<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR APRIL 30, 1994 COMMISSION FILE NUMBER 1-7797
PHH CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
Maryland 52-0551284
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<TABLE>
<S> <C>
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
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<S> <C>
11333 McCormick Road, Hunt Valley, Maryland 21031
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<TABLE>
<S> <C>
(Address of principal executive offices) (Zip Code)
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(410) 771-3600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of each exchange
Title of each class on which registered
<S> <C>
Common Stock, no par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K [X]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF JUNE 30, 1994: $615,088,532.
NUMBER OF SHARES OF PHH CORPORATION OUTSTANDING ON JUNE 30, 1994: 17,265,643.
Documents Incorporated by Reference
Part III--Proxy Statement for 1994 Annual Meeting of Stockholders
<PAGE>
PHH CORPORATION
PART I
ITEM 1. BUSINESS
GENERAL
The Company provides a broad range of integrated management services,
expense management programs and mortgage banking services to more than 2,000
clients, including many of the world's largest corporations, as well as
governmental agencies and affinity groups. Its primary business service
segments consist of vehicle management, relocation and real estate and mortgage
banking. Information as to revenues, operating income and identifiable assets
by business segment is included in the Business Segments note in the Notes to
Consolidated Financial Statements.
As of June 30, 1994, the Company and its subsidiaries had approximately
5,000 employees.
VEHICLE MANAGEMENT SERVICES
Vehicle management services consist primarily of the management, purchase,
leasing and resale of vehicles for corporate clients and governmental agencies,
including fuel and expense management programs and other fee-based services for
clients' vehicle fleets.
FLEET MANAGEMENT SERVICES
The Company provides fully integrated vehicle management and leasing
programs through PHH Vehicle Management Services. These programs were developed
to meet the specific needs of companies using large and small numbers of cars
and trucks and consist of managerial, leasing and advisory services, aimed at
reducing and controlling the cost of operating corporate fleets.
The Company's advisory services for automobile fleet management programs
include recommendations on the makes and models of cars and accessories best
suited to the client's use, the determination of persons eligible for company
cars, the method of reimbursing field representatives for actual car expenses,
the care and maintenance of cars and the personal use of company cars.
Managerial services for automobile fleet programs include purchasing
automobiles, arranging for their delivery through new car dealers located
throughout the United States, Canada, the United Kingdom and the Republic of
Ireland, complying with various local registration, title, tax and insurance
requirements, pursuing warranty claims with automobile manufacturers and
selling used cars at replacement time.
The Company offers similar programs and services for vans and light and
heavy-duty truck fleets. Advisory services offered include the determination of
the vehicle specifications, makes, models and equipment best suited to perform
the functions required by the client. Managerial services include purchasing
new vans, light and heavy-duty trucks, trailers, truck bodies and equipment
from manufacturers and franchised dealers, the performance of title,
registration, tax and insurance functions, arranging for them to be titled,
licensed and delivered to locations designated by clients, verifying invoices
and selling used vehicles at replacement time.
The Company offers various leasing plans for its vehicle leasing programs.
Under these plans, the Company provides for the financing primarily through the
issuance of commercial paper and medium-term notes and through unsecured
borrowings under revolving credit agreements and bank lines of credit. See the
Liabilities Under Management Programs note in Notes to Consolidated Financial
Statements.
The Company leases vehicles for minimum lease terms of twelve months or
more under either direct financing or operating lease agreements. The Company's
experience indicates that the full term of the leases may vary considerably due
to extensions beyond the minimum lease term. Under the direct financing lease
agreements, resale of the vehicles upon termination of the lease is generally
for the account of the lessee. The Company has two distinct types of operating
leases. Under one type, the open-end operating lease, resale of the vehicles
upon termination of the lease is for the account of the lessee except for a
minimum residual value which the Company has guaranteed. The Company's
experience has been that vehicles under this type of lease agreement have
consistently been sold for amounts exceeding residual value guarantees. Under
the other type of operating lease, the closed-end operating lease, resale of
the vehicle on termination of the lease is for the account of the Company.
1
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The Company's fleet management services may be the same whether the client
owns or leases the vehicles. In either case, the client generally operates the
vehicles on a net basis, paying all the actual costs incidental to their
operation, including gasoline, oil, repairs, tires, depreciation, vehicle
licenses, insurance and taxes. The fee charged by the Company for its services
is based upon either a percentage of the original cost of the vehicle or a
stated management fee and, in the case of a leasing client, includes the
interest cost incurred in financing the vehicle.
FUEL AND EXPENSE MANAGEMENT PROGRAMS
The Company offers fuel and expense management programs to corporations
and governmental agencies for the control of automotive business travel
expenses in each of the United States, Canada, United Kingdom, Republic of
Ireland and Germany. Through a service card and billing service, a client's
traveling representatives are able to purchase various products and services
such as gasoline, tires, batteries, glass and maintenance services at numerous
outlets. The Company also provides a series of safety-related programs,
statistical control reports detailing expenses related to the general operation
of vehicles, and a program which monitors and controls the type and cost of
vehicle maintenance for individual automobiles.
The Company also provides a fuel and expense management program and a
centralized billing service for companies operating truck fleets in each of the
United States, Canada, United Kingdom, Republic of Ireland and Germany. Drivers
of the clients' trucks are furnished with courtesy cards together with a
directory listing the names of strategically located truck stops and service
stations which participate in this program. Service fees are earned for the
billing, collection and record keeping services and for assuming the credit
risk. These fees are paid by the truck stop or service stations and/or the
fleet operator and are based upon the total dollar amount of fuel purchased or
the number of transactions processed.
COMPETITIVE CONDITIONS
The principal methods of competition within vehicle management services
are service quality and price.
In the United States and Canada, an estimated 30% of the market for
vehicle management services is served by third-party providers. There are 5
major providers of such services in North America, as well as an estimated
several hundred local and regional competitors. The Company shares the market
leadership with one other provider.
In the United Kingdom, the portion of the fuel card services and vehicle
management services markets served by third-party providers is an estimated 37%
and 35%, respectively. The Company is the market leader among the 4 major
nation-wide providers of fuel card services, and a market leader among the 7
major nation-wide providers of vehicle management services. Numerous local and
regional competitors serve each such market element.
The following sets forth certain statistics concerning automobiles, vans,
light and heavy-duty trucks for which the Company provides managerial, leasing
and/or advisory services in the United States, Canada, the United Kingdom, the
Republic of Ireland and Germany at the end of the fiscal years shown:
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<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Ending number of vehicles under management:
United States................................................ 312,288 322,598 333,528 334,823 332,423
Canada....................................................... 46,317 45,336 46,466 44,082 33,774
United Kingdom (2)........................................... 91,776 86,341 86,983 83,781 57,721
Average cost of vehicles:
United States................................................ $ 17,603 $ 16,865 $ 15,601 $ 14,598 $ 14,395
Canada (1)................................................... $ 15,118 $ 14,874 $ 14,402 $ 14,061 $ 13,182
United Kingdom (1)(2)........................................ $ 20,346 $ 19,183 $ 18,229 $ 15,639 $ 14,249
Number of vehicles purchased................................... 107,999 115,768 117,877 128,435 133,665
Number of fuel and service card transactions
(in thousands)............................................... 47,349 45,636 44,124 43,126 41,081
Gallons of fuel processed (in thousands)....................... 1,073,119 1,038,723 1,076,026 1,064,983 882,534
</TABLE>
(1) The cost of the Canadian and United Kingdom vehicles is stated in United
States dollars, translated at the average exchange rate in effect for the
year ended April 30, 1994 in order to eliminate the effect of exchange rate
fluctuations.
(2) Includes the Republic of Ireland.
2
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RELOCATION AND REAL ESTATE SERVICES
EMPLOYEE RELOCATION
The Company provides employee relocation services principally to large
international corporations, governmental agencies and affinity groups in the
United States, Canada, the United Kingdom and the Republic of Ireland through
PHH Homequity Corporation and other relocation subsidiaries. Principal services
consist of counseling transferred employees of clients and the purchase,
management and resale of their homes. The Company's relocation services offer
clients the opportunity to reduce employee relocation costs and facilitate
employee relocation.
The relocation subsidiary pays a transferring employee his/her equity in a
home based upon a value determined by independent appraisals. In certain
circumstances the employee's mortgage may be retired concurrently with the
purchase of the equity; otherwise the relocation subsidiary normally accepts
the administrative responsibility for making payments on any mortgages.
Following payment to the employee, the corporate client normally pays the
relocation subsidiary an advance billing to cover costs to be incurred during
the period the home is held for resale, including debt service on any existing
mortgage. These costs are paid by the relocation subsidiary and, after ultimate
resale, a settlement is made with the corporate client reconciling the advance
billing and the expense payments. Under the terms of the client contracts, the
relocation subsidiaries are generally protected against losses from changes in
market conditions.
Funds to finance the purchase of homes are provided primarily through the
issuance of commercial paper and medium-term notes and occasionally through
unsecured borrowings under revolving credit agreements and bank lines of
credit, or may be provided by the client. Interest costs are billed directly to
the Company's clients. See the Liabilities Under Management Programs note in
Notes to Consolidated Financial Statements.
The Company's relocation subsidiaries also offer programs which provide
home marketing, moving services, rental management, spousal career counseling
and consulting services for transferred employees to help in selecting their
new communities and homes. The destination services operations focus on
developing and delivering home-finding and settling-in services for individual
customers through local centers.
Through its PHH Fantus Corporation subsidiary, the Company provides
strategic facilities planning services, site selection and location consulting
for corporate clients and governmental agencies. Additionally, the Company
provides consulting services in the areas of general business strategy,
marketing and management for transnational clients.
REAL ESTATE SERVICES
The Company provides real estate services through PHH Homequity
Corporation and other relocation subsidiaries. These services primarily include
the management and resale of homes for financial institutions and governmental
agencies in the United Kingdom, the United States and Canada.
COMPETITIVE CONDITIONS
The principal methods of competition within relocation and real estate
services are service quality and price. In the United States, Canada and the
United Kingdom, an estimated 25% of the market for relocation and real estate
services is served by third-party providers.
In each of the United States, Canada and the United Kingdom, there are 4
major national providers of such services. There are an estimated several dozen
local and regional competitors in each such country. The Company is the market
leader in the United States and Canada, and third in the United Kingdom.
3
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The following sets forth certain statistics concerning relocation and real
estate services in the United States, Canada and the United Kingdom for the
fiscal years shown:
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Number of transactions:
Home purchase authorizations......................... 31,780 31,800 30,387 31,266 34,081
Transferee homes sold................................ 28,906 28,417 28,113 28,191 29,286
Fee-based services:
Home finding...................................... 22,519 15,625 10,541 7,716 N/A
Home marketing.................................... 14,970 8,047 6,171 4,158 N/A
Household-goods moves............................. 13,722 8,727 7,168 7,526 N/A
51,211 32,399 23,880 19,400
Average value of U.S. transferee homes sold (1)........ $ 165,000 $ 156,000 $ 156,600 $ 150,200 $ 140,200
</TABLE>
(1) Revenues for the U.S. relocation services are significantly determined
based on the value of homes sold, while revenues for the United Kingdom and
Canadian segments are primarily based on fees which are not related to the
value of homes sold; therefore, this table only includes the average value
of U.S. homes sold.
N/A Information not available.
MORTGAGE BANKING SERVICES
The Company provides residential mortgage banking services through PHH US
Mortgage Corporation. These services consist of the origination, sale and
servicing of residential first mortgage loans. A variety of first mortgage
products as well as casualty insurance-related products are marketed to
consumers through relationships with corporations, affinity groups, real estate
brokerage firms and other mortgage banks.
PHH US Mortgage is a centralized mortgage lender conducting business in
all 50 states. It utilizes its computer system and an extensive telemarketing
operation to allow the consumer to complete the entire mortgage transaction
over the telephone. Through its own network of appraisers, title companies and
closing attorneys, the Company can effectively administer its products and
services anywhere in the nation.
The mortgage unit customarily sells all mortgages it originates to
investors (which include a variety of institutional investors) either as
individual loans, as mortgage-backed securities or as participation
certificates issued or guaranteed by the Federal National Mortgage Association
(FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), or the Government
National Mortgage Association (GNMA) while generally retaining mortgage
servicing rights. The guarantees provided by FNMA and FHLMC are on a
non-recourse basis to the Company. Guarantees provided by GNMA are non-recourse
to the extent recoverable from certain government insurance programs.
Mortgage servicing consists of collecting loan payments, remitting
principal and interest payments to investors, holding escrow funds for payment
of mortgage-related expenses such as taxes and insurance, and otherwise
administering the Company's mortgage loan servicing portfolio.
COMPETITIVE CONDITIONS
The principal methods of competition in mortgage banking services are
service quality and price. There are an estimated 22,000 national, regional or
local providers of mortgage banking services across the United States. The
Company ranked twenty-third among loan originators for calendar year 1993 and
twenty-fourth for the three months ended March 31,1994.
The following sets forth certain statistics concerning mortgage banking
services for the fiscal years shown:
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<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Mortgage loan closings
(in millions)...................................... $ 8,074 $ 5,618 $ 3,797 $ 2,331 $ 1,962
Mortgage servicing portfolio at April 30
(in millions)...................................... $ 16,645 $ 11,047 $ 7,517 $ 5,007 $ 3,411
Delinquency rate..................................... 1.2% 1.1% 1.8% 2.3% 2.4%
</TABLE>
4
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SIGNIFICANT CUSTOMERS
No customer purchased services totaling 10% or more of consolidated
revenues in 1994, 1993, or 1992.
ITEM 2. PROPERTIES
The corporate offices of the Company are located at 11333 McCormick Road,
Hunt Valley, Maryland in an eight-story building which is owned by the Company
and contains approximately 163,000 square feet of office space.
The offices of PHH Vehicle Management Services North American operations
are located throughout the US and Canada as follows:
(Bullet) A six-story, 200,000 square foot office building in Hunt Valley,
Maryland leased until September 2003
(Bullet) Office space totaling 17,500 square feet in five cities leased as
full service branch offices for fleet management activities for
various terms to April 2003
(Bullet) A dealership in Williamsburg, Virginia, having 101,000 square
feet, leased until March 1998
(Bullet) A dealership in Edenton, North Carolina, having 337,100 square
feet, leased until December 1998
(Bullet) Offices in Fort Worth, Texas, having 75,500 square feet, leased
until March 2002
(Bullet) Administrative offices in Mississauga, Canada, having 59,400
square feet, leased until February 1998
(Bullet) Regional offices located in Montreal, Calgary, Vancouver,
Mississauga & Quebec, Canada, having a total of 43,100 square
feet, leased for various terms to December 2002
The offices of PHH Relocation and Real Estate Services North American
operations are located throughout the US and Canada as follows:
(Bullet) Offices located in Wilton, Connecticut, having 40,000 square
feet, leased until January 1996
(Bullet) Offices in Danbury, Connecticut, having 92,500 square feet,
leased until January 2000
(Bullet) Field office space leased in fourteen cities as follows: 56,500
square feet in Irving, Texas until November 1998; 54,000 square
feet in Oak Brook, Illinois until April 2003; 52,800 square feet
in Concord, California until October 1998; and 55,500 square feet
in eleven other cities for various terms to June 2002
(Bullet) Offices located in Florham Park, New Jersey, where 14,200 square
feet are leased until May 1996
(Bullet) Offices in Chicago, Illinois, having 8,800 square feet, leased
until September 2004
(Bullet) Office space totaling 35,300 square feet in Toronto, Montreal,
Vancouver, Ottawa and Nova Scotia, leased for various terms to
May 2004
The offices of Mortgage Banking Services are located as follows:
(Bullet) A 127,000 square foot building in Mount Laurel, New Jersey which
is owned by the Company
(Bullet) In Englewood, Colorado in a building having 27,900 square feet
leased until June 1997
(Bullet) In two other locations totaling 16,300 square feet for various
terms to June 1995.
The offices of Vehicle Management Services and Relocation and Real Estate
Management Services operations located in the United Kingdom and Europe are as
follows:
(Bullet) A 129,000 square foot building which is owned by the Company
located in Swindon, United Kingdom
(Bullet) Field offices having 47,800 square feet located in Swindon and
Manchester, United Kingdom, Munich, Germany and Dublin, Ireland
are leased for various terms to February 2016.
The Company considers that its properties are generally in good condition
and well maintained and are generally suitable and adequate to carry on the
Company's business.
5
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ITEM 3. LEGAL PROCEEDINGS
The Company is party to various litigation arising in the ordinary course
of business and is plaintiff in several collection matters which are not
considered material either individually or in the aggregate.
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended April 30, 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is publicly traded on the New York Stock
Exchange under the symbol "PHH". The common stock is entitled to dividends when
and as declared by the Board of Directors. The payment of future dividends will
depend upon earnings, the financial condition of the Company and other relevant
factors. At June 30, 1994 there were 1,975 holders of common stock. The
dividends and high and low prices for each quarter during the Company's 1994
and 1993 fiscal years were as follows:
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<CAPTION>
DIVIDEND PRICE
1994 PAID HIGH LOW
<S> <C> <C> <C>
First quarter................... $.30 $ 42 1/2 $ 39 1/2
Second quarter.................. $.30 $ 46 3/4 $ 41 3/8
Third quarter................... $.30 $ 46 3/4 $ 40 5/8
Fourth quarter.................. $.30 $ 43 1/4 $ 33 1/4
1993
First quarter................... $.30 $ 36 7/8 $ 32 3/4
Second quarter.................. $.30 $ 38 7/8 $ 34 5/8
Third quarter................... $.30 $ 41 1/2 $ 37 1/4
Fourth quarter.................. $.30 $ 43 $ 39
</TABLE>
6
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In thousands except per share data)
Years ended April 30, 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Revenues:
Vehicle management services $ 1,162,483 $ 1,069,484 $ 992,514 $ 1,023,857 $ 1,022,233
Relocation and real estate services 816,261 829,336 849,871 923,536 822,662
Mortgage banking services 155,935 122,111 89,099 70,232 57,096
$ 2,134,679 $ 2,020,931 $ 1,931,484 $ 2,017,625 $ 1,901,991
Income from continuing operations $ 64,558 $ 56,417 $ 49,979 $ 47,079 $ 57,308
Discontinued operations, net of income taxes - - - - (18,500)
Net income $ 64,558 $ 56,417 $ 49,979 $ 47,079 $ 38,808
Income per share:
From continuing operations $ 3.64 $ 3.25 $ 2.92 $ 2.78 $ 3.38
From discontinued operations - - - - (1.09)
Net income per share $ 3.64 $ 3.25 $ 2.92 $ 2.78 $ 2.29
Cash dividends per share $ 1.20 $ 1.20 $ 1.20 $ 1.20 $ 1.16
Selected Balance Sheet Data
As of April 30, 1994 1993 1992 1991 1990
Total assets $ 4,766,783 $ 4,613,028 $ 4,365,031 $ 4,198,689 $ 4,464,094
Assets under management programs $ 3,243,014 $ 3,393,425 $ 3,115,680 $ 3,133,332 $ 3,419,324
Liabilities under management programs $ 2,841,905 $ 2,900,934 $ 2,771,250 $ 2,804,688 $ 3,027,594
Other debt $ 719,822 $ 511,128 $ 405,017 $ 184,497 $ 259,136
Stockholders' equity $ 498,313 $ 457,483 $ 423,287 $ 392,866 $ 362,706
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
RESULTS OF OPERATIONS
All comparisons within the following discussion are to the previous year,
unless otherwise stated.
Consolidated results: Net income increased 14% to $64.6 million in fiscal
1994. Net income per share increased 12% to $3.64. The increase in net income
was due to increases in the mortgage banking services and vehicle management
services business segments, partially offset by a decrease in the relocation and
real estate services business segment. In fiscal 1993, net income increased 13%
to $56.4 million and net income per share increased 11% to $3.25, reflecting
increases in all three of the Company's business segments, though primarily in
mortgage banking services.
Consolidated revenues increased 6% to $2.1 billion in fiscal 1994 and 5% to
$2.0 billion in fiscal 1993.
The provision for income taxes reflects effective tax rates of 41.2%, 40.1%
and 39.9% in fiscal 1994, 1993 and 1992, respectively. The fiscal 1994 rate
reflects the increase in the US federal corporate income tax rate from 34% to
35%. The additional tax accrued to adjust the Company's deferred tax assets and
liabilities for the effect of the increased income tax rate was offset by an
adjustment of tax accruals based upon the completion of certain tax
examinations.
Vehicle Management Services
Vehicle management services primarily consist of the management, purchase,
leasing and resale of vehicles for corporate clients and governmental agencies,
including fuel and expense management programs and other fee-based services for
clients' vehicle fleets.
<TABLE>
<CAPTION>
Operating Income (in thousands) 1994 1993 1992
<S> <C> <C> <C>
Revenues:
Leasing revenues $ 968,149 $ 894,576 $ 827,696
Other 194,334 174,908 164,818
1,162,483 1,069,484 992,514
Expenses:
Depreciation 808,894 707,542 600,109
Interest 109,859 124,038 157,522
Selling, general and
administrative 197,500 195,632 194,148
1,116,253 1,027,212 951,779
Operating Income $ 46,230 $ 42,272 $ 40,735
</TABLE>
Leasing revenues increased 8% to $968 million in fiscal 1994 and 8% to $895
million in fiscal 1993. The increases were primarily due to a reduced amount, in
comparison to prior years, of leases and leased vehicles sold or transferred to
third parties for which management and servicing responsibility is retained. Had
these assets not been sold or transferred, the related rental payments would
have been included in revenues and the related depreciation on vehicles under
operating leases and interest would have been included in expenses. On a pro
forma basis, the result would have been a decrease in leasing revenues of 6% for
fiscal 1994 and 3% for fiscal 1993. The decreases in pro forma leasing revenues
were primarily due to a lower rental interest component charged on certain
leases and leased vehicles due to reduced interest rates and a decrease in the
number of leased vehicles under management.
Other revenues increased 11% to $194 million in fiscal 1994 and 6% to $175
million in fiscal 1993. The increases were primarily due to growth in domestic
fee-based services such as vehicle maintenance management programs and a
favorable resale market for disposition of vehicles under closed-end leases.
<TABLE>
<CAPTION>
Key Operating Factors 1994 1993 1992
<S> <C> <C> <C>
Ending number of vehicles
under management 450,381 454,275 466,977
Percent change (1%) (3%) 1%
Number of vehicles
purchased 107,999 115,768 117,877
Percent change (7%) (2%) (8%)
Number of fuel and
service card transactions
(in thousands) 47,349 45,636 44,124
Percent change 4% 3% 5%
Gallons of fuel processed
(in thousands) 1,073,119 1,038,723 1,076,026
Percent change 3% (3%) 1%
</TABLE>
Vehicle management services operating income increased 9% to $46.2 million
in fiscal 1994. The increase was primarily due to increases from the continuing
positive effects of a favorable resale market for disposition of vehicles under
closed-end leases, higher management fees resulting from increases in the
average cost of vehicles managed, growth in domestic fee-based vehicle services
as reflected in the number of fuel and service card transactions and gallons
processed (see key operating factors) as well as the favorable effect of
productivity efforts. Partially offsetting the increase were decreased revenues
resulting from a slight decrease in the number of vehicles under management as
well as increased selling, general and administrative costs including costs
related to certain information technology improvements.
In fiscal 1993, operating income increased 4% to $42.3 million. The increase
was primarily due to growth in fee-based vehicle management services as well as
improvements in fuel and expense management programs in the UK. These
improvements were partially offset by a decrease in domestic fuel and expense
management programs, a decrease in the number of vehicles under management,
continued investment toward expansion into Continental Europe, and a reduction
due to the effect of foreign currency translation.
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The Company's profitability from vehicle management services is affected by
the number of vehicles managed and related services provided for clients.
Profitability can also be affected as corporate clients exercise a higher degree
of caution by decreasing the size of their vehicle fleets or by extending the
service period of existing fleet vehicles. Operating results should be
positively affected as clients choose to outsource their vehicle management
services and as the Company expands into new markets, further enhances its
product diversity, broadens its client base and continues its productivity and
quality improvement efforts.
Relocation and Real Estate Services
Relocation and real estate services primarily consist of the purchase,
management and resale of homes for transferred employees of corporate clients,
governmental agencies and affinity groups. Other programs include fee-based
services which provide assistance to the transferring employee and real estate
services to financial institutions as well as other consulting services.
<TABLE>
<CAPTION>
Operating Income (in thousands) 1994 1993 1992
<S> <C> <C> <C>
Revenues $ 816,261 $ 829,336 $ 849,871
Expenses:
Costs of carrying and
reselling homes
and interest 718,078 738,979 760,831
Selling, general and
administrative 76,683 63,742 62,683
794,761 802,721 823,514
Operating Income $ 21,500 $ 26,615 $ 26,357
</TABLE>
Relocation and real estate services revenues decreased 2% to $816 million in
fiscal 1994. Revenue decreases were primarily due to a reduction in the number
of transferee homes sold in the US and UK and a reduction in interest rates and
other direct costs of carrying and reselling homes, which are charged to the
Company's clients. These decreases were partially offset by revenue increases
due to an increase in the number of homes sold in Canada resulting from an
acquisition in fiscal 1994; an increase in domestic fee-based relocation
services such as home marketing programs, group move planning and household
goods moving; and an increase in the average value of transferee homes sold in
the US.
In fiscal 1993, revenues decreased 2% to $829 million. The decrease was
primarily due to a reduction in interest rates and other direct costs of
carrying and reselling homes, which are passed through to the Company's clients,
partially offset by an increase in the number of transferee homes sold in the US
and favorable results in the US from other fee-based relocation services.
Costs of carrying and reselling homes and interest decreased 3% to $718
million in fiscal 1994 and 3% to $739 million in fiscal 1993. The decreases were
primarily due to a decrease in interest expense caused by a reduction in
interest rates as noted above, as well as a reduction in other direct costs of
carrying and reselling homes due to a reduction in the number of days homes were
held for resale. In fiscal 1994, increased costs were incurred due to an
increase in the number of homes sold resulting from the Company's acquisition in
Canada and to enhance the Company's global information technology.
<TABLE>
<CAPTION>
Key Operating Factors 1994 1993 1992
<S> <C> <C> <C>
Number of transactions:
Home purchase
authorizations 31,780 31,800 30,387
Percent change - 5% (3%)
Transferee homes sold 28,906 28,417 28,113
Percent change 2% 1% -
Fee-based services:
Home finding 22,519 15,625 10,541
Home marketing 14,970 8,047 6,171
Household-goods
moves 13,722 8,727 7,168
51,211 32,399 23,880
Percent change 58% 36% 19%
Average value of US
transferee home sold $ 165,000 $ 156,000 $ 156,600
Percent change 6% - 4%
</TABLE>
Relocation and real estate services operating income decreased 19% to $21.5
million in fiscal 1994. The decrease was primarily due to costs incurred by the
Company to broaden its worldwide consulting business, enhance its global
information technology and consolidate office space in North America, as well as
integration costs from its acquisition in Canada. The decrease was partially
offset by improvement in the results of other fee-based relocation and real
estate services and an increase in the value of transferee homes sold in the US.
In fiscal 1993, operating income increased 1% to $26.6 million. The increase
was primarily due to increases in the number of transferee homes sold in the US
as well as improvement in other fee-based services in the US. Partially
offsetting the increase were decreases in the number of homes sold and a
reduction of real estate services provided in the UK and Canada, as well as the
minor effect of a change in the application of revenue recognition accounting
policies in the UK to more closely align policies for similar product lines on a
worldwide basis.
The Company is generally not at risk on its carrying value of homes should
there be a downturn in the housing market. Management anticipates that, as
businesses continue to reassess their relocation plans as part of cost control
measures, the results of the relocation services segment may be impacted.
However, operating results should be positively affected as the Company expands
into new markets, enhances its product diversity, broadens its client base and
continues its productivity and quality improvement efforts.
9
<PAGE>
Mortgage Banking Services
Mortgage banking services primarily consist of the origination, sale and
servicing of residential first mortgage loans. A variety of first mortgage
products are marketed to consumers through relationships with corporations,
affinity groups, real estate brokerage firms and other mortgage banks.
<TABLE>
<CAPTION>
Operating Income (in thousands) 1994 1993 1992
<S> <C> <C> <C>
Revenues $ 155,935 $ 122,111 $ 89,099
Expenses:
Direct costs
and interest 85,564 69,805 55,669
Selling, general and
administrative 28,305 26,955 17,405
113,869 96,760 73,074
Operating Income $ 42,066 $ 25,351 $ 16,025
</TABLE>
Mortgage banking services revenues increased 28% to $156 million in fiscal
1994. The increase was primarily due to a large percentage increase in loan
closing volume as well as a 51% increase in the servicing portfolio. The value
of loan closings increased 44% due to growth in volume from established customer
relationships, increased market penetration, as well as volume generated from
residential mortgage refinancings. Similarly, in fiscal 1993, revenues increased
37% to $122 million.
Direct costs and interest increased 23% to $86 million in fiscal 1994 and
25% to $70 million in fiscal 1993. The increases were primarily due to increased
costs to support increased loan closings and a larger servicing portfolio
partially offset by reduced interest rates. Additionally, direct costs include
unscheduled amortization of excess mortgage servicing fees of $11.3 million and
$11.9 million in fiscal 1994 and 1993, respectively.
Key Operating Factors 1994 1993 1992
Mortgage loan closings
(in millions) $ 8,074 $ 5,618 $ 3,797
Percent change 44% 48% 63%
Ending mortgage
servicing portfolio
(in millions) $ 16,645 $ 11,047 $ 7,517
Percent change 51% 47% 50%
Delinquency rate 1.2% 1.1% 1.8%
Mortgage banking services operating income increased 66% to $42.1 million in
fiscal 1994 and 58% to $25.4 million in fiscal 1993. The increase reflects
increases in revenues as discussed above, partially offset by higher costs
incurred due to increased loan closings as well as higher costs of managing the
larger servicing portfolio.
