UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the SEC Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

PHH CORPORATION

(Name of Registrant as Specified In Its Charter)

 

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

þ  No fee required.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

April 30, 2010

 

Dear Fellow Stockholder:

 

You are cordially invited to attend the 2010 Annual Meeting of Stockholders (the “Annual Meeting”) of PHH Corporation (the “Company”), which will be held at the Company’s offices located at 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054, on Tuesday, June 15, 2010, at 10:00 a.m., local time. At the Annual Meeting, stockholders will be asked to elect two Class II directors to hold office until the 2013 Annual Meeting of Stockholders, to ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010, and to consider and vote upon such other business as may properly come before the meeting. This Notice of 2010 Annual Meeting, Proxy Statement and 2009 Annual Report describes in more detail the business to be conducted at the Annual Meeting and provides other information concerning the Company of which you should be aware when you vote your shares.

 

YOUR VOTE IS EXTREMELY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.

 

In order to ensure that your shares are represented at the Annual Meeting, whether you plan to attend or not, please vote in accordance with the enclosed instructions. You can vote your shares by telephone, electronically via the Internet or by completing and returning the enclosed proxy card or vote instruction form. If you vote using the enclosed proxy card or vote instruction form, you must sign, date and mail the proxy card or vote instruction form in the enclosed envelope. If you decide to attend the Annual Meeting and wish to modify your vote, you may revoke your proxy and vote in person at the meeting.

 

Admission to the Annual Meeting will be by admission ticket only. If you are a stockholder of record and plan to attend the Annual Meeting, retain the top portion of your proxy card as your admission ticket and bring it and a photo ID with you so that you may gain admission to the meeting. If your shares are held through a bank, broker or other nominee, please contact your nominee and request that the nominee obtain an admission ticket for you or provide you with evidence of your share ownership, which will gain you admission to the Annual Meeting.

 

This year, pursuant to rules adopted by the U.S. Securities and Exchange Commission (the “SEC”), we are furnishing via the Internet our proxy statement and other proxy materials to stockholders holding less than 1,000 shares of our common stock as of the record date for the Annual Meeting. We believe that this e-proxy process will reduce the environmental impact of our Annual Meeting, reduce our printing and postage costs, and will expedite the receipt of proxy materials by our stockholders.

 

The Board of Directors appreciates your time and attention in reviewing the accompanying Notice of 2010 Annual Meeting, Proxy Statement and 2009 Annual Report. Thank you for your continued interest in PHH Corporation. We look forward to seeing you at the meeting.

 

Sincerely,

 

 

Jerome J. Selitto
President and Chief Executive Officer

PHH CORPORATION
3000 Leadenhall Road
Mt. Laurel, New Jersey 08054

 

 

NOTICE OF 2010 ANNUAL MEETING

 

 

 

To Our Stockholders:

 

The 2010 Annual Meeting of Stockholders of PHH Corporation (the “Company”) will be held at the Company’s offices located at 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054, on Tuesday, June 15, 2010, at 10:00 a.m., local time (the “Annual Meeting”), for the following purposes:

 

1. To elect two Class II directors, each to serve until the 2013 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified, or until their earlier death, retirement or resignation;

 

2. To consider and vote upon a proposal to ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010; and

 

3. To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

 

The Board of Directors has fixed the close of business on March 25, 2010 as the record date for the Annual Meeting. Only stockholders of record as of the close of business on the record date are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.

 

By Order of the Board of Directors

 

 

William F. Brown
Senior Vice President, General Counsel and Secretary

 

April 30, 2010

 

 

 

 

PHH CORPORATION
3000 Leadenhall Road
Mt. Laurel, New Jersey 08054

 

 

PROXY STATEMENT FOR THE
2010 ANNUAL MEETING OF STOCKHOLDERS

 

 

This Proxy Statement is being furnished to the holders of common stock, par value $0.01 per share, of PHH Corporation, a Maryland corporation (the “Company”), in connection with the solicitation by the Company’s Board of Directors of proxies to be voted at the 2010 Annual Meeting of Stockholders of the Company (the “Annual Meeting”) to be held at the Company’s offices located at 3000 Leadenhall Road, Mt. Laurel, New Jersey, on Tuesday, June 15, 2010, at 10:00 a.m., local time, or at any postponement or adjournment of the Annual Meeting, for the purposes set forth in the accompanying Notice of 2010 Annual Meeting.

 

This Proxy Statement and the other proxy materials are being mailed to stockholders and are first being made available via the Internet on or about April 30, 2010. If a stockholder executes and returns the enclosed proxy card or vote instruction form or submits vote instructions to us by telephone or via the Internet, the stockholder may nevertheless revoke their proxy at any time prior to its use by filing with the Secretary of the Company a written revocation or a duly executed proxy bearing a later date or by submitting revised vote instructions to us by telephone or via the Internet prior to 11:59 p.m. EDT on Monday, June 14, 2010, in accordance with the instructions on the enclosed proxy card or vote instruction form. A stockholder who attends the Annual Meeting in person may revoke his or her proxy at that time and vote in person if so desired.

 

Admission to the Annual Meeting will be by admission ticket only. If you are a stockholder of record and plan to attend the Annual Meeting, retain the top portion of your proxy card as your admission ticket and bring it and a photo ID with you so that you may gain admission to the meeting. If your shares are held through a bank, broker or other nominee, please contact your nominee and request that the nominee obtain an admission ticket for you or provide you with evidence of your share ownership, which will gain you admission to the Annual Meeting.

 

Unless revoked or unless contrary instructions are given, each proxy that is properly signed, dated and returned or authorized by telephone or via the Internet in accordance with the instructions on the enclosed proxy card or vote instruction form prior to the start of the Annual Meeting will be voted as indicated on the proxy card or via telephone or the Internet and if no indication is made, each such proxy will be deemed to grant authority to vote, as applicable:

 

(1) Proposal 1: FOR the election of each of Ms. Deborah M. Reif, currently a Class II director, and Mr. Carroll R. Wetzel, Jr., currently a Class III director, as Class II directors, each to serve until the 2013 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified, or until their earlier death, retirement or resignation (the “Director Election Proposal”);

 

(2) Proposal 2: FOR the ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2010 (the “Ratification of Auditors Proposal”); and

 

(3) At the discretion of the persons named in the enclosed proxy card or vote instruction form, on any other matter that may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting.

 

THE COMPANY’S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE COMPANY’S NOMINEES LISTED UNDER THE DIRECTOR ELECTION PROPOSAL AND “FOR” THE RATIFICATION OF AUDITORS PROPOSAL.

 

TABLE OF CONTENTS

 

 

Why am I receiving these proxy materials?

 

You are receiving these proxy materials because our Board of Directors (the “Board”) is soliciting your proxy to cast your vote at the 2010 Annual Meeting of Stockholders (the “Annual Meeting”) of PHH Corporation, a Maryland corporation (“we,” “our,” “us,” “PHH” or the “Company”), and any adjournment or postponement of the Annual Meeting. This Proxy Statement, the accompanying Notice of 2010 Annual Meeting, our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 1, 2010 (the “2009 Annual Report”), and the enclosed proxy card or vote instruction form for those stockholders that have been sent printed copies of our proxy materials are being mailed to stockholders or are first being made available to stockholders via the Internet on or about April 30, 2010.

 

When and where is the Annual Meeting going to be held?

 

The Annual Meeting will be held at the Company’s offices located at 3000 Leadenhall Road, Mt. Laurel, New Jersey, on Tuesday, June 15, 2010, at 10:00 a.m., local time. Registration and seating will begin at 9:00 a.m., local time.

 

What is the purpose of the Annual Meeting?

 

At the Annual Meeting, stockholders will vote on the matters described in the accompanying Notice of 2010 Annual Meeting and this Proxy Statement. The only matters expected to be voted upon at the Annual Meeting are (1) the Director Election Proposal and (2) the Ratification of Auditors Proposal.

 

What are the Board’s recommendations for how I should vote my shares?

 

The Board recommends that you vote your shares as follows:

 

 

Who can attend the Annual Meeting?

 

Only stockholders of record as of the close of business on March 25, 2010, or their duly appointed proxies, may attend the Annual Meeting. Stockholders will be asked to present valid picture identification, such as a driver’s license or passport. Please note that, if you hold your shares in “street name” (that is, through a bank, broker or other nominee), you must bring either a copy of the vote instruction form provided by your bank, broker or other nominee or a copy of a brokerage statement reflecting your stock ownership as of the record date.

 

Cameras and video recording devices will not be permitted at the Annual Meeting. A list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder for any purpose germane to the Annual Meeting beginning ten days prior to the Annual Meeting during ordinary business hours at 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054, the Company’s principal place of business, and ending on the date of the Annual Meeting.

 

Do I need an admission ticket to attend the Annual Meeting?

 

Yes. Attendance at the Annual Meeting will be limited to stockholders of record as of the record date, their authorized representatives and our guests. Admission will be by admission ticket only. For registered stockholders, the top portion of the proxy card enclosed with the Proxy Statement will serve as an admission ticket. If you are a

beneficial owner and hold your shares in “street name,” or through an intermediary, such as a bank, broker or other nominee, you should request an admission ticket from your bank, broker or other nominee or send a request in writing to PHH Corporation, Attention: Investor Relations, 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054, and include proof of ownership of PHH Corporation common stock, such as a bank or brokerage firm account statement or letter from the bank, broker or other nominee holding your stock, confirming your beneficial ownership. Stockholders who do not obtain admission tickets in advance of the Annual Meeting may obtain them on the date of the Annual Meeting at the registration desk upon verifying their stock ownership as of the record date. In accordance with our security procedures, all persons attending the Annual Meeting must present picture identification along with their admission ticket or proof of beneficial ownership in order to gain admission to the meeting. Admission to the Annual Meeting will be expedited if admission tickets are obtained in advance. Admission tickets may be issued to others at our discretion.

 

How many votes must be present at the Annual Meeting to constitute a quorum?

