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EXHIBIT 2.3
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (this "Agreement")
is made and entered into as of the 31st day of July, 1997, by and between Xxxxx
X. Xxxx ("Xxxx"), Wyndham Hotel Corporation, a Delaware corporation (the
"Acquiror"), and ClubHouse Hotels, Inc., a Kansas corporation (the "Target
Company").
RECITALS
A. Pursuant to the Agreement and Plan of Merger dated as of July
21, 1997 among the Target Company, the Acquiror, WHC Acquisition Corporation,
a Delaware corporation ("MergerSub"), Xxxxxx X. Samples and Xxxx (the "Merger
Agreement"), the parties have agreed to the merger of MergerSub with and into
the Target Company (the "Merger") and certain related transactions (the Merger
and such related transactions are collectively referred to herein as the
"Merger Transactions"), all on the terms and subject to the conditions set
forth in the Merger Agreement and such other ancillary agreements as are
referenced therein.
X. Xxxx is a principal stockholder of the Target Company and, as
such, will derive substantial benefit from the Merger Transactions.
C. Each of the Acquiror and the Target Company has been and
presently is engaged (itself and through its subsidiaries and the Related
Entities) in the business of owning, franchising, licensing and operating
hotels (the "Business"). Xxxx is the Chairman of the Board of Directors and
the Secretary of the Target Company (and is also an officer and/or director of
certain of the Target Company's subsidiaries and affiliates and the Related
Entities).
D. The Merger Agreement provides, as a condition to the Closing
thereunder, that Xxxx shall execute and deliver this Agreement.
E. The agreements of Xxxx hereunder are an important aspect of
the Merger Transactions, and the Acquiror and MergerSub would not consummate
the Merger Transactions absent the execution and delivery by Xxxx of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
1. Certain Definitions. Terms with initial capital letters used
herein that are not defined herein shall have the meanings provided for such
terms in the Merger Agreement. As used herein, the term "Target Company" shall
mean ClubHouse Hotels, Inc. prior to the consummation of the Merger and as the
surviving corporation in the Merger.
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2. Restrictive Covenants.
(a) Xxxx hereby acknowledges and agrees that (i) the
know-how, trade secrets, intellectual property rights, marketing and operating
techniques, contacts, customers, suppliers, technology and other aspects of the
business of the Target Company and the Related Entities have been, and
hereafter will be, of value to the Acquiror, the Target Company and the Related
Entities and have provided, and hereafter will provide, the Acquiror, the
Target Company and the Related Entities with substantial competitive advantage
in the operation of their businesses; (ii) by virtue of his previous
relationship with the Target Company and the Related Entities as an officer,
director, shareholder and employee, he has detailed and substantial knowledge
and possesses confidential information concerning the business, operations,
pricing structure, customers, suppliers, personnel and competitive methods of
the Target Company and the Related Entities; and (iii) he has substantial
financial resources and experience in the business of owning, franchising,
licensing and operating hotels and the ability to operate a business or
businesses that could compete with the Acquiror, the Target Company, their
respective subsidiaries and affiliates and the other Related Entities.
(b) Xxxx agrees that, except for such disclosure as may
be required by applicable law, he shall not, directly or indirectly, for
himself or through or on behalf of any other person or entity, at any time
after the date hereof, without the prior written consent of the Acquiror,
reveal, divulge, disclose or communicate to any person, firm, association,
corporation or other entity, or use, in any manner whatsoever any know-how,
trade secrets, intellectual property rights, marketing and operating
techniques, business contacts, client or customer lists, suppliers, technology,
contracts or other confidential or proprietary information of the Target
Company, any Related Entity or any of their respective affiliates (except Innco
Hospitality, Inc. and any entity controlled by Innco Hospitality, Inc. and
Transamerican Properties, Inc. and T.I.P. Realty Partners, and any entity
controlled by either of them and the Broadway Plaza Suites in Kansas City,
Missouri); provided, however, that for purposes hereof, information shall not
be considered to be confidential or proprietary if (i) it is a matter of common
knowledge or public record or (ii) the Undersigned can demonstrate that such
information was already known to the recipient thereof other than by reason of
any breach of any obligation under this Agreement or any other confidentiality
or non-disclosure agreement.