The Company's profitability from mortgage banking services will be affected
by such external factors as the level of interest rates, the strength of the
various segments of the economy, and the condition of residential real estate
markets. The Company is experiencing a slowdown in refinancing activity due to a
rise in interest rates. Management believes the Company's broad-based marketing
strategies and continuous quality improvement efforts, as well as its focus on
building and maintaining a high quality servicing portfolio, should continue to
positively affect operating results.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions". Additionally, in November 1992, the Financial Accounting
Standards Board (FASB) issued SFAS No. 112, effective in fiscal 1995,
"Employers' Accounting for Postemployment Benefits". Application of this
statement will require the Company to change from the cash basis to the accrual
basis of recording the costs of benefits provided to former or inactive
employees after employment but before retirement. The effect of this statement
has been estimated and will not significantly affect the consolidated financial
statements of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company manages its funding sources to ensure adequate liquidity for
servicing of existing liabilities and by obtaining longer-term funds required to
meet the Company's strategic growth objectives. The mix of funding sources
depends on market conditions at the time, the characteristics of the assets of
the Company, and the management of diverse international funding sources for the
greatest long-term financial flexibility.
The sources of liquidity fall into three general areas: ongoing liquidation
of assets under management, international money and capital markets, and
committed credit agreements with various high-quality domestic and international
banks. In the ordinary course of business, the liquidation of assets under
management programs, as well as cash flows generated from operating activities,
provide the cash flow necessary for the repayment of existing liabilities. (See
Operating Activities and Investing Activities in the Company's Consolidated
Statements of Cash Flows.)
Based upon historical information, the Company projects the time period that
a client's vehicle will be in service or the length of time that a home will be
held in inventory before being sold on behalf of a client. Within mortgage
banking services, the asset characteristics reflect the length of time from
commitment to the sale of mortgages to unrelated investors. Once the asset
characteristics are projected, the Company generally matches the projected
dollar amount, interest rate and maturity characteristics of the assets within
the overall funding program. This is accomplished through stated debt terms or
effectively modifying such terms through other instruments, primarily interest
rate swap agreements and revolving credit agreements. Interest rate risk on
mortgages originated for sale is managed through the use of forward delivery
contracts, financial futures and options.
To maintain the integrity of its assets under management, the Company
maintains rigorous client credit standards to minimize credit risk and the
potential for losses.
Domestic and international financial markets provide a variety of sources of
funding. The Company has consciously managed these sources to ensure broad
access to major money and capital markets. Depending upon asset growth and
financial market conditions, the Company utilizes the United States, Euro,
Canadian and Sterling commercial paper markets, as well as other cost effective
short-term instruments. In addition, the Company utilizes the public and private
debt markets to issue unsecured senior corporate debt. Augmenting these sources,
the Company has reduced outstanding debt by the sale or
10
<PAGE>
transfer of managed assets to third parties while retaining fee-related
servicing responsibility. The Company's aggregate commercial paper outstanding
totaled $2.1 and $1.9 billion at April 30, 1994 and April 30, 1993,
respectively. At April 30, 1994, $1.2 billion in medium-term notes and $185
million in other debt securities were outstanding compared to $1.1 billion and
$390 million, respectively, in fiscal 1993. (See Financing Activities in the
Company's Consolidated Statements of Cash Flows.) From a risk management
standpoint, borrowings not in the local currency of the business unit are
converted to the local currency through the use of foreign currency forward
contracts.
To provide additional financial flexibility, the Company's current policy is
to ensure that minimum committed bank facilities aggregate 80% of the average
amount of outstanding commercial paper. Committed revolving credit agreements
totaling $2.4 billion and uncommitted lines of credit aggregating $330 million
are currently in place with 31 domestic and international banks. Management
closely evaluates not only the credit quality of the banks but the maturity of
the various agreements to ensure ongoing availability. Of the Company's $2.4
billion in committed facilities at April 30, 1994, the full amount was undrawn
and available. Management believes that its current policy provides adequate
protection should financial stress occur in the commercial paper or medium-term
note markets.
These established means of effectively matching floating and fixed interest
rate and maturity characteristics of funding to related assets, the variety of
short- and long-term domestic and international funding sources, and the
committed banking facilities enable the Company to service its debt and offer a
broad spectrum of service products to its clients.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT AND CONSENT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
PHH Corporation:
We have audited the consolidated financial statements of PHH Corporation
and subsidiaries as listed in the accompanying index on page 27. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedules as listed in the accompanying index. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PHH
Corporation and subsidiaries at April 30, 1994 and 1993, and the results of
their operations and their cash flows for each of the years in the three-year
period ended April 30, 1994, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK
Baltimore, Maryland
May 23, 1994
To the Stockholders and Board of Directors
PHH Corporation:
We consent to incorporation by reference in the Registration Statements on
Form S-3 (No. 33-48125, No. 33-52669 and No. 33-59376) and Form S-8 (No.
33-38309 and No. 33-53282) of PHH Corporation of our report dated May 23, 1994,
relating to the consolidated balance sheets of PHH Corporation and subsidiaries
as of April 30, 1994 and 1993, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the years in the
three-year period ended April 30, 1994, and all related schedules, which report
appears in the April 30, 1994 annual report on Form 10-K of PHH Corporation.
KPMG PEAT MARWICK
Baltimore, Maryland
July 29, 1994
12
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
(In thousands except per share data)
Years ended April 30, 1994 1993 1992
<S> <C> <C> <C>
Revenues:
Vehicle management services $ 1,162,483 $ 1,069,484 $ 992,514
Relocation and real estate services 816,261 829,336 849,871
Mortgage banking services 155,935 122,111 89,099
2,134,679 2,020,931 1,931,484
Expenses:
Depreciation on vehicles under operating leases 808,894 707,542 600,109
Costs, including interest, of carrying and
reselling homes 717,793 734,640 757,534
Direct costs of mortgage banking services 57,091 47,288 30,738
Interest 138,617 150,894 185,750
Selling, general and administrative 302,488 286,329 274,236
2,024,883 1,926,693 1,848,367
Income before income taxes 109,796 94,238 83,117
Income taxes 45,238 37,821 33,138
Net income $ 64,558 $ 56,417 $ 49,979
Net income per share $ 3.64 $ 3.25 $ 2.92
</TABLE>
See Notes to Consolidated Financial Statements.
13
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands)
As of April 30, 1994 1993
<S> <C> <C>
Assets
Cash $ 25 $ 522
Accounts receivable, less allowance for doubtful
accounts of $6,525 in 1994 and $8,453 in 1993 470,756 402,581
Carrying costs on homes under management 36,085 52,042
Mortgages held for resale 705,888 478,658
Property and equipment, net 108,158 98,886
Unamortized goodwill 54,797 55,209
Other assets 148,060 131,705
1,523,769 1,219,603
Assets Under Management Programs
Net investment in leases and leased vehicles 2,766,983 2,716,956
Equity advances on homes 474,525 674,799
Other assets under management programs 1,506 1,670
3,243,014 3,393,425
$ 4,766,783 $ 4,613,028
Liabilities
Accounts payable and accrued expenses $ 533,943 $ 545,598
Advances from clients 49,765 73,190
Deferred revenue 29,435 33,449
Other debt 719,822 511,128
Deferred income taxes 93,600 91,246
1,426,565 1,254,611
Liabilities Under Management Programs 2,841,905 2,900,934
Stockholders' Equity
Preferred stock, authorized 3,000,000 shares - -
Common stock, no par value, authorized
50,000,000 shares; issued and outstanding
17,245,673 shares in 1994 and 17,197,785
shares in 1993 92,139 91,306
Cumulative foreign currency translation adjustment (21,627) (17,916)
Retained earnings 427,801 384,093
498,313 457,483
$ 4,766,783 $ 4,613,028
</TABLE>
See Notes to Consolidated Financial Statements.
14
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)
Years ended April 30, 1994 1993 1992
<S> <C> <C> <C>
Operating Activities:
Net income $ 64,558 $ 56,417 $ 49,979
Adjustments to reconcile income to cash
provided by operating activities:
Depreciation and amortization 843,678 738,062 620,298
Deferred income taxes 3,036 (14,075) (8,686)
Changes in:
Accounts receivable (72,536) 29,452 104,437
Carrying costs on homes under management 15,544 10,510 14,779
Mortgages held for resale (227,230) (28,505) (258,563)
Accounts payable and accrued expenses (6,177) 12,387 5,058
Advances from clients (23,249) (9,329) (59,986)
Deferred revenue (3,897) 3,592 4,666
All other operating activity (34,539) (21,969) (7,179)
Cash provided by operating activities 559,188 776,542 464,803
Investing Activities:
Investment in leases and leased vehicles (1,578,721) (1,699,971) (1,744,771)
Repayment of investment in leases and leased
vehicles 549,262 553,822 578,687
Proceeds from sales and transfers of
vehicle management-related assets 105,087 90,697 450,163
Value of homes acquired (4,101,894) (4,102,013) (3,992,271)
Value of homes sold 4,301,529 4,068,422 4,061,685
Proceeds from sales of relocation and real estate-
related assets 0 39,318 59,399
Additions to property and equipment, net of
dispositions (32,719) (20,825) (23,992)
Acquisitions accounted for as a purchase (2,594) - (35,381)
All other investing activities 602 3,006 5,501
Cash used in investing activities (759,448) (1,067,544) (640,980)
Financing Activities:
Net change in borrowings with terms of less than
90 days 172,255 81,453 (227,412)
Proceeds from issuance of other borrowings 1,040,092 1,123,795 927,824
Principal payment on other borrowings (1,011,673) (947,905) (515,775)
Stock option plan transactions 833 9,833 (362)
Payment of dividends (20,850) (20,436) (20,272)
Cash provided by financing activities 180,657 246,740 164,003
Effect of exchange rate changes on cash 19,106 43,601 13,088
Increase (decrease) in cash (497) (661) 914
Cash at beginning of period 522 1,183 269
Cash at end of period $ 25 $ 522 $ 1,183
</TABLE>
See Notes to Consolidated Financial Statements.
15
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Cumulative
Foreign
Currency
(In thousands) Common Stock Translation Retained
Years Ended April 30, 1994, 1993 and 1992 Shares Amount Adjustment Earnings
<S> <C> <C> <C> <C>
Balance April 30, 1991 16,881,057 $ 81,835 $ (7,374) $ 318,405
Net income 49,979
Cash dividends declared ($1.20 per share) (20,272)
Foreign currency translation adjustment 1,076
Stock option plan transactions,
net of treasury share activity
and related income tax benefits - (362)
Balance April 30, 1992 16,881,057 81,473 (6,298) 348,112
Net income 56,417
Cash dividends declared ($1.20 per share) (20,436)
Foreign currency translation adjustment (11,618)
Stock option plan transactions,
net of treasury share activity
and related income tax benefits 316,728 9,833
Balance April 30, 1993 17,197,785 91,306 (17,916) 384,093
Net income 64,558
Cash dividends declared ($1.20 per share) (20,850)
Foreign currency translation adjustment (3,711)
Stock option plan transactions,
net of treasury share activity
and related income tax benefits 47,888 833
Balance April 30, 1994 17,245,673 $ 92,139 $ (21,627) $ 427,801
See Notes to Consolidated Financial Statements.
16
<PAGE>
Notes to the Consolidated Financial Statements
(In thousands except per share data)
ACCOUNTING POLICIES
The accounting policies of PHH Corporation conform to generally accepted
accounting principles. The consolidated financial statements include the
accounts of PHH Corporation and its wholly-owned domestic and foreign
subsidiaries (the Company). Policies outlined below include all policies
considered significant. All significant intercompany balances and transactions
have been eliminated.
Vehicle Management Services
Vehicle management services primarily consist of the management, purchase,
leasing, and resale of vehicles for corporate clients and governmental agencies,
including fuel and expense management programs and other fee-based services for
clients' vehicle fleets. Revenues from these services other than leasing are
taken into income over the periods in which the services are provided and the
related expenses are incurred.
The Company leases vehicles to corporate fleet users under operating and
direct financing lease arrangements. The initial lease term typically covers a
period of twelve months or more and thereafter may be extended at the option of
the lessee. The Company records the cost of leased vehicles as an "investment in
leases and leased vehicles." Amounts charged to lessees for interest on the
unrecovered investment are credited to income on a level yield method which
approximates the contractual terms.
Relocation and Real Estate Services
Relocation services primarily consist of the purchase, management and resale
of homes for transferred employees of corporate clients, governmental agencies
and affinity groups. The Company pays transferring employees their equity based
on an appraised value of their homes, determined by independent appraisers,
after deducting any outstanding mortgages. In certain circumstances the
mortgages may be retired concurrently with the purchase of the equity;
otherwise, the relocation management subsidiaries normally accept administrative
responsibility for making payments on any mortgages. These mortgages are either
retired at settlement or assumed by the purchaser when the homes are resold,
which generally is within six months.
The client normally pays an advance billing for a portion of the costs to be
incurred during the period the home is held for resale. These advances are
included in "advances from clients." These costs are paid by the relocation
management subsidiaries and are identified as "carrying costs on homes under
management" until resale. After resale, a settlement of actual costs and the
advance billing is made with the client.
Revenues and the related "costs, including interest, of carrying and
reselling homes" of the relocation management subsidiaries are recognized at
closing for the resale of the home. Under the terms of their contracts with
clients, the Company is generally protected against losses from changes in
market conditions.
The Company also offers fee-based programs such as home marketing programs,
moving services, rental management, and other programs designed to assist
transferred employees. The destination services operations focus on developing
and delivering home-finding and settling-in services for individual customers
through local centers. Revenues from these fee-based services are taken into
income over the periods in which the services are provided and the related
expenses are incurred.
Real estate services include fee-based services for the management and
resale of homes primarily for financial institutions and governmental agencies.
The Company also offers strategic management consulting services to corporate
clients and governmental agencies. Revenues from these fee-based services are
taken into income over the periods in which the services are provided and the
related expenses are incurred.
Mortgage Banking Services
Mortgage banking services primarily include the origination, sale and
servicing of residential first mortgage loans as well as related insurance
products. The Company markets a variety of first mortgage products to consumers
through relationships with corporations, affinity groups, real estate brokerage
firms and other mortgage banks. Loan origination fees, commitment fees paid in
connection with the sale of loans, and direct loan origination costs associated
with loans held for resale, are deferred until the loan is sold. Fees received
for servicing loans owned by investors are based on the difference between the
weighted average yield received on the mortgages and the amount paid to the
investor, or on a stated percentage of the outstanding monthly principal balance
on such loans. Servicing fees are credited to income when received. Costs
associated with loan servicing are charged to expense as incurred.
Sales of mortgage loans are generally recorded on the date a loan is
delivered to an investor. Sales of mortgage securities are recorded on the
settlement date. Gains or losses on sales of mortgage loans are recognized based
upon the difference between the selling price and the carrying value of the
related mortgage loans sold. Such gains and losses are increased or decreased by
the amount of deferred mortgage servicing fees recorded.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation of property and equipment is provided by charges to
income over the estimated useful lives of such assets. Buildings are depreciated
on the straight-line method (25 to 45 years); building improvements, on the
straight-line method (10 to 20 years); equipment and leasehold improvements, on
either the double-declining balance or straight-line method (3 to 10 years); and
externally developed software is capitalized and amortized on the straight-line
method (5 years). Expenditures for improvements that increase value or that
extend the life of the assets are capitalized; maintenance and repairs are
charged to operations. Gains or losses from retirements and disposals of
property and equipment are included in selling, general and administrative
expense.
Unamortized Goodwill
Unamortized goodwill represents the excess of cost over the net tangible and
intangible assets of businesses acquired. It is being amortized by the straight-
line method over various periods up to 40 years and is included in selling,
general and administrative expense.
17
<PAGE>
Assets Under Management Programs
Assets under management programs are held subject to leases or other client
contracts. The effective interest rates and maturity characteristics of the
leases and other contracts are generally matched with the characteristics of the
overall funding program.
Translation of Foreign Currencies
Assets and liabilities of the foreign subsidiaries are translated at the
exchange rates as of the balance sheet dates; equity accounts are translated at
historical exchange rates. Revenues, expenses and cash flows are translated at
the average exchange rates for the periods presented. Translation gains and
losses are included in stockholders' equity including, for years prior to 1991,
transaction gains and losses resulting from forward exchange contracts on
foreign equity amounts net of income tax effects. Gains and losses resulting
from the change in exchange rates realized upon settlement of foreign currency
transactions are substantially offset by gains and losses realized upon
settlement of forward exchange contracts. Therefore, the resulting net income
effect of transaction gains and losses in all three years was not significant.
Interest
Interest expense consists of interest on debt incurred to fund working
capital requirements and to finance vehicle leasing activities, relocation
services and mortgage banking operations. Interest used to finance equity
advances on homes is included in "costs, including interest, of carrying and
reselling homes" and was $23,491 in 1994, $43,041 in 1993, and $51,308 in 1992.
Total interest paid, including amounts within "costs, including interest, of
carrying and reselling homes," was $165,406 in 1994, $170,628 in 1993, and
$229,332 in 1992.
Income Taxes
The provision for income taxes includes deferred taxes resulting from items
reported in different periods for income tax and financial statement purposes.
The Company computes deferred taxes using the liability method. No provision has
been made for US income taxes on cumulative undistributed earnings of foreign
subsidiaries since it is the present intention of management to reinvest the
undistributed earnings indefinitely in foreign operations. Undistributed
earnings of the foreign subsidiaries at April 30, 1994, were $84,078. The
determination of unrecognized deferred US tax liability for unremitted earnings
is not practicable. However, it is estimated that foreign withholding taxes of
$5,462 may be payable if such earnings were remitted.
Net Income Per Share
Net income per share is based on the weighted average number of shares of
common stock outstanding during the year and common stock equivalents arising
from the assumed exercise of outstanding stock options under the treasury stock
method. The number of shares used in the calculations were approximately
17,741,000 for 1994, 17,357,000 for 1993, and 17,100,000 for 1992.
Fair Values of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
about Fair Value of Financial Instruments", requires disclosure of the fair
value of certain on- and off-balance sheet financial instruments for which it is
practicable to estimate fair value. The fair values presented for certain
financial instruments are estimates, which in many cases may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of fair
value are based on discounted cash flow analyses which utilize current interest
rates for similar financial instruments with comparable terms and credit
quality. Fair value estimates are based on existing on- and off-balance sheet
financial instruments, without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company. Financial instruments that
are subject to fair value disclosure requirements are carried in the financial
statements at amounts that approximate fair value, unless otherwise noted in the
Notes to Consolidated Financial Statements.
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements for comparative purposes.
NEW ACCOUNTING PRONOUNCEMENT
In November 1992, the Financial Accounting Standards Board (FASB) issued
SFAS No. 112, effective in fiscal 1995, "Employers' Accounting for
Postemployment Benefits." Application of this statement will require the Company
to change from the cash basis to the accrual basis of recording the costs
associated with benefits provided to former or inactive employees after
employment but before retirement. The effect of this statement has been
estimated and will not significantly affect the consolidated financial
statements of the Company.
MORTGAGES HELD FOR RESALE
Mortgages held for resale represent mortgage loans originated by the Company
and held pending sale to permanent investors. Such mortgages are recorded at the
lower of cost or market value.
The Company is party to a variety of forward delivery contracts, financial
futures programs and options in order to minimize the risk of price fluctuations
with respect to both mortgage loans held for resale and anticipated mortgage
production arising from loan commitments issued. At April 30, 1994, the Company
had mandatory commitments to sell loans amounting to $997,300 and optional
commitments to sell loans amounting to $141,000 and commitments to fund loans
amounting to $561,000. These contractual commitments are taken into account
together with the stated interest on mortgages held for resale in recording
mortgages at the lower of cost or market value. The fair value of the mortgages
and related contractual commitments, estimated using quoted market prices of
similar instruments, approximates the carrying amount of mortgages held for
resale at April 30, 1994 and 1993.
The Company issues mortgage-backed certificates insured or guaranteed by the
Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage
Corporation (FHLMC), Government National Mortgage Association (GNMA) and other
private insurance agencies. The insurance provided by FNMA and FHLMC and other
private insurance agencies are on a non-recourse basis to the Company. However,
the guarantee provided by GNMA is only to the extent recoverable from insurance
programs of the Federal Housing Administration and the Veterans Administration.
The outstanding principal balance of mortgages backing GNMA certificates issued
by the Company aggregated approximately $1,139,199 and $611,234 at April 30,
1994 and 1993, respectively. Additionally, the Company sells mortgage loans as
part of various mortgage-backed security programs sponsored by FNMA, FHLMC, and
GNMA. Certain of these sales are subject to recourse or indemnification
provisions in the event of default by the borrower. As of April 30, 1994 and
1993,
18
<PAGE>
mortgage loans sold with recourse amounted to $14,400 and $23,800,
respectively. The Company believes adequate reserves are maintained to cover all
potential losses.
PROPERTY AND EQUIPMENT
Property and equipment at April 30 consisted of the following:
</TABLE>
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land $ 10,748 $ 10,194
Buildings and leasehold improvements 55,421 49,442
Equipment 108,848 102,022
Accumulated depreciation
and amortization (78,371) (77,742)
96,646 83,916
Capitalized software costs, net 11,512 14,970
$ 108,158 $ 98,886
</TABLE>
OTHER ASSETS
Other assets at April 30 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Unamortized mortgage servicing fees $ 88,337 $ 64,187
Residential properties held for resale 13,488 21,679
Intangible assets recognized
from acquisitions 8,359 11,593
Mortgage-related notes receivable 5,039 6,387
Other 32,837 27,859
$ 148,060 $ 131,705
</TABLE>
The unamortized mortgage servicing fees represent the value of purchased
servicing rights and excess servicing fees which are deferred. Such servicing
rights and fees are charged to income over the estimated effective life of the
related mortgages, estimated to average 6 years. The fair value of excess
servicing fees, estimated using discounted cash flows, approximates the carrying
amount which was $74,200 and $58,500 at April 30, 1994 and 1993, respectively.
Mortgage loans serviced were $16,644,730 and $11,047,284 at April 30, 1994 and
1993, respectively. Intangible assets recognized from acquisitions of relocation
services companies are being amortized by the straight-line method over periods
ranging from 5 to 10 years. Residential properties held for resale are located
primarily in the US and are carried at the lower of cost or resale value.
Mortgage-related notes receivable are loans secured by real estate.
ASSETS UNDER MANAGEMENT PROGRAMS
Net Investment in Leases and Leased Vehicles
The net investment in leases and leased vehicles at April 30 consisted of
the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Vehicles under open-end
operating leases $2,156,768 $2,033,222
Vehicles under closed-end
operating leases 254,614 306,926
Direct financing leases 354,485 375,621
Accrued interest on leases 1,116 1,187
$2,766,983 $2,716,956
</TABLE>
The Company leases vehicles for initial periods of twelve months or more
under either direct financing or operating lease agreements. The Company's
experience indicates that the full term of the leases may vary considerably due
to extensions beyond the minimum lease term. Lessee repayments of investments
in leases and leased vehicles for 1994 and 1993 were $1,358,156 and
$1,173,994, respectively; and the ratios of such repayments to the average net
investment in leases and leased vehicles were 49% in 1994 and 46% in 1993.
The Company has two types of operating leases. Under one type, open-end
operating leases, resale of the vehicles upon termination of the lease is
generally for the account of the lessee except for a minimum residual value
which the Company has guaranteed. The Company's experience has been that
vehicles under this type of lease agreement have consistently been sold for
amounts exceeding the residual value guarantees. Maintenance and repairs of
vehicles under these agreements are the responsibility of the lessee. The
original cost of vehicles under this type of operating lease at April 30, 1994
and 1993, was $3,538,000 and $3,184,000, respectively.
Under the other type of operating lease, closed-end operating leases, resale
of the vehicles on termination of the lease is for the account of the Company.
The lessee generally pays for or provides maintenance, vehicle licenses and
servicing. The original cost of vehicles under these agreements at April 30,
1994 and 1993, was $367,000 and $484,000, respectively. The Company believes
adequate reserves are maintained in the event of loss on vehicle disposition.
Under the direct financing lease agreements, resale of the vehicles upon
termination of the lease is generally for the account of the lessee. Maintenance
and repairs of these vehicles are the responsibility of the lessee.
Leasing revenues are included in revenues from vehicle management services.
Following is a summary of leasing revenues for years ended April 30:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operating leases $ 939,297 $ 855,510 $ 772,292
Direct financing leases,
primarily interest 28,852 39,066 55,404
$ 968,149 $ 894,576 $ 827,696
</TABLE>
Other managed vehicles are subject to leases serviced by the Company for
others, and neither the vehicles nor the leases are included as assets of the
Company. The Company receives a financial spread under such agreements which
covers or exceeds its cost of servicing. The agreements are made in various
ways, some of which entail some risks of accounting loss to the Company, and all
of which has been included in its consideration of related reserves.
The Company has transferred existing managed vehicles and related leases to
unrelated investors and has retained servicing responsibility. Credit risk for
such agreements is retained by the Company to a maximum extent in one of two
forms: excess assets transferred which were $12,836 and $42,120 at April 30,
1994 and 1993, respectively; or guarantees to a maximum extent of $2,749 and
$3,475 at April 30, 1994 and 1993, respectively. All such credit risk has been
included in the Company's consideration of related reserves. The outstanding
balances under such agreements aggregated $189,480 and $392,642 at April 30,
1994 and 1993, respectively.
Other managed vehicles with balances aggregating $206,740 and $181,296 at
April 30, 1994 and 1993, respectively, are included in special-purpose entities
whose ownership is deemed unrelated to the Company and whose credit and residual
value risk characteristics are ultimately not the Company's responsibility.
19
<PAGE>
Equity Advances on Homes
Equity advances on homes represent advances paid to transferring employees
of clients for their equity based on an appraised value of their homes.
The Company manages the resale of homes for unrelated investors under its
real estate management program in the UK. The Company receives a financial
spread under this agreement which covers or exceeds its cost of servicing. The
outstanding balance under such agreements aggregated $1,848 and $10,237 at April
30, 1994 and 1993, respectively. The Company retains credit risk to the extent
of excess assets sold totaling $1,419 and $3,041 in 1994 and 1993, respectively,
which has been included in the Company's consideration of related reserves.
Other Assets Under Management Programs
Other assets under management programs represent mortgage-related loans
receivable originated by the Company on behalf of corporate clients and secured
by real estate. Based on contracts with corporate clients, the Company is
generally protected against loss after taking into account all related costs.
OTHER DEBT
Other debt at April 30 consisted of the following:
1994 1993
Commercial paper $ 619,822 $ 411,128
Medium-term note 100,000 100,000
$ 719,822 $ 511,128
As more fully described in the Note for Liabilities Under Management
Programs, commercial paper is primarily supported by committed one-year and
three-year revolving credit agreements. The weighted average interest rate on
commercial paper, all of which matures within ninety days, was 4.0% and 3.3% at
April 30, 1994 and 1993, respectively. The medium-term note represents an
unsecured obligation having a fixed interest rate of 6.5% with interest payable
semi-annually and a term of 7 years payable in full in fiscal 2000. At April 30,
1994 and 1993, respectively, the fair value of the medium-term note, estimated
from quotes from brokers, was $95,930 and $101,180, respectively.
INCOME TAXES
Provisions (credits) for income taxes for the years ended April 30, were
comprised as follows:
1994 1993 1992
Current income taxes:
Federal $ 24,316 $ 34,300 $ 24,298
State and local 11,905 9,643 6,233
Foreign 6,663 9,612 11,387
42,884 53,555 41,918
Deferred income taxes:
Federal 7,686 (8,000) (1,280)
State and local (3,000) (2,873) (653)
Foreign (2,332) (4,861) (6,847)
2,354 (15,734) (8,780)
$ 45,238 $ 37,821 $ 33,138
Deferred income taxes are recorded based upon differences between the
financial statements and the tax bases of assets and liabilities and available
tax credit carryforwards. There was no valuation allowance relating to deferred
tax assets.
Deferred tax assets (liabilities) as of April 30 were comprised as follows:
1994 1993
Alternative minimum tax credit
carryforwards $ 8,310 $ 43,268
Depreciation (137,602) (167,217)
Unamortized mortgage servicing fees (3,033) (6,013)
Accrued liabilities and deferred income 38,725 38,716
$ (93,600) $ (91,246)
The portions of the 1994 income tax liability and provision classified as
current and deferred are subject to final determination based on the actual 1994
income tax returns. The liability and provision amounts for 1993 have been
reclassified to reflect the final determination made in filing the 1993 income
tax returns.
The Company paid income taxes of $35,739 in 1994, $50,092 in 1993, and
$42,011 in 1992.
The US federal statutory tax rate for the Company was 35% in 1994, and 34%
in 1993 and 1992. The effective tax rates on income were 41.2% in 1994, 40.1% in
1993 and 39.9% in 1992. A summary of the reasons for differences between the
statutory rate and the Company's effective rate follows:
1994 1993 1992
Federal income tax
statutory rate 35.0% 34.0% 34.0%
Increase (decrease)
resulting from:
State income taxes,
net of federal
tax effect 5.3 4.7 4.4
Amortization of goodwill 0.7 0.8 0.8
Rate increase -
deferred taxes 3.0 - -
Adjustment of tax
accruals due to
completed tax
examinations (3.0) - -
Foreign tax rates higher
than US federal income
tax statutory rate - 0.4 0.8
Other 0.2 0.2 (0.1)
Effective tax rate 41.2% 40.1% 39.9%
The Company's US federal income tax returns have been examined by the
Internal Revenue Service through April 30, 1991.
LIABILITIES UNDER MANAGEMENT PROGRAMS
Borrowings to fund assets under management programs are classified as
"liabilities under management programs" and, at April 30, consisted of the
following:
1994 1993
Commercial paper $1,513,897 $1,479,671
Medium-term notes 1,143,235 1,031,085
Eurobond - 76,000
Limited recourse debt 9,819 54,693
Secured notes payable on
vehicles under lease 34,621 35,893
Other unsecured debt 140,333 223,592
$2,841,905 $2,900,934
20
<PAGE>
Commercial paper, all of which matures within ninety days, is supported by
committed revolving credit agreements described below and short-term lines of
credit. The weighted average interest rates on commercial paper were 4.0% and
3.3% at April 30, 1994 and 1993, respectively.