 

Stockholders holding a majority of the issued and outstanding shares of our common stock as of the record date, March 25, 2010, must be present, in person or by proxy, to constitute a quorum at the Annual Meeting. As of the record date, there were 55,272,382 shares of our common stock issued and outstanding. Shares represented by abstentions on any proposal to be acted upon by stockholders at the Annual Meeting will be treated as present at the Annual Meeting for purposes of determining whether a quorum is present.

 

How many votes can be cast by all stockholders?

 

55,272,382 votes may be cast at the Annual Meeting. Each stockholder is entitled to cast one vote for each share of common stock held by such stockholder as of the record date. There is no cumulative voting and the holders of our common stock vote together as a single class.

 

What vote is needed for each of the proposals to be adopted?

 

 

What is a broker non-vote?

 

Generally, a broker non-vote occurs when shares held by a bank, broker or other nominee for a beneficial owner are not voted with respect to a particular proposal because (i) the nominee has not received voting

instructions from the beneficial owner and (ii) the nominee lacks discretionary voting power to vote such shares. Under the rules of The New York Stock Exchange, LLC (the “NYSE”), a nominee does not have discretionary voting power with respect to “non-routine” matters.

 

Historically, uncontested director elections were deemed “routine” matters under the NYSE’s rules and banks, brokers and other nominees could vote your shares on your behalf even in the absence of specific voting instructions given by you to your bank, broker or other nominee. Recently, however, the NYSE amended its rules to prohibit banks, brokers and other nominees from exercising discretionary voting authority in uncontested director elections. As a result, director elections, whether contested or uncontested, are now deemed to be “non-routine” matters and your bank, broker or other nominee may only vote your shares for director nominees if you have provided your bank, broker or other nominee with specific voting instructions.

 

Thus, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted in the election of directors, your bank, broker or other nominee will not be able to vote your shares in the election of directors, and your shares will not be voted for any of the nominees. We urge you to provide instructions to your bank, broker or other nominee so that your votes may be counted on this important matter. You should vote your shares by following the instructions provided on the vote instruction form that you receive from your bank, broker or other nominee.

 

If you fail to provide your bank, broker or other nominee with specific voting instructions as to how you would like your shares voted for director nominees or other non-routine matters, your bank, broker or other nominee will not vote your shares on your behalf and your shares will be reported as “broker non-votes.” For matters that are still considered “routine” under the NYSE’s rules (e.g., ratification of auditors), your bank, broker or other nominee may continue to exercise discretionary voting authority and may vote your shares on your behalf if you fail to provide your bank, broker or other nominee with specific voting instructions as to how you would like your shares voted on such routine matters.

 

How do I vote?

 

You can vote in person or by valid proxy received by telephone, via the Internet or by mail. We urge you to vote by doing one of the following:

 

 

The deadline for voting by telephone or electronically through the Internet is 11:59 p.m. EDT on June 14, 2010.

 

Can I change my vote?

 

Yes. A proxy may be revoked at any time prior to the voting at the Annual Meeting by submitting a later dated proxy (including a proxy authorization submitted by telephone or electronically through the Internet prior to the deadline for voting by telephone or the Internet), by giving timely written notice of such revocation to our Corporate Secretary in advance of the Annual Meeting or by attending the Annual Meeting and voting in person. However, if you hold shares in “street name,” you may not vote shares in person at the Annual Meeting unless you bring with

you a legal proxy from the stockholder of record. Only the latest dated and properly executed or authorized proxy that you timely submit will be counted.

 

Could other matters be decided at the Annual Meeting?

 

The Board does not intend to bring any matter before the Annual Meeting other than those described in this Proxy Statement. If any other matters properly come before the Annual Meeting, the persons named in the enclosed proxy, or their duly appointed substitutes acting at the Annual Meeting, will be authorized to vote or otherwise act in respect of any such matters in their discretion.

 

How do participants in our employee savings plans vote?

 

For participants in the PHH Corporation Employee Savings Plan and the PHH Home Loans, LLC Employee Savings Plan (the “Savings Plans”) with shares of our common stock credited to their accounts, voting instructions for the trustees of the Savings Plans are also being solicited through this Proxy Statement. In accordance with the provisions of the Savings Plans, the respective trustees will vote shares of our common stock in accordance with instructions received from the plan participants to whose accounts such shares are credited. To the extent such instructions are not received prior to 11:59 p.m. EDT on June 10, 2010, the trustees of the Savings Plans will vote the shares with respect to which they have not received instructions proportionately in accordance with the votes received for shares which they have received instructions. Instructions given with respect to shares in accounts of the Savings Plans may be changed or revoked only in writing, and no such instructions may be revoked after 11:59 p.m. EDT on June 10, 2010. Participants in the Savings Plans are not entitled to vote in person at the Annual Meeting. If a participant in the Savings Plans has shares of our common stock credited to his or her account and also owns other shares of our common stock in registered form or through a bank, broker or other nominee, he or she should receive a separate proxy card or vote instruction form for shares credited to his or her account in the Savings Plans and any other shares that he or she owns. All such proxy cards and vote instruction forms should be completed, signed and returned to ensure that votes are cast for all shares owned either directly or beneficially.

 

What if I vote for some but not all of the proposals?

 

Shares of our common stock represented by proxies received by us (whether received through the return of the enclosed proxy card or received via telephone or the Internet) where the stockholder has provided voting instructions with respect to the proposals described in this Proxy Statement, including the Director Election Proposal and the Ratification of Auditors Proposal, will be voted in accordance with the voting instructions so made. If your proxy card is properly executed and returned but does not contain voting instructions as to one or more of the proposals to be voted upon at the Annual Meeting, or if you give your proxy by telephone or via the Internet without indicating how you want to vote on each of the proposals to be voted upon at the Annual Meeting, your shares will be voted:

 

 

If your shares are held in street name and you do not properly instruct your bank, broker or other nominee how to vote your shares, your bank, broker or other nominee may either use its discretion to vote your shares on matters deemed “routine” by the NYSE or may not vote your shares. For any matters deemed “non-routine” by the NYSE, your bank, broker or other nominee would not be able to vote your shares on such matters. We encourage you to provide instructions to your bank, broker or other nominee by carefully following the instructions provided to ensure that your shares are voted at the Annual Meeting in accordance with your desires.

Who will pay for the cost of this proxy solicitation?

 

We will pay the cost of soliciting proxies on behalf of our Board. Our directors, officers and employees may solicit proxies on behalf of the Company in person or by telephone, facsimile or electronically through the Internet, as described above. We have engaged Broadridge Financial Solutions, Inc. (“Broadridge”) to assist us in the distribution and solicitation of proxies for a fee of up to $90,000 plus expenses. We will also reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending our proxy materials to beneficial owners of our common stock as of the record date.

 

Who will count and certify the vote?

 

Representatives of Broadridge will count the votes and certify the voting results. The voting results are expected to be published in a Current Report on Form 8-K filed with the SEC within four business days following the conclusion of the Annual Meeting.

 

How can I access the Company’s proxy materials and 2009 Annual Report electronically?

 

Copies of the Notice of 2010 Annual Meeting, Proxy Statement and 2009 Annual Report, as well as other materials filed by the Company with the SEC, are available without charge to stockholders on our corporate website at www.phh.com or upon written request to PHH Corporation, Attention: Investor Relations, 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054. You can elect to receive future annual reports, proxy statements and other proxy materials electronically by marking the appropriate box on your proxy card or vote instruction form or by following the instructions provided if you vote by telephone or via the Internet.

 

Copies of our Corporate Governance Guidelines, Independence Standards for Directors, Code of Business Conduct and Ethics for Directors, Code of Conduct for employees and officers, and the charters of each standing committee of our Board, including our Audit Committee, Compensation Committee, Corporate Governance Committee, and Finance and Risk Management Committee, are also available without charge to stockholders on our corporate website at www.phh.com or upon written request to PHH Corporation, Attention: Investor Relations, 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054.

 

The Board has nominated Ms. Deborah M. Reif, currently a Class II director, and Mr. Carroll R. Wetzel, Jr., currently a Class III director, for election at the Annual Meeting, each to serve as Class II directors until the 2013 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified, or until their earlier death, retirement or resignation. Although Mr. Wetzel currently serves as a Class III director, he has been nominated to stand for election at the Annual Meeting as a Class II director. Upon the election at the Annual Meeting of Mr. Wetzel as a Class II director, a Class III director vacancy will be created on the Board. The Board presently intends to fill such Class III director vacancy with the addition of a new independent director. Mr. Kilroy is not standing for re-election. Each nominee has consented to being named in this Proxy Statement and to serve if elected. Shares of our common stock represented by duly authorized proxies will be voted FOR Ms. Reif and Mr. Wetzel, or any substitute nominee or nominees designated by the Board if, prior to the Annual Meeting, any nominee should become unable to serve, unless the Board determines to reduce the total number of directors in accordance with our Articles of Amendment and Restatement (as amended) (the “Charter”) and amended and restated by-laws.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF MS. REIF AND MR. WETZEL USING THE ENCLOSED PROXY CARD OR VOTE INSTRUCTION FORM. UNLESS MARKED TO THE CONTRARY, PROPERLY EXECUTED PROXY CARDS RECEIVED BY THE COMPANY WILL BE VOTED “FOR” THE ELECTION OF MS. REIF AND MR. WETZEL.

 

Our Board currently consists of eight members. The principal occupations of, and certain other information regarding, each of the Class II director nominees and our other incumbent directors, as of April 30, 2010, are set forth below. During 2009, our Board held fifteen meetings and each incumbent director and director nominee attended at least 75% of the meetings held by the Board during the period in which each such director served as a member of the Board. All directors are expected to attend each regularly scheduled meeting of the Board, as well as each annual meeting of our stockholders (subject to certain limited exceptions). All of our directors that were serving as directors on June 10, 2009, attended the 2009 Annual Meeting of Stockholders held on June 10, 2009.

