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Wyndham Worldwide DEF 14A 2007 Documents found in this filing:Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
Wyndham Worldwide
Corporation
Payment of Filing Fee (Check the appropriate box):
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Wyndham Worldwide Corporation
Seven Sylvan Way
Parsippany, New Jersey 07054
March 12, 2007
Dear Shareholder of Wyndham Worldwide Corporation,
You are invited to attend the 2007 Annual Meeting of
Shareholders to be held on April 26, 2007, at
3:00 p.m. local time at the Meadow Wood Manor, 461 Route 10
East, Randolph, New Jersey 07869.
The annual meeting will begin with voting on the matters set
forth in the accompanying notice of annual meeting and proxy
statement and discussion on other business matters properly
brought before the meeting followed by a brief report on our
operations.
If you plan to attend the meeting, please follow the
instructions provided in the proxy statement. An admission
ticket is required for admission to the meeting.
Whether or not you plan to attend it is important that your
shares be represented and voted at the meeting. To make it
easier for you to vote your shares, you have a choice of voting
over the Internet or by telephone, or by completing, signing,
dating and returning your proxy card in the enclosed envelope.
To vote your shares by Internet or telephone please refer to the
instructions contained on the enclosed proxy card.
Cordially,
Stephen P. Holmes
Chairman and Chief Executive Officer
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WYNDHAM WORLDWIDE
CORPORATION
March 12, 2007
To the Shareholders:
Wyndham Worldwide Corporation’s 2007 Annual Meeting of
Shareholders will be held at the Meadow Wood Manor, 461 Route 10
East, Randolph, New Jersey 07869, on April 26, 2007 at
3:00 p.m. local time for the following purposes:
The matters specified for voting above are more fully described
in the attached proxy statement, which are hereby made a part of
this Notice. Only shareholders of record at the close of
business on March 7, 2007 will be entitled to notice of and
to vote at the meeting and any adjournments.
By Order of the Board of Directors
Lynn A. Feldman
Senior Vice President,
Deputy General Counsel and
Corporate Secretary
Even though you may plan to attend the meeting in person,
please vote by telephone or the Internet, or complete and
execute the enclosed proxy card and mail it promptly. A return
envelope (which requires no postage if mailed in the United
States) is enclosed for your convenience. Telephone and Internet
voting information is provided on your proxy card. Should you
attend the meeting in person, you may revoke your proxy and vote
in person.
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WYNDHAM WORLDWIDE
CORPORATION
2007 ANNUAL
MEETING OF SHAREHOLDERS
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WYNDHAM WORLDWIDE
CORPORATION
The enclosed proxy materials are being sent at the request of
the Board of Directors of Wyndham Worldwide Corporation to
encourage you to vote your shares at our 2007 Annual Meeting of
Shareholders to be held April 26, 2007. This Proxy
Statement contains information on matters that will be presented
at the meeting and is provided to assist you in voting your
shares. References in this proxy statement to “we,”
“us,” “our,” and “Wyndham
Worldwide” refer to Wyndham Worldwide Corporation and our
consolidated subsidiaries.
Our 2006 Annual Report on SEC
Form 10-K,
containing our management’s discussion and analysis of
financial condition and results of operations and audited
financial statements together with this proxy statement were
distributed together beginning on or about March 12, 2007.
GENERAL
INFORMATION
All holders of record of our common stock as of the close of
business on March 7, 2007 (the record date) are entitled to
vote at the meeting. Each shareholder will have one vote for
each share of our common stock held as of the close of business
on the record date. As of the record date,
188,203,537 shares of our common stock were outstanding.
There is no cumulative voting and the holders of our common
stock vote together as a single class.
The holders of a majority of the outstanding shares of our
common stock entitled to vote at the meeting, or
94,101,769 votes, must be present, in person or by proxy,
at the meeting in order to constitute a quorum necessary to
conduct the meeting. Abstentions and broker non-votes will be
counted for the purposes of establishing a quorum at the meeting.
We urge you to vote by proxy even if you plan to attend the
meeting so that we will know as soon as possible that a quorum
has been achieved.
You are being asked to vote on the following:
Even if you plan to attend the meeting you are encouraged to
vote by proxy. You may vote by proxy in one of the following
ways:
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When you vote by proxy, your shares will be voted according to
your instructions. If you sign your proxy card, vote by Internet
or by telephone, but do not specify how you want your shares to
be voted, they will be voted as the Board recommends. You may
change or revoke your proxy at any time prior to the voting at
the meeting by submitting a later dated proxy, by entering new
instructions by Internet or telephone, by giving timely written
notice of such change or revocation to the Corporate Secretary
or by attending the meeting and voting in person and requesting
that your prior proxy not be used.
If your shares are registered in the name of a bank, broker or
other nominee, follow the proxy instructions on the form you
receive from the nominee. The availability of telephone and
internet proxy will depend on the nominee’s proxy
processes. However, you may not vote these shares in person at
the meeting unless you bring with you a legal proxy from the
stockholder of record.
For participants in the Wyndham Worldwide Corporation Employee
Savings Plan, with shares of our common stock credited to their
accounts, voting instructions for the trustees of the plan are
also being solicited through this proxy statement. In accordance
with the provisions of the plan, the trustee will vote shares of
our common stock in accordance with instructions received from
the participants to whose accounts the shares are credited.
The Board recommends the following votes:
We are not aware of any other matters that will be brought
before the shareholders for a vote at the annual meeting. If any
other matters are properly presented for a vote, the individuals
named as proxies will have discretionary authority, to the
extent permitted by law, to vote on such matters according to
their best judgment.
In the election of directors, the affirmative vote of a
plurality of the votes present in person or by proxy and
entitled to vote at the meeting is required. In other words, the
director nominees receiving the greatest number of votes will be
elected. Abstentions will have no effect on the outcome of the
vote.
For the proposal to ratify the selection of Deloitte &
Touche LLP to serve as our independent registered public
accounting firm, the affirmative vote of the holders of a
majority of the shares represented at the meeting in person or
by proxy and entitled to vote on the proposal will be required
for approval. An abstention will have the effect of a vote
against this proposal.
If your shares are registered in the name of a bank, broker or
other nominee and you do not give your broker or other nominee
specific voting instructions for your shares, under rules of the
New York Stock Exchange your record holder has discretion to
vote your shares on proposals relating to what are deemed to be
“routine” matters, which include the election of
directors and the ratification of auditors described in this
proxy statement, and do not have discretion to vote on proposals
relating to what are deemed to be “non-routine”
matters. A “broker non-vote” occurs when a broker or
other nominee submits a proxy that states that the broker does
not vote for some or all of the proposals, because the broker
has not received instructions from the beneficial owner on how
to vote on the proposals and does not have discretionary
authority to vote in the absence of instructions.
Although broker non-votes will be considered as represented for
purposes of determining a quorum, broker non-votes are not
counted in the tabulation of the voting results for the election
of directors or the ratification of our auditors. Thus, a broker
non-vote will make a quorum more readily obtainable and will not
count as a vote against a proposal that requires a majority of
the votes represented at the meeting.
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Attendance at the meeting will be limited to shareholders as of
the record date, their authorized representatives and guests of
Wyndham Worldwide. Admission will be by ticket only. For
registered shareholders, please check the appropriate box on the
proxy card and retain the bottom portion of the card as your
admission ticket. Beneficial owners with shares held through a
bank, broker or other nominee should request tickets in writing
from the Corporate Secretary of Wyndham Worldwide Corporation,
Seven Sylvan Way, Parsippany, New Jersey 07054, and include
proof of ownership, such as a bank or brokerage firm account
statement or letter from the broker, trustee, bank or nominee
holding their stock, confirming beneficial ownership.
Shareholders who do not obtain tickets in advance may obtain
them on the meeting date at the registration desk upon verifying
his or her stock ownership as of the record date. In accordance
with our security procedures, all persons attending the meeting
must present a picture identification along with their admission
ticket or proof of beneficial ownership in order to gain
admission. Admission to the meeting will be expedited if tickets
are obtained in advance. Tickets may be issued to others at our
discretion.