Medium-term notes represent unsecured loans which mature as follows:
$1,043,235 in 1995 and $100,000 in 1997. The weighted average interest rates on
medium-term notes were 4.1% and 4.0% at April 30, 1994 and 1993, respectively.
At April 30, 1994 and 1993, respectively the fair value of medium-term notes,
estimated by obtaining quotes from brokers, was $1,145,800 and $1,041,047.
Limited recourse debt and secured notes payable on vehicles under lease
primarily consist of secured loans arranged for certain clients for their
convenience. The lenders hold a security interest in the lease payments and the
clients' leased vehicles. The debt and notes payable mature concurrently with
the related lease payments. The aggregate lease payments due from the lessees
exceed the loan repayment requirements. The weighted average interest rates on
secured debt were 4.2% and 3.7% at April 30, 1994 and 1993, respectively.
The Company has unsecured committed credit agreements with various banks
totaling $2,400,000. These agreements have both fixed and evergreen maturities
ranging from June 15, 1994 to April 28, 1997. The evergreen revolving credit
agreements require a notice of termination of one to three years. Interest rates
under all revolvers are either at fixed rates or vary with prime or the London
Interbank Offered Rate. Under these agreements, the Company is obligated to pay
annual commitment fees which were $3,975 and $3,954 in 1994 and 1993,
respectively. The Company has other unused lines of credit with various banks of
$223,000 and $121,000 at April 30, 1994 and 1993, respectively.
Other unsecured debt, all of which matures in 1995, includes other
borrowings under short-term lines of credit and other bank facilities. The
weighted average interest rates on unsecured debt were 5.2% and 5.3% at April
30, 1994 and 1993, respectively.
The Company employs interest rate swap agreements to match effectively the
fixed or floating rate nature of liabilities to the assets funded. The notional
amount of outstanding swap agreements is not indicative of the degree of risk of
accounting loss. At April 30, 1994 and 1993, the notional amount of swap
agreements with commercial and investment banks which effectively converts
outstanding short-term, floating rate debt to medium-term, fixed rate debt was
$708,368 and $938,624, respectively. The notional amount of swap agreements with
commercial and investment banks which effectively converts outstanding medium-
term fixed rate debt to short-term floating rate debt was $100,000 and $385,000,
at April 30, 1994 and 1993, respectively. The notional amount of swap agreements
with commercial and investment banks which effectively converts floating rate
debt to floating rate debt based on a different index was $1,040,000 and
$713,000 at April 30, 1994 and 1993, respectively. Additionally, the Company has
entered into interest rate swap agreements with unrelated investors to whom it
has transferred certain managed leases and leased vehicles to effectively
convert fixed rate leases into floating rate leases. The notional amount of such
swaps is $64,131 and $108,238 at April 30, 1994 and 1993, respectively, against
which the Company has in place interest rate swap agreements with commercial and
investment banks as discussed above. The fair value of interest rate swaps
(used for hedging purposes) is the estimated amount the Company would receive or
pay to terminate the swap agreements at April 30,1994 and 1993, respectively,
taking into account current interest rates and the current creditworthiness of
the swap counterparties. The estimated fair values of the Company's interest
rate swaps at April 30, 1994 and 1993, respectively, in a gain position
aggregated $5,929 and $15,693, respectively, and in a loss position aggregated
$6,064 and $29,854, respectively. The Company is exposed to credit loss in the
event of nonperformance by the other parties to the interest rate swap
agreements. However, the Company does not anticipate nonperformance by the
counterparties. The Company manages such risk by periodically evaluating the
financial condition of counterparties and spreading its positions among multiple
counterparties.
The Company has entered into foreign exchange contracts as hedges against
currency fluctuation on certain intercompany loans. Such contracts effectively
offset the currency risk applicable to approximately $85,852 and $231,944 of
obligations at April 30, 1994 and 1993, respectively. Market value gains and
losses are recognized, and the resulting gains and losses offset foreign
exchange gains or losses on such loans. At April 30, 1994 and 1993,
respectively, the fair value of the Company's foreign exchange contracts,
estimated by obtaining quotes from financial institutions, is a loss position
aggregating $260 and $8,587, respectively.
Although the period of service for a vehicle is at the lessee's option, and
the period a home is held for resale varies, management estimates, by using
historical information, the rate at which vehicles will be disposed and the rate
at which homes will be resold. These projections of estimated liquidations of
assets under management programs and the related estimated repayment of
liabilities under management programs as of April 30, 1994, as set forth in the
table below, indicate that the actual repayments of liabilities under management
programs will be different than required by contractual maturities.
Assets Under Liabilities Under
Management Programs Management Programs
1995 $ 1,705,609 $ 1,613,423
1996 916,369 743,275
1997 414,997 323,567
1998 132,702 107,523
1999 43,976 34,501
2000-2004 29,361 19,616
$ 3,243,014 $ 2,841,905
STOCK OPTION, INVESTMENT AND INCENTIVE PLANS
The Company's employee stock option plans allow for options to be granted to
key employees for the purchase of common stock at prices not less than fair
market value on the date of grant. Either incentive stock options or non-
statutory stock options may be granted under the plans. The Company's Directors'
stock option plan allows for options to be granted to outside Directors of the
Company for the purchase of common stock at prices not less than fair market
value on the date of grant. Options become exercisable after one year from date
of grant on a vesting schedule provided by the plan and expire either eight or
ten years after the date of the grant. Option transactions during 1994, 1993,
and 1992 were as follows:
21
<PAGE>
Number of Option Price
Shares per Share
Outstanding April 30, 1991 1,826,925 $18.13 to $39.00
Granted 362,460 $26.25 to $35.88
Exercised (77,148) $18.13 to $34.25
Canceled (159,399) $23.38 to $39.00
Outstanding April 30, 1992 1,952,838 $18.13 to $37.75
Granted 440,500 $33.63 to $39.63
Exercised (372,203) $19.88 to $37.75
Canceled (49,565) $23.38 to $37.75
Outstanding April 30, 1993 1,971,570 $18.13 to $39.63
Granted 199,450 $39.00 to $42.00
Exercised (305,062) $18.13 to $37.75
Canceled (97,785) $27.00 to $39.63
Outstanding April 30, 1994 1,768,173 $19.88 to $42.00
Exercisable April 30, 1994 1,575,723 $19.88 to $41.88
At April 30, 1994, there were 1,218,241 shares of common stock reserved,
including 889,827 shares for issuance under the employee stock option plans,
265,914 shares for issuance under the employee investment plan and 62,500 shares
for issuance under the Directors' stock option plan.
Under provisions of the Company's employee investment plan, a qualified
retirement plan, eligible employees may generally have up to 10% of their base
salaries withheld and placed with an independent custodian and elect to invest
in common stock of the Company, an index equity fund, a growth equity fund, an
international equity fund, a fixed income fund, an asset allocation fund and/or
a money market fund. The Company's contributions vest proportionately in
accordance with an employee's years of vesting service, with an employee being
100% vested after three years of vesting service. For 1991 and prior years, the
Company matched, in common stock of the Company, employees' contributions to 6%
of their base salaries. Beginning in 1992 and thereafter, the Company matches,
in common stock of the Company, employee contributions to 3%, with an additional
3% match available at the end of the year based on the Company's operating
results. In 1994 and 1993, the Company made an additional match of 50% of
employee contributions greater than 3% up to 6%. The additional match, initially
invested in a money market fund, can be redirected by the employee into any of
the investment elections noted above. No additional match was made in 1992. The
Company's expenses for contributions included in selling, general and
administrative expenses were $4,020, $3,662, and $2,450 for the years ended
April 30, 1994 and the two preceding years, respectively.
The Company has incentive compensation plans for certain key employees. The
plans provide for the payment of cash bonuses or, in some instances, stock
incentives, based upon the achievement of predetermined performance objectives.
The related expense included in selling, general and administrative expenses for
1994, 1993 and 1992 was $6,086, $5,659 and $1,861, respectively.
STOCK RIGHTS
On March 17, 1986, the Company declared a dividend of one preferred share
purchase right for each share of common stock outstanding on April 11, 1986. The
Company adopted an amendment to its rights agreement January 16, 1989. Each
right entitles the holder to purchase 1/100th of a share of series A Junior
Participating Preferred Stock at an exercise price of $120. The rights become
exercisable in the event any party acquires or announces an offer to acquire 20%
or more of the Company's common stock. The rights expire April 10, 1996, and are
redeemable at $.05 per right prior to the time any party owns 20% or more of
the Company's outstanding common stock. In the event the Company enters into a
consolidation or merger after the time rights are exercisable, the rights
provide that the holder will receive, upon exercise of the right, shares of
common stock of the surviving company having a market value of twice the
exercise price of the right. Until the earlier of the time the rights become
exercisable, are redeemed or expire, the Company will issue one right with each
new share of common stock issued. The Company has designated 200,000 shares of
the authorized preferred shares as series A Junior Participating Preferred Stock
for issuance upon exercise of the rights.
PENSION AND OTHER EMPLOYEE BENEFIT PLANS
Pension Plans
The Company has a non-contributory defined benefit pension plan covering
substantially all US employees of the Company and its subsidiaries. The
Company's subsidiary located in the UK has a contributory defined benefit
pension plan, with participation at the employee's option. Under both the US and
UK plans, benefits are based on an employee's years of credited service and a
percentage of final average compensation. The Company's policy for both plans is
to contribute amounts sufficient to meet the minimum requirements plus other
amounts as the Company deems appropriate from time to time.
Pension cost for both plans for 1994, 1993, and 1992 included the following
components:
1994 1993 1992
Service cost--benefits
earned $ 4,514 $ 3,760 $ 3,477
Interest cost on projected
benefit obligation 5,259 4,559 4,126
Actual return on assets (2,049) (3,959) (4,250)
Net amortization and
deferral (2,620) (377) 207
Net pension cost $ 5,104 $ 3,983 $ 3,560
The following table provides a reconciliation of the actuarial present value
of projected benefit obligation for the plans in 1994 and 1993 and the Company's
recorded pension liability recognized in the Consolidated Balance Sheets at
April 30, 1994 and 1993:
1994 1993
Accumulated benefit obligation:
Vested $ 40,681 $ 36,035
Unvested 7,072 6,073
$ 47,753 $ 42,108
Projected benefit obligation $ 71,571 $ 63,199
Funded assets, at fair value (53,177) (48,212)
Unrecognized net loss from past
experience different from that assumed
and effects of changes in assumptions (11,528) (7,082)
Unrecognized prior service cost 129 (882)
Unrecognized net (obligation) asset (29) 19
Recorded liability $ 6,966 $ 7,042
Plan assets are primarily invested in marketable securities.
Supplemental Retirement Plans
The Company also sponsors two unfunded supplemental retirement plans to
provide certain key executives with benefits in excess of limits under the
federal tax law and to include annual incentive payments in benefit
calculations.
22
<PAGE>
The cost of these plans in 1994, 1993 and 1992 included the following
components:
1994 1993 1992
Service cost--benefits
earned $ 90 $ 44 $ 7
Interest cost on projected
benefit obligation 922 824 781
Net amortization and deferral 570 445 409
$ 1,582 $ 1,313 $ 1,197
The following table provides a reconciliation of the actuarial present value
of projected benefit obligation for the plans and the Company's recorded
liability as reported in the Consolidated Balance Sheets at April 30, 1994 and
1993:
1994 1993
Accumulated benefit obligation
Vested $ 8,202 $ 7,407
Unvested 1,445 1,077
$ 9,647 $ 8,484
Projected benefit obligation $ 13,466 $ 10,656
Unrecognized net obligation (1,856) (2,088)
Unrecognized prior service cost (2,941) (1,034)
Minimum liability adjustment 2,562 2,464
Unrecognized net loss (1,584) (1,514)
Recorded liability $ 9,647 $ 8,484
In accordance with SFAS No. 87, $2,562 and $2,464 of additional minimum
liability is included in the recorded liability in 1994 and 1993, respectively,
to provide a total liability that is at least equal to the unfunded accumulated
benefit obligation. The Company recorded an intangible asset of the same amount
which is included in the Consolidated Balance Sheets.
Assumptions
Certain assumptions were used in determining the cost and related
obligations under the US pension and unfunded supplemental retirement plans as
follows:
1994 1993 1992
Percent
Pension Cost:
Discount rate 8.25 8.75 9.00
Rate of increase in
compensation 5.00 5.00 5.50
Long-term rate of
return on assets 10.00 10.00 10.00
Pension Obligation:
Discount rate 8.25 8.25 8.75
Rate of increase in
compensation 5.00 5.00 5.00
Postretirement Benefits Other Than Pensions
Effective May 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which requires
accrual accounting for postretirement benefits other than pensions. The Company
provides healthcare and life insurance benefits for certain retired employees up
to the age of 65. Prior to adoption of SFAS No. 106, the Company recognized the
costs of these benefits by expensing the benefits as paid. The aggregate costs
of such benefits did not exceed $500 in 1993 or 1992.
The Company has elected to recognize the cost of its transition obligation
(the accumulated postretirement benefit obligation as of May 1, 1993) by
amortizing it on a straight-line basis over 20 years. The Company's SFAS No. 106
obligation and cost are based on a discount rate of 8.25%. The assumed rate of
increase in healthcare costs (healthcare cost trend rate) was 12% in 1994,
decreasing to 10% in 1995 and gradually decreasing to 4.75% by 2004. Increasing
the healthcare cost trend rates of future years by one percentage point would
increase the accumulated postretirement benefit obligation by $560 and would
increase annual aggregate service and interest costs by $161.
Net periodic postretirement benefits costs for 1994 included the following
components:
1994
Service cost - benefits earned during period $ 788
Interest cost on accumulated postretirement
benefit obligation 469
Amortization of the unrecognized transition obligation 294
Net periodic postretirement benefit cost $ 1,551
Status of Plan
Accumulated postretirement benefit obligation:
Active employees fully eligible for benefits $ 5,361
Current retirees 1,599
6,960
Unrecognized transition obligation (5,583)
Recorded liability $ 1,377
LEASE COMMITMENTS
Total rental expenses relating to office facilities and equipment were
$27,264, $25,368, and $25,994 for 1994, 1993 and 1992, respectively. Minimum
rental commitments under non-cancelable leases with remaining terms in excess of
one year are as follows:
1995 $ 15,037 1998 $ 7,970
1996 $ 13,004 1999 $ 4,703
1997 $ 9,303 2000-2004 $ 13,942
2005 & thereafter $ 1,863
These leases provide for additional rentals based on the lessors' increased
property taxes, maintenance and operating expenses.
ACQUISITION
In 1994 the Company purchased all of the outstanding stock of a Canadian
relocation company. The acquisition was accounted for as a purchase and is not
material to the consolidated financial statements.
CONTINGENT LIABILITIES
The Company and its subsidiaries are involved in pending litigation of the
usual character incidental to the business transacted by them. In the opinion of
management, such litigation will not have a material effect on the Company's
consolidated financial statements.
The Company is contingently liable under the terms of an agreement involving
its discontinued aviation services segment for payment of Industrial Revenue
Bonds issued by local governmental authorities operating at three airports, as
well as guarantor on a note associated with the buyer of one office closed as
part of its disposition of its facilities management services segment. The
Company believes its allowance for disposition loss is sufficient to cover all
potential liability.
23
<PAGE>
BUSINESS SEGMENTS
The Company operations are classified into three business segments: vehicle
management services, relocation and real estate services and mortgage banking
services. In the selected information by business segment and geographic area
which follows, previously reported operating income has been replaced by income
before income taxes to reflect the retroactive reclassification of "Other
expense, net" to "Selling, general and administrative" expenses. Further,
Canadian information has been combined with that of the United States to reflect
the Company's North American management structure. Additionally, minor
adjustments have been made to the methodology applied in allocating certain
income and expense items. None of these changes had a significant effect on the
information presented.
Business Segments
<TABLE>
<CAPTION>
(In thousands)
Years Ended April 30, 1994 1993 1992
<S> <C> <C> <C>
Revenues:
Vehicle Management Services $ 1,162,483 $ 1,069,484 $ 992,514
Relocation and Real Estate Services 816,261 829,336 849,871
Mortgage Banking Services 155,935 122,111 89,099
Consolidated $ 2,134,679 $ 2,020,931 $ 1,931,484
Income Before Income Taxes:
Vehicle Management Services $ 46,230 $ 42,272 $ 40,735
Relocation and Real Estate Services 21,500 26,615 26,357
Mortgage Banking Services 42,066 25,351 16,025
Consolidated $ 109,796 $ 94,238 $ 83,117
Identifiable Assets:
Vehicle Management Services $ 3,120,154 $ 3,053,652 $ 2,803,952
Relocation and Real Estate Services 807,119 970,810 1,011,723
Mortgage Banking Services 839,510 588,566 549,356
Consolidated $ 4,766,783 $ 4,613,028 $ 4,365,031
Capital Expenditures:
Vehicle Management Services $ 10,250 $ 11,205 $ 18,534
Relocation and Real Estate Services 8,839 4,343 8,458
Mortgage Banking Services 17,023 8,085 2,606
Consolidated $ 36,112 $ 23,633 $ 29,598
Depreciation and Amortization:
Vehicle Management Services $ 825,609 $ 722,913 $ 613,443
Relocation and Real Estate Services 8,921 8,349 5,139
Mortgage Banking Services 9,148 6,800 1,716
Consolidated $ 843,678 $ 738,062 $ 620,298
Geographic Areas
(In thousands)
Years Ended April 30, 1994 1993 1992
Revenues:
North America $ 1,954,106 $ 1,802,201 $ 1,711,132
Europe 180,573 218,730 220,352
Consolidated $ 2,134,679 $ 2,020,931 $ 1,931,484
Income Before Income Taxes:
North America $ 106,895 $ 89,664 $ 76,586
Europe 2,901 4,574 6,531
Consolidated $ 109,796 $ 94,238 $ 83,117
Identifiable Assets:
North America $ 4,211,169 $ 4,042,912 $ 3,739,525
Europe 555,614 570,116 625,506
Consolidated $ 4,766,783 $ 4,613,028 $ 4,365,031
</TABLE>
24
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands except per share data) Year ended April 30, 1994
Quarter First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
Revenues $ 538,570 $ 545,374 $ 516,809 $ 533,926 $ 2,134,679
Income before income taxes $ 24,944 $ 27,929 $ 26,328 $ 30,595 $ 109,796
Net income $ 14,789 $ 16,203 $ 15,411 $ 18,155 $ 64,558
Net income per share $ .84 $ .90 $ .87 $ 1.03 $ 3.64
Cash dividends per share $ .30 $ .30 $ .30 $ .30 $ 1.20
Price range of stock:
High $ 42 1/2 $ 46 3/4 $ 46 3/4 $ 43 1/4 $ 46 3/4
Low $ 39 1/2 $ 41 3/8 $ 40 5/8 $ 33 1/4 $ 33 1/4
Year ended April 30, 1993
Quarter First Second Third Fourth Year
Revenues $ 513,266 $ 504,057 $ 488,518 $ 515,090 $ 2,020,931
Income before income taxes $ 21,392 $ 21,194 $ 23,910 $ 27,742 $ 94,238
Net income $ 12,639 $ 12,757 $ 14,398 $ 16,623 $ 56,417
Net income per share $ .74 $ .73 $ .83 $ .95 $ 3.25
Cash dividends per share $ .30 $ .30 $ .30 $ .30 $ 1.20
Price range of stock:
High $ 36 7/8 $ 38 7/8 $ 41 1/2 $ 43 $ 43
Low $ 32 3/4 $ 34 5/8 $ 37 1/4 $ 39 $ 32 3/4
</TABLE>
25
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the Directors is contained on pages 2 through
6 of the Registrant's Proxy Statement for its 1994 Annual Meeting of
Stockholders, which information is hereby incorporated by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<S> <C> <C>
An Executive Officer
Office Held Name--Age Since Fiscal Year
Chairman of the Board, President
and Chief Executive Officer Robert D. Kunisch--53 1982
Senior Vice President William F. Adler--50 1986
Senior Vice President and Secretary Eugene A. Arbaugh--56 1987
Senior Vice President Stephen A. Fragapane--44 1988
Senior Vice President and Chief
Financial Officer Roy A. Meierhenry--55 1987
Senior Vice President H. Robert Nagel--50 1992
Vice President Terry E. Kridler--47 1986
Vice President Edwin F. Miller--51 1990
Vice President and Treasurer Robert W. Mitchell--47 1992
Vice President Donna C. Startzel--46 1988
Vice President Samuel H. Wright--48 1983
Controller Nan A. Grant--42 1991
</TABLE>
Officers are elected by the Board of Directors to serve at the pleasure of the
Board. There is no family relationship between any of such persons. Each of the
persons named above has been employed by the Company or one of its subsidiaries
for more than the past five years except Mr. Mitchell, who was Vice President,
Finance for Household International Corporation and Vice President and
Treasurer for Household Finance Corporation.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is contained on pages 9
through 17 of the Registrant's Proxy Statement for its 1994 Annual Meeting of
Stockholders, which information is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners and
management is contained on pages 7, 8 and 9 of the Registrant's Proxy Statement
for its 1994 Annual Meeting of Stockholders, which information is hereby
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
26
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
(a) 1. Index to Financial Statements
Report and Consent of Independent Auditors 12
Consolidated Financial Statements of PHH Corporation
and Subsidiaries and related notes:
Consolidated Statements of Income for the years ended April 30, 1994, 1993 and 1992 13
Consolidated Balance Sheets at April 30, 1994 and 1993 14
Consolidated Statements of Cash Flows for the years ended April 30, 1994, 1993 and
1992 15
Consolidated Statements of Stockholders' Equity for the years ended April 30, 1994,
1993 and 1992 16
Notes to Consolidated Financial Statements 17
2. Index to Financial Statement Schedules
Consolidated Schedules of PHH Corporation and Subsidiaries for the years ended April 30,
1994, 1993 and 1992:
Schedule VIII--Valuation and Qualifying Accounts 30
Schedule IX--Short-Term Borrowings 31
All schedules not listed have been omitted because of the absence of the conditions under which they are
required or the required information is included elsewhere in the financial statements or notes thereto.
3. Exhibits
The exhibits identified by an asterisk (*) are on file with the Commission and such exhibits are
incorporated by reference from the respective previous filings. The exhibits identified by a double
asterisk (**) are being filed with this report.
</TABLE>
<TABLE>
<S> <C>
Exhibit No.
3-1 Charter of PHH Corporation, as amended(*).
3-2 By-Laws of PHH Corporation, as amended October 1990(*).
4-1 Master Credit Agreements of various dates among the Company and various commercial banks filed as
Exhibit 4-4 to Form 10-K for fiscal year ended April 30, 1990(*).
4-2 Credit Agreements of various dates among the Company and various commercial banks filed as Exhibit 4-5
to Form 10-K for fiscal year ended April 30, 1990(*).
4-3 Indenture between the Company and Bank of New York, Trustee, dated as of May 1, 1992, filed as Exhibit
4(a)(iii) to Registration Statement 33-48125(*).
4-4 Indenture between the Company and First National Bank of Chicago, Trustee, dated as of March 1, 1993,
filed as Exhibit 4(a)(i) to Registration Statement 33-59376 (*).
4-5 Policy on confidential proxy voting and Independent Tabulation and Inspection of Elections adopted by
resolution of the Board of Directors on June 17, 1991 filed as an exhibit to Form 10-K for fiscal year
ended April 30, 1991 (*).
10-1 Amended and Restated Stock Compensation Plan of 1990 filed as Exhibit 4(a) to Registration No.
33-53282 (*)
10-2 Outside Directors Stock Option Plan filed as Exhibit 4(b) to Registration No. 33-38309 (*).
10-3 Amended and Restated Directors Deferred Compensation Plan for Corporate Directors filed as Exhibit
10-3 to Form 10-K for fiscal year ended April 30, 1993 (*).
10-4 Directors Deferred Stock Retirement Plan (**).
10-5 Executive Deferred Compensation Plan and Form of Executive Deferred Compensation Plan Trust Agreement
(**).
10-6 Long-Term Incentive Plan (FY93-94-95) filed as Exhibit 10-7 to Form 10-K for fiscal year ended April
30, 1992 (*).
10-7 Long-Term Incentive Plan (FY 95-96-97) (**).
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
10-8 Corporate Incentive Plan (FY 95) and CEO & President Incentive Plan (FY95) (**).
10-9 Amended and Restated Supplemental Executive Retirement Plan, filed as Exhibit 10-10 to Form 10-K for
fiscal year ended April 30, 1989, as amended on June 18, 1990, filed as Exhibit 10-12 to Form 10-K for
fiscal year ended April 30, 1990, and amended on November 11, 1991 filed as Exhibit 10-8 to Form 10-K
for fiscal year ended April 30, 1993 (*).
10-10 Third Amendment to Supplemental Executive Retirement Plan (**).
10-11 Form of Amended and Restated Supplemental Executive Retirement Agreement (**).
10-12 Amended and Restated Excess Benefit Plan (**).
10-13 Form of Amended and Restated Deferred Compensation Trust Agreement for Supplemental Executive
Retirement Plan and Excess Benefit Plan (**).
10-14 Amended and Restated Senior Executive Severance Plan filed as Exhibit 10-14 to Form 10-K for fiscal
year ended April 30, 1990 (*).
10-15 Form of Distribution Agreement between the Company and The First Boston Corporation, Goldman, Sachs &
Co., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith, Incorporated and J.P. Morgan
Securities Inc. dated July 8, 1992 filed as Exhibit 1 to Registration Statement 33-48125 (*).
10-16 Form of Distribution Agreement between the Company and The First Boston Corporation, Goldman, Sachs &
Co., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith, Incorporated and J.P. Morgan
Securities Inc. dated March 26, 1993 filed as Exhibit 1 to Registration Statement 33-59376 (*).
10-17 Form of Distribution Agreement between the Company, Goldman, Sachs & Co., Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith, Incorporated and J.P. Morgan Securities Inc. dated July 5, 1994 filed
as Exhibit 1 to Registration Statement 33-52669 (*).
10-18 Form of Rights Agreement between the Company and Maryland National Bank dated as of March 17, 1986
filed as an exhibit to the Form 8-K for the month of March 1986 and amended January 16, 1989 filed as
an exhibit to Form 8-K for the month of January 1989 and amended April 6, 1992, filed as Exhibit 10-15
to Form 10-K for the fiscal year ended April 30, 1992 (*).
11 Schedule containing information used in the computation of net income per share(**).
12 Schedule containing information used in the computation of the ratio of earnings to fixed charges(**).
21 Subsidiaries of the registrant(**).
24 Power of Attorney(**).
The registrant hereby agrees to furnish to the Commission upon request a copy of all constituent instruments defining
the rights of holders of long-term debt of the registrant and all its subsidiaries for which consolidated or
unconsolidated financial statements are required to be filed under which instruments the total amount of securities
authorized does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis.
</TABLE>
(b) Reports on Form 8-K--There were no filings on Form 8-K during the
fourth quarter of fiscal 1994.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PHH CORPORATION
By ROBERT D. KUNISCH
Robert D. Kunisch
Chairman of the Board,
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Principal Executive Officer:
<TABLE>
<C> <S> <C>
ROBERT D. KUNISCH July 29, 1994
Robert D. Kunisch
Chairman of the Board,
Chief Executive Officer
and President
</TABLE>
Principal Financial Officer:
<TABLE>
<C> <S> <C>
ROY A. MEIERHENRY July 29, 1994
Roy A. Meierhenry
Senior Vice President and
Chief Financial Officer
</TABLE>
Principal Accounting Officer:
<TABLE>
<C> <S> <C>
NAN A. GRANT July 29, 1994
Nan A. Grant
Controller
</TABLE>
Majority of the Board of Directors:
Robert D. Kunisch, James S. Beard,
Andrew F. Brimmer, George L. Bunting, Jr.,
Barbara S. Feigin, Paul X. Kelley, Thomas V. King,
L. Patton Kline, Francis P. Lucier, Kent C. Nelson,
Alexander B. Trowbridge
<TABLE>
<C> <S> <C>
ROBERT D. KUNISCH July 29, 1994
Robert D. Kunisch
As Attorney-in-fact
</TABLE>
29
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED APRIL 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
<S> <C> <C> <C> <C> <C>
CHARGED
BALANCE AT (CREDITED) BALANCE
BEGINNING OF TO OPERATING AT END
DESCRIPTION YEAR EXPENSES OTHERS (a) DEDUCTIONS (b) OF YEAR
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
VALUATION ACCOUNTS DEDUCTED IN THE
BALANCE SHEET FROM ASSETS TO
WHICH THEY APPLY
Accounts receivable $ 8,453,000 $ 3,299,000 $ 22,000 $ 5,249,000 $ 6,525,000
Net investment in leases and
leased vehicles 8,282,000 (1,669,000) -- 751,000 5,862,000
Carrying costs on homes under
management 1,301,000 349,000 -- -- 1,650,000
Mortgages held for resale and
mortgage-related notes
receivable 11,823,000 1,079,000 -- 2,225,000 10,677,000
Real estate management programs 2,001,000 (269,000) -- -- 1,732,000
YEAR ENDED APRIL 30, 1994 $ 31,860,000 $ 2,789,000 $ 22,000 $ 8,225,000 $ 26,446,000
Accounts receivable $ 7,343,000 $ 6,156,000 $ -- $ 5,046,000 $ 8,453,000
Net investment in leases and
leased vehicles 6,754,000 4,781,000 -- 3,253,000 8,282,000
Carrying costs on homes under
management 381,000 50,000 870,000 -- 1,301,000
Mortgages held for resale and
mortgage-related notes
receivable 10,680,000 5,424,000 -- 4,281,000 11,823,000
Real estate management programs 2,107,000 -- -- 106,000 2,001,000
YEAR ENDED APRIL 30, 1993 $ 27,265,000 $ 16,411,000 $ 870,000 $ 12,686,000 $ 31,860,000
Accounts receivable $ 5,744,000 $ 8,303,000 $ -- $ 6,704,000 $ 7,343,000
Net investment in leases and
leased vehicles 4,333,000 4,541,000 -- 2,120,000 6,754,000
Carrying costs on homes under
management 381,000 353,000 -- 353,000 381,000
Mortgages held for resale and
mortgage-related notes
receivable 3,644,000 7,764,000 -- 728,000 10,680,000
Real estate management programs 3,229,000 -- -- 1,122,000 2,107,000
YEAR ENDED APRIL 30, 1992 $ 17,331,000 $ 20,961,000 $ -- $ 11,027,000 $ 27,265,000
</TABLE>
NOTES:(a) Amounts relate to acquisitions, divestitures and reclassifications of
prior year amounts.