 

 

Nominees to Serve as Class II Directors — Term Expires in 2013

 

 

Deborah M. Reif, 57, has served as a director since April 1, 2010. Ms. Reif served most recently as Chief Executive Officer and President of the Equipment Services division of General Electric Company, a global transportation equipment enterprise, from 2006 through 2009 with responsibility for a global operating lease portfolio and a supply chain service strategy. From 2005 to 2006, Ms. Reif served as President of Digital Media of NBC Universal where she led the transformation of that operation to a digital business model. Prior to that, Ms. Reif served as Executive Vice President of Financial Structuring for NBC Universal where she led the assessment and restructuring of the Universal Theme Park portfolio from 2004 through 2005. From 2001 through 2004, she served as Chairman and Chief Executive Officer of Financial Guaranty Insurance Company and earlier in her career, in various financial roles of increasing importance with GE Capital from 1971 through 2001. Ms. Reif’s financial, risk management and relevant operational experience and leadership roles within a large, publicly-traded global enterprise led to a conclusion that it is appropriate that she be appointed as a director and be nominated to stand for election.

 

Carroll R. Wetzel, Jr., 66, has served as a director since January 1, 2010. Mr. Wetzel also serves as a director of Exide Technologies and Brink’s Home Security Holdings, Inc. He previously served as Vice Chairman and lead director at Arch Wireless from 2001 through 2002; as non-executive Chairman of the Board of Directors of Safety Components International from 2000-2005 and as a director of Laidlaw International, Inc. from 2004 to 2007. Before that, he spent approximately 20 years working in investment banking and corporate finance. From 1988 to 1996, Mr. Wetzel served as co-head of the Merger and Acquisition Group at Chase Manhattan Bank (and at Chemical Bank prior to its merger with Chase Manhattan Bank) and also previously served as a corporate finance officer at Dillon Read & Co., Inc. and Smith Barney. Mr. Wetzel’s investment banking and financial services industry experience and his past service as a member of several other public company Board’s led to a conclusion that it is appropriate that he be appointed as a director and be nominated to stand for election.

 

Continuing Class III Directors — Term Expires in 2011

 

 

James W. Brinkley, 73, has served as a director since January 31, 2005. In July 2009, Mr. Brinkley became Vice Chairman of Morgan Stanley Smith Barney Global Wealth Management, effective with the new joint venture of Morgan Stanley and Smith Barney. In December 2005, Mr. Brinkley became Vice Chairman of Smith Barney’s Global Private Client Group following Citigroup Inc.’s acquisition of Legg Mason Wood Walker, Incorporated (“LMWW”). Mr. Brinkley served as a director of Legg Mason, Inc., a holding company that, through its subsidiaries, provides financial services to individuals, institutions, corporations, governments and government agencies since its formation in 1981. Mr. Brinkley has served as a Senior Executive Vice President of Legg Mason, Inc. since December 1983. Mr. Brinkley became Chairman of LMWW, Legg Mason Inc.’s principal brokerage subsidiary, in February 2004. Mr. Brinkley previously served as LMWW’s Vice Chairman and Chief Executive Officer from July 2003 through February 2004, as its President from 1985 until July 2003 and as its Chief Operating Officer from February 1998 until July 2003. Mr. Brinkley is Chairman of the Mason School of Business Foundation Board of the College of William and Mary, the Founding Board Chair of Business Volunteers Unlimited of Maryland and a former Director of AARP Services Inc. Mr. Brinkley’s nearly five decades of senior management and leadership experience in the financial services industry, as well as his past contributions to the Board, led to a conclusion that it is appropriate that he continue to serve as a director.

 

Jerome J. Selitto, 68, has served as a director and as President and Chief Executive Officer since October 26, 2009. Prior to joining PHH, Mr. Selitto worked most recently at Ellie Mae as a senior consultant and, later, as a member of the senior management team to help develop a sales and marketing strategy for a new division of the company focused on linking lenders and mortgage originators on a real-time basis, allowing the lender to immediately screen for loan attributes that met their purchase criteria. Prior to that, in 2000, Mr. Selitto founded DeepGreen Financial, an innovative web-based federal savings bank and mortgage company that grew to become one of the nation’s most successful online home equity lenders, originating over $5 billion in home equity loans. From 1992 to 1999, he served as founder and Vice Chairman of Amerin Guaranty Corporation (now Radian Guaranty), a mortgage insurance company he helped grow to an 8% market share and a successful IPO. Mr. Selitto previously served as a Managing Director at First Chicago Corporation and PaineWebber Inc., and as a senior executive at Kidder, Peabody & Co., William R. Hough & Company, and the Florida Federal Savings and Loan Association. Mr. Selitto’s position as President and Chief Executive Officer of the Company and his financial services industry and leadership experience led to a conclusion that it is appropriate that he continue to serve as a director.

 

Continuing Class I Directors — Term Expires in 2012

 

 

James O. Egan, 61, has served as a director since March 30, 2009. Mr. Egan served as a Managing Director of Investcorp International, Inc., an alternative asset management firm specializing in private equity, hedge fund offerings and real estate and technology investments, from 1998 through 2008. Mr. Egan was the partner-in-charge, M&A Practice, U.S. Northeast Region for KPMG LLP from 1997 to 1998 and served as the Senior Vice President and Chief Financial Officer of Riverwood International, Inc. from 1996 to 1997. Mr. Egan began his career with PricewaterhouseCoopers (formerly Coopers & Lybrand) in 1971 and served as partner from 1982 to 1996 and a member of the Board of Partners from 1995 to 1996. Mr. Egan possesses nearly forty years of business experience involving companies of varying sizes from start-ups to Fortune 500 public companies operating across numerous industries, including twenty-five years of public accounting experience having served as lead audit partner involved in the audits of annual financial statements of numerous public companies. He also has ten years of private equity experience working with portfolio companies in the US and Europe to create shareholder value. Mr. Egan’s business, audit and private equity experience led to a conclusion that it is appropriate that he continue to serve as a director.

 

Allan Z. Loren, 71, has served as a director since June 10, 2009. Mr. Loren currently serves as an Executive Coach to chief executive officers. He served as both Chairman and Chief Executive Officer of Dun & Bradstreet from 2000 through 2004 and as Chairman in 2005. Prior to joining Dun & Bradstreet, he served as Executive Vice President and Chief Information Officer of American Express from 1994 to 2000, as President and Chief Executive Officer of Galileo International from 1991 to 1994, as President of Apple Computer USA from 1988 to 1990, and as Chief Information Officer of Apple Computer from 1987 to 1988. Mr. Loren was also the Chief Administrative Officer and Chief Information Officer of Cigna from 1979 to 1987 and 1971 to 1987, respectively. He currently serves on the Board of Trustees of Queens College, City University of New York as a director. Mr. Loren previously served on the board of directors of Fair Isaac Corporation, Hershey Foods, Reynolds & Reynolds, U.S. Cellular, and Venator Group (currently known as Foot Locker, Inc.) Mr. Loren’s operational, technological, executive coaching and leadership experience, including experience leading transformational change, led to a conclusion that it is appropriate that he continue to serve as a director.

 

Gregory J. Parseghian, 49, has served as a director since June 10, 2009. Mr. Parseghian is currently a private investor and, from September 2007 through December 2008, served as Director of Research for Brahman Capital. He has substantial experience in the financial and mortgage industries, having served in executive positions at First Boston Corp., BlackRock Financial Management and Salomon Brothers from 1982 through 1995. In 1996, Mr. Parseghian became Chief Investment Officer of Freddie Mac and served in that position until June 2003 at which time he was promoted by Freddie Mac’s board of directors to Chief Executive Officer. He currently serves on the board of directors of the Armenian Church Endowment Fund and The Langley School, both of which are non-profit organizations, and Everquest Financial, Ltd., a specialty finance holding company. Mr. Parseghian has had over twenty-five years of progressively increasing responsibility in the areas of investment banking, investment management and risk management. His background includes substantial involvement in the analysis, securitization and management of mortgage-backed securities. Mr. Parseghian’s mortgage industry and risk management experience led to a conclusion that it is appropriate that he continue to serve as a director.

 

Directors Not Standing for Re-Election and Former Directors

 

 

The following member of the Board will not be standing for re-election at the Annual Meeting:

 

George J. Kilroy, 62, currently serves as a Class II director and as Executive Vice President, Fleet. Since 2001, Mr. Kilroy has been responsible for the management of the Company’s vehicle fleet management services business, PHH Arval. From May 1997 to March 2001, Mr. Kilroy served as Senior Vice President, Business Development and was responsible for new client sales, client relations and marketing for PHH Arval’s United States operations. Mr. Kilroy joined PHH Arval in 1976 as an Account Executive in the Truck and Equipment Division and has held positions of increasing responsibility, including head of Diversified Services and Financial Services.

 

The following former members of the Board served as directors during 2009:

 

Ann D. Logan, 55, served as a director from January 31, 2005, until April 1, 2010. Since July 2000, Ms. Logan has worked with various non-profit organizations. Ms. Logan was an Executive Vice President at the Federal National Mortgage Association (“Fannie Mae”) from January 1993 to July 2000. Ms. Logan ran the single-family mortgage business at Fannie Mae from 1998 to 2000 and was the Chief Credit Officer from 1993 to 1998. From 1989 to 1993, Ms. Logan was a Senior Vice President in charge of Fannie Mae’s Northeast Regional Office in Philadelphia. Prior to joining Fannie Mae, Ms. Logan was Assistant Vice President at Standard & Poor’s Corporation in New York. From 1976 to 1980, Ms. Logan worked for the U.S. Senate Judiciary Committee and served as the Committee Staff Director in 1980.

 

Jonathan D. Mariner, 55, served as a director until December 31, 2009.

 

Terence W. Edwards, 54, served as a director until June 10, 2009.

 

A.B. Krongard, 73, served as a director and as our non-executive Chairman of the Board until June 10, 2009.

 

Francis J. Van Kirk, 61, served as a director until March 30, 2009.

