NON-COMPETITION AGREEMENT
October 1, 1996
WHEREAS, FIRST, pursuant to certain loan agreements (the "Loan
Agreements") entered into between each of Province of Alberta Treasury Branches
("ATB"), Bank of Montreal, Scotia Mortgage Corporation and Canadian Imperial
Bank of Commerce (each, a "Lender" and, collectively, the "Lenders") with
Capital Properties Limited Partnership ("CPLP"), Syndicated Capital Properties
Inc. ("Syndicated"), and Syncap Properties Inc. ("Syncap"), the Lenders each
agreed to lend certain funds to CPLP, Syndicated and Syncap (collectively, the
"Borrowers"), based on certain security provided to the Lenders or a trustee
for a Lender by Tegrad Properties (Winnipeg) Inc., Tegrad Montreal I Inc. and
1002370 Ontario Inc. (collectively, the "Nominees", the Nominees and the
Borrowers are collectively defined as the "Debtors") including and in respect
of certain properties;
WHEREAS, SECOND, as a result of certain ongoing defaults by the Borrowers
under the Loan Agreements and a request by the Lenders that CPLP attempt to
restructure its affairs, National Lodging Corp. ("NLC") agreed to enter into a
letter agreement (the "Lender Letter Agreement") with the Lenders for the
purchase of certain debt and security (the "Loan"), which Lender Letter
Agreement will be assigned prior to or at closing to Bear Financial Corp., an
affiliate of NLC ("Bear");
WHEREAS, THIRD, in order to settle certain disputes between Royco Hotels &
Resorts Ltd. ("Royco"), its shareholders and certain related parties, on the
one hand, and ATB, on the other, such parties, together with NLC are entering
into a certain letter agreement dated as of the date hereof (the "ATB Letter
Agreement") pursuant to which such parties, as a result, in part, of the
intervention by NLC, and the provision by NLC of $155,000, will settle disputes
as referenced therein;
WHEREAS, FOURTH, contemporaneously with the execution of the Lender Letter
Agreement and the ATB Letter Agreement, CPLP and the Debtors entered into a
contract of sale (the "NLC Agreement") with Chartwell Canada Corp.
("Chartwell") an affiliate of NLC (together with NLC and Bear, collectively
"NLC"), pursuant to which such affiliate will purchase the Properties;
WHEREAS, FIFTH, contemporaneously with the execution of the NLC Agreement,
the Royers will deliver a Guaranty to NLC (the "Guaranty");
WHEREAS, SIXTH, contemporaneously with the closing of the NLC Agreement,
Royco will enter into an Amended and Restated Management Services and Franchise
Development Agreement with NL Hotels, Inc. ("NL"; and the agreement to be known
as the "MSFDA"); and
WHEREAS, SEVENTH, NLC is willing to enter into the Lender Letter
Agreement, the ATB Letter Agreement and the NLC Agreement, respectively, only
if, inter alia, the Royers execute and deliver this Agreement, all as more
particularly set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and legal sufficiency of which is
hereby acknowledged, and in order to induce NLC and its Affiliate to enter into
the Lender Letter Agreement, the ATB Letter Agreement and the NLC Agreement,
respectively, the Royers hereby guarantee, covenant and agree with NLC as
follows:
1. As used herein, the following terms shall have the following meanings:
C/M: 11752.0002 384735.2
Royers: The term "Royers" shall mean, collectively, Royco, Xxxxx Xxxxx,
Xxxxxxxx Xxxxx, Xxxxxxx Xxxxx and Xxxxx X. Xxxxxx. Each of the Royers shall be
defined as a "Xxxxx".
1. (A) Save and except as hereinafter provided, without the
prior written consent of the Executive Committee as provided for in
the MSFDA, the Royers hereby covenant and agree that they, and each
of them, shall not (i) engage in any Management Business or Franchise
Business (as such terms are defined in the MSFDA) independent of
Royco or (ii) assist, advise or otherwise consult with any other
person or entity, whether directly or indirectly, with respect to the
Management Business or the Franchise Business independent of Royco
prior to the termination of the MSFDA in accordance with its terms
and satisfaction of the parties' respective obligations thereunder.
(B) The business (the "RVI Business") currently carried on by
RVI Holiday Limited Partnership, NRG Vacations Inc., R.V.I. Holiday
Inc., R.V.I. Holiday Group and Steelgate Financial Services Inc.