(b) Deductions from reserves represent accounts charged off, less
recoveries, and foreign translation gains and losses.
30
<PAGE>
PHH CORPORATION AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
FOR THE YEARS ENDED APRIL 30, 1994, 1993, AND 1992
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
<S> <C> <C> <C> <C> <C>
Weighted Weighted
Category of Average Max. Amount Avg. Amount Average
Aggregate Balance Interest Outstanding Outstanding Int. Rate
Short-term at End of Rate At During During During
Borrowings Period Period End Period Period(a) Period (a)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
YEAR ENDED APRIL 30, 1994:
Commercial Paper (b) $ 2,133,719 4.00% $ 3,215,324 $ 2,525,201 3.43%
Other Borrowings $ 127,467 4.86% $ 262,165 $ 168,518 5.20%
YEAR ENDED APRIL 30, 1993:
Commercial Paper (b) $ 1,890,799 3.26% $ 2,826,466 $ 2,233,779 3.85%
Other Borrowings $ 221,869 5.30% $ 284,242 $ 136,682 7.49%
YEAR ENDED APRIL 30, 1992:
Commercial Paper (b) $ 1,924,843 4.75% $ 2,731,293 $ 2,451,018 5.66%
Master Notes $ 0 -- $ 149,895 $ 17,347 6.12%
Other Borrowings $ 124,853 10.51% $ 247,092 $ 89,255 9.45%
</TABLE>
(a) The average amount outstanding during the period is the average of the
daily balances. The weighted average interest rate during the period is
determined by dividing interest expense related to short-term borrowings by
the average of the daily balances.
(b) Commercial paper is supported by long-term revolving credit agreements and
short-term lines of credit.
31
<PAGE>
EXHIBIT A
PHH CORPORATION DIRECTORS DEFERRED STOCK RETIREMENT PLAN
1. PURPOSES
The purposes of this Directors Deferred Stock Retirement Plan are to
provide a retirement benefit for members of the Board of Directors of the
Corporation who are not employees of the Corporation and to increase such
members' stock ownership in the Corporation.
2. DEFINITIONS
The following terms shall have the following meanings, unless a
different meaning plainly is required by the context:
(a) "Account" means the bookkeeping account established with
respect to a Participant pursuant to Section 7.
(b) "Corporation" means PHH Corporation.
(c) "Designated Beneficiary(ies)" means that person or persons
(including individuals, trusts or the estate of the Participant) designated
to receive benefits hereunder in the event of a Participant's death on the
Beneficiary Designation Election form approved by the Compensation Committee
of the Board of Directors.
(d) "Director" means any person duly elected and serving as a
member of the Board of Directors of the Corporation who is not an employee
of the Corporation.
(e) "Effective Date" means the Effective Date of the Plan, which
shall be the date the Plan is approved by the stockholders of the Corporation.
The effective date of any amendment to the Plan shall be such date as
is specified in the amendment.
(f) "Fees" means the Retainer a Participant receives for serving
as a Director, plus the compensation he or she receives for serving on one
or more committees of the Board of Directors and attendance at Board or
committee meetings.
(g) "Fiscal Year" means the fiscal year of the Corporation, which
begins May 1 and ends April 30.
(h) "Optional Deferral Election" means an election made by a
Participant pursuant to Section 6 hereof to defer all or any portion of his or
her Fees that are not mandatorily deferred. An Optional Deferral Election
shall be made substantially in the form approved by the Compensation Committee
of the Board of Directors.
(i) "Participant" means a Director who participates in this Plan.
(j) "Payment Election" means an election made by a Participant
pursuant to Section 8 hereof wherein he or she elects when benefits shall be
payable upon retirement, whether benefits shall be payable in the form of a
single sum or installments, and whether they shall be payable in cash or in
Stock. A Payment Election shall be made substantially in the form approved
by the Compensation Committee of the Board of Directors.
(k) "Plan" means this Directors Deferred Stock Retirement Plan,
as it may be amended by the Board of Directors from time to time.
<PAGE>
(l) "Plan Year" means the calendar year.
(m) " Retainer" means the fixed compensation an individual
receives for serving as a Director, exclusive of compensation for service on
a committee, for attendance at meetings and all other compensation.
(n) "Secretary" means the person holding the office of secretary
of the Corporation.
(o) "Stock" means common stock of the Corporation.
(p) "Trust" means the PHH Corporation Directors Deferred Stock
Grantor Trust to which reference is made in Section 7(e) hereof.
(q) "16b-3 Rules" means rules issued pursuant to Section 16(b) of
the Securities Exchange Act of 1934.
3. PARTICIPATION
An individual who is a Director on the Effective Date shall become a
Participant as of such Effective Date. Any other individual shall become a
Participant as of the date that he or she becomes a Director. Participation
shall continue until an individual is paid all of the amounts to which he or
she is entitled hereunder; provided, however, that the provisions of the
Plan with respect to the deferral of Retainers and Fees, including matching
contributions, shall apply only with respect to Retainers and Fees earned by
an individual while he or she is a Director.
4. MANDATORY DEFERRALS
One-third (1/3) of a Director's Retainers shall be deferred in
accordance with the provisions of this Plan, without regard to any election
by the Participant. Such mandatory deferrals shall be credited to a
Participant's Account as of the last day of each quarter of the Fiscal Year.
A Participant shall be 100% vested in the portion of his Account
attributable to mandatory deferrals at all times.
5. MATCHING OF MANDATORY DEFERRALS
(a) Profitability Match. Mandatory deferrals will be matched by
hypothetical matching contributions made by the Corporation if the
Corporation attains specified earnings per share targets for the Fiscal Year
in which the mandatory deferrals are made. The targets for the 1994 Fiscal
Year are to be approved by the Board of Directors in connection with its
approval of this Plan. Prior to the beginning of each Fiscal Year thereafter,
the Board of Directors shall determine the applicable targets which
shall form an integral part of this Plan. Matching contributions shall not
exceed 100% of the mandatory deferrals, determined as of the dates such
mandatory deferrals were credited to a Participant's Account.
(b) Crediting of Match. Matching contributions with respect to
any Fiscal Year shall be credited to a Participant's Account as of the last
day of June following that Fiscal Year.
<PAGE>
(c) Vesting. A Participant shall vest in the portion of his or
her Account attributable to matching contributions in accordance with the
following schedule.
Years of Service Vested Percentage
One 33 1/3%
Two 66 2/3%
Three 100%
For this purpose, the term "year of service" means each Fiscal
Year in which an individual is a Director, including Fiscal Years prior
to and inclusive of the Effective Date, and counting periods of six or more
months during a Fiscal Year as a complete Fiscal Year. Amounts distributable
to a Participant pursuant to Section 8 hereof shall be reduced to the extent
a Participant is not 100% vested when he or she is entitled to a
distribution. The amount of the reduction shall be treated as a forfeiture.
6. OPTIONAL DEFERRALS
(a) General Rule. In accordance with the election form approved
by the Compensation Committee of the Board of Directors, a Participant may
make an Optional Deferral Election to defer all or a portion of his or her
Fees that are not mandatorily deferred in accordance with Section 4.
Optional Deferral Elections shall be made on a Plan Year basis, with
deferrals credited to the Participant's Account as of the last day of each
quarter of the Plan Year for which the election is made. A Participant shall
be 100% vested in the portion of his or her Account attributable to optional
deferrals at all times.
(b) Time of Election. An Optional Deferral Election form must be
submitted to the Secretary prior to January 1 of the Plan Year in which it
becomes effective and will be effective six months after the date on which
it is received by the Secretary. Notwithstanding the foregoing, (i) in the
case of any individual who becomes a Participant on the Effective Date, an
Optional Deferral Election form for the short Plan Year beginning on the
Effective Date and ending on December 31, 1993 may be submitted on any date
on or before the Effective Date, and (ii) in the case of any individual who
becomes a Participant after the Effective Date and on a date other than
January 1, an Optional Deferral Election form for the remainder of the Plan
Year in which he or she becomes a Participant may be submitted within thirty
(30) days after becoming a Participant; provided, however, that in the case
of both (i) and (ii), the Election shall apply only to Fees earned following
the date the Election is submitted.
(c) Election Irrevocable. Once submitted, an Optional Deferral
Election is irrevocable for the Plan Year to which it applies.
(d) Continuing Effectiveness of Elections. Once submitted, a
Participant's Optional Deferral Election shall continue in effect for
subsequent Plan Years unless a Participant submits a new Optional Deferral
Election form in accordance with the foregoing provisions.
7. ACCOUNTS
(a) General. An Account shall be established in the name of each
Participant. Within each Account, there shall be three subaccounts,
reflecting a Participant's interests attributable to mandatory deferrals,
the match on such deferrals, and a Participant's optional deferrals.
<PAGE>
(b) Hypothetical Investment in Stock. For purposes of determining
the value of a Participant's Account, it shall be assumed that (i) as of the
date an amount is credited to the Participant's Account, 100% of such amount
is invested in shares of Stock and such shares are allocated to the
Participant's Account, (ii) once allocated, all shares remain so invested
until all distributions to a Participant have been made, and (iii) until all
distributions have been made, all dividends are reinvested in shares of
Stock.
(c) Bookkeeping Account Only. The Account established in a Par-
ticipant's name is for bookkeeping purposes only. It is the intention of the
parties that the Plan and Trust, and any Account established thereunder, be
unfunded for tax purposes and further, that since this Plan is solely for
the benefit of Directors who are not employees, the Plan not be subject to
the Employee Retirement Income Security Act of 1974.
(d) Unsecured Creditors. Participants in this Plan have the sta-
tus of unsecured creditors of the Corporation, and the Plan constitutes a
mere unsecured promise by the Corporation to make benefit payments in the
future.
(e) Trust. Notwithstanding the foregoing, to assist it in meeting
its obligations hereunder, the Corporation may establish a Trust,
substantially in accordance with the terms of the model trust described in
Revenue Procedure 92-64. If the Corporation establishes a Trust, shares of
Stock equal in value to Participants' mandatory deferrals, the match on such
deferrals, and optional deferrals, shall either be purchased by the trustee on
the open market or issued directly by the Corporation to the Trust,
provided, however, that the aggregate number of shares of Stock to be issued
by the Corporation shall not exceed two hundred fifty thousand (250,000)
shares, as adjusted by the Board of Directors, whose determination shall be
binding, final and conclusive, to reflect any stock dividend, stock split or
combination, reclassification or other capital adjustment in shares of
Stock.
8. DISTRIBUTIONS
(a) Distributable Events.
(1) Retirement. Subject to subsection (b) hereof, a Participant
shall become entitled to distributions from the Plan upon retirement.
Retirement shall be deemed to occur (i) on the date the Participant ceases
to be a Director for any reason other than disability or death, or (ii) on
the later of the date on which the Participant ceases to be a Director for
any reason other than disability or death or the date the sum of his or her
age and years of service equals seventy (70), as specified in such
Participant's last Payment Election form submitted while a Director,
provided, however, that once an election has been made with respect to the
date on which retirement occurs, no change in that election will be
effective unless it is made at least twelve (12) months before distribution
would have begun in the absence of the change. For this purpose, the term
"years of service" has the meaning set forth in Section 5.
(2) Disability. Subject to subsection (b) hereof, in the event
that a Participant ceases to be a Director on account of total and permanent
disability prior to retirement, he or she shall become entitled to
distributions from the Plan payable in the same form, and at the same time,
that such distribution would have been payable, had the Participant met the
conditions for retirement set forth in paragraph (1) hereof on the date of
such disability; provided that total and permanent disability shall not be
deemed to occur until the date the Participant submits proof, satisfactory
to the Compensation Committee of the Board of Directors, that he or she is
entitled to begin receiving Social Security disability benefits.
<PAGE>
(3) Death. In the event a Participant dies prior to the receipt
of any distributions from the Plan, his or her Designated Beneficiary shall
become entitled to distributions payable in the same form, and at the same
time, that such distributions would have been payable, had the Participant
met the conditions for retirement set forth in paragraph (1) hereof on the
date of death. In the event a Participant dies subsequent to the
commencement of distributions but prior to the receipt of all installments
that are payable, any remaining installments shall be paid to the
Participant's Designated Beneficiary, in the same amount and at the same
time that the installments would have been paid to the Participant, had he
or she survived. Notwithstanding the foregoing, if a Participant dies
(whether before or after distributions to the Participant have commenced)
and, at the time of death, there is no Designated Beneficiary, any amount
remaining to be paid shall be paid in a single sum to the Participant's
estate.
(b) Distribution and Installment Dates. Distributions in the form
of a single sum shall be made as of the January 1 of the Plan Year next
following the date of the Participant's retirement, total and permanent
disability or death, as the case may be (the "distribution date").
Distributions in the form of installments shall commence to be made as of
such January 1 and, thereafter, shall be made as of each January 1 during
the remainder of the installment period. Notwithstanding the foregoing,
actual distributions of all or part of the amount payable may be deferred
for a period not in excess of sixty (60) days following the distribution
date or any installment date, without the requirement to pay any interest or
other amount on account of the deferral.
(c) Amount Distributed
(1) Single Sum Distribution. If distribution is made to a
Participant in a single sum, the amount distributed shall be equal to
(i) the number of whole shares allocated to a Participant's Account
(and not paid in installments, if the Participant elects under subsection
(d) to divide his or her distribution between the single sum and installment
form of payment), or cash representing the value of all or a percentage of
the number of such shares, plus (ii) cash representing the value of any
fractional shares remaining, all determined as of the distribution date
specified in subsection (b).
(2) Installment Distribution. If distribution is made to a
Participant in installments, the amount distributed as of the distribution date
and each subsequent installment date shall be equal to the quotient
obtained, expressed as a number of whole and fractional shares, when the
number of whole shares then standing to the credit of his or her Account
(and not paid in a single sum, if the Participant elects under subsection
(d) to divide his or her distribution between the single sum and installment
form of payment) is divided by the number of installments remaining to be
paid. The fifth (5th) installment also shall include any additional unpaid
amount. Distribution shall be made in (i) shares, or cash representing the
value of all or a percentage of the number of such shares, plus (ii) cash
representing the value of any fractional shares remaining, all determined as
of the applicable distribution or installment date.
(d) Form of Payment. Distribution shall be made in a single sum
or in installments payable for a five (5) year period, or partly in the form
of a single sum and partly in the form of installments, as specified in the
Payment Election form. Prior to becoming a Participant (or at such time
specified in Section 6(b), in the case of any Director who becomes a
Participant on a date other than a January 1), each Participant shall submit
a Payment Election form. Once made, no change in that election will be
effective with respect to a distribution made on account of retirement
unless it is made at least twelve (12) months before distribution begins.
(e) Stock or Cash. Distribution shall be made in shares of Stock
(plus cash representing the value of any fractional shares), in cash, or
partly in the form of shares and partly in the form of cash, as specified in
the Payment Election form. Prior to becoming a Participant (or at such time
specified in Section 6(b), in the case of
<PAGE>
any Director who becomes a
Participant on a date other than a January 1), each Participant shall submit
a Payment Election form. Once made, the election of Stock or cash shall be
irrevocable.
(f) Distributions Attributable to Initial Partial Year Elections.
Notwithstanding any other provision of this Plan or a Participant's Payment
Election, amounts attributable to a Participant's Optional
Deferral Election under Section 6(b)(i) or (ii) hereof shall be distributed
in cash as of the distribution date specified in subsection (b) hereof. In
construing the foregoing provisions of this Section 8 and a Participant's
Payment Election, such amounts shall be subtracted from the amounts otherwise
distributable.
9. NONALIENATION
A Participant's rights to benefit payments under the Plan are not
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Participant, the Participant's Designated Beneficiary or the Participant's
estate.
10. AMENDMENT AND TERMINATION
(a) General. Subject to Section 12 hereof, this Plan may be
altered, amended, suspended, or terminated at any time, in any manner and for
any reason by the Board of Directors of the Corporation; provided, however,
that no alteration, amendment, suspension, termination or similar action
shall decrease the number of shares of Stock credited to a Participant's
Account or adversely affect a Participant's rights appurtenant to such
shares, in both cases determined as of the earlier of the date the amendment
is adopted or made effective.
(b) Securities Law Restrictions. To the extent prescribed by
16b-3 Rules, Plan provisions concerning the conditions under which Directors
are eligible to participate herein, and the amount, price and timing of
awards under the Plan, including mandatory deferrals and matching
contributions, may not be amended more than once every six months, other
than to comport with changes in the Internal Revenue Code.
11. ADMINISTRATION
(a) General. The Plan shall be administered by the Compensation
Committee of the Board of Directors, and any question regarding the proper
administration of the Plan or the construction of any term hereof shall be
resolved by it, in its sole discretion.
(b) Agents. Notwithstanding the foregoing, the Compensation
Committee may delegate the performance of such functions as are necessary or
appropriate for it to properly administer and construe the Plan to agents
including, but not limited to, appropriate officers of the Corporation. In
addition, the Compensation Committee (directly or through its agents) may
retain attorneys, accountants and such other experts as are necessary or
appropriate to properly administer and construe the Plan.
(c) Expenses. All expenses associated with the establishment,
maintenance and termination of this Plan shall be borne by the Company.
12. MISCELLANEOUS
(a) Shareholder Approval. The effectiveness of this Plan and of
any amendment hereto is subject to shareholder approval, to the extent
required by, and in accordance with, 16b-3 Rules.
<PAGE>
(b) Recordkeeping and Benefit Statements. Accurate and detailed
records of all transactions under this Plan shall be kept by the Corpora-
tion. Within ninety (90) days following the close of each Plan Year during
which an individual is a Participant, the Corporation shall issue to the
Participant a statement showing the amounts allocated to the subaccounts
within that Participant's Account as of the close of such Plan Year, the
percentage vested, and other appropriate information.
(c) Value of Shares. When, for allocation, distribution or any
other purpose, it is necessary to determine the value of shares of Stock as
of a particular date, the closing price on the New York Stock Exchange as of
that date (or as of the last date that the shares were actively traded)
shall be used.
(d) Effectiveness of Elections, Other Notices. To be effective,
any election by a Participant hereunder must be completed in full, signed by
the Participant and submitted to the Secretary. Any election or other notice
hereunder shall be effective when delivery occurs, if hand delivered, or
when properly postmarked, if mailed.
(e) Severability. Any provision of this Plan prohibited by law
shall be ineffective to the extent of any such prohibition, without invali-
dating the remaining provisions thereof.
(f) Governing Law. This Plan shall be governed by and construed
in accordance with the laws of the State of Maryland other than the
conflicts of laws rules thereof.
[Approved by the Board of Directors on June 21, 1993 and by the
Stockholders on August 23, 1993]
<PAGE>
PHH CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
1. PREAMBLE
This Executive Deferred Compensation Plan enables designated executives of
the Corporation to defer voluntarily the receipt of compensation until
retirement or other termination of employment. It also enables any such
designated executive who is limited under the terms of the PHH Corporation
Employee Investment Plan from contributing the maximum salary deferral
contributions permissible under section 402(g) of the Internal Revenue Code
to receive a credit hereunder equal to any matching contributions that the
Corporation would have contributed to the Employee Investment Plan for the
account of such executive, but for such limitation.
The Plan is unfunded and is maintained by the Corporation primarily for the
purpose of providing deferred compensation for a select group of highly
compensated employees. As such, the Plan is exempt from Part 2
(participation and funding), Part 3 (funding) and Part 4 (fiduciary
responsibility) of the Employee Retirement Income Security Act of 1974 and
is subject to limited reporting and disclosure rules under Part 1 of such
Act.
2. DEFINITIONS
The following terms shall have the following meanings, unless a different
meaning is plainly required by the context:
(a) "Account" means the bookkeeping account established with
respect to a Participant pursuant to Section 6.
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Committee" means the Compensation Committee of the Board
of Directors.
(d) "Compensation" means, for any Plan Year, the aggregate of a
Participant's salary earned and payable in that Year and awards payable
under any of the Corporation's incentive plans in that Year, but only to the
extent such salary and awards are payable in cash.
(e) "Corporation" means PHH Corporation and any successor
thereto. Any reference to a Participant's employment with the Corporation
shall be deemed to refer to the Participant's employment with PHH
Corporation or any of its subsidiaries or affiliates.
<PAGE>
(f) "Designated Beneficiary(ies)" means that person or persons
(including individuals, trusts or the estate of the Participant) designated
on the Beneficiary Designation Election form attached hereto as Exhibit A to
receive benefits hereunder in the event of a Participant's death. Exhibit A
and each election made on Exhibit A shall be an integral part of this Plan.
(g) "Effective Date" means the Effective Date of the Plan,
which shall be March 1, 1994. The effective date of any amendment to the
Plan shall be such date as is specified in the amendment.
(h) "Employee Investment Plan" means the PHH Corporation
Employee Investment Plan, as amended from time to time.
(i) "ERISA" means the Employee Retirement Income Security Act
of 1974.
(j) "Investment Funds" means such mutual fund or funds as may
from time to time be available under the Employee
Investment Plan; provided, however, that the P H H
Stock Fund shall not be an Investment Fund under this Plan.
(k) "Optional Deferral Election" means an election made by a
Participant pursuant to Section 4 to reduce a portion of his or her
Compensation and have an equivalent amount deferred under this Plan. An
Optional Deferral Election shall be made substantially in the form attached
hereto as Exhibit B. Exhibit B and each election made on Exhibit B shall be
an integral part of this Plan.
(l) "Participant" means an executive of the Corporation who
participates in this Plan.
(m) "Payment Election" means an election made by a Participant
pursuant to Section 7 wherein he or she elects when benefits shall be
payable and whether they shall be payable in the form of a single sum or
installments. A Payment Election shall be made substantially in the form
attached hereto as Exhibit C. Exhibit C and each election made on Exhibit C
shall be an integral part of this Plan.
(n) "Plan" means this Executive Deferred Compensation Plan, as
it may be amended from time to time.
(o) "Plan Year" means the calendar year.
(p) " Secretary" means the person holding the office of
secretary of the Corporation.
2
<PAGE>
3. PARTICIPATION
(a) Commencement. The Participants in the Plan as of the
Effective Date shall be those executives designated in
Appendix A attached hereto. From time to time, and in its
sole discretion, the Committee may amend Appendix A to add
or delete executives, effective as of such date as is
specified by the Committee; provided that the addition of
any executive of the Corporation does not cause the Plan to
fail to be a "top hat" plan, as that term is defined under
ERISA.
(b) Termination. Deferral of compensation under the Plan may
continue as to any participant until the earliest of any of
the following: (i) he or she terminates his or her
Optional Deferral Election pursuant to the terms hereof, in
which event such deferral shall terminate effective at the
end of the Plan Year in which the termination notice is
received; (ii) the Committee amends Appendix A to eliminate
the Participant; or (iii) the date the Participant ceases
to be an active employee of the Corporation. Termination
of deferrals under this Section 3(b) shall create no right
to distribution unless otherwise provided under this Plan.
4. OPTIONAL DEFERRALS
(a) General Rule. In accordance with such Optional Deferral
Election form(s) as approved by Committee, and subject to such limitations
as the Committee may impose with respect to any Participant, a Participant
may make an Optional Deferral Election with respect to all or any portion of
his or her Compensation for the Plan Year or partial Plan Year to which the
Optional Deferral Election relates. Optional deferrals shall be credited to
the Participant's Account as of each date Compensation subject to an
Optional Deferral Election otherwise would be payable. A Participant shall
be 100 percent vested in the portion of his or her Account attributable to
optional deferrals at all times.
(b) Time of Optional Deferral Election. To be effective for
any Plan Year, an Optional Deferral Election form to defer Compensation must
be received by the Committee prior to January 1 of the Plan Year to which it
relates. However, if an individual becomes a Participant on or after the
Effective Date and on a date other than January 1, the individual may submit
an Optional Deferral Election form for the remainder of the Plan Year in
which he or she becomes a Participant if the form is submitted within thirty
(30) days after becoming a Participant; provided, however, that the Optional
Deferral Election shall apply only to Compensation relating to the period
following the date the Optional Deferral Election is submitted.
(c) Optional Deferral Election Irrevocable. Once submitted, an
Optional Deferral Election is irrevocable for the Plan Year to which it
applies. 3
<PAGE>
(d) Continuing Effectiveness of Optional Deferral Elections.
Once submitted, a Participant's Optional Deferral Election shall continue in
effect for subsequent Plan Years unless the Participant submits a new
Optional Deferral Election form in accordance with the terms of this Plan
and such administrative rules and policy as the Committee shall establish,
or unless, pursuant to Section 3(b) hereof, the Participant is no longer
permitted to defer. Notwithstanding the above, and subject to such
administrative rules as are established by the Committee, a Participant may
change the apportionment of his or her Optional Deferral Election among the
Investment Funds.
5. MATCHING CONTRIBUTIONS RELATING TO EMPLOYEE INVESTMENT PLAN
(a) General Rule. For any Plan Year in which a Participant is
limited under the terms of the Employee Investment Plan from contributing
the maximum salary deferral contributions permissible under section 402(g)
of the Internal Revenue Code, a Participant shall have credited to his
Account the amount of any matching contributions the Corporation would have
credited to the Participant's account under the Employee Investment Plan but
for such limitation; provided that the Participant has made to the Plan an
optional deferral in the amount to be matched. Matching contributions shall
be credited to a Participant's Account as of the dates they would have been
credited under the Employee Investment Plan. This provision shall not
affect any limitations on benefits imposed by sections 401(a)(17) and 415 of
the Internal Revenue Code.
The following example illustrates the effect of this
Section: Assume the Corporation meets its Employee Investment Plan profit
targets and makes, under the Employee Investment Plan, a 100% Matching
Contribution on the first 3% of deferrals and 100% Matching Contribution on
the second 3% of deferrals so that all deferrals under the Employee
Investment Plan up to 6% are matched. Assume further that the Participant
has Compensation in excess of the Internal Revenue Code Section 401(a)(17)
limits ($150,000 as indexed). If the Participant contributes the maximum
amount (6%) permitted to be deferred under the Employee Investment Plan,
$9,000 of his deferrals ($150,000 x 6%) would be subject to the base and
profit share Matching Contributions under the Employee Investment Plan. If
the Participant had been limited to contributing 5% under the Employee
Investment Plan ($7,500), the base Matching Contribution would be $4,500 and
the profit share Matching Contribution would be $3,000, for a total Matching
Contribution under the Employee Investment Plan of $7,500. If the
Participant had contributed the excluded 1% or $1,500 ($9,000 match limit
minus the $7,500 limit imposed by the Corporation under the Employee
Investment Plan) under this Plan, a match of $1,500
4
<PAGE>
($9,000 Matching Contribution at 6% less the $7,500 Matching Contribution
made under the Employee Investment Plan) would be made to the Participant's
Account under this Plan.
(b) Vesting. A Participant shall become vested in the portion
of his or her Account attributable to matching contributions in accordance
with the vesting schedule applicable to Company Accounts under the Employee
Investment Plan; provided that such matching contributions are subject to
forfeiture under the events set forth in Section 10 hereof.
6. ACCOUNTS
(a) General. An Account shall be established in the name of
each Participant. Within each Account, there shall be two sub-accounts, one
reflecting a Participant's interests attributable to optional deferrals made
pursuant to Section 4, and the other reflecting a Participant's interests
attributable to matching contributions made pursuant to Section 5.
(b) Hypothetical Investment. For purposes of determining the
value of a Participant's Account, it shall be assumed that: (i) optional
deferrals credited to the Participant's Account under Section 4 are invested
in the Investment Funds in accordance with the Participant's instructions as
set forth in the election form approved by the Committee; and (ii) matching
contributions under Section 5 are invested in the money market Investment
Fund or in such other Investment Fund as the Committee shall determine. The
Participant's Account shall be credited on a daily basis with the investment
gain or loss that would have been credited to his or her account under the
Employee Investment Plan, had the amounts credited to the Participant's
Account instead been contributed to the Employee Investment Plan.
(c) Value of Account. Whenever it is necessary to determine
the value of a Participant's Account, the value as of the day immediately
preceding the date the determination is being made shall be used.
(d) Bookkeeping Account Only. The Account established in a
Participant's name is for bookkeeping purposes only. It is the intention of
the parties that the Plan and any trust hereunder, and any Account, be
unfunded for purposes of the Internal Revenue Code and the Employee
Retirement Income Security Act of 1974 and that benefits shall be paid
solely from the general assets of the Corporation.
5
<PAGE>
(e) Unsecured Creditors. Participants in this Plan have the
status of unsecured creditors of the Corporation, and the Plan constitutes a
mere unsecured promise by the Corporation to make benefit payments in the
future.
(f) Trust or Other Vehicles. Notwithstanding the foregoing, to
assist it in meeting its obligations hereunder, the Corporation may
establish a grantor trust or custodial account, purchase one or more
insurance policies, or use any other vehicle that it deems appropriate for
such purpose; provided, however, that no such vehicle shall be for the
benefit of, or cause amounts to be set aside for the benefit of, any one or
group of Participants.