If you are unable to attend the annual meeting in person, you
may listen to the proceedings through the Internet. To listen to
the live webcast, please log on at www.wyndhamworldwide.com and
select “News and Events” and “Webcasts and
Events” on the Investor Center page of the website. The
webcast will begin at 3:00 p.m., New York time, and will
remain on our website for 90 days. The webcast will permit
shareholders to listen to the meeting but will not provide for
the ability to vote, present any stockholder proposals or ask
questions.
We will pay all costs relating to the solicitation of proxies.
Mellon Investor Services LLC has been retained to assist in
soliciting proxies at a cost of $11,500 plus reasonable
expenses. Proxies may be solicited by our officers, directors
and employees personally, by mail, telephone or other electronic
means. We will also reimburse brokers, custodians, nominees and
fiduciaries for reasonable expenses in forwarding proxy
materials to beneficial owners of our common stock.
Shareholders interested in presenting a proposal for inclusion
in our proxy statement and proxy relating to our 2008 Annual
Meeting of Shareholders may do so by following the procedures
prescribed in
Rule 14a-8
under the Securities Exchange Act of 1934, as amended, and our
By-Laws. To be eligible for inclusion in next year’s proxy
statement, shareholder proposals must be received by the
Corporate Secretary at our principal executive offices no later
than the close of business on November 10, 2007. In
general, any shareholder proposal to be considered at next
year’s annual meeting, but not included in the proxy
statement, must be submitted in writing to and received by the
Corporate Secretary at our principal executive offices not
earlier than the close of business on December 29, 2007 and
not later than the close of business on January 28, 2008.
However, if the date of the 2008 Annual Meeting of Shareholders
is not within 30 days before or after April 26, 2008,
then a shareholder will be able to submit a proposal for
consideration at the annual meeting not later than the
10th day following the day on which public disclosure of
the date of the annual meeting was made or such notice of the
date of such annual meeting was mailed, whichever occurs first.
Any notification to bring any proposal before the 2008 Annual
Meeting of the Shareholders must comply with the requirements of
our By-Laws. A shareholder may obtain a copy of our By-Laws on
our website or by writing to our Corporate Secretary. Our
Corporate Governance Committee will take into consideration
nominees for election to the Board submitted by shareholders in
accordance with the criteria and procedures described in this
proxy statement under “Director Nomination Process.”
The Corporate Governance Committee will consider shareholder
recommendations for candidates to the Board sent to the
Committee c/o the Corporate Secretary. In order to submit a
nomination, a shareholder must comply with provisions of
applicable law and our By-Laws.
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The SEC has adopted rules governing the delivery of annual
disclosure documents that permit us to send a single set of our
annual report and proxy statement to any household at which two
or more shareholders reside if we believe that the shareholders
are members of the same family. This rule benefits both
shareholders and us by reducing the volume of duplicate
information received and our expenses. Each shareholder will
continue to receive a separate proxy card. If your household
received a single set of disclosure documents for this year, but
you would prefer to receive your own copy, or if you share an
address with another shareholder and together both of you wish
to receive only a single set of our annual disclosure documents,
please contact our transfer agent, Mellon Investor Services, by
calling their toll-free number
(866) 540-5760
or through their website at www.melloninvestors.com.
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Strong corporate governance is an integral part of our core
values. We are committed to having sound corporate
governance principles and practices. Please visit our website at
www.wyndhamworldwide.com under the Investor Center page for the
Board’s Corporate Governance Guidelines and Director
Independence Criteria, the Board-approved charters for the
Audit, Compensation and Corporate Governance committees and
related information. These guidelines and charters may be
obtained by writing to our Corporate Secretary at Wyndham
Worldwide Corporation, Seven Sylvan Way, Parsippany, New Jersey
07054.
Our Board has adopted Corporate Governance Guidelines that,
along with the charters of the Board committees, Director
Independence Criteria and Code of Business Conduct and Ethics
for Directors, provide the framework for our governance. The
governance rules for companies listed on the New York Stock
Exchange and those contained in the Sarbanes-Oxley Act of 2002
and related regulations are reflected in the guidelines. The
Board will review these principles and other aspects of
governance periodically. The Corporate Governance Guidelines are
available on the Investor Center page of our website
(www.wyndhamworldwide.com).
The Board adopted the Director Independence Criteria set out
below for its evaluation of the materiality of director
relationships with us. The Director Independence Criteria
contain independence standards that exceed the independence
standards specified in the listing standards of the New York
Stock Exchange. The Director Independence Criteria are available
on the Investor Center page of our website
(www.wyndhamworldwide.com).
A director who satisfies all of the following criteria shall be
presumed to be independent under our Director Independence
Criteria:
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The Corporate Governance Guidelines and Director Independence
Criteria provide for director independence standards that meet
or exceed those of the New York Stock Exchange. These standards
require the Board to affirmatively determine that each director
has no material relationship with Wyndham Worldwide other than
as a director.
In accordance with these standards and criteria, the Board
undertook its annual review of the independence of its
directors. During this review, the Board considered whether
there are any relationships between each director or any member
of his or her immediate family and us and our subsidiaries and
affiliates. The Board also considered whether there were any
transactions or relationships between directors or any member of
their immediate family or any entity of which a director or an
immediate family member is an executive officer, general partner
or significant equity holder and us. The purpose of this review
was to determine whether any such relationships or transactions
existed that were inconsistent with a determination that the
director is independent.
As a result of this review, the Board affirmatively determined
that the following directors are independent of Wyndham
Worldwide and its management as required by the New York Stock
Exchange listing standards and the Director Independence
Criteria: Myra J. Biblowit, George Herrera, The Right Honourable
Brian Mulroney, Pauline D.E. Richards and Michael H. Wargotz.
Under New York Stock Exchange rules, Mr. Buckman, as a
former executive officer of our former parent corporation,
Cendant Corporation (now Avis Budget Group), may not be deemed
to be independent until August 2009, three years from the
effective date of the spin-off. All members of the Audit,
Compensation and Corporate Governance committees are independent
directors as required by the New York Stock Exchange listing
standards, SEC rules as applicable and the Director Independence
Criteria.
The Board follows a number of procedures to review, and if
necessary and appropriate, ratify related persons transactions.
Each Board member answers a questionnaire designed to disclose
conflicts and related persons transactions. We also review our
internal records for related party transactions. Based on a
review of these standards and materials, none of the directors
determined by the Board to be independent had or has any
relationship with us other than as a director. Accordingly, the
Board did not need to consider any director relationship with us
to make its determination of director independence.
The following describes our Board Committees. The composition of
the Committees is provided immediately after.
Responsibilities include:
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All members of the Audit Committee are independent directors
under the Board’s Director Independence Criteria and
applicable regulatory and listing standards. The Board in its
business judgment has determined that each member of the Audit
Committee is financially literate, knowledgeable and qualified
to review financial statements in accordance with applicable
listing standards. The Board has also determined that Pauline
D.E. Richards is an audit committee financial expert within the
meaning of applicable SEC rules.
See the Audit Committee Report below. The Audit Committee
Charter is available on the Investor Center page of our website
(www.wyndhamworldwide.com).
Responsibilities include:
All members of the Compensation Committee are independent
directors under the Board’s Director Independence Criteria
and applicable regulatory and listing standards.
See the Compensation Committee Report below. The Compensation
Committee Charter is available on the Investor Center page on
our website (www.wyndhamworldwide.com).
Cendant’s compensation committee retained Frederic W.
Cook & Co., Inc. as third party advisor and employed
them to provide independent advice and evaluation on the
compensation packages of Cendant’s executives, including
our CEO, effective for 2006.
In October 2006, Hewitt Associates was retained by our
Compensation Committee as a third-party advisor to provide
independent advice, research, and evaluation related to
executive compensation. In this capacity, Hewitt Associates
reports directly to the Compensation Committee. Hewitt
Associates has been retained to provide our Compensation
Committee with the following services upon request: competitive
market pay analyses including total compensation measurement
services, proxy data studies, dilution analyses and market
trends; ongoing support with regard to the latest relevant
legal, regulatory and accounting considerations impacting
compensation and benefit programs; assistance with the redesign
of any compensation or benefit programs, if needed; and
preparation for and attendance at selected management, committee
and Board meetings.
