EX-10.5





Exhibit 10.5




EXECUTION VERSION




JPMorgan Chase Bank, National Association

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England




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: Warrants




     The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and
conditions of the Warrants issued by Wyndham Worldwide Corporation (“Company”) to JPMorgan Chase
Bank, National Association, London Branch (“Dealer”) 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. This Transaction shall
be deemed to be a Share Option Transaction within the meaning set forth in the Equity Definitions.



     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 Company 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 Company 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 Transaction is a Warrant Transaction, which shall be considered a Share Option
Transaction for purposes of the Equity Definitions. The terms of the particular Transaction
to which this Confirmation relates are as follows:





JPMorgan Chase Bank, National Association

Organised under the laws of the United States as a National Banking Association

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authority




 









 





	 	 	 	 	 
	General Terms:	 	 
	 
	 	 	 	 
	 

	 	Trade Date:
	 	May 13, 2009
	 
	 	 	 	 
	 

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

	 	Warrants:
	 	Equity call warrants, each giving the holder the right to purchase one Share at the
Strike Price, subject to the Settlement Terms set forth below. For the purposes of the
Equity Definitions, each reference to a Warrant herein shall be deemed to be a reference
to a Call Option.
	 
	 	 	 	 
	 

	 	Warrant Style:
	 	European
	 
	 	 	 	 
	 

	 	Seller:
	 	Company
	 
	 	 	 	 
	 

	 	Buyer:
	 	Dealer
	 
	 	 	 	 
	 

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

	 	Number of Warrants:
	 	4,712,538, subject to adjustment as provided herein.
	 
	 	 	 	 
	 

	 	Warrant Entitlement:
	 	One Share per Warrant
	 
	 	 	 	 
	 

	 	Strike Price:
	 	USD 20.1590
	 
	 	 	 	 
	 

	 	Premium:
	 	USD 2,640,000
	 
	 	 	 	 
	 

	 	Premium Payment Date:
	 	May 19, 2009
	 
	 	 	 	 
	 

	 	Exchange:
	 	The New York Stock Exchange
	 
	 	 	 	 
	 

	 	Related Exchange(s):
	 	All Exchanges
	 
	 	 	 	 
	Procedures for Exercise:	 	 
	 
	 	 	 	 
	 

	 	Expiration Time:
	 	The Valuation Time
	 
	 	 	 	 
	 

	 	Expiration Date(s):
	 	Each Scheduled Trading Day during the period from and including the First
Expiration Date and to and including the fortieth (40th) Scheduled Trading
Day following the First Expiration Date shall be an “Expiration Date” for a number of
Warrants equal to the Daily Number of Warrants on such date; provided that,
notwithstanding anything to the contrary in the Equity Definitions, if any such date is
a Disrupted Day, the Calculation Agent shall make adjustments, if applicable, to the
Daily Number of Warrants for which such day shall be an Expiration Date (or shall reduce
such Daily Number of Warrants to zero) and shall designate a Scheduled Trading Day or a
number of Scheduled Trading Days as the Expiration Date(s) for the remaining Daily
Number of Warrants or a portion thereof for the originally scheduled Expiration Date;
and provided further that if such Expiration Date has not occurred pursuant to this
clause as of the eighth Scheduled Trading Day following the last scheduled






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	 	 	 	Expiration Date under this Transaction, the Calculation
Agent shall have the right to declare such Scheduled
Trading Day to be the final Expiration Date and the
Calculation Agent shall determine its good faith
estimate of the fair market value for the Shares as of
the Valuation Time on that eighth Scheduled Trading Day
or on any subsequent Scheduled Trading Day, as the
Calculation Agent shall determine using commercially
reasonable means. Any day on which the Exchange is
scheduled to close prior to its normal closing time
shall be considered a Disrupted Day in whole.
	 
	 	 	 	 
	 

	 	First Expiration Date:
	 	July 30, 2012 (or if such day is not a Scheduled Trading Day, the
next following Scheduled Trading Day), subject to Market Disruption Event below.
	 
	 	 	 	 
	 

	 	Daily Number of Warrants:
	 	For any Expiration Date, the Number of Warrants that have not
expired or been exercised as of such day, divided by the remaining number of Expiration
Dates (including such day), rounded down to the nearest whole number, subject to
adjustment pursuant to the provisos to “Expiration Date(s)”.
	 
	 	 	 	 
	 

	 	Automatic Exercise:
	 	Applicable; and means that for each Expiration Date, a number of Warrants
equal to the Daily Number of Warrants (as adjusted pursuant to the terms hereof) for such
Expiration Date will be deemed to be automatically exercised.
	 
	 	 	 	 
	 

	 	Market Disruption Event:
	 	Section 6.3(a)(ii) of the Equity Definitions is hereby amended by
replacing clause (ii) in its entirety with “(ii) an Exchange Disruption,” and inserting
immediately following clause (iii) the phrase “or (iv) a Regulatory Disruption; in each
case that the Calculation Agent determines is material.”
	 
	 	 	 	 
	 

	 	Regulatory Disruption:
	 	Any event that Dealer, in its commercially reasonable discretion based
on advice of counsel, determines makes it appropriate with regard to any legal,
regulatory or self-regulatory requirements or related policies and procedures (whether or
not such requirements, policies or procedures are imposed by law or have been voluntarily
adopted by Dealer, and including without limitation Rule 10b-18 and Regulation 14E under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation M),
for Dealer to refrain from or decrease any market activity in connection with the
Transaction. Dealer shall notify Company as soon as reasonably practicable that a
Regulatory Disruption has occurred and the Expiration Dates affected by it.
	 
	 	 	 	 
	Valuation:	 	 
	 
	 	 	 	 
	 

	 	Valuation Time:
	 	Scheduled Closing Time; provided that if the principal trading session is
extended, the Calculation Agent shall determine the Valuation Time in its reasonable
discretion.
	 
	 	 	 	 
	 

	 	Valuation Date:
	 	Each Exercise Date.






3









 







	 	 	 	 	 
	Settlement Terms:	 	 
	 
	 	 	 	 
	 

	 	Settlement Method Election:
	 	Applicable; provided that (i) references to “Physical Settlement”
in Section 7.1 of the Equity Definitions shall be replaced by references to “Net Share
Settlement”; (ii) Company may elect Cash Settlement only if Company represents and
warrants to Dealer in writing on the date of such election that (A) Company is not in
possession of any material non-public information regarding Company or the Shares, (B)
Company is electing Cash Settlement in good faith and not as part of a plan or scheme to
evade compliance with the federal securities laws, and (C) the assets of Company at their
fair valuation exceed the liabilities of Company (including contingent liabilities), the
capital of Company is adequate to conduct the business of Company, and Company has the
ability to pay its debts and obligations as such debts mature and does not intend to, or
does not believe that it will, incur debt beyond its ability to pay as such debts mature;
and (iii) the same election of settlement method shall apply to all Expiration Dates
hereunder (and under any additional warrants issued as contemplated in Section 9(v)
hereof).
	 

	 	Electing Party:
	 	Company
	 
	 	 	 	 
	 

	 	Settlement Method	 	 
	 

	 	Election Date:
	 	The third Scheduled Trading Day immediately preceding the
first Expiration Date.
	 
	 	 	 	 
	 

	 	Default Settlement Method:
	 	Net Share Settlement
	 
	 	 	 	 
	 

	 	Net Share Settlement:
	 	If Net Share Settlement is applicable, then on the relevant
Settlement Date, Company shall deliver to Dealer the Share Delivery Quantity of Shares
for such Settlement Date to the account specified hereto free of payment through the
Clearance System.
	 
