) the other provisions of the Leasehold Charges and Leasehold Charge Consents; (c) the Loan Agreement and the 11 amendments to the Loan Agreement; and (d) the broader commercial context surrounding leasehold charges and the reasons landlords and secured creditors enter into leasehold charge consents.

77. A subordination may, by its terms, be limited to specific security or to specific collateral, and a subordination is only effective and enforceable strictly in accordance with its terms. SREIT has no rights beyond those which are provided by the clear terms of the Leasehold Charge Consents.

See, for example, McCain Produce Inc. (c.o.b. McCain Fertilizers) v. P.E.I. Lending Agency, [2010] P.E.I.J. No. 9 (C.A.); Canadian Imperial Bank of Commerce v. International Harvester Credit Corp. of Canada Ltd., [1986] O.J. No. 1315 (C.A.). See also Hickman Equipment (1985) Ltd. (Re), [2004] N.J. No. 286 (C.A.); Hickman Equipment (1985) Ltd. (Re), [2005] N.J. No. 238 (S.C.); 878184 Alberta Ltd. v. 782883 Alberta Ltd., [2001] B.C.J. No. 2740 (S.C.).

78. Assuming that the Leasehold Charge Consents do create a limited subordination in favour of SREIT, the effect of that limited subordination is that any proceeds received by Prudential from the enforcement of the Leasehold Charges, up to the amount that SREIT can establish was received as consideration for the assignment of the Consent Leases, would have to a claim by SREIT. However, Prudential's right to recover money under the Leasehold Charges are is very limited and there will, as a practical matter, be no recoveries under the Leasehold Charges. Prudential’s only recovery rights on the enforcement of the Leasehold Charges are to sell Priszm's interest in the Consent Leases. The CCAA proceedings and the appointment of the Receiver, and the completion of the Soul, FMI 1 and HFFI Transactions, have prevented Prudential from exercising any rights under the Leasehold Charges and there is, as a result, nothing to "subordinate" to SREIT.

See Newman v. Skene, [1953] O.J. No. 269 (C.A.); Shoppers World Co. v. Pensionfund Realty Ltd., [1995] O.J. No. 3611 (Gen. Div.); Farm Credit Canada v. Mainline Pulse Inc., 2005 SKQB 175 with respect to the tenuous nature of a leasehold charge and the enforcement of leasehold charges.

DISCUSSION

[43] For the purpose of analyzing the positions put forth by the parties, there is no dispute between Scott’s REIT and Prudential with respect to the following basic principles that courts should apply when interpreting the various agreements in issue on this motion.

[44] When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties. The court should interpret the contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity. If the court finds that the contract is ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity. When a transaction involves the execution of several documents that form parts of a larger composite whole – such as a complex commercial transaction – and each agreement is entered into on the faith of the others being executed, then assistance in the interpretation of one agreement may be drawn from the related agreements. See Eli Lilly and Co. v. Novapharm Limited, 1998 CanLII 791 (SCC), [1998] 2 S.C.R. 129 and Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, 74 B.L.R. (4th) 161.

[45] The court should interpret a contract in a manner consistent with the intent of the parties and the parties are presumed to have intended the legal consequences of their words. The court will consider the context or factual matrix in which the contract was drafted, including commercial reasonableness, to understand what the parties intended. The court will not adopt an interpretation that is “clearly” commercial absurd. The various provisions in an agreement should be read, not as standing alone, but in light of the agreement as a whole and other provisions of the agreement. SimEx Inc. v. IMAX Corp. (2005), 2005 CanLII 46629 (ON CA), 11 B.L.R. (4th) 214 (Ont. C.A.).

[46] A commercial contract is to be interpreted: (i) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective; (ii) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the “cardinal presumption” that they have intended what they have said; (iii) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without enforcement to the subjective intention of the parties; and (iv) in a fashion that accords with sound commercial principles and good business sense, and that avoids commercial absurdity. Ventas Inc. v. Sunrise Senior Living Real Estate Investment Trust (2007), 2007 ONCA 205, 85 O.R. (3d) 254 (C.A.).

[47] Having reviewed the contrasting arguments, I conclude that Scott’s positions are fundamentally flawed on three significant points.

[48] First, I disagree with Scott’s repeated characterization that it has a proprietary entitlement to the Lease Consideration; just because you unilaterally claim to possess a right does not mean that you have it.

[49] Upon reviewing the operative terms of the Consent Leases and the Conditional Notice Leases, I am not persuaded by Scott’s arguments. At best, I am of the view that Scott’s has an unsecured contractual claim against Priszm to receive from Priszm an amount equal to any such Lease Consideration.

[50] The operative provisions of the Leases set out certain restrictions on a Transfer and, if there is such a Transfer, it provides for certain payments to be made by the Tenant to the Landlord. This creates, at best, a contractual entitlement.

[51] The Leases do not, in my view, provide a security interest in (or an absolute assignment of) any Lease Consideration in favour of Scott’s to secure the obligation of Priszm to pay over any such Lease Consideration. The documents do not contain any provision that would require Priszm to hold any Lease Consideration in trust for Scott’s. Simply put, the documents contain provisions that, at best, create an obligation from the Tenant to the Landlord. This falls far short of creating a propriety entitlement.

[52] I agree with Prudential’s submission that there is no basis for the assertion that Priszm’s obligations to pay Scott’s an amount equal to any Leasehold Consideration creates a propriety entitlement.

[53] I similarly agree with Prudential’s submission that finding that Scott’s has no proprietary interest in any Lease Consideration would not “render the Lease Consideration Clauses meaningless”.

[54] If it is accepted that Priszm does not have the financial means to pay the amount owing to Scott’s or that Scott’s unsecured claim against Priszm is not recoverable in an insolvency of Priszm, this does not render the Lease Consideration Clauses “meaningless” or “generally ineffective”. The Lease Consideration Clauses create an unsecured contingent contractual obligation to pay money and is effective on those terms. The fact that recovery may be impaired does not lead to the conclusion that the Lease Consideration Clauses are meaningless.

[55] On this issue, I conclude that Scott’s does not have a proprietary (property) interest under section 21.03 of the Consent Leases or Conditional Notice Leases.

[56] Second, it is important to note a fundamental distinction between the Consent Leases and Conditional Notice Leases.

[57] The provision contained in both the Consent Leases and Conditional Notice Leases on the issue of assignability represent a restriction or a limitation on the Tenant.

[58] There are the following two main categories of Leases:

1. Leases where Scott’s consent is required to transfer or assign the Lease to a purchaser (Consent Leases); and

2. Leases where Scott’s consent is not required to transfer or assign the Lease to a purchaser (Conditional Notice Leases).

[59] Scott’s submits that it is entitled to receive an amount equal to such Lease Consideration from Priszm under both the Consent Leases and the Conditional Notice Leases.