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Responsibilities include:
All members of the Corporate Governance Committee are
independent directors under the Board’s Director
Independence Criteria and applicable regulatory and listing
standards.
The Corporate Governance Charter is available on the Investor
Center page on our website (www.wyndhamworldwide.com).
The Executive Committee may exercise all of the powers of the
Board when the Board is not in session, including the power to
authorize the issuance of stock, except that the Executive
Committee does not have the authority to alter, amend or repeal
the by-laws or any resolution or resolutions of the Board,
declare any dividend or make any other distribution to
shareholders, appoint any member of the Executive Committee or
take any other action which legally may be taken only by the
full Board.
The following chart shows the current committee membership and
the number of meetings that each committee held since
July 31, 2006, the effective date of our spin-off from
Cendant Corporation.
M = Member
C = Chair
Directors fulfill their responsibilities not only by attending
Board and committee meetings but also through communication with
the Chairman and CEO and other members of management relative to
matters of mutual interest and concern to Wyndham Worldwide.
Since July 31, 2006, the Board held two meetings. Each
director attended 100% of the meetings of the Board and the
committees of the Board on which the director served.
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The Board will meet at least three times a year in executive
session without any members of management present, whether or
not they are directors, and at least once per year with only the
independent directors present. Directors meeting in executive
session will formulate and disclose the manner by which a
presiding director is selected for each executive session.
Shareholders and other parties interested in communicating
directly with the Board or an individual non-employee director
may do so by writing our Corporate Secretary at Wyndham
Worldwide Corporation, Seven Sylvan Way, Parsippany, New Jersey
07054. The Corporate Secretary will forward the correspondence
only to the intended recipients. However, prior to forwarding
any correspondence, the Corporate Secretary will review it and,
in her discretion, not forward correspondence deemed to be of a
commercial nature.
The Board has adopted a Code of Business Conduct and Ethics for
Directors with ethics guidelines specifically applicable to
directors. In addition, we adopted Business Principles
applicable to all our employees, including our CEO, CFO and
Chief Accounting Officer. The Code of Business Conduct and
Ethics for Directors and our Business Principles are available
on the Investor Center page of our website
(www.wyndhamworldwide.com). Copies of these documents may also
be obtained free of charge by writing to our Corporate
Secretary. We will disclose on our website any amendment to or
waiver from a provision of our Business Principles that applies
to our CEO, CFO or Chief Accounting Officer.
As provided in the Board’s Corporate Governance Guidelines,
directors are expected to attend our annual meeting of
shareholders absent exceptional cause. All of our directors plan
to attend the Annual Meeting.
Role of Corporate Governance Committee. The
Corporate Governance Committee considers the appropriate balance
of experience, skills and characteristics required of the Board
when considering potential candidates to serve on the Board.
Nominees for director are selected on the basis of their depth
and breadth of experience, wisdom, integrity, ability to make
independent analytical inquiries, understanding of our business
environment and willingness to devote adequate time to Board
duties.
Identification and Evaluation Process. The
process for identifying and evaluating nominees to the Board is
initiated by identifying a candidate who meets the criteria for
selection as a nominee and has the specific qualities or skills
being sought based on input from members of the Board and, if
the Corporate Governance Committee deems appropriate, a
third-party search firm. These candidates will be evaluated by
the Corporate Governance Committee by reviewing the
candidates’ biographical information and qualifications and
checking the candidates’ references. Qualified nominees
will be interviewed by at least one member of the Corporate
Governance Committee. Using the input from the interview and
other information obtained by the Corporate Governance
Committee, the Corporate Governance Committee evaluates whether
the prospective candidate is qualified to serve as a director
and whether the Corporate Governance Committee should recommend
to the Board that the Board nominate this prospective candidate
for election by the shareholders or to fill a vacancy on the
Board.
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Shareholder Nominations and By-Law
Procedures. The Corporate Governance Committee
will consider written proposals from shareholders for nominees
for director. Nominations should be submitted to the Corporate
Governance Committee, c/o the Corporate Secretary, and
include at least the following: name of the shareholder and
evidence of the person’s ownership of our common stock,
number of shares owned and the length of time of ownership, name
of the candidate, the candidate’s resume or a listing of
his or her qualifications to be a director and the person’s
consent to be named as a director if selected by the Corporate
Governance Committee and nominated by the Board.
Our By-Laws establish procedures pursuant to which a stockholder
may nominate a person for election to the Board. Our By-Laws are
posted on our website under Investor Center at
www.wyndhamworldwide.com. To nominate a person for election to
the Board, a stockholder must set forth all information relating
to the nominee that is required to be disclosed in a proxy
statement or other filings required to be made in connection
with solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Section 14
under the Securities Exchange Act of 1934, as amended (and the
related rules and regulations). Such notice must also contain
information specified in the By-Laws as to the director nominee,
information about the shareholder making the nomination,
including name and address, class and number of shares owned,
and representations regarding the intention to make such a
nomination and to solicit proxies in support of it. We may
require any proposed nominee to furnish information concerning
his or her eligibility to serve as an independent director or
that could be material to a reasonable shareholder’s
understanding of the independence of the nominee.
To nominate a person for election to the Board at our annual
meeting of stockholders, written notice of a stockholder
nomination must be delivered to our Corporate Secretary not less
than 90 nor more than 120 days prior to the anniversary
date of the prior year’s annual meeting. However, if our
annual meeting is advanced or delayed by more than 30 days
from the anniversary date of the previous year’s meeting, a
shareholder’s written notice will be timely if it is
delivered by no later than the close of business on the
10th day following the day on which public disclosure of
the date of the annual meeting is made or the notice of the date
of the annual meeting was mailed, whichever occurs first. A
shareholder may make nominations of persons for election to the
Board at a special meeting if the shareholder delivers written
notice to our Corporate Secretary not later than the close of
business on the 10th day following the day on which public
disclosure of the date such special meeting was made or notice
of such special meeting was mailed, whichever occurs first. At a
special meeting of shareholders, only such business may be
conducted as shall have been brought before the meeting pursuant
to our notice of meeting.
Evaluation of Shareholder Nominees. The
Corporate Governance Committee intends to use a substantially
similar evaluation process as discussed above to evaluate
nominees for director recommended by shareholders.
The Audit Committee of the Board of Directors assists the Board
in fulfilling its oversight responsibilities for the external
reporting process and the adequacy of Wyndham Worldwide’s
internal controls. Specific responsibilities of the Audit
Committee are set forth in the Audit Committee Charter adopted
by the Board on July 13, 2006. The Charter is available on
the Investor Center page of our website
(www.wyndhamworldwide.com).
The Audit Committee is comprised of three directors, all of whom
meet the standards of independence adopted by the New York Stock
Exchange and the SEC. Subject to shareholder ratification, the
Audit Committee appoints Wyndham Worldwide’s independent
registered public accounting firm. The Audit Committee approves
in advance all services to be performed by Wyndham
Worldwide’s independent registered public accounting firm
in accordance with SEC rules, subject to the de minimis
exceptions for non-audit services.
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Management is responsible for Wyndham Worldwide’s financial
statements and reporting process, for establishing and
maintaining an adequate system of internal controls over
financial reporting, and for assessing the effectiveness of
Wyndham Worldwide’s internal controls over financial
reporting. Deloitte & Touche LLP, Wyndham
Worldwide’s independent registered public accounting firm,
is responsible for auditing Wyndham Worldwide’s
consolidated and combined financial statements. The Audit
Committee has reviewed and discussed Wyndham Worldwide’s
2006 annual report on
Form 10-K,
including the audited consolidated and combined financial
statements of Wyndham Worldwide for the year ended
December 31, 2006, with management and with representatives
of Deloitte & Touche LLP.
The Audit Committee has also discussed with Deloitte &
Touche LLP matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit
Committees), as amended, other applicable auditing standards of
the Public Company Audit Oversight Board, as well as
Rule 2-07
of
Regulation S-X
of the SEC — Communication with audit
committees. The Audit Committee has received from
Deloitte & Touche LLP the written disclosures required
by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has
discussed with Deloitte & Touche LLP its independence.