 

Independence of the Board of Directors

 

Under the rules of the NYSE and the SEC, our Board is required to affirmatively determine which directors are independent and to disclose such determination in our annual report to stockholders and in our proxy statement for each annual meeting of stockholders. Our Board has reviewed each director’s relationships with us in conjunction with our previously adopted categorical Independence Standards for Directors (the “Independence Standards”) and Section 303A of the NYSE’s Listed Company Manual (the “NYSE Listing Standards”). A copy of our categorical Independence Standards is available on our corporate website at www.phh.com under the heading “Investor Relations — Corporate Governance.” A copy of our Independence Standards is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054. Based on the Board’s review, our Board has affirmatively determined that each of our current non-employee directors and director nominees — Messrs. Brinkley, Egan, Loren, Parseghian and Wetzel and Ms. Reif — is independent within the meaning of our categorical Independence Standards and the NYSE Listing Standards and has no material relationship with us or any of our subsidiaries, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. Our Board has also determined that Messrs. Selitto and Kilroy, who serve as executive officers, are not independent directors. Accordingly, 75% of our incumbent directors, representing more than two-thirds of our incumbent directors as required by our Corporate Governance Guidelines, are independent. As noted above, the Board presently intends to appoint a new independent director to the Board to fill the vacancy created in Class III of the Board upon the election of Mr. Wetzel as a Class II director at the Annual Meeting. Following any such appointment of a new independent Class III director and in the absence of any additional changes in the composition of the Board, it is anticipated that 87.5% of the Board will be comprised of independent directors.

 

In evaluating Mr. Brinkley’s independence, the Board reviewed and considered certain relationships and transactions involving Mr. Brinkley and affirmatively determined that Mr. Brinkley is an independent director

within the meaning of the NYSE Listing Standards and our Independence Standards. The relationships and transactions involving Mr. Brinkley that were reviewed and considered by the Board are as follows:

 

Mr. Brinkley became Vice Chairman of Smith Barney’s Global Private Client Group (“SBGPCG”) following the acquisition by Citigroup Inc. (“Citigroup”) of LMWW in December 2005. Mr. Brinkley served in such capacity until May 31, 2009, at which time, Citigroup and Morgan Stanley created a joint venture entity known as Morgan Stanley Smith Barney Holdings LLC (“MSSB Holdings”) in which Citigroup holds a minority ownership interest and to which Citigroup contributed, among other things, the business of SBGPCG. Since May 31, 2009, Mr. Brinkley has served as Vice Chairman of the Morgan Stanley Smith Barney Global Wealth Management (“MSSBGWM”) division of MSSB Holdings. The Company has no relationships with SBGPCG, MSSB Holdings or MSSBGWM. The Company has certain relationships with the Corporate and Investment Banking segment of Citigroup, including financial services, commercial banking and other transactions. Citigroup is a lender, along with various other lenders, in several of our credit facilities and vehicle management asset-backed debt. The fees paid to Citigroup, including interest expense, were approximately $20 million during the year ended December 31, 2009, representing less than 0.1% of Citigroup’s consolidated revenues for the year ended December 31, 2009. Citigroup Global Markets, Inc. was a joint book-running manager for our offering of 4.00% Convertible Senior Notes due 2014 that closed on September 29, 2009. We used a portion of the net proceeds from the offering to reduce the principal balance under one of the credit facilities in which Citigroup is a lender. The Company’s indebtedness to Citigroup was $103 million as of December 31, 2009, representing less than 0.1% of Citigroup’s total consolidated assets as of December 31, 2009, and was made in the ordinary course of business upon terms, including interest rates and collateral, substantially the same as those prevailing at the time for comparable loans. Mr. Brinkley’s son, Douglas Brinkley, is a principal at Colliers Pinkard, a member firm of Colliers, which provides certain lease management services to us. The fees paid to Colliers during 2009 were approximately $284,500, representing less than 0.1% of Colliers’ global revenues.

 

Our Board had previously determined that the following former directors that served on the Board during 2009 were independent within the meaning of our categorical Independence Standards and the NYSE Listing Standards during their respective terms of service on the Board and had no material relationship with us or any of our subsidiaries, either directly or as a partner, stockholder or officer of an organization that had a relationship with us: Ann D. Logan, Jonathan Mariner, A.B. Krongard and Fran Van Kirk. Our Board had also previously determined that Mr. Terence W. Edwards, our former President and Chief Executive Officer who served on the Board during 2009, was not an independent director by virtue of his position as an executive officer of the Company.

 

The Board has a standing Audit Committee, Compensation Committee, Corporate Governance Committee, and Finance and Risk Management Committee. Each such committee consists solely of directors who have been affirmatively determined to be “independent” within the meaning of the NYSE Listing Standards and the Company’s Independence Standards. In addition, the Board has a standing Executive Committee which may take certain actions on behalf of the Board when the Board is not in session.

 

Audit Committee

 

The Audit Committee assists our Board in the oversight of the integrity of our financial statements, our independent registered public accounting firm’s qualifications and independence, the performance of our independent registered public accounting firm and our internal audit function, and our compliance with legal and regulatory requirements. The Audit Committee also oversees our corporate accounting and reporting practices by:

 

 

The Audit Committee is currently comprised of Messrs. Egan (Chair), Parseghian and Wetzel. Our Board has determined that Mr. Egan qualifies as an “audit committee financial expert” within the meaning of applicable SEC rules and is an independent director under the Independence Standards and the NYSE Listing Standards. During 2009, the Audit Committee met eight times and each incumbent member of the Audit Committee attended at least 75% of the meetings held by the Audit Committee during the period in which each such member served as a member of the Audit Committee.

 

The Audit Committee is a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit Committee operates pursuant to a written charter that is available on our corporate website at www.phh.com under the heading “Investor Relations — Corporate Governance.” A copy of the Audit Committee’s charter is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

 

Compensation Committee

 

The Compensation Committee determines and approves all elements of compensation for our Chief Executive Officer and senior management; reviews and approves our compensation strategy, including the elements of total compensation for senior management; reviews and approves the annual bonus and long-term bonus incentive plans, and reviews and grants equity awards for our employees. The Compensation Committee also assists us in developing compensation and benefit strategies to attract, develop and retain qualified employees. See “Executive Compensation” for additional information regarding the process for the determination and consideration of executive compensation. The Compensation Committee is currently comprised of Messrs. Loren (Chair), Brinkley and Parseghian. During 2009, the Compensation Committee met fifteen times and each incumbent member of the Compensation Committee attended at least 75% of the meetings held by the Compensation Committee during the period in which each such member served as a member of the Compensation Committee.

 

The Compensation Committee operates pursuant to a written charter that is available on our corporate website at www.phh.com under the heading “Investor Relations — Corporate Governance.” A copy of the Compensation Committee’s charter is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

Corporate Governance Committee

 

The Corporate Governance Committee’s responsibilities with respect to its governance function include considering matters of corporate governance and reviewing and revising our Corporate Governance Guidelines, Code of Business Conduct and Ethics for Directors and our Code of Conduct for employees and officers. The Corporate Governance Committee identifies, evaluates and recommends nominees for our Board for each annual meeting (see “Corporate Governance — Nomination Process and Qualifications for Director Nominees” below); evaluates the composition, organization and governance of our Board and its committees, and develops and recommends corporate governance principles and policies applicable to us. The Corporate Governance Committee is also responsible for reviewing and recommending to the Board the compensation of our non-employee directors. The Corporate Governance Committee is currently comprised of Messrs. Egan (Chair), Brinkley, Loren and Parseghian. During 2009, the Corporate Governance Committee met nine times and each incumbent member of the Corporate Governance Committee attended at least 75% of the meetings held by the Corporate Governance Committee during the period in which each such member served as a member of the Corporate Governance Committee.

 

The Corporate Governance Committee operates pursuant to a written charter that is available on our corporate website at www.phh.com under the heading “Investor Relations — Corporate Governance.” A copy of the Corporate Governance Committee’s charter is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

 

Finance and Risk Management Committee

 

The Finance and Risk Management Committee was formed on February 27, 2008 to assist our Board in fulfilling its oversight responsibilities with respect to the assessment of our overall capital structure and its impact on the generation of appropriate risk adjusted returns, as well as the existence, operation and effectiveness of our risk management programs, policies and practices. The Finance and Risk Management Committee is currently comprised of Messrs. Parseghian (Chair) and Wetzel and Ms. Reif. During 2009, the Finance and Risk Management Committee met seven times and each incumbent member of the Finance and Risk Management Committee attended at least 75% of the meetings held by the Finance and Risk Management Committee during the period in which each such member served as a member of the Finance and Risk Management Committee.

 

The Finance and Risk Management Committee operates pursuant to a written charter that is available on our corporate website at www.phh.com under the heading “Investor Relations — Corporate Governance.” A copy of the Finance and Risk Management Committee’s charter is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

 

Executive Committee

 

The Executive Committee may generally exercise all of the powers of our Board when the Board is not in session, including, subject to certain limitations, the power to authorize the issuance of stock, except that the Executive Committee has no power to alter, amend or repeal our by-laws or any resolution or resolutions of the Board, declare any dividend or make any other distribution to our stockholders, appoint any member of the Executive Committee or take any other action which legally may be taken only by the full Board. The Executive Committee is currently comprised of Messrs. Egan, Brinkley, Loren, Parseghian and Wetzel and Ms. Reif. During 2009, the Executive Committee did not meet.

 

Board of Directors’ Role in Risk Oversight

 

The business and affairs of the Company are managed under the direction of the Board in accordance with the Company’s amended and restated by-laws. The role of the Board is one of oversight, including as to matters relating to risk management. The Company’s management is responsible for managing the day-to-day operations and affairs of the Company, including the development and implementation of systems and processes to identify and monitor risks to the Company and policies and procedures to ensure that risks undertaken by the Company are consistent with the Company’s business objectives and risk tolerances. To assist it in fulfilling its oversight function, including as to matters related to risk management, the Board has established four standing committees: the Audit Committee, the Compensation Committee, the Corporate Governance Committee, and the Finance and Risk Management Committee. Each standing committee regularly reports to the Board and is responsible for risk oversight in connection with actions taken by such committee consistent with the exercise of fiduciary duties by the directors serving on such committee.