7. DISTRIBUTIONS
(a) Distributable Event. Subject to subsection (b), a
Participant (or his Designated Beneficiary(ies)) shall become entitled to a
distribution under the Plan upon the date the Participant ceases employment
with the Corporation for any reason; provided that the Committee may, in its
sole discretion, defer payment of such distribution until any date up to the
later of (i) such time as the Participant ceases to be subject to any
reporting requirements as to his or her compensation under the Securities
Exchange Act of 1934, or (ii) such time as the Participant ceases to be
classified as an executive officer, the deductibility of whose compensation
by the Corporation is limited under Section 162(m) of the Internal Revenue
Code.
(b) Commencement of Distribution. Distribution to a
Participant of his or her vested interest shall be made or commence as of
such date specified in the last Payment Election form submitted by the
Participant; provided, however, that no change in a Payment Election will be
effective unless it has been made at least twelve (12) months before
distribution would have been made or begun in the absence of the change.
Notwithstanding the foregoing, actual distributions of a Participant's lump
sum or initial installment payment may be deferred for a period not in
excess of sixty (60) days following the date a lump sum or initial
installment becomes payable, without the requirement to pay any interest or
other amount on account of the deferral.
(c) Form of Distribution. Distribution either may be made in a
lump sum or in monthly, quarterly or annual installments for a period of
time not to exceed ten (10) years, as specified in the last Payment Election
form submitted by the Participant; provided, however, that no change in a
Payment Election will be effective unless it has been made at least twelve
(12) months before distribution would have been made or begun in the absence
of such a change. If distributions are made in installments, investment
gain and loss shall continue to be credited in accordance with
6
<PAGE>
Section 6(b) hereof until complete distribution has been made. All
distributions shall be made in cash.
(d) Death. If a Participant dies before receiving 100 percent
of his or her vested interest, the unpaid balance of the Participant's
Account shall become 100 percent vested and shall be paid as soon as
practicable after death to the Participant's Designated Beneficiary(ies) in
the form (lump sum or installments) as specified in the last Payment
Election Form submitted by the Participant; provided that no change in a
Payment Election will be effective unless made at least twelve (12) months
before the Participant's death.
(e) Emergency Distributions. If the Committee, in its sole
discretion, determines that a Participant has incurred an unforeseeable
emergency that would result in severe financial hardship to the Participant
if a distribution from the Plan were not made, the Committee may distribute
to the Participant such portion of the Participant's Account as it, in its
sole discretion, determines is necessary to meet the emergency.
(f) Acceleration because of Taxable Event. If the Committee,
in its sole discretion, determines that a Participant has become subject to
income tax on all or any portion of his Account, the taxable portion shall
be distributed to the Participant.
8. CLAIMS PROCEDURE
(a) I n i t i a l Claim. If a Participant or Designated
Beneficiary(ies) (hereinafter referred to as a "Claimant") is denied all or
a portion of an expected benefit under this Plan for any reason, he or she
may file a claim with the Committee. The Committee shall review the claim
itself or appoint a person to review the claim. The Claimant shall be
notified within sixty (60) days after his or her claim is filed whether the
claim is allowed or denied, unless the Claimant receives written notice
prior to the end of the sixty (60) day period stating that special
circumstances require an extension of the time for decision. The notice of
the decision shall be in writing, sent by mail to the Claimant's last known
address, and, if a denial of the claim, shall contain the following
information:
(1) the specific reasons for the denial;
(2) specific reference to pertinent provisions of
the Plan on which the denial is based; and
7
<PAGE>
(3) if applicable, a
description of any additional information or
material necessary to perfect the claim, an
explanation of why such information or material is
necessary, and an explanation of the claims review
procedure.
(b) Review Procedure. A Claimant is entitled to request a
review by the Committee of any denial of the Claimant's claim. The request
for review must be submitted to the Committee in writing within sixty (60)
days of mailing of notice of the denial. Absent a request for review within
the sixty (60) day period, the claim will be deemed to be conclusively
denied. The review of a denial of a claim shall be conducted by the
Committee or an individual or entity appointed by the Committee. The
reviewer shall afford the Claimant an opportunity to review all pertinent
documents and submit issues and comments in writing and shall render a
review decision in writing, all within sixty (60) days after receipt of a
request for a review, provided that, unless prohibited by law, the reviewer
may extend the time for decision by not more than sixty (60) days upon
written notice to the Claimant. The Claimant shall receive written notice
of the reviewer's decision, together with specific reasons for the decision
and reference to the pertinent provisions of the Plan.
9. CLAIMS AGAINST ACCOUNT
A Participant's rights to benefit payments under the Plan are not subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant, the
Participant's Designated Beneficiary(ies) or the Participant's estate.
Nothing contained in this Plan shall give any Participant or beneficiary any
interest, lien or claim against any specific assets of the Corporation. No
Participant or beneficiary shall have any rights other than as a general
creditor of the Corporation.
10. FORFEITURE OF RIGHT TO MATCHING CONTRIBUTIONS
Notwithstanding any other provision of this Plan, and at the sole and
absolute discretion of the Board of Directors of the Corporation, a
Participant will forfeit all right to receive matching contributions
credited to his Account pursuant to Section 5 hereof and all investment gain
thereon and will be immediately obligated to return to the Corporation the
amount of any such matching contributions previously distributed to the
Participant or other beneficiary if (a) such Participant, within a period of
two years from the date his or her employment with the Corporation or its
affiliates terminates, directly or indirectly, either individually or as
owner, partner, agent, employee, consultant or otherwise, except for the
account of and on behalf of the Corporation or an affiliate of the
Corporation, engages in any activity competitive with the business of the
Corporation or an affiliate of the Corporation, or in competition with the
Corporation or one of its affiliates, solicits or otherwise attempts to
establish for himself or herself or for any other person, firm or entity,
any business relationships with any person, firm or corporation which was,
at the time the Participant's employment terminates or within one year prior
thereto, a customer
8
<PAGE>
of the Corporation or one of its affiliates or (b) a
Participant's employment is terminated because of willful misconduct or
gross negligence in the performance of his or her duties and the Committee
determines in its sole and absolute discretion that such matching
contributions shall be forfeited.
If Participant is determined by the Board of Directors, in its sole and
absolute discretion, to have committed or threatened to commit an act set
forth above, the Participant, by his or her participation herein,
acknowledges that such act will cause irreparable injury to the Corporation
and that money damages alone will not provide an adequate remedy to the
Corporation, and the Board of Directors may, in its sole and absolute
discretion, determine that the Corporation is entitled to an injunction
against such act and direct the appropriate representatives of the
Corporation to seek such an injunction.
1. ADMINISTRATION
(a) General. The Plan shall be administered by the Committee,
and any question regarding the proper administration of the Plan or the
construction of any term hereof shall be resolved by it, in its sole
discretion. The Committee shall act by a majority of its members then in
office, except that the members thereof may authorize any one or more of
their number or any officer of the Corporation to execute and deliver
documents on behalf of the Committee or otherwise to perform the duties of
the Committee.
(b) Agents. The Committee may delegate the performance of such
functions as are necessary or appropriate for it to properly administer and
construe the Plan to agents including, but not limited to, appropriate
officers of the Corporation or any subcommittee of the Committee. In
addition, the Committee (directly, or through its agents) may retain
attorneys, accountants, and such other experts as are necessary or
appropriate to properly administer and construe the Plan.
(c) Liability. To the extent permitted by law, neither the
Committee, nor any other person performing duties under this Plan, shall
incur any liability for any act done, determination made or failure to act,
if in good faith, and the Corporation shall indemnify the Committee, its
members and such other persons against any and all liability that is
incurred as a result of the good faith performance or non-performance of
their duties hereunder. The Corporation may, but shall not be obligated to,
purchase liability insurance to protect such persons with respect to their
duties under the Plan.
(d) Expenses. The Corporation shall pay all expenses
associated with the establishment, maintenance and termination of this Plan.
9
<PAGE>
12. AMENDMENT AND TERMINATION
The Board of Directors may amend, suspend or terminate this Plan at any
time, in any manner and for any reason; provided, however, that no
alteration, amendment, suspension, termination or similar action shall
reduce or impair the rights of a Participant accrued prior to such action.
To the extent permitted by law, the Board of Directors, in its discretion,
may delegate all or any of its authority under this Section 12 to the
Committee.
13. MISCELLANEOUS
(a) Recordkeeping and Benefit Statements. The Corporation
shall keep accurate and detailed records of all transactions under this
Plan. Within 60 days following the close of each quarter of Plan Year
during which an individual is a Participant, the Corporation shall issue to
the Participant a statement showing the amounts allocated to the sub
accounts within that Participant's Account as of the close of such quarter
of the Plan Year, the percentage vested, and other appropriate information.
(b) Effectiveness of Optional Deferral Elections, Other
Notices. Any Optional Deferral Election by a Participant under this Plan
must either be completed in full, signed by the Participant and received by
the Secretary or be made by telephonic instructions from the Participant to
the extent permitted under such administrative rules or policy as shall be
established by the Committee.
(c) Limitation of Rights. Nothing contained in this Plan shall
be construed to limit in any way the right of the Corporation to terminate a
Participant's employment at any time, or be evidence of any agreement or
understanding, express or implied, that a Participant will be employed in a
particular position or at any particular rate of remuneration.
(d) Severability. Any provision of this Plan prohibited by law
shall be ineffective to the extent of any such prohibition, without
invalidating the Plan's remaining provisions.
(d) Applicable State Law. To the extent not preempted by the
Employee Retirement Income Security Act of 1974, this Plan shall be governed
by, and construed in accordance with, the laws of the State of Maryland
other than the conflicts of laws rules thereof.
(e) Construction. This Plan shall be construed and
administered as an unfunded plan maintained primarily for the purpose of
providing deferred compensation to a select group of management or highly
compensated employees, as those terms are used in the Employee Retirement
Income Security Act of 1974.
[Approved by the Board of Directors on February 28, 1994]
10
<PAGE>
TRUST AGREEMENT
Between
______________________________________________
PHH CORPORATION
And
FIDELITY MANAGEMENT TRUST COMPANY
______________________________________________
PHH CORPORATION EXECUTIVE
DEFERRED COMPENSATION PLAN TRUST
Dated as of February 28, 1994
<PAGE>
TABLE OF CONTENTS
Section Page
1 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Establishment
(b) Grantor Trust
(c) Trust Assets
(d) Non-Assignment
(e) Change in Control
2 Payments to Sponsor . . . . . . . . . . . . . . . . . . . . . . . . 3
3 Disbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Directions from Administrator
(b) Limitations
4 Investment of Trust . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Selection of Investment Options
(b) Available Investment Options
(c) Investment Directions
(d) Mutual Funds
(e) Trustee Responsibility and Powers
5 Recordkeeping and Administrative Services to Be Performed... . . . . 7
(a) General
(b) Accounts
(c) Inspection and Audit
(d) Effect of Plan Amendment
(e) Returns, Reports and Information
6 Compensation and Expenses . . . . . . . . . . . . . . . . . . . . . 8
7 Directions and Indemnification . . . . . . . . . . . . . . . . . . . 9
(a) Identity of Administrator
(b) Directions from Administrator
(c) Directions from Participants
(d) Indemnification
(e) Survival
8 Resignation or Removal of Trustee . . . . . . . . . . . . . . . . 10
(a) Resignation
(b) Removal
(c) Upon a Change of Control
(d) Transfer of Trust Assets
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TABLE OF CONTENTS
(Continued)
Section Page
9 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . .11
(a) Appointment
(b) Acceptance
(c) Corporate Action
10 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11 Resignation, Removal, and Termination Notices . . . . . . . . . . .12
12 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
13 Insolvency of Sponsor . . . . . . . . . . . . . . . . . . . . . . .12
14 Amendment or Modification . . . . . . . . . . . . . . . . . . . . .13
15 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
(a) Performance by Trustee, its Agent or Affiliates
(b) Entire Agreement
(c) Waiver
(d) Successors and Assigns
(e) Partial Invalidity
(f) Section Headings
16 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . .15
(a) Massachusetts Controls
(b) Trust Agreement Controls
Schedules
A. Recordkeeping and Administrative Services
B. Fee Schedule
C. Administrator's Authorization Letter
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TRUST AGREEMENT, dated as of the 28th day of February, 1994, between
PHH Corporation, a Maryland corporation, having an office at 11333 McCormick
Road, Hunt Valley, Maryland 21031 (the "Sponsor"), and FIDELITY MANAGEMENT
TRUST COMPANY, a Massachusetts trust company, having an office at 82
Devonshire Street, Boston, Massachusetts 02109 (the "Trustee").
WITNESSETH:
WHEREAS, the Sponsor is the sponsor of the PHH Corporation Executive
Deferred Compensation Plan (the "Plan"); and
WHEREAS, the Sponsor wishes to establish an irrevocable trust and to
contribute to the trust assets that shall be held therein, subject to the
claims of Sponsor's creditors in the event of Sponsor's Insolvency, as
herein defined, until paid to Plan participants and their beneficiaries in
such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Plan as an unfunded nonqualified plan maintained for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees for purposes of Title I of the Employee Retirement
Income Security Act of 1974 ("ERISA"); and
WHEREAS, it is the intention of the Sponsor to make contributions to
the trust to provide itself with a source of funds to assist it in the
meeting of its liabilities under the Plan; and
WHEREAS, the Trustee is willing to hold and invest the aforesaid plan
assets in trust among several investment options selected by the Sponsor to
be allocated in a manner selected by the Sponsor; and
WHEREAS, the Sponsor wishes to have the Trustee perform certain
ministerial recordkeeping and administrative functions under the Plan; and
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WHEREAS, the Compensation Committee of the Sponsor's Board of
Directors (the "Administrator") is the administrator of the Plan; and
WHEREAS, the Trustee is willing to perform recordkeeping and
administrative services for the Plan if the services are purely ministerial
in nature and are provided within a framework of plan provisions, guidelines
and interpretations conveyed in writing to the Trustee by the Administrator.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth below, the Sponsor and the Trustee
agree as follows:
Section 1. Trust.
(a) Establishment. The Sponsor hereby establishes the PHH
Corporation Executive Deferred Compensation Plan Trust (the "Trust"), with
the Trustee. The Trust shall consist of an initial contribution of money or
other property acceptable to the Trustee in its sole discretion, made by the
Sponsor or transferred from a previous trustee under the Plan, such
additional sums of money as shall from time to time be delivered to the
Trustee under the Plan, all investments made therewith and proceeds thereof,
and all earnings and profits thereon, less the payments that are made by the
Trustee as provided herein, without distinction between principal and
income. The Trustee hereby accepts the Trust on the terms and conditions
set forth in this Agreement. In accepting this Trust, the Trustee shall be
accountable for the assets received by it, subject to the terms and
conditions of this Agreement.
(b) Grantor Trust. The Trust is intended to be a grantor
trust, of which the Sponsor is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended, and shall be construed accordingly.
The Sponsor shall make irrevocable deposits of cash or
other property with the Trustee equal to deferrals under the Plan, and to
the Sponsor matching contributions under the Plan, as of such dates as made
to participant's accounts under the terms of the Plan. If there is a
forfeiture of any portion of a participant's account pursuant to the Plan,
the Sponsor may offset subsequent deposits to the extent of assets of the
Trust attributable to such forfeiture.
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(c) Trust Assets. The principal of the Trust, and any
earnings thereon shall be held separate and apart from other funds of the
Sponsor and shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan participants
and their beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created under
the Plan and this Trust Agreement shall be mere unsecured contractual rights
of Plan participants and their beneficiaries against the Sponsor. Any
assets held by the Trust will be subject to the claims of the Sponsor's
general creditors under federal and state law in the event of Insolvency, as
defined in Section 13(a).
(d) Non-Assignment. Benefit payments to Plan participants and
their beneficiaries funded under this Trust may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered, or subjected
to attachment, garnishment, levy, execution, or other legal or equitable
process.
(e) Change in Control. Upon a Change of Control, the Sponsor
shall, as soon as possible but in no event later than 15 days following the
Change of Control, as defined herein, make an irrevocable contribution to
the Trust in an amount that will be sufficient to the Trust to pay the
benefits to which Plan participants or their beneficiaries would be entitled
pursuant to the terms of the Plan, as of the date on which the Change of
Control occurred.
Section 2. Payments to Sponsor. Except as provided under Section 13, the
Sponsor shall have no right to retain or divert to others any of the Trust
assets before all payment of benefits have been made to the participants and
their beneficiaries pursuant to the terms of the Plan.
Section 3. Disbursements.
(a) Directions from Administrator. The Trustee shall disburse
monies to the Sponsor for benefit payments in the amounts that the
Administrator directs from time to time in writing. The Trustee shall have
no responsibility to ascertain any direction's compliance with the terms of
the Plan or of any applicable law. The Trustee shall not be responsible for
making benefit payments to participants under the Plan, nor shall the
Trustee be responsible for any Federal, State or local income tax reporting
or withholding with respect to such Plan benefits.
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(b) Limitations. The Trustee shall not be required to make
any disbursement in excess of the net realizable value of the assets of the
Trust at the time of the disbursement. The Trustee shall not be required to
make any disbursement in cash unless the Administrator has provided a
written direction as to the assets to be converted to cash for the purpose
of making the disbursement. Except as provided either in Section 13 hereof
(with respect to Insolvency of the Sponsor) or as provided in the Plan (with
respect to forfeiture of Sponsor matching contributions), and except as
necessary to satisfy the employee portion of FICA taxes due, the Sponsor
shall have no right or power to direct the Trustee to return to the Sponsor
or divert to others any of the Trust assets before all payment of benefits
have been made to Plan participants or their beneficiaries pursuant to the
terms of the Plan.
Section 4. Investment of Trust.
(a) Selection of Investment Options. The Trustee shall have
no responsibility for the selection of investment options under the Trust
and shall not render investment advice to any person in connection with the
selection of such options.
(b) Available Investment Options. The Sponsor shall initially
direct the Trustee as to the investment options in which Trust assets shall
be invested, subject to the following limitations. The Sponsor may
determine to use as investment options only securities issued by the
investment companies advised by Fidelity Management & Research Company
("Mutual Funds") identified on Schedules "A" attached hereto; provided,
however, that the Trustee shall not be considered a fiduciary with
investment discretion. The Sponsor may add or delete investment options
upon mutual amendment of this Trust Agreement and the Schedule "A" thereto
to reflect such addition(s) or deletion(s).
(c) Investment Directions. In order to provide for an
accumulation of assets comparable to the contractual liabilities accruing
under the Plan, the Sponsor may direct the Trustee in writing how to invest
the assets held in the Trust. In accordance with the above, directions may
be provided directly by Plan participants with respect for their own account
under the Trust by use of the telephone exchange system maintained for such
purposes by the Trustee or its agent. In the event that the Trustee fails
to receive a proper direction from the Sponsor or
4
<PAGE>
from Participants, the
assets in question shall be invested in Fidelity Retirement Money Market
Fund until the Trustee receives a proper direction.
(d) Mutual Funds. The Sponsor hereby acknowledges that it has
received from the Trustee a copy of the prospectus for each Mutual Fund
selected by the Sponsor as a Plan investment option. Trust investments in
Mutual Funds shall be subject to the following limitations:
(i) Execution of Purchases and Sales. Purchases and
sales of Mutual Funds (other than for Exchanges) shall be made on the date
on which the Trustee receives from the Sponsor in good order all information
and documentation necessary to accurately effect such purchases and sales
(or in the case of a purchase, the subsequent date on which the Trustee has
received a wire transfer of funds necessary to make such purchase).
Exchanges of Mutual Funds shall be made on the same business day that the
Trustee receives a proper direction if received before 4:00 p.m. eastern
time; if the direction is received after 4:00 p.m. eastern time, the
exchange shall be made the following day.
(ii) Voting. At the time of mailing of notice of each
annual or special stockholders' meeting of any Mutual Fund, the Trustee
shall send a copy of the notice and all proxy solicitation materials to each
Plan participant who has shares of the Mutual Fund credited to the
participant's accounts under the Trust, together with a voting direction
form for return to the Trustee or its designee. The participant shall have
the right to direct the Trustee as to the manner in which the Trustee is to
vote the shares credited to the participant's accounts (both vested and
unvested). The Trustee shall vote the shares as directed by the
participant. The Trustee shall not vote shares for which it has received no
directions from the participant. With respect to all rights other than the
right to vote, the Trustee shall follow the directions of the participant
and if no such directions are received, the directions of the Sponsor. The
Trustee shall have no additional duty to solicit directions from
participants or the Sponsor.
(e) Trustee Responsibility and Powers. The Trustee shall act
with the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent person acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character
and with like aims. The Trustee shall have the following powers and
authority:
5
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(i) Subject to paragraphs (b), (c) and (d) of this
Section 4, to sell, exchange, convey, transfer, or otherwise dispose of any
property held in the Trust, by private contract or at public auction. No
person dealing with the Trustee shall be bound to see to the application of
the purchase money or other property delivered to the Trustee or to inquire
into the validity, expediency, or propriety of any such sale or other
disposition.
(ii) To cause any securities or other property held as
part of the Trust to be registered in the Trustee's own name, in the name of
one or more of its nominees, or in the Trustee's account with the Depository
Trust Company of New York and to hold any investments in bearer form, but
the books and records of the Trustee shall at all times show that all such
investments are part of the Trust.
(iii) To keep that
portion of the Trust in cash or cash balances as the Sponsor or
Administrator may, from time to time, deem to be in the best interest of the
Trust.
(iv) To make, execute, acknowledge, and deliver any and
all documents of transfer or conveyance and to carry out the powers herein
granted.
(v) To settle, compromise, or submit to arbitration any
claims, debts, or damages due to or arising from the Trust; to commence or
defend suits or legal or administrative proceedings; to represent the Trust
in all suits and legal and administrative hearings; and to pay all
reasonable expenses arising from any such action, from the Trust if not paid
by the Sponsor.
(vi) To employ legal, accounting, clerical, and other
assistance as may be required in carrying out the provisions of this
Agreement and to pay their reasonable expenses and compensation from the
Trust if not paid by the Sponsor.
(vii) To do all other acts although not specifically
mentioned herein, as the Trustee may deem necessary to carry out any of the
foregoing powers and the purposes of the Trust.
6
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Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing
the gains therefrom, within the meaning of Section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to the
Internal Revenue Code. The Sponsor shall provide the Trustee with an
opinion of counsel whether an annual fiduciary tax return should be filed
for the Trust; in the absence of such opinion, Trustee may consult with
counsel to the extent it deems appropriate on this issue, and any resulting
counsel fees shall be charged to the Trust to the extent not paid by the
Sponsor.
Section 5. Recordkeeping and Administrative Services to Be Performed.
(a) General. The Trustee shall perform those recordkeeping
and administrative functions described in Schedule "A" attached hereto.
These recordkeeping and administrative functions shall be performed within
the framework of the Administrator's written directions regarding the Plan's
provisions, guidelines and interpretations.
(b) Accounts. The Trustee shall keep accurate accounts of all
investments, receipts, disbursements, and other transactions hereunder, and
shall report the value of the assets held for the account of each
participant in the Trust as of the last day of each calendar quarter of the
Plan and, if not on the last day of a calendar quarter, the date on which
the Trustee resigns or is removed as provided in Section 8 of this Agreement
or is terminated as provided in Section 10 (the "Reporting Date"). Within
thirty (30) days following each Reporting Date or within sixty (60) days in
the case of a Reporting Date caused by the resignation or removal of the
Trustee, or the termination of this Agreement, the Trustee shall file with
the Administrator a written account setting forth all investments, receipts,
disbursements, and other transactions effected by the Trustee between the
Reporting Date and the prior Reporting Date, and setting forth the value of
the Trust as of the Reporting Date. Except as otherwise required under
applicable law, upon the expiration of one year from the date of filing such
account with the Administrator, the Trustee shall have no liability or
further accountability to anyone with respect to the propriety of its acts
or transactions shown in such account, except with respect to such acts or
transactions as to which the Sponsor shall within such one year period file
with the Trustee written objections, and except in the case of gross
negligence or willful misconduct of the Trustee.
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<PAGE>
(c) Inspection and Audit. All records generated by the
Trustee in accordance with paragraphs (a) and (b) shall be open to
inspection and audit, during the Trustee's regular business hours prior to
the termination of this Agreement, by the Administrator or any person
designated by the Administrator. Upon the resignation or removal of the
Trustee or the termination of this Agreement, the Trustee shall provide to
the Administrator, at no expense to the Sponsor, in the format regularly
provided to the Administrator, a statement of each participant's accounts as
of the resignation, removal, or termination, and the Trustee shall provide
to the Administrator or the Plan's new recordkeeper such further records as
are reasonable, at the Sponsor's expense.
(d) Effect of Plan Amendment. The Trustee's provision of the
recordkeeping and administrative services set forth in this Section 5 shall
be conditioned on the Sponsor delivering to the Trustee a copy of any
amendment to the Plan as soon as administratively feasible following the
amendment's adoption, and on the Administrator providing the Trustee on a
timely basis with all the information the Administrator deems necessary for
the Trustee to perform the recordkeeping and administrative services and
such other information as the Trustee may reasonably request.
(e) Returns, Reports and Information. The Administrator shall
be responsible for the preparation and filing of all returns, reports, and
information required of the Trust or Plan by law. The Trustee shall provide
the Administrator with such information as the Administrator may reasonably
request to make these filings. The Administrator shall also be responsible
for making any disclosures to participants required by law.
Section 6. Compensation and Expenses. Within thirty (30) days of receipt
of the Trustee's bill, which shall be computed and billed in accordance with
Schedule "B" attached hereto and made a part hereof, as amended from time to
time, the Sponsor shall send to the Trustee a payment in such amount or the
Sponsor may direct the Trustee to deduct such amount from participants'
accounts. All expenses of the Trustee relating directly to the acquisition
and disposition of investments constituting part of the Trust, and all taxes
of any kind whatsoever that may be levied or assessed under existing or
future laws upon or in respect of the Trust or the income thereof, shall be
a charge against and paid from the appropriate Plan participants' accounts.
8
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Section 7. Directions and Indemnification.
(a) Identity of Administrator. The Trustee shall be fully
protected in relying on the fact that the Administrator under the Plan is
the individual or persons named as such above or such other individuals or
persons as the Sponsor may notify the Trustee in writing. The Administrator
may from time to time delegate to others its authority to provide directions
to the Trustee hereunder, and the Trustee shall be fully protected in
relying upon directions by any such person provided that the Administrator
has informed the Trustee and Sponsor in writing of such delegation.
(b) Directions from Administrator. Whenever the Administrator
provides a direction to the Trustee, the Trustee shall not be liable for any
loss, or by reason of any breach, arising from the direction if the
direction is contained in a writing (or is oral and immediately confirmed in
a writing) signed by any individual whose name and signature have been
submitted (and not withdrawn) in writing to the Trustee by the Administrator
in the form attached hereto as Schedule "C", provided the Trustee reasonably
believes the signature of the individual to be genuine. Such direction may
be made via EDT in accordance with procedures agreed to by the Administrator
and the Trustee; provided, however, that the Trustee shall be fully
protected in relying on such direction as if it were a direction made in
writing by the Administrator. The Trustee shall have no responsibility to
ascertain any direction's (i) accuracy, (ii) compliance with the terms of
the Plan or any applicable law, or (iii) effect for tax purposes or
otherwise.
(c) Directions from Participants. The Trustee shall not be
liable for any loss which arises from any participant's exercise or non-
exercise of rights under this Section 4 over the assets in the participant's
accounts.
(d) Indemnification. The Sponsor shall indemnify the Trustee
against, and hold the Trustee harmless from, any and all loss, damage,
penalty, liability, cost, and expense, including without limitation,
reasonable attorneys' fees and disbursements, that may be incurred by,
imposed upon, or asserted against the Trustee by reason of any claim,
regulatory proceeding, or litigation arising from any act done or omitted to
be done by any individual or person with respect
9
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to the Plan or Trust,
excepting only any and all loss, etc., arising solely from the Trustee's
negligence or bad faith.
(e) Survival. The provisions of this Section 7 shall survive
the termination of this Agreement.
Section 8. Resignation or Removal of Trustee.
(a) Resignation. The Trustee may resign at any time upon
sixty (60) days' notice in writing to the Sponsor, unless a shorter period
of notice is agreed upon by the Sponsor.
(b) Removal. The Sponsor may remove the Trustee at any time
upon sixty (60) days' notice in writing to the Trustee, unless a shorter
period of notice is agreed upon by the Trustee.
(c) Upon a Change of Control. Upon a Change of Control, as
defined herein, the Trustee may not be removed by the Sponsor for a period
of one year unless seventy-five percent (75%) of the number of participants
in the Plan (or their surviving beneficiaries, as the case may be) consent
in writing to the removal of the Trustee and the identity of the successor
Trustee. If the Trustee resigns within one year following a Change of
Control, as defined herein, the choice of the successor Trustee shall be
subject to the condition that seventy-five percent (75%) of the number of
participants in the Plan (or their surviving beneficiaries, as the case may
be) consent in writing to the identity of the successor Trustee. The
purpose of these provisions is to ensure that, following a Change of
Control, the Trust continues to be administered for the purpose of providing
benefits to the participants and beneficiaries covered by the Plan.
For purposes of this Trust, the term "Change of Control"
shall mean the earlier to occur of either of the following events: (1) a
third person, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner of shares of
the Company having 20% or more of the total number of votes that may be cast
for the election of directors of the Sponsor, or (ii) as the result of, or
in connection with, any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election, or any
combination of the foregoing transactions (a "Transaction"), the persons who
were directors
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of the Sponsor before the Transaction cease to constitute a
majority of the Board of Directors of the Sponsor or any successor to the
Sponsor. Unless the Trustee has actual knowledge of a Change in Control,
the Trustee shall have no duty to inquire whether a Change in Control has
occurred unless it has received notice from the Sponsor of a Change in
Control.
(d) Transfer of Trust Assets. Upon the resignation or removal
of the Trustee and the appointment of a successor Trustee, all assets shall
subsequently be transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after receipt of notice or resignation,
removal or transfer, unless the Sponsor extends the time limit.
Section 9. Successor Trustee.