[60] In this respect, it is noted that all of the Conditional Notice Leases were in respect of Restaurants in Ontario and were transferred or assigned as part of the Soul Transaction. A chart categorizing the Leases based on the Transaction and whether the Lease is a Consent Lease or Conditional Notice Lease is attached as Schedule “B”.

[61] Prudential’s counsel submits that, in the case of Conditional Notice Leases, no consent from Scott’s was required.

[62] Section 21.04 of the Conditional Notice Leases reads:

Notwithstanding subsections 21.01, 21.02 and 21.03 herein, provided the Tenant shall remain liable for its covenants under this Lease, upon prior written notice given to the Landlord, but without having to obtain the Landlord’s prior written consent, the Tenant shall have the right to assign the Lease or sublet the Leased Premises, including any options to renew or other things benefitting the Tenant, without any increased rental or fee, to any of the following:

(c) to any person, corporation or entity who was purchasing a majority in the Province of Ontario of the Tenant’s other similar businesses as the business being operated on the Leased Premises.

[63] Paragraph 58 of the Agreed Statement of Facts reads: “Substantially all of Priszm’s outlets in Ontario were transferred as part of the Revised Soul Transaction”.

[64] Paragraph 21.04 of the Conditional Notice Leases is clear. The Conditional Notice Leases could be assigned by Priszm on notice to Scott’s provided that:

(a) Priszm remained liable for its covenants under the Conditional Notice Leases; and

(b) the assignee/transferee was purchasing a majority of the Restaurants in Ontario.

[65] There seems to be no dispute that Soul was purchasing a majority of Restaurants in Ontario or that the notice required to be given to Scott’s was properly given.

[66] Further, there does not appear to be any issue that Priszm remain liable on the covenant of the Conditional Notice Leases as:

(a) Scott’s did not release Priszm from its ongoing obligations and covenants under the Conditional Notice Leases;

(b) Priszm did not disclaim its obligation under the Conditional Notice Leases; and

(c) the Receiver has not disclaimed Scott’s obligations under the Conditional Notice Leases.

[67] It seems to me that the provisions of the Conditional Notice Leases that deal with Lease Consideration are inapplicable in these circumstances.

[68] Scott’s entitlement to Lease Consideration depends on whether the Lease is a Consent Lease or a Conditional Notice Lease. I reject Scott’s argument that it is entitled to Lease Consideration in respect of the Conditional Notice Leases. In my view, Lease Consideration is only an issue in respect of the Consent Leases.

[69] Third, on the issue of subordination, I accept the submissions of Prudential’s counsel quoted above with specific reference to paragraphs 64 to 72 of his factum.

[70] It seems to me that there is ambiguity in the operative sense in the Leasehold Consent Charge that uses the phrase “subject to and subordinate to”, which to my view cannot be reasonably interpreted, in the context of the factual matrix of the Transactions involving Scott’s, Priszm and Prudential, as a broad subordination of Prudential’s security to Scott’s unsecured claim as against Priszm. Prudential’s arguments provide a complete and rational explanation for the use of the phrase “subject to and subordinate to”. I am satisfied that Prudential agreed that if it ever enforced the Leasehold Charges – it would do so in accordance with the Leases and would respect Scott’s rights under the Leases. This does not mean, however, that Prudential at any point in time subordinated its security position to the unsecured claim that Scott’s may have as against Prudential.

[71] I also reject Scott’s argument that Prudential’s security has not attached. In my view, all of the conditions for attachment were satisfied at the time that Prudential and Priszm entered into the loan agreement, and the supporting security. I do not see where there has been any agreement to delay attachment of the security interests granted in favour of Prudential.

[72] For the foregoing reasons, I conclude that any right that Scott’s has to Lease Consideration that is found to have been received by Priszm is an unsecured claim against Priszm; this claim is subordinate to Prudential’s security over Priszm’s property, including the sale proceeds from the Soul, FMI 1 and HFFI Transactions.

DISPOSITION

[73] In the result, both of the questions posed at [17] are answered in the negative. I have concluded that Scott’s does not have a proprietary (property) interest in and to any Lease Consideration; and Prudential has not subordinated its security interest in favour of Scott’s to any Lease Consideration.

[74] If the parties are unable to agree on the quantum of costs, written submissions, to a maximum of three pages, may be submitted within 30 days.

MORAWETZ J.

Date: December 21, 2012

SCHEDULE “A”

Court File No. CV-11-9375-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

B E T W E E N:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, PRUCO LIFE INSURANCE COMPANY AND PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY

Applicants

• and -

PRISZM INCOME FUND, PRISZM CANADIAN OPERATING TRUST, PRISZM INC., KIT FINANCE INC. AND PRISZM LP

Respondents

AGREED STATEMENT OF FACTS

July 11, 2012 AIRD & BERLIS LLP

181 Bay Street, Suite 1800 Toronto, ON M5J 2T9

Steven L. Graff (LSUC # 31871B)

Ian Aversa (LSUC # 55449N)

Mark van Zandvoort (LSUC # 59120U)

Tel: 416.863.1500

Fax: 416.863.1515

GOODMANS LLP

333 Bay Street, Suite 3400

Toronto, ON M5H 2S7

Fred Myers (LSUC # 26301A)

Tel: 416.979.2211

Fax: 416.979.1234

Lawyers for KEYreit, SR Operating Trust, Scott’s Real Estate Limited Partnership, Scott’s Trustee Corp. and Scott’s GP Trust

Court File No. CV-11-9375-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

B E T W E E N:

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, PRUCO LIFE INSURANCE COMPANY AND PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY

Applicants

• and -

PRISZM INCOME FUND, PRISZM CANADIAN OPERATING TRUST, PRISZM INC., KIT FINANCE INC. AND PRISZM LP

Respondents

AGREED STATEMENT OF FACTS

(Motion returnable July 18 and 19, 2012)

The parties agree on the following facts:

I. THE PARTIES AND THEIR RELATED ENTITIES

1. Scott’s Real Estate Investment Trust, now known as KEYreit (“Scott’s REIT”) (Scott’s REIT and its subsidiaries and affiliates being collectively referred to hereinafter as “Scott’s”[^1]) is an unincorporated open-ended real estate investment trust established under Ontario law. As at June 20, 2012, Scott’s REIT managed a portfolio of 229 retail properties located in eight provinces across Canada.

2. Priszm Income Fund, Priszm Canadian Operating Trust, Priszm Inc. (“Priszm GP”), Kit Finance Inc. and Priszm Limited Partnership (“Priszm LP”) (collectively, “Priszm” or the “Priszm Entities”) has been a significant tenant of Scott’s properties for several years.

3. Prior to its filing under the Companies’ Creditors Arrangement Act (the “CCAA”), Priszm operated retail establishments under the names “KFC”, “Pizza Hut” and “Taco Bell” out of 188 of Scott’s properties. Priszm was also liable on the covenant in respect of three other of Scott’s properties that operate as KFC restaurants.

