<PAGE>
PHH CORPORATION 11333 MCCORMICK ROAD
HUNT VALLEY, MARYLAND 21031
PHH
July 17, 1995
To the Stockholders:
You are invited to attend the Annual Meeting of Stockholders of PHH
Corporation, which will be held on Monday, August 21, 1995, at 10 o'clock a.m.
(E.D.T.), at the PHH Corporation Headquarters Building, 11333 McCormick Road,
Hunt Valley, Maryland 21031. The accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement describe in detail the matters to be
considered and acted upon, and you should read such material carefully.
We hope you will be able to attend the meeting, but, if you cannot do so,
it is important that your shares be represented. ACCORDINGLY, WE URGE YOU TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY. You may, of course,
withdraw your proxy if you attend the meeting and choose to vote in person.
Sincerely yours,
ROBERT D. KUNISCH
CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE OFFICER
AND PRESIDENT
<PAGE>
PHH CORPORATION 11333 MCCORMICK ROAD
HUNT VALLEY, MARYLAND 21031
PHH
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 1995
To the Stockholders:
The Annual Meeting of Stockholders of PHH Corporation (the "Company") will
be held at the PHH Corporation Headquarters Building, 11333 McCormick Road, Hunt
Valley, Maryland 21031, on Monday, August 21, 1995, at 10 o'clock a.m. (E.D.T.),
for the following purposes:
1. To elect four Group C Directors, one Group A Director and one Group B
Director of the Company, to hold office for terms of three years, one year and
two years, respectively, and until their successors are elected and qualified.
2. To act upon such other matters as may properly come before the meeting.
You are entitled to vote all shares of common stock of the Company
registered in your name at the close of business on June 23, 1995, the record
date fixed for the determination of the stockholders entitled to notice of and
to vote at the meeting. IF YOU CANNOT PERSONALLY ATTEND THE MEETING, WE URGE YOU
TO SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID ENVELOPE
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
By Order of the Board of Directors,
EUGENE A. ARBAUGH
Secretary
July 17, 1995
<PAGE>
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is being sent to the stockholders of PHH Corporation
(the "Company"), 11333 McCormick Road, Hunt Valley, Maryland 21031
(410-771-3600) on approximately July 17, 1995, in connection with the
solicitation of proxies by the Company to be used at the Annual Meeting of
Stockholders which will be held on August 21, 1995 (the "Annual Meeting"). The
solicitation of proxies will generally be by mail, and in some instances,
solicitation may be made by telephone or facsimile, the cost of which will be
borne by the Company. The Company will supply proxies and proxy materials to
brokerage houses and other custodians, nominees and fiduciaries for transmission
to the beneficial owners of its stock, and the Company may reimburse them for
reasonable out-of-pocket and clerical expenses in so doing. The Company also has
retained Georgeson & Company, Inc., to aid in the solicitation of proxies and to
verify certain records related to the solicitation at a cost estimated to be
$8,000 plus expenses.
Any proxy given pursuant to this solicitation may be revoked by the
stockholder at any time prior to exercise of the proxy. Such right of revocation
is not limited or subject to compliance with any formal procedure.
As of June 23, 1995, the Company had issued and outstanding 17,040,394
shares of Common Stock. Each such outstanding share entitles the holder of
record thereof at the close of business on that date to one vote at the meeting
or any adjournment thereof. The shares represented by all properly executed
proxies will be voted in accordance with the terms thereof. The election of
Directors requires a plurality of the votes cast with a quorum present. For
purposes of the election of Directors, abstentions and broker non-votes are not
considered to be votes cast and have no effect on the plurality vote required
for the election of Directors.
It is the policy of the Company that all stockholder votes, whether by
proxy or in person, will be handled in a manner that protects individual
stockholder voting privacy. Only the proxy solicitor, independent tabulator and
the few other persons engaged in the receipt and tabulation of proxies and
ballots have access to them and such persons are required to keep all voting
information confidential. Under the policy, no vote of any individual
stockholder will be disclosed to the Company except when required by law, when
disclosure is voluntarily made or requested by a stockholder, in certain
circumstances in a proxy contest, or when there is a bona fide dispute as to the
authenticity or tabulation of votes.
ELECTION OF DIRECTORS
The Company's Charter and By Laws provide for a classified Board of
Directors consisting of 12 Directors to serve in three groups: Group A, Group B
and Group C.
At the meeting, four Group C Directors will be elected to hold office for a
three-year term and until their successors are elected at the 1998 Annual
Meeting of Stockholders. In addition, Alan P. Hoblitzell, Jr., will be elected
as a Group A Director to hold office for a one-year term and until his successor
is elected at the 1996 Annual Meeting of Stockholders, and Anne M. Tatlock will
be elected as a Group B Director to hold office for a two-year term and until
her successor is elected at the 1997 Annual Meeting of Stockholders. Each of the
nominees named below for election is currently a Director and, in the case of
the Group C Directors, was elected at the 1992 Annual Meeting of Stockholders.
Mr. Hoblitzell, a Group A Director, was re-elected to the Board of Directors in
January 1995 to fill the vacancy created by the resignation of Barbara S.
Feigin. Mr. Hoblitzell had previously served as a Director from 1970 to 1994.
Ms. Tatlock, a Group B Director, was elected to the Board of Directors in April
1995 to fill a vacancy created by an increase in the number of Directors.
Barbara S. Feigin, who served as a Director since 1992, resigned from the Board
of Directors effective January 2, 1995. Management does not expect that any
nominee will be unable to serve as a Director, but if that should occur for any
2
<PAGE>
reason prior to the meeting, the proxy holders reserve the right to vote for
another person of their choice. The nominees for election as Group C Directors,
and the nominees for election as a Group A Director and a Group B Director, are
as follows:
Group C Directors to be Elected.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
<S> <C>
JAMES S. BEARD, 54 Vice-President of Caterpillar, Inc., a manufacturer of earth-moving
equipment, since 1990. Director and President of Caterpillar Financial
Services Corporation, a wholly owned subsidiary of Caterpillar, Inc.,
Nashville, Tennessee, and its predecessor, Caterpillar Leasing Co., from
1984 to present. Director of the Company since 1992; member of the Audit
and Finance Committees.
L. PATTON KLINE, 66 Vice Chairman of Marsh & McLennan Incorporated, an insurance services
company, New York, New York, from 1985 to 1988. Director of Marsh &
McLennan Companies, Inc., from 1975 to 1988 and President from 1980 to
1984; President and Chairman of Marsh & McLennan, Inc., from 1975 to 1980;
Director of Utilicorp United. Director of the Company since 1983; Chairman
of the Compensation Committee.
FRANCIS P. LUCIER, 67 Chairman of the Board of Hartland & Co., a pension finance consulting
company, Cleveland, Ohio, since 1989. Management consultant since 1984.
Chairman of the Board of Micom Systems, Inc., from January 1988 until its
sale in September 1988. Chairman of the Board and Chief Executive Officer
of Mohawk Data Sciences Corporation, a manufacturer of computer hardware
and software systems, from 1984 to 1985. Chairman of the Board of The
Black & Decker Corporation from 1979 to 1984 and President from 1972 to
1979. Director of Beckman Instruments, Inc., and Miami Subs Corporation.
Director of the Company since 1973; Chairman of the Nominating Committee
and member of the Compensation Committee.