 

The Audit Committee charter provides that the Audit Committee is responsible for discussing the Company’s policies with respect to risk assessment and risk management, including the Company’s major financial accounting and risk exposures and the steps management has undertaken to control them. Further, as part of the Company’s periodic reporting process, management reviews with the Audit Committee the Company’s disclosures contained in the Company’s periodic reports filed with the SEC, including disclosure concerning the Company’s risk factors.

 

The primary purpose of the Finance and Risk Management Committee is to assist the Board in fulfilling its oversight responsibilities with respect to the assessment of the Company’s overall capital structure and its impact on the generation of appropriate risk adjusted returns, as well as the existence, operation and effectiveness of the risk management programs, policies and practices of the Company, among other things. The Finance and Risk Management Committee regularly discusses with the Company’s management, including, among others, the Chief Executive Officer, Chief Financial Officer and Treasurer, risks facing the Company and management’s plans and initiatives undertaken to mitigate such risks.

 

Board Leadership Structure

 

Since 2005, our Chairman of the Board has been an independent, non-employee director. The Chairman of the Board is elected by a majority vote of the directors. Currently, James O. Egan serves as our non-executive Chairman of the Board, a position he has held since June 17, 2009. Mr. Egan has served as a director and as Chair of the Audit Committee of the Board since March 30, 2009. Mr. Egan has also served as Chair of the Corporate Governance Committee of the Board since June 17, 2009.

 

In his capacity as non-executive Chairman of the Board, Mr. Egan leads all meetings of our Board at which he is present, but does not serve as an employee or corporate officer. The non-executive Chairman of the Board serves on appropriate committees as requested by the Board, sets meeting schedules and agendas and manages information flow to the Board to assure appropriate understanding of, and discussion regarding matters of interest or concern to the Board. The non-executive Chairman of the Board also has such additional powers and performs such additional duties consistent with organizing and leading the actions of the Board as the Board may from time-to-time prescribe.

 

The decision to separate the positions of Chairman of the Board and Chief Executive Officer was made at the time the Company was spun-off from Cendant Corporation in early 2005. Although the Board does not currently have a policy requiring that the positions of Chairman of the Board and Chief Executive Officer be separated, the Board continues to believe that it is appropriate for the Chairman of the Board to be an independent, non-employee director to ensure that the Board operates independently of management in the fulfillment of its oversight function and that the matters presented for consideration by the Board and its committees reflect matters of key importance to the Company and it stockholders as determined by the independent directors.

Executive Sessions of Non-Management Directors

 

Executive sessions of non-management directors are held regularly by the Board and its Committees without management present to discuss the criteria upon which the performance of the Chief Executive Officer and other senior executives is based, the performance of the Chief Executive Officer and other senior executives against such criteria, the compensation of the Chief Executive Officer and other senior executives and any other relevant matters. Our Board has designated Mr. Egan, our non-executive Chairman of the Board and Chairman of the Corporate Governance Committee, as the presiding director of executive sessions of the non-management directors of the Board.

 

Corporate Governance Guidelines

 

The Board has adopted Corporate Governance Guidelines to assist the Board in monitoring the effectiveness of decision-making, both at the Board and management levels and to enhance long-term stockholder value. The Corporate Governance Guidelines outline the following:

 

 

Our Corporate Governance Guidelines are available on our corporate website at www.phh.com under the heading “Investor Relations — Corporate Governance.” A copy of our Corporate Governance Guidelines is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

 

Code of Business Conduct and Ethics for Directors

 

We are committed to conducting business in accordance with the highest standards of business ethics and complying with applicable laws, rules and regulations. In furtherance of this commitment, our Board promotes ethical behavior and has adopted a Code of Business Conduct and Ethics for Directors (the “Directors Code”) that is applicable to all of our directors. The Directors Code provides, among other things:

 

 

The Directors Code is available on our corporate website at www.phh.com under the heading “Investor Relations — Corporate Governance.” We will post any amendments to the Directors Code, or waivers of its provisions, to our corporate website under the heading “Investor Relations — Corporate Governance.” A copy of the Directors Code is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

Code of Conduct for Employees and Officers

 

Our Board has also adopted a Code of Conduct for employees and officers (the “Employees and Officers Code”) that is applicable to all of our officers and employees, including our Chief Executive Officer and Chief Financial Officer. The Employees and Officers Code provides, among other things:

 

 

The Employees and Officers Code is available on our corporate website at www.phh.com under the heading “Investor Relations — Corporate Governance.” We will post any amendments to the Employees and Officers Code, or waivers of its provisions for any of our executive officers, to our corporate website under the heading “Investor Relations — Corporate Governance.” A copy of the Employees and Officers Code is also available to stockholders upon request, addressed to the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054.

 

Nomination Process and Qualifications for Director Nominees

 

The Board has established certain procedures and criteria for the selection of nominees for election to our Board. In accordance with the Board’s Corporate Governance Guidelines, the Board seeks members from diverse professional and personal backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Pursuant to its charter, the Corporate Governance Committee is required to identify individuals qualified to become members of the Board, which shall be consistent with the Board’s criteria for selecting new directors. The Corporate Governance Committee considers criteria such as diversity, age, skills and experience so as to enhance the Board’s ability to oversee in the interest of our stockholders our affairs and business, including, when applicable, to enhance the ability of Committees of the Board to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or NYSE requirement. The Corporate Governance Committee is also responsible for conducting a review of the credentials of individuals it wishes to recommend to the Board as a director nominee, recommending director nominees to the Board for submission for a stockholder vote at either an annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors, reviewing the suitability for continued service as a director of each Board member when his or her term expires and when he or she has a significant change in status, including but not limited to an employment change, and recommending whether such a director should be re-nominated to the Board or continue as a director.

 

Our amended and restated by-laws provide the procedure for stockholders to make director nominations either at any annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors. A stockholder who is both a stockholder of record on the date of notice as provided for in our amended and restated by-laws and on the record date for the determination of stockholders entitled to vote at such meeting and gives timely notice can nominate persons for election to our Board either for an annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors. The notice must be delivered to or mailed and received by the Corporate Secretary at 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054:

 

 

 

The stockholder’s notice to our Corporate Secretary must be in writing and include the following information, as more fully described in Section 1.10 of our amended and restated by-laws:

 

(i) as to each person whom the stockholder proposes to nominate for election as a director (each, a “Proposed Nominee”):

 

 

(ii) as to the stockholder giving the notice of any Proposed Nominee and any Stockholder Associated Person (as defined in the amended and restated by-laws):

 

 

(iii) as to the stockholder giving the notice, any Stockholder Associated Person with an interest or ownership referred to in (ii) above, and any Proposed Nominee, the name and address of such stockholder, as they appear on the Company’s stock ledger, and the current name and business address, if different, of each such Stockholder Associated Person and any Proposed Nominee;

 

(iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the Proposed Nominee(s) in its notice, and

 

(v) any other information relating to such stockholder that would be required to be disclosed in connection with solicitations of proxies for election of the Proposed Nominee pursuant to Regulation 14A of the Exchange Act.

 

Such notice must be accompanied by a written consent of each Proposed Nominee to be named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Company unless nominated in accordance with the procedures set forth in our amended and restated by-laws. If the chairman of the meeting determines that a nomination was not made in accordance with the above-described procedures, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective

nomination shall be disregarded. No adjournment or postponement of a meeting of stockholders shall commence a new period for the giving of notice of a stockholder proposal under our amended and restated by-laws.

 

Communication with Non-Management Directors

 

In accordance with our Corporate Governance Guidelines, all stockholder and interested party communications to any director, the non-management directors as a group or the Board shall be forwarded to the attention of the Chair of the Corporate Governance Committee, c/o the Corporate Secretary, 3000 Leadenhall Road, Mt. Laurel, New Jersey, 08054. The Corporate Secretary shall review all such stockholder and interested party communications and discard those which (i) are not related to our business or governance of our Company, (ii) are commercial solicitations which are not relevant to the Board’s responsibilities and duties, (iii) pose a threat to health or safety or (iv) the Chair of the Corporate Governance Committee has otherwise instructed the Corporate Secretary not to forward. The Corporate Secretary will then forward all relevant stockholder and interested party communications to the Chair of the Corporate Governance Committee for review and dissemination.

 

Our non-employee directors compensation program is intended to align our non-employee directors’ interests with those of our stockholders by providing for equity-based compensation, to focus our non-employee directors on sustainable value creation by restricting the sale of vested equity-based compensation until at least 200 days (and in some cases up to one year) after a non-employee director’s Board service ceases, and to provide our non-employee directors with market-competitive compensation for their Board service. Members of our Board who are also our officers or employees do not receive any additional compensation for serving as a director.

 

The Corporate Governance Committee is responsible for reviewing and recommending to the Board the compensation of our non-employee directors. During 2009, the Corporate Governance Committee and the Compensation Committee jointly requested that the Compensation Committee’s independent compensation consultant undertake an analysis of market-competitive director compensation levels and practices. Although the consultant’s analysis determined that our non-employee director compensation program is below market-competitive median levels, the Corporate Governance Committee decided to defer any discussion of potential changes to the non-employee director compensation program until mid-2010.

 

The following table sets forth our non-employee director compensation schedule for 2009:

 

 

At the end of the first calendar quarter following the date that a non-employee director first commences service as a member of the Board, such non-employee director is granted restricted stock units under the PHH Corporation Amended and Restated 2005 Equity and Incentive Plan (the “2005 Equity and Incentive Plan”) with an aggregate grant date fair value of approximately $60,000 with cash being paid in lieu of any fractional restricted stock units. Each such restricted stock unit is immediately vested and non-forfeitable and represents the right to receive one share of the Company’s common stock on the one year anniversary date following the date such director’s service as a member of the Board terminates for any reason. During 2009, Messrs. Egan, Loren and Parseghian first commenced service on the Board.