(a) Appointment. If the office of Trustee becomes vacant for
any reason, the Sponsor may in writing appoint a successor trustee under
this Agreement. The successor trustee shall have all of the rights, powers,
privileges, obligations, duties, liabilities, and immunities granted to the
Trustee under this Agreement. The successor trustee and predecessor trustee
shall not be liable for the acts or omissions of the other with respect to
the Trust.
(b) Acceptance. When the successor trustee accepts its
appointment under this Agreement, title to and possession of the Trust
assets shall immediately vest in the successor trustee without any further
action on the part of the predecessor trustee. The predecessor trustee
shall execute all instruments and do all acts that reasonably may be
necessary or reasonably may be requested in writing by the Sponsor or the
successor trustee to vest title to all Trust assets in the successor trustee
or to deliver all Trust assets to the successor trustee.
(c) Corporate Action. Any successor of the Trustee or
successor trustee, through sale or transfer of the business or trust
department of the Trustee or successor trustee, or through reorganization,
consolidation, or merger, or any similar transaction, shall, upon
consummation of the transaction, become the successor trustee under this
Agreement.
Section 10. Termination. This Agreement may be terminated at any time by
the Sponsor upon sixty (60) days' notice in writing to the Trustee. On the
date of the termination of this Agreement, the Trustee shall forthwith
transfer and deliver to such individual or entity as the Sponsor shall
11
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designate, all cash and assets then constituting the Trust. If, by the
termination date, the Sponsor has not notified the Trustee in writing as to
whom the assets and cash are to be transferred and delivered, the Trustee
may bring an appropriate action or proceeding for leave to deposit the
assets and cash in a court of competent jurisdiction. The Trustee shall be
reimbursed by the Sponsor for all costs and expenses of the action or
proceeding including, without limitation, reasonable attorneys' fees and
disbursements.
Section 11. Resignation, Removal, and Termination Notices. All notices of
resignation, removal, or termination under this Agreement must be in writing
and mailed to the party to which the notice is being given by certified or
registered mail, return receipt requested, to the Sponsor c/o Ms. Patricia
Muncy, Manager, Retirement Planning and Operations, PHH Corporation, 11333
McCormick Road, Hunt Valley, Maryland 21031, and to the Trustee c/o John M.
Kimpel, Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts
02109, or to such other addresses as the parties have notified each other of
in the foregoing manner.
Section 12. Duration. This Trust shall continue in effect without limit as
to time, subject, however, to the provisions of this Agreement relating to
amendment, modification, and termination thereof.
Section 13. Insolvency of Sponsor.
(a) Trustee shall cease disbursement of funds for payment of
benefits to Plan participants and their beneficiaries if the Sponsor is
Insolvent. Sponsor shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) Sponsor is unable to pay its debts as they become
due, or (ii) Sponsor is subject to a pending proceeding as a debtor under
the United States Bankruptcy Code.
(b) All times during the continuance of this Trust, the
principal and income of the Trust shall be subject to claims of general
creditors of the Sponsor under federal and state law as set forth below.
(i) The Board of Directors and the Chief Executive
Officer of the Sponsor shall have the duty to inform Trustee in writing of
Sponsor's Insolvency. If a person claiming to be a
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creditor of the Sponsor
alleges in writing to Trustee that Sponsor has become Insolvent, Trustee
shall determine whether Sponsor is Insolvent and, pending such
determination, Trustee shall discontinue disbursements for payment of
benefits to Plan participants or their beneficiaries.
(ii) Unless Trustee has
actual knowledge of Sponsor's Insolvency, or has received notice from
Sponsor or a person claiming to be a creditor alleging that Company is
Insolvent, Trustee shall have no duty to inquire whether Sponsor is
Insolvent. Trustee may in all events rely on such evidence concerning
Sponsor's solvency as may be furnished to Trustee and that provides Trustee
with a reasonable basis for making a determination concerning Sponsor's
solvency.
(iii) If any time
Trustee has determined that Sponsor is Insolvent, Trustee shall discontinue
disbursements for payments to Plan participants or their beneficiaries and
shall hold the assets of the Trust for the benefit of Sponsor's general
creditors. Nothing in this Trust Agreement shall in any way diminish any
rights of Plan participants or their beneficiaries to pursue their rights as
general creditors of Sponsor with respect to benefits due under the Plan or
otherwise.
(iv) Trustee shall
resume disbursement for the payment of benefits to Plan participants or
their beneficiaries in accordance with Section 2 of this Trust Agreement
only after Trustee has determined that Sponsor is not Insolvent (or is no
longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to (a) hereof
and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Plan participants or their beneficiaries under the terms of the Plan for the
period of such discontinuance, less the aggregate amount of any payments
made to Plan participants or their beneficiaries by Sponsor is lieu of the
payments provided for hereunder during any such period of discontinuance.
Section 14. Amendment or Modification. This Agreement may be amended or
modified at any time and from time to time only by an instrument executed by
both the Sponsor and the Trustee.
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Notwithstanding the foregoing, to reflect
increased operating costs the Trustee may once each calendar year amend
Schedule "B" without the Sponsor's consent upon seventy-five (75) days'
written notice to the Sponsor; provided that no such increase shall occur
within the first year of this Agreement.
Section 15. General.
(a) Performance by Trustee, its Agents or Affiliates. The
Sponsor acknowledges and authorizes that the services to be provided under
this Agreement shall be provided by the Trustee, its agents or affiliates,
including Fidelity Investments Institutional Operations Company or its
successor, and that certain of such services may be provided pursuant to one
or more other contractual agreements or relationships.
(b) Entire Agreement. This Agreement contains all of the
terms agreed upon between the parties with respect to the subject matter
hereof.
(c) Waiver. No waiver by either party of any failure or
refusal to comply with an obligation hereunder shall be deemed a waiver of
any other or subsequent failure or refusal to so comply.
(d) Successors and Assigns. The stipulations in this
Agreement shall inure to the benefit of, and shall bind, the successors and
assigns of the respective parties.
(e) Partial Invalidity. If any term or provision of this
Agreement or the application thereof to any person or circumstances shall,
to any extent, be invalid or unenforceable, the remainder of this Agreement,
or the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not
be affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
(f) Section Headings. The headings of the various sections
and subsections of this Agreement have been inserted only for the purposes
of convenience and are not part of this Agreement and shall not be deemed in
any manner to modify, explain, expand or restrict any of the provisions of
this Agreement.
14
<PAGE>
Section 16. Governing Law.
(a) Massachusetts Law Controls. This Agreement is being
made in the Commonwealth of Massachusetts, and the Trust shall be
administered as a Massachusetts trust. The validity, construction, effect,
and administration of this Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts, except to the
extent those laws are superseded under section 514 of ERISA.
(b) Trust Agreement Controls. The Trustee is not a party
to the Plan, and in the event of any conflict between the provisions of the
Plan and the provisions of this Agreement, the provisions of this Agreement
shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
PHH CORPORATION
Attest: ______________________ By: ______________________
Secretary Vice President
FIDELITY MANAGEMENT TRUST
COMPANY
Attest: ______________________ By ________________________
Assistant Clerk Senior Vice President
15
<PAGE>
PHH CORPORATION
CORPORATE LONG-TERM INCENTIVE PLAN
FY 1995-96-97
The purpose of this plan is to encourage the achievement of the long-term
objectives of PHH Corporation and its shareholders, by providing incentive
opportunities to designated senior key executives.
DEFINITIONS
A) The "Company" shall mean PHH Corporation, or its successor in interest.
B) The "term" shall mean the term of this plan which shall be the three
fiscal years, beginning May 1, 1994 through April 30, 1997
C) "Return on beginning equity (ROBE)" shall mean the Company's annual net
income after taxes, after giving effect for any incentive to be paid,
computed in accordance with generally accepted accounting principles,
divided by the beginning shareholders' equity for the fiscal year. The
performance measure for the plan shall be the average of the ROBE results
for each of the three fiscal years in the plan. Determination of the
performance measure results shall be made by the Committee following the
close of fiscal 1997.
D) The "Board of Directors" shall mean the Board of Directors of PHH
Corporation.
E) The "Committee" shall mean the Compensation Committee of the Board of
Directors.
F) The "Chairman & CEO" shall mean the Chairman & Chief Executive Officer of
PHH Corporation.
PARTICIPATION AND EMPLOYMENT STATUS
Participation in the plan is limited to key senior executives of the Company
specifically designated by the Chairman & CEO and approved by the Committee.
None of the members of the Committee may participate in the plan. Initially
designated participants must be actively employed as of May 1, 1994 in order
to be eligible to receive any incentive under the plan. Except as otherwise
determined by the Committee pursuant to the plan, additional participants
may be approved prior to May 1, 1995, to be considered for a prorated award,
based on their service during the plan term. Incentive targets for the
designated participants shall be determined by the Committee at the
beginning of the plan term. No participant has any vested rights or
interest under the plan and must be actively employed as of April 30, 1997
or have terminated employment by reason of retirement, death or disability
(as determined by the Committee) during the term to be eligible for any
incentive payment under the plan.
In the discretion of the Committee, awards may be granted in relation to a
non qualified stock option granted under the Amended and Restated Stock
Compensation Plan of 1990 of the Company ("Stock Compensation Plan"), in
which event, at the end of the term, a participant shall make a written
election either to receive payment of the award or to retain the related non
qualified stock option. Awards granted in relation to non qualified stock
options shall be canceled, to the extent determined in the discretion of the
Committee, (i) if the related non qualified stock option is exercised prior
to the end of the term or (ii) if at the end of the term, the participant
elects to retain the related non qualified stock option.
<PAGE>
FY 1995-96-97 CORPORATE LONG-TERM INCENTIVE PLAN
Page 2
COMPANY PERFORMANCE MEASUREMENT
Exhibit A sets forth the ROBE results which the Committee determines must be
obtained in order for the corresponding percentage of the target incentive
to be payable to participants. The performance measure is the average of
the ROBE results for each of the three fiscal years of the term. In
determining whether ROBE targets have been met, the Committee may take into
account one time charges or other factors, if any, as it deems relevant.
The aggregate incentive amounts which may be paid out for the designated
participants under the plan are set forth on Exhibit A, including the
maximum amounts which may be paid out for the designated participants under
the plan. Failure to meet the minimum ROBE results will result in no
payment to the participant.
INDIVIDUAL INCENTIVE PAYMENTS
Payments of individual incentive amounts, if any, will be made following the
determination of the ROBE results by the Committee. At the determination of
the Committee, payment may be made in cash and/or in shares of Common Stock
of the Company awarded pursuant to the Stock Compensation Plan. A
participant may elect to defer receipt of all or a portion of any incentive
payment as provided in the form of Deferral Election approved from time to
time by the Committee. Such deferral election must be made by the
participant in accordance with applicable deferred compensation plans
established by the Company and in a manner consistent with federal, state
and local tax laws.
ADMINISTRATION
The plan, adopted by the Board of Directors, shall be administered by the
Committee. The Committee is authorized to promulgate rules relating to
administration of the plan and to make determinations with respect thereto.
The Company shall have the right to deduct from all awards paid under the
plan all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
Where a "change of control" (as defined in the Company's Stock Compensation
Plan) occurs during the term, the Company shall pay to participants an
incentive under the plan based on ROBE results up until such date of such
change of control as if such ROBE result constituted the three-year average
ROBE result provided for herein multiplied by the fraction, the denominator
of which shall be thirty-six (36) months and the numerator of which shall be
that number of full months elapsed from the beginning of the term up until
such date. If a change of control occurs after the term, all incentive
payments which the participant had elected to defer under the terms of any
unfunded deferred compensation plan established by the company shall be
either contributed in full by the Company under any such deferred
compensation plan trust or, if no such trust has been established, paid in
full by the Company as soon as practicable following the change of control.
In case of separations from the Company for the following reasons, the
following provisions will apply.
Retirement, Death or Disability - Awards will be prorated based on the
nearest full quarter of the fiscal year of active employment. The incentive
award payment will be made following the end of the term of the plan after
full-term results are known. Disability will be defined in the same manner
as provided in qualified plan provisions in effect at the time of
disability.
<PAGE>
FY 1995-96-97 CORPORATE LONG-TERM INCENTIVE PLAN
Page 3
Voluntary Resignation - Awards will be forfeited when executives voluntarily
resign before the end of the term.
Termination or other Resignation - Awards, if any, will be made as
determined by the Compensation Committee in its sole discretion.
No member of the Board of Directors or the Committee nor any officer,
employee or agent of the Company shall have any liability to any person
based on or arising out of the plan, absent bad faith or willful misconduct.
Nothing contained in the plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between the Company and any participant, beneficiary,
legal representative or any other person. To the extent that any person
acquires a right to receive payments from the Company under the plan, such
right shall be no greater than the right of an unsecured general creditor of
the Company. All payment to be made hereunder shall be paid from the
general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of
such amounts.
REVISION OR CANCELLATION OF THE PLAN
Nothing in the plan shall be deemed to create any rights of participation of
any employee. The Committee shall have the full authority in its sole
discretion to unilaterally modify, terminate or cancel the plan, in whole or
in part, or with respect to any designated participant, at any time without
liability to any participant.
NON-TRANSFERABILITY
A participant may not assign, sell, encumber, transfer or otherwise dispose
of any rights or interests under the plan and any attempted disposition
shall be null and void.
<PAGE>
PHH CORPORATION
CORPORATE INCENTIVE PLAN
FY 1995
The purpose of this plan is to encourage the achievement of the annual
business objectives of PHH Corporation and its shareholders, by providing
incentive opportunities to designated key executives.
DEFINITIONS
A) The "Company" shall mean PHH Corporation, or its successor in interest.
B) The "term" shall mean the term of this plan which shall be the fiscal
year beginning May 1, 1994 through April 30, 1995.
C) "Return on beginning equity (ROBE)" shall mean the Company's annual net
income after taxes, after giving effect for any incentive to be paid,
computed in accordance with generally accepted accounting principles,
divided by the beginning shareholders' equity for the fiscal year. The
performance measure for the plan shall be the ROBE result for the fiscal
year in the plan. Determination of the performance measure results shall be
made by the Committee following the close of fiscal 1995.
D) The "Committee" shall mean the Compensation Committee of the Board of
Directors.
E) "Chairman & CEO" shall mean the Chairman & Chief Executive Officer of
PHH Corporation.
F) "Salary" shall mean the annual base salary paid during the term.
G) "Target Incentive" shall be fixed at that level of ROBE result
determined by the Committee as constituting 100% of incentive payout and
shall be expressed as a percent of salary.
PARTICIPATION
Participation in the plan is limited to key executives of the Company
specifically designated by the Chairman & CEO and approved by the Committee.
EMPLOYMENT STATUS AND GRADE CHANGES
Any Company key executive designated as of May 1, 1994 as a plan participant
and actively employed on or before February 1, 1995 is eligible to
participate in this program. Participants who are hired or transferred
during the plan year are eligible to be considered for a prorated award.
Individuals transferred during the period will be eligible for a prorated
award proportionate to the full months worked in the previous and
transferred Company. Individuals hired between February 1, 1995 and April
30, 1995 shall not be eligible to participate in the Corporate Incentive
Plan for FY 1995. Participants who have been promoted or demoted after May
1, 1994, but before February 1, 1995, will be considered for prorated
payouts based on the schedules in effect for each position. Plan
participants who become disabled (as determined by the Committee) and are
out of work in excess of 30 days during the plan year, are eligible to be
considered for a prorated award.
<PAGE>
FY 1995 CORPORATE INCENTIVE PLAN
PAGE 2
COMPANY PERFORMANCE MEASUREMENT
Exhibit A sets forth the Company ROBE results which must be obtained in
order for the corresponding percentage of the Target Incentive to be payable
to participants. In determining whether ROBE targets have been met, the
Committee may take into account one time charges or other factors, if any,
as it deems relevant. Incentive payouts under this plan are contingent upon
achievement of the Company's stated leverage target in effect at the close
of FY 1995. The aggregate incentive amounts which may be paid out under the
plan are designated by the Chairman & CEO and approved by the Committee.
PAYMENT OF INDIVIDUAL INCENTIVE AMOUNTS
The determination of the total available incentive amount, if any, which
might be paid to any plan participant, shall be determined by the Chairman &
CEO and approved by the Committee in its sole discretion following the close
of FY 1995 and shall be based upon the achievement of the related ROBE
result as shown on Exhibit A and the achievement of individual performance
objectives as identified at the beginning of the plan year. Payment of the
portion of the incentive target recognizing individual performance is
contingent upon achievement of the threshold corporate net income (net of
incentive plan funding).
No participant has any vested interest in the plan and must be actively
employed as of April 30, 1995 to be eligible for incentive award
distribution. A participant may elect to defer receipt of all or a portion
of any incentive payment as provided in the form of Deferral Elections
approved from time to time by the Committee. Such deferral election must be
made by the participant in accordance with applicable deferred compensation
plans and in a manner consistent with applicable federal, state and local
tax laws.
ADMINISTRATION
The plan adopted by the Committee shall be administered by the Chairman &
CEO. The Chairman & CEO is authorized to promulgate rules relating to
administration of the plan and to make determinations with respect thereto,
including any discretionary cash payments in excess of available incentive
amounts calculated hereunder.
If a "change of control" (as defined in the Company's Stock Compensation
Plan) occurs after the term, all incentive payments which the participant
had elected to defer under the terms of any unfunded deferred compensation
plan established by the company shall be either contributed in full by the
Company under any such deferred compensation plan or, if no such trust has
been established, paid in full by the Company as soon as practicable
following the "change of control".
REVISION OR CANCELLATION OF THE PLAN
This Corporate Incentive Plan shall not create any rights of future
participation therein of any employee. The Committee shall have the full
authority, in its sole discretion, to unilaterally modify, terminate or
cancel the plan at any time, in whole or in part, or with respect to any
designated participant, at any time, without liability to any participant.
NON-TRANSFERABILITY
A participant may not pledge, assign, sell, encumber, or transfer or
otherwise dispose of any rights or interests under the plan and any
attempted disposition shall be null and void.
<PAGE>
PHH CORPORATION
CEO & PRESIDENT INCENTIVE PLAN
FY 1995
The purpose of this plan is to encourage the achievement of the annual
business objectives of PHH Corporation and its shareholders, by providing
incentive opportunities to the CEO & President of PHH Corporation.
DEFINITIONS
A) The "Company" shall mean PHH Corporation, or its successor in interest.
B) The "term" shall mean the term of this plan which shall be the fiscal
year beginning May 1, 1994 through April 30, 1995.
C) "Return on beginning equity (ROBE)" shall mean the Company's annual net
income after taxes, after giving effect for any incentive to be paid,
computed in accordance with generally accepted accounting principles,
divided by the beginning shareholders' equity for the fiscal year. The
performance measure for the plan shall be the ROBE result for the fiscal
year in the plan. Determination of the performance measure results shall be
made by the Committee following the close of fiscal 1995.
D) The "Committee" shall mean the Compensation Committee of the Board of
Directors.
E) "CEO & President" shall mean the Chief Executive Officer and President
of PHH Corporation.
F) "Salary" shall mean the annual base salary paid during the term.
G) "Target Incentive" shall be fixed at that level of ROBE result
determined by the Committee as constituting 100% of incentive payout and
shall be expressed as a percent of salary.
PARTICIPATION
Participation in the plan is limited to the CEO & President.
EMPLOYMENT STATUS AND GRADE CHANGES
Any participant designated as of May 1, 1994 as a plan participant and
actively employed on or before February 1, 1995 is eligible to participate
in this program. A participant who is hired or transferred during the plan
year is eligible to be considered for a prorated award. An individual
transferred during the period will be eligible for a prorated award
proportionate to the full months worked in the previous and transferred
Company. An individual hired between February 1, 1995 and April 30, 1995
shall not be eligible to participate in this plan for FY 1995. A
participant who has been promoted or demoted after May 1, 1994, but before
February 1, 1995, will be considered for a prorated payout based on the
schedules in effect for each position. A plan participant who becomes
disabled (as determined by the Committee) and is out of work in excess of 30
days during the plan year, is eligible to be considered for a prorated award
as determined by the Committee.
<PAGE>
FY 1995 CEO & PRESIDENT INCENTIVE PLAN
PAGE 2
COMPANY PERFORMANCE MEASUREMENT
Exhibit A sets forth the Company ROBE results which must be obtained in
order for the corresponding percentage of the Target Incentive to be payable
to a participant. In determining whether ROBE targets have been met, the
Committee may take into account one time charges or other factors, if any,
as it deems relevant. Incentive payouts under this plan are contingent upon
achievement of the Company's stated leverage target in effect at the close
of FY 1995. The aggregate incentive amounts which may be paid out under the
plan are designated and approved by the Committee.
PAYMENT OF INDIVIDUAL INCENTIVE AMOUNTS
The determination of the total available incentive amount, if any, which
might be paid to any plan participant, shall be determined by the Committee
in its sole discretion following the close of FY 1995 and shall be based
upon the achievement of the related ROBE result as shown on Exhibit A.
No participant has any vested interest in the plan and must be actively
employed as of April 30, 1995 to be eligible for incentive award
distribution. A participant may elect to defer receipt of all or a portion
of any incentive payment as provided in the form of Deferral Elections
approved from time to time by the Committee. Such deferral election must be
made by the participant in accordance with applicable deferred compensation
plans and in a manner consistent with applicable federal, state and local
tax laws.
ADMINISTRATION
The plan adopted by the Committee shall be administered by the Committee.
The Committee is authorized to promulgate rules relating to administration
of the plan and to make determinations with respect thereto, including any
discretionary cash payments in excess of available incentive amounts
calculated hereunder.
If a "change of control" (as defined in the Company's Stock Compensation
Plan) occurs after the term, all incentive payments which the participant
had elected to defer under the terms of any unfunded deferred compensation
plan established by the company shall be either contributed in full by the
Company under any such deferred compensation plan or, if no such trust has
been established, paid in full by the Company as soon as practicable
following the "change of control".
REVISION OR CANCELLATION OF THE PLAN
This Incentive Plan shall not create any rights of participation of any
employee. The Committee shall have the full authority, in its sole
discretion, to unilaterally modify, terminate or cancel the plan at any
time, in whole or in part without liability to any participant.
NON-TRANSFERABILITY
A participant may not pledge, assign, sell, encumber, or transfer or
otherwise dispose of any rights or interests under the plan and any
attempted disposition shall be null and void.
<PAGE>
PHH CORPORATION
THIRD AMENDMENT TO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
THIS THIRD AMENDMENT is dated as of February 28, 1994, to the PHH Corporation
Supplemental Executive Retirement Plan as amended and restated effective May
1, 1987 and further amended by the Amendment dated as of June 18, 1990 and the
Second Amendment dated as of November 11, 1991 (the "SERP"),
WITNESSETH;
The Compensation Committee of the Board of Directors of PHH Corporation (the
"Company") desires that the definition of "Final Average Compensation" under
the SERP be amended to clarify that only annual cash incentives are to be taken
into account, and to include salary reduction contributions under the PHH
Corporation Executive Deferred Compensation Plan approved by the Board of
Directors of even date herewith.
Accordingly, the SERP is hereby amended as follows:
1. Definitions.
The definition of "Final Average Compensation" set forth in Section 2.1(i)
of the SERP is hereby deleted in its entirety and the following definition is
inserted in lieu thereof:
"2.1(i) "Final Average Compensation" means (a) the cash equivalent
of stock options (valued at the date of grant) granted to a Participant during
fiscal year 1992 in lieu of merit salary increases or annual cash incentives
payable during such year, plus (b) the sum of the average of each of the
following for the five Credited Years of Executive Service prior to a
Participant's retirement, or such other period as the Company shall determine:
(i) a Participant's base salary and (ii) cash incentives paid to a Participant
under any of the executive compensation plans that relate to the achievement
of annual goals, including in each of case (i) and (ii) above, amounts deferred
by a Participant under the Company's Executive Deferred Compensation Plan,
Employee Investment Plan or under any other plan or arrangement maintained by
the Company under Section 401(k) or 125 of the Internal Revenue Code of 1986,
as amended."
1
<PAGE>
2. Miscellaneous.
2.1 Except as otherwise expressly provided herein, the terms of the SERP
shall remain in full force and effect.
2.2 Capitalized terms not otherwise defined herein shall have the same
meanings as set forth under the SERP.
This Third Amendment to the Supplemental Executive Retirement Plan is hereby
executed as of the date first above written pursuant to the approval of
Company's Board of Directors on February 28, 1994.
PHH CORPORATION
By:
2
<PAGE>
PHH CORPORATION
AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
AGREEMENT, dated as of ___________________, 1994 (this
"Agreement") between PHH CORPORATION (the "Employer") and ____________________
(the "Executive").
W I T N E S S E T H:
The Executive is among the senior management group of the
Employer, as currently established, and is a party to a Supplemental Executive
Retirement Agreement dated as of [all October 12, 1988 except Mr. Nagel
who is January 12, 1993] (the "Original Agreement"). In establishing the
Original Agreement, the Employer has concluded generally that it would be in
the best interests of the Employer to provide for a relative parity in
normal retirement benefits amongst those executives included in the senior
executive management group, to redetermine the type and level of service that
qualifies as executive service and, in light of the Executive's particular
circumstances, to provide certain adjustments to various features of the
Supplemental Executive Retirement Plan, as amended and restated effective
May 1, 1987 as further amended by a First Amendment dated June 18, 1990, a
Second Amendment dated November 11, 1991, and a Third Amendment dated
February 28, 1994 (the "Supplemental Plan") for the Executive. The Employer
has reviewed the Original Agreement, reaffirmed its purposes and interest and
determined to update certain provisions in light of current circumstances,
and the Executive has accepted and agreed upon the updating changes.
- 1 -
<PAGE>
Accordingly, and in part pursuant to Section 2.1(g) of the
Supplemental Plan, the Employer and the Executive agree as follows:
1. Certain Definitions.
(a) For purposes of Section 6 of the Supplemental
Plan, "Credited Years of Executive Service" for the Executive shall
mean the sum of _____ plus the number of years of employment by the
Employer or a Subsidiary from and after April 30, 1989.
(b) For purposes of Section 3.2 of the Supplemental
Plan, the Executive shall be considered as having sufficient Credited
Years of Executive Service under this Agreement in order to
qualify for a _____% Executive Service Benefit [or such greater
percentage, not to exceed 60%, as may be applicable by computing
Credited Years of Executive Service as the sum of plus the
number of years of employment by the Employer or a Subsidiary from
and after April 30, 1989]. [NOTE: Material in brackets to be
included only if percentage is less than 60.]
(c) For purposes of Section 2.1(i) of the Supplemental
Plan, the term "Final Average Compensation" shall not be less the
amount computed thereunder for the Employer's Fiscal Year ending
April 30, 1993 for any determination made before April 30, 1998.
2. Payment Offsets. For purposes of Section 3.3 of the Plan,
in addition to the reductions provided by clause (iv), qualified pension or
profit sharing plans of subsequent employers whether or not affiliated with
the Employer, regardless of whether the Executive actually receives any
amount in any given year, shall be included as an additional reduction,
calculated in the same manner as provided in Section 3.3 of the Supplemental
Plan.
3. Certain Elections. In the event that the Executive terminates
employment after the sum of his age and Credited Years of Executive Service
is at least 60, then, in lieu of the payment commencement date determined under
Section 6 of the Supplemental Plan, he shall be entitled to make an election to
receive at any age after 55 the Supplemental Retirement Benefit
- 2 -
<PAGE>
earned to the date of termination computed under this Agreement re-
duced for early receipt of benefits as provided in Section 3.3 of the Sup-
plemental Plan.
4. Employer. For purposes of this Agreement, (a) "Employer"
includes any direct or indirect subsidiary controlled by the Employer within
the meaning of Section 368(c) of the Internal Revenue Code of 1986, and (b)
the Employer may transfer its obligations hereunder to any such subsidiary
that is the parent company of a major business unit of Employer's consolidated
group, in which case PHH Corporation shall be relieved of its obligations
hereunder.
5. Effect of This Agreement. This Agreement supercedes,
amends and restates the Original Agreement and is intended to be and
constitutes a separate Agreement between the Employer and the Executive in
addition to any and all rights he may now or hereafter have under the
Supplemental Plan, the Qualified Pension Plan as defined in the Supplemental
Plan, the PHH Long Term Disability Plan as defined in the Supplemental Plan,
the PHH Excess Benefit Plan as defined in the Supplemental Plan and any
other rights and benefits to which the Executive is entitled. All the terms
and provisions of the Supplemental Plan are hereby incorporated by reference
into, and made a part of this Agreement without, however, changing or
diminishing the independent application of the provisions of the
Supplemental Plan to the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal the date first above written.
ATTEST: PHH CORPORATION
_______________________________ By:_____________________________(SEAL)
WITNESS: EXECUTIVE:
_______________________________ ________________________________(SEAL)
- 3 -
<PAGE>
PHH CORPORATION
EXCESS BENEFIT PLAN
Amendment and Restatement as of May 1, 1994
ARTICLE I
PURPOSE
1.1 PURPOSE. This Plan has been established to
provide deferred compensation for certain highly compensated
employees of PHH Corporation (formerly PHH Group, Inc.) and of
certain of its affiliates. Subject to the compensation limits
specified in Sections 3.1 and 4.1, the Plan compensates certain
designated participants in the PHH Corporation Pension Plan to the
extent that benefits under such plan are reduced by virtue of the
limitations on benefits payable from tax qualified pension plans
set forth in section 415 of the Internal Revenue Code, as amended
(the "Code") and the limit on compensation which may be taken into
account under tax qualified pension plans imposed by section
401(a)(17) of the Code. The Plan is intended to qualify as a plan
maintained for the benefit of a "select group of management or
highly compensated employees" within the meaning of applicable
provisions of the Employee Retirement Income Security Act of 1974.
This Plan amends and restates the PHH Corporation Excess Benefit
Plan effective May 1, 1994.
ARTICLE II
DEFINITIONS
2.1 BASIC PLAN means the PHH Corporation Pension
Plan.
2.2 BOARD means the Board of Directors of the
Company.
2.3 COMMITTEE means the Compensation Committee of the
Board.
2.4 COMPANY means PHH Corporation (formerly known as
PHH Group, Inc.), a Maryland corporation, and any successor
corporation.