KENT C. NELSON, 57 Chairman of the Board and Chief Executive Officer of United Parcel Service
of America, Inc., a consolidated parcel delivery company, Atlanta,
Georgia, since 1989; Vice Chairman in 1989, Executive Vice President from
1986 to 1989 and Director and Senior Vice President from 1983 to 1985.
Director of the Company since 1989; Chairman of the Finance Committee and
member of the Nominating Committee.
</TABLE>
Group A Director to be Elected.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
<S> <C>
ALAN P. HOBLITZELL, JR., 64 Executive Vice President and Chief Financial Officer of The Ryland Group,
Inc., a home-building services company, Columbia, Maryland, from 1991 to
1994. Chairman of the Board and Chief Executive Officer of MNC Financial,
Inc. from 1983 to 1990. Director of Fidelity and Deposit Company of
Maryland. Director of the Company from 1970 to 1994 and re-elected in
1995; member of the Finance Committee.
</TABLE>
3
<PAGE>
Group B Director to be Elected.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
<S> <C>
ANNE M. TATLOCK, 56 President of Fiduciary Trust Company International, an investment firm,
New York, New York, since 1994; Executive Vice President from 1990 to
1994, and Director from 1989 to present. Director of American General
Corp. Director of the Company since 1995; member of the Audit and Finance
Committees.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE
PROPOSAL TO ELECT ALL GROUP C DIRECTORS AND, IN ADDITION, ALAN P. HOBLITZELL,
JR., AS A GROUP A DIRECTOR AND ANNE M. TATLOCK AS A GROUP B DIRECTOR. APPROVAL
OF THE ELECTION OF THESE DIRECTORS REQUIRES THE AFFIRMATIVE VOTE OF A PLURALITY
OF THE SHARES OF THE COMPANY'S COMMON STOCK CAST WITH A QUORUM PRESENT.
CONTINUING DIRECTORS. The balance of the current 12-member Board of
Directors consists of three Group A Directors and three Group B Directors, none
of whom are nominees for election at the meeting and all of whom will continue
in office after the meeting for the terms shown below. All of the Group A
Directors listed below were elected at the 1993 Annual Meeting of Stockholders,
and all of the Group B Directors listed below were elected at the 1994 Annual
Meeting of Stockholders.
Group A Directors -- Term expiring at the 1996 Annual Meeting.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
<S> <C>
GEORGE L. BUNTING, JR., 55 President, Bunting Management Group, a financial services firm, since
1991. Formerly, Chairman of the Board and Chief Executive Officer of the
Noxell Corporation, a wholly owned subsidiary of The Procter & Gamble
Company, a proprietary drug, toiletries and cosmetics manufacturer, Hunt
Valley, Maryland, from 1986 to 1990. Director of Crown Central Petroleum
Company, Mercantile Bankshares Corporation and USF&G Corporation. Director
of the Company since 1989; member of the Audit, Compensation, Executive
and Nominating Committees.
DONALD J. SHEPARD, 48 Chairman of the Board of AEGON USA, Inc., a holding company owning
insurance and insurance-related companies, since 1992; President and Chief
Executive Officer since 1989, Executive Vice President and Chief Operating
Officer from 1985 to 1989. Member of the Executive Board of AEGON N.V.
since 1992. Director of Mercantile Bankshares Corporation. Director of the
Company since 1993; member of the Compensation, Executive and Finance
Committees.
ALEXANDER B. TROWBRIDGE, 65 President of Trowbridge Partners, Inc., a consulting firm, Washington,
D.C., since 1990. President of the National Association of Manufacturers
from 1980 to 1990. Director of New England Mutual Life Insurance Co., WMX
Technologies Inc., The Rouse Company, SunResorts Inc., Harris Corp., The
Sun Co., The Gillette Company, ICOS Corporation, and the Warburg-Pincus
Counselors Funds. Director of the Company since 1984; member of the
Nominating Committee.
</TABLE>
4
<PAGE>
Group B Directors -- Term expiring at the 1997 Annual Meeting.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER INFORMATION
<S> <C>
ANDREW F. BRIMMER, 68 President of Brimmer & Company, Inc., an economic and financial consulting
firm, Washington, D.C., since 1976. Director of BankAmerica Corporation,
Connecticut Mutual Life Insurance Company, BlackRock Investment Income
Trust, Inc., E. I. duPont de Nemours & Company, Gannett Company, Navistar
International Corporation and Airborne Express. Director of the Company
since 1990; member of the Finance Committee.
PAUL X. KELLEY, 66 Vice Chairman of Cassidy and Associates, Inc., a government relations
firm, Washington, D.C., since 1987. Commandant of the United States Marine
Corps from 1983 to 1987. Director of Allied-Signal, Inc., GenCorp, Inc.,
The Wackenhut Corporation, The Holden Group, UST, Inc., Sturm, Ruger &
Company, Inc., Saul Centers, Inc., London Insurance Group and London Life
Insurance Company of London, Ontario. Director of the Company since 1987;
Chairman of the Audit Committee and member of the Executive and Nominating
Committees.
ROBERT D. KUNISCH, 54 Chairman of the Board of the Company since 1989, Chief Executive Officer
since 1988, President since 1984. Formerly Chief Operating Officer from
1984 to 1987, President of PHH Homequity Corporation from 1976 to 1984.
Director of Mercantile Bankshares Corporation, CSX Corporation and
GenCorp, Inc. Director of the Company since 1984; Chairman of the
Executive Committee.
</TABLE>
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors held eight meetings during the fiscal year ended
April 30, 1995. All Directors attended at least 75% of the aggregate number of
meetings of the Board and the Committees on which they served during the fiscal
year. Among the standing committees of the Board of Directors of the Company are
the Audit, Compensation, Finance and Nominating Committees.
The Audit Committee, comprised of Messrs. Kelley (Chairman), Beard, Bunting
and Ms. Feigin, held three meetings during the fiscal year ended April 30, 1995.
Ms. Tatlock was appointed to the Audit Committee effective at the June 1995
meeting. The duties of the Audit Committee include: making recommendations
concerning the appointment of the Company's independent auditors, their fees and
the scope of their audits; approving the performance of certain non-audit
services; conferring with the independent auditors; receiving and reviewing
reports of the independent auditors; and determining the duties and
responsibilities of the Company's internal auditing staff and monitoring the
adequacy of the Company's internal controls.
The Compensation Committee, comprised of Messrs. Kline (Chairman), Bunting
and Lucier, held three meetings during the fiscal year ended April 30, 1995. Mr.
Shepard was appointed to the Compensation Committee effective at the June 1995
meeting. The duties of the Compensation Committee include: reviewing and
approving the policies concerning compensation of the directors and officers;
making recommendations concerning compensation of Company officers; reviewing
and approving performance targets and awards under certain incentive plans;
administering the Company's director and executive compensation plans and
appointing members of the Employee Benefits Committee which administers the
Company's pension, 401(k) and health benefit plans.
5
<PAGE>
The Finance Committee, comprised of Messrs. Nelson (Chairman), Beard,
Brimmer, Hoblitzell and Shepard, held five meetings during the fiscal year ended
April 30, 1995. Ms. Tatlock was appointed to the Finance Committee effective at
the June 1995 meeting. The duties of the Finance Committee include: reviewing
and monitoring policies underlying the financial plans and structure of the
Company; reviewing proposed capital plans and budgets; establishing and
maintaining a dividend policy, including such elements as a proper dividend
payout ratio; and reviewing proposed major financing activities and all
offerings of equity securities.