(collectively, the "RVI Group") and any direct or indirect
involvement of the Royers or any of them (other than Royco) in the
RVI Business or with the RVI Group, subject to the obligations of the
Royers under the Service Contracts (as that term is defined in the
MSFDA and in the Development Agreement) shall in no event constitute
or be deemed to constitute a breach of the provisions hereof. For
greater certainty, notwithstanding the provisions of section 1(A)
hereof but subject to the foregoing, any of the Royers shall be
entitled to carry on or be engaged in or concerned with, or lend
money to, or guarantee the debts or obligations of, or permit their
names or any part thereof to be used or employed by the RVI Business
or by any member of the RVI Group in respect of or in connection with
the RVI Business. The Royers hereby represent and warrant that the
RVI Business consists solely of (i) the indirect (pursuant to third
party licenses or contracts) and direct purchase and sale of
timeshare inventory, and (ii) the management and operation of
timeshare programs and the use of timeshare inventory (other than the
management of timeshare resorts).
(C) If any Xxxxx (an "Applicant Xxxxx") (i) wishes to engage
in an activity (a "Prohibited Activity") that would be a violation of
the provisions of section 1(A) hereof, (ii) the Applicant Xxxxx is not
at the relevant time directly or indirectly employed by NLC or an
affiliate thereof, pursuant to the MSFDA, the Development Agreement or
otherwise, (iii) the Applicant Xxxxx has submitted a written proposal
(a "Proposal") in respect of the Prohibited Activity to the Executive
Committee, and (iv) the Executive Committee does not wish Royco to
pursue the Prohibited Activity pursuant to its mandate under the
MSFDA, then the Applicant Xxxxx, or an affiliate thereof, may, without
cost to or interference from NLC or NL or interference with the
obligations of Royco under the MFSDA or of the Royers under the
Service Contracts (as such term is defined in the MSFDA and the
Development Agreement), and provided that the Prohibited Activity is
not directly or indirectly competitive with Royco's extant Management
Business, Franchise Business or business plan, pursue the Prohibited
Activity for its own account on substantially the same terms as set
forth in the applicable Proposal without being otherwise liable for
breach hereof or accountable to NLC, NL or the Executive Committee in
respect thereof.
2. Any breach hereunder shall be grounds for NL to terminate the
Development Agreement (as such term is defined in the NLC Agreement) and the
MSFDA "with cause" as provided for therein. In addition, all proceeds realized
by the Royers in connection with a breach hereunder shall be (i) considered to
be Gross Revenues (as that term is defined in the MSFDA), (ii) dealt with as
Gross Revenue in accordance with the MSFDA, and (iii) held in constructive
trust for the benefit of Royco and NLC. Furthermore, all hotel management
business and/or franchise business, as the case may be, performed in breach
hereof shall be (x) considered to be Management Business or Franchise Business,
as the case may be, and (y) dealt with in accordance with the terms of the
MSFDA; provided, however, that terms and conditions of this sentence shall be
deemed partial compensatory damages resulting from a breach of the Xxxxx'x
obligations under Section 1
C/M: 11752.0002 384735.2
2
hereof and shall not be deemed, or construed to be (1) a waiver by NLC of its
right to terminate the Development Agreement and/or MFSDA "with cause" or (2)
as a waiver by NLC of its right to seek, and obtain and receive, damages
resulting from a breach by the Royers or any of their respective affiliates of
any of their respective obligations under the NLC Agreement, the Guaranty, the
Development Agreement, the MFSDA, the Indemnification Agreement or hereunder.
3. The Royers hereby waive (a) notice of acceptance of this
Agreement; and (b) all other notices of any nature whatsoever to which the
Royers might otherwise be entitled (except as otherwise expressly provided for
in this Agreement).
4. Each reference herein to NLC shall be deemed to include its
affiliated successors and assigns, in whose favor the provisions of this
Agreement shall also inure. Each reference herein to the Royers or a Xxxxx
shall be deemed to include such Xxxxx'x, respective heirs, executors,
administrators, legal representatives, trustees, successors and assigns, and
with respect to a Xxxxx which is not an individual, such entities' beneficial
owners and their respective heirs, executors, administrators, legal
representatives, trustees, successors and assigns, all of whom shall be bound
by the provisions of this Agreement (but, subject to the provisions of section
19 of the Guaranty, in no event shall such entities' beneficial owners and
their respective heirs, executors, administrators, legal representatives,
trustees, successors and assigns be liable for amounts in excess of amounts
distributable to such persons by reason of their respective ownership interests
in Royco for and in respect of any period from and after October 1, 1996),
provided, however, that in no event or under any circumstance shall the Royers,
or any Xxxxx, have the right to assign or transfer his, its, or their joint and
several obligations and liabilities under this Agreement, in whole or in part,
to any other person, party or entity; provided, further, however,
notwithstanding the foregoing, in no event shall Avola Limited have any
liabilities, obligations or responsibilities in respect of or as a result of
the foregoing and this Agreement unless and to the extent the representations
and warranties contained in section 20 of the Guaranty are at any time untrue.