(c) Xxxx agrees that, for a period of five (5) years (or
such lesser period hereinafter provided for) following the date hereof (the
"Restricted Period"), he shall not, without the prior express written consent
of the Acquiror:
(i) except with respect to the Permitted Hotels
(as defined below), call upon, solicit, divert, take away or attempt
to call upon, solicit, divert or take away any existing or potential
customers, suppliers or accounts of the Acquiror Companies, the
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Target Company or the Related Entities or their respective businesses
in connection with any business substantially similar to the Business;
(ii) hire or attempt to hire, for himself or on
behalf of any other person, any present or future employee of the
Acquiror Companies, the Target Company or any Related Entity; or
(iii) own, lease, maintain, operate, franchise,
license, manage, invest in or provide financing for, or give any
advice to any person, firm, partnership, association, venture,
corporation or other entity owning an interest in or engaging,
directly or indirectly, in the management or operation of, (A) any
Hilton Garden, Courtyard by Marriott or Doubletree Club hotel wherever
located or (B) any other Upscale Hotel (as defined below) or Extended
Stay Hotel (as defined below) located in the United States, Canada,
Mexico or the Caribbean within a ten (10)-mile radius of any hotel now
or hereafter operated under the "Wyndham" or "ClubHouse" brand or any
hotel now or hereafter operated under an Extended Stay Hotel brand
owned or hereafter acquired by Acquiror, Target Company or any of
their respective affiliates or now or hereafter operated by Acquiror,
Target Company or any of their respective affiliates under an Extended
Stay Hotel brand licensed to Acquiror, Target Company or any of their
respective affiliates, except for any such activity conducted for or
on behalf of, or in conjunction with, any of the Acquiror Companies
or, in the case of clause (B), Permitted Hotels (as defined below);
provided, that if a hotel operated under the "Wyndham" or "ClubHouse"
brand or any such Extended Stay Hotel brand is announced for a
location that is within a ten (10)-mile radius of any hotel that prior
to the date of such announcement was in operation and is owned,
managed or operated by any such entity in which Xxxx has also prior to
such date commenced involvement of a type that would otherwise be
restricted by clause (B), then this clause (iii) shall not require
Xxxx to cease such involvement; or
(iv) enter into any contract or make any
commitment to take any action that is restricted by clauses (i), (ii)
or (iii) above.
(d) As used in the foregoing provisions, (i) the term
"Upscale Hotel" shall mean any hotel or other lodging facility that is a full
service hotel or facility of a type that is treated or classified as an
"upscale hotel" or as part of the "upscale segment" of the lodging industry by
Xxxxx Travel Research or, if such a classification is not available from Xxxxx
Travel Research, by a similar reputable hotel industry service; (ii) the term
"Extended Stay Hotel" shall mean any hotel or other lodging facility that
derives the majority of its business from guests who stay three consecutive
nights or longer or that is of a type that is treated or classified as an
"extended stay hotel" or as part of the "extended stay segment" of the lodging
industry by Xxxxx Travel Research or, if such a classification is not available
from Xxxxx Travel Research, by a
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similar reputable hotel industry service and (iii) "Permitted Hotels" shall
mean, collectively, (A) the hotel in Wichita, Kansas operated as of the date
hereof as the Wichita Airport Hilton and (B) the hotel in Peoria, Illinois
operated as of the date hereof as the Pere Marquette, (C) any upscale
all-suites hotel located or to be located adjacent to the Sprint campus in
Overland Park, Kansas, (D) the Holiday Inn in Topeka, Kansas, so long as
managed under a management contract by Xxxx or any entity controlled by Xxxx;
(E) if so provided by Section 2(e) below, any three (3) other hotels that, at
the time that Xxxx owns, leases, operates, franchises, licenses, manages,
invests in or gives advice in respect of such hotels, have been open and in
operation for at least one (1) year, provided that this clause (E) and the
similar provision of the Non-Competition and Non-Disclosure Agreement of Xxxxx
X. Xxxx of even date herewith shall collectively not authorize more than a
total of three hotels; (F) the Broadway Plaza Suites in Kansas City, Missouri
and (G) any Extended Stay Hotel at a specified site if (x) Xxxx has offered in
writing to Acquiror or its designee to develop for Acquiror or such designee an
Extended Stay Hotel at such site under an Extended Stay Hotel brand owned or
licensed to Acquiror, Target Company or any of their respective affiliates in
accordance with the procedure set forth below and (y) Acquiror or its designee
has either advised Xxxx that it does not wish to have an Extended Stay Hotel
developed at such site under an Extended Stay Hotel brand owned or licensed to
Acquiror, Target Company or any of their respective affiliates or failed to
respond within the time period set forth below. In the case of clause (G)
above, Xxxx'x offer shall include a reasonably detailed proposal for the
development of the site as an Extended Stay Hotel. Acquiror or its designee
shall be given at least thirty (30) days to evaluate such offer and respond to
Xxxx. If Acquiror or its designee fails to respond within such thirty (30) day
period or advises Xxxx that it does not wish to have an Extended Stay Hotel
developed at such site under an Extended Stay Hotel brand owned or licensed to
Acquiror, Target Company or any of their respective affiliates, Xxxx may
develop an Extended Stay Hotel on such site with another party if construction
of such Extended Stay Hotel is commenced within 180 days thereafter and is
pursued with reasonable diligence thereafter.
