Common use of Loss of Exclusivity Clause in Contracts

Loss of Exclusivity. A. The parties agree that the exclusivity granted in Section 1 of this Agreement shall become non-exclusive and the restrictions and limitations on Starwood and its Affiliates in Section 2.2A of this Agreement shall cease upon the last to occur of the following events in connection with clauses (i) through (vi) below, as applicable: (x) the calculations required to determine the amounts as set forth in any of clauses (i) through (vi) below are completed, as applicable, (y) any dispute in connection with the results of such calculations is resolved, and (z) an installment of the applicable Exclusivity Continuation Fee has become due and payable and Vistana has failed to make the required payment thereof before the end of the applicable cure period (each of clauses (i) through (vi) below being an “Exclusivity Test”): (i) If the aggregate Gross Sales Price for sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests, during the period commencing on January 1, 2021 and ending on December 31, 2040 and calculated by Vistana by no later than February 28, 2041 is less than six billion dollars ($6,000,000,000); (ii) If the aggregate Gross Sales Price for sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests, during the prior twenty (20) year period ending on December 31, 2060 and calculated by Vistana by no later than February 28, 2061 is less than six billion dollars ($6,000,000,000), as adjusted annually after the Effective Date by the GDP Deflator; (iii) If the aggregate Gross Sales Price for sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests during the prior twenty (20) year period ending on December 31, 2080 and calculated by Vistana by no later than February 28, 2081 is less than six billion dollars ($6,000,000,000), as adjusted annually after the Effective Date by the GDP Deflator; (iv) In the event Vistana obtains the first Extension Term in accordance with Section 4.2, if the aggregate Gross Sales Price for sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests during the prior twenty (20) year period ending on December 31, 2100 and calculated by Vistana by no later than February 28, 2101 is less than six billion dollars ($6,000,000,000), as adjusted annually after the Effective Date by the GDP Deflator; (v) In the event Vistana obtains the first Extension Term in accordance with Section 4.2, if the aggregate Gross Sales Price for sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests during the prior twenty (20) year period ending on December 31, 2120 and calculated by Vistana by no later than February 28, 2121 is less than six billion dollars ($6,000,000,000), as adjusted annually after the Effective Date by the GDP Deflator; or (vi) In the event Vistana obtains the second Extension Term in accordance with Section 4.2, if the aggregate Gross Sales Price for sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests during the prior twenty (20) year period ending on December 31, 2140 and calculated by Vistana by no later than February 28, 2141 is less than six billion dollars ($6,000,000,000), as adjusted annually after the Effective Date by the GDP Deflator. (vii) For the purposes hereof, each twenty (20) year period, as applicable, described in clauses (i) through (vi) above shall be an “Exclusivity Test Period”, and the respective six billion dollar ($6,000,000,000) amount (as appropriately adjusted by the GDP Deflator) for each such Exclusivity Test Period shall be an “Exclusivity Test Target”. Any Exclusivity Test Target shall be replaced in one or more of clauses (i) through (vi) above by the Adjusted Exclusivity Test Target, if any, as determined in accordance with Section 2.5B(iii) below. (i) Notwithstanding the foregoing to the contrary, in the event an Exclusivity Test Target is not satisfied for any Exclusivity Test Period as provided in Section 2.5A above, Vistana may maintain the exclusivity granted to it in Section 1 of this Agreement by paying an Exclusivity Continuation Fee (as defined below). Each Exclusivity Continuation Fee, if any, shall be paid in six (6) equal installments, with the first installment due within ten (10) Business Days after the calculations to determine the Exclusivity Continuation Fee for the applicable Exclusivity Test Period are finalized, and the remaining five (5) installments paid on the next five (5) anniversaries of the payment of the first installment for the applicable period. Vistana may prepay any Exclusivity Continuation Fee without penalty. If Vistana fails to pay any installment when the same becomes due and payable, then Starwood may issue a notice to Vistana with respect to such failure. Vistana shall have thirty (30) days following Vistana’s receipt of such notice to cure the failure to pay. If Vistana fails to cure any payment failure within such thirty (30) day period, then the entire outstanding amount of the Exclusivity Continuation Fee shall become immediately due and payable. Without limiting any other remedies that may be available to Starwood under this Agreement or otherwise, in the event of an uncured default by Vistana of its payment of an Exclusivity Continuation Fee, Starwood may at any time after the end of the applicable cure period, upon delivery of written notice to Vistana, declare that the grant of exclusive rights under this Agreement have become non-exclusive, at which time the exclusivity granted in Section 1 and the restrictions and limitations on Starwood and its Affiliates in Section 2.2A shall immediately cease and be of no further force or effect. (ii) Vistana shall calculate the amount of any shortfall for an Exclusivity Test Period by determining the difference between the applicable Exclusivity Test Target for such Exclusivity Test Period and the actual aggregate Gross Sales Price for sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests occurring during such Exclusivity Test Period (the “Sales Performance Shortfall Amount”). The Sales Performance Shortfall Amount shall be multiplied by two percent (2%) to determine the Variable Sale Royalty to be paid for the applicable Exclusivity Test Period attributable to sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests. The amount so calculated is the “Exclusivity Continuation Fee,” (which, for the avoidance of doubt, shall be payable in addition to the Variable Sale Royalty payable for sales of Licensed Vacation Ownership Interests and Licensed Unbranded Vacation Ownership Interests which did occur during such period). (iii) The Exclusivity Test Target shall be reduced for any Exclusivity Test Period, as applicable, by an amount determined at the time of calculation which is equal to the following fraction, (a) the numerator of which is the total number of Vacation Ownership Units in Vacation Ownership Properties which were rejected by Starwood during the applicable Exclusivity Test Period and subsequently developed by Vistana or its Affiliate as unbranded Vacation Ownership Properties during the applicable Exclusivity Test Period (but not on account of a rejection based on the location for such proposed New Properties being within a Permitted Territorial Restriction previously identified to Vistana); provided, however, that all such rejections must have been made after the complete Property Approval Request of such proposed New Property has been submitted in good faith and the related Property Approval Request Fee has been paid in full; and (b) the denominator of which is the total number of Vacation Ownership Units in all approved New Properties as of the date of determination. The resulting fraction shall be multiplied by the then Exclusivity Test Target and the product thereof shall be subtracted from such Exclusivity Test Target to determine an adjusted Exclusivity Test Target (the “Adjusted Exclusivity Test Target”).