4. Pursuant to a Franchise Agreement[^2] entered into between Priszm and Yum! Restaurants International (Canada) Company LP (“Yum!”), Priszm’s operations at Scott’s properties were carried out in Priszm’s capacity as Yum!’s franchisee.

5. Computershare Trust Company of Canada, as collateral agent for Prudential Investment Management, Inc., The Prudential Insurance Company of America, Pruco Life Insurance Company and Prudential Retirement Insurance and Annuity Company (collectively, “Prudential”), is Priszm’s senior secured lender, holding general security against all of Priszm’s assets, including, a general security agreement, a hypothec and a mortgage of certain leases pursuant to which Priszm is, or was, a tenant of Scott’s.[^3] All of the security granted by Priszm to Prudential was granted on or after January 31, 2006.

6. As will be described in detail below, the three transactions at issue will be hereinafter referred to as follows: (i) the “Revised Soul Transaction”; (ii) the “FMI1 Transaction”; and (iii) the “Hi-Flyer Transaction” (collectively, the “Transactions”).

II. OVERVIEW OF THE TRANSACTIONS

A. THE REVISED SOUL TRANSACTION

i. The Proposed Soul Transaction

7. By way of letters from Priszm dated January 31, 2011, Scott’s received a notice[^4] and a request[^5] from Priszm to assign and transfer seven master leases and two single location leases, with respect to 79 premises, or outlets, in respect of which Scott’s is or was the landlord, to Soul Restaurants Canada Inc. (“Soul”).

8. Priszm sought to assign and transfer these leases pursuant to an asset purchase agreement[^6] dated December 11, 2010 between Priszm, as vendor, and Soul, as purchaser (the “Initial Soul Agreement”) (the underlying sale transaction being hereafter referred to as the “Proposed Soul Transaction”).

9. The original closing date for the Proposed Soul Transaction was February 28, 2011.

ii. The CCAA Proceedings

10. On March 31, 2011, Priszm sought and obtained an initial order[^7] (the “Initial Order”) under the CCAA, which was subsequently amended and restated on April 29, 2011.[^8]

11. At the time the Initial Order was obtained, the Proposed Soul Transaction had not closed, and no motion had been brought seeking the approval of the transaction.

12. Pursuant to the Initial Order, FTI Consulting Canada Inc. was appointed as the Court-appointed monitor (the “Monitor”) of Priszm in its CCAA Proceedings.

13. Scott’s was advised thereafter that the Proposed Soul Transaction was the subject of further negotiation by Priszm and the Monitor.

iii. The Revised Soul Transaction

14. The Revised Soul Transaction, in the form of an amended and restated asset purchase agreement dated May 17, 2011[^9] (the “Revised Soul Agreement”), was presented to Scott’s at a meeting held on or about May 18, 2011 (the “May 18th Meeting”) among the Monitor, its counsel, and Scott’s counsel.

15. Pursuant to the Revised Soul Agreement, the number of premises in Ontario, British Columbia and Quebec which Priszm sought to assign and transfer to Soul, including those in respect of which Scott’s is or was the landlord, was reduced from 231 to 204.

16. The purchase price under the Revised Soul Agreement was approximately $42.82 million.

17. The number of premises which Priszm sought to assign and transfer to Soul which were governed by Scott’s leases was reduced from 79, in the Initial Soul Agreement, to 63 in the Revised Soul Agreement.

iv. The Approval and Closing of the Revised Soul Transaction

18. Pursuant to an order[^10] made May 30, 2011 (the “Soul Approval and Vesting Order”), the Court approved the Revised Soul Agreement, and provided for the vesting in Soul of all of Priszm’s right, title and interest in and to the assets described in the Revised Soul Agreement.

19. The Revised Soul Transaction closed on June 1, 2011.

20. The Monitor held approximately $12.20 million of the proceeds of the Revised Soul Transaction in its account pending the outcome of this dispute. Those funds were subsequently transferred to the Receiver. Paragraphs 4 and 7 of the Soul Approval and Vesting Order provide:

21. THIS COURT ORDERS that: (a) nothing in this Order shall amend or vary, or be deemed to amend or vary the terms of a real property lease; (b) where any real property leases are not, in accordance with their terms, transferable or assignable to the Purchaser without first obtaining the consent of the applicable landlord, none of the real property leases shall be transferred, conveyed, assigned or vested in the Purchaser by operation of this Order, save and except to the extent that respective consents have been, or are in the future, obtained from the respective landlords.

22. THIS COURT ORDERS that notwithstanding the holding of the Purchase Price by the Monitor the Purchase Price is not being and shall not be deemed to be held in trust for any specific party or specific parties and for purposes of determining the nature and priority of Claims, the net proceeds from the sale of the Purchased Assets held by the Monitor, after payment in full of any refunds and other payments to the Purchaser (or, at its direction, Bank of Montreal) from the Purchase Price described in paragraph 6 hereof, shall stand in the place and stead of the Purchased Assets, and that from and after the delivery of the Monitor's Certificate, all Claims, charges and encumbrances shall attach to the net proceeds from the sale of the Purchased Assets, subject to paragraph 6 hereof, with the same priority as they had with respect to the Purchased Assets immediately prior to the sale, as if the Purchased Assets had not been sold and remained in the possession or control of the person having that possession or control immediately prior to the sale.

23. Yum!, as franchisor, received approximately $9.49 million of the proceeds arising from the Revised Soul Transaction pursuant to the terms of the Franchise Agreement and the delivery of Yum!’s consent to the Revised Soul Transaction.

24. The proceeds arising from the Revised Soul Transaction net of the purchase price adjustments total approximately $39.50 million.

B. THE FMI TRANSACTIONS

i. The FMI1 Transaction

23. On July 29, 2011, Priszm LP, Priszm GP, FMI Atlantic Inc. (“FMI”), as purchaser, and FMI Ontario Inc., as guarantor, entered into an asset purchase agreement[^11] (the “FMI1 Agreement”) whereby Priszm LP agreed, among other things, to assign and transfer leases and leased premises to FMI with respect to 38 locations in Nova Scotia and New Brunswick (the “FMI1 Transaction”).

24. Pursuant to the FMI1 Transaction, Priszm sought to assign and transfer, among other things, leases to FMI which govern 16 premises in respect of which Scott’s is the landlord.

25. The purchase price under the FMI1 Agreement was approximately $3.23 million.

26. The Monitor held approximately $1.0 million the proceeds of the FMI1 Transaction in its account pending the outcome of this dispute. Those funds were subsequently transferred to the Receiver.

27. Yum!, as franchisor, received approximately $2.32 million of the proceeds arising from the FMI1 Transaction pursuant to the terms of the Franchise Agreement and the delivery of Yum!’s consent to the FMI1 Transaction.