5. No delay on the part of NLC in exercising any right or remedy
under this Agreement or failure to exercise the same shall operate as a waiver
in whole or in part of any such right or remedy. No notice to or demand on the
Royers shall be deemed to be a waiver of the obligation of the Royers or of the
right of NLC to take further action without notice or demand as provided in
this Agreement.
6. This Agreement may only be modified, amended or changed by an
agreement in writing signed by NLC and the Royers, and shall in no event be
terminated except in accordance with the provisions of this Agreement. No
waiver of any term, covenant or provision of this Agreement shall be effective
unless given in writing by NLC and if so given by NLC shall only be effective
in the specific instance in which given.
7. Other than as expressly stated herein, the Royers acknowledge and
agree that this Agreement and their obligations hereunder are and shall at all
times be absolute and unconditional in all respects, and are and shall at all
times be valid and enforceable irrespective of any other agreements or
circumstances of any nature whatsoever which might otherwise constitute a
defense to this Agreement and the obligations of the Royers hereunder or the
obligations of any other person or party relating to this Agreement or the
obligations of the Royers hereunder, other than factual matters which may have
a bearing on liability hereunder. This Agreement sets forth the entire
agreement and understanding of NLC and the Royers with respect to the matters
covered by this Agreement, and the Royers absolutely, unconditionally and
irrevocably waive any and all right to assert any defense, setoff, counterclaim
or crossclaim of any nature whatsoever with respect to this Agreement or the
obligations of the Royers under this Agreement or the obligations of any other
person or party relating to this Agreement or the obligations of the Royers
hereunder or to enforce the obligations of the Royers under this Agreement
other than factual matters which may have a bearing on liability hereunder, but
excluding any defenses and the like which are founded in legal or documentary
infirmities or issues, and not assertions of contrary or germane facts which
would mitigate liability hereunder. The Royers acknowledge and agree that no
oral or other agreements, understandings, representations or warranties exist
C/M: 11752.0002 384735.2
3
with respect to this Agreement or with respect to the obligations of the Royers
under this Agreement, except those specifically set forth in this Agreement.
8. THE ROYERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, AND NLC
BY ITS ACCEPTANCE OF THIS AGREEMENT IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN
CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT.
9. Any notice, demand or other communication which any party hereto
may desire or may be required to give to any other party hereto shall be in
writing, and shall be deemed given (a) if and when personally delivered, (b)
upon receipt if sent by a nationally recognized overnight courier addressed to
a party at its address set forth below, or (c) on the seventh (7th) business
day after being deposited in United States or Canadian registered or certified
mail, postage prepaid, addressed to a party at its address set forth below, or
to such other address as the party to receive such notice may have designated
to all other parties by notice in writing in accordance herewith: If to the
Royers:
Royco Hotels & Resorts Ltd.
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xx. Xxxxxxxx Xxxxx
Telecopy: (000) 000-0000
Xx. Xxxxx Xxxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopy: (000) 000-0000
Xx. Xxxxxxx Xxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopy: (000) 000-0000
Xx. Xxxxxxxx Xxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopy: (000) 000-0000
Xx. Xxxxx Xxxxx
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx X0X 0X0
Telecopy: (000) 000-0000
C/M: 11752.0002 384735.2
4
With a copy to:
Brans, Lehun, Xxxxxxx & Champagne
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
If to NLC, at:
c/o National Lodging Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
With a copy to:
Battle Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
Telecopy: (000) 000-0000
Each party to this Agreement may designate a change of address by written
notice given to the other parties fifteen (15) days prior to the date such
change of address is to become effective.
10. This Agreement is, and shall be deemed to be, a contract entered
into under and pursuant to the laws of Ontario and shall be in all respects
governed, construed and applied in accordance with the laws of Ontario.
11. The Royers agree to submit to personal jurisdiction of Ontario
courts in any action or proceeding arising out of this Agreement and, in
furtherance of such agreement, the Royers hereby agree and consent that without
limiting other methods of obtaining jurisdiction, personal jurisdiction over
the Royers in any such action or proceeding may be obtained within or without
the jurisdiction of any court located in Ontario and that any process or notice
of motion or other application to any such court in connection with any such
action or proceeding may be served upon the Royers by registered or certified
mail to or by personal service at the last known address of the Royers, whether
such address be within or without the jurisdiction of any such court.
12. No exculpatory provisions contained in any document or instrument
executed and delivered in connection therewith or under any circumstance be
deemed or construed to modify, qualify or affect in any manner whatsoever the
personal recourse obligations and liabilities of the Royers under this
Agreement.