The Audit Committee has also considered whether
Deloitte & Touche LLP providing limited non-audit
services to Wyndham Worldwide is compatible with maintaining its
independence. The Audit Committee has satisfied itself as to the
independence of Deloitte & Touche LLP.
Based on the Audit Committee’s review of the audited
consolidated and combined financial statements of Wyndham
Worldwide, and on the Audit Committee’s discussions with
management of Wyndham Worldwide and with Deloitte &
Touche LLP, the Audit Committee recommended to the Board of
Directors that the audited consolidated and combined financial
statements be included in Wyndham Worldwide’s Annual Report
on
Form 10-K
for the year ended December 31, 2006.
AUDIT COMMITTEE
Michael H. Wargotz (Chair)
George Herrera
Pauline D.E. Richards
In July 2006, we separated from Cendant Corporation (now Avis
Budget Group) in a spin-off and became a stand-alone public
company. Compensation paid to our non-employee directors in 2006
was determined by Cendant prior to the spin-off.
Non-employee directors receive compensation for Board service
designed to compensate directors for their Board
responsibilities and align their interests with the long-term
interests of shareholders. An employee director receives no
additional compensation for Board service.
In connection with the spin-off, on August 1, 2006 our
non-employee directors received new director equity grants in
the form of deferred stock units. Each deferred stock unit
entitles the director to receive one share of common stock
following retirement or termination of service from our Board
for any reason. Directors may not sell or receive value from any
deferred stock unit prior to termination of service. The number
of units granted equaled $75,000, the grant date fair value,
divided by $31.85, the fair market value of a share of our
common stock as of the close of business on the grant date.
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The following table describes compensation for non-employee
directors for 2006. The amounts reported include compensation
paid to the directors in their capacity as directors of Cendant
prior to the spin-off.
The following describes compensation we will pay our
non-employee directors in 2007:
The annual director retainer and committee chair and membership
fees are paid on a quarterly basis 50% in cash and 50% in
deferred stock units. The number of deferred stock units issued
is based on our stock price on the quarterly determination date.
Directors may elect to receive more than 50% of the retainer and
fees in deferred stock units. Board members do not receive
additional fees for meeting attendance.
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In addition to this compensation, Directors Biblowit, Mulroney
and Richards are insured by term life insurance policies owned
by us with a $1.1 million death benefit payable
$1 million to us, which benefit we will donate to a
charitable beneficiary of the director’s choice, and
$100,000 paid directly to a personal beneficiary of the
director’s choice. Mr. Buckman is currently insured by
a term life insurance policy established when he was an
executive officer of Cendant with a $1 million death
benefit payable to us. We expect to insure all of our directors
under the arrangement currently in place for Directors Biblowit,
Mulroney and Richards described above.
We adopted a policy providing for a company match of a
director’s charitable contributions in an amount up to
$10,000 per year.
The Corporate Governance Guidelines require each non-employee
director to own at least 1,000 shares of our common stock.
As of December 31, 2006, all of our non-employee directors
met or exceeded the ownership requirements.
The following table describes the beneficial ownership of our
common stock for the following persons as of January 31,
2007: each executive officer named in the Summary Compensation
Table below (who we refer to as named executive officers), each
person who to our knowledge owns in excess of 5% of our common
stock; and all of our directors and executive officers as a
group. The percentage values are based on
188,895,025 shares of our common stock outstanding as of
January 31, 2007. The principal address for each director,
nominee and executive officer of Wyndham Worldwide is Seven Sylvan
Way, Parsippany, New Jersey 07054.
Under SEC rules, “beneficial ownership” includes
shares for which the individual, directly or indirectly, has or
shares voting or investment power, whether or not the shares are
held for the individual’s benefit.
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Directors and executive officers are required to file reports of
ownership and changes in ownership of our common stock with the
SEC and the New York Stock Exchange. In 2006 all reports were
filed on time.
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At the date of this proxy statement, the board of directors
consists of seven members, six of whom are non-employee
directors and five of whom are independent directors under
applicable listing standards and our corporate governance
documents. The board is divided into three classes, each with
three-year terms. The terms of the classes are staggered so that
one-third of the directors, or as near to one-third as possible,
are elected at each annual meeting.
At this year’s meeting, two directors are to be elected for
three-year terms. The Corporate Governance Committee of the
board has nominated the Right Honourable Brian Mulroney and
Michael H. Wargotz, both of whom are presently our directors.
We do not know of any reason why any nominee would be unable to
serve as a director. If any nominee is unable to serve, the
shares represented by all valid proxies will be voted for the
election of such other person as the Board may nominate.
The two nominees and the other present directors continuing in
office after the meeting are listed below, with brief
biographies.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE ELECTION OF THE NOMINEES,
THE RIGHT HONOURABLE BRIAN MULRONEY AND MICHAEL H. WARGOTZ
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Separation from Cendant. During 2005 and 2006
Cendant’s compensation committee met on numerous occasions
to, among other things, determine and approve the employment
agreement for our CEO. We subsequently entered into employment
agreements with our other named executive officers.
Wyndham Worldwide Compensation Committee. Our
Compensation Committee is responsible for establishing executive
compensation policies and programs consistent with corporate
objectives and shareholder interests. The Compensation Committee
operates under a written charter adopted by the Board. The
charter is reviewed on an annual basis and revised as
appropriate. The Committee’s membership is determined by
the Board and is composed entirely of independent directors. The
Compensation Committee Chair reports on Compensation Committee
actions and recommendations at our Board meetings.
Ratification of Prior Actions. In October 2006
our Compensation Committee reviewed the actions of
Cendant’s compensation committee as they applied to our CEO
and ratified the employment agreements of our other named
executive officers.
Management’s Role. Management plays a
significant role in the compensation-setting process. The most
significant aspects of management’s role are evaluating
employee performance, establishing business performance targets
and objectives, and recommending salary levels and equity
awards. Our CEO works with the Compensation Committee in
establishing the agenda for committee meetings. Management also
prepares meeting information for each Compensation Committee
meeting. Our CEO also participates in Compensation Committee
meetings at the committee’s request to provide background
information regarding our strategic objectives, his evaluation
of the performance of the senior executive officers and
compensation recommendations as to senior executive officers
(other than himself). The CEO is not involved in setting his own
compensation. CEO compensation is exclusive responsibility of
the Compensation Committee.
Compensation
Discussion & Analysis
In July 2006, we separated from Cendant Corporation (now Avis
Budget Group) in a spin-off and became a stand-alone public
company. Compensation elements and target levels for our named
executive officers for 2006 were determined by Cendant. These
determinations were made largely in the context of the spin-off.
In summary, the compensation decisions relevant to our named
executive officers for 2006 were as follows:
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In February 2007, we adopted our Executive Total Compensation
Strategy with the following principles and objectives as they
apply to our named executive officers:
An important aspect of the Compensation Committee’s annual
work relates to the determination of compensation for our senior
executives.
Annual Evaluation. The Compensation Committee
will meet each year to evaluate the performance of the named
executive officers, to consider and review their base salaries
for potential annual increases and to consider and approve any
grants to them of long-term incentive compensation.
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Performance Compensation and
Objectives. Performance-based compensation for
our named executive officers generally includes cash annual
incentive compensation for achievement of specified performance
objectives and stock-based compensation whose value is dependent
upon long-term appreciation in stock price. The “Non-Equity
Incentive Plan” column of the Summary Compensation Table
below lists the annual incentive compensation we paid our named
executive officers for 2006.
Performance objectives for 2006 annual incentive compensation
paid in 2007 were established on the basis of corporate
and/or
business unit Earnings Before Interest and Taxes (EBIT), a
measure of our profitability. The EBIT targets for 2006 were
adjusted for separation and related costs and other special
items. The 2006 adjusted EBIT targets and funding models for the
corporation and business units were set by management based on
approved operating budgets and represented a specified growth
rate over the prior year’s EBIT consistent with our
strategic plan. We used these operating budgets to set the
ranges for our published 2006 earnings guidance.
