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Re: Call Option Transaction

Option Agreement

Re: Call Option Transaction | Document Parties: WYNDHAM WORLDWIDE CORP You are currently viewing:
This Option Agreement involves

WYNDHAM WORLDWIDE CORP

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Title: Re: Call Option Transaction
Date: 5/19/2009
Industry: Hotels and Motels     Sector: Services

Re: Call Option Transaction, Parties: wyndham worldwide corp
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Exhibit 10.7

EXECUTION VERSION

Citibank, N.A.
390 Greenwich Street
New York, NY 10013
Attention:    Equity Derivatives
Facsimile: (212) 723-8328
Telephone: (212) 723-7357

May 13, 2009

To: Wyndham Worldwide Corporation
22 Sylvan Way
Parsippany, NY 07054
Attention:    Vice President, Treasury
Telephone No.: (973) 753-7703
Facsimile No.: (973) 753-6730

Re: Call Option Transaction

     The purpose of this letter agreement (this “ Confirmation ”) is to confirm the terms and conditions of the call option transaction entered into between Citibank, N.A. (“ Dealer ”) and Wyndham Worldwide Corporation (“ Counterparty ”) as of the Trade Date specified below (the “ Transaction ”). This letter agreement constitutes a “Confirmation” as referred to in the Agreement specified below. This Confirmation shall replace any previous agreements and serve as the final documentation for this Transaction.

     The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the “ Equity Definitions ”), as published by the International Swaps and Derivatives Association, Inc. (“ ISDA ”) are incorporated into this Confirmation. In the event of any inconsistency between the Equity Definitions and this Confirmation, this Confirmation shall govern. Certain defined terms used herein have the meanings assigned to them in the Indenture dated as of November 20, 2008 (the “ Base Indenture ”), as supplemented by a Second Supplemental Indenture thereto (the “ Supplemental Indenture ”) to be dated May 19, 2009, between Counterparty and U.S. Bank National Association, as trustee (as so supplemented, the “ Indenture ”) relating to the USD 200,000,000 principal amount of Convertible Senior Notes due 2012, (the “ Convertible Notes ” and each USD 1,000 principal amount of Convertible Notes, a “ Convertible Note ”) issued by Counterparty. In the event of any inconsistency between the terms defined in the Indenture and this Confirmation, this Confirmation shall govern. The parties acknowledge that this Confirmation is entered into on the date hereof with the understanding that (i) definitions set forth in the Indenture that are also defined herein by reference to the Indenture and (ii) sections of the Indenture that are referred to herein will conform to the descriptions thereof in the Prospectus dated November 25, 2008, as supplemented by the Prospectus Supplement dated May 13, 2009 (as so supplemented, the “ Prospectus ”) relating to the Convertible Notes. If any such definitions in the Indenture or any such sections of the Indenture differ from the descriptions thereof in the Prospectus, the descriptions thereof in the Prospectus will govern for purposes of this Confirmation. The parties further acknowledge that the Supplemental Indenture section numbers used herein are based on the draft of the Supplemental Indenture last reviewed by Dealer as of the date of this Confirmation, and if any such section numbers are changed in the Supplemental Indenture as executed, the parties will amend this Confirmation in good faith to preserve the intent of the parties. For the avoidance of doubt, references to the Indenture herein are references to the Indenture as in effect on the date of its execution and if the Indenture is amended following its execution, any such amendment will be disregarded for purposes of this Confirmation unless the parties agree otherwise in writing.

     Each party is hereby advised, and each such party acknowledges, that the other party has engaged in, or refrained from engaging in, substantial financial transactions and has taken other material actions in reliance upon the parties’ entry into the Transaction to which this Confirmation relates on the terms and conditions set forth below.

1. This Confirmation evidences a complete and binding agreement between Dealer and Counterparty as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the 2002 ISDA Master Agreement (the “ Agreement ”)


 

as if Dealer and Counterparty had executed an agreement in such form (but without any Schedule except for the election of the laws of the State of New York as the governing law) on the Trade Date. In the event of any inconsistency between provisions of that Agreement and this Confirmation, this Confirmation will prevail for the purpose of the Transaction to which this Confirmation relates. The parties hereby agree that no Transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement.

2. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:

 

 

 

Trade Date:

 

May 13, 2009

 

 

 

Effective Date:

 

The third Exchange Business Day immediately prior to the Premium Payment Date.

 

 

 

Option Style:

 

“Modified American”, as described under “Procedures for Exercise” below

 

 

 

Option Type:

 

Call

 

 

 

Buyer:

 

Counterparty

 

 

 

Seller:

 

Dealer

 

 

 

Shares:

 

The common stock of Counterparty, par value USD 0.01 per Share (Exchange symbol “WYN”)

 

 

 

Number of Options:

 

200,000; provided that the Number of Options shall be automatically increased as of the date of exercise by Credit Suisse Securities (USA) LLC, J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “ Representatives ”), as representatives of the Underwriters (as defined in the Underwriting Agreement), of their option pursuant to Section 2(b) of the Underwriting Agreement (the “ Underwriting Agreement ”) dated as of May 13, 2009 between Counterparty and the Representatives, by a number of Options (the “ Additional Options ”) equal to the aggregate principal amount of Convertible Notes issued pursuant to such exercise (such Convertible Notes, the “ Additional Convertible Notes ”) divided by USD 1,000. For the avoidance of doubt, the Number of Options outstanding shall be reduced by each exercise of Options hereunder. In no event will the Number of Options be less than zero.

 

 

 

Applicable Percentage:

 

 40%

 

 

 

Option Entitlement:

 

As of any date, a number equal to the Applicable Percentage multiplied by the Conversion Rate as of such date (as defined in the Supplemental Indenture, but without regard to any adjustments to the Conversion Rate pursuant to Section 4.05(g) or (h) or to Section 4.07 of the Supplemental Indenture), for each Convertible Note.

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Strike Price:

 

USD 12.7320

 

 

 

Premium:

 

USD 14,480,000 (Premium per Option USD 181.0000); provided that if the Number of Options is increased pursuant to the proviso to the definition of “Number of Options” above, an additional Premium equal to the product of the number of Additional Options and the Premium per Option shall be paid on the Additional Premium Payment Date.

 

 

 

Premium Payment Date:

 

May 19, 2009

 

 

 

Additional Premium Payment Date:

 

The closing date for the purchase and sale of the Additional Convertible Notes.

 

 

 

Exchange:

 

The New York Stock Exchange

 

 

 

Related Exchange(s):

 

All Exchanges

 

 

 

Procedures for Exercise:

 

 

 

 

 

Exercise Period(s):

 

Notwithstanding anything to the contrary in the Equity Definitions, an Exercise Period shall occur with respect to an Option hereunder only if such Option is an Exercisable Option (as defined below) and the Exercise Period shall be, in respect of any Exercisable Option, the period commencing on, and including, the relevant Conversion Date and ending on, and including, the Scheduled Valid Day immediately preceding the first day of the relevant Settlement Averaging Period in respect of such Conversion Date; provided that in respect of Exercisable Options relating to Convertible Notes for which the relevant Conversion Date occurs on or after February 1, 2012, the final day of the Exercise Period shall be the Scheduled Valid Day immediately preceding the Expiration Date.

 

 

 

Conversion Date:

 

With respect to any conversion of Convertible Notes, the date on which the Holder (as such term is defined in the Supplemental Indenture) of such Convertible Notes satisfies all of the requirements for conversion thereof as set forth in Section 4.02(b) of the Supplemental Indenture; provided that in no event shall a Conversion Date be deemed to occur hereunder (and no Option shall be deemed to be an Exercisable Option) with respect to any Convertible Note surrendered for conversion in respect of which Counterparty elects to designate a financial institution for exchange in lieu of conversion pursuant to Section 4.04 of the Supplemental Indenture, and such financial accepts such Convertible Note (regardless of whether such financial institution delivers any amounts due in respect of such Convertible Note, or whether such Convertible Note is resubmitted to Counterparty for conversion following a failure by such financial institution to deliver any such amounts or otherwise).