 

With the exception of new director equity grants, non-employee director compensation is paid in arrears in four equal quarterly installments at the end of each calendar quarter (each payment date, a “Fee Payment Date”) and is paid half in restricted stock units that are granted under our 2005 Equity and Incentive Plan (the “Director RSUs”) and, unless deferred as described below, half in cash. Each Director RSU represents the right to receive one share of our common stock upon settlement of such Director RSU. Director RSUs are immediately vested and are settled in shares of our common stock one year after the director is no longer a member of the Board. Director RSUs may not be sold or otherwise transferred for value prior to the director’s termination of service on the Board.

 

The number of Director RSUs granted to each non-employee director on each Fee Payment Date that is attributable to the portion of the compensation that is payable in the form of Director RSUs is determined by dividing one-half of the total dollar amount of compensation that is payable to each such non-employee director on such Fee Payment Date by the closing price of our common stock on the NYSE on such Fee Payment Date (or, if there was no trading of our common stock on the NYSE on such Fee Payment Date, the closing price of our common stock on the date last preceding such Fee Payment Date upon which our common stock was traded on the NYSE).

Fractional Director RSUs are not granted and any fractional portion resulting from the foregoing calculation is paid in cash or deferred as described below.

 

A non-employee director may elect to defer under the PHH Corporation Non-Employee Directors’ Deferred Compensation Plan all or any portion of any compensation that would otherwise be paid to such non-employee director in cash. If deferred, a director is credited with additional Director RSUs with a fair market value on each applicable Fee Payment Date equal to the cash that such non-employee director has elected to defer in lieu of such cash. Director RSUs that are received pursuant to elective deferrals of fees that are otherwise payable in cash are immediately vested and are settled in shares of our common stock 200 days after the director is no longer a member of the Board.

 

We do not maintain a pension plan for non-employee directors. Non-employee directors did not receive any form of compensation for 2009 other than as described above.

 

Director Compensation Table

 

The following table sets forth the compensation paid to or earned by each of our current and former non-employee directors during 2009:

 

 

 

 

The Audit Committee has appointed Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2010. The submission of this matter for approval by stockholders is not legally required; however, the Board believes that such submission provides stockholders an opportunity to provide feedback to the Board on an important issue of corporate governance. If stockholders do not approve the selection of Deloitte & Touche LLP, the selection of such firm as our independent registered public accounting firm will be reconsidered. In the event that Deloitte & Touche LLP is unable to serve as independent registered public accounting firm for the fiscal year ending December 31, 2010 for any reason, the Audit Committee will appoint another independent registered public accounting firm. Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting, will be given an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions regarding the Company.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2010. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE COMPANY WILL BE VOTED ‘‘FOR” THE RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2010.

 

In connection with the preparation of the Company’s consolidated financial statements for the year ended December 31, 2009, the Audit Committee:

 

 

Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for filing with the Securities and Exchange Commission.

 

 

Our Audit Committee is responsible for pre-approving all audit services and permitted non-audit services, including the fees and terms thereof, to be performed for us and our subsidiaries by our independent registered public accounting firm, Deloitte & Touche LLP (the “Independent Auditor”). The Audit Committee has adopted a pre-approval policy and implemented procedures that provide that all engagements of our Independent Auditor are reviewed and pre-approved by the Audit Committee, except for such services that fall within the de minimis exception for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that our Audit Committee approves prior to the completion of the audit. The pre-approval policy also permits the delegation of pre-approval authority to a member of the Audit Committee between meetings of the Audit Committee, and any such approvals are reviewed and ratified by the Audit Committee at its next scheduled meeting.

 

For the years ended December 31, 2009 and 2008, professional services were performed for us by our Independent Auditor pursuant to the oversight of our Audit Committee. Representatives of our Independent Auditor are expected to be present at the Annual Meeting, will be given an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions regarding the Company.

 

Set forth below are the fees billed to us by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu and their respective affiliates. All fees and services were approved in accordance with the Audit Committee’s pre-approval policy.

 

 

Audit Fees.  Audit fees primarily related to the annual audits of the Consolidated Financial Statements included in our Annual Reports on Form 10-K and our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, the reviews of the Condensed Consolidated Financial Statements included in our Quarterly Reports on Form 10-Q and services provided in connection with regulatory and statutory filings.

 

Audit-Related Fees.  Audit-related fees primarily related to audit fees for our employee benefit plans, comfort letters for registration statements and agreed upon procedures.

 

Tax Fees.  Tax fees related to tax compliance, tax advice and tax planning.

 

All Other Fees.  The aggregate fees billed for all other services during the years ended December 31, 2009 and 2008 were not significant and primarily related to software license fees.

 

The table below presents information as of December 31, 2009:

 

 

 

 

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis set forth below with management and, based on such review, recommended to the Board of Directors that the Compensation Discussion and Analysis set forth below be included in the Company’s Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2009.

 

 

Introduction

 

PHH underwent significant change in 2009, with transitions in both the Board of Directors and the management team. Despite these transitions, the Company provided positive stockholder returns, including overall corporate profitability for the year. These changes were accompanied by changes to the executive compensation programs in 2009 (as well as 2010), as PHH continued its efforts to better align employee rewards with sustainable stockholder value creation. In preparation for 2009, the Compensation Committee authorized management to work with the Compensation Committee’s independent compensation consultant to provide recommendations for a new long-term incentive plan. The Compensation Committee directed management to design a performance-based program that would provide regular equity grants to members of management, in order to better align executives’ interests with those of the stockholders, and reward executives commensurate with sustainable stockholder value creation. This request was made in the context of the lack of long-term incentive grants in 2006 and 2007, and the

nature of the 2008 grant. The Compensation Committee reviewed management’s recommendations, and approved long-term incentive awards in February 2009 linked to profitability measures.

 

Following the 2009 annual meeting of stockholders, new members joined the Board of Directors and the Compensation Committee, and there was a change in the Chief Executive Officer position. Given these and other changes in the Board and management team over the last year, the Compensation Committee asked management to work with the Compensation Committee’s independent compensation consultant to undertake a thoughtful, multi-phase approach to developing a new, integrated executive compensation program that is market-competitive, pay-for-performance driven, and aligned with PHH’s achievement of its short-term and long-term strategic objectives and sustainable stockholder value creation. This approach consists of:

 

1. Designing a new Management Incentive Plan for 2010 that aligns rewards with achievement of PHH’s key objectives, including the focus on achieving Core Earnings (Pre-Tax) (defined below), and the transformation objectives that will result in a reengineering of the Company’s operations and organizational structure. The 2010 Management Incentive Plan has been adopted and is described more fully below.

 

2. Developing a new executive compensation philosophy that will be the underpinning of executive compensation decision-making. This philosophy will be aligned with sustainable stockholder value creation.

 

3. Designing a new, integrated executive compensation program for 2011, based on the executive compensation philosophy, PHH’s key strategic objectives, including transformation, and leading market practices around compensation design and risk. The 2010 Management Incentive Plan is a bridge to the 2011 program.

 

4. Designing a new long-term incentive plan consistent with the integrated executive compensation program in the context of leading market practices around the linkage to sustainable stockholder value creation and risk management.

 

The Compensation Committee’s 2009/2010 corporate governance, process and decision-making around executive compensation program design and payouts were made in explicit accordance with a focus on sustainable stockholder value creation.

 

Corporate Governance

 

Compensation Committee Oversight of Executive Compensation.  The Compensation Committee of the Board of Directors underwent a change in 2009. The Compensation Committee was originally comprised of three independent, non-employee directors — Messrs. James Brinkley (Chair) and A.B. Krongard and Ms. Ann Logan. In June 2009, Mr. Allan Loren replaced Mr. Krongard on the Compensation Committee, and assumed the Chairmanship of the Compensation Committee from Mr. Brinkley. On April 1, 2010, Mr. Greg Parseghian replaced Ms. Logan on the Compensation Committee.

 

The Board of Directors has adopted a Compensation Committee charter which sets forth the purpose, composition, authority and responsibilities of the Compensation Committee. The Compensation Committee is currently reviewing its charter and may recommend to the Board that the Compensation Committee charter be revised to broaden the scope and authority of the Compensation Committee.

 

The changes in the Compensation Committee’s membership have not affected its responsibility for overseeing PHH’s executive compensation policies, including evaluating and approving the compensation of PHH’s Named Executive Officers as listed in the “Summary Compensation Table” below. The Compensation Committee reviews and determines the base salary, annual and long-term incentive awards, equity awards and other compensation for each Named Executive Officer, including PHH’s President and Chief Executive Officer, as well as other executive officers, and evaluates PHH’s compensation policies. The Compensation Committee also has the authority to engage and retain executive compensation consultants to assist with such evaluations, and has, in fact, retained PricewaterhouseCoopers LLP (“PwC”) as its independent consultant.

 

Role of Management in Executive Compensation Decisions.  Generally, PHH’s Chief Executive Officer makes recommendations to the Compensation Committee as it relates to the compensation of the Company’s other executive officers. In addition, the Company’s executive officers, including the Company’s Chief Executive Officer, Chief Financial Officer and human resources personnel, may provide input and make proposals as requested by the

Compensation Committee regarding the design, operation, objectives and values of the various components of compensation in order to provide appropriate performance and retention incentives for key employees. These proposals may be made on the initiative of the Chief Executive Officer, the executive officers or upon the request of the Compensation Committee. The Compensation Committee makes the ultimate decisions relating to executive compensation design and payouts.