	 	 	 	 
	 

	 	Share Delivery Quantity:
	 	For any Settlement Date, a number of Shares, as calculated by
the Calculation Agent, equal to the Net Share Settlement Amount for such Settlement Date
divided by the Settlement Price on the Valuation Date in respect of such Settlement Date,
rounded down to the nearest whole number plus any Fractional Share Amount.
	 
	 	 	 	 
	 

	 	Net Share Settlement Amount:
	 	For any Settlement Date, an amount equal to the product of
(i) the Number of Warrants exercised or deemed exercised on the relevant Exercise Date,
(ii) the Strike Price Differential for such Settlement Date and (iii) the Warrant
Entitlement.
	 
	 	 	 	 
	 

	 	Cash Settlement:
	 	If Cash Settlement is applicable, then on the relevant Settlement Date,
Company shall pay to Dealer an amount of cash in USD equal to the Net Share Settlement
Amount for such Settlement Date.
	 
	 	 	 	 
	 

	 	Settlement Price:
	 	For any Valuation Date, 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 the period from the scheduled opening time of
the Exchange to the Scheduled Closing Time on such Valuation Date (or if such
volume-weighted average price is unavailable or is manifestly incorrect, the market value
of one Share on such Valuation Date, as determined by the Calculation






4









 






	 	 	 	 	 
	 

	 	 	 	Agent using a volume-weighted method). Notwithstanding
the foregoing, if (i) any Expiration Date is a Disrupted
Day and (ii) the Calculation Agent determines that such
Expiration Date shall be an Expiration Date for fewer
than the Daily Number of Warrants, as described above,
then the Calculation Agent may adjust the Settlement
Price for the relevant Valuation Date as it deems
appropriate using a volume-weighted methodology, taking
into account the nature and duration of the relevant
Market Disruption Event.
	 
	 	 	 	 
	 

	 	Settlement Date(s):
	 	As determined in reference to Section 9.4 of the Equity Definitions,
subject to Section 9(k)(i) hereof.
	 
	 	 	 	 
	Other Applicable Provisions:	 	If Net Share Settlement is applicable, the provisions of Sections
9.1(c), 9.8, 9.9, 9.11 (as modified herein), 9.12 and 10.5 of the Equity Definitions will be
applicable as if Physical Settlement were applicable.
	 
	 	 	 	 
	Representation and Agreement:	 	Notwithstanding Section 9.11 of the Equity Definitions, the parties
acknowledge that any Shares delivered to Dealer may be, upon delivery, subject to restrictions
and limitations arising under applicable securities laws from Company’s status as issuer of
the Shares.
	 
	 	 	 	 
	3. Additional Terms applicable to the Transaction:
	 
	 	 	 	 
	 

	 	Adjustments applicable to the
Warrants:	 	 
	 
	 	 	 	 
	 

	 	Method of Adjustment:
	 	Calculation Agent Adjustment. For the avoidance of doubt, in making any
adjustments under the Equity Definitions, the Calculation Agent may make adjustments, if
any, to any one or more of the Strike Price, the Number of Warrants, the Daily Number of
Warrants and the Warrant Entitlement. Notwithstanding the foregoing, any cash dividends or
distributions on the Shares, whether or not extraordinary, shall be governed by Section
9(f) of this Confirmation in lieu of Article 10 or Section 11.2(c) of the Equity
Definitions.
	 
	 	 	 	 
	Extraordinary Events applicable to the Transaction:
	 
	 	 	 	 
	 

	 	New Shares:
	 	Section 12.1(i) of the Equity Definitions is hereby amended (a) by deleting
the text in clause (i) thereof in its entirety (including the word “and” following clause
(i)) and replacing it with the phrase “publicly quoted, traded or listed (or whose
related depositary receipts are publicly quoted, traded or listed) on any of the New York
Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their
respective successors)” and (b) by inserting immediately prior to the period the phrase
“and (iii) of an entity or person organized under the laws of the United States, any
State thereof or the District of Columbia that also becomes Company under the Transaction
following such Merger Event or Tender Offer”.
	 
	 	 	 	 
	 

	 	Consequence of
Merger Events:	 	 






5









 






	 	 	 	 	 
	Merger Event:	 	Applicable; provided that if an event occurs that constitutes both a Merger
Event under Section 12.1(b) of the Equity Definitions and an Additional Termination Event
under Section 9(h)(ii)(A) of this Confirmation, Dealer may elect, in its commercially
reasonable judgment, whether the provisions of Section 12.1(b) of the Equity Definitions
or Section 9(h)(ii)(A) will apply.
	 
	 	 	 	 
	 

	 	Share-for-Share:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	 

	 	Share-for-Other:
	 	Cancellation and Payment (Calculation Agent Determination)
	 
	 	 	 	 
	 

	 	Share-for-Combined:
	 	Cancellation and Payment (Calculation Agent Determination); provided
that Dealer may elect, in its commercially reasonable judgment, Component
Adjustment (Calculation Agent Determination).
	 
	 	 	 	 
	Consequence of Tender Offers:	 	 
	 
	 	 	 	 
	Tender Offer:	 	Applicable; provided however that if an event occurs that constitutes both a
Tender Offer under Section 12.1(d) of the Equity Definitions and Additional Termination
Event under Section 9(h)(ii)(C) of this Confirmation, Dealer may elect, in its
commercially reasonable judgment, whether the provisions of Section 12.3 of the Equity
Definitions or Section 9(h)(ii)(C) will apply.
	 
	 	 	 	 
	 

	 	Share-for-Share:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	 

	 	Share-for-Other:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	 

	 	Share-for-Combined:
	 	Modified Calculation Agent Adjustment
	 
	 	 	 	 
	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:
	 	Not Applicable
	 
	 	 	 	 
	 

	 	Insolvency Filing:
	 	Applicable
	 
	 	 	 	 
	 

	 	Hedging Disruption:
	 	Applicable; provided that Section 12.9(a)(v) of the Equity
Definitions is hereby replaced in its entirety by the following:






6









 






	 	 	 	 	 
	 

	 	 	 	“‘Hedging Disruption’ means that the Hedging Party is
unable, after using commercially reasonable efforts, to
(A) acquire, establish, re-establish, substitute,
maintain, unwind or dispose of any transaction(s) or
asset(s) it deems necessary to hedge the equity price
risk of entering into and performing its obligations
with respect to the relevant Transaction, or (B)
realize, recover or remit the proceeds of any such
transaction(s) or asset(s). For the avoidance of doubt,
the term “equity price risk” shall be deemed to include,
but shall not be limited to, stock price and volatility
risk. And, for the further avoidance of doubt, such
transactions or assets referred to in phrases (A) or (B)
above must be available on commercially reasonable
pricing terms (considered in the aggregate across all
such transactions).”
	 
	 	 	 	 
	 

	 	Increased Cost of Hedging:
	 	Not Applicable
	 
	 	 	 	 
	 

	 	Loss of Stock Borrow:
	 	Applicable
	 
	 	 	 	 
	 

	 	Maximum Stock Loan Rate:
	 	200 basis points
	 
	 	 	 	 
	 

	 	Increased Cost of Stock
Borrow:
	 	Applicable
	 
	 	 	 	 
	 

	 	Initial Stock Loan Rate:
	 	25 basis points
	 
	 	 	 	 
	 

	 	Hedging Party:
	 	Dealer for all applicable Additional Disruption Events
	 
	 	 	 	 
	 

	 	Determining Party:
	 	Dealer for all applicable Extraordinary Events
	 
	 	 	 	 
	 

	 	Non-Reliance:
	 	Applicable
	 
	 	 	 	 
	 

	 	Agreements and
Acknowledgments	 	 
	 
	 	 	 	 
	 

	 	Regarding Hedging Activities:
	 	 Applicable
	 
	 	 	 	 
	 

	 	Additional Acknowledgments:
	 	Applicable
	 
	 	 	 	 
	4. Calculation Agent:	 	Dealer
	 
	 	 	 	 
	5. Account Details:	 	 







	 	(a)	 	Account for payments to Company:





	 	 	 	 	 
	 

	 	Bank:
	 	JPMorgan Chase Bank, New York, NY
	 

	 	ABA#:
	 	 021000021
	 

	 	Acct Name:
	 	WHG Hospitality, Inc.
	 