An executive’s annual incentive compensation may be higher
or lower than the target payment (down to zero) depending on
corporate and business unit performance. For example, the annual
incentive payment could be as high as 125% of the target if the
operating unit results exceed 106% of the 2006 adjusted EBIT
target or as low as zero if the operating unit results are less
than 95% of the 2006 adjusted EBIT target.
For our CEO and CFO, the 2006 annual incentive payment was based
on a corporate target. For our business unit chief executives
other than Mr. Hanning, the 2006 annual incentive payment
was weighted 50% for the corporate target and 50% for the
business unit target. For Mr. Hanning, the 2006 annual
incentive payment was weighted 100% for the business unit target.
We link performance to our long-term incentives by basing the
size of the aggregate pool of shares available for grant on
business unit and corporate performance and, for individual
grants, on individual performance assessment and future
potential. The long-term incentive awards we made to our named
executive officers in 2006 are described below in the Grants of
Plan-Based Awards Table.
Targeted Compensation Levels. We believe that
information regarding compensation practices at other companies
is useful in evaluating compensation of our named executive
officers. We recognize that our compensation practices must be
competitive in the market. In addition, this market information
is a key factor that we consider in assessing the reasonableness
of compensation. Accordingly, we review compensation levels for
our CEO against compensation levels at the companies in the peer
group deemed appropriate by our Compensation Committee for
benchmarking purposes.
At the request of Cendant’s Compensation Committee,
Cendant’s compensation consultant provided Cendant with
information regarding CEO compensation levels at the
50th and 75th percentiles among a group of
representative hospitality, travel and gaming companies.
For our 2007 compensation arrangements, our compensation
consultant provided our Compensation Committee CEO compensation
levels of base salary, annual incentive awards and long-term
incentive awards at the 50th and 75th percentile among
those companies that we consider to be our most directly
comparable peer hospitality companies.
The Compensation Committee also reviewed general industry market
survey data from the 2006 Hewitt Associates Total Compensation
Measurement (TCM) database. The general industry peer group
consists of 54 companies with revenues between $2.5 and
$5 billion with a median of $3.3 billion.
We and Cendant used the comparable data to determine
compensation levels for our CEO, and in turn, our other named
executive officers as described below.
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Policies and Practices for Pricing and Timing of Equity
Grants. We expect to make equity grants to our
named executive officers in May of each year. We expect to
observe the following relating to the timing of equity grants:
Base Salary. Base salary is a critical element
of executive compensation because it provides executives with a
base level of monthly income needed to be market competitive. We
set base salaries at a level designed to attract and retain
superior managers. Base salaries for our executives are
established based on the scope of their responsibilities, taking
into account historical compensation, competitive market
compensation paid by other companies for similar positions as
well as salaries paid to the executives’ peers within the
company.
The base salaries we (and Cendant) paid to our named executive
officers in 2006 are listed in the Summary Compensation Table
below. These amounts include compensation paid by Cendant prior
to the spin-off.
Mr. Holmes’ base salary was targeted to the
75th percentile of the peer group selected by
Cendant’s compensation consultant. The base salaries of our
other named executive officers were set relative to
Mr. Holmes’ base salary and each other.
Annual Incentive Compensation. We pay annual
incentive compensation to incent and reward superior performance
for the year. Annual incentive compensation is paid in cash in
the first quarter for the prior year’s performance. Annual
incentive awards are granted under our 2006 Equity and Incentive
Plan. Consistent with their employment agreements, we paid our
named executive officers the annual incentive compensation
listed in the Summary Compensation Table below.
Mr. Holmes’ target annual incentive compensation was
set by Cendant to the 75th percentile of the peer group
used by Cendant’s compensation consultant and consistent
with his historical compensation. The target annual incentive
compensation eligible paid to our other named executive officers
were set relative to their base salaries and each other. The
possible threshold, target and maximum annual incentive
compensation payouts payable to the named executive officers for
2006 are described below in the Grants of Plan Based Awards
Table.
The annual incentive compensation paid to Mr. Holmes and
Ms. Wilson for 2006 was weighted 100% on a corporate
adjusted EBIT target. We achieved at least 102.3% of the
corporate adjusted EBIT target which resulted in an annual
incentive payment of 105% of target for Mr. Holmes and
Ms. Wilson under the established corporate funding models.
The annual incentive compensation paid to Mr. May and
Mr. Rudnitsky for 2006 was weighted 50% for the corporate
target and 50% for the business unit target. Each of these
executives received 105% of
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50% of his target annual incentive compensation based on the
corporate results as described above. Mr. May’s
business unit, RCI Global Vacation Network, did not achieve at
least 97% of the adjusted EBIT target which resulted in him
receiving 0% of 50% of his target annual incentive compensation
under the established business unit funding models.
Mr. Rudnitsky’s business unit, Wyndham Hotel Group,
achieved at least 103.2% of the adjusted EBIT target which
resulted in him receiving 105% of 50% of his target annual
incentive compensation under the established business unit
funding models.
The annual incentive compensation paid to Mr. Hanning for
2006 was weighted 100% for the business unit target.
Mr. Hanning’s business unit, Wyndham Vacation
Ownership, achieved at least 110.3% of the adjusted EBIT target
which resulted in him receiving 125% of his target annual
incentive compensation under the established business unit
funding models.
Long-Term Incentive Compensation. The purpose
of long-term incentives for our named executive officers is to
align their interests with shareholders through meaningful
equity participation and long-term ownership. Long-term
incentives should help balance a short-term performance focus
and encourage retention. Long-term incentive awards are granted
under our 2006 Equity and Incentive Plan.
At the CEO level, long-term incentives are heavily weighted
toward stock settled stock appreciation rights to provide
maximum leverage and to drive long-term share price
appreciation. A stock settled stock appreciation right is
similar to a stock option and gives the executive the right to
receive an amount in shares of common stock equal to the excess
of the fair market value of a share of our common stock on the
date of exercise over the exercise price of the stock
appreciation right. For our other named executive officers,
long-term incentives are weighted between stock settled stock
appreciation rights and restricted stock units to encourage
retention. A restricted stock unit represents the right to
receive a share of our common stock on a set vesting date.
We granted the stock settled stock appreciation rights and
restricted stock units to our named executive officers as
described in the Grants of Plan-Based Awards Table below. The
grant made to our CEO was designed to equal 200% of his prior
year award intended to provide increased retention incentive and
consistent with the CEOs of the other companies being separated
from Cendant. The grants made to our other named executive
officers were set relative to Mr. Holmes’ grant and
each other.
Officer Deferred Compensation Plan. We adopted
an officer deferred compensation plan that permits named
executive officers to defer salary and bonus compensation. We
match executive contributions to the plan up to 6% of salary and
bonus. The executive may elect a single lump-sum payment of his
or her account or may elect payments over time subject to
5-year
vesting. The participant’s entire account balance will vest
and be paid in a single lump sum following a
change-in-control
or in the event that the executive’s employment terminates.
401(k) Plan. We provide employees, including
our named executive officers, with a 401(k) plan. We provide
named executive officers and other participants a company match
of salary contributed up to 6% of salary. If an executive elects
to participate in both the Officer Deferred Compensation Plan
and the 401(k) plan, the executive must elect to defer salary in
one or the other of the plans but not both.
Savings Restoration Plan. We adopted a savings
restoration plan, which allows executives to defer compensation
in excess of the amounts permitted by the Internal Revenue Code
under our 401(k) plan, but there are no matching contributions
for these deferrals.
Perquisites. We provide our senior executive
officers with perquisites that we believe are reasonable,
competitive and consistent with our overall executive
compensation program. We believe that our perquisites help us to
retain the best managers and allow them to operate more
effectively.
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In 2006 we provided our named executives perquisites consistent
with Cendant’s historical practices including a leased
automobile and financial planning services. For each of these
perquisites the executive receives a “tax
gross-up”
payment, which means the executive receives additional
compensation to reimburse them for the amount of taxes owed on
the compensation imputed for the perquisite. We also provided
our CEO with limited personal use of company aircraft for which
we imputed income for our incremental costs without a tax
gross-up.
Perquisites provided in 2006 are described in the All Other
Compensation Table below.