2.5 ELIGIBLE EMPLOYEE means any employee of an
Employer who is a participant in the Basic Plan and who is
designated by the Committee, acting in its sole and absolute
discretion, as an Eligible Employee.
2.6 EMPLOYER means the Company and any other employer
which participates in the Basic Plan and which, with the consent
of PHH Corporation, adopts the Plan by action of its board of
directors.
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<PAGE>
2.7 PLAN means this PHH Corporation Excess Benefit
Plan.
ARTICLE III
LIFETIME BENEFITS
3.1 ELIGIBILITY OF BENEFITS DURING LIFE. An Eligible
Employee who retires under the Early Retirement, Normal Retirement
or Deferred Retirement provision of the Basic Plan shall be
entitled to receive compensation under this Plan, from the
Company, equal to the difference between the benefit payable to
the Eligible Employee under the Basic Plan and the benefit which
would have been payable to the Eligible Employee under the Basic
Plan if the dollar and percentage limits on benefits imposed by
section 415(b)(1) of the Code did not apply, and if the limit on
compensation imposed by section 401(a)(17) of the Code were
increased to one hundred sixty six and two-thirds percent (166
2/3%) of the actual 401(a)(17) limit. If benefits payable to an
Eligible Employee under the Basic Plan are increased after the
Eligible Employee's participation in the Basic Plan terminates,
whether due to cost of living increases in the said section
415(b)(1) or 401(a)(17) limits or otherwise, then the Eligible
Employee's benefits under this Plan shall be decreased
accordingly.
3.2 COMMENCEMENT AND FORM OF BENEFITS DURING LIFE.
An Eligible Employee's benefits under Section 3.1 shall commence
at the same time as the Eligible Employee's benefits commence
under the Basic Plan, and shall be paid to the Eligible Employee
in the same form as the Eligible Employee's benefits under the
Basic Plan.
ARTICLE IV
DEATH BENEFITS
4.1 QUALIFICATION FOR AND AMOUNT OF DEATH BENEFITS.
If an Eligible Employee dies before beginning to receive
compensation under this Plan, and if the surviving spouse or other
beneficiary of such Eligible Employee is entitled to a death
benefit under the Basic Plan, then the surviving spouse or other
beneficiary of the Eligible Employee shall be entitled to receive
an amount under this Plan, from the Company, equal to the
difference between the benefit payable to such surviving spouse or
other beneficiary under the Basic Plan and the benefit which such
surviving spouse or other beneficiary would have received under
the Basic Plan if the dollar and percentage limits on benefits
imposed by section 415(b)(1) of the Code did
2
<PAGE>
not apply and if the
limit on compensation imposed by section 401(a)(17) of the Code
were increased to one hundred sixty six and two-thirds percent
(166 2/3%) of the actual 401(a)(17) limit. If benefits payable
under the Basic Plan to an Eligible Employee's surviving spouse or
other beneficiary are increased after the Eligible Employee's
death, whether due to cost of living increases in the said section
415(b)(1) or 401(a)(17) limits or otherwise, then the benefits
payable to the surviving spouse or other beneficiary under this
Plan shall be decreased accordingly.
4.2 DURATION OF PAYMENT. The surviving spouse's or
the beneficiary's benefit payable under Section 4.1 shall commence
at the same time as the surviving spouse's or the beneficiary's
death benefit under the Basic Plan and shall continue until the
surviving spouse's or the beneficiary's death benefit under the
Basic Plan terminates.
ARTICLE V
ADMINISTRATION
5.1 THE COMMITTEE. The Committee shall administer,
construe and interpret this Plan.
5.2 DUTIES. In carrying out its duties herein, the
Committee shall have discretionary authority to construe and
interpret any provisions of this plan and to exercise all powers
and to make all determinations, consistent with the terms of the
Plan, in all matters entrusted to it, and its determinations shall
be given deference and shall be final and binding on all
interested parties. The Committee shall determine, subject to the
provisions of this Plan:
(a) t h e Eligible Employees who shall
participate in the Plan from time to time; and
(b) the amount, if any, due pursuant to the
terms hereof to an Eligible Employee (or the Eligible Employee's
surviving spouse or other beneficiary) under this Plan.
5.3 DELEGATION OF DUTIES. Consistent with its
charter, the Committee may, in its discretion, delegate its duties
to any other person.
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5.4 CLAIMS PROCEDURE.
(a) Initial Claim. If an Eligible Employee or
an Eligible Employee's surviving spouse or other beneficiary
(hereinafter referred to as a "Claimant") is denied any benefit
under this Plan, the Claimant may file a claim with the Committee.
The Committee shall review the claim itself or appoint an
individual or an entity to review the claim. The Claimant shall
be notified within sixty (60) days after the claim is filed
whether the claim is allowed or denied, unless the Claimant
receives written notice prior to the end of the sixty (60) day
period stating that circumstances require an extension of the time
for decision. The notice of the decision shall be in writing,
sent by mail to the Claimant's last known address, and, if the
notice is a denial of the claim, the notice must contain the
following information:
(1) the specific reasons for the denial;
(2) a specific reference to pertinent
provisions of the Plan on which the denial is based; and
(3) if applicable, a description of any
additional information or material necessary to perfect the claim,
an explanation of why such information or material is necessary,
and an explanation of the Plan's claims review procedure.
(b) Review Procedure. A Claimant is entitled
to request a review by the Committee of any denial of the
Claimant's claim. The request for review must be submitted to the
Committee in writing within sixty (60) days of mailing of notice
of the denial. Absent a request for review within the sixty (60)
day period, the claim will be deemed to be conclusively denied.
The review of a denial of a claim shall be conducted by the
Committee or an individual or entity appointed by the Committee.
The reviewer shall afford the Claimant an opportunity to review
all pertinent documents and submit issues and comments in writing
and shall render a review decision in writing, all within sixty
(60) days after receipt of a request for a review, provided that,
where not prohibited by law, the reviewer may extend the time for
decision by not more than sixty (60) days upon written notice to
the Claimant. The Claimant shall receive written notice of the
reviewer's decision, together with specific reasons for the
decision and reference to the pertinent provisions of the Plan.
5.5 INDEMNIFICATION AND INSURANCE. To the extent
permitted by law, neither the Committee, nor any other
person
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performing duties hereunder, shall incur any liability for
any act done, determination made or failure to act, if in good
faith, and the Company shall indemnify the Committee, its members
and such other persons against any and all liability which is
incurred as a result of the good faith performance or
non-performance of their duties hereunder. Nothing in this Plan
shall preclude the Company from purchasing liability insurance to
protect such persons with respect to their duties under this Plan.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 LIMITATION OF RIGHTS. Nothing contained in this
Plan shall be construed to:
(a) limit in any way the right of an Employer
to terminate an Eligible Employee's employment at any time; or
(b) b e evidence of any agreement or
understanding, express or implied, that an Employer will employ an
Eligible Employee in a particular position or at any particular
rate of remuneration.
6.2 LIFE INSURANCE. The Company, in its discretion,
may apply for and procure, as owner and for its own benefit,
insurance on the life of an Eligible Employee, in such amounts and
in such forms as the Company may choose. An Eligible Employee
shall have no interest whatsoever in any such policy or policies,
but, at the request of the Company, the Eligible Employee shall
submit to medical examinations and supply such information and
execute such documents as may be required by the insurance company
or companies to whom the Company has applied for insurance.
6.3 NONALIENATION OF BENEFITS. No benefit under the
Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to do so shall be void. No benefit under the Plan shall
in any manner be liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person. If any person
entitled to benefits under the Plan becomes bankrupt or attempts
to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge any benefit under the Plan, or if any attempt is made to
subject any such benefit to the debts, contracts, liabilities,
engagements or torts of the person entitled to any such benefit,
except as specifically provided in the Plan, then such benefit
shall cease and
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terminate in the discretion of the Administrator,
and the Administrator may hold or apply the same or any part
thereof to the benefit of any dependent or beneficiary or such
person, in such manner and proportion as the Administrator may
deem proper. The Employer shall not in any manner be liable for
or subject to, the debts, contracts, liabilities, engagements or
torts of any person entitled to benefits hereunder.
6.4 AMENDMENT OR TERMINATION OF PLAN. The Board may
amend the Plan from time to time in any respect, and may at any
time terminate the Plan in its entirety or as it applies to any
E m p l oyer; provided, however, that an Eligible Employee's
entitlement to benefits earned under this Plan as of the date of
amendment or termination may not be terminated or reduced. This
Plan shall terminate automatically if the Basic Plan terminates,
i n which event (i) no additional employees shall become
participants in this Plan and (ii) benefits under this Plan shall
be paid in the same manner and at the same time as benefits under
the Basic Plan, regardless of whether Basic Plan benefits are paid
at or before an Eligible Employee's retirement.
6.5 UNFUNDED PLAN. This Plan is unfunded. The
obligations of the Company with respect to the benefits payable
hereunder shall be paid out of the Company's general assets and
shall not be secured by any form of trust, escrow or otherwise.
The rights of an Eligible Employee, or the Eligible Employee's
surviving spouse or other beneficiary, to benefits under the Plan
shall be solely those of an unsecured creditor of the Company.
Any insurance policy or other assets acquired by or held by the
Company in connection with the liabilities assumed by it pursuant
to the Plan shall not be deemed to be held under any trust for the
benefit of an Eligible Employee or the Eligible Employee's
surviving spouse or beneficiary, or to be security for the
performance of the obligations of the Company, but shall be, and
remain, a general, unpledged and unrestricted asset of the
Company. No representation shall be made to any Eligible Employee
which is contrary to this Section or which in any way suggests
that any insurance policies or other assets which may be
maintained by the Company in respect of its obligations under this
Plan will be used solely for that purpose. Notwithstanding the
preceding provisions of this Section 6.5, the Company, in its
discretion, may establish a "rabbi" trust for purposes of
accumulating or holding assets in connection with the Company's
liabilities under the Plan as long as the establishment and
maintenance of such trust does not cause benefits under this Plan
to be taxed to Eligible Employees before such benefits are
received.
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6.6 CONSTRUCTION OF PLAN. This Plan shall be so
construed that it will be maintained an unfunded plan of deferred
compensation for a "select group of management or highly
compensated employees" within the meaning of applicable provisions
of the Employee Retirement Income Security Act of 1974.
6.7 COMPANY OBLIGATIONS. The Company shall be
obligated to pay benefits under this Plan to Eligible Employees
and no other person shall be obligated to fulfill the obligations
of the Company under this Plan.
6.8 FORFEITURE OF RIGHT TO FUTURE BENEFITS. Notwith-
standing any other provision of this Plan, an Eligible Employee
(or such Eligible Employee's surviving spouse or other
beneficiary) will forfeit all rights with respect to Plan benefits
on account of which payments remain to be made and will be
immediately obligated to return to the Company the amount of any
Plan benefits previously distributed to the Eligible Employee and
the Eligible Employee's surviving spouse or other beneficiary if
(a) such Eligible Employee, within a period of two years from the
date his or her employment with the Employer or its affiliates
terminates, directly or indirectly, either individually or as
owner, partner, agent, employee, consultant or otherwise, except
for the account of and on behalf of the Employer or an affiliate
of the Employer, engages in any activity competitive with the
business of the Employer or an affiliate of the Employer, or in
competition with the Employer or one of its affiliates, solicits
or otherwise attempts to establish for himself or herself or for
any other person, firm or entity, any business relationships with
any person, firm or corporation which was, at the time the
Eligible Employee's employment terminates or within one year prior
thereto, a customer of the Employer or one of its affiliates or
(b) an Eligible Employee's employment is terminated because of
willful misconduct or gross negligence in the performance of his
or her duties, as determined by the Employer, and the Committee
determines in its sole and absolute discretion that such matching
contributions shall be forfeited.
If an Eligible Employee is determined by the
Board, in its sole and absolute discretion, to have committed or
threatened to commit an act set forth above, the Eligible
Employee, by the Eligible Employee's participation herein,
acknowledges that such act will cause irreparable injury to the
Employer and that money damages alone will not provide an adequate
remedy to the Employer, and that the Board may, in its sole and
absolute discretion, determine that the Employer is
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entitled to an injunction against such act and direct
the appropriate representatives of the Employer to seek such an injunction.
ARTICLE VII
EFFECTIVE DATE
7.1 EFFECTIVE DATE. This amendment and restatement
of the Plan shall become effective May 1, 1994. The Plan as
herein amended and restated shall apply to persons in the employ
of an Employer on and after that date. The rights, if any, of
former employees of any Employer whose employment terminated
before that date shall be determined under the terms of this Plan
as in effect immediately before May 1, 1994.
IN WITNESS WHEREOF, the Company has caused this Plan to
be executed and its seal to be affixed hereto, effective as of
May 1, 1994.
ATTEST: PHH CORPORATION
By:
(SEAL)
Print Name:
Date:
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PHH CORPORATION
AMENDED AND RESTATED
DEFERRED COMPENSATION TRUST AGREEMENT
<PAGE>
PHH CORPORATION
AMENDED AND RESTATED
DEFERRED COMPENSATION TRUST AGREEMENT
Table of Contents
Page
ARTICLE I
GENERAL
1.1 Establishment of Trust 2
1.2 General Provisions 3
1.3 Contributions to Trust 4
1.4 Change in Control/Potential Change in Control 4
ARTICLE II
TRUSTEE ACCEPTANCE
2.1 Trustee Acceptance 7
ARTICLE III
THE PLANS
3.1 Delivery of Plans 7
3.2 Plans to Control 7
3.3 Amendment or Termination of Plans 7
ARTICLE IV
TRUST FUND
4.1 Grantor Trust; Unfunded Plans 8
4.2 Company Insolvency 8
ARTICLE V
DUTIES AND POWERS OF THE TRUSTEE
WITH RESPECT TO INVESTMENTS
5.1 In General 11
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ARTICLE VI
ADDITIONAL POWERS AND AUTHORITY OF THE TRUSTEE
6.1 Additional Powers and Authority 14
ARTICLE VII
PAYMENTS BY THE TRUSTEE
7.1 Effect of Article 17
7.2 Delivery of Actuarial Statements 17
7.3 Payments from Trust Fund 17
7.4 Tax Withholding 18
7.5 Return of Excess Assets 18
7.6 Letter of Credit 19
7.7 Accelerated Payments 20
ARTICLE VIII
TAXES, EXPENSES AND COMPENSATION
8.1 Payment of Taxes 21
8.2 Litigation Expenses 22
8.3 General Expenses 22
8.4 Trustee Compensation 22
ARTICLE IX
ADMINISTRATION AND RECORDS
9.1 Accounts 23
9.2 Written Accountings 23
9.3 Access to Records 24
9.4 Judicial Settlements 24
9.5 Successor Trustees 25
9.6 Returns and Reports 25
ARTICLE X
REMOVAL OR RESIGNATION OF THE TRUSTEE
AND DESIGNATION OF SUCCESSOR TRUSTEE
10.1 Removal of Trustee 25
10.2 Trustee Resignation 25
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10.3 Procedure on Removal or Resignation 25
10.4 Successor Trustee Provisions 26
ARTICLE XI
ENFORCEMENT OF TRUST AGREEMENT
11.1 Enforcement 27
ARTICLE XII
AMENDMENTS
12.1 Amendments Before Change in Control 28
12.2 Amendments After Change in Control 28
ARTICLE XIII
TERMINATION OF TRUST
13.1 Termination of Trust 29
13.2 Procedure on Termination 29
ARTICLE XIV
NON-ALIENATION
14.1 Non-Alienation 30
ARTICLE XV
COMMUNICATIONS
15.1 To the Company 30
15.2 To the Trustee 30
15.3 Receipt Required 31
15.4 Company Actions and Trustee Reliance 31
15.5 Company Designees 31
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.1 Governing Law; Successors 32
16.2 Headings 32
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16.3 Merger Provision 32
16.4 Trustee Successors 32
16.5 Severability 33
16.6 Participant and Beneficiary Status 33
16.7 Gender and Plural 33
16.8 Counterparts 33
SCHEDULE A
Assumptions for Valuation of Plan Benefits
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PHH CORPORATION
AMENDED AND RESTATED
DEFERRED COMPENSATION TRUST AGREEMENT
THIS AMENDED AND RESTATED TRUST AGREEMENT is made and
entered into this day of 19 , by and between PHH
Corporation, a Maryland corporation ("Company"), and, ("Trustee").
W I T N E S S E T H:
WHEREAS, the Company maintains two non-tax-qualified
supplemental retirement plans known as the PHH Corporation
Supplemental Executive Retirement Plan and the PHH Corporation
Excess Benefit Plan (each such plan is referred to individually
as a "Plan" and they are referred to collectively as the
"Plans") to provide retirement benefits for certain of its key
executives; and
WHEREAS, the Plans provide for the Company to pay all
benefits from its general revenues and assets; and
WHEREAS, by Trust Agreement dated July 31, 1990 by and
between the Company and the Security Trust Company, N.A. (the
"Prior Trust Agreement"), the Company has heretofore established
a trust fund with respect to the PHH Corporation Supplemental
Executive Retirement Plan (the "SERP"); and
WHEREAS, is corporate successor
to Security Trust, N.A. and as such serves as Trustee under the
Prior Trust Agreement pursuant to Section 16.4 thereof; and
<PAGE>
WHEREAS, the Company wishes to amend and restate the
Prior Trust Agreement as hereinafter set forth so that the trust
fund will extend to both Plans; and
WHEREAS, the trust fund shall be subject to the claims
of the Company's creditors in the event of the Company's
bankruptcy or insolvency, and may not necessarily hold
sufficient assets to satisfy all of the benefits to be provided
under the Plans; and
WHEREAS, contributions (if any) to the trust fund shall
be held by the Trustee and invested, reinvested and distributed
in accordance with the provisions of this Trust Agreement; and
WHEREAS, the trust established by this Trust Agreement
is intended to be a "grantor trust" with the result that the
corpus and income of the trust are treated as assets and income
of the Company pursuant to sections 671 through 679 of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, the Company and the Trustee,
intending to be legally bound, declare and agree as follows.
ARTICLE I
GENERAL
1.1 ESTABLISHMENT OF TRUST. The Company hereby
establishes with the Trustee a grantor trust ("Trust") on behalf
of the participants in the Plans (the "Participants")
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and the beneficiaries of such Participants (the "Beneficiaries"). The
Trust so established shall be governed by the terms of this
Trust Agreement. The Company shall not be obligated to fund the
Trust except as expressly provided herein.
1.2 GENERAL PROVISIONS. The Trust shall consist of
such sums of money and other property acceptable to the Trustee
as from time to time shall be paid or delivered to the Trustee.
The Trust shall be revocable unless and until a Change in
Control or Potential Change in Control as described in Section
1.4 occurs, at which time the Trust shall become irrevocable,
subject, however, to the obligation of the Trustee to return
assets to the Company upon a resolution of the Company's Board
of Directors as described in Section 1.4. Until such time, if
ever, as the Trust becomes irrevocable, the Company shall have
the right, upon written notice to the Trustee, to revoke the
Trust and to receive a distribution of the Trust assets. In the
event the Trust becomes irrevocable, the Company shall have no
right to direct the Trustee to return or divert any Trust assets
before the payment of all Plan benefits to Participants and
Beneficiaries except in accordance with the provisions of
Section 7.5 below.
All money and other property of the Trust, all
investments and reinvestments made therewith or proceeds thereof
and all earnings and profits thereon, less all payments and
charges as authorized herein, are hereinafter referred to
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as the "Trust Fund." The Trust Fund shall be held by the Trustee and
shall be dealt with in accordance with the provisions of this
Trust Agreement. The Trust Fund shall at all times be subject
to the claims of the general creditors of the Company as set
forth in Section 4.2. The insufficiency of assets in the Trust
shall not relieve the Company of its obligation or liability to
make benefit payments otherwise due under the terms of the
Plans.
1.3 CONTRIBUTIONS TO TRUST. Except as required in
Section 1.4 below, the Company in its discretion may contribute
to the Trust from time to time such amounts as it deems
advisable.
1.4 CHANGE IN CONTROL/POTENTIAL CHANGE IN CONTROL.
Upon the occurrence of a Change in Control or a Potential Change
in Control as hereinafter defined, the Company shall pay to the
Trustee sufficient amounts to fund all Accrued Benefits, as
hereafter defined, under the Plans as of the date such Change in
Control or Potential Change in Control occurs. Accrued Benefits
shall be valued by an independent actuarial firm (the
"Actuaries") selected by the Company using the assumptions set
forth in Schedule A to this Trust Agreement. The Company shall
furnish a copy of the Actuaries' valuation report to the Trustee
within thirty (30) days after such date, and the Trustee shall
be entitled to rely on such report. If a Change in Control does
not occur within ninety (90) days after
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the occurrence of a Potential Change in Control, and the Board
of Directors of the Company adopts a resolution to the effect
that, for purposes of this Trust Agreement, a Change in
Control is not imminent, any amounts contributed to the Trust
because of the Potential Change in Control, together with any
earnings thereon, shall be paid by the Trustee to the Company.
For purposes of this Agreement (a) "Accrued Benefits" shall
mean benefits calculated under the Plans based on (i) service
as of the date of the Change in Control or Potential Change in
Control and (ii) compensation projected to the benefit commencement
date assumed on Schedule A to the Trust Agreement, using for that
projection the Compensation Scale set forth on Schedule A, and
(b) a "Change in Control" shall be deemed to have taken place if:
(i) a third person, including a "group" as defined in section
13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial
owner of shares of the Company having twenty percent (20%) or
more of the total number of votes that may be cast for the
election of directors of the Company; or (ii) as a result of, or
in connection with, any cash tender or exchange offer, merger or
other business combination, sale of assets or contested election, or
any combination of the foregoing transactions (a "Transaction"),
the persons who were directors of the Company before the Transaction
shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company. A
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"Potential Change in Control" shall be deemed to
have taken place if (i) any third person commences a tender or
exchange offer (other than a tender or exchange offer which, if
consummated, would not result in a change of control) for twenty
percent (20%) or more of the then outstanding shares of common
stock or combined voting power of the Company's then outstanding
voting securities; (ii) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control; (iii) any person (including the Company)
publicly announces an intention to take or to consider taking
actions which if consummated would constitute a Change in
Control; or (iv) the Board of Directors of the Company adopts a
resolution to the effect that, for purposes of this Trust
Agreement, a Change in Control is imminent. The Company shall
have a duty to inform the Trustee whenever a Change in Control
or Potential Change in Control has occurred. If any two
Participants or Beneficiaries notify the Trustee in writing that
a Change in Control has occurred then, unless, in the written
opinion of counsel to the Company (which opinion may be based on
representations of fact as long as counsel does not know that
such representations are untrue) such a Change in Control has
not occurred, a Change in Control will be deemed to have
occurred for purposes of this Trust Agreement.
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ARTICLE II
TRUSTEE ACCEPTANCE
2.1 TRUSTEE ACCEPTANCE. The Trustee accepts the
Trust established under this Trust Agreement on the terms and
subject to the provisions set forth herein, and it agrees to
discharge and perform fully and faithfully all of the duties and
obligations imposed upon it under this Trust Agreement.
ARTICLE III
THE PLANS
3.1 DELIVERY OF PLANS. A copy of each Plan has been
delivered to the Trustee. All terms defined in the Plans shall
have the same meanings when used herein unless expressly
provided to the contrary herein. The Company will deliver
promptly to the Trustee copies of all amendments to the Plans.
3.2 PLANS TO CONTROL. The terms of each Plan shall
govern the amount, form and timing of benefit payments under
that Plan to which a Participant or Beneficiary is entitled.
3.3 AMENDMENT OR TERMINATION OF PLANS. The Company
retains sole discretion to modify or amend any of the provisions
of the Plans or to terminate one or both of them as provided
therein.
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ARTICLE IV
TRUST FUND
4.1 GRANTOR TRUST; UNFUNDED PLANS. It is intended
that the Trust constitute a grantor trust under Code sections
671 through 679, with the assets of the Trust Fund being treated
as assets of the Company for purposes of Federal, state and
local income tax laws. The creation of this Trust is not
intended to cause the Plans to be treated as a funded plan for
purposes of Title I of the Employee Retirement Income Security
Act of 1974, as amended from time to time.
4.2. COMPANY INSOLVENCY.
(a) The assets of the Trust Fund shall at all
times be subject to the rights of the bankruptcy or insolvency
creditors of the Company under this Section. At any time the
Trustee has actual knowledge or has determined that the Company
is Insolvent (as defined below), the Trustee shall deliver any
undistributed principal and income in the Trust Fund to satisfy
such claims of the general creditors of the Company as a court
of competent jurisdiction may direct. The Board of Directors
and the Chief Executive Officer of the Company shall have the
duty to inform the Trustee of the Company's Insolvency. If the
Company or a person claiming to be a creditor of the Company
alleges in writing to the Trustee that the Company has become
Insolvent, the Trustee shall independently determine, within
thirty (30) days after receipt of such notice, whether the
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Company is Insolvent and, pending such determination, the
Trustee shall discontinue payments under the Plans, shall hold
the Trust Fund assets for the benefit of the Company's general
creditors, and shall resume payments under the Plans only after
the Trustee has determined that the Company is not Insolvent (or
is no longer Insolvent, if the Trustee initially determined the
Company to be Insolvent). For purposes of such determination,
the Trustee may employ legal counsel, accountants and other
advisors and shall be entitled to rely on their advice. Unless
the Trustee has actual knowledge of the Company's Insolvency,
the Trustee shall have no duty to inquire whether the Company is
Insolvent. The Trustee may in all events rely on such evidence
concerning the Company's solvency as may be furnished to the
Trustee which will give the Trustee a reasonable basis for
making a determination concerning the Company's solvency. For
purposes of this Trust Agreement, the Trustee shall be
considered to possess any knowledge and information concerning
the Company in the possession of the Trustee's Banking
Department or other departments that can reasonably be imputed
to the Trustee under normal bank procedures. Nothing in this
Trust Agreement shall in any way diminish any rights of the
Participants and Beneficiaries to pursue their rights as general
creditors of the Company with respect to payments under the
Plans. The Company shall be considered "Insolvent" for purposes
of this Trust Agreement in
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the event of (a) the Company's inability to pay its debts as
they mature, within the meaning of Section 15-202 of the
Maryland Uniform Fraudulent Conveyance Act; (b) a general
assignment for the benefit of the Company's creditors; (c)
the voluntary commencement by the Company of any proceeding
under Title 11 of the United States Code or any other
law of any jurisdiction for the relief, liquidation or
rehabilitation of debtors (all of which proceedings are
hereinafter collectively referred to as "Insolvency
Proceedings"); (d) the making of an admission by the Company of
any of the material allegations of or consenting to or
acquiescing in a petition, application, motion or complaint
commencing an Insolvency Proceeding or the seeking by the
Company of the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar official of
or for a substantial part of its assets; (e) the involuntary
commencement of an Insolvency Proceeding against the Company
which is not fully stayed, timely controverted or dismissed
within one hundred twenty (120) days after the filing thereof;
or (f) the appointment of or taking of possession by a receiver,
custodian, trustee, liquidator or similar official of or for the
Company or of or for a substantial part of its assets.
(b) If the Trustee discontinues payments from
the Trust Fund pursuant to Section 4.2(a) and subsequently
resumes such payments, the first payment following such
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discontinuance shall include the aggregate amount of all
payments which would have been made (together with interest on
the amount delayed at a rate equal to the "prime rate" charged
by the Trustee's commercial lending department) in accordance
with each Plan during the period of such discontinuance, less
the aggregate amount of payments made under that Plan by the
Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
(c) It is intended that the rights of the
general creditors of the Company to enforce the provisions of
this Article in the event of the Company's Insolvency be
enforceable with respect to the Trust Fund at the time of
Insolvency under both Federal and state law.
ARTICLE V
DUTIES AND POWERS OF THE TRUSTEE
WITH RESPECT TO INVESTMENTS
5.1 IN GENERAL.
(a) The Trustee shall invest and reinvest the
principal and income of the Trust Fund as directed by the
Company or, in the absence of direction, as it shall determine
in its sole discretion; provided, however, that the Trustee
shall follow the Company's direction as to investments only if
the Trustee, in its own judgment, determines that the Company's
directions are reasonable in light of the current and
anticipated obligations of the Plans. The Trustee shall keep
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the Trust Fund invested, without distinction between principal
and income, in any property, whether real, personal or mixed,
and wherever situated and whether or not productive of income,
including without limitation, capital, common and preferred
stocks and personal, corporate and governmental or other
obligations, whether secured or unsecured, and including any
collective part interest therein; mortgages, leaseholds, fees
and other interests in realty; oil, gas or mineral properties
and rights, royalties, payments or other interests in such
properties; contracts, choses in action, trust and participation
certificates or other evidences of ownership, part ownership or
part interest; all without being limited or restricted to
investments of a character authorized for trustees or other
fiduciaries under any present or future laws and, except as
otherwise required by Federal law, without regard to the
proportion any such property may bear to the entire amount of
the Trust Fund.
(b) Specifically, but not by way of limitation,
the Trustee is authorized and empowered to invest all or any
part of the Trust Fund in any common or collective trust fund or
pooled investment fund presently or hereafter maintained by the
Trustee as the same may be amended from time to time; and the
declaration of trust establishing such common or collective fund
is hereby made a part hereof as if set forth at length herein,
the assets of the fund invested in said common or
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collective trusts shall be held and administered by the Trustee
strictly in accordance with the terms of the instrument, and the
combining of assets of the Trust Fund with assets of other trusts
in such common or collective trust fund is specifically authorized
hereby.
(c) The Trustee in its discretion may keep such
portion of the Trust Fund in cash or cash balances or hold all
or any portion of the Trust Fund in savings accounts,
certificates of deposit and other types of time or demand
deposits with any financial institution or quasi-financial
institution, either domestic or foreign (including any such
institution operated or maintained by the Trustee in its
corporate capacity) as the Trustee may from time to time
determine to be in the best interests of the Trust Fund.