	 	Acct No.:
	 	 304656429







	 	 	 	Account for delivery of Shares from Company:
	 
	 	 	 	To be provided by Company.
	 
	 	(b)	 	Account for payments to Dealer:




JPMorgan Chase Bank, N.A., New York

ABA: 021 000 021

Favour: JPMorgan Chase Bank N.A., London

A/C: 0010962009

CHASUS33




7









 







Account for delivery of Shares to Dealer:



DTC 0060




6. Offices:



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



The Office of Dealer for the Transaction is: London



JPMorgan Chase Bank, National Association

London Branch

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England




7. Notices: For purposes of this Confirmation:





	 	(a)	 	Address for notices or communications to Company:




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:




Dealer notice information to follow:



JPMorgan Chase Bank, National Association

277 Park Avenue, 11th Floor

New York, NY 10172



Attention: Mariusz Kwasnik

Title: Operations Analyst

EDG Corporate Marketing

Telephone No:      (212) 623-7223

Facsimile No:       (212) 622-8534




8. Representations and Warranties of Company



The representations and warranties made by Company pursuant to the Underwriting Agreement (the
“Underwriting Agreement”) dated as of May 13, 2009 between Company and Credit Suisse Securities
(USA) LLC, J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, as representatives of the Underwriters party thereto, are true and
correct and are hereby deemed to be repeated to Dealer as if set forth herein. Company hereby
further represents and warrants to Dealer that:





	 	(a)	 	Company 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 Company’s
part; and this Confirmation has been duly and validly executed and delivered by Company
and constitutes its valid and binding obligation, enforceable against Company 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




8









 






	 	 	 	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 Company hereunder will conflict with or result in a
breach of the certificate of incorporation or by-laws (or any equivalent documents) of
Company, 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 Company or any of its subsidiaries is a party or by which Company or any of its
subsidiaries is bound or to which Company 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 Company 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.
	 
	 	(d)	 	The Shares of Company initially issuable upon exercise of the Warrant by the
net share settlement method (the “Warrant Shares”) have been reserved for issuance by
all required corporate action of Company. The Warrant Shares have been duly authorized
and, when delivered against payment therefor (which may include Net Share Settlement in
lieu of cash) and otherwise as contemplated by the terms of the Warrant following the
exercise of the Warrant in accordance with the terms and conditions of the Warrant,
will be validly issued, fully-paid and non-assessable, and the issuance of the Warrant
Shares will not be subject to any preemptive or similar rights.
	 
	 	(e)	 	Company is not and will not be required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.
	 
	 	(f)	 	Company is an “eligible contract participant” (as such term is defined in
Section 1a(12) of the Commodity Exchange Act, as amended (the “CEA”)) because one or
more of the following is true:
	 
	 	 	 	Company is a corporation, partnership, proprietorship, organization, trust or other
entity and:






	 	(A)	 	Company has total assets in excess of USD 10,000,000;
	 
	 	(B)	 	the obligations of Company hereunder are guaranteed, or
otherwise supported by a letter of credit or keepwell, support or other
agreement, by an entity of the type described in Section 1a(12)(A)(i) through
(iv), 1a(12)(A)(v)(I), 1a(12)(A)(vii) or 1a(12)(C) of the CEA; or
	 
	 	(C)	 	Company has a net worth in excess of USD 1,000,000 and has
entered into this Agreement in connection with the conduct of Company’s
business or to manage the risk associated with an asset or liability owned or
incurred or reasonably likely to be owned or incurred by Company in the conduct
of Company’s business.






	 	(g)	 	Company is not, on the date hereof, in possession of any material non-public
information with respect to Company.
	 
	 	(h)	 	No state or local (including, for the avoidance of doubt, jurisdictions outside
the United States) law, rule, regulation or regulatory order applicable to the Shares
or Company (including without limitation any such law, regulation or order regulating
the gaming business or the consumer finance business, but excluding Federal securities
laws) (“Applicable State Share Ownership Law”) would give rise to any reporting or
registration obligations or other requirements on Dealer




9









 






	 		 	or its affiliates (including obtaining prior approval from any person or entity), or
would result in an adverse effect on Dealer or its affiliates, (each, an “Ownership
Obligation”), as a consequence of Dealer and its affiliates collectively holding the
power to vote Shares in excess of any threshold amount that is less than 10% of the
number of Shares outstanding; and no Applicable State Share Ownership Law imposes
any Ownership Obligation by any method other than counting the number of Shares
which a person holds the power to vote. 
	 
	 	(i)	 	Company does not hold any license to operate a gaming business in any
jurisdiction (including without limitation any jurisdiction outside the United States)
other than Puerto Rico, and Company is not subject to regulation under any law, rule,
regulation or regulatory order relating to the gaming business of any jurisdiction
(including without limitation jurisdictions outside the United States) other than under
the gaming regulations issued by the Commonwealth of Puerto Rico Tourism Company.





9. Other Provisions:





	 	(a)	 	Opinions. Company shall deliver an opinion of counsel, dated as of the
Trade Date, to Dealer with respect to the matters set forth in Sections 8(a) through
(d) of this Confirmation.
	 
	 	(b)	 	Repurchase Notices. Company shall, on any day on which Company effects
any repurchase of Shares, promptly give Dealer a written notice of such repurchase (a
“Repurchase Notice”) on such day if following such repurchase, the number of
outstanding Shares on such day, subject to any adjustments provided herein, is (i) less
than 155 million (in the case of the first such notice) or (ii) thereafter more than 19
million less than the number of Shares included in the immediately preceding Repurchase
Notice. Company agrees to indemnify and hold harmless Dealer and its affiliates and
their respective officers, directors, employees, affiliates, advisors, agents and
controlling persons (each, an “Indemnified Person”) from and against any and all losses
(including losses relating to Dealer’s hedging activities as a consequence of becoming,
or of the risk of becoming, a Section 16 “insider”, including without limitation, any
forbearance from hedging activities or cessation of hedging activities and any losses
in connection therewith with respect to this Transaction), claims, damages, judgments,
liabilities and expenses (including reasonable attorney’s fees), joint or several, to
which an Indemnified Person actually may become subject, as a result of Company’s
failure to provide Dealer with a Repurchase Notice on the day and in the manner
specified in this paragraph, and to reimburse, within 30 days, upon written request,
each of such Indemnified Persons for any reasonable legal or other expenses incurred in
connection with investigating, preparing for, providing testimony or other evidence in
connection with or defending any of the foregoing. If any suit, action, proceeding
(including any governmental or regulatory investigation), claim or demand shall be
brought or asserted against the Indemnified Person, such Indemnified Person shall
promptly notify Company in writing, and Company, upon request of the Indemnified
Person, shall retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others Company may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding. Company shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, Company agrees to indemnify any Indemnified Person from and
against any loss or liability by reason of such settlement or judgment. Company shall
not, without the prior written consent of the Indemnified Person, effect any settlement
of any pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of such
proceeding on terms reasonably satisfactory to such Indemnified Person. If the
indemnification provided for in this paragraph is unavailable to an Indemnified Person
or insufficient in respect of any losses, claims, damages or liabilities referred to
therein, then Company under such paragraph, in lieu of indemnifying such Indemnified
Person thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities. The remedies
provided for in this paragraph are not exclusive and shall not limit any rights or
remedies




10









 






	 	 	 	that may otherwise be available to any Indemnified Person at law or in equity. The
indemnity and contribution agreements contained in this paragraph shall remain
operative and in full force and effect regardless of the termination of this
Transaction.
	 