28. The proceeds arising from the FMI1 Transaction net of the purchase price adjustments total approximately $2.50 million.

ii. The FMI2 Transaction

29. On August 23, 2011, Priszm LP, Priszm GP, FMI, as purchaser, and FMI Ontario Inc., as guarantor, entered into an asset purchase agreement[^12] (the “FMI2 Agreement”) with respect to the sale by Priszm LP of five additional premises located in Nova Scotia and three in New Brunswick (the “FMI2 Transaction”).

30. Pursuant to the FMI2 Transaction, Priszm sought to assign and transfer leases and leased premises to FMI which govern three premises in respect of which Scott’s is the landlord.

31. The leases with respect to these three premises were ultimately disclaimed and, subsequently, new leases were entered into with FMI on substantially the same terms and conditions as the previous ones, with the exception that the tenant was granted an option to terminate in 2013.

32. Accordingly, there is no dispute or claim by Scott’s with respect to the three Scott’s properties which were the subject of the FMI2 Transaction or the proceeds generated from such transaction.

iii. The Approval of the FMI Transactions

33. On September 14, 2011, the Court approved[^13] the FMI Transactions (collectively, the “FMI Approval and Vesting Orders” and, individually, an “FMI Approval and Vesting Order”). Paragraphs 4 and 8 of the FMI Approval and Vesting Order relating to the FMI1 Transaction provide:

34. THIS COURT ORDERS that: (a) nothing in this Order shall amend or vary, or be deemed to amend or vary the terms of a real property lease; (b) where any real property leases are not, in accordance with their terms, transferable or assignable to the Purchaser without first obtaining the consent of the applicable landlord, none of the real property leases shall be transferred, conveyed, assigned or vested in the Purchaser by operation of this Order, save and except to the extent that respective consents have been, or are in the future, obtained from the respective landlords.

35. THIS COURT ORDERS that notwithstanding the holding of the Purchase Price by the Monitor the Purchase Price is not being and shall not be deemed to be held in trust for any specific party or specific parties and for purposes of determining the nature and priority of Claims, the net proceeds from the sale of the Purchased Assets held by the Monitor, after payment in full of any payments to the Purchaser from the Purchase Price described in paragraph 7 hereof, shall stand in the place and stead of the Purchased Assets, and that from and after the delivery of the Monitor's Certificate, all Claims, charges and encumbrances shall attach to the net proceeds from the sale of the Purchased Assets, subject to paragraph 7 hereof, with the same priority as they had with respect to the Purchased Assets immediately prior to the sale, as if the Purchased Assets had not been sold and remained in the possession or control of the person having that possession or control immediately prior to the sale.

C. THE RECEIVERSHIP PROCEEDINGS AND THE HI-FLYER TRANSACTION

i. The Termination of the CCAA Proceedings

34. A further order made on September 14, 2011[^14] (the “CCAA Termination Order”) provided for the termination of Priszm’s CCAA proceedings conditional upon, among other things, the closing of the FMI Transactions.

35. Pursuant to an application brought by Prudential under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA”), an additional order[^15] was made on September 14, 2011 (the “Receivership Order”) whereby RSM Richter Inc., thereafter replaced by Duff & Phelps Canada Restructuring Inc., would be appointed as receiver (the “Receiver”), without security, of the assets, undertakings, and properties of Priszm, following the closing of the FMI Transactions.

36. The FMI Transactions closed on September 19, 2011.

37. The termination of the CCAA Proceedings and the appointment of the Receiver became effective on September 21, 2011.

38. Paragraph 31 of the Receivership Order provides:

39. THIS COURT ORDERS that all funds transferred by the Monitor to the Receiver pursuant to the Termination and Discharge Order shall be held by the Receiver as follows:

(a) with respect to the proceeds from the sale of certain assets by the Priszm Entities to Soul pursuant to the Soul Agreement and approved by the Soul Approval and Vesting Order (the “Soul Transaction Proceeds”), (i) in accordance with the Soul Approval and Vesting Order, with the Receiver being substituted for the Monitor in such paragraphs in all respects without any change to the character of the funds being held or the purpose for which they are being held, and (ii) subject to the reserves in favour of certain landlords of the Priszm Entities, described in the Second Report of the Monitor dated May 26, 2011 and issued in the CCAA Proceeding;

(b) with respect to the proceeds from the sale of certain assets by the Priszm Entities to FMI pursuant to the FMI Agreements and approved by the FMI Approval and Vesting Orders (the “FMI Transaction Proceeds”), in accordance with the FMI Approval and Vesting Orders, with the Receiver being substituted for the Monitor in such paragraphs in all respects without any change to the character of the funds being held or the purpose for which they are being held; and

(c) with respect to any deposits relating to the sale of assets by the Priszm Entities, in accordance with the terms of the agreements that relate to such deposits.

ii. The Hi-Flyer Transaction

39. On April 25, 2012, the Receiver, Hi-Flyer Food (Canada) Inc. (“Hi-Flyer”) and Wholesome Foods Inc. (the “Guarantor”) entered into an asset purchase agreement[^16] (the “Hi-Flyer Agreement”) with respect to the sale by Priszm of 41 premises located in Alberta and 16 in Manitoba (the “Hi-Flyer Transaction”).

40. Pursuant to the Hi-Flyer Transaction, the Receiver sought to assign and transfer, among other things, leases and leased premises to Hi-Flyer which govern 13 premises in respect of which Scott’s is the landlord.

41. The purchase price under the Hi-Flyer Agreement was approximately $18.57 million.

42. On May 18, 2012, the Court approved[^17] the Hi-Flyer Transaction (the “Hi-Flyer Approval and Vesting Order”).

43. The Hi-Flyer Transaction closed on May 28, 2012.

44. Paragraphs 5 and 6 of the Hi-Flyer Approval and Vesting Order provides:

45. THIS COURT ORDERS that nothing in this Order shall amend or vary, or be deemed to amend or vary, the terms of a real property lease, and where any real property leases are not, in accordance with their terms, transferable or assignable without first obtaining the consent of the applicable landlord, none of the real property leases referred to in the Sale Agreement shall be transferred, conveyed, assigned or vested in the Purchaser by operation of this Order, save and except to the extent that respective consents have been, or are in the future, obtained from the respective landlords or on further order of this Court.

46. THIS COURT ORDERS that for purposes of determining the nature and priority of Claims, the net proceeds from the sale of the Purchase Assets shall stand in the place and stead of the Purchased Assets, and that from and after the delivery of the Receiver’s Certificate all Claims and Encumbrances shall attach to the net proceeds from the sale of the Purchase Assets with the same priority as they had with respect to the Purchased Assets immediately prior to the sale, as if the Purchased Assets had not been sold and remained in the possession or control of the person having that possession or control immediately prior to the sale.