The Nominating Committee, comprised of Messrs. Lucier (Chairman), Bunting,
Kelley, Nelson and Trowbridge, held four meetings during the fiscal year ended
April 30, 1995. The duties of the Nominating Committee include: selecting and
submitting to the Board for its approval qualified candidates to fill vacancies
on the Board; reviewing the slate of directors to be elected at the Company's
annual stockholders' meeting; receiving and reviewing the qualifications of
candidates for key corporate offices; acting as an advisory board to management
concerning manpower planning and reviewing policies concerning the structure of
the Board of Directors. The Nominating Committee will consider nominees
suggested by stockholders for election to the Board of Directors.
Recommendations by stockholders should be forwarded to the Secretary of the
Company and should identify the nominee by name and provide pertinent
information concerning the nominee's background and experience.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company received, in fiscal year
1995, a $30,000 annual retainer fee plus $1,000 for each Board or Committee
meeting attended, and each Committee Chairman received an additional $3,000
annual fee. One-third of the annual retainer was paid in the Company's Common
Stock and deferred under the Directors Deferred Stock Retirement Plan (the
"Mandatory Deferral"). Directors may elect to have all or any part of the
remaining portion of the annual retainer as well as the meeting fees and
Committee Chairman retainer fee deferred either under the Company's Directors
Deferred Compensation Plan in one or more mutual funds or under the Directors
Deferred Stock Retirement Plan in the Company's Common Stock. Under the terms of
the Directors Deferred Stock Retirement Plan, the Company matched, in shares of
PHH Common Stock, a portion of the Directors' Mandatory Deferrals for fiscal
year 1995 based on the Company's achievement of the threshold minimum earnings
per share targets established by the Board of Directors at the beginning of
Fiscal Year 1995. Under both Plans, amounts elected to be deferred are not
includable in a Director's gross income for Federal income tax purposes until
actually distributed to the Director.
Non-employee Directors are also eligible to receive stock options pursuant
to the PHH Corporation Outside Directors Stock Option Plan (the "Directors
Option Plan"). Options to acquire shares of the Company's Common Stock have been
granted to the Directors pursuant to the Directors Option Plan which was
approved by stockholders and became effective in August of 1990. The Directors
Option Plan is administered by the Compensation Committee of the Board of
Directors and stock options representing an aggregate of not more than 100,000
shares of Common Stock are available to be granted under the Directors Option
Plan.
Options to purchase 1,500 shares of Common Stock are granted to each
Director under the Directors Option Plan upon the first anniversary of the
Director's election to the Board. In addition, on May 1 of each year, each
Director is automatically granted an option to purchase 500 shares of Common
Stock. The option exercise price is the fair market value of the shares of
Common Stock represented by the stock option on the date of grant. The option
may not be exercised prior to the first anniversary of the date of grant and may
not be exercised after the earlier of (a) 10 years following the date of grant
or (b) one year following the date the Director ceases to be a director;
provided that a stock option shall become immediately exercisable in full upon
either the retirement of the Director with the consent of the Board or the death
or permanent disability of the Director.
Payment of the option exercise price shall be made at the time the option
is exercised in cash or shares of the Company's Common Stock owned by the
optionee, or in a combination of cash and such owned shares. When
6
<PAGE>
the Company's Common Stock is used in full or partial payment of the exercise
price, it is valued at its fair market value on the date of option exercise.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The only persons known to the Company to be the beneficial owners of more
than five percent of the Company's Common Stock are:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
<S> <C> <C> <C>
PHH Corporation Fund Asset Management, Inc.
Common Stock 800 Scudders Mills Road 1,715,000 10.16%(1)
Plainsboro, New Jersey 08536
PHH Corporation Invesco Capital Management, Inc.
Common Stock 1315 Peachtree Street N.E. 1,485,650 8.80%(2)
Atlanta, Georgia 30309
PHH Corporation PHH Corporation 873,899 5.15%(3)
Common Stock Employee Investment Plan
11333 McCormick Road
Hunt Valley, Maryland 21031
</TABLE>
(1) Information reported is derived from Form 13F of Fund Asset Management,
Inc., as filed with the Securities and Exchange Commission on April 24,
1995. As reported in Form 13F, the person filing the statement had (i)
shared dispositive power as to 1,715,000 shares and (ii) sole voting power
as to 1,715,000 shares. As reported in Form 13F, the information is given as
of March 31, 1995.
(2) Information reported is derived from Form 13F of Invesco Capital Management,
Inc., as filed with the Securities and Exchange Commission on May 10, 1995.
As reported in Form 13F, the person filing the statement had (i) sole
dispositive power as to 1,269,650 of such shares and shared dispositive
power as to 216,000 of such shares, (ii) sole voting power as to 689,800 of
such shares, (iii) shared voting power as to 346,600 of such shares and (iv)
no voting power as to 449,250 of such shares. As reported in Form 13F, the
information is given as of March 31, 1995.
(3) Information reported is derived from Form 13G of PHH Corporation Employee
Investment Plan, as filed with the Securities and Exchange Commission on
June 29, 1995. As reported in Form 13G, the person filing the statement had
shared dispositive power and shared voting power as to all of the shares,
but disclaimed beneficial ownership to all of the shares. The shares
represent the number of shares allocated to the accounts of participants in
the PHH Corporation Employee Investment (401(k)) Plan. As reported in Form
13G, the information is given as of June 2, 1995.
COMPLIANCE WITH EXCHANGE ACT FILING REQUIREMENTS
Section 16 of the Securities Exchange Act of 1934 requires the Company's
executive officers and Directors, and any persons owning more than 10% of the
Company's common stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and the New York Stock Exchange. In
fiscal year 1995, Alan P. Hoblitzell, Jr., a Director of the Company, was late
in filing a report reflecting his stock ownership in the Company within 10 days
of his re-election as a Director of the Company, but filed such report prior to
the first Board of Directors meeting which he attended after his re-election.
Other than the late report mentioned above, the Company does not know of any
reports that were either not filed or not timely filed.
7
<PAGE>
The following table shows, as of June 2, 1995, the shares of Common Stock
of the Company beneficially owned by all Directors of the Company, by nominees
for director, by each of the executive officers named in the Summary
Compensation Table and by the Directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES AND
NATURE OF
NAME BENEFICIAL OWNERSHIP(A)(B)
<S> <C>
William F. Adler........................................................................ 125,410(f)
Eugene A. Arbaugh....................................................................... 108,044(f)
James S. Beard.......................................................................... 5,055(i)
Andrew F. Brimmer....................................................................... 4,466(i)
George L. Bunting, Jr................................................................... 8,368(i)
Stephen A. Fragapane.................................................................... 123,790(c)(f)
Alan P. Hoblitzell, Jr.................................................................. 3,212(i)
Paul X. Kelley.......................................................................... 5,133(d)(i)
L. Patton Kline......................................................................... 4,832(e)(i)
Robert D. Kunisch....................................................................... 375,173(f)(g)
Francis P. Lucier....................................................................... 5,332(h)(i)
Roy A. Meierhenry....................................................................... 119,214(f)
Kent C. Nelson.......................................................................... 6,314(i)
Donald J. Shepard....................................................................... 2,847(i)
Anne M. Tatlock......................................................................... 500
Alexander B. Trowbridge................................................................. 4,432(i)
All Directors and executive officers as a group (22 persons)............................ 1,133,761(f)
</TABLE>
(a) Except for Mr. Kunisch, who beneficially owns 2.17% of the Company's
outstanding Common Stock, no individual Director, nominee or executive
officer beneficially owns more than 1% of the Company's outstanding Common
Stock. Directors and executive officers as a group beneficially own 6.35% of
the Company's outstanding Common Stock. Except as otherwise indicated, all
beneficial ownership is direct ownership.