	 	(c)	 	Regulation M; Company Purchases. (i) During the period starting on the
first Expiration Date and ending on the last Expiration Date (the “Settlement Period”),
the Shares or securities that are convertible into, or exchangeable or exercisable for
Shares, are not, and shall not be, subject to a “restricted period,” as such term is
defined in Regulation M under the Exchange Act (“Regulation M”), and Company shall not
engage in any “distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange Business Day
immediately following the Settlement Period, unless in either case Company has provided
written notice to Dealer of the relevant restricted period not later than 7:00 a.m.
(New York City time) on the first day of such restricted period. Company acknowledges
that any such notice may cause a Disrupted Day to occur pursuant to Regulatory
Disruption; accordingly, Company acknowledges that its delivery of such notice must be
made in good faith and not as part of a plan or scheme to evade the prohibitions of
Rule 10b-5 of the Exchange Act.
	 
	 	 	 	(ii) During the Settlement Period, neither Company nor any “affiliate” or
“affiliated purchaser” (each as defined in Rule 10b-18 of the Exchange Act (“Rule
10b-18”)) shall directly or indirectly (including, without limitation, by means of
any cash-settled or other derivative instrument) purchase, offer to purchase, place
any bid or limit order that would effect a purchase of, or commence any tender offer
relating to, any Shares (or an equivalent interest, including a unit of beneficial
interest in a trust or limited partnership or a depository share) or any security
convertible into or exchangeable or exercisable for Shares, except through Dealer.
	 
	 	 	 	(iii) Company (A) shall not during the Settlement Period make, or permit to be
made, any public announcement (as defined in Rule 165(f) under the Securities Act)
of any Merger Transaction or potential Merger Transaction unless such public
announcement is made prior to the opening or after the close of the regular trading
session on the Exchange; (B) shall promptly (but in any event prior to the next
opening of the regular trading session on the Exchange) provide Dealer with written
notice specifying (I) Company’s average daily Rule 10b-18 purchases (as defined in
Rule 10b-18) during the three full calendar months immediately preceding the
announcement date that were not effected through Dealer or its affiliates and (II)
the number of Shares purchased pursuant to the proviso in Rule 10b-18(b)(4) under
the Exchange Act for the three full calendar months preceding the announcement date.
In addition, Company shall promptly notify Dealer of the earlier to occur of the
completion of such transaction and the completion of the vote by target
shareholders. “Merger Transaction” means any merger, acquisition or similar
transaction involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv)
under the Exchange Act.
	 
	 	(d)	 	No Manipulation. Company is not entering into this Transaction to
create actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for the Shares) or to raise or depress or otherwise manipulate the
price of the Shares (or any security convertible into or exchangeable for the Shares)
or otherwise in violation of the Exchange Act.
	 
	 	(e)	 	Transfer or Assignment. Company may not transfer any of its rights or
obligations under this Transaction without the prior written consent of Dealer. Dealer
may, without Company’s consent, transfer or assign all or any part of its rights or
obligations under this Transaction to any third party that is a financial institution
that regularly enters into OTC derivatives. If after Dealer’s commercially reasonable
efforts, Dealer is unable to effect such a transfer or assignment on pricing terms
reasonably acceptable to Dealer and within a time period reasonably acceptable to
Dealer of a sufficient number of Warrants to reduce (i) the Section 16 Percentage to
8.0% or less, (ii) the Warrant Equity Percentage to 14.5% or less, or (iii) the Share
Amount to the Applicable Limit or less, Dealer may designate any Exchange Business Day
as an Early Termination Date with respect to a portion (the “Terminated Portion”) of
this Transaction, such that (i) the Section 16 Percentage following such partial
termination will be equal to or less than 8.0% (but not less than 7%), (ii) the Warrant
Equity Percentage following such partial termination will be equal to or less




11









 






	 	 	 	than 14.5% (but not less than 13.5%) and (iii) the Share Amount following such
partial termination will be equal to or less than the Applicable Limit (but not less
than the Applicable Limit minus 1% of Shares then outstanding). In the event that
Dealer so designates an Early Termination Date with respect to a portion of this
Transaction, a payment shall be made pursuant to Section 6 of the Agreement as if
(i) an Early Termination Date had been designated in respect of a Transaction having
terms identical to this Transaction and a Number of Warrants equal to the Terminated
Portion, (ii) Company shall be the sole Affected Party with respect to such partial
termination and (iii) such Transaction shall be the only Terminated Transaction
(and, for the avoidance of doubt, the provisions of paragraph 9(j) shall apply to
any amount that is payable by Company to Dealer pursuant to this sentence). The
“Section 16 Percentage” as of any day is the fraction, expressed as a percentage,
(A) the numerator of which is the number of Shares that Dealer, each person subject
to aggregation of Shares with Dealer under Section 13 or Section 16 of the Exchange
Act and rules promulgated thereunder and any “group,” as such term is defined in
such Section 13 and Rules, of which Dealer or any such person is a member or may be
deemed a member (collectively, the “Dealer Group”) directly or indirectly
beneficially own (as defined under Section 13 or Section 16 of the Exchange Act and
rules promulgated thereunder) and (B) the denominator of which is the number of
Shares outstanding. The “Warrant Equity Percentage” as of any day is the fraction,
expressed as a percentage, (A) the numerator of which is the sum of (x) the product
of the Number of Warrants and the Warrant Entitlement and (y) the aggregate number
of Shares underlying any other warrants purchased by Dealer from Company, and (B)
the denominator of which is the number of Shares outstanding. The “Share Amount” as
of any day is the number of Shares that Dealer, Dealer Group or any person whose
ownership position would be aggregated with that of Dealer or Dealer Group (Dealer,
Dealer Group or any such person, a “Dealer Person”) under Section 203 of the
Delaware General Corporation Law (the “DGCL Takeover Statute”) or under any other
law, rule, regulation or regulatory order of any jurisdiction (including without
limitation jurisdictions outside the United States) that for any reason becomes
applicable to ownership of Shares after the Trade Date (“Applicable Laws”), owns,
beneficially owns, constructively owns, controls, holds the power to vote or
otherwise meets a relevant definition of ownership of under the Applicable Laws, as
determined by Dealer in its reasonable discretion. The “Applicable Limit” means (x)
the minimum number of Shares that would give rise to reporting or registration
obligations or other requirements (including obtaining prior approval from any
person or entity) of a Dealer Person, or would result in an adverse effect on a
Dealer Person, under the Applicable Laws, as determined by Dealer in its reasonable
discretion, minus (y) 1% of the number of Shares outstanding. Notwithstanding any
other provision in this Confirmation to the contrary requiring or allowing Dealer to
purchase, sell, receive or deliver any Shares or other securities to or from
Company, Dealer may designate any of its affiliates to purchase, sell, receive or
deliver such Shares or other securities and otherwise to perform Dealer’s
obligations in respect of this Transaction and any such designee may assume such
obligations. Dealer shall be discharged of its obligations to Company to the extent
of any such performance.
	 
	 	(f)	 	Dividends. If at any time during the period from and including the
Effective Date, to and including the Expiration Date, (i) an ex-dividend date for a
cash dividend occurs with respect to the Shares (an “Ex-Dividend Date”), and that
dividend differs from the Regular Dividend on a per Share basis or (ii) if no
Ex-Dividend Date for a cash dividend occurs with respect to the Shares in any quarterly
dividend period of Company, then the Calculation Agent will adjust any of the Strike
Price, Number of Warrants and/or Daily Number of Warrants to preserve the fair value of
the Warrants to Dealer after taking into account such dividend or lack thereof.
“Regular Dividend” shall mean for any calendar quarter, USD 0.04 for the first cash
dividend or distribution on the Shares for which the Ex-Dividend Date falls within such
calendar quarter, and zero for any subsequent dividend or distribution on the Shares
for which the Ex-Dividend Date falls within the same calendar quarter.
	 
