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 This NonCompetition Agreement involves

INTERVAL LEISURE GROUP, INC. | Applicable System | Iris Merger Sub, Inc | STARWOOD HOTELS RESORTS WORLDWIDE, INC | Starwood, Vistana, Interval Leisure Group, Inc | Vistana Signature Experiences, Inc

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Title: NONCOMPETITION AGREEMENT
Governing Law: Maryland     Date: 5/12/2016
Industry: Personal Services     Law Firm: Latham Watkins;Weil Gotshal     Sector: Services

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Exhibit 10.2

 

EXECUTION VERSION

 

NONCOMPETITION AGREEMENT

 

dated as of

 

MAY 11, 2016

 

by and between

 

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

 

and

 

VISTANA SIGNATURE EXPERIENCES, INC.

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

ARTICLE I DEFINITIONS

1

 

 

 

Section 1.1

Certain Defined Terms

1

 

Section 1.2

Table of Definitions

3

 

 

 

 

ARTICLE II STARWOOD NONCOMPETITION COVENANTS

3

 

 

 

Section 2.1

Restrictions

3

 

Section 2.2

Management Exception

4

 

Section 2.3

Starwood Exceptions

4

 

Section 2.4

Single Hotel Acquisitions and Hotel Chain Transactions

5

 

 

 

 

ARTICLE III VISTANA NONCOMPETITION COVENANTS

6

 

 

 

Section 3.1

Restrictions

6

 

Section 3.2

Vistana Exceptions

6

 

Section 3.3

Vacation Ownership Business Acquisitions

7

 

Section 3.4

Hotels Acquired for Conversion to Vacation Ownership Properties

8

 

Section 3.5

Considerations In Pursuing Opportunities

8

 

 

 

 

ARTICLE IV TERM

9

 

 

ARTICLE V DISPUTE RESOLUTION

9

 

 

 

Section 5.1

Governing Law

9

 

Section 5.2

Injunctive Relief

9

 

Section 5.3

Costs of Enforcement

9

 

Section 5.4

Mediation

9

 

Section 5.5

Arbitration

9

 

Section 5.6

Litigation

10

 

Section 5.7

Class Actions

10

 

Section 5.8

Decisions in Prior Claims

10

 

 

 

 

ARTICLE VI MISCELLANEOUS

11

 

 

 

Section 6.1

Counterparts; Entire Agreement; Corporate Power

11

 

Section 6.2

Assignment

11

 

Section 6.3

Third Party Beneficiaries

12

 

Section 6.4

Notices

12

 

Section 6.5

Severability

13

 

Section 6.6

Headings

13

 

Section 6.7

Waivers

13

 

Section 6.8

Amendments

13

 

Section 6.9

Interpretation

13

 



 

NONCOMPETITION AGREEMENT

 

NONCOMPETITION AGREEMENT, dated as of May 11, 2016 (the “ Effective Date ”), between Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (“ Starwood ”), and Vistana Signature Experiences, Inc., a Delaware corporation (“ Vistana ”).  Starwood and Vistana are hereinafter referred to individually as a “ Party ” and collectively as the “ Parties .”

 

RECITALS

 

(A)                               Pursuant to that certain Agreement and Plan of Merger, dated as of October 27, 2015 by and among Starwood, Vistana, Interval Leisure Group, Inc., a Delaware corporation (“ Buyer ”), and Iris Merger Sub, Inc., a Delaware corporation and wholly-owned Subsidiary of Buyer (“ Merger Sub ”) (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Merger Agreement ”), Merger Sub will merge with and into Vistana immediately following the spin-off of Vistana to Starwood’s stockholders.

 

(B)                               Following the closing of the transactions contemplated by the Merger Agreement, (i) Vistana will continue to own and conduct, directly and indirectly, the Vacation Ownership Business (as defined herein) and (ii) Starwood will continue to own and conduct, directly and indirectly, the Hotel Management and Franchising Business (as defined herein).