47. The Receiver holds all of the proceeds of the Hi-Flyer Transaction in its account.

48. Yum!, as franchisor, received approximately $3.28 million of the proceeds arising from the Hi-Flyer Transaction pursuant to the terms of the Franchise Agreement and the delivery of Yum!’s consent to the Hi-Flyer Transaction.

49. Assuming all of the leases subject to the Hi-Flyer Transaction are assigned, the proceeds arising from the Hi-Flyer Transaction net of the purchase price adjustments will total approximately $17.83 million.

D. QUEBEC

48. Scott’s is also Priszm’s landlord in respect of 51 premises in Quebec (the “Quebec Leases”).

49. To date, no transaction has been consummated with respect to these leases and none of these leases have been repudiated.

III. THE SCOTT’S LEASES THAT ARE SUBJECT OF THE TRANSACTIONS AND THE QUEBEC LEASES

50. The Scott’s leases and leased premises, which Priszm sought to transfer (assign) pursuant to the Revised Soul, FMI1 and Hi-Flyer Transactions, and the Quebec Leases, can be separated into 3 groups:

(a) six master leases[^18], each of which contains a provision stating that the tenant cannot assign the lease without the prior written consent of the landlord (collectively, the “Consent Leases”), and which leases apply to:

(i) 31 properties in respect of which Scott’s is the landlord and which were transferred in the Revised Soul Transaction;

(ii) 16 properties in respect of which Scott’s is the landlord and which were transferred in the FMI1 Transaction;

(iii) 12 properties in respect of which Scott’s is the landlord and which are the subject of the Hi-Flyer Transaction; and

(iv) 51 properties in respect of which Scott’s is the landlord;

(b) four master leases[^19], governing 31 properties in respect of which Scott’s is the landlord and which were transferred in the Revised Soul Transaction, each of which contains a provision that the written consent of the landlord is required prior to any assignment of the lease or the leased premises by the tenant, unless the tenant remains liable for its covenants under the lease, in which case the tenant shall have the right to assign the lease, but only to certain parties specified in the lease, upon giving prior written notice to the landlord (collectively, the “Conditional Notice Leases”); and

(c) two single location leases[^20], both of which contain a provision stating that the written consent of the landlord is required prior to any assignment of the lease or the leased premises by the tenant, unless: (i) the tenant remains liable for its financial performance pursuant to the lease; and (ii) provided that the lease is assigned only to one of the specified parties set out in the lease (collectively, the “Consent Exemption Leases”). These two single location leases apply, respectively, to:

(i) a single property in respect of which Scott’s is the landlord, and which was transferred in the Revised Soul Transaction; and

(ii) a single property in respect of which Scott’s is the landlord, and which is the subject of the Hi-Flyer Transaction.

51. The Scott’s properties that were the subject of the Transactions, and the Quebec Leases, described in the preceding paragraph, are categorized by lease at Schedule A hereto.

52. Scott’s claims an entitlement to the proceeds (the “Lease Consideration”) which have been or are to be received in consideration for the transfer and assignment of the Consent Leases and the Conditional Notice Leases and the leased premises governed by such leases.

i. The Lease Provisions

53. The operative provisions of the Consent Leases and the Conditional Notice Leases in issue provide:

Consent Leases

21.01 The Tenant shall not assign, sublet, transfer, set over, mortgage, charge, hypothecate, create any security interest in, or part with possession of, all or any part of the Leased Premises or of this Lease (a ‘‘Transfer’’), without the prior written consent of the Landlord in each instance, which consent may not be unreasonably withheld. With any request for consent, the Tenant shall submit information as to the financial background, financial status, and business history of the party who is to acquire an interest in this Lease or the Leased Premises (the “Transferee”) and such other information as the Landlord may reasonably request in connection with such request for consent.

21.02 Any consent by the Landlord under this Article shall not constitute a waiver of the necessity for such consent on any subsequent occasion requiring consent, and shall not relieve the Tenant from any of its obligations to pay rent or perform the covenants contained in this Lease. Notwithstanding any Transfer, the Tenant shall not be relieved of liability by any subsequent amendment of the terms hereof between the Landlord and the assignee or any granting of time, renewals, extensions, indulgences, releases, discharges or other arrangements with the assignee. If this Lease is disclaimed or terminated by any trustee in bankruptcy of any assignee of this Lease, the original tenant named in this Lease shall, if requested by the Landlord within thirty days of such disclaimer or termination, enter into a lease with the Landlord upon the same terms and conditions as contained herein except for the duration of term, which shall expire on the date this Lease would have expired save for such disclaimer or termination. Any assignment or other document effecting a transaction to which the Landlord’s consent is required shall be in a form satisfactory to the Landlord. Any assignment or sublease shall at the Landlord’s option be on the Landlord’s form and shall in any event contain a covenant by the Transferee with the Landlord that it will observe and perform all of the Tenant’s obligations contained in this Lease. Any such document shall be reviewed by the Landlord or its solicitors or prepared by them at the expense of the Tenant.

21.03 The Landlord’s consent to any Transfer shall be subject to the condition that if the minimum rent, and additional rent to be paid by the Transferee under such Transfer exceeds the Minimum Rent and additional rent payable under this Lease, the amount of any excess shall be paid by the Tenant to the Landlord. If the Tenant receives from any Transferee, either directly or indirectly, any consideration other than rent and additional rent for such Transfer, either in the form of cash, goods or services (other than the proceeds of any bona fide financing as the result of a Transfer involving a mortgage, charge or similar security interest in this Lease) the Tenant shall forthwith pay to the Landlord an amount equivalent to such consideration. The Tenant and the Transferee shall execute any agreement required to give effect to the foregoing term.

Conditional Notice Leases

21.01 The Tenant shall not assign, sublet, transfer, set over, mortgage, charge, hypothecate, create any security interest in, or part with possession of, all or any part of the Leased Premises or of this Lease (a “Transfer”), without the prior written consent of the Landlord in each instance, which consent may not be unreasonably withheld. With any request for consent, the Tenant shall submit information as to the financial background, financial status, and business history of the party who is to acquire an interest in the Tenant or in this Lease or the Leased Premises (the “Transferee”) and such other information as the Landlord may reasonably request in connection with such request for consent.

21.02 Any consent by the Landlord under this Article shall not constitute a waiver of the necessity for such consent on any subsequent occasion requiring consent, and shall not relieve the Tenant from any of its obligations to pay rent or perform the covenants contained in this Lease. Notwithstanding any Transfer, the Tenant shall not be relieved of liability by any subsequent amendment of the terms hereof between the Landlord and the assignee or any granting of time, renewals, extensions, indulgences, releases, discharges or other arrangements with the assignee. If this Lease is disclaimed or terminated by any trustee in bankruptcy of any assignee of this Lease, the original tenant named in this Lease shall, if requested by the Landlord within thirty days of such disclaimer or termination, enter into a lease with the Landlord upon the same terms and conditions as contained herein except for the duration of term, which shall expire on the date this Lease would have expired save for such disclaimer or termination. Any assignment or other document effecting a transaction to which the Landlord's consent is required shall be in a form satisfactory to the Landlord. Any assignment or sublease shall at the Landlord's option be on the Landlord's form and shall in any event contain a covenant by the Transferee with the Landlord that it will observe and perform all of the Tenant's obligations contained in this Lease. Any such document shall be reviewed by the Landlord or its solicitors or prepared by them at the expense of the Tenant.