(b) Includes shares subject to stock options which may be exercised within 60
days of June 2, 1995, as follows: Mr. Kunisch, 296,920 shares; each other
Director (with the exception of Messrs. Beard, Hoblitzell and Shepard and
Ms. Tatlock), 3,500 shares; Mr. Beard, 3,000 shares; Mr. Shepard, 500
shares; Mr. Adler, 101,950 shares; Mr. Meierhenry, 95,550 shares; Mr.
Fragapane, 97,900 shares; Mr. Arbaugh, 84,600 shares; and all Directors and
executive officers as a group, 901,881 shares.
(c) Includes 20,000 shares which Mr. Fragapane owns jointly with his wife.
(d) Includes 1,001 shares which Mr. Kelley owns jointly with his wife.
(e) Includes 700 shares in an inter vivos trust in which Mr. Kline has a
beneficial interest.
(f) Includes shares allocated to the accounts of participants in the Company's
Employee Investment Plan as of June 2, 1995.
(g) Includes 2,500 shares owned directly by Mr. Kunisch's wife.
(h) Includes 1,000 shares in a pension plan and trust in which Mr. Lucier has a
beneficial interest.
(i) Includes shares deferred under the Directors' Stock Retirement Plan as of
June 2, 1995.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table (the "Summary Compensation Table") sets forth for the
Company's fiscal years ended April 30, 1995, 1994 and 1993, annual and long-term
compensation information as to the Chief Executive Officer and the four other
most highly compensated executive officers of the Company whose salary and bonus
exceeded $100,000 during fiscal year 1995. No stock appreciation rights (SARs)
were granted during fiscal years 1993 to 1995, nor have any SARs been granted at
any time in prior years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND FISCAL COMPENSATION OPTIONS LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (1) (2) (#) PAYOUTS COMPENSATION (3)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Kunisch 1995 $698,462 $395,560 $ 0 30,000 $658,471 $ 6,750
President and Chief Executive 1994 658,462 553,580 0 20,000 359,730 8,283
Officer 1993 620,000 490,003 0 40,000 0 6,690
William F. Adler 1995 319,038 145,168 0 10,000 194,644 7,096
Senior Vice President 1994 294,423 226,860 0 6,000 128,475 9,188
1993 280,000 182,093 0 10,000 0 7,256
Roy A. Meierhenry 1995 314,039 143,743 2,641 10,000 194,644 7,096
Senior Vice President 1994 289,615 205,597 2,491 6,000 111,345 8,986
and Chief Financial 1993 280,000 199,761 1,686 10,000 0 7,287
Officer
Stephen A. Fragapane 1995 310,000 139,750 7,927 6,000 208,548 8,215
Senior Vice President 1994 309,615 243,139 12,815 6,000 128,475 28,516
1993 300,000 209,046 16,094 12,000 0 234,378
Eugene A. Arbaugh 1995 274,038 154,643 8,202 10,000 150,849 7,096
Senior Vice President 1994 248,731 219,195 6,766 8,000 68,520 8,814
1993 217,000 141,777 4,282 8,000 0 7,151
</TABLE>
(1) For fiscal years 1993 through 1995, perquisites and other personal benefits
to the named executive officers were less than either $50,000 or 10% of the
total annual Salary and Bonus reported for the named executive officers, and
therefore, information has not been included.
(2) Amounts shown represent reimbursement for taxes paid by the named executive
officers in connection with the use of a company-provided automobile and, in
addition, in the case of Mr. Fragapane for fiscal years 1993 through 1995,
in connection with the payment of relocation expenses.
(3) Amounts shown represent the value of the Company's matching cash
contribution to the PHH Corporation Employee Investment (401(k)) Plan and,
in addition, in the case of Mr. Fragapane, a relocation payment of $1,465 in
fiscal year 1995, $19,301 in fiscal year 1994 and $227,225 in fiscal year
1993.
9
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal year
1995 to the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM (10 YEARS) GRANT DATE
INDIVIDUAL GRANTS (4) (5) VALUE (5) (6)
NO. OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEE PRICE GRANT DATE GRANT DATE
GRANTED IN FY ($/SHARE) EXPIRATION PRESENT PRESENT
NAME (1)(#) 1995(2) (3) DATE 5% 10% VALUE-5 YRS. VALUE-10 YRS.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R.D. Kunisch...... 30,000 12.90% $ 35.50 05/02/04 $ 669,773 $ 1,697,336 $ 221,100 $ 311,400
W.F. Adler........ 10,000 4.30 35.50 05/02/04 223,258 565,779 73,700 103,800
R.A. Meierhenry... 10,000 4.30 35.50 05/02/04 223,258 565,779 73,700 103,800
S.A. Fragapane.... 6,000 2.60 35.50 05/02/04 133,955 339,467 44,220 62,280
E.A. Arbaugh...... 10,000 4.30 35.50 05/02/04 223,258 565,779 73,700 103,800
All Stockholders
(7)............. N/A N/A N/A N/A 388,212,029 983,655,917 N/A N/A
</TABLE>
(1) The stock options were granted for a ten-year term under the PHH Corporation
Amended and Restated Stock Compensation Plan (the "Stock Option Plan"). The
stock options were granted on May 2, 1994. The stock options become
exercisable one year after the date of grant, except that in the event of a
change in control (as defined in the Stock Option Plan) the options shall
become immediately exercisable.
(2) Includes options granted to employees which have been canceled due to
termination of employment.
(3) Exercise price equals the market price of the Company's Common Stock at date
of grant.
(4) The 5% and 10% appreciation over 10 years option valuation method assumes a
stock price of $57.83 and $92.08, respectively, at May 2, 2004, the
expiration date of the options granted in fiscal year 1995.
(5) The potential realizable value and grant date present value of options have
been calculated in conformity with Securities and Exchange Commission
regulations, and are not intended to either forecast possible future
appreciation or to provide a true assessment of present option values,
respectively. The Company is not aware of any formula, except for the actual
market price, which will either predict or determine with reasonable
accuracy the future appreciation or present value based on future unknown or
volatile factors. No gain to optionees is possible without stock price
appreciation, which will benefit all stockholders commensurately. A zero
percent gain in stock price appreciation will result in zero dollars for the
optionee.
(6) The present value of options granted has been reported using the
Black-Scholes option pricing model. These values assume: (a) a grant date of
May 2, 1994; (b) an exercise price of $35.50 (the closing market price on
the date of grant); (c) an exercise date of May 2, 1999 and May 2, 2004
based on a five- and ten-year exercise period, respectively; (d) a risk-free
interest rate of 6.63% and 7.03% based on a five- and ten-year exercise
period, respectively; (e) a dividend yield of 3.0%; and (f) volatility of
.17847, resulting in an option pricing value of $7.37 and $10.38 based on a
five- and ten-year exercise period, respectively.