 

(C)                               The Parties have entered into a License, Services and Development Agreement, dated as of the date hereof (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ License Agreement ”), pursuant to which, among other things, Starwood has granted to Vistana the limited right for the Vacation Ownership Business to be operated under the Licensed Marks using the Applicable System pursuant to the terms thereof.

 

(D)                               In connection with the closing of the transactions contemplated by the Merger Agreement, and to permit Starwood and Vistana to tailor their business strategies to best address market opportunities in their respective industries while maximizing the value of the Westin and Sheraton brands and the Applicable System, Starwood and Vistana have agreed to the noncompetition covenants set forth in this Agreement.  Except as expressly stated in this Agreement, the License Agreement and the other Transaction Agreements, there are no agreements or understandings between Starwood and Vistana limiting in any way the extent to which or the means by which each Party might choose to compete with the other Party.  Each of Starwood and Vistana acknowledges and agrees that Starwood and Vistana are not Affiliates for purposes of this Agreement.

 

AGREEMENT

 

In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parties agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1                                     Certain Defined Terms .  For the purpose of this Agreement (a) unless otherwise defined herein capitalized terms used herein shall have the meanings ascribed to them in the License Agreement, and (b) the following terms shall have the meanings hereinafter specified:

 

Agreement ” means this Noncompetition Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 



 

Compete ” means: (i) to conduct or participate or engage in, or bid for or otherwise pursue a business in exchange for any direct fees or other direct payment, whether as a principal, sole proprietor, partner, stockholder, or agent of, or consultant to or manager for, any Person or in any other capacity; or (ii) to have any debt or equity ownership interest in or actively assist, any Person or business that conducts, participates or engages in, or bids for or otherwise pursues a business in exchange for any direct fees or other direct payment, whether as a principal, sole proprietor, partner or stockholder, or agent of, or consultant to or manager for, any Person or in any other capacity.

 

Exclusive Marks ” means the names and marks “Sheraton” and “Westin,” whether alone or together with other words, terms, designs or other elements.

 

Existing Vacation Ownership Management Affiliate ” means an Affiliate of Vistana as of the Effective Date (or a Subsidiary of such Affiliate that, after the Effective Date, becomes part of such Affiliate’s business in existence as of the Effective Date) that provides management services to Vacation Ownership Properties.

 

Fractional Business ” means the Vacation Ownership Business to the extent involving the development, sale, marketing, managing, operating and financing of Fractional Interests and Fractional Units.

 

Fractional Interest ” means a Vacation Ownership Interest where the ownership interest in, use right of or other entitlement to use the applicable accommodations and facilities is acquired for not less than three (3) weeks per calendar year.

 

Fractional Unit ” means a physical unit used for overnight accommodation as part of a Fractional Interest.

 

Hotel Management and Franchising Business ” means the business of developing, selling, marketing, managing, operating, licensing or franchising Hotels, including Condominium Hotels, but does not include the activities included in the term Vacation Ownership Business.  For the avoidance of doubt, the mere ownership or leasing of a Hotel shall not be deemed to be engaging in the Hotel Management and Franchising Business.

 

Law ” means any statute, law, regulation, ordinance, rule, judgment, rule of common law, order, decree, government approval, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereinafter in effect and, in each case, as amended.

 

Management Agreements ” means the management agreements between Starwood and Vistana relating to Starwood’s management of the Transferred Lodging Properties, as such agreements may be amended, restated, supplemented or otherwise modified from time to time.

 

Membership Program ” means a program under which purchasers acquire a membership interest in, use right of or other entitlement to use, on a recurring basis, overnight accommodations and access to associated facilities at one or more properties.

 

Membership Program Hotel ” means any Hotel that offers a Membership Program.

 

Subsidiary ” with respect to any Person, any corporation or other legal entity, of which such Person and/or one or more of its subsidiaries, controls or owns, directly or indirectly, at least a

 

2



 

majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or other similar governing body, or in the case of a legal entity with no governing body, at least a majority of the equity or voting interest.