21.03 The Landlord’s consent to any Transfer shall be subject to the condition that if the minimum rent and additional rent to be paid by the Transferee under such Transfer exceeds the Minimum Rent, Percentage Rent and additional rent payable under this Lease, the amount of any excess shall be paid by the Tenant to the Landlord. If the Tenant receives from any Transferee, either directly or indirectly, any consideration other than rent and additional rent for such Transfer, either in the form of cash, goods or services (other than the proceeds of any bona fide financing as the result of a Transfer involving a mortgage, charge or similar security interest in this Lease) the Tenant shall forthwith pay to the Landlord an amount equivalent to such consideration. The Tenant and the Transferee shall execute any agreement required to give effect to the foregoing term.

21.04 Notwithstanding subsections 20.01, 20.02 and 20.03 herein, provided the Tenant shall remain liable for its covenants under this Lease, upon prior written notice given to the Landlord, but without having to obtain the Landlord’s prior written consent, the Tenant shall have the right to assign the Lease or sublet the Leased Premises, including any options to renew or other rights benefiting the Tenant, without any increased rental or fee, to any of the following:

(a) to any corporation or partnership which is now or in the future affiliated or associated with the Tenant or any holding body corporate or subsidiary body corporate (as those terms are defined pursuant to the Ontario Business Corporations Act) of the Tenant or any of ... (the “Related Companies”);

(b) to any corporation formed as a result of a merger or amalgamation of the Tenant or any of the Related Companies with another corporation or corporations;

(c) to any person, corporation or entity who is purchasing a majority in the Province of Ontario of the Tenant’s other similar businesses as the business being operated on the Leased Premises; and

(d) to a party that is a franchisee, licensee or concessionaire entitled to carry on the permitted use, so long as the same business is operated and the franchisee, licensee or concessionaire agrees to be bound by, perform and observe all of the terms, conditions and agreements of the Lease.

IV. THE LEASEHOLD MORTGAGEE AGREEMENT

54. Scott’s (or its affiliates and subsidiaries owning lands or premises in which they hold as mandatory for and on behalf of Scott’s), Priszm (or its predecessor, including Kit Inc.) and Prudential, among others, are parties to a Leasehold Mortgagee Agreement[^21] which relates to each of the Scott’s premises governed by the Consent Leases and the Conditional Notice Leases and which are the subject of the Revised Soul Transaction, the FMI1 Transaction and the Hi-Flyer Transaction. The two Consent Exemption Leases are not the subject of the Leasehold Mortgagee Agreement.

55. The operative provisions of the Leasehold Mortgage Agreement in issue provide:

AND WHEREAS the Tenant intends to mortgage and charge the Leases by way of security to and in favour of the Leasehold Mortgagee pursuant to collateral charges and deeds of hypothecs, as the case may be, granted in favour of the Leasehold Mortgagee (the “Charges”), copies of which shall be contemporaneously delivered to the Landlord;

AND WHEREAS the parties have agreed to enter into this Agreement in order to provide for certain direct rights and obligations between the parties hereto; ...

1. The Landlord herby consents to the Charges and agrees that the Charges may be extended, amended, renewed or replaced without the consent of the Landlord and the Tenant covenants and agrees to provide the Landlord with written notice in respect thereof.

2. The Landlord in granting its consent to the Charges does not hereby acknowledge or approve of any of the terms of the Charges as between the Tenant and the Leasehold Mortgagee except for the granting itself of the Charges and except as aforesaid, the Landlord shall not be bound by nor be deemed to have knowledge of any of the terms of the Charges. The Leasehold Mortgagee acknowledges that, subject to the terms hereof, the Charges are subject to and subordinate to all conditions and covenants of the Leases and to the rights of the Landlord thereunder.

3. Nothing contained in this Agreement shall release, or be deemed to release, the Tenant from any one or more of its covenants or obligations under any of the Leases, unless the Landlord specifically consents in writing to such release.

4. Nothing contained in this Agreement or in any Assignment and Assumption Agreement shall: (i) restrict the ability of the Landlord to transfer, assign or convey the Leased Premises or the Leases or any interest of the Landlord therein; (ii) be deemed or otherwise construed to be a waiver of, or subordination of, any rights of the Landlord against any personal and/or other property on or in the Leased Premises including without limitation any right of distraint that the Landlord has in respect of any such property; or (iii) be deemed or otherwise construed to be a waiver of, or subordination of, any rights of the Landlord under the Leases or at law, including, without limitation, under section 38 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7. For greater certainty, the Landlord shall have no obligation on any transfer, assignment or conveyance contemplated in (i) above, to obtain any covenant by any purchaser, transferee or assignee of the Landlord’s interest to be bound by the terms of this Agreement.

5. The Leasehold Mortgagee further agrees that in the event of a default under the Charges resulting in the Leasehold Mortgagee realizing on its security by way of any further assignment of the Leases or subletting of the Leased Premises, and in any case prior to its assigning the Leases or subletting the Leased Premises, the consent of the Landlord shall be required in accordance with the provisions of the Leases being assigned or sublet, which consent in accordance with the Leases shall not be unreasonably withheld.

V. THE DISPUTE

56. By way of letters from Priszm dated January 31, 2011, Scott’s received a notice[^22] and a request[^23] from Priszm to assign and transfer seven master leases and two single location leases, with respect to 79 premises, or outlets, in respect of which Scott’s is or was the landlord, to Soul.

57. In response to Priszm’s initial notice that it was assigning certain of the leases in respect of which Scott’s is landlord as part of the Proposed Soul Transaction, Scott’s sent a letter to Priszm dated February 14, 2011[^24], which, among other things, advised Priszm that pursuant to section 21.03 of the Conditional Notice Leases, the respective tenants would not be released from any of their obligations or covenants contained in these leases. The letter further advised Priszm that Scott’s reserved its rights pursuant to the Conditional Notice Leases to require that the Lease Consideration be paid to Scott’s.

58. Substantially all of Priszm’s outlets in Ontario were transferred as part of the Revised Soul Transaction.

59. Scott’s further letter[^25] to Priszm dated February 14, 2011 advised Priszm of Scott’s reservation of its rights pursuant to section 21.02 and 21.03 of the Consent Leases, as applicable, to require that any Lease Consideration arising from the transfer of the Consent Leases, and the premises subject of same, be paid to Scott’s.