	 	(g)	 	Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan
Securities Inc., an affiliate of Dealer (“JPMSI”), has acted solely as agent and not as
principal with respect to this Transaction and (ii) JPMSI has no obligation or
liability, by way of guaranty, endorsement or otherwise, in any manner in respect of
this Transaction (including, if applicable, in respect of the




12









 






	 	 	 	settlement thereof). Each party agrees it will look solely to the other party (or
any guarantor in respect thereof) for performance of such other party’s obligations
under this Transaction.
	 
	 	(h)	 	Additional Provisions.
	 
	 	 	 	(i) Amendments to the Equity Definitions:






(A) Section 11.2(a) of the Equity Definitions is hereby amended by deleting the
words “a diluting or concentrative” and replacing them with the words “an”; and
adding the phrase “or Warrants” at the end of the sentence.




(B) Section 11.2(c) of the Equity Definitions is hereby amended by (x)
replacing the words “a diluting or concentrative” with “an”, (y) adding the
phrase “or Warrants” after the words “the relevant Shares” in the same sentence
and (z) deleting the phrase “(provided that no adjustments will be made to
account solely for changes in volatility, expected dividends, stock loan rate
or liquidity relative to the relevant Shares)” and replacing it with the phrase
“(and, for the avoidance of doubt, adjustments may be made to account solely
for changes in volatility, expected dividends, stock loan rate or liquidity
relative to the relevant Shares).”




(C) Section 11.2(e)(vii) of the Equity Definitions is hereby amended by
deleting the words “a diluting or concentrative” and replacing them with the
word “a material”; and adding the phrase “or Warrants” at the end of the
sentence.




(D) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1)
deleting from the fourth line thereof the word “or” after the word “official”
and inserting a comma therefor, and (2) deleting the semi-colon at the end of
subsection (B) thereof and inserting the following words therefor “or (C) at
Dealer’s option, the occurrence of any of the events specified in Section
5(a)(vii) (1) through (9) of the ISDA Master Agreement with respect to that
Issuer.”




(E) Section 12.9(b)(iv) of the Equity Definitions is hereby amended by:




(x) deleting (1) subsection (A) in its entirety, (2) the phrase “or (B)”
following subsection (A) and (3) the phrase “in each case” in subsection
(B); and




(y) deleting the phrase “neither the Non-Hedging Party nor the Lending
Party lends Shares in the amount of the Hedging Shares or” in the
penultimate sentence.




(F) Section 12.9(b)(v) of the Equity Definitions is hereby amended by:




(x) adding the word “or” immediately before subsection “(B)” and
deleting the comma at the end of subsection (A); and




(y) (1) deleting subsection (C) in its entirety, (2) deleting the word
“or” immediately preceding subsection (C) and (3) deleting the
penultimate sentence in its entirety and replacing it with the sentence
“The Hedging Party will determine the Cancellation Amount payable by one
party to the other.”




	 	 	 	(ii) Notwithstanding anything to the contrary in this Confirmation, upon the
occurrence of one of the following events, with respect to this Transaction, (1)
Dealer shall have the right to designate such event an Additional Termination Event
and designate an Early Termination Date pursuant to Section 6(b) of the Agreement,
and (2) Company shall be deemed the sole Affected Party and the Transaction shall be
deemed the sole Affected Transaction:






(A) Consummation of (i) any recapitalization, reclassification or change of the
Shares (other than changes resulting from a subdivision or combination of the
Shares or any such recapitalization, reclassification or change that is
effected solely to change Company’s



13









 







jurisdiction of incorporation and results in a reclassification, conversion or
exchange of outstanding Shares solely into shares of common stock of the
surviving entity) as a result of which the Shares would be converted into, or
exchanged for, stock, other securities, other property or assets or (ii) any
share exchange, consolidation or merger of Company pursuant to which the Shares
will be converted into cash, securities or other property or any sale, lease or
other transfer in one transaction or a series of transactions of all or
substantially all of the consolidated assets of Company and its subsidiaries,
taken as a whole, to any person other than one of Company’s subsidiaries;
provided, however, that a transaction where the holders of more than 50% of all
classes of the common equity of Company immediately prior to such transaction
that is a share exchange, consolidation or merger own, directly or indirectly,
more than 50% of all classes of common equity of the continuing or surviving
corporation or transferee or the parent thereof immediately after such event
shall not be an Additional Termination Event. Notwithstanding the foregoing,
any event set forth in this clause (A) shall not constitute an Additional
Termination Event if 90% of the consideration received or to be received by
holders of the Shares in connection with such event consists of shares of
common stock traded on a national securities exchange or that will be so traded
or quoted when issued or exchanged in connection with such event.




(B) There is an event of default by Company under the terms of any indenture,
mortgage, agreement or other instrument under which there may be outstanding,
or by which there may be secured or evidenced, any indebtedness of Company for
money borrowed in an original aggregate principal or face amount in excess of
$175 million, whether such indebtedness now exists or shall hereafter be
created, which event of default results in acceleration of such indebtedness.




(C) A “person” or “group” within the meaning of Section 13(d) of the Exchange
Act, other than Company, any of its subsidiaries and its and their employee
benefit plans, files a Schedule TO or any schedule, form or report under the
Exchange Act, disclosing that such person or group has become the direct or
indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act,
of the common equity of Company representing more than 50% of the voting power
of such common equity.




(D) If (i) the directors who were members of the board of directors of Company
on the Trade Date or (ii) the directors who become members of the board of
directors of Company subsequent to that date and whose election, appointment or
nomination for election by Company stockholders is duly approved by a majority
of the continuing directors on the board of directors of Company at the time of
such approval, either by a specific vote or by approval of the proxy statement
issued by Company on behalf of the entire board of directors of Company in
which such individual is named as nominee for director, cease to constitute at
least a majority of Company’s board of directors.




(E) Dealer, despite using commercially reasonable efforts is unable, or
reasonably determines based on the advice of counsel that it is impractical or
illegal, to hedge its exposure with respect to this Transaction in the public
market without registration under the Securities Act or as a result of any
legal or regulatory requirements or related policies and procedures (whether or
not such requirements, policies or procedures are imposed by law or have been
voluntarily adopted by Dealer).




	 	 	 	For purposes of this Section 9(h)(ii), any transaction or event that constitutes an
Additional Termination Event under both clause (A) and clause (C) above will be
deemed to be solely an Additional Termination Event under clause (A).
	 
	 	(i)	 	No Collateral or Setoff. Notwithstanding any provision of the
Agreement or any other agreement between the parties to the contrary, the obligations
of Company hereunder are not secured by any collateral. Neither party shall have the
right to set off any obligation that it may have to the other party under this
Transaction against any obligation such other party may have to it, whether




14









 







	 	 	 	arising under the Agreement, this Confirmation or any other agreement between the
parties hereto, by operation of law or otherwise.
	 
