WYNDHAM WORLDWIDE CORPORATION

capacity and the Company’s corporate credit rating. If such bonding capacity is unavailable or, alternatively, the
terms and conditions and pricing of such bonding capacity may be unacceptable to the Company, the cost of
development of the Company’s vacation ownership units could be negatively impacted.
LITIGATION
The Company is involved in claims, legal proceedings and governmental inquiries related to the Company’s
business.
Wyndham Worldwide Litigation
The Company is involved in claims and legal actions arising in the ordinary course of its business including
but not limited to: for its lodging business — breach of contract, fraud and bad faith claims between franchisors and
franchisees in connection with franchise agreements and with owners in connection with management contracts,
negligence, breach of contract, fraud, privacy, consumer protection and other statutory claims asserted in connection
with alleged acts or occurrences at franchised or managed properties; for its vacation exchange and rentals
business — breach of contract, fraud and bad faith claims by affiliates and customers in connection with their
respective agreements, negligence, breach of contract, fraud, privacy, consumer protection and other statutory claims
asserted by members and guests for alleged injuries sustained at affiliated resorts and vacation rental properties; for
its vacation ownership business — breach of contract, bad faith, conflict of interest, fraud, privacy, consumer
protection and other statutory claims by property owners’ associations, owners and prospective owners in connection
with the sale or use of VOIs or land, or the management of vacation ownership resorts, construction defect claims
relating to vacation ownership units or resorts and negligence, breach of contract, fraud, privacy, consumer protection
and other statutory claims by guests for alleged injuries sustained at vacation ownership units or resorts; and for
each of its businesses, bankruptcy proceedings involving efforts to collect receivables from a debtor in bankruptcy,
employment matters involving claims of discrimination, harassment and wage and hour claims, claims of infringement
upon third parties’ intellectual property rights, tax claims and environmental claims.
The Company believes that it has adequately accrued for such matters with reserves of $38 million as of
December 31, 2010. Such amount is exclusive of matters relating to the Company’s separation from its Parent
(“Separation”). For matters not requiring accrual, the Company believes that such matters will not have a material
adverse effect on its results of operations, financial position or cash flows based on information currently available.
However, litigation is inherently unpredictable and, although the Company believes that its accruals are adequate
and/or that it has valid defenses in these matters, unfavorable results could occur. As such, an adverse outcome from
such proceedings for which claims are awarded in excess of the amounts accrued, if any, could be material to the
Company with respect to earnings or cash flows in any given reporting period. However, the Company does not
believe that the impact of such litigation should result in a material liability to the Company in relation to its
consolidated financial position or liquidity.
Cendant Litigation
Under the Separation Agreement, the Company agreed to be responsible for 37.5% of certain of Cendant’s
contingent and other corporate liabilities and associated costs, including certain contingent litigation. Since the
Separation, Cendant settled the majority of the lawsuits pending on the date of the Separation. See also Note 22 —
Separation Adjustments and Transactions with Former Parent and Subsidiaries regarding contingent litigation
liabilities resulting from the Separation.
GUARANTEES/INDEMNIFICATIONS
Standard Guarantees/Indemnifications
In the ordinary course of business, the Company enters into agreements that contain standard guarantees and
indemnities whereby the Company indemnifies another party for specified breaches of or third-party claims relating
to an underlying agreement. Such underlying agreements are typically entered into by one of the Company’s
subsidiaries. The various underlying agreements generally govern purchases, sales or outsourcing of assets or
businesses, leases of real estate, licensing of trademarks, development of vacation ownership properties, access to
credit facilities, derivatives and issuances of debt securities. While a majority of these guarantees and indemnifications
extend only for the duration of the underlying agreement, some survive the expiration of the agreement. The
Company is not able to estimate the maximum potential amount of future payments to be made under these
guarantees and indemnifications as the triggering events are not predictable. In certain cases the Company maintains
insurance coverage that may mitigate any potential payments.
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