60. Scott’s also sent a letter[^26] dated February 14, 2011 to Nazir Hussein, the consultant to Soul Foods Group, which also reserved Scott’s rights under the Consent Leases and the Conditional Notice Leases.

61. After further correspondence had been exchanged between Priszm and Scott’s[^27], Priszm responded to Scott’s by way of letter dated February 21, 2011[^28] stating that it disagreed with Scott’s view that certain provisions of the Consent Leases and the Conditional Notice Leases (the “Lease Consideration Clauses”) provide Scott’s with rights and an entitlement to a certain portion of the proceeds of sale from the Proposed Soul Transaction.

62. In verbal discussions with Soul and its counsel, Soul requested to Scott’s that the Lease Consideration Clauses be removed from Scott’s leases going forward. This request was also made in writing in a letter from Soul to Scott’s dated February 28, 2011[^29]. Scott’s was not agreeable to this request.

63. There was no direct correspondence between Scott’s and Prudential with respect to the issues raised as between Scott’s and Priszm.

VI. THE FUNDS HELD IN TRUST

64. On April 19, 2011, in an attempt to exercise its rights under the Consent Leases and the Conditional Notice Leases, Scott’s counsel delivered to Priszm and its lawyers a trust agreement[^30] to be executed by Scott’s, Priszm and Soul (the “Trust Agreement”).

65. In response to Scott’s request to execute the Trust Agreement, Priszm’s counsel sent a letter to Scott’s dated April 21, 2011[^31], which, among other things, stated that the trust mechanism to hold proceeds of the sale was unnecessary on the basis that the sale approval and/or distribution order would deal with the conditions pursuant to which such proceeds would be held.

66. Scott’s counsel responded to Priszm’s counsel by way of subsequent letters dated April 28, 2011[^32] and May 10, 2011[^33], wherein Scott’s advised Priszm, among other things, that pending agreement of an acceptable form of sale order, Scott’s continued to reserve all of its rights pursuant to its leases, including, without limitation, the right to insist on the trust mechanism proposed in the letter dated April 19, 2011.

67. There were no direct communications between Scott’s and Prudential with respect to Scott’s assertions with respect to its rights under the Consent Leases.

VII. CONCLUDING FACTS

68. In each case, the purchaser has taken an assignment of the leases, among other things, without amendment and is paying to Scott’s the same rent that was being paid by Priszm.

69. Lease Assignment & Assumption Agreements[^34] were entered into by Scott’s to facilitate the assignment of the Consent Leases included in the Revised Soul and the FMI1 Transaction. The Lease Assignment & Assumption Agreements are without prejudice to the claims and rights of Scott’s, if any, to the proceeds of the Revised Soul and the FMI1 Transactions.

70. Since the closing of the Hi-Flyer Transaction, the Receiver and Hi-Flyer have entered into an occupation agreement[^35] pursuant to which Hi-Flyer is occupying and operating the premises sold under the Hi-Flyer Agreement in respect of which Consent Leases remain unassigned.

71. Scott’s, the Receiver and Hi-Flyer intend on executing a lease assignment and assumption agreement in the near future to allow for the assignment of Scott’s Consent Leases in the time period provided for in the Hi-Flyer Agreement, without prejudice to the claims and rights of Scott’s, if any, to the proceeds of the Hi-Flyer Transaction.

72. As at June 22, 2012, the Receiver was holding approximately $39.6 million in the estate bank account, which funds primarily represent proceeds generated from the Revised Soul Transaction, the FMI1 Transaction and the Hi-Flyer Transaction. As at June 22, 2012, the Receiver was also holding approximately $11.8 million in the estate bank account, which funds represent proceeds from the Hi-Flyer Transaction allocable to locations for which lease assignments have not yet been obtained.

73. A transaction involving the Quebec Leases may take place within the 2012 calendar year, which transaction(s) will result in the further assignment and transfer of some or all of the Consent Leases, as such leases govern 51 of the properties in respect of which Scott’s is the landlord.

74. Cushman & Wakefield Ltd. produced an expert report dated August 8, 2011, which was delivered to the Monitor.

75. Scott’s has produced an expert report from Hilco Appraisal Services LLC dated September 30, 2011, to which Prudential has responded with an expert report from Deloitte & Touche LLP dated April 27, 2012, to which Scott’s has replied with an expert report from Hilco Appraisal Services LLC dated June 1, 2012.

July 11, 2012

Steven L. Graff

AIRD & BERLIS LLP

Fred Myers

GOODMANS LLP

Lawyers for KEYreit, SR Operating Trust, Scott’s Real Estate Limited Partnership, Scott’s Trustee Corp. and Scott’s GP Trust

E. Patrick Shea

GOWLING LAFLEUR HENDERSON LLP

Lawyers for Prudential Investment Management Inc.

SCHEDULE “B”