(7) Based on 17,385,223 shares outstanding on May 2, 1994.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table provides information on option exercises in fiscal year
1995 by the named executive officers and the value of such officers' unexercised
options.
<TABLE>
<CAPTION>
NO. OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE APRIL 30, 1995 (#) APRIL 30, 1995 (1)
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Robert D. Kunisch.............. 21,000 $182,200 266,920 30,000 $1,783,650 $ 142,500
William F. Adler............... 4,000 39,000 91,950 10,000 663,938 47,500
Roy A. Meierhenry.............. 4,330 22,733 85,550 10,000 621,706 47,500
Stephen A. Fragapane........... 5,000 7,793 91,900 6,000 630,845 28,500
Eugene A. Arbaugh.............. 5,280 29,040 74,600 10,000 519,312 47,500
</TABLE>
(1) An "In-the-Money" option is an option for which the option price of the
underlying stock is less than the market price at April 30, 1995, and all of
the value shown reflects stock price appreciation since the granting of the
option.
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, OTHER PERIOD UNTIL NON-STOCK PRICE-BASED PLANS (2)(3)
UNITS OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) PAYOUT ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Robert D. Kunisch............ (1) 3 Years $385,000 $770,000 $2,310,000
President and Chief
Executive Officer
William F. Adler............. (1) 3 Years 115,200 230,400 691,200
Senior Vice President
Roy A. Meierhenry............ (1) 3 Years 113,400 226,800 680,400
Senior Vice President
and Chief Financial
Officer
Stephen A. Fragapane......... (1) 3 Years 111,600 223,200 669,600
Senior Vice President
Eugene A. Arbaugh............ (1) 3 Years 99,000 198,000 594,000
Senior Vice President
</TABLE>
(1) Indicates awards under the PHH Corporation Long-Term Incentive Plan for
fiscal years 1995-96-97 ("FY'97 LTI Plan") pursuant to which executives
designated by the Compensation Committee may receive incentive awards based
wholly upon the Company's achievement of specified threshold, target or
maximum levels of financial performance objectives, expressed in terms of
the Company's average annual Return on Beginning Equity ("ROBE"), which are
established by the Committee for the three-fiscal year performance period.
No payments are made under the Plan if the financial performance for the
performance period falls below threshold levels.
(2) Percentages of average annual compensation (determined for the three-fiscal
year performance period) payable to participants upon attainment of targeted
ROBE objectives for the fiscal years 1995-96-97 performance period are as
follows:
<TABLE>
<CAPTION>
Threshold Target Maximum
<S> <C> <C> <C>
President and CEO............................... 55% 110% 330%
Senior Vice Presidents.......................... 36 72 216
</TABLE>
(3) Future payouts, if any, will be calculated on the basis of actual average
salary paid to the executive during the three-year performance period. For
purposes of the above table, estimated future payouts have been calculated
on the basis of the executive's fiscal year 1995 salary shown in the Summary
Compensation Table on page 9.
11
<PAGE>
PENSION PLANS
The Company has a non-contributory Pension Plan for employees providing for
fixed benefits commencing at normal retirement age of 65 (or earlier, with
reduced payments, upon early retirement or disability). The Pension Plan
benefits paid to executives are supplemented by an Excess Benefit Plan, which
provides for the payment to certain executives, commencing at the time benefits
are paid under the Pension Plan, of benefits that would otherwise be paid to
them under the Pension Plan but for certain limitations imposed by the Internal
Revenue Code. The Company also maintains a Supplemental Executive Retirement
Plan (the "SERP") which provides supplemental retirement income benefits for
certain executives commencing as early as age 60 (or earlier, with reduced
payments, upon early retirement or disability) after completing at least five
credited years of executive service.
PENSION TABLE
The following table shows the estimated aggregate benefits payable under
the Pension Plan, the Excess Benefit Plan and the SERP (collectively, the
"Pension Plans") for persons retiring at age 60, calculated on a straight-life
annuity basis under various assumptions as to years of credited service and
final average compensation and without regard to offsets for Social Security
benefits or any benefits payable under former employers' plans.
<TABLE>
<CAPTION>
FINAL AVERAGE YEARS OF CREDITED SERVICE
COMPENSATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
$ 250,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000
300,000 180,000 180,000 180,000 180,000 180,000
350,000 210,000 210,000 210,000 210,000 210,000
400,000 240,000 240,000 240,000 240,000 240,000
450,000 270,000 270,000 270,000 270,000 270,000
500,000 300,000 300,000 300,000 300,000 300,000
550,000 330,000 330,000 330,000 330,000 330,000
600,000 360,000 360,000 360,000 360,000 360,000
650,000 390,000 390,000 390,000 390,000 390,000
700,000 420,000 420,000 420,000 420,000 420,000
750,000 450,000 450,000 450,000 450,000 450,000
800,000 480,000 480,000 480,000 480,000 480,000
1,000,000 600,000 600,000 600,000 600,000 600,000
1,200,000 720,000 720,000 720,000 720,000 720,000
1,400,000 840,000 840,000 840,000 840,000 840,000
</TABLE>
The actual aggregate benefits provided under the Pension Plans to the
executive officers named in the Summary Compensation Table are based upon years
of credited executive service and final average compensation, and are offset by
Social Security benefits and any benefits payable under retirement plans of
former employers acquired by the Company. The maximum aggregate benefit provided
to each of the named executive officers under the Pension Plans is equal to 60%
of the executive officer's Final Average Compensation, assuming he has 15 or
more years of credited executive service. Final Average Compensation for
purposes of computing aggregate benefits payable to the named executive officers
under the Pension Plans is the average, for the five years of executive service
prior to retirement or other termination of employment, of base salary and bonus
as reported under the "Salary" and "Bonus" columns in the Summary Compensation
Table, although the grant-date cash-equivalent value of stock options granted in
1992 in lieu of merit salary increases or annual bonuses is also included. The
Company has entered into Supplemental Executive Retirement Agreements (the
"Supplemental Agreements") with the eight current executives, including the
named executive officers, which establish a floor
12
<PAGE>
for Final Average Compensation and, in some cases, grant additional years of
credited executive service for purposes of the SERP and for purposes of
calculating aggregate benefits under the Pension Plans. Taking into account
these Supplemental Agreements, for purposes of the SERP and for purposes of
calculating aggregate benefits under the Pension Plans, the named executive
officers are deemed to have Final Average Compensation as follows: Mr. Kunisch
$1,110,003; Mr. Adler $462,093, Mr. Meierhenry $479,761; Mr. Fragapane $509,046
and Mr. Arbaugh $358,777. Each of the named executive officers is vested in the
SERP and each of them currently has or is deemed to have at least 15 years of
credited executive service other than Mr. Fragapane who has 9 years of credited
executive service and Mr. Adler who has 11 years of credited executive service.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into Senior Executive Severance Agreements
("Severance Agreements") with eight current executives, including the executive
officers named in the Summary Compensation Table, pursuant to its Senior
Executive Severance Plan originally adopted in 1984 and subsequently amended.