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Exercisable Options:

 

In respect of any Exercise Period, the number of Convertible Notes surrendered to Counterparty for conversion on the first day of such Exercise Period (the “ Related Convertible Notes ” for such Exercisable Options). Notwithstanding the foregoing, in no event shall the number of Exercisable Options exceed the Number of Options.

 

 

 

Expiration Time:

 

The Valuation Time

 

 

 

Expiration Date:

 

May 1, 2012, subject to earlier exercise.

 

 

 

Multiple Exercise:

 

Applicable, as described under Exercisable Options above.

 

 

 

Automatic Exercise:

 

Applicable; and means that in respect of an Exercise Period, a number of Options not previously exercised hereunder equal to the number of Exercisable Options shall be deemed to be exercised on the final day of such Exercise Period for such Exercisable Options; provided that such Options shall be deemed exercised only to the extent that Counterparty has provided a Notice of Exercise to Dealer.

 

 

 

Notice of Exercise:

 

Notwithstanding anything to the contrary in the Equity Definitions, in order to exercise any Exercisable Options, Counterparty must notify Dealer in writing before 5:00 p.m. (New York City time) on the Scheduled Valid Day prior to the scheduled first day of the Settlement Averaging Period for the Exercisable Options being exercised of (i) the number of such Options, and (ii) the scheduled first day of the Settlement Averaging Period and the scheduled Settlement Date; provided that in respect of Exercisable Options with Related Convertible Notes with a Conversion Date occurring on or after February 1, 2012, such notice may be given on or prior to the Scheduled Valid Day immediately preceding the Expiration Date and need only specify the number of such Exercisable Options.

 

 

 

Valuation Time:

 

At the close of trading of the regular trading session on the Exchange; provided that if the principal trading session is extended, the Calculation Agent shall determine the Valuation Time in its reasonable discretion.

 

 

 

Market Disruption Event:

 

Section 6.3(a) of the Equity Definitions is hereby replaced in its entirety by the following:

 

 

 

 

 

“‘Market Disruption Event’ means in respect of a Share, (i) a failure by the primary United States national or regional securities exchange or market on which Shares are listed or admitted to trading to open for trading during its regular trading session or (ii) the occurrence or existence prior to 1:00 p.m. (New York City time) on any Scheduled Valid Day for the Shares for more than one half-hour period in the aggregate during regular

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trading hours of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant stock exchange or otherwise) in the Shares or in any options, contracts or future contracts relating to the Shares.”

 

 

 

Settlement Terms:

 

 

 

 

 

Settlement Method:

 

Cash Settlement

 

 

 

Cash Settlement:

 

In respect of any Exercisable Option exercised or deemed exercised hereunder, in lieu of Section 8.1 of the Equity Definitions, Dealer will pay to Counterparty, on the relevant Settlement Date, the Option Cash Settlement Amount in respect of such Exercisable Option. In no event will the Option Cash Settlement Amount be less than zero.

 

 

 

Option Cash Settlement Amount:

 

In respect of any Exercisable Option exercised or deemed exercised, an amount in cash equal to the sum of the quotients, for each Valid Day during the Settlement Averaging Period for such Exercisable Option, of (A) (x) the Option Entitlement on such Valid Day multiplied by (y) the Relevant Price on such Valid Day less the Strike Price, divided by (B) the number of Valid Days in the Settlement Averaging Period; provided that if the calculation contained in clause (y) above results in a negative number, such number shall be replaced with the number “zero”.

 

 

 

Valid Day:

 

A day on which (i) trading in the Shares generally occurs on the Exchange or, if the Shares are not then listed on the Exchange, on the principal other United States national or regional securities exchange on which the Shares are then listed or, if the Shares are not then listed on a United States national or regional securities exchange, on the principal other market on which the Shares are then traded and (ii) there is no Market Disruption Event. If the Shares are not so listed or traded, “Valid Day” means a Business Day.

 

 

 

Scheduled Valid Day:

 

A day on which trading in the Shares is scheduled to occur on the principal United States national or regional securities exchange or market on which the Shares are listed or admitted for trading. If the Shares are not so listed or admitted for trading, “Scheduled Valid Day” means a Business Day.