	 	(j)	 	Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If, in respect of this Transaction, an amount is payable by
Company to Dealer, (i) pursuant to Section 12.7 or Section 12.9 of the Equity
Definitions or (ii) pursuant to Section 6(d)(ii) of the Agreement (a “Payment
Obligation”), Company shall have the right, in its sole discretion, to satisfy any such
Payment Obligation by the Share Termination Alternative (as defined below) (except that
Company shall not make such an election in the event of a Nationalization, Insolvency,
Merger Event or Tender Offer in which the consideration to be paid to holders of shares
consists solely of cash or an Event of Default in which Company is the Defaulting Party
or a Termination Event in which Company is the Affected Party, other than an Event of
Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or (viii) of the
Agreement or a Termination Event of the type described in Section 5(b) of the
Agreement, in each case that resulted from an event or events outside Company’s
control) and shall give irrevocable telephonic notice to Dealer, confirmed in writing
within one Scheduled Trading Day, no later than 12:00 p.m. New York local time on the
Merger Date, Tender Offer Date, Announcement Date (in the case of a Nationalization,
Insolvency or Delisting), Early Termination Date or date of cancellation, as
applicable; provided that if Company does not validly elect to satisfy its Payment
Obligation by the Share Termination Alternative, Dealer shall have the right to require
Company to satisfy its Payment Obligation by the Share Termination Alternative.
Notwithstanding the foregoing, Company’s or Dealer’s right to elect satisfaction of a
Payment Obligation in the Share Termination Alternative as set forth in this clause
shall only apply to Transactions under this Confirmation and, notwithstanding anything
to the contrary in the Agreement, (1) separate amounts shall be calculated with respect
to (a) Transactions hereunder and (b) all other Transactions under the Agreement, and
(2) such separate amounts shall be payable pursuant to Section 6(d)(ii) of the
Agreement, subject to, in the case of clause (a), Company’s Share Termination
Alternative right hereunder.





	 	 	 
	Share Termination Alternative:

	 	
If applicable, Company shall deliver
to Dealer the Share Termination Delivery Property on the date (the “Share
Termination Payment Date”) on which the Payment Obligation would otherwise be
due pursuant to Section 12.7 or Section 12.9 of the Equity Definitions or
Section 6(d)(ii) of the Agreement, as applicable, subject to paragraph (k)(i)
below, in satisfaction, subject to paragraph (k)(ii) below, of the Payment
Obligation in the manner reasonably requested by Dealer free of payment.
	 
	 	 
	Share Termination Delivery Property:

	 	

A number of Share Termination
Delivery Units, as calculated by the Calculation Agent, equal to the Payment
Obligation divided by the Share Termination Unit Price. The Calculation Agent
shall adjust the amount of Share Termination Delivery Property by replacing any
fractional portion of a security therein with an amount of cash equal to the
value of such fractional security based on the values used to calculate the
Share Termination Unit Price.
	 
	 	 
	Share Termination Unit Price:

	 	

The value to Dealer of property
contained in one Share Termination Delivery Unit on the date such Share
Termination Delivery Units are to be delivered as Share Termination Delivery
Property, as determined by the Calculation Agent in its discretion by
commercially reasonable means. The Calculation Agent shall notify Company of
such Share






15









 








	 	 	 
	 

	 	Termination Unit Price at the time of
notification of the Payment Obligation. In
the case of a Private Placement of Share
Termination Delivery Units that are Restricted
Shares (as defined below), as set forth in
paragraph (k)(i) below, the Share Termination
Unit Price shall be determined by the
discounted price applicable to such Share
Termination Delivery Units. In the case of a
Registration Settlement of Share Termination
Delivery Units that are Restricted Shares (as
defined below) as set forth in paragraph
(k)(ii) below, the Share Termination Unit
Price shall be the Settlement Price on the
Merger Date, the Tender Offer Date, the
Announcement Date (in the case of a
Nationalization, Insolvency or Delisting), the
date of cancellation or the Early Termination
Date, as applicable.
	 
	 	 
	Share Termination Delivery Unit:

	 	

In the case of a Termination Event,
Event of Default Additional Disruption Event or Delisting, one Share or, in the
case of Nationalization, Insolvency, Tender Offer or Merger Event, a unit
consisting of the number or amount of each type of property received by a
holder of one Share (without consideration of any requirement to pay cash or
other consideration in lieu of fractional amounts of any securities) in such
Nationalization, Insolvency, Tender Offer or Merger Event. If such
Nationalization, Insolvency, Tender Offer or Merger Event involves a choice of
consideration to be received by holders, such holder shall be deemed to have
elected to receive the maximum possible amount of cash.
	 
	 	 
	Failure to Deliver:

	 	Inapplicable
	 
	 	 
	Other applicable provisions:

	 	If Share Termination Alternative is
applicable, the provisions of Sections 9.8, 9.9, 9.11 (as modified herein),
9.12 and 10.5 (as modified above) of the Equity Definitions will be applicable
as if Physical Settlement were applicable.







	 	(k)	 	Registration/Private Placement Procedures. If, in the reasonable
opinion of Dealer, following any delivery of Shares or Share Termination Delivery
Property to Dealer hereunder, such Shares or Share Termination Delivery Property would
be in the hands of Dealer subject to any applicable restrictions with respect to any
registration or qualification requirement or prospectus delivery requirement for such
Shares or Share Termination Delivery Property pursuant to any applicable federal or
state securities law (including, without limitation, any such requirement arising under
Section 5 of the Securities Act as a result of such Shares or Share Termination
Delivery Property being “restricted securities”, as such term is defined in Rule 144
under the Securities Act, or as a result of the sale of such Shares or Share
Termination Delivery Property being subject to paragraph (c) of Rule 145 under the
Securities Act) (such Shares or Share Termination Delivery Property, “Restricted
Shares”), then delivery of such Restricted Shares shall be effected pursuant to either
clause (i) or (ii) below at the election of Company, unless Dealer waives the need for
registration/private placement procedures set forth in (i) and (ii) below.
Notwithstanding the foregoing, solely in respect of any Daily Number of Warrants
exercised or deemed exercised on any Expiration Date, Company shall elect, prior to the
first Settlement Date for the first Expiration Date, a Private Placement Settlement or
Registration Settlement for all deliveries of Restricted




16









 






	 	 	 	Shares for all such Expiration Dates, which election shall be applicable to all
Settlement Dates for such Warrants and the procedures in clause (i) or clause (ii)
below shall apply for all such delivered Restricted Shares on an aggregate basis
commencing after the final Settlement Date for such Warrants. The Calculation Agent
shall make reasonable adjustments to settlement terms and provisions under this
Confirmation to reflect a single Private Placement or Registration Settlement for
such aggregate Restricted Shares delivered hereunder.






	 	(i)	 	If Company elects to settle the Transaction pursuant to this
clause (i) (a “Private Placement Settlement”), then delivery of Restricted
Shares by Company shall be effected in customary private placement procedures
with respect to such Restricted Shares reasonably acceptable to Dealer;
provided that Company may not elect a Private Placement Settlement if, on the
date of its election, it has taken, or caused to be taken, any action that
would make unavailable either the exemption pursuant to Section 4(2) of the
Securities Act for the sale by Company to Dealer (or any affiliate designated
by Dealer) of the Restricted Shares or the exemption pursuant to Section 4(1)
or Section 4(3) of the Securities Act for resales of the Restricted Shares by
Dealer (or any such affiliate of Dealer). The Private Placement Settlement of
such Restricted Shares shall include customary representations, covenants, blue
sky and other governmental filings and/or registrations, indemnities to Dealer,
due diligence rights (for Dealer or any designated buyer of the Restricted
Shares by Dealer), opinions and certificates, and such other documentation as
is customary for private placement agreements, all reasonably acceptable to
Dealer. In the case of a Private Placement Settlement, Dealer shall determine
the appropriate discount to the Share Termination Unit Price (in the case of
settlement of Share Termination Delivery Units pursuant to paragraph (j) above)
or any Settlement Price (in the case of settlement of Shares pursuant to
Section 2 above) applicable to such Restricted Shares in a commercially
reasonable manner and appropriately adjust the number of such Restricted Shares
to be delivered to Dealer hereunder; provided that in no event shall such
number be greater than 1.85 times the Number of Shares (the “Maximum Amount”).
Notwithstanding the Agreement or this Confirmation, the date of delivery of
such Restricted Shares shall be the Exchange Business Day following notice by
Dealer to Company, of such applicable discount and the number of Restricted
Shares to be delivered pursuant to this clause (i). For the avoidance of
doubt, delivery of Restricted Shares shall be due as set forth in the previous
sentence and not be due on the Share Termination Payment Date (in the case of
settlement of Share Termination Delivery Units pursuant to paragraph (j) above)
or on the Settlement Date for such Restricted Shares (in the case of settlement
in Shares pursuant to Section 2 above).
	 