The Company's obligations under each Severance Agreement are triggered if the
executive's employment is terminated either (a) within two years of a change in
control (as defined) either by the Company without cause (as defined) or by the
executive for good reason (as defined) or (b) within the 30-day period following
the first anniversary of a change in control by the executive for any reason
(other than death, disability or normal retirement). Under each Severance
Agreement, the terminated executive would receive a cash severance payment equal
to the sum of (a) three times the highest amount of salary and incentive
compensation (as defined) paid to the executive during any consecutive 12 months
in the three-year period preceding termination, (b) the maximum amount to which
the executive would have been entitled assuming attainment of certain corporate
performance levels (as specified) under the current long-term incentive plans in
which the executive was participating, and (c) the value of three additional
years' worth of retirement benefits. The Severance Agreements also provide for
the continuation for up to three years of health care and life insurance and
certain other benefits, and protect the executives against the assessment of
certain income and excise taxes. In addition, in the event of an actual or
potential change in control, the Company would be required to fund a grantor
trust in an amount sufficient to cover the Company's possible obligations during
the Severance Agreements' two-year employment protection period. The monies in
the trust would revert to the Company if or to the extent such obligations were
not triggered.
For purposes of these Severance Agreements, a change in control would occur
when a third party or group becomes the owner of stock of the Company entitled
to cast 20% or more of general voting power of the Company's stock or where, as
a result of one or more tender offers, mergers, other acquisitions or proxy
contests, a majority of the Board of Directors has changed.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No Director or executive officer of the Company is a director or executive
officer of any other corporation that has a director or executive officer who is
a member of the Compensation Committee of the Company.
13
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of independent outside directors who are not eligible to
participate in any of the executive compensation plans that it administers.
Thomas V. King, who served as a Committee member prior to his retirement from
the Board of Directors of the Company in August, 1994, participated as a
Committee member in decisions relating to executive compensation paid in fiscal
year 1995. George L. Bunting, Jr., who was appointed to the Committee in
February 1995, did not participate as a Committee member in decisions relating
to executive compensation paid in fiscal year 1995, except for approval of the
annual and long-term incentive awards under the incentive plans previously
approved by the Committee.
The Committee is responsible for establishing the Company's executive
compensation philosophy and the compensation of executives in accordance with
that philosophy in a manner designed to attract and retain qualified, motivated
executives and to closely align their financial interests with those of the
Company's stockholders. Prior to the commencement of each fiscal year of the
Company, the Committee reviews the Company's executive compensation philosophy
and strategic business plan performance goals and establishes the executive
compensation structure, the targets for awards under the Company's incentive
plans, and the range of potential individual payments in accordance with that
philosophy and those goals. The Committee considers the recommendations of the
Company's Human Resources Department, the Chief Executive Officer (except with
regard to his own compensation) and outside compensation consultants. The
Committee also reviews the factors on which such recommendations are based,
including previous Company performance and strategic business objectives,
performance of individual executives, and data on executive compensation paid by
similarly situated companies in comparable industries. The Committee reviews
with the Board of Directors on an annual basis the executive compensation
structure and programs, and submits for Board approval its recommendations as to
compensation of executive officers.
Company performance is generally expressed in terms of the Company's return
on beginning equity ("ROBE") for the relevant fiscal year based upon the
Committee's belief that ROBE is the best measure of achieving long-term
shareholder value. ROBE is determined by dividing (a) the Company's net income,
including a deduction for the amount of any incentive to be paid, by (b) the
beginning shareholders' equity for the relevant fiscal year. Individual
executive performance is generally evaluated on the basis of the executive's
attainment of performance objectives identified at the beginning of the fiscal
year. Other measures of Company and individual performance may also be taken
into account; however, except as specifically noted in the description of the
Annual Incentive Plan below, no specific weighting is assigned to any particular
factor.
The competitive nature of the Company's executive compensation is
determined by reference to publicly available data on companies in the business
and financial services industries, including those in the leasing and mortgage
banking industries, and to published executive compensation surveys. The report
of the Company's independent compensation consultants compares this data to the
compensation of the Company's executives in terms of total cash compensation,
financial performance, executive officer stock ownership levels and stock option
grant practices. Nearly one-half of the companies in the S&P Midcap Commercial
Services (Specialized) Index shown in the Stock Performance Chart on page 19 are
included in the Company's comparison group for executive compensation purposes
(the "Comparison Group"). The Committee believes that the companies included in
the Comparison Group are the Company's most direct competitors for executive
talent, and therefore serve as better indicators of competitive levels of
executive compensation than those companies included in the S&P Midcap
Commercial Services (Specialized) Index used in the Stock Performance Chart.
New limits on the deductibility of compensation in excess of $1 million
paid to the Chief Executive Officer and other named executive officers of public
companies under Section 162 of the Internal Revenue Code have been imposed by
the Omnibus Budget Reconciliation Act of 1993. The Company first became subject
to those limitations in fiscal year 1994. The Company's compensation program for
senior executives has both objective
14
<PAGE>
and discretionary elements. While the Committee wishes to maximize deductibility
of certain compensation elements, the Committee does not believe the new tax law
requirements are fully consistent with sound executive compensation policy and
incentives to improve stockholder value. The Committee, therefore, reserves the
right to make additional incentive payments that may not qualify for deduction
if the recipient's compensation exceeds the $1 million limit.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's philosophy is to respond to the interests of stockholders in
the payment of executive compensation, and specifically, to link the interests
of executives to the interests of stockholders. The Company's executive
compensation is structured to (a) align executive compensation with Company and
individual performance, (b) ensure fairness and consistency in executive
compensation in accordance with both competitive market levels and individual
responsibilities and performance, (c) promote flexibility for growth in new
markets and/or services, (d) ensure the maintenance of sound and adequate
financial reporting and accounting controls on executive compensation and (e)
emphasize both short and long-term Company performance.
Consistent with this philosophy, the Company is committed to providing
total executive compensation which attracts and retains executives qualified and
motivated to fulfill the Company's business strategy and to deliver enhanced
stockholder value. Accordingly, the Company has consistently adhered in both
principle and practice to the concept of pay-for-performance and relies heavily
on incentive compensation programs designed to motivate executives to achieve
the Company's short and long-term business objectives.
EXECUTIVE COMPENSATION STRUCTURE
The executive compensation structure consists of salary, annual incentives,
long-term incentives, stock options and other benefits generally available to
all employees. Each component is offered to executives in combinations designed
to meet strategic business objectives and to provide risk-based pay
opportunities which reflect individual and Company performance. Within this
structure, total compensation, including base salary, for individual executives
varies equitably with their individual responsibilities and performance.
BASE SALARY
The base salary is determined in accordance with that paid to persons
holding similar positions in the companies surveyed, including the Comparison
Group companies. In assessing the competitive position of the Company's salaries
for fiscal year 1995, the target level used was the median (50th percentile) of
the companies surveyed, including the Comparison Group companies. Actual
salaries for each position are based on the positioning of base salary within
the competitive range, individual performance in relation to the executive's
responsibilities during the previous year, the value each executive is expected
to contribute to the Company during the next fiscal year and the financial
performance of the operations, as measured by net income, directed by the
executive in relation to that provided for in the annual financial plan for
those operations. In general, the financial performance of the operations
directed by the executives named in the Summary Compensation Table achieved the
goals provided for in the annual financial plan for those operations. The
Committee does not assign a specific weighting to any particular factor, but
rather applies its collective business judgment to recommend for approval by the
full Board of Directors a base salary that it deems fair to the Company and its
stockholders. For fiscal year 1995, actual base salaries paid to the executive
officers named in the Summary Compensation Table, other than the Chief Executive
Officer, were slightly less than the median (50th percentile) of competitive
rates, based on the factors outlined above.