 

Timeshare Business ” means the Vacation Ownership Business but specifically excluding the Fractional Business.

 

Timeshare Unit ” means any Vacation Ownership Unit that is not a Fractional Unit.

 

Section 1.2                                     Table of Definitions .  The following terms have the meanings set forth in the Sections referenced below:

 

Definition

 

Location

Aqua-Aston

 

Section 3.2

Adjacent Hotel

 

Section 2.4

Buyer

 

Recitals

Conversion Hotels

 

Section 3.4

Effective Date

 

Preamble

Hotel Chain Transaction

 

Section 2.4

License Agreement

 

Recitals

Merger Agreement

 

Recitals

Merger Sub

 

Recitals

Owned or Leased Hotels

 

Section 3.3

Part(y)(ies)

 

Preamble

Permitted Hotel Transaction

 

Section 2.4

Permitted Vacation Ownership Business Acquisition

 

Section 3.3

Single Hotel Acquisition

 

Section 2.4

Starwood

 

Preamble

Term

 

Article IV

Vistana

 

Preamble

 

ARTICLE II

 

STARWOOD NONCOMPETITION COVENANTS

 

Section 2.1                                     Restrictions .  Subject to the exclusions, exceptions and limitations expressly set forth in this Agreement, Starwood agrees that during the Term, it will not, and it will cause each of its Subsidiaries and Affiliates not to:

 

(i)                                      Compete in the Timeshare Business anywhere in the world;

 

(ii)                                   license its names or marks (including the Applicable System) to any Person other than Vistana or its Affiliates for use in the Timeshare Business anywhere in the world;

 

(iii)                                Compete in the Fractional Business under the Exclusive Marks anywhere in the world;

 

(iv)                               license the Exclusive Marks to any Person other than Vistana or its Affiliates for use in the Fractional Business anywhere in the world; or

 

(v)                                  use or license the term “Starwood Vacation Network.”

 

3



 

Section 2.2                                     Management Exception .  Notwithstanding Section 2.1 above, nothing in this Agreement will restrict Starwood or its Affiliates from operating and managing properties branded under the Proprietary Marks (including the Exclusive Marks and the Licensed Marks) that are developed, owned, leased or sold by Vistana under on-site resort management contracts (or similar agreements) between Vistana (or its Affiliates) and Starwood (or its Affiliates).

 

Section 2.3                                     Starwood Exceptions .  Notwithstanding Section 2.1 above, nothing in this Agreement will restrict Starwood or any of its Subsidiaries or Affiliates from engaging in the following:

 

(i)                                      developing, selling, marketing, owning, operating, licensing, leasing, managing, franchising or financing Condominium Hotel units and Residential Units;

 

(ii)                                   engaging in activities that Starwood or its Affiliates are specifically permitted to engage in under Section 2.3(B) or Section 5.7 of the License Agreement or under Section 2.4 below, in each case, in accordance with such provisions;

 

(iii)                                (x) managing or franchising a Starwood Lodging Facility that is not branded with the Exclusive Marks and that is a Membership Program Hotel; provided that the amount of revenue generated from transient rental of the rooms/units at such Membership Program Hotel is more than the amount of revenue generated from use of the rooms/units at such Membership Program Hotel by members who have prepaid for use of such Membership Program Hotel through a Membership Program associated with such Membership Program Hotel, with such revenue amounts calculated based on the average revenue generated by the applicable Membership Program Hotel during the five (5) year period immediately preceding the date of the commencement of the management or franchise activities, or (y) providing operational services to a Vacation Ownership Property whose operations are complexed with a Starwood Lodging Facility and Starwood’s involvement in such Vacation Ownership Property is otherwise permitted pursuant to Section 5.7 of the License Agreement; provided that (A) neither Starwood nor any of its Affiliates markets or sells membership interests in any such Membership Program Hotel or units in any such Vacation Ownership Property, as applicable, or receives any direct fees or other direct payment in connection with any such marketing or sale activities, and (B) participants in the Membership Program associated with any such Membership Program Hotel and Owners of interests in any such Vacation Ownership Property are not permitted to trade usage rights associated with such interests for points under any Brand Loyalty Program, or otherwise utilize or have access to a Brand Loyalty Program with respect to their interests;