Severance Arrangements. The employment
agreements of our named executive officers provide for payments
related to base salary and bonus as well as accelerated equity
vesting if the executive’s employment is terminated without
cause or for a constructive discharge. The payments and terms
vary in certain respects between the individual executives.
These payments and terms are discussed below under Agreements
with Named Executive Officers.
Change-in-Control
Arrangements. Mr. Holmes’ employment
agreement provides for payments related to base salary and bonus
as well as accelerated equity vesting in the event of a
change-in-control.
The employment agreements of our other named executive officers
provide for accelerated equity vesting based on certain vesting
schedules in the event of a
change-in-control.
The payments and terms vary in certain respects between the
individual executives. These payments and terms are discussed
below under Agreements with Named Executive Officers. In
addition, equity grants made to all employees, including the
named executive officers, under our 2006 Equity and Incentive
Plan fully vest on a
change-in-control.
2007 Executive
Compensation Decisions
Base Salary. In the first quarter of 2007 our
Compensation Committee approved the 2006 annual incentive
compensation payments discussed above and the 2007 base salaries
for each of our named executive officers. Consistent with the
executives’ employment agreements, 2007 base salaries are
as follows:
Merit increases in base salary reward successful performance and
seek to create incentives for retention. We based the 2007 merit
increases on a review of the 2006 performance of the named
executive officers and their applicable function or business
unit.
Annual Incentive Compensation. Consistent with
the executives’ employment agreements, and based on the
2007 base salaries described above, the possible threshold,
target and maximum annual incentive compensation payouts payable
to the named executive officers for 2007 are as follows:
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Management provided our Compensation Committee with the
financial criteria and targets that will be used to determine
the level of annual incentive compensation payouts and
management’s rationale as to why these targets are
appropriate. Performance objectives for 2007 annual incentive
compensation were established on the basis of corporate
and/or
business unit EBIT. The EBIT targets for both corporate and the
business units will be adjusted for separation, related costs
and special items if appropriate.
The 2007 adjusted EBIT targets and funding models for the
corporation and business units were set by management based on
approved operating budgets and represented a specified growth
rate over the prior year’s EBIT consistent with our
strategic plan. We used these operating budgets to set the
ranges for our published 2007 earnings guidance.
For our CEO and CFO, the 2007 annual incentive payment will be
weighted 100% on the corporate target. For our business unit
chief executives, the 2007 annual incentive payment will be
weighted 25% for the corporate target and 75% for the business
unit target.
The Compensation Committee reviewed the criteria and targets
with our compensation consultant and management and approved the
threshold, target and maximum levels of financial performance
under the plan and the potential payouts at those levels of
performance. The Compensation Committee and we believe these
financial targets are rigorous but reasonably attainable.
The federal tax laws impose requirements in order for
compensation payable to the CEO and certain executive officers
to be fully deductible and generally provide that compensation
in excess of a certain amount is deductible only if it is
performance-based compensation and meets certain requirements.
In 2007, we expect to claim an income tax deduction for 2006
compensation paid to our CEO and executive officers to the
extent permitted by this section of the Internal Revenue Code.
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis contained in
this proxy statement. The Compensation Committee is satisfied
that the Compensation Discussion and Analysis fairly and
completely represents the philosophy, intent, and actions of the
Compensation Committee with regard to executive compensation. We
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this proxy statement for
filing with the Securities and Exchange Commission.
COMPENSATION COMMITTEE
The Right Honourable Brian Mulroney (Chair)
Myra J. Biblowit
Pauline D.E. Richards
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2006 Summary
Compensation Table
The following table describes compensation paid to our named
executive officers for 2006. The amounts reported include
compensation attributable to employment with Cendant prior to
the spin-off.
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2006 All Other
Compensation Table
The All Other Compensation in the Summary Compensation Table
above includes the following components. The total compensation
amounts for the table are provided in the “All Other
Compensation” column of the Summary Compensation Table
above.
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2006 Grants of
Plan-Based Awards Table
The following table summarizes grants of plan-based awards made
to named executive officers in 2006.
Under our 2006 Equity and Incentive Plan, all grants set forth
in the table fully-vest on a change-in-control. In the event
dividends are paid on our common stock, dividends are credited
for unvested restricted stock units and are paid in cash on
vesting.
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Outstanding
Equity Awards at 2006 Fiscal Year-End Table
The following table summarizes the number of securities
underlying outstanding plan awards for the named executive
officers as of December 31, 2006.
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2006 Wyndham
Worldwide Option Exercises and Stock Vested Table
The following table summarizes the Wyndham Worldwide stock
option exercises and vesting of restricted stock by named
executive officers in 2006.
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The following Cendant, Realogy and Avis Budget Option Exercises
and Stock Vested Tables are presented to describe the 2006
option exercises and vesting of awards denominated in stock of
those entities. In connection with the separation of Cendant
into three separate companies, Cendant equity awards were
equitably adjusted to become awards for each of the companies.
We do not expect to provide this data for future periods.
2006 Cendant
Option Exercises and Stock Vested Table
2006 Realogy
Option Exercises and Stock Vested Table
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2006 Avis Budget
Option Exercises and Stock Vested Table
2006 Deferred
Compensation Table
The following table provides information regarding 2006
nonqualified deferred compensation for our named executive
officers.
Our Officer Non-Qualified Deferred Compensation Plan is
described above under 2006 Executive Compensation Elements and
Decisions. The aggregate balances of the named executive
officers are invested based on the executive’s election
made at the time of enrollment. Executives may change their
elections during the year. For 2007 we offer a choice of 21
investment options including our common stock. Investment
options include money market, debt, equity and real estate
mutual funds.
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The following describes our employment, termination,
change-in-control
and related arrangements with our named executive officers.
Employment Agreement. We entered into an
employment agreement with Mr. Holmes with a term expiring
in July 2009. The term automatically extends for an additional
year unless we or Mr. Holmes provide notice of non-renewal.
The agreement provides for a minimum base salary of
$1 million, an annual incentive award with a target amount
equal to 200% of his base salary subject to meeting performance
goals, employee benefits generally available to our executive
officers and grants of long-term incentive awards on terms as
determined by our Board or Compensation Committee. Under the
agreement, we granted Mr. Holmes equity incentive awards
with a grant date value of $5 million as described above in
the Grants of Plan-Based Awards Table. These grants vest fully
on a
change-in-control.
The agreement provides Mr. Holmes and his dependents with
medical benefits through his age 75. The agreement provides
for customary restrictive covenants including non-competition
and non-solicitation covenants effective during the period of
employment and for two years after termination of employment.
Mr. Holmes’ agreement provides that upon a
change-in-control
or if his employment with us is terminated by us without cause
or due to a constructive discharge he will be entitled to a lump
sum payment equal to 299% of the sum of his then-current base
salary plus his then-current target annual bonus and all of his
then-outstanding equity awards will fully vest and remain
exercisable for varying periods as described in the agreement.
If the payments we make to Mr. Holmes for termination on a
change-in-control
give rise to excise tax on golden parachute payments, then we
will pay Mr. Holmes a
gross-up
payment to cover the tax.
Employment Agreement. We entered into an
employment agreement with Mr. Hanning with a term expiring
in July 2009. The agreement provides for a minimum base salary
of $550,000, a retention bonus of $700,000, an annual incentive
award with a target amount equal to $660,000, subject to meeting
performance goals and participation in benefit plans generally
available to our executive officers. Mr. Hanning’s
agreement provides that he will be granted an equity incentive
award with a grant date value of $3 million, two-thirds of
which will vest in equal installments on each of the first four
anniversaries of May 2, 2006, subject to continued
employment through each vesting date, and one-third of which
will vest (or not vest) on May 2, 2009, subject to
continued employment with us through the vesting date.
Mr. Hanning’s actual 2006 equity incentive award was
granted with terms and vesting schedules consistent with the
other named executive officers and is described above in the
Grants of Plan-Based Awards Table. Under Mr. Hanning’s
agreement and our 2006 Equity and Incentive Plan, these grants
fully vest on a
change-in-control.