 

Executive Compensation Consultants.  During 2009, the Compensation Committee retained PwC to assist it with the evaluation of the Company’s executive compensation. PwC analyzed and provided comparative executive and director compensation data and compensation program design assistance for the Compensation Committee’s consideration in evaluating and setting the compensation of the Named Executive Officers and the overall structure of the Company’s compensation policies, as well as assistance with market-competitive data in connection with the Company’s Chief Executive Officer search. The compensation services PwC provided to the Compensation Committee resulted in approximately $265,000 in fees paid to PwC during 2009. During 2009, upon prior approval, PwC also provided certain other consulting services to management. These additional services were provided by individuals different from those who work directly with the Compensation Committee. These additional services, which mainly related to corporate tax management/planning, internal audit outsourcing and other consulting services, resulted in payments to PwC of approximately $2,050,000 during 2009. The projects associated with many of these additional services have been completed, and it is expected that work during 2010 related to the remaining services will be about 15% of the amount paid to PwC during 2009 in respect of such services. The Compensation Committee believes that these other services, which are performed by PwC employees other than the PwC employees providing compensation consulting services to the Compensation Committee, do not compromise PwC’s ability to provide the Compensation Committee with an independent perspective on executive compensation. The Compensation Committee has asked PwC to provide executive compensation consulting services to the Compensation Committee again in 2010.

 

Compensation Process

 

Executive Compensation Objectives.  The primary objective of the Company’s executive compensation policies, as overseen by the Compensation Committee, is to attract, retain and motivate qualified executive officers to manage the Company’s business in order to maximize sustainable stockholder value creation within approved risk profiles. The Company’s executive compensation policies are intended to facilitate the achievement of the Company’s short-term and long-term business strategies through aligning compensation with performance by:

 

 

The Compensation Committee does not rely upon a fixed formula or specific numerical criteria in determining each Named Executive Officer’s total compensation or the allocation of compensation among the various components of compensation described below. Moreover, the Compensation Committee does not have a specific policy for the allocation of compensation between short-term and long-term compensation or cash and equity compensation. Rather, the Compensation Committee exercises its business judgment in determining total compensation based upon the following criteria:

 

 

 

Based upon its analysis of these criteria, the Compensation Committee determines each component of executive compensation (as discussed below) for the Named Executive Officers, taking into consideration the total compensation relative to Peer Group (as defined in “Benchmarking” below) and other market-competitive practice.

 

Benchmarking.  The Compensation Committee believes that an understanding of market-competitive practices is a critical underpinning to making sound executive compensation decisions. In early 2009, the Compensation Committee conducted its annual review of the peer group which it uses to ensure that the Company is competitive in attracting and retaining executive talent. The peer group was revised at that time to reflect the turbulence in the capital markets, and the fact that many peer organizations were no longer independent, publicly-traded organizations. The revised peer group against which the Company benchmarked its executive compensation consisted of seven companies in similar businesses, including mortgage, leasing, and financial services companies with whom the Company competes for executive talent and/or investor capital. PHH’s revenue approximated the 75th percentile of the peer group. The Compensation Committee will again review the peer group composition as part of the Company’s overall executive compensation redesign for 2011.

 

The companies in the peer group are:

 

 

AMERCO and IndyMac Bancorp, Inc. were removed from the peer group.

 

The Compensation Committee asked PwC to also provide data from multiple national compensation databases (the “Survey Data”) in order to assist in the compensation evaluation due to the unique nature of the Company’s business units and the lack of peer companies with a similar business unit mix for comparison.

 

The Compensation Committee evaluated the base salary, short-term and long-term incentives and actual and target total compensation levels for the Peer Group and Survey Data, including the median and percentile ranges for each compensation component, for comparison with that of PHH’s Named Executive Officers. The Compensation Committee determined that for 2009, total executive compensation for the Named Executive Officers should be targeted at or slightly above the median of the compensation of the Peer Group for above-average performance in order to be competitive with the compensation structure of the Peer Group and to attract and retain executive talent. The Compensation Committee will again review this compensation philosophy in connection with the Company’s executive compensation program redesign for 2011 and may adjust these targets based upon how they advance sustainable stockholder value creation.

 

2009 Executive Compensation Program Design

 

Components of Executive Compensation.  The primary components of the executive compensation arrangements for the Company’s Named Executive Officers are base salaries, variable annual compensation programs and long-term incentive awards. In making its decisions for 2009, the Compensation Committee considered the turbulent nature of the economy, and the negative trend in share price in the overall capital markets.

 

Base Salaries.  The Compensation Committee is responsible for determining the base salary of PHH’s Chief Executive Officer and other Named Executive Officers, which includes the review and approval of annual adjustments to their base salaries. Base salaries are intended to provide a level of cash compensation that is externally competitive in relation to the responsibilities of the executive’s position in order to attract and retain executive talent.

 

During 2009, the Compensation Committee evaluated salary levels based upon competitive compensation levels for companies in the Peer Group, as well as consideration of the nature of each executive officer’s position and the contribution, achievement, experience and tenure of each executive officer. No market-based compensation adjustments were made to the compensation for the Named Executive Officers, due to the nature of the economy at the time, consistent with decisions made for the remainder of the organization’s employees. The Company did,

however, increase the base salary of Mark Danahy to $375,000 to reflect his promotion to Executive Vice President, Mortgage, and the base salary of Bill Brown to $330,000 to reflect a delayed increase.

 

The following table sets forth the annualized base salaries for the Named Executive Officers for 2009.

 

 

 

 

Variable Annual Cash Compensation Programs.  In 2009, the Company’s Named Executive Officers, other executive officers, and certain other employees were eligible for additional cash compensation through participation in the Company’s annual management incentive plans for PHH Corporate, Mortgage and Fleet employees (collectively, the “MIPs”) that are designed to motivate eligible recipients to achieve the Company’s short-term objectives. Generally, each executive officer was eligible to receive an annual cash incentive payout calculated as a percentage of the executive officer’s base salary and based upon the achievement of performance targets for consolidated results, operating segment results, individual executive officer performance and/or other performance targets established by the Compensation Committee in its discretion. In order to tie a greater percentage of each executive officer’s compensation to the achievement of the Company’s annual performance objectives, the target payout percentage of base salary increases as an executive officer’s duties and responsibilities within the Company increase.

 

The Compensation Committee set the performance targets under the 2009 MIPs at levels that were considered to be challenging based on historical performance, industry and market conditions, and adjusted the targets to coincide with the Company’s overall strategy, business plan and other factors. From 2005 through 2009, the Compensation Committee established the performance targets for the Named Executive Officers and all MIP eligible employees based on the pre-tax income after non-controlling interest (“PTIANI”) for the Company’s Mortgage and/or Fleet business units. In 2009, in order to reflect key initiatives by the Company towards achieving overall profitability in a challenging economic environment, other measures, such as cost per loan and general and administrative expense reduction metrics, were added to the performance targets. The diverse nature of the separate PHH business units was a driving factor in establishing MIPs for each business unit, and then combining that performance for corporate officers. That construct is evaluated for effectiveness each year, was revised in 2010 (as discussed below), and will again be under review in connection with the integrated executive compensation redesign for 2011.

 

During 2009, in consultation with management and PwC, the Compensation Committee approved the 2009 PHH Corporation Management Incentive Plan (the “2009 Corporate MIP”), the 2009 PHH Arval Management Incentive Plan (the “2009 Fleet MIP”) and the 2009 PHH Mortgage Management Incentive Plan (the “2009 Mortgage MIP”) (together, the “2009 MIPs”) and established performance targets under each of the 2009 MIPs. The performance targets for the 2009 Fleet MIP and 2009 Mortgage MIP were based on PTIANI for the year ended December 31, 2009, for each of Fleet and Mortgage. In addition, Mortgage had additional operating expense goals related to creating sustainable underlying profitability, such as reducing production cost per loan, servicing cost per loan, and general and administrative expenses. Performance against the operating expense goals was considered

necessary to overall Mortgage performance. The Mortgage operating expense goals were considered to be difficult to achieve since they represented an enhanced focus for the business.

 

Under the 2009 Mortgage MIP, achievement against the PTIANI goal for the combined Mortgage Production and Mortgage Servicing segments represented 50% of the potential incentive payout for a participant, with achievement of the operating expense metrics (production cost per loan, servicing cost per loan, and general and administrative cost reduction) representing the remaining 50% of the potential payout. Performance at target resulted in a payout of 100% of each participant’s incentive opportunity. Performance at the “Outstanding” level for PTIANI would result in a payout of 200% of the PTIANI share of the incentive payout. Above-target performance for the operating expense metrics would not result in increased payouts, so that the maximum payout for any participant under the 2009 Mortgage MIP was 150% of target. Performance below target in either PTIANI or the operating expense metrics would result in no payout for that particular goal. Performance between the “Target” and “Outstanding” levels for PTIANI would result in an interpolated payout.

 

Consistent with prior years, performance achievement under the 2009 Fleet MIP was based on the attainment of a target level of PTIANI for the Fleet Management Services segment. Performance at target would result in a payout of 100% of target. The maximum payout that could be earned was 125% of the participant’s target payout, upon achieving the “Outstanding” PTIANI goal. Performance below target would result in no payout. Performance between the “Target” and “Outstanding” levels would result in an interpolated payout.

 

The differences in payout leverage between the 2009 Mortgage MIP and 2009 Fleet MIP were reflective of the Compensation Committee’s view of the potential variability in each business unit’s performance. Performance achievement under the 2009 Corporate MIP was based 50% on the performance achievement under the 2009 Mortgage MIP and 50% on the performance achievement under the 2009 Fleet MIP. Participants in the 2009 Corporate MIP would receive a payout of 100% of their target payout percentage if both the Mortgage and Fleet business units achieved their target performance goals. If maximum performance were achieved under both the 2009 Mortgage MIP and 2009 Fleet MIP, the maximum performance that could be paid under the 2009 Corporate MIP was 137.5% of the participant’s target payout percentage of base salary.

 

The table below sets forth the PTIANI performance goals for the Mortgage and Fleet businesses under the 2009 Mortgage MIP and 2009 Fleet MIP.