	 	 	 	In the event Company shall not have delivered the full number of Restricted
Shares otherwise applicable as a result of the proviso above relating to the
Maximum Amount (such deficit, the “Deficit Restricted Shares”), Company
shall be continually obligated to deliver, from time to time until the full
number of Deficit Restricted Shares have been delivered pursuant to this
paragraph, Restricted Shares when, and to the extent, that (i) Shares are
repurchased, acquired or otherwise received by Company or any of its
subsidiaries after the Trade Date (whether or not in exchange for cash, fair
value or any other consideration), (ii) authorized and unissued Shares
reserved for issuance in respect of other transactions prior to such date
that prior to the relevant date become no longer so reserved and (iii)
Company additionally authorizes any unissued Shares that are not reserved
for other transactions. Company shall immediately notify Dealer of the
occurrence of any of the foregoing events (including the number of Shares
subject to clause (i), (ii) or (iii) and the corresponding number of
Restricted Shares to be delivered) and promptly deliver such Restricted
Shares thereafter.
	 
	 	(ii)	 	If Company elects to settle the Transaction pursuant to this
clause (ii) (a “Registration Settlement”), then Company shall promptly (but in
any event no later than the beginning of the Resale Period) file and use its
reasonable best efforts to make effective under the Securities Act a
registration statement or supplement or amend an outstanding registration
statement in form and substance reasonably satisfactory to Dealer, to cover




17









 






	 	 	 	the resale of such Restricted Shares in accordance with customary resale
registration procedures, including covenants, conditions, representations,
underwriting discounts (if applicable), commissions (if applicable),
indemnities due diligence rights, opinions and certificates, and such other
documentation as is customary for equity resale underwriting agreements, all
reasonably acceptable to Dealer. If Dealer, in its sole reasonable
discretion, is not satisfied with such procedures and documentation Private
Placement Settlement shall apply. If Dealer is satisfied with such
procedures and documentation, it shall sell the Restricted Shares pursuant
to such registration statement during a period (the “Resale Period”)
commencing on the Exchange Business Day following delivery of such
Restricted Shares (which, for the avoidance of doubt, shall be (x) the Share
Termination Payment Date in case of settlement in Share Termination Delivery
Units pursuant to paragraph (j) above or (y) the Settlement Date in respect
of the final Expiration Date for all Daily Number of Warrants) and ending on
the earliest of (i) the Exchange Business Day on which Dealer completes the
sale of all Restricted Shares or, in the case of settlement of Share
Termination Delivery Units, a sufficient number of Restricted Shares so that
the realized net proceeds of such sales equals or exceeds the Payment
Obligation (as defined above), (ii) the date upon which all Restricted
Shares have been sold or transferred pursuant to Rule 144 (or similar
provisions then in force) or Rule 145(d)( 2) (or any similar provision then
in force) under the Securities Act and (iii) the date upon which all
Restricted Shares may be sold or transferred by a non-affiliate pursuant to
Rule 144 (or any similar provision then in force) or Rule 145(d)(2) (or any
similar provision then in force) under the Securities Act. If the Payment
Obligation exceeds the realized net proceeds from such resale, Company shall
transfer to Dealer by the open of the regular trading session on the
Exchange on the Exchange Trading Day immediately following the last day of
the Resale Period the amount of such excess (the “Additional Amount”) in
cash or in a number of Shares (“Make-whole Shares”) in an amount that, based
on the Settlement Price on the last day of the Resale Period (as if such day
was the “Valuation Date” for purposes of computing such Settlement Price),
has a dollar value equal to the Additional Amount. The Resale Period shall
continue to enable the sale of the Make-whole Shares. If Company elects to
pay the Additional Amount in Shares, the requirements and provisions for
Registration Settlement shall apply. This provision shall be applied
successively until the Additional Amount is equal to zero. In no event
shall Company deliver a number of Restricted Shares greater than the Maximum
Amount.
	 
	 	(iii)	 	Without limiting the generality of the foregoing, Company
agrees that any Restricted Shares delivered to Dealer, as purchaser of such
Restricted Shares, (i) may be transferred by and among Dealer and its
affiliates and Company shall effect such transfer without any further action by
Dealer and (ii) after the period of 6 months from the Trade Date (or 1 year
from the Trade Date if, at such time, informational requirements of Rule 144(c)
are not satisfied with respect to Company) has elapsed after any Settlement
Date for such Restricted Shares, Company shall promptly remove, or cause the
transfer agent for such Restricted Shares to remove, any legends referring to
any such restrictions or requirements from such Restricted Shares upon request
by Dealer (or such affiliate of Dealer) to Company or such transfer agent,
without any requirement for the delivery of any certificate, consent,
agreement, opinion of counsel, notice or any other document, any transfer tax
stamps or payment of any other amount or any other action by Dealer (or such
affiliate of Dealer).






	 	 	 	If the Private Placement Settlement or the Registration Settlement shall not be
effected as set forth in clauses (i) or (ii), as applicable, then failure to effect
such Private Placement Settlement or such Registration Settlement shall constitute
an Event of Default with respect to which Company shall be the Defaulting Party.
	 
	 	(l)	 	Limit on Beneficial Ownership. Notwithstanding any other provisions
hereof, Dealer may not exercise any Warrant hereunder, have the “right to acquire”
(within the meaning of NYSE Rule 312.04(g)) Shares upon exercise of any Warrant
hereunder or be entitled to take delivery of any




18









 






	 	 	 	Shares deliverable hereunder, and Automatic Exercise shall not apply with respect to
any Warrant hereunder, to the extent (but only to the extent) that, after such
receipt of any Shares upon the exercise of such Warrant or otherwise hereunder, (i)
the Share Amount would exceed the Applicable Limit or (ii) Dealer Group would
directly or indirectly beneficially own (as such term is defined for purposes of
Section 13 or Section 16 of the Exchange Act and the rules promulgated thereunder)
in excess of the lesser of (A) 8.0% of the then outstanding Shares or (B) 8,752,148
Shares (the “Threshold Number of Shares”). Any purported delivery hereunder shall
be void and have no effect to the extent (but only to the extent) that, after such
delivery, (i) the Share Amount would exceed the Applicable Limit, or (ii) Dealer
Group would directly or indirectly so beneficially own in excess of the Threshold
Number of Shares. If any delivery owed to Dealer hereunder is not made, in whole or
in part, as a result of this provision, Company’s obligation to make such delivery
shall not be extinguished and Company shall make such delivery as promptly as
practicable after, but in no event later than one Business Day after, Dealer gives
notice to Company that, after such delivery, (i) the Share Amount would not exceed
the Applicable Limit, and (ii) Dealer Group would not directly or indirectly so
beneficially own in excess of the Threshold Number of Shares.
	 