 

 

 

Business Day:

 

Any day other than a Saturday, a Sunday or a day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.

 

 

 

Relevant Price:

 

On any Valid Day, the per Share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page WYN.N <equity> AQR (or any successor thereto) in respect of

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the period from the scheduled opening time of the Exchange to the Scheduled Closing Time of the Exchange on such Valid Day (or if such volume-weighted average price is unavailable, the market value of one Share on such Valid Day, as determined by the Calculation Agent using a volume-weighted method).

 

 

 

Settlement Averaging Period:

 

For any Exercisable Option, (x) if Counterparty has delivered, in accordance with the terms set forth above, a Notice of Exercise to Dealer with respect to such Exercisable Option with a Conversion Date occurring prior to February 1, 2012, the thirty (30) consecutive Valid Day period beginning on, and including, the second Scheduled Valid Day immediately following such Conversion Date, or (y) if Counterparty has delivered, in accordance with the terms set forth above, a Notice of Exercise to Dealer with respect to such Exercisable Option with a Conversion Date occurring on or after February 1, 2012, the thirty (30) consecutive Valid Day period beginning on, and including, the thirty-second (32 nd ) Scheduled Valid Day immediately prior to the Expiration Date.

 

 

 

Settlement Date:

 

For any Exercisable Option, the date cash will be paid under the terms of the Indenture with respect to the conversion of the Related Convertible Notes for such Exercisable Option, but in no event earlier than the third Business Day immediately following the final Valid Day of the Settlement Averaging Period.

 

 

 

Settlement Currency:

 

USD

 

 

 

3. Additional Terms applicable to the Transaction:

 

 

 

Adjustments applicable to the Transaction:

 

 

 

Potential Adjustment Events:

 

Notwithstanding Section 11.2(e) of the Equity Definitions, a “Potential Adjustment Event” means an occurrence of any event or condition, as set forth in Section 4.05 of the Supplemental Indenture that would result in an adjustment to the Conversion Rate of the Convertible Notes; provided that in no event shall there be any adjustment hereunder as a result of an adjustment to the Conversion Rate pursuant to Section 4.05(g) or (h) or Section 4.07 of the Supplemental Indenture.

 

 

 

Method of Adjustment:

 

Calculation Agent Adjustment, and means that, notwithstanding Section 11.2(c) of the Equity Definitions, upon any adjustment to the Conversion Rate of the Convertible Notes pursuant to the Supplemental Indenture (other than Section 4.05(g) and (h) and Section 4.07 of the Supplemental Indenture), the Calculation Agent will make a corresponding adjustment to any one or more of the Strike Price, Number of Options, Option Entitlement and any other variable relevant to the exercise, settlement or payment for the Transaction.

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Extraordinary Events applicable to the Transaction:

 

 

 

Merger Events:

 

Applicable; provided that notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event” means the occurrence of any event or condition set forth in the definition of “Merger Event” in Section 4.08 of the Supplemental Indenture.

 

 

 

Tender Offers:

 

Applicable; provided that notwithstanding Section 12.1(d) of the Equity Definitions, a “Tender Offer” means the occurrence of any event or condition set forth in Section 4.05(e) of the Supplemental Indenture.

 

 

 

Consequence of Merger Events/
Tender Offers:

 


Notwithstanding Section 12.2 and Section 12.3 of the Equity Definitions, upon the occurrence of a Merger Event or a Tender Offer, the Calculation Agent shall make a corresponding adjustment in respect of any adjustment under the Supplemental Indenture to any one or more of the nature of the Shares, Strike Price, Number of Options, Option Entitlement and any other variable relevant to the exercise, settlement or payment for the Transaction; provided , however , that such adjustment shall be made without regard to any adjustment to the Conversion Rate as set forth in Section 4.07 of the Supplemental Indenture; provided further that if, with respect to a Merger Event or a Tender Offer, (i) the consideration for the Shares includes (or, at the option of a holder of Shares, may include) shares of an entity or person not organized under the laws of the United States, any State thereof or the District of Columbia or (ii) the Counterparty to the Transaction following such Merger Event or Tender Offer, will not be the Issuer following such Merger Event or Tender Offer, then Cancellation and Payment (Calculation Agent Determination) shall apply.