Mr. Hanning will receive a long term cash bonus not to
exceed $2 million for the three year period from
January 1, 2006 to December 31, 2008 for meeting goals
relating to Wyndham Vacation Ownership’s financial
performance. The bonus is payable within 60 days of
December 31, 2008. In consideration of the long term bonus
and the employment agreement, we and Mr. Hanning agreed to
terminate all bonuses, commission, incentive and cash payment
opportunities owed to Mr. Hanning by Cendant. The agreement
provides for customary restrictive covenants including
non-competition and non-solicitation covenants effective during
the period of employment and for one year after termination of
employment.
Mr. Hanning’s agreement provides that if his
employment is terminated by us without cause or due to a
constructive discharge, he will be entitled to a lump sum
payment equal to 100% of the sum of his then-current base salary
plus his then-current target annual bonus, accelerated vesting
and payment of the long term bonus, and payment of COBRA
premiums less the contribution payable by active employees until
Mr. Hanning
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commences new or self
employment. If the payments we make to Mr. Hanning for
termination without cause or for a constructive discharge give
rise to a golden parachute excise tax then we will pay
Mr. Hanning a
gross-up
payment to cover the tax.
Mr. May
Employment Agreement. We entered into an
employment agreement with Mr. May with a term expiring in
July 2009. The agreement provides for a minimum base salary of
$550,000, an annual incentive award with a target amount equal
to 100% of his base salary, subject to meeting performance
goals, participation in employee benefit plans generally
available to our executive officers and grants of long-term
incentive awards upon terms determined by us. Under the
agreement we granted Mr. May equity incentive awards with a
grant date value of $3 million described above in the
Grants of Plan-Based Awards Table. Under our 2006 Equity and
Incentive Plan, these grants fully vest on a
change-in-control.
The agreement provides for customary restrictive covenants
including non-competition and non-solicitation covenants
effective during the period of employment and for one year
following termination if his employment terminates after the
expiration of his employment agreement and for two years
following termination if his employment terminates before the
expiration of his employment agreement.
Mr. May’s agreement provides that if his employment is
terminated by us without cause or due to a constructive
discharge, he will receive a lump sum payment equal to 200% of
his then-current base salary and target annual bonus. In this
event, all of Mr. May’s then-outstanding equity awards
that would otherwise vest within one year following termination
will vest. Any award granted on or after July 31, 2006 will
remain exercisable until the earlier of two years following his
termination of employment and the original expiration date of
the awards.
Employment Agreement. We entered into an
employment agreement with Mr. Rudnitsky with a term
expiring in July 2009. The agreement provides for a minimum base
salary of $500,000, an annual incentive award with a target
amount equal to 100% of his base salary, subject to meeting
performance goals, participation in employee benefit plans
generally available to our executive officers and grants of
long-term incentive awards upon terms determined by us. Under
the agreement we granted Mr. Rudnitsky equity incentive
awards with a grant date value of $3 million as described
above in the Grants of Plan-Based Awards Table. Under our 2006
Equity and Incentive Plan, these grants fully vest on a
change-in-control.
The agreement provides for customary restrictive covenants
including non-competition and non-solicitation covenants
effective during the period of employment and for one year
following termination if his employment terminates after the
expiration of his employment agreement and for two years
following termination if his employment terminates before the
expiration of his employment agreement.
Mr. Rudnitsky’s agreement provides that if his
employment is terminated by us without cause or due to a
constructive discharge, he will receive a lump sum payment equal
to 200% of his then-current base salary and target annual bonus.
In this event, all of Mr. Rudnitsky’s then-outstanding
equity awards that would otherwise vest within one year
following termination will vest, subject to meeting applicable
performance goals. Any award granted on or after July 31,
2006 will remain exercisable until the earlier of two years
following termination and the original expiration date of the
awards.
Employment Agreement. We entered into an
agreement with Ms. Wilson with a term expiring in July
2009. The agreement provides for a minimum base salary of
$475,000, an annual incentive award with a target amount equal
to 100% of her base salary, subject to meeting performance
goals, participation in employee benefit plans generally
available to our executive officers and grants of long-term
incentive awards upon terms determined by us. Under the
agreement we granted Ms. Wilson equity incentive awards
with a grant date value of $2.5 million as described above
in the Grants of Plan-Based Awards Table. Under our 2006 Equity and
Incentive Plan,
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these grants fully vest on a
change-in-control.
The agreement provides for customary restrictive covenants
including non-competition and non-solicitation covenants
effective during the period of employment and for one year
following termination if her employment terminates after the
expiration of her employment agreement and for two years
following termination if her employment terminates before the
expiration of her employment agreement.
Ms. Wilson’s agreement provides that if her employment
is terminated by us without cause or due to a constructive
discharge, she will be entitled to a lump sum payment equal to
200% her then-current base salary and target annual bonus. In
this event, all of Ms. Wilson’s then-outstanding
equity awards that would otherwise vest within one year
following termination will vest, subject to meeting applicable
performance goals. Any award granted on or after July 31,
2006 will remain exercisable until the earlier of two years
following termination and the original expiration date of the
awards.
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The following table describes the potential payments and
benefits under our compensation and benefit plans and
arrangements to which the named executive officers would be
entitled upon termination of employment. The payments described
in the table are based on the assumption that the termination of
employment or
change-in-control
occurred on December 31, 2006.
Potential
Payments Upon Termination of Employment Table
Accrued Pay. The amounts shown in the table
above do not include payments and benefits, including accrued
salary and bonus, to the extent they are provided on a
non-discriminatory basis to salaried employees generally upon
termination of employment.
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Deferred Compensation. The amounts
shown in the table do not include
distributions of aggregate balances under the Officer Deferred Compensation Plan.
Those amounts are shown in the Nonqualified Deferred Compensation Table above.
Covered Terminations. The table assumes a
termination of employment that is eligible for severance or
other benefits under the terms of the named executive
officers’ employment agreement and our 2006 Equity and
Incentive Plan.
Continuation of Medical
Benefits. Mr. Holmes’ agreement
provides Mr. Holmes and his dependents with medical
benefits through his age 75 regardless of the termination
event. Mr. Hanning’s agreement provides that if his
employment is terminated by us without cause or due to a
constructive discharge, he will be entitled to the payment of
COBRA premiums less the contribution payable by active employees
until Mr. Hanning commences new or self employment.
The actuarial assumptions used to calculate continued medical
benefits for Mr. Holmes include a discount rate of 5.9%; no
mortality assumptions for Mr. Holmes, his spouse or
children; and standard pre-retirement and post-retirement per
capita costs for Mr. Holmes and his spouse and standard per
capita costs for Mr. Holmes’ children. Continuation of
medical benefits for Mr. Hanning were calculated using a
standard COBRA payment less the contribution payable by active
employees, for a period of eighteen months using a discount rate
of 5.9%.
Acceleration of Equity and Cash Incentive
Awards. Equity grants made to all employees,
including the named executive officers, under our 2006 Equity
and Incentive Plan, fully vest on a
change-in-control.
Since any Cendant legacy equity awards fully vested in
connection with the spin-off, the amounts described in the table
for a
change-in-control
include only the value of the named executive officers’
2006 equity grants based on a year-end stock price of $32.02.
Under Mr. Hanning’s employment agreement, on his death
or disability his long-term cash bonus is vested to the extent
earned and unpaid. If Mr. Hanning’s employment is
terminated without cause or for constructive discharge, his
long-term cash bonus fully vests and is payable.
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Excise Tax
Gross-Up. Upon
a
change-in-control,
executives may be subject to certain excise taxes under
Section 280G of the Internal Revenue Code. We have agreed
to reimburse Mr. Holmes and Mr. Hanning for any excise
taxes as well as any income and excise taxes payable by them as
a result of any reimbursements for the 280G excise taxes. The
amounts in the table are based on a 280G excise tax rate of
20 percent, a statutory 35% percent federal income tax
rate, a 1.45% percent Medicare tax rate and a 0% percent state
income tax rate for Mr. Hanning based on his current
residency in Florida. In the event that a
change-in-control
occurred as of December 31, 2006, Mr. Holmes would not
have been subject to excise tax that would have given rise to a
gross-up
payment.