(e) If, by July 1, 1998, Xxxx has not entered into an
agreement with the Acquiror (or any successor to or affiliate of the Acquiror
or any such successor) concerning the development, franchise or operation of a
hotel, then upon such date the definition of Permitted Hotels in Section 2(d)
above shall include clause (E) thereof from and after such date. As used in
the preceding sentence and in Section 2(f) below, an "affiliate" of any person
means any other person controlling, controlled by, or under common control
with, such first person.
(f) If, by July 1, 1998 (if the merger of Acquiror into
Patriot Hospitality, Inc. provided for in the Patriot-Acquiror Merger Agreement
(as defined in the Merger Agreement) (the "Patriot-Acquiror Merger") has not
occurred by that date) or one (1) year after the closing of the
Patriot-Acquiror Merger (if such merger has occurred prior to July 1, 1998),
Xxxx has not entered into an agreement with the Acquiror (or any successor to
or affiliate of the Acquiror or any such successor) concerning the development,
franchise or operation of a hotel, then upon
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such date the term of the Restricted Period automatically shall be reduced from
five (5) to three (3) years.
(g) Except as otherwise expressly permitted hereby, the
covenants in this Section 2 are intended to restrict Xxxx from competing in any
manner with the Acquiror Companies, the Target Company and the Related Entities
or the Business in the activities that have heretofore been carried on by the
Acquiror Companies, the Target Company and the Related Entities. The
obligations set forth in this Section above shall apply to actions by Xxxx,
whether taken directly or indirectly, through any form of ownership, and
whether as principal, officer, director, agent, employee, employer, consultant,
stockholder or holder of any equity security (beneficially or as trustee of any
trust), lender, partner, joint venturer or in any other individual or
representative capacity whatsoever. However, none of the foregoing shall
prevent Xxxx from (i) being the holder of up to 5% in the aggregate of any
class of securities of any corporation engaged in the activities described
above, provided that such securities are listed on a national securities
exchange or reported on NASDAQ or (ii) being the holder of non-convertible debt
securities of any entity.
3. Enforcement of Covenants. Xxxx acknowledges that a violation
or attempted violation of any of the covenants and agreements in Section 2
above will cause such damage to the Acquiror Companies, the Target Company and
the Related Entities as will be irreparable, the exact amount of which would be
difficult to ascertain and for which there will be no adequate remedy at law,
and accordingly, Xxxx agrees that each of the Acquiror Companies and the Target
Company and any Related Entity shall be entitled as a matter of right to an
injunction issued by any court of competent jurisdiction, restraining such
violation or attempted violation of such covenants and agreements by Xxxx, or
the employees, partners or agents of Xxxx, as well as recover from Xxxx any and
all costs and expenses sustained or incurred by the Acquiror Companies and the
Target Company and the Related Entities in obtaining such an injunction,
including, without limitation, reasonable attorneys' fees. Xxxx agrees that no
bond or other security shall be required in connection with such injunction.
Xxxx further agrees that the Restricted Period shall be tolled during any
period of violation thereof by Xxxx. Any exercise by any one or more of the
Acquiror Companies and the Target Company and the Related Entities of their
respective rights pursuant to this Section 3 shall be cumulative and in
addition to any other remedies to each of them may be entitled.
4. Intellectual Property. Xxxx recognizes and agrees that, on
and after the date hereof, he will not have the right to use for his own
account any of the service marks, trademarks, trade names, licenses, labels,
trade secrets or customers' lists owned by or licensed to the Acquiror
Companies, the Target Company or any of the Related Entities.