	 	(m)	 	Share Deliveries. Company acknowledges and agrees that, to the extent
the holder of this Warrant is not then an affiliate and has not been an affiliate for
90 days (it being understood that Dealer will not be considered an affiliate under this
paragraph solely by reason of its receipt of Shares pursuant to this Transaction), and
otherwise satisfies all holding period and other requirements of Rule 144 of the
Securities Act applicable to it, any delivery of Shares or Share Termination Delivery
Property hereunder at any time after 6 months from the Trade Date (or 1 year from the
Trade Date if, at such time, informational requirements of Rule 144(c) are not
satisfied with respect to Company) shall be eligible for resale under Rule 144 of the
Securities Act and Company agrees to promptly remove, or cause the transfer agent for
such Shares or Share Termination Delivery Property, to remove, any legends referring to
any restrictions on resale under the Securities Act from the Shares or Share
Termination Delivery Property. Company further agrees that any delivery of Shares or
Share Termination Delivery Property prior to the date that is 6 months from the Trade
Date (or 1 year from the Trade Date if, at such time, informational requirements of
Rule 144(c) are not satisfied with respect to Company), may be transferred by and among
Dealer and its affiliates and Company shall effect such transfer without any further
action by Dealer. Notwithstanding anything to the contrary herein, Company agrees that
any delivery of Shares or Share Termination Delivery Property shall be effected by
book-entry transfer through the facilities of DTC, or any successor depositary, if at
the time of delivery, such class of Shares or class of Share Termination Delivery
Property is in book-entry form at DTC or such successor depositary. Notwithstanding
anything to the contrary herein, to the extent the provisions of Rule 144 of the
Securities Act or any successor rule are amended, or the applicable interpretation
thereof by the Securities and Exchange Commission or any court change after the Trade
Date, the agreements of Company herein shall be deemed modified to the extent
necessary, in the opinion of outside counsel of Company, to comply with Rule 144 of the
Securities Act, as in effect at the time of delivery of the relevant Shares or Share
Termination Delivery Property.
	 
	 	(n)	 	Governing Law. New York law (without reference to choice of law
doctrine).
	 
	 	(o)	 	Waiver of Jury Trial. Each party waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect of any
suit, action or proceeding relating to this Transaction. Each party (i) certifies that
no representative, agent or attorney of the other party has represented, expressly or
otherwise, that such other party would not, in the event of such a suit, action or
proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it and the
other party have been induced to enter into this Transaction, as applicable, by, among
other things, the mutual waivers and certifications provided herein.
	 
	 	(p)	 	Tax Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, Company and each of its employees, representatives, or
other agents may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the




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	 	 	 	Transaction and all materials of any kind (including opinions or other tax analyses)
that are provided to Company relating to such tax treatment and tax structure.
	 
	 	(q)	 	Maximum Share Delivery. Notwithstanding any other provision of this
Confirmation or the Agreement, in no event will Company be required to deliver more
than the Maximum Amount of Shares in the aggregate to Dealer in connection with this
Transaction, subject to the provisions regarding Deficit Restricted Shares
	 
	 	(r)	 	Right to Extend. Dealer may postpone, in whole or in part, any
Expiration Date or any other date of valuation or delivery with respect to some or all
of the relevant Warrants (in which event the Calculation Agent shall make appropriate
adjustments to the Daily Number of Warrants with respect to one or more Expiration
Dates) if Dealer determines, in its commercially reasonable judgment, that such
extension is reasonably necessary or appropriate to preserve Dealer’s hedging or hedge
unwind activity hereunder in light of existing liquidity conditions or to enable Dealer
to effect purchases of Shares in connection with its hedging, hedge unwind or
settlement activity hereunder in a manner that would, if Dealer were Issuer or an
affiliated purchaser of Issuer, be in compliance with applicable legal, regulatory or
self-regulatory requirements, or with related policies and procedures applicable to
Dealer.
	 
	 	(s)	 	Status of Claims in Bankruptcy. Dealer acknowledges and agrees that
this Confirmation is not intended to convey to Dealer rights against Company with
respect to the Transaction that are senior to the claims of common stockholders of
Company in any United States bankruptcy proceedings of Company; provided that nothing
herein shall limit or shall be deemed to limit Dealer’s right to pursue remedies in the
event of a breach by Company of its obligations and agreements with respect to the
Transaction; provided, further, that nothing herein shall limit or shall be deemed to
limit Dealer’s rights in respect of any transactions other than the Transaction.
	 
	 	(t)	 	Securities Contract; Swap Agreement. The parties hereto intend for:
(a) the Transaction to be a “securities contract” and a “swap agreement” as defined in
the Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”), and
the parties hereto to be entitled to the protections afforded by, among other Sections,
Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the Bankruptcy Code; (b)
a party’s right to liquidate the Transaction and to exercise any other remedies upon
the occurrence of any Event of Default under the Agreement with respect to the other
party to constitute a “contractual right” as described in the Bankruptcy Code; and (c)
each payment and delivery of cash, securities or other property hereunder to constitute
a “margin payment” or “settlement payment” and a “transfer” as defined in the
Bankruptcy Code.
	 
	 	(u)	 	Delivery or Receipt of Cash. For the avoidance of doubt, other than
receipt of the Premium by Company, nothing in this Confirmation shall be interpreted as
requiring Company to cash settle this Transaction, except in circumstances where such
cash settlement is within Company’s control (including, without limitation, where
Company elects to deliver or receive cash, where Company fails timely to elect the
Share Termination Alternative, or where Company has made Private Placement Settlement
unavailable due to the occurrence of events within its control ) or in those
circumstances in which holders of the Shares would also receive cash.
	 
	 	(v)	 	Amendment. If the Underwriters exercise their right to purchase some
or all of the Option Securities (as defined in the Underwriting Agreement) (“Option
Securities”) pursuant to the Underwriting Agreement, then, at the discretion of
Company, Dealer and Company will either enter into a new confirmation evidencing
additional warrants to be issued by Company to Dealer or amend this Confirmation to
evidence such additional warrants (in each case on the same pricing terms as the
Warrants hereunder) (such additional confirmation or amendment to this Confirmation to
provide for the payment by Dealer to Company of the additional premium related thereto
in an amount to be agreed between the parties).
	 
	 	(w)	 	Lock Up. Prior to the first anniversary of the Trade Date, if the
Underwriters exercise their right to purchase Option Securities pursuant to the
Underwriting Agreement and Company does not elect to issue the maximum number of
Additional Warrants as provided in Section 9(v) above,




20









 






	 	 	 	Company shall not issue or enter into any warrant, call option, variable forward or
other derivative linked to the Shares (collectively, “Warrants”), whether cash
settled and/or physically settled and/or net share settled, without the prior
written consent of Dealer which shall not be unreasonably withheld, unless such
Warrants are issued (i) pursuant to any present or future employee, director or
consultant benefit plan or program of Company or any hedging arrangements in respect
thereof, (ii) to all Company’s stockholders as a free distribution or a distribution
for less than the fair market value of such Warrants (as determined by the
Calculation Agent), (iii) as part of mandatorily convertible units in a bona fide
capital raising transaction unrelated to the convertible notes sold pursuant to the
Underwriting Agreement (the “Convertible Notes”), or (iv) as part of a bona fide
Share repurchase transaction unrelated to the Convertible Notes. “Additional
Warrants” shall equal to the product of (i) the Warrant Entitlement, (ii) the
initial conversion rate of the Convertible Notes and (iii) the aggregate principal
amount of the Option Securities divided by USD 1,000.





21









 










     Please confirm that the foregoing correctly sets forth the terms of our agreement by executing
this Confirmation and returning it to EDG Confirmation Group, J.P. Morgan Securities Inc., 277 Park
Avenue, 11th Floor, New York, NY 10172-3401, or by fax to (212) 622 8519.



Very truly yours,




	 	 	 	 	 
	 

	 	J.P. Morgan Securities Inc., as agent for
JPMorgan Chase Bank, National Association	 	 
	 
	 	 	 	 
	 

	 	By: /s/ Michael O’Donovan 

Authorized
Signatory
	 	 
	 

	 	Name: Michael O’Donovan	 	 






Accepted and confirmed

as of the Trade Date:




Wyndham Worldwide Corporation




By: /s/
Virginia M.
Wilson 

Authorized Signatory

Name: Virginia M.
Wilson
            Executive
Vice President
and
            Chief
Financial Officer




JPMorgan Chase Bank, National Association

Organised under the laws of the United States as a National Banking Association

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authority