 

(iv)                               (x) accepting advance deposits or payments for Hotel stays, and (y) accepting multi-year advance Hotel bookings ( provided that any such multi-year advance Hotel bookings relate to specific, identified Hotels and not on a systemwide basis);

 

(v)                                  developing, selling, marketing, owning, operating, licensing, leasing, managing, franchising or financing any Ancillary Amenities;

 

(vi)                               owning equity securities of a publicly-traded Person that Competes in the Timeshare Business; provided that the aggregate holdings of Starwood and its Subsidiaries and Affiliates of such equity securities in such Person does not exceed 5% of the outstanding equity securities of such Person; provided , however , that no such cap on equity ownership will apply in the event Starwood and its Subsidiaries and Affiliates in the aggregate hold more than 5% of the outstanding equity securities of such Person

 

4



 

as a result of a transaction otherwise permitted pursuant to Section 2.4 below and not prohibited by Section 18.2 of the License Agreement;

 

(vii)                            owning equity securities of a publicly-traded Person that Competes in the Fractional Business but not in the Timeshare Business; and/or

 

(viii)                         entering into an agreement for a transaction that would otherwise be restricted by Section 2.1 above; provided that any Vacation Ownership Property contemplated by any such transaction does not open for business and sales of Vacation Ownership Units at such Vacation Ownership Property do not commence, in each case, until after the Term (even if the development or construction of any such Vacation Ownership Property commences during the Term).

 

Section 2.4                                     Single Hotel Acquisitions and Hotel Chain Transactions .

 

Vistana acknowledges that Starwood and its Affiliates may whether by purchase of assets, purchase or exchange of stock of or by another Person, merger or consolidation with or into another Person, undergoing a change of control, joint ventures or other strategic partnerships with another Person, assumption of management or franchise rights, or otherwise (and subsequent dispositions thereof) (i) acquire a single Hotel that may include an existing branded or unbranded Vacation Ownership Business (a “ Single Hotel Acquisition ”) or (ii) make or be the subject of transactions with another Person that includes or otherwise involves another Hotel chain that may also include or otherwise involve an existing branded or unbranded Vacation Ownership Business, whether by way of owning, managing, or franchising, or otherwise licensing rights to, such Vacation Ownership Business (a “ Hotel Chain Transaction ”) to the extent permitted under this Section 2.4 and not prohibited by Section 18.2 of the License Agreement.  Any Single Hotel Acquisition or Hotel Chain Transaction in which (1) the aggregate number of Hotel rooms that are the subject of such Single Hotel Acquisition or Hotel Chain Transaction (whether owned, leased, managed or franchised) is greater than the aggregate number of Timeshare Units that are the subject of such Single Hotel Acquisition or Hotel Chain Transaction (whether owned, leased, managed or franchised) and/or (2) with respect to any single Membership Program Hotel or portfolio of Membership Program Hotels, the amount of revenue generated from transient rental of the rooms/units at such Membership Program Hotel(s) is more than the amount of revenue generated from use of the rooms/units at such Membership Program Hotel(s) by members who have prepaid for use of such Membership Program Hotel(s) through a Membership Program associated with such Membership Program Hotel(s), with such revenue amounts calculated based on the average revenue generated by the applicable Membership Program Hotel(s) during the five (5) year period immediately preceding the date of the Single Hotel Acquisition or Hotel Chain Transaction (each such Single Hotel Acquisition or Hotel Chain Transaction in (1) and (2), a “ Permitted Hotel Transaction ”) shall be permitted under this Section 2.4 , subject to this Section 2.4 .  Starwood shall notify Vistana within five (5) Business Days following the closing of any such Permitted Hotel Transaction, and, to the extent Starwood is permitted pursuant to the terms ( provided Starwood does not seek to include terms that restrict a Vistana relationship) or nature of such Permitted Hotel Transaction, Starwood and Vistana shall use commercially reasonable efforts to negotiate (i) an exchange relationship between the Vacation Ownership Business acquired in the Permitted Hotel Transaction and the Licensed Business, (ii) the affiliation of all or part of any such acquired Vacation Ownership Business with the Licensed Business, and/or (iii) the management or purchase by Vistana of all or part of any such acquired Vacation Ownership Business.  In the event that the Parties are unable to reach agreement on any of the foregoing alternatives within sixty (60) days following the receipt of notice of closing of such Permitted Hotel Transaction (or, to the extent Starwood is not permitted pursuant to the terms or nature of such Permitted Hotel Transaction to allow Vistana to participate in any of the foregoing alternatives, immediately upon the closing of any such Permitted Hotel Transaction), then Starwood and its Affiliates shall have the right to operate or manage (or engage third