Location

Lease Type

Transaction

1000 - KFC-Taco Bell

Consent

FMI

1003 – KFC

Consent

FMI

1016 – KFC

Consent

FMI

1018 - KFC-Taco Bell

Consent

FMI

1019 - KFC-Pizza Hut

Consent

FMI

1022 – KFC

Consent

FMI

1023 – KFC

Consent

FMI

1024 – KFC

Consent

FMI

1029 – KFC

Consent

FMI

1036 – KFC

Consent

FMI

1037 – KFC

Consent

FMI

1038 – KFC

Consent

FMI

1041 – KFC

Consent

FMI

1042 – KFC

Consent

FMI

1044 – KFC

Consent

FMI

1055 – KFC

Consent

FMI

1100 – KFC

Consent

PQ

1101 – KFC

Consent

PQ

1102 – KFC

Consent

PQ

1103 – KFC

Consent

PQ

1104 – KFC

Consent

PQ

1105 – KFC

Consent

PQ

1106 – KFC

Consent

PQ

1108 – KFC

Consent

PQ

1109 – KFC

Consent

PQ

1110 – KFC

Consent

PQ

1111 – KFC

Consent

PQ

1112 – KFC

Consent

PQ

1114 – KFC

Consent

PQ

1115 – KFC

Consent

PQ

1116 – KFC

Consent

PQ

1117 – KFC

Consent

PQ

1119 – KFC

Consent

PQ

1121 – KFC

Consent

PQ

1124 - KFC-Taco Bell

Consent

PQ

1127 – KFC

Consent

PQ

1129 – KFC

Consent

PQ

1130 - KFC-Taco Bell

Consent

PQ

1150 – KFC

Consent

PQ

1152 – KFC

Consent

PQ

1154 – KFC

Consent

PQ

1156 – KFC

Consent

PQ

1157 - KFC-Taco Bell

Consent

PQ

1158 – KFC

Consent

PQ

1171 – KFC

Consent

PQ

1174 – KFC

Consent

PQ

1175 – KFC

Consent

PQ

1176 – KFC

Consent

PQ

1177 – KFC

Consent

PQ

1178 – KFC

Consent

PQ

1179 – KFC

Consent

PQ

1180 – KFC

Consent

PQ

1181 - KFC-Pizza Hut

Consent

PQ

1182 - KFC-Pizza Hut

Consent

PQ

1184 – KFC

Consent

PQ

1185 – KFC

Consent

PQ

1186 – KFC

Consent

PQ

1187 - KFC-Pizza Hut

Consent

PQ

1188 – KFC

Consent

PQ

1191 – KFC

Consent

PQ

1193 – KFC

Consent

PQ

1196 – KFC

Consent

PQ

1198 – KFC

Consent

PQ

1200 – KFC

Consent

PQ

1201 – KFC

Consent

PQ

1202 – KFC

Consent

PQ

1203 – KFC

Consent

PQ

1204 – KFC

Consent

PQ

1205 – KFC

Consent

PQ

1206 – KFC

Consent

PQ

1211 - KFC-Pizza Hut

Consent

PQ

1212 - KFC-Pizza Hut

Consent

PQ

1213 – KFC

Consent

PQ

1214 – KFC

Consent

PQ

1215 – KFC

Consent

PQ

1217 – KFC

Consent

PQ

1218 – KFC

Consent

PQ

1219 – KFC

Consent

PQ

1208 – KFC

Consent

Soul

1209 – KFC

Consent

Soul

1210 - KFC-Taco Bell

Consent

Soul

1355 – KFC

Consent

Soul

1351 – KFC

Consent

Soul

1411 – KFC

Consent

Soul

1412 – KFC

Consent

Soul

1414 – KFC

Consent

Soul

1425 – KFC

Consent

Soul

1426 – KFC

Consent

Soul

1427 – KFC

Consent

Soul

1428 – KFC

Consent

Soul

1429 – KFC

Consent

Soul

1438 – KFC

Consent

Soul

1448 – KFC

Consent

Soul

1449 – KFC

Consent

Soul

1506 – KFC

Consent

Soul

1515 – KFC

Consent

Soul

1528 – KFC

Consent

Soul

1529 – KFC

Consent

Soul

1532 – KFC

Consent

Soul

1533 – KFC

Consent

Soul

1535 – KFC

Consent

Soul

1541 – KFC

Consent

Soul

1548 – KFC

Consent

Soul

1552 – KFC

Consent

Soul

1553 – KFC

Consent

Soul

1559 – KFC

Consent

Soul

1303 – KFC

Notice

Soul

1305 - KFC-Pizza Hut

Notice

Soul

1307 – KFC

Notice

Soul

1309 – KFC

Notice

Soul

1310 – KFC

Notice

Soul

1311 – KFC

Notice

Soul

1315 - KFC-Pizza Hut

Notice

Soul

1323 – KFC

Notice

Soul

1327 – KFC

Notice

Soul

1329 – KFC

Notice

Soul

1331 - KFC-Taco Bell

Notice

Soul

1333 - KFC-Taco Bell

Notice

Soul

1334 - KFC-Taco Bell

Notice

Soul

1336 – KFC

Notice

Soul

1338 – KFC

Notice

Soul

1372 – KFC

Notice

Soul

1373 – KFC

Notice

Soul

1374 – KFC

Notice

Soul

1402 – KFC

Notice

Soul

1405 – KFC

Notice

Soul

1406 – KFC

Notice

Soul

1418 – KFC

Notice

Soul

1442 – KFC

Notice

Soul

1446 – KFC

Notice

Soul

1509 – KFC

Notice

Soul

1510 - KFC-Taco Bell

Notice

Soul

1514 – KFC

Notice

Soul

1516 - KFC-Taco Bell

Notice

Soul

1519 – KFC

Notice

Soul

1554 – KFC

Notice

Soul

1557 – KFC

Notice

Soul

1600 - KFC-Taco Bell

Consent

HFFI

1606 - KFC-Taco Bell

Consent

HFFI

1607 - KFC-Taco Bell

Consent

HFFI

1608 - KFC-Taco Bell

Consent

1749 – KFC

Consent

HFFI

1750 - KFC-Taco Bell

Consent

HFFI

1751 – KFC

Consent

HFFI

1753 – KFC

Consent

HFFI

1755 – KFC

Consent

HFFI

1756 – KFC

Consent

HFFI

1783 – KFC

Consent

HFFI

1786 – KFC

Consent

1787 – KFC

Consent

HFFI

1814 – KFC

Consent

Soul

1824 – KFC

Consent

Soul

1861 – KFC

Consent

Soul

[^1]: The organization chart of Scott’s REIT can be found at Tab 1 of Scott’s Book of Documents (the “Book of Documents”)

[^2]: Tab 2 – Book of Documents

[^3]: Tab 3 – Book of Documents

[^4]: Tab 4 – Book of Documents

[^5]: Tab 5 – Book of Documents

[^6]: Tab 6 – Book of Documents

[^7]: Tab 7 – Book of Documents

[^8]: Tab 8 – Book of Documents

[^9]: Tab 9 – Book of Documents

[^10]: Tab 10 – Book of Documents

[^11]: Tab 11 – Book of Documents

[^12]: Tab 12 – Book of Documents

[^13]: Tab 13 – Book of Documents

[^14]: Tab 14 – Book of Documents

[^15]: Tab 15 – Book of Documents

[^16]: Tab 16 – Book of Documents

[^17]: Tab 17 – Book of Documents

[^18]: Tab 18 – Book of Documents; See Schedule A hereto for particulars of the quantum of Scott’s premises, the leases with respect to which were transferred (assigned) by Priszm pursuant to the Revised Soul Transaction, the FMI1 Transaction and the Hi-Flyer Transaction, and the Quebec Leases

[^19]: Tab 19 – Book of Documents; See Schedule A hereto for particulars of the quantum of Scott’s premises, the leases with respect to which were transferred (assigned) by Priszm pursuant to the Revised Soul Transaction

[^20]: Tab 20 – Book of Documents; See Schedule A hereto for particulars of the quantum of Scott’s premises, the leases with respect to which were transferred (assigned) by Priszm pursuant to the Revised Soul Transaction and the Hi-Flyer Transaction

[^21]: Tab 21 – Book of Documents

[^22]: Tab 4 – Book of Documents

[^23]: Tab 5 – Book of Documents

[^24]: Tab 22 – Book of Documents

[^25]: Tab 23 – Book of Documents

[^26]: Tab 24 – Book of Documents

[^27]: Tab 25 – Book of Documents

[^28]: Tab 26 – Book of Documents

[^29]: Tab 27 – Book of Documents

[^30]: Tab 28 – Book of Documents

[^31]: Tab 29 - Book of Documents

[^32]: Tab 30 – Book of Documents

[^33]: Tab 31 – Book of Documents

[^34]: Tab 32 – Book of Documents

[^35]: Tab 33 – Book of Documents