ANNUAL INCENTIVE PROGRAM
Annual incentive awards are targeted between the 50th and 75th percentile
of competitive incentive awards paid to persons holding similar positions in the
companies surveyed, including the Comparison Group companies, and vary with
measures of Company and individual performance.
15
<PAGE>
Executives designated by the Committee are eligible to participate in an
annual cash incentive plan (the "Annual Incentive Plan") which is designed both
to encourage the achievement of the Company's short-term strategic business
objectives and to recognize specific contributions by executives to the
attainment of the Company's performance goals by providing direct cash
incentives. The level of targeted payout for executive officers is expressed as
a percentage of base salary, which increases for higher positions within the
Company, thereby placing a greater percentage of compensation at risk for those
with greater responsibilities.
The annual incentive award to executives is based primarily on the
attainment of specific business performance objectives, expressed in terms of
the Company's ROBE (the "formula-derived award"), which are established by the
Committee prior to the commencement of the relevant award period. Before any
formula-derived award can be paid out under the Annual Incentive Plan, the
Company must achieve a threshold minimum ROBE, with increasing amounts to be
awarded if the Company achieves or exceeds the target ROBE. A small portion of
the formula-derived award is attributable to the Committee's collective
subjective evaluation of individual performance provided the Company's net
income targets in addition to ROBE targets have been attained. For fiscal year
1995, the Company achieved a ROBE of 14.38% and net income of $71.7 million,
which was between the threshold minimum and the target objectives under the
Annual Incentive Plan and resulted in a formula-derived award to the named
executive officers equal to 69% of target under the Fiscal Year 1995 Annual
Incentive Plan. The Chief Executive Officer and, with respect to the Chief
Executive Officer's award, the Committee without any input from the Chief
Executive Officer, exercises discretionary authority under the Annual Incentive
Plan to adjust individual formula-derived awards based on his or its subjective
determination of individual performance and the level of ownership of the
Company's Common Stock. No particular weighting is accorded to any one factor;
the Committee instead applies its collective subjective business judgment to
reach a decision on compensation that it deems fair to the Company and its
stockholders.
LONG-TERM INCENTIVE PROGRAM
The Company's long-term incentive program consists of both long-term
incentive awards based on the Company's performance over the three-fiscal year
period designated by the Committee and stock options. Awards and stock option
grants to executives under the long-term incentive program are targeted between
the 50th and 75th percentile of incentive awards paid to persons holding similar
positions in the companies surveyed, including the Comparison Group companies.
Awards to executives under the long-term incentive plan vary with measures of
Company and individual performance. Stock option grants are based upon position
level and individual performance.
LONG-TERM INCENTIVE PLAN
Executives designated by the Committee participate in biennial long-term
incentive plans (collectively the "Long-Term Incentive Plans") which are
designed to encourage the achievement of the Company's long-term objectives by
providing direct cash, stock grants or stock option incentives. Awards under
each Long-Term Incentive Plan are based wholly on the Company's achievement of
threshold minimum business performance objectives, expressed in terms of the
Company's average annual ROBE, with increasing amounts to be awarded if the
Company achieves or exceeds the average annual ROBE targets. Average annual ROBE
targets are established by the Committee under the Long-Term Incentive Plan
prior to the commencement of the relevant award period consisting of three
complete fiscal years of the Company. As with the Annual Incentive Plan, the
level of targeted payout for executive officers under the Long-Term Incentive
Plan is expressed as a percentage of average base salary paid during the
relevant award period, which increases for higher positions within the Company,
thereby placing a greater percentage of compensation at risk for those with
greater responsibilities. The Company achieved an average ROBE during fiscal
years 1993 through 1995 of 13.94%, which exceeded the threshold minimum
objectives and was slightly less than the target objectives under the Long-Term
Incentive Plan for fiscal years 1993-94-95 (the "FY'95 Long-Term Incentive
Plan"), resulting in long-term incentive awards to the named executive officers
equal to 96.55% of target under the FY'95 Long-Term Incentive Plan.
16
<PAGE>
STOCK OPTION GRANTS
Both nonqualified stock options and incentive stock options, as defined in
the Internal Revenue Code of 1986, are granted periodically to executive
officers designated by the Committee as a means of further aligning the
interests of executives with the long-term interests of stockholders. Executives
are encouraged to exercise options and to hold those shares received upon the
exercise of options. It is the Company's objective to achieve a significant
level of stock ownership by executives through this program.
The options are granted pursuant to the Amended and Restated Stock
Compensation Plan of 1990 (the "1990 Compensation Plan"). Options generally may
not be exercised prior to the first anniversary of the date of grant and expire
ten years after the date of grant. Options granted by the Company have a per
share exercise price of 100% of the fair market value of a share of Common Stock
on the date of grant and, accordingly, the value of the option will be dependent
on the appreciation in the market value of the Company's Common Stock.
The actual number of stock options granted to each executive in fiscal year
1995 is based on the executive's position level, the Committee's collective
subjective evaluation of the executive's performance and the executive's
existing level of stock ownership. No particular weighting is accorded to any
one factor, nor does the Committee directly consider past Company performance in
determining the option grants.
OTHER EMPLOYEE BENEFITS
Executive officers are also eligible to participate in other benefit plans
generally available to all employees (including medical, dental, 401(k) and
pension), as well as certain other perquisites and benefits designed to promote
business development and financial planning, and to replace benefit
opportunities lost due to regulatory limits on qualified retirement plan
participation. The Committee believes that these benefits are competitive with
those offered in the marketplace and are essential to attract and retain key
executives.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Committee meets without the Chief Executive Officer to evaluate his
performance and to determine his total annual compensation. The Committee
determined Mr. Kunisch's fiscal year 1995 total compensation in a manner
consistent with the structure and guidelines discussed above. Specifically, the
Committee considered the report of the Company's outside compensation consultant
on the competitiveness of the Chief Executive Officer's total compensation with
that offered to other chief executive officers of the companies surveyed,
including the Comparison Group companies. The Committee also considered the
Company's achievement of strategic business performance and financial
objectives, and Mr. Kunisch's performance in meeting those objectives. In
reviewing the Company's performance, the Committee takes into account the
Company's revenue, net income, earnings per share and ROBE. The Committee does
not assign a specific weighting to any particular factor, but rather applies its
collective subjective business judgment to reach a decision on compensation that
it deems fair to the Company and its stockholders.
The Committee was pleased with the progress of the Company and determined
that an increase in Mr. Kunisch's salary for fiscal year 1995 was warranted in
view of both Mr. Kunisch's and the Company's performance for fiscal year 1994.
The Committee also determined that an increase in Mr. Kunisch's salary should be
made to bring it within competitive market levels. Mr. Kunisch's salary for
fiscal year 1995 was approximately the median (50th percentile) of salaries paid
to chief executive officers in the companies surveyed, including the Comparison
Group companies. The Committee considered the extensive efforts and dedication
of the Chief Executive Officer in managing the Company's core businesses, which
resulted in the development of significant opportunities for expansion.