13. If any term, covenant or provision of this Agreement shall be
held to be invalid, illegal or unenforceable in any respect, this Agreement
shall be construed without such term, covenant or provision; provided, however,
the Royers and NLC shall use their best efforts to reform such term, covenant
or provision held to be invalid, illegal or unenforceable so as to make same
valid, legal and binding.
C/M: 11752.0002 384735.2
5
14. Each of the Royers acknowledge that he (a) has had the
opportunity to obtain advice of counsel of its own choosing in connection with
the negotiations concerning this Agreement and the drafting and other
preparation of this Agreement; (b) has read the Agreement, has had the
Agreement fully explained by such counsel, and is fully aware of its contents
and legal effects; (c) has entered into this Agreement of his own free will and
accord and without threats, coercion, fraud or duress of any kind and (d) is
not relying on any representation, statement or warranty of any person, party
or entity regarding this Agreement or the transactions contemplated hereby,
except as set forth in this Agreement.
15. In the event the parties hereunder are unable to resolve a
dispute, claim, question or difference, then the parties shall use their best
endeavors to settle any disputes, claims, questions or differences arising out
of or in relation to this Agreement. To this effect, they shall consult and
negotiate with each other, in good faith and understanding of their mutual
interests, to reach a just and equitable solution satisfactory to all of them
within fifteen (15) days of written notice of a claim by one party to another.
If they do not reach such solution within such fifteen (15) day period, then
any party may deliver notice (the "Arbitration Notice") to the other party
requiring resolution by arbitration and thereafter the dispute, claim, question
or difference in issue shall be referred to arbitration for final settlement
binding on both parties in accordance with the provisions of the Arbitrations
Act (Ontario) as follows:
(A) The arbitration tribunal shall consist of one arbitrator
appointed by mutual agreement of the parties. In the event of the
failure of the parties to agree on such arbitrator within ten (10)
days after delivery of the Arbitration Notice, the arbitration
tribunal shall consist of three (3) arbitrators and within twenty (20)
days after delivery of the Arbitration Notice, each party shall
jointly appoint one (1) arbitrator to the arbitration tribunal and the
two (2) arbitrators appointed by the parties shall appoint a third
(3rd) arbitrator. In the event that the two (2) arbitrators appointed
by the parties fail to agree on the third (3rd) arbitrator, the
parties shall apply to a judge of the Ontario Court of Justice
(General Division) to appoint the third (3rd) arbitrator. The
arbitrator(s) shall be qualified by education and training to pass
upon the particular matter and shall have a minimum of five (5) years
of experience pertinent to the subject matter of the dispute, claim,
question or indifference.
(B) The arbitrator(s) shall be instructed that time is of the
essence in proceeding with the determination of any dispute, claim,
question or difference.
(C) The arbitration shall be conducted in English and shall
take place in Toronto, Canada.
(D) The arbitration award shall be given in writing and shall
be final, binding on the parties, not subject to any appeal, and shall
deal with the question of costs of arbitration and all matters related
thereto.
(E) Judgment upon the award rendered may be entered into any
court having jurisdiction, or application may be made to such court
for a judicial recognition of the award or an order of enforcement
thereof, as the case may be.
16. This Agreement and the obligations of the Royers hereunder shall
terminate upon the termination of the MSFDA in accordance with the terms and
conditions thereof and the satisfaction of the parties' respective obligations
thereunder and hereunder.
C/M: 11752.0002 384735.2
6
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the day and year first above set forth.
ROYCO HOTELS & RESORTS LTD.
By: /s/ Xxxxxxxx Xxxxx
Name: XXXXXXXX XXXXX
Title:
By: /s/ Xxxxx X. Xxxxxx
Name: XXXXX X. XXXXXX
Title: An Individual
By: /s/ Xxxxxxxx Xxxxx
Name: XXXXXXXX XXXXX
Title: An Individual
By: /s/ Xxxxx Xxxxx
Name: XXXXX XXXXX
Title: An Individual
By: /s/ Xxxxxxx Xxxxx
Name: XXXXXXX XXXXX
Title: An Individual
NATIONAL LODGING CORP. (Now known as
Chartwell Leisure Inc. as of 8/8/96)
By: /s/ Xxxxxxx Xxxxxx
Name: XXXXXXX XXXXXX
Title:
NL HOTELS, INC. (Now known as Chartwell
Lodging Inc. as of 8/8/96)
By: /s/ Xxxxxxx Xxxxxx
Name: XXXXXXX XXXXXX
Title:
C/M: 11752.0002 384735.2
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