Payments Upon
Change-in-Control
Alone. For our named executive officers other
than Mr. Holmes, severance payments in connection with a
change-in-control
are “double triggered”, meaning the payments following
a
change-in-control
are made only if the executive suffers a covered termination of
employment. The table does not assume that the employment of
these executives was terminated on a
change-in-control.
Equity grants made under our 2006 Equity and Incentive Plan
fully vest on a
change-in-control
whether or not the executives’ employment is terminated.
In connection with our spin-off from Cendant (now Avis Budget
Group), we entered into customary separation, tax sharing,
transition services and related agreements with Cendant and
former Cendant units, Realogy and Travelport, to effect the
separation and allocate Cendant’s assets and liabilities.
Under the separation agreement, among other things, we assumed
37.5% of certain contingent and other liabilities of Cendant
which were not primarily related to our business or the
businesses of Realogy, Travelport or Avis Budget, and Realogy
assumed 62.5% of these liabilities.
Under the transition services agreement, in 2006 Avis Budget,
Realogy and Travelport provided us with various services
relating to, among other things, human resources and employee
benefits, payroll, financial systems management, treasury
and cash management, accounts payable, telecommunications and
information technology. In 2006, cash paid to Avis Budget,
Realogy and Travelport under the transition services agreement
was approximately $7.3 million, $868,000 and
$158,000, respectively. In 2006, we received no cash
from under the transition services agreement. Cash received from
Travelport under a sublease was approximately $403,000.
For additional information on the spin-off, the separation
agreements and related matters, see our Annual Report on
Form 10-K
filed with the SEC on March 7, 2007 and our Information
Statement for the spin-off, filed with the SEC on July 19,
2006 as Exhibit 99.1 to a Current Report on
Form 8-K.
In addition, in connection with the spin-off, we entered into
various commercial arrangements with Realogy, Travelport and
Avis Budget. Activities covered by these agreements include:
provision of access to our hotel accommodation and vacation
exchange and rentals inventory to be distributed through
Travelport; utilization of Realogy’s employee relocation
services, including relocation policy management, household
goods moving services and departure and destination real estate
related services; utilization of Realogy’s commercial real
estate brokerage services, such as transaction management,
acquisition and disposition services, broker price opinions,
renewal due diligence and portfolio review; utilization of
corporate travel management services of Travelport; and
designation of Avis Budget’s car rental brands, as the
exclusive primary and secondary suppliers, respectively, of car
rental services for our employees. In 2006, cash paid to Avis
Budget, Realogy and Travelport with respect to these
arrangements was approximately $2.7 million;
$1.2 million and $17 million, respectively, and cash
received from Avis Budget, Realogy and Travelport with respect
to these commercial arrangements was approximately
$178,000, $3.2 million and $1.9 million,
respectively.
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Certain affiliates of Barclays Global Investors, N.A., which
owns approximately 6.39% of our common stock, have performed,
and may in the future perform, various commercial banking,
investment banking and other financial advisory services for us
and our subsidiaries for which they have received, and will
receive, customary fees and expenses. We estimate the fees paid
to Barclays by us in 2006 were less than $1.5 million.
A member of Mr. Hanning’s family is a member of a law
firm which has provided and continues to provide services to our
vacation ownership business. Fees and expenses paid for such
services were approximately $220,000 in 2006 based on the
firm’s customary rates.
Another member of Mr. Hanning’s family currently
serves as a Senior Vice President, Sales of our vacation
ownership business. This individual was hired in 1981, prior to
Mr. Hanning’s employment. In 2006, he received total
cash compensation consisting of base salary, commission and
bonuses of $689,943 and was granted 13,343 restricted stock
units. All compensation and incentive awards were paid and
awarded on a basis consistent with that applied to our other
employees.
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The Audit Committee has selected Deloitte & Touche LLP
as our independent registered public accounting firm to examine
our consolidated financial statements for fiscal year 2007. The
Board seeks an indication from shareholders of their approval or
disapproval of the Audit Committee’s appointment of
Deloitte & Touche LLP as independent registered public
accounting firm (auditors) for fiscal year 2007.
Deloitte & Touche LLP served as our independent
registered public accounting firm for 2006. No relationship
exists between Deloitte & Touche LLP and us other than
the usual relationship between auditor and client.
Representatives of Deloitte & Touche LLP will be
present at the annual meeting of shareholders and available to
respond to questions and will have the opportunity to make a
statement, if such representatives desire to do so.
The following table presents fees for professional audit
services rendered by Deloitte & Touche LLP for the
audit of our financial statements for the fiscal year ended
December 31, 2006 and fees billed by Deloitte &
Touche LLP for other services during those periods.
In the above table, in accordance with the SEC’s
definitions and rules, audit fees are fees that we paid to
Deloitte & Touche LLP for the audit of our annual
financial statements included in our
Form 10-K
for fiscal year 2006 and review of interim financial statements
included in our
Form 10-Qs
for the quarters ended March 31, June 30 and
September 30, 2006 and for services that are normally
provided by the auditor in connection with statutory and
regulatory filings or engagements. Audit-related fees are fees
for assurance and related services that are reasonably related
to the performance of the audit or review of our financial
statements; tax fees are fees for tax compliance, tax advice and
tax planning; and all other fees are fees for any services not
included in the first three categories.
Under the Audit Committee charter, the Audit Committee is
required to pre-approve all audit services and permissible
non-audit services, including related fees and terms, to be
performed for us by our independent auditor, subject to the
de minimus exceptions for non-audit services permitted
under applicable SEC rules. Cendant’s audit committee
pre-approved the review services performed by
Deloitte & Touche LLP on the interim financial
statements for the quarters ended March 31 and
June 30, 2006, since the separation of Wyndham Worldwide
into an independent company had not yet occurred. The fees
related to those two review services are included in the above
fee disclosure. Our Audit Committee pre-approved all other audit
services, audit-related services and tax review, compliance and
other services performed for us by Deloitte & Touche
LLP for fiscal year 2006.
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PROXY
WYNDHAM
WORLDWIDE CORPORATION
Annual Meeting of Shareholders — April 26, 2007 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The
undersigned hereby appoints Stephen P. Holmes, Scott G. McLester
and Lynn A. Feldman, and each of them, with power to act without
the other and with power of substitution, as proxies and
attorneys-in-fact and hereby authorizes them to represent and vote,
as provided on the other side, all the shares of Wyndham Worldwide
Corporation Common Stock which the undersigned is entitled to vote,
and, in their discretion, to vote upon such other business as may
properly come before the Annual Meeting of Shareholders of the
company to be held April 26, 2007 or at any adjournment or
postponement thereof, with all powers which the undersigned would
possess if present at the Meeting.
(Continued and to be marked, dated and signed, on the other side)
Address Change/Comments (Mark the corresponding box on the reverse side)
5 FOLD AND DETACH HERE 5
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK. Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day. Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your
proxy card. To vote by mail, mark, sign and date your proxy card and return it in the enclosed
postage-paid envelope.
Choose MLinkSM for fast, easy and secure 24/7 online access to your
future proxy materials, investment plan statements, tax documents and more. Simply
log on to Investor ServiceDirect® at www.melloninvestor.com/isd
where step-by-step instructions will
prompt you through enrollment.
You can view our Annual Report on Form 10-K and Proxy Statement
on the internet at www.wyndhamworldwide.com
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THE BOARD OF DIRECTORS OF WYNDHAM WORLDWIDE
CORPORATION RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE AS DIRECTOR.
THE BOARD OF DIRECTORS OF WYNDHAM WORLDWIDE CORPORATION RECOMMENDS
A VOTE FOR PROPOSAL 2.
NOTE: Please sign as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
5 FOLD AND DETACH HERE 5
ADMISSION TICKET
Bring this admission ticket with you to the meeting on April 26, 2007. Do not mail.
This admission ticket admits you to the meeting. You will not be allowed to attend the meeting
without an admission ticket or other proof of stock ownership. WYNDHAM WORLDWIDE CORPORATION
2007 Annual Meeting of Shareholders
Thursday, April 26, 2007
3:00 p.m. The Meadow Wood Manor
461 Route 10 East Randolph, New Jersey 07869
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