 

 

 

Nationalization, Insolvency or Delisting:

 


Cancellation and Payment (Calculation Agent Determination); provided that, in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a Delisting if the Exchange is located in the United States and the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors), such exchange or quotation system shall thereafter be deemed to be the Exchange.

 

 

 

Additional Disruption Events:

 

 

 

 

 

Change in Law:

 

Applicable; provided that Section 12.9(a)(ii)(X) of the Equity Definitions is hereby amended by replacing the word “Shares” with the phrase “Hedge Positions.”

 

 

 

Failure to Deliver:

 

Applicable

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Hedging Party:

 

Dealer for all applicable Additional Disruption Events

 

 

 

Determining Party:

 

For all applicable Extraordinary Events, Dealer

 

 

 

Non-Reliance:

 

Applicable

 

 

 

Agreements and Acknowledgements Regarding Hedging Activities:

 


Applicable

 

 

 

Additional Acknowledgments:

 

Applicable

 

 

 

4. Calculation Agent:

 

Dealer

 

 

 

5. Account Details:

 

 

 

 

(a)

 

Account for payments to Counterparty:

Bank: JPMorgan Chase Bank, New York, NY
ABA#: 021000021

Acct Name: WHG Hospitality, Inc.
Acct No.: 304656429

 

(b)

 

Account for payments to Dealer:

Citibank, N.A.
ABA #021000089
DDA 00167679
Ref: Equity Derivatives

6. Offices:

The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is not a Multibranch Party.

The Office of Dealer for the Transaction is: New York

Citibank, N.A.
390 Greenwich Street
New York, NY 10013

7. Notices: For purposes of this Confirmation:

 

(a)

 

Address for notices or communications to Counterparty:

Wyndham Worldwide Corporation
22 Sylvan Way
Parsippany, NY 07054
Attention: Vice President, Treasury
Telephone No.: (973) 753-7703
Facsimile No.: (973) 753-6730

 

(b)

 

Address for notices or communications to Dealer:

Citibank, N.A.
390 Greenwich Street
New York, NY 10013
Attention: Equity Derivatives
Facsimile: (212) 723-8328
Telephone: (212) 723-7357

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With a copy to:

Citibank, N.A.
250 West Street, 10th Floor
New York, NY 10013
Attention: GCIB Legal Group—Derivatives
Facsimile: (212) 816-7772
Telephone: (212) 816-2211

8. Representations and Warranties of Counterparty

The representations and warranties made by Counterparty pursuant to the Underwriting Agreement are true and correct and are hereby deemed to be repeated to Dealer as if set forth herein. Counterparty hereby further represents and warrants to Dealer that:

 

(a)

 

Counterparty has all necessary corporate power and authority to execute, deliver and perform its obligations in respect of this Transaction; such execution, delivery and performance have been duly authorized by all necessary corporate action on Counterparty’s part; and this Confirmation has been duly and validly executed and delivered by Counterparty and constitutes its valid and binding obligation, enforceable against Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity) and except that rights to indemnification and contribution hereunder may be limited by federal or state securities laws or public policy relating thereto.

 

 

(b)

 

Neither the execution and delivery of this Confirmation nor the incurrence or performance of obligations of Counterparty hereunder will conflict with or result in a breach of the certificate of incorporation or by-laws (or any equivalent documents) of Counterparty, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which Counterparty or any of its subsidiaries is a party or by which Counterparty or any of its subsidiaries is bound or to which Counterparty or any of its subsidiaries is subject, or constitute a default under, or result in the creation of any lien under, any such agreement or instrument.

 

 

(c)

 

No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required in connection with the execution, delivery or performance by Counterparty of this Confirmation, except such as have been obtained or made and such as may be required under the Securities Act of 1933, as amended (the “ Securities Act ”) or state securities laws.

 


 
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