 

5



 

parties to operate or manage, under a management, license or franchise agreement or otherwise) such acquired Vacation Ownership Business, including through the use of the System, but under a brand name that does not include any of the Exclusive Marks, even if the Timeshare Units that are part of such Vacation Ownership Business are co-located with a Starwood Lodging Facility; provided , however , that Starwood and its Affiliates will have the right (and will have the right to permit third parties, under a management, license or franchise agreement or otherwise) to (x) market, offer, and sell Timeshare Units that are part of such Vacation Ownership Business at any Hotel (including any Starwood Lodging Facility as long as it is not branded with the Exclusive Marks) acquired as part of such Permitted Hotel Transaction and adjacent to the Vacation Ownership Property that includes such Timeshare Units (an “ Adjacent Hotel ”) to any Person, including guests of such Adjacent Hotel, whether or not such guest is a member of any brand loyalty program, (y) place overflow guests of such Adjacent Hotel in such adjacent Vacation Ownership Property on a transient basis, and (z) offer potential customers of such adjacent Vacation Ownership Property stays at such Adjacent Hotel in connection with the marketing and sale of the Timeshare Units of such adjacent Vacation Ownership Property.

 

ARTICLE III

 

VISTANA NONCOMPETITION COVENANTS

 

Section 3.1                                     Restrictions .  Subject to the exclusions, exceptions and limitations expressly set forth in this Agreement, Vistana agrees that during the Term it will not, and it will cause each of its Subsidiaries and Affiliates not to: (i) Compete in the Hotel Management and Franchising Business anywhere in the world; or (ii) license its names or marks or systems to any Persons (other than Starwood or its Affiliates) for use in the Hotel Management and Franchising Business anywhere in the world.

 

Section 3.2                                     Vistana Exceptions .  Notwithstanding Section 3.1 above, nothing in this Agreement will restrict Vistana or any of its Subsidiaries or Affiliates from engaging in the following:

 

(i)                                      engaging in activities that Vistana or its Affiliates are specifically permitted to engage in under Section 8.2 of the License Agreement or Section 3.3 or Section 3.4 below, in each case, in accordance with such provisions;

 

(ii)                                   owning Hotels branded under the Proprietary Marks subject to a management agreement with Starwood;

 

(iii)                                operating Hotels branded under the Proprietary Marks as a franchisee under a franchise agreement with Starwood;

 

(iv)                               owning equity securities of a publicly-traded Person that Competes in the Hotel Management and Franchising Business; provided that the aggregate holdings of Vistana and its Subsidiaries and Affiliates of such equity securities in such Person does not exceed 5% of the outstanding equity securities of such Person;

 

(v)                                  owning the Transferred Lodging Properties subject to and in accordance with the Management Agreements and Section 5.9 of the License Agreement;

 

(vi)                               engaging in the business operated by Aqua-Aston Holdings, 


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