5. Consideration. As consideration for Xxxx'x agreements
provided herein, the Acquiror agrees to pay to Xxxx the total sum of $500,000,
which amount shall be payable by wire
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transfer of immediately available funds on the date hereof. Xxxx also
acknowledges and agrees that, in addition thereto, he has received substantial
consideration and benefit, direct and indirect, pursuant to the Merger and the
other transactions contemplated by the Merger Agreement.
6. Validity. Xxxx acknowledges and agrees that each of the
covenants contained herein is a reasonable limitation as to time, geographical
area and scope of activity to be restrained and does not impose a greater
restraint than is necessary to protect the goodwill or other interests of the
Acquiror Companies and the Target Company and the Related Entities. To the
extent permitted by applicable law, if it should ever be held that any
provision contained herein does not contain reasonable limitations as to time,
geographical area or scope of activity to be restrained, then the court so
holding shall at the request of any of the Acquiror Companies or the Target
Company or any Related Entity reform such provisions to the extent necessary to
cause them to contain reasonable limitations as to time, geographical area and
scope of activity to be restrained and to give the maximum permissible effect
to the intentions of the parties as set forth herein; and the court shall
enforce such provisions as so reformed. If, notwithstanding the foregoing, any
provision hereof is held to be illegal, invalid or unenforceable under present
or future laws effective during the term hereof, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof; and the
remaining provisions hereof shall remain in full force and effect and shall not
be affected by the illegal, invalid or enforceable provision or by its
severance here from. Furthermore, in lieu of such illegal, invalid or
unenforceable provision there shall be added automatically by the Acquiror and
the Target Company as a part hereof a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable, and the parties hereby agree to such provision.
7. Waiver of Breach. The waiver by any party to this Agreement
of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach by any party.
8. Tax Reporting. The parties hereby expressly agree that the
consideration given and received pursuant to this Agreement shall, for income
tax purposes, be reported as amounts paid for a covenant not to compete. The
parties acknowledge that Xxxx shall be solely responsible for the payment of
any federal, state or local taxes arising from his receipt of the consideration
under this Agreement.
9. Notice. Any notice, request, instruction, document or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and validly given if (i) delivered personally, (ii)
sent by telecopy, (iii) delivered by overnight express, or (iv) sent by
registered or certified mail, postage prepaid, as follows:
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If to Acquiror or the Target Company:
Wyndham Hotel Corporation/ClubHouse Hotels, Inc.
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: Legal Department
Facsimile No. (000) 000-0000
If to Xxxx:
Xx. Xxxxx X. Xxxx
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxx 00000-0000
Facsimile No. (000) 000-0000
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally, or sent by telecopy or overnight express
in the manner provided herein shall be deemed to have been duly given to the
party to whom it is directed upon actual receipt by such party. Any notice
which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been given to the party to whom it is addressed
at the close of business, local time of the recipient, on the third day after
the day it is so placed in the mail.
10. Entire Agreement. This Agreement contains the entire
agreement of the parties hereto with respect to the matters covered hereby, and
supersedes all prior negotiations and written, oral or implied representations,
warranties, commitments, offers, contracts and understandings between the
parties with respect to such matters. No modification or amendment of any of
the terms, conditions or provisions in this Agreement may be made otherwise
than by written agreement signed by the parties hereto, except as provided in
Section 6 hereof.
11. Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns; provided, however, that
the obligations herein of Xxxx may not be delegated or assigned, and any
purported delegation or assignment by Xxxx in violation of this Section 11
shall be null and void. Xxxx hereby acknowledges and agrees that the Acquiror
Companies and Related Entities, and any other entity now or hereafter owning or
operating any hotel operated under the "Wyndham," "ClubHouse" or "Homegate"
brand, are intended beneficiaries of the provisions hereof, notwithstanding the
fact that such entities may not be parties hereto, and shall be entitled to
enforce the provisions hereof as if they were parties hereto.
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12. Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.
13. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED,
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO
ITS CHOICE OF LAW PRINCIPLES).
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and such counterparts
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ XXXXX X. XXXX
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Xxxxx X. Xxxx
WYNDHAM HOTEL CORPORATION,
a Delaware corporation
By: /s/ XXXXXXX XXXXXXXXX
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Name: Xxxxxxx Xxxxxxxxx
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Title: Authorized Agent
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CLUBHOUSE HOTELS, INC.
a Kansas corporation
By: /s/ XXXXXX X. SAMPLES
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Name: Xxxxxx X. Samples
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Title: President
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