(d) Notwithstanding any powers granted to
Trustee pursuant to this Trust Agreement or to applicable law,
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Internal Revenue Code.
(e) In no event may Trustee invest in
securities (including stock or rights to acquire stock) or
obligations issued by the Company, other than a de minimis amount
held in common investment vehicles in which Trustee invests. All
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rights associated with assets of the Trust shall
be exercised by Trustee or the person designated by Trustee, and
shall in no event be exercisable by or rest with Plan
Participants.
ARTICLE VI
ADDITIONAL POWERS AND AUTHORITY OF THE TRUSTEE
6.1 ADDITIONAL POWERS AND AUTHORITY. The Trustee
shall have the following additional powers and authority with
respect to the Trust or any property constituting part of the
Trust Fund:
(a) To sell, exchange or transfer any such
property at public or private sale for cash or on credit and
grant options for the purchase or exchange thereof.
(b) To participate in any plan of
reorganization, consolidation, merger, combination, liquidation
or other similar plan relating to any such property, and to
consent to or oppose any such plan or any action thereunder, or
any contract, lease, mortgage, purchase, sale or other action by
any corporation or other entity.
(c) To deposit any such property with any
protective, reorganization or similar committee; to delegate
discretionary power to any such committee; and to pay part of
the expenses and compensation of any such committee and any
assessments levied with respect to any property so deposited.
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(d) To exercise any conversion privilege or
subscription right available in connection with any such
property; to oppose or to consent to the reorganization,
consolidation, merger or readjustment of the finances of any
corporation, company or association, or to the sale, mortgage,
pledge or lease of the property of any corporation, company or
association any of the securities of which may at any time be
held in the Trust Fund and to do any act with reference thereto,
including the exercise of options, the making of agreements or
subscriptions and the payment of expenses, assessments or
subscriptions, which may be deemed necessary or advisable in
connection therewith, and to hold and retain any securities or
other property which it may so acquire.
(e) To commence or defend suits or legal
proceedings and to represent the Trust in all suits or legal
proceedings; to settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Trust.
(f) To exercise, personally or by general or
limited power of attorney, any right, including the right to
vote, appurtenant to any securities or other such property.
(g) To borrow money from any lender in such
amounts and upon such terms and conditions as shall be deemed
advisable or proper to carry out the purposes of the Trust and
to pledge any securities or other property for the repayment of
any such loan.
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(h) To engage any legal counsel, including
counsel to the Company, or any other suitable agents, to consult
with such counsel or agents with respect to the construction of
this Trust Agreement, the duties of the Trustee hereunder, the
transactions contemplated by this Trust Agreement or any act
which the Trustee proposes to take or omit, to rely upon the
advice of such counsel or agents, and to charge against and pay
from the Trust Fund the reasonable fees and expenses of such
counsel or agents, which fees and expenses shall be paid or
reimbursed by the Company.
(i) To register any securities held by it in
its own name or in the name of any custodian of such property or
of its nominee, including the nominee of any system for the
central handling of securities, with or without the addition of
words indicating that such securities are held in a fiduciary
capacity, to deposit or arrange for the deposit of any such
securities with such a system and to hold any securities in
bearer form.
(j) To take, execute and deliver, as Trustee,
any and all deeds, leases, notes, bonds, guarantees, mortgages,
conveyances, contracts, waivers, releases or other instruments
in writing necessary or proper for the accomplishment of any of
the foregoing powers.
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ARTICLE VII
PAYMENTS BY THE TRUSTEE
7.1 EFFECT OF ARTICLE. This Article shall only apply
after funds have been transferred to the Trust. Until that
time, this Article shall have no force or effect and shall
impose no duties or obligations on the parties.
7.2 DELIVERY OF ACTUARIAL STATEMENTS. The Company
shall deliver to the Trustee a copy of each statement which the
Company receives from the Company's actuaries concerning the
Accrued Benefits of Participants (and, if applicable,
Beneficiary) under the Plans upon receipt of such statement by
the Company.
7.3 PAYMENTS FROM TRUST FUND. Unless the Company has
provided written evidence to the Trustee that the Company has
made payments to Participants (and, if applicable,
Beneficiaries) pursuant to the terms of the Plans, the Trustee
shall make such payments from the Trust Fund provided that the
Company is not Insolvent at the time of such payments. If a
Participant or Beneficiary does not receive a payment that he or
she believes he or she has become entitled to under a Plan, he
or she shall notify the Trustee of such entitlement. The
Trustee shall within ten (10) days after its receipt of such
notice forward a copy of such notice to the Company. If the
Company fails to notify the Trustee within ten (10) days after
its receipt of such notice that it denies the claim of the
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Participant or Beneficiary to payment by the Trustee, the
Trustee shall make payment from the Trust Fund to the
Participant or Beneficiary under the terms of the Plan as soon
as practicable and, in any event, within thirty (30) days after
the expiration of said ten (10) day notice period. The Trustee
shall provide the Company with written confirmation of the fact
and amount of such payment after it is made. If the Company
shall notify the Trustee within said ten (10) day notice period
that it denies the claim of the Participant or Beneficiary to
payment by the Trustee, then, within thirty (30) days after
receipt by the Trustee of such notice from the Company, the
Company shall commence an action or proceeding in court and
shall join the Trustee so that the dispute may be resolved. Such
action or proceeding shall be commenced in the Federal or state
court at the situs of the Trust Fund, subject to removal by any
party in accordance with the rules of practice applicable
thereto.
7.4 TAX WITHHOLDING. The Trustee shall deduct from
each payment hereunder any Federal, state or local withholding
or other taxes or charges which the Trustee is required to
deduct under applicable laws.
7.5 RETURN OF EXCESS ASSETS. As of each April 30
(the "Determination Date") during the term of this Agreement,
the Trustee shall determine the fair market value of such assets
as may have been contributed to the Trust, and report
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that value in writing to the Company. If the total assets of the
Trust exceed 110% of the present value of the Accrued Benefits under
the Plans as of that date (valued by the Actuaries in the same
way that benefits were valued for purposes of Section 1.4
above), the Trustee shall pay to the Company the amount of any
such excess or agree to a reduction in the face amount of any
letter of credit used to fund the Trust equal to the amount of
such excess. The determination of the above items and the
amount, if any, to be paid to the Company, shall be made not
later than the September 1 next following each Determination
Date, and payment to the Company if any, shall be made within
thirty (30) days after the determination is completed. The
payment of excess assets to the Company under this Section 7.5
shall only be made to the extent that assets are available to
make such payment, and the Trustee shall not be required to
surrender or borrow from any insurance policy to fund such
payment nor shall the Trustee be required to sell any stock or
liquidate any other asset should the Trustee in its sole
discretion deem it not prudent to do so.
7.6 LETTER OF CREDIT. The Company may provide to the
Trustee as an asset of the Trust Fund one or more irrevocable
and unconditional letters of credit. The Trustee shall accept a
letter of credit as part of the Trust Fund only if (i) it is
irrevocable and grants the Trustee the unconditional right to
draw upon it in whole or in part at any time, (ii) it is issued
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by a bank having total assets at the time the letter of credit
is issued of at least $1 billion, and (iii) the Trustee has
received an opinion of Piper & Marbury, or of other outside
legal counsel selected by the Company, addressed to the Trustee,
to the effect that the acceptance by the Trustee of a letter of
credit as part of the Trust Fund should not adversely affect the
status of the trust as a "grantor trust" for purposes of the
Code. The Trustee shall be entitled to rely on such opinion.
The Trustee agrees that it shall draw upon a letter of credit
only upon the following circumstances: (i) the letter of credit
will expire within fifteen (15) days and either the letter of
credit has not been renewed or the Trustee has not received from
the Company assets having a market value equal to the face
amount of the letter of credit, or (ii) the Trustee is obligated
to make payments to a Participant or Beneficiary or to commence
an action or proceeding in court in the nature of interpleader
as provided in Section 7.3 and the Trustee, in its sole and
absolute discretion, determines that it does not have sufficient
liquid assets to make the payments which it is obligated to make
or which are under dispute pursuant to Section 7.3.
7.7 ACCELERATED PAYMENTS. Notwithstanding any
provision of the Trust Agreement or the Plans to the contrary,
the Trustee shall make payments of Plan benefits hereunder
before such payments are otherwise due if it determines, based
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on an opinion of counsel to the Trustee (who may, but need not,
be counsel to the Company), that a Participant or Beneficiary
has recognized or will recognize income for federal income tax
purposes with respect to amounts that are or will be payable to
him or her under a Plan before they otherwise would be paid to
him or her. The amount to be paid under this Section 7.7 shall
be the amount of the benefit which the Participant or
Beneficiary recognizes as income. Payments under this Section
7.7 shall be made during the year in which the Participant or
Beneficiary recognizes income, or as soon as practicable
thereafter. Payments under this Section 7.7 shall reduce
benefits otherwise payable to a Participant or Beneficiary under
the terms of the Plan with respect to which payments are made.
ARTICLE VIII
TAXES, EXPENSES AND COMPENSATION
8.1 PAYMENT OF TAXES. The Company shall from time to
time pay taxes of any and all kinds which are lawfully levied or
assessed upon or become payable in respect of the Trust Fund,
the income or any property forming a part thereof, or any
security transaction pertaining thereto. To the extent that any
taxes lawfully levied or assessed upon the Trust Fund are not
paid by the Company, the Trustee shall pay such taxes out of the
Trust Fund. The Trustee shall, at Company expense,
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contest the validity of such taxes in any manner deemed appropriate
by the Company or its counsel or the Company may itself contest the
validity of any such taxes.
8.2 LITIGATION EXPENSES. In the event the Trustee
deems it necessary to litigate any issue regarding this Trust or
the payment of benefits hereunder, all reasonable attorney's
fees and expenses incurred by the Trustee shall be charged
against and paid from the Trust Fund and shall be reimbursed by
the Company, unless, with respect to any such issue, the Trustee
is found to have acted with gross negligence or in breach of its
fiduciary duty.
8.3 GENERAL EXPENSES. Any other reasonable expenses
incurred by the Trustee in the performance of its duties under
this Trust Agreement, including brokerage commissions, shall be
charged against and paid from the Trust Fund to the extent that
the Company does not pay such expenses. The Company shall
reimburse the Trust Fund for any such expenses paid from the
Trust Fund.
8.4 TRUSTEE COMPENSATION. The Company will pay the
Trustee such reasonable compensation for its services as may be
agreed upon in writing from time to time by the Company and the
Trustee. Such compensation shall be charged against and paid
from the Trust Fund to the extent the Company does not pay such
compensation.
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ARTICLE IX
ADMINISTRATION AND RECORDS
9.1 ACCOUNTS. The Trustee shall keep or cause to be
kept accurate and detailed accounts of any investments,
receipts, disbursements and other transactions hereunder, and
all accounts, books and records relating thereto shall be open
to inspection and audit at all reasonable times by any person
designated by the Company. All such accounts, books and records
shall be preserved (in original form, or on microfilm, magnetic
tape or any other similar process) for such period as the
Trustee may determine, but the Trustee may only destroy such
accounts, books and records after first notifying the Company in
writing of its intention to do so and transferring to the
Company any of such accounts, books and records requested.
9.2 WRITTEN ACCOUNTINGS. Within sixty (60) days
after each April 30, and within sixty (60) days after the
removal or resignation of the Trustee or of the termination of
the Trust, the Trustee shall file with the Company a written
accounting setting forth all investments, receipts,
disbursements and other transactions effected by it from the
preceding May 1 to April 30 or to the date of such removal,
resignation or termination, including a description of all
investments and securities purchased and sold with the cost or
net proceeds of such purchases or sales and showing all cash,
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securities and other property held as of April 30 or at the end
of such other period. Upon the expiration of one hundred eighty
(180) days from the date of filing such annual or other
accounting, the Trustee shall be released and discharged from
all liability and accountability with respect to the propriety
of its acts and transactions shown in such accounting, except
with respect to any such acts or transactions as to which the
Company shall within such one hundred eighty (180) day period
file with the Trustee written objections and except for matters
which the Company, would not reasonably have been expected to
have discovered by a proper review of such accounting.
9.3 ACCESS TO RECORDS. The Trustee shall from time
to time permit the Company's employees and agents to have
reasonable access during ordinary business hours to such records
as may be necessary to audit the Trustee's accounts. Upon
reasonable prior notice, the Trustee shall also make its records
of the Trust available for inspection during ordinary business
hours by any Participant or Beneficiary and shall furnish to
each Participant or Beneficiary who so requests in writing a
copy of any or all reports with respect to the Trust which are
furnished to the Company.
9.4 JUDICIAL SETTLEMENTS. Nothing contained in this
Trust Agreement shall be construed as depriving the Trustee or
the Company of the right to have a judicial settlement of the
Trustee's accounts, and upon any proceeding for a judicial
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settlement of the Trustee's accounts or for instructions the
only necessary party thereto in addition to the Trustee shall be
the Company.
9.5 SUCCESSOR TRUSTEES. In the event of the removal
or resignation of the Trustee, the Trustee shall deliver to the
successor trustee all records which shall be required by the
successor trustee to enable it to carry out the provisions of
this Trust Agreement.
9.6 RETURNS AND REPORTS. In addition to any returns
required of the Trustee by law, the Trustee shall prepare and
file such tax reports and other returns as the Company and the
Trustee may from time to time agree.
ARTICLE X
REMOVAL OR RESIGNATION OF THE TRUSTEE
AND DESIGNATION OF SUCCESSOR TRUSTEE
10.1 REMOVAL OF TRUSTEE. The Company may remove the
Trustee, with or without cause, upon at least thirty (30) days'
notice in writing to the Trustee.
10.2 TRUSTEE RESIGNATION. The Trustee may resign at
any time upon at least thirty (30) days' notice in writing to
the Company.
10.3 PROCEDURE ON REMOVAL OR RESIGNATION. In the
event of such removal or resignation, the Trustee shall duly
file with the Company a written accounting as provided in
Section 9.2 above for the period since the last previous annual
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accounting, listing the investments of the Trust and any
uninvested cash balance thereof, and setting forth all receipts,
disbursements, distributions and other transactions respecting
the Trust not included in any previous accounting, and if
written objections to such accounting are not filed as provided
in Section 9.2, the Trustee shall to the maximum extent
permitted by applicable law be forever released and discharged
from all liability and accountability with respect to the
propriety of its acts and transactions shown in such accounting
except for matters which the Company could not reasonably have
been expected to have discovered by a proper review of such
accounting.
10.4 SUCCESSOR TRUSTEE PROVISIONS. Within thirty (30)
days after any such notice of removal or resignation of the
Trustee, the Company shall designate a successor trustee
qualified to act hereunder. A successor trustee must be a
financial institution having trust assets under management of at
least $1 billion as of the date of appointment as successor
trustee. Each successor trustee, during such period as it shall
act as such, shall have the powers and duties herein conferred
upon the Trustee, and the word "Trustee" wherever used herein,
except where the context otherwise requires, shall be deemed to
include any successor trustee. Upon designation of a successor
trustee and delivery to the resigned or removed Trustee of
written acceptance by the successor trustee of such
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designation, such resigned or removed Trustee shall promptly assign,
transfer, deliver and pay over to such successor trustee, in
conformity with the requirements of applicable law, the funds
and properties in its control or possession then constituting
the Trust Fund.
ARTICLE XI
ENFORCEMENT OF TRUST AGREEMENT
11.1 ENFORCEMENT. The Company shall have the right to
enforce any provisions of this Trust Agreement. After a Change
in Control as described in Section 1.4, each Participant and
Beneficiary shall have the right to enforce the payment of his
or her benefits under the Plans. In any action or proceeding
affecting the Trust, the only necessary parties shall be the
Company and the Trustee and, except as otherwise required by
applicable law, no other person shall be entitled to any notice
or service of process; provided, however, that in any action or
proceeding pertaining to the payment or amount of benefits
payable from the Trust Fund, the Participants (and the
Beneficiaries of deceased Participants) whose benefits are or
will be affected by such action or proceeding shall be entitled
to written notice of such action or proceeding. Any judgment
entered in an action or proceeding described in this Section
11.1 shall be binding and conclusive on all persons having or
claiming to have any interest in the Trust.
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ARTICLE XII
AMENDMENTS
12.1 AMENDMENTS BEFORE CHANGE IN CONTROL. Prior to
the time that a Change in Control described in Section 1.4
occurs, the Company shall have the right, with or without the
consent of the Trustee, the Participants, any Beneficiaries or
any other persons, to amend or modify this Agreement in whole or
in part. The Company's right to amend under the preceding
sentence shall include, without limitation, the right to make
the Trust Agreement irrevocable and the right to extend the time
at which the Trust Agreement becomes irrevocable. Any
amendments made under this Section 12.1 shall be in writing and
executed by the Company, and a copy of any such amendments shall
be delivered to the Trustee.
12.2 AMENDMENTS AFTER CHANGE IN CONTROL. After a
Change in Control described in Section 1.4 occurs, the Company
may from time to time amend or modify, in whole or in part, any
or all of the provisions of this Trust Agreement, except to make
it revocable, with the written consent of the Trustee and the
Participants (and Beneficiaries of deceased Participants),
except that amendments to this Agreement affecting only one Plan
may be made with the written consent of the Trustee and the
Participants (and Beneficiaries of deceased Participants) of
that Plan. The Company and the Trustee shall execute such
supplements to, or amendments of, this Trust Agreement as shall
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be necessary to give effect to any such amendment or
modification.
ARTICLE XIII
TERMINATION OF TRUST
13.1 TERMINATION OF TRUST. Except as provided in
Sections 1.2, 1.4, 4.2 and 7.5, no part of the corpus or income
of the Trust shall be paid to the Company or be used for any
purpose other than for the exclusive purpose of providing
benefits under the Plans prior to the satisfaction of all
liabilities under the Plans; provided, however, that nothing in
this Article shall be deemed to limit or otherwise prevent the
payment from the Trust of expenses, taxes and other charges as
provided in Article VIII or the return of surplus as provided in
Article VII. The Trust may be terminated by the Company at such
time as all amounts due the Participants and Beneficiaries under
the terms of the Plans are paid.
13.2 PROCEDURE ON TERMINATION. Upon the termination
of the Trust, any and all funds remaining in the Trust shall be
paid to the Company and the Trustee shall promptly take such
action as shall be necessary to transfer such assets to the
Company.
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ARTICLE XIV
NON-ALIENATION
14.1 NON-ALIENATION. Except to the extent otherwise
required by law, (i) no amount payable to or in respect of any
Participant or Beneficiary at any time under the Trust shall be
subject in any manner to alienation by anticipation, sale,
transfer, assignment, bankruptcy, pledge, attachment, charge or
encumbrance of any kind, and any attempt to so alienate, sell,
transfer, assign, pledge, attach, charge or otherwise encumber
any such amount, whether presently or thereafter payable, shall
be void; and (ii) the Trust Fund shall in no manner be liable
for or subject to the debts or liabilities of any Participant or
Beneficiary.
ARTICLE XV
COMMUNICATIONS
15.1 TO THE COMPANY. Communications to the Company
shall be addressed to the Company at its office at 11333
McCormick Road, Hunt Valley, Maryland 21031, attention Vice
President of Human Resources and Quality; provided, however,
that upon the Company's written request, such communications
shall be sent to such other address and or addressee as the
Company may specify.
15.2 TO THE TRUSTEE. Communications to the Trustee
shall be addressed to it at ;
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provided, however, that upon the Trustee's written request, such
communications shall be sent to such other address as the
Trustee may specify.
15.3 RECEIPT REQUIRED. No communication shall be
binding on the Trustee until it is received by the Trustee, and
no communication shall be binding on the Company until it is
received by the Company.
15.4 COMPANY ACTIONS AND TRUSTEE RELIANCE. Any action
of the Company pursuant to this Trust Agreement, including all
orders, requests, directions, instructions, approvals and
objections of the Company to the Trustee, shall be in writing
signed on behalf of the Company by any duly authorized officer
of the Company. The Trustee may rely on, and will be fully
protected with respect to any such action taken or omitted in
reliance on, any information, order, request, direction,
instruction, approval, objection and list delivered to the
Trustee by the Company or failure to act due to lack of receipt
of direction.
15.5 COMPANY DESIGNEES. The Company may designate
individuals or committees to act on its behalf for purposes of
some or all of the provisions of this Trust Agreement. Such
individuals or committees and their respective authorities and
powers under this Agreement shall be designated by the Company
in writing to the Trustee. Their authority shall continue
until revoked in writing by the Company and received by the
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Trustee. The Trustee shall incur no liability for failure to
act on such individuals' or committees' instructions without
written designation from the Company.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.1 GOVERNING LAW; SUCCESSORS. This Trust Agreement
shall be governed by and construed in accordance with the laws
of the State of Maryland applicable to contracts made and to be
performed therein. It shall be binding upon and inure to the
benefit of the Company and the Trustee and their respective
successors and assigns.
16.2 HEADINGS. All Article and Section headings
herein have been inserted for convenience of reference only and
shall in no way modify, restrict or affect the meaning or
interpretation of any of the terms or provisions of this Trust
Agreement.
16.3 MERGER PROVISION. This Trust Agreement is
intended as a complete and exclusive statement of the agreement
of the parties hereto, and supersedes all previous agreements or
understandings among them.
16.4 TRUSTEE SUCCESSORS. The term "Trustee" shall
include any successor trustee. If a Trustee is a bank or trust
company, any corporation resulting from any merger,
consolidation or conversion to which such bank or trust company
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may be a party, or any corporation otherwise succeeding
generally to all or substantially all of the assets or business
of such bank or trust company, shall be the successor to it as
Trustee hereunder without the execution of any instrument or any
further action on the part of any party hereto or any
Participant or Beneficiary hereunder.
16.5 SEVERABILITY. If any provision of this Trust
Agreement shall be invalid and unenforceable, the remaining
provisions hereof shall continue to be effective.
16.6 PARTICIPANT AND BENEFICIARY STATUS. Any
reference hereunder to a Participant shall expressly be deemed
to include, where relevant, a Beneficiary of such Participant
duly designated under the terms of a Plan. A Participant shall
cease to have such status once all amounts due him or her under
the Plans have been paid.
16.7 GENDER AND PLURAL. Whenever used herein, and to
the extent appropriate, the masculine, feminine or neuter gender
shall include the other two genders, the singular shall include
the plural and the plural shall include the singular.
16.8 COUNTERPARTS. This Trust Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be the original, and said counterparts shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, this Trust Agreement has been duly
executed by the parties hereto effective as of the day and year
first above written.
ATTEST/WITNESS: PHH CORPORATION
By: (SEAL)
Print Name:
Date:
, Trustee
By: (SEAL)
Print Name:
Date:
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SCHEDULE A
TO
PHH CORPORATION
AMENDED AND RESTATED
DEFERRED COMPENSATION TRUST AGREEMENT
Assumptions for Valuation of Plan Benefits
The assumptions set forth below shall be used for
purposes of determining the Accrued Benefits funding amount
required to be paid to the Trustee under Section 1.4 of the
Trust Agreement upon the occurrence of a Change in Control or
Potential Change in Control (as therein defined):
Item Assumption
Form of Benefit Payments Straight life annuity, except elected
form for benefits in pay
status.
Commencement of Benefits Greater of age 55 or age on
(other than benefits in the second anniversary date
pay status) of the Change in Control or
Potential Change in Control.
Discount Rate (for Adjusted federal long-term
determination of present rate determined under
value of future benefits) Section 382(f)(2) (or any
successor provision) of the
Internal Revenue Code of
1986, as amended, with
respect to ownership changes
occurring in the month of
the Change in Control or the
Potential Change in Control.
Interest Rate (for Same as Discount Rate.
projecting future earnings
on trust assets)
Mortality 1983 Basic Group Annuity
Mortality Table projected
to 1996.
Turnover and Preretirement None.
Deaths
Forfeitures None.
Compensation Scale (for Increasing at the rate of
determination of Final six percent (6%) per year
Average Compensation used to assumed benefit commence-
to compute future amount of ment date, except for accrued
Supplemental Retirement benefits in pay status.
Benefit accrued as of date
of Change in Control or
Potential Change in Control)
<PAGE>
Exhibit (11)
PHH CORPORATION AND SUBSIDIARIES
INFORMATION USED IN THE COMPUTATION OF PRIMARY AND
FULLY-DILUTED EARNINGS PER SHARE
FOR THE YEARS ENDED APRIL 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net income -- as reported $ 64,558,000 $ 56,417,000 $ 49,979,000
Weighted average number of shares outstanding 17,371,000 17,006,000 16,892,000
Give effect to the exercise of dilutive options determined
under the treasury stock method 342,000 307,000 136,000
Number of shares used in the computation of primary
earnings per share 17,713,000 17,313,000 17,028,000
Reflect the quarter-end market price when greater than the
average market price during the respective quarter 28,000 44,000 72,000
Number of shares used in the computation of fully diluted
earnings per share 17,741,000 17,357,000 17,100,000
AMOUNTS PER SHARE:
Primary $ 3.64 $ 3.26 $ 2.94
Assuming full dilution $ 3.64 $ 3.25 $ 2.92
</TABLE>
<PAGE>
Exhibit (12)
PHH CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended April 30
<S> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990
Income from continuing operations
before income taxes $ 109,796 $ 94,238 $ 83,117 $ 77,759 $ 89,698
Add:
Interest expense 162,108 193,935 237,058 302,853 352,469
Interest portion of rentals* 9,088 8,456 8,665 7,796 6,251
Earnings available for fixed charges $ 280,992 $ 296,629 $ 328,840 $ 388,408 $ 448,418
Fixed charges:
Interest expense $ 162,108 $ 193,935 $ 237,058 $ 302,853 $ 352,469
Interest portion of rentals* 9,088 8,456 8,665 7,796 6,251
$ 171,196 $ 202,391 $ 245,723 $ 310,649 $ 358,720
Ratio of earnings to fixed charges 1.64 1.47 1.34 1.25 1.25
</TABLE>
*Amounts reflect a one-third portion of rentals, the portion deemed
representative of the interest factor.
Note: The interest included in fixed charges consists of the amounts identified
as interest expense in the Consolidated Statements of Income, the
substantial portion of which represents interest on debt incurred to
finance leasing and mortgage banking activities, as well as the interest
costs associated with home relocation services which are ordinarily
recovered through direct billings to clients and are included with
"Costs, including interest, of carrying and reselling homes" in the
Consolidated Financial Statements.
<PAGE>
Exhibit (21)
SUBSIDIARIES OF REGISTRANT
PHH Corporation owns 100% of PHH Holdings Corporation. All other companies
(except those formed under Ontario or Canadian federal law, which are owned
100% directly by PHH Corporation) are owned 100% either directly or indirectly
by PHH Holdings Corporation (a Maryland corporation).
PHH Vehicle Management Services Corporation (a Maryland corporation)
NTS, Inc. (a Maryland corporation)
PHH Vehicle Management Services Inc. (a Canadian corporation)
PHH Vehicle Management Services Limited (a United Kingdom corporation)
PHH Homequity Corporation (a Delaware corporation)
PHH Fantus Corporation (a Maryland corporation)
PHH Homequity Inc. (an Ontario corporation)
PHH Homequity Limited (a United Kingdom corporation)
PHH US Mortgage Corporation (a New Jersey corporation)
PHH Deutschland, Inc. (a Maryland corporation)
PHH Europe PLC (a United Kingdom corporation)
PHH Network Services S.A. de C.V. (a Mexican corporation)
The names of 20 consolidated multiple subsidiaries wholly-owned directly
or indirectly by the registrant have been omitted. All such subsidiaries
operate in the United States and all are engaged in providing financing for
clients' leased vehicle and truck fleets. Other particular subsidiaries have
been omitted because in the aggregate they would not constitute a significant
subsidiary.
<PAGE>
PHH CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of this 19th day of April, 1993,
that the undersigned directors and officers of PHH Corporation, a Maryland
corporation with offices at 11333 McCormick Road, Hunt Valley, Maryland 21031
(the "Corporation"), hereby constitute and appoint Robert D. Kunisch, Eugene A.
Arbaugh, Samuel H. Wright and Gordon W. Priest, Jr., and each of them, the true
and lawful agents and attorneys-in-fact of the undersigned, with full power of
substitution and with full power and authority in said agents and attorneys-in-
fact, and in any one or more of them, to sign for the undersigned as director
and/or officer of the Corporation any registration statement of the Corporation
under the Securities Act of 1933 relating to the Corporation's equity or debt
securities to be issued in one or more series from time-to-time, any report
filed pursuant to Section 13 under the Securities Exchange Act of 1934, any
other registration or filing with the Securities and Exchange Commission,
Washington, D.C., or any other federal governmental agency, or any registration
or filing with any state or local jurisdiction within the United States or any
foreign jurisdiction, and any exhibits or amendments to any such SEC or federal
registration statement, report or filing, or state, local, or foreign
registration or filing (including post-effective amendments), hereby ratifying
and confirming all acts taken by such agents and attorneys-in-fact, or any one
or more of them, as herein authorized.
<TABLE>
<S> <C> <C>
JAMES S. BEARD Director
James S. Beard
ANDREW F. BRIMMER Director
Andrew F. Brimmer
GEORGE L. BUNTING, JR. Director
George L. Bunting, Jr.
BARBARA S. FEIGIN Director
Barbara S. Feigin
ALAN P. HOBLITZELL, JR. Director
Alan P. Hoblitzell, Jr.
PAUL X. KELLEY Director
Paul X. Kelley
THOMAS V. KING Director
Thomas V. King
L. PATTON KLINE Director
L. Patton Kline
FRANCIS P. LUCIER Director
Francis P. Lucier
KENT C. NELSON Director
Kent C. Nelson
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ALEXANDER B. TROWBRIDGE Director
Alexander B. Trowbridge
HARRY K. WELLS Director
Harry K. Wells
ROBERT D. KUNISCH Director, Chairman of
the Board, President &
Robert D. Kunisch Chief Executive Officer
ROY A. MEIERHENRY Senior Vice President &
Roy A. Meierhenry Chief Financial Officer
NAN A. GRANT Controller
Nan A. Grant
</TABLE>