Specifically, the Committee recognized the increased ranking of the Company's
mortgage banking subsidiary to among the nation's top 15 retail mortgage
originators, the increase of its servicing portfolio and the expansion of its
affinity relationships. With respect to the Company's vehicle management
services subsidiaries, the Committee recognized the productivity improvements
resulting from its business process reengineering and the increased use of
diversified vehicle fee-based services by its clients. Finally, the Committee
noted the increased focus of the Company's real estate services companies on
fee-based services and
17
<PAGE>
development of cost efficiency initiatives in response to a decrease in
relocation volume. The leadership and vision provided by Mr. Kunisch was
recognized as well as his fulfillment of the key roles of Chief Executive
Officer and President of the Company in addition to that of Chairman of the
Board of Directors. As a result of Mr. Kunisch's direction, the Company
continues to transition to a greater percentage of service fee-based, versus
capital-intensive asset-based, revenues. In addition, the Company has further
developed its cross-marketing initiatives to develop new market opportunities.
The Committee also considered the achievement of increased financial returns to
the Company's stockholders, largely as a result of strategic business decisions
made by Mr. Kunisch. The Company's net income for fiscal year 1994 grew to $64.6
million, an increase of 14% over fiscal year 1993, and earnings per share
increased 12% to $3.64. Worldwide revenues were $2.1 billion, a 6% increase from
fiscal year 1993. The Company has also maintained its "A" financial rating,
which the Committee viewed as the best example of the Company's management
policies, profit performance, financial returns and quality of its client base.
The award paid to Mr. Kunisch under the Fiscal Year 1995 Annual Incentive
Plan was based primarily upon the Company's achievement of a ROBE of 14.38%,
which exceeded the threshold minimum objectives, but was less than the Company's
performance target objectives for fiscal year 1995. The award paid to Mr.
Kunisch under the FY'95 Long-Term Incentive Plan was based wholly upon the
Company's achievement of an average ROBE of 13.94% for fiscal years 1993-94-95,
which average was slightly less than the target objectives under the FY'95
Long-Term Incentive Plan. The level of awards under the incentive plans as a
percentage of Mr. Kunisch's salary are consistent with the executive
compensation philosophy of placing a greater percentage of compensation at risk
for those with greater responsibility.
The fiscal year 1995 stock options granted to Mr. Kunisch reflect the
stated desire of the Committee to increase his stock-based compensation relative
to other aspects in order to further align his total compensation with the
interests of stockholders. Mr. Kunisch's total compensation for fiscal year 1995
is set forth in the Summary Compensation Table appearing on page 9.
PHH CORPORATION
COMPENSATION COMMITTEE
L. Patton Kline, Chairman
Thomas V. King
Francis P. Lucier
George L. Bunting, Jr.
18
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the total return of the Company's Common Stock,
the S&P 500 Index and the S&P Midcap Commercial Services (Specialized) Index
during the five fiscal years ended April 30, 1995. The cumulative total return
is calculated assuming $100 was invested on April 30, 1990, in the Company's
Common Stock and in each of the foregoing indices. The graph also assumes that
all dividends were reinvested.
There can be no assurance as to the future trends in the cumulative total
return of the Company's Common Stock or of the following indices. The Company
does not make nor does it endorse any predictions as to future stock
performance.
CUMULATIVE TOTAL RETURN
Based on an initial investment of $100 beginning
on April 30, 1990, assuming reinvestment of dividends.
(graph appears here)
<TABLE>
<CAPTION> Apr-90 Apr-91 Apr-92 Apr-93 Apr-94 Apr-95
<S> <C> <C> <C> <C> <C> <C>
PHH Corporation $100 $86 $125 $142 $128 $150
S&P 500(registration) $100 $118 $134 $147 $154 $181
S&P(registration) MidCap Commercial
Services (Specialized) Index $100 $123 $141 $150 $178 $212
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Directors and officers of the Company, members of their immediate
families or entities with which they are associated, entered into transactions
with the Company, including the Company's services for obtaining residential
mortgage loans, home relocation and vehicle leasing and/or management, during
fiscal year 1995. All such transactions were made in the ordinary course of
business on substantially the same terms, including interest rates and
collateral, that prevailed at the time for comparable transactions with other
persons and did not involve more than the normal risk of collectibility or have
other features unfavorable to the Company.
19
<PAGE>
ACCOUNTING MATTERS
KPMG Peat Marwick LLP served as the independent auditors of the Company for
the fiscal year ended April 30, 1995, and the Board of Directors has selected
that firm to continue as the Company's independent auditors for the current
fiscal year. Representatives of KPMG Peat Marwick LLP are expected to be present
at the Annual Meeting, will have an opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
DEADLINE FOR STOCKHOLDERS' PROPOSALS
FOR 1996 ANNUAL MEETING
All stockholder proposals for action at the 1996 Annual Meeting must be
received by the Secretary of PHH Corporation, 11333 McCormick Road, Hunt Valley,
Maryland 21031, by March 11, 1996, and must otherwise comply with the rules of
the Securities and Exchange Commission in order to be eligible to be included in
the Company's proxy statement for the 1996 Annual Meeting.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended April 30, 1995,
which does not constitute a part of this Proxy Statement, is being mailed to all
persons who were stockholders of record on June 23, 1995, together with the
mailing of this Notice of Annual Meeting and Proxy Statement.
OTHER MATTERS
The Board of Directors does not know of any matters which will be brought
before the meeting other than those set forth in the notice thereof. However, if
any matter properly comes before the meeting, it is intended that the persons
named in and acting under the enclosed form of proxy will vote thereon in
accordance with their best judgment.
20
<PAGE>
*********************
APPENDIX
*********************
PHH CORPORATION
PROXY FOR ANNUAL STOCKHOLDERS' MEETING--1995
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement relating to the Annual Meeting of Stockholders of PHH Corporation,
called to convene on August 21, 1995, at 10:00 A.M. (E.D.T.), and hereby
constitutes and appoints ROBERT D. KUNISCH, ROY A. MEIERHENRY and SAMUEL H.
WRIGHT, and any one or all of them, the true and lawful attorneys and proxies
of the undersigned with full power of substitution to each, to vote all the
shares of Common Stock of said corporation which the undersigned is entitled to
vote at said meeting and at any adjournment thereof. The undersigned further
gives the proxies authority to vote according to their best judgment in respect
of any other matters properly coming before the meeting.
Election of Group C Directors (three-year terms). Nominees:
James S. Beard, L. Patton Kline, Francis P. Lucier and Kent C. Nelson.
Election of Group A Director (one-year term). Nominee:
Alan P. Hoblitzell, Jr.
Election of Group B Director (two-year term). Nominee:
Anne M. Tatlock.
SEE REVERSE
SIDE
<PAGE>
X Please mark your
votes as in this
example.
This proxy is to be voted in the manner directed herein and, in the discretion
of the proxies, on any other business coming before the meeting. If no
direction is given, this Proxy is to be voted FOR all of the Board of
Directors' nominees.
The Board of Directors recommends a vote FOR its nominees.
FOR WITHHELD
Election of (box) (box)
Directors
(See Reverse)
Vote FOR all nominees, except:
You are encouraged to specify your choices by marking the appropriate boxes.
You need not mark any boxes if you wish to vote in accordance with the Board
of Directors' recommendations.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
SIGNATURE(S) DATE