 

 

 

 

Pursuant to the terms of the 2009 MIPs, in the event that the performance targets were achieved or exceeded, the participating Named Executive Officer would receive a cash payment in an amount equal to the Named Executive Officer’s base salary multiplied by the target payout percentage for such Named Executive Officer multiplied by the percentage by which the performance target for such plan was met or exceeded. Given their respective responsibilities, the Named Executive Officers participated in the various MIP Plans as follows:

 

 

 

In addition to his duties as the Executive Vice President, Fleet, Mr. Kilroy served as Acting Chief Executive Officer and President of PHH for part of 2009. Mr. Kilroy’s incentive compensation was modified to include incentive payouts based 50% upon the 2009 Fleet MIP and 50% upon the 2009 Corporate MIP to reflect his overall corporate duties. Mr. Kilroy’s target payout percentage for performance achievement under the 2009 Fleet MIP was 100% of base salary and under the 2009 Corporate MIP was 150% of base salary. His overall payout percentage for 2009 was 125% of base salary assuming a Target level of performance achievement under both the 2009 Fleet MIP and 2009 Corporate MIP, and a maximum payout percentage for 2009 of 165.625% of base salary assuming maximum performance achievement under both the 2009 Fleet MIP and 2009 Corporate MIP.

 

Variable Annual Long-Term Incentive Awards.  The Compensation Committee administers the Company’s 2005 Equity and Incentive Plan, which provides for equity-based awards, including restricted stock units (“RSUs”) and options to purchase PHH common stock (“Stock Options”). The Compensation Committee considers equity-based awards to the Company’s Named Executive Officers an appropriate and effective method of retaining key management employees and aligning their interests with the interests of the Company’s stockholders. Eligibility for equity-based awards, the number of shares underlying each award and the terms and conditions of each award are determined by the Compensation Committee upon consultation with management and the Compensation Committee’s independent compensation consultant.

 

On March 25, 2009, based on recommendations from management and the Compensation Committee’s independent compensation consultant, the Compensation Committee changed the long-term incentive plan to move away from performance-accelerated RSUs to a mix of (1) premium-priced Stock Options, and (2) performance-vested RSUs, as described below, for its awards under the 2005 Equity and Incentive Plan to Messrs. Edwards, Kilroy, Danahy and Brown and Ms. Bell.

 

The Compensation Committee considered the impact on stockholders of the reduction in PHH’s share price in the period preceding the long-term incentive grants. Although the share price decline was viewed as part of an overall capital markets decline, as well as due to short-term changes in the liquidity/capital markets, the Compensation Committee nevertheless decided that it was not appropriate to continue to provide the same long-term incentive fair value to executives as in the prior year, since that would require a more than doubling in the share usage, and resulting potential stockholder dilution. The Compensation Committee therefore decided to provide approximately one-half the fair value as in the prior year, even though the market-competitive data indicated that these long-term incentive grant values were below market levels.

 

Performance-vested RSUs.  During 2009, the Compensation Committee granted performance-vested RSUs based on cumulative three-year PTIANI (pre-tax income after non-controlling interest) results. PTIANI was used as an appropriate measure of profitability, and therefore underlying stockholder value creation. The Compensation Committee utilized a three-year performance vesting schedule to align the program with multi-year sustainable value creation.

 

The following table sets forth the threshold, target and maximum number of shares issuable upon settlement of the performance-vested RSUs that were granted on March 25, 2009 (the “2009 Performance Units”) to the Named Executive Officers employed by the Company on such date:

 

2009 Performance Unit Awards

 

Recipients of the 2009 Performance Units will earn shares of the Company’s common stock pursuant to the awards in accordance with the percentage by which the Company attains or exceeds the minimum threshold amount of cumulative PHH PTIANI during the target measurement period of January 1, 2009 through December 31, 2011. The minimum threshold performance level required for a recipient of a 2009 Performance Unit to earn shares pursuant to such award is 50% of the target amount of cumulative PHH PTIANI during the target measurement period (in which case, such recipient will earn 50% of the target level of shares awarded). Recipients may not earn more than 120% of the target level of shares subject to the award. The Compensation Committee has the authority and discretion to exclude the impact of certain extraordinary or unusual accounting adjustments or income/expense items from the calculation of PTIANI during the target measurement period that, in the discretion of the Compensation Committee, are reasonably considered to be outside of the control of management. Provided the requisite minimum threshold of PTIANI is satisfied, the 2009 Performance Units will be settled, and shares earned will be issued, on or after January 1, 2012, and on or before April 30, 2012. Except to the extent that a 2009 Performance Unit is modified, no shares will be issued to any recipient of a 2009 Performance Unit whose employment terminates for any reason (other than for death or disability) before January 1, 2012. If a “change in control” of the Company (as defined in the 2005 Equity and Incentive Plan) occurs during the target measurement period, the performance conditions contained in the 2009 Performance Unit awards will be deemed to be fully achieved and shares will then be issued to recipients of the 2009 Performance Unit awards that are employed on the date of the “change in control.”

 

Premium-priced Stock Options.  Stock Options were added to the long-term incentive program during 2009 because the Compensation Committee believed that Stock Options are aligned with ultimate stockholder value creation — the increase in share price. The Compensation Committee further recognized that, at the time of the Stock Option grants, the Company’s share price was artificially depressed by the capital markets turbulence. Therefore, the Compensation Committee approved Stock Option awards during 2009 with an exercise price that was 20% above the closing price of PHH’s common stock on the date of grant in an effort to ensure that management would not receive value from the Stock Options merely from an overall increase in the equity capital markets.

 

On March 25, 2009, the Compensation Committee granted non-qualified stock options under the 2005 Equity and Incentive Plan (the “2009 Stock Options”) to each of the Company’s Named Executive Officers at an exercise price of $16.548 per share, representing a 20% premium to the closing price of the Company’s common stock on the NYSE on March 25, 2009. Subject to continued employment and unless modified, the 2009 Stock Options vest ratably in three equal annual installments beginning March 25, 2010. If a “change in control” of the Company (as defined in the 2005 Equity and Incentive Plan) occurs during the vesting period, the vesting conditions contained in the 2009 Stock Option awards will be deemed to be fully satisfied as of the date of such “change in control” and the 2009 Stock Options held by persons that are employed by PHH on the date of such “change in control” will become immediately exercisable.

 

The following table sets forth the 2009 Stock Options that were granted on March 25, 2009, to the Named Executive Officers that were employed by the Company on such date:

 

2009 Stock Option Awards

 

 

Other Long-term Incentive Grants.  PHH provided Mr. Selitto with a sign-on grant of 250,000 Stock Options upon his commencement of employment as Chief Executive Officer. These Stock Options vest ratably over three years, and are intended to provide Mr. Selitto with immediate alignment with stockholders and provide a focus on stockholder value creation. In order to create even greater stockholder alignment, PHH provided Mr. Selitto with a

matching grant of one RSU for each share of PHH common stock purchased in the open market by Mr. Selitto during the first open trading window following commencement of his employment, or 17,500 RSUs. These RSUs vest one year following the grant date.

 

Under the terms of the 2008 long-term incentive grant of service vested RSUs with vesting acceleration based on achievement of performance metrics established by the Compensation Committee (the “2008 RSUs”), the Compensation Committee set the required annual performance metric that is used to determine whether one-third of the grant would be subject to vesting acceleration for each of 2008, 2009, and 2010. In 2009, the Compensation Committee approved the achievement of the vesting acceleration performance metric for 2008. In 2009, the Compensation Committee also set the vesting acceleration performance metric for the 2009 performance period, and used the same PTIANI (pre-tax income after non-controlling interest) goals that it used for the 2009 MIPs. On February 25, 2010, the Compensation Committee approved the achievement of the vesting acceleration performance metric for 2009.

 

Consistent with the Compensation Committee’s focus on earnings on an ongoing basis and consistent with the Compensation Committee’s commitment to stockholders, the Compensation Committee set the 2010 vesting acceleration performance metric for the 2008 RSUs based on Core Earnings (Pre-Tax). Core Earnings (Pre-Tax) is based on pre-tax income after non-controlling interest adjusted for the effects of the following special items: (a) the pre-tax change in the fair value of mortgage servicing rights due to changes in market inputs or assumptions used in the valuation model and (b) the pre-tax change in the fair value of mortgage service rights primarily due to changes in estimated portfolio delinquencies and foreclosures. Any 2008 RSUs for which the vesting has not been accelerated following the conclusion of the 2010 performance period will vest ratably in 2012 and 2013 subject to the employee’s continued employment with the Company throughout such period, with the exception of Mr. Edwards, whose unvested 2008 RSUs will become fully vested at the end of his two year severance period notwithstanding that he is no longer an employee of the Company. The Compensation Committee has asked management to work with the independent consultant to review the long-term incentive plan and make recommendations for potential terms and levels for 2010 and 2011.

 

2010 Executive Compensation Decision-making

 

Base Salaries.  During 2010, the Compensation Committee evaluated salary levels based upon market-competitive compensation levels, as well as consideration of the nature of each executive officer’s position and the contribution, achievement, experience and tenure of each executive officer. No market-based or other compensation adjustments were made to the compensation for the Named Executive Officers, consistent with decisions made for the remainder of the organization’s employees.

 

2009 Management Incentive Plan.  The Compensation Committee reviewed the unadjusted PTIANI (pre-tax income after non-controlling interest) results for 2009, and potential adjustments to those results for extraordinary items, given the unusual economic and capital markets turbulence, as well as the changes in the composition of the Board of Directors and management team. In reviewing adjustments to performance against goals, the Compensation Committee utilized the principle that management is accountable for the Company’s operations, and therefore decisions related to those operations. As a result, the Compensation Committee applied negative discretion to reduce Mortgage PTIANI and Fleet PTIANI results to account for various items that had not originally been included, but that the Compensation Committee viewed as within management’s operational and strategic responsibility. Mortgage PTIANI performance therefore was adjusted downward to $195.7 million and Fleet PTIANI performance was similarly adjusted downward to $26.6 million. The Compensation Committee further determined that the Mortgage business met all of its operating cost metrics. This resulted in calculated performance achievements of 121.8% of Target under the 2009 Mortgage MIP, 121.5% of Target under the 2009 Fleet MIP, and 121.7% of Target under the 2009 Corporate MIP. Applying the formula resulted in MIP payouts to the Named Executive Officers of $687,160 for Mr. Edwards, $486,800 for Ms. Bell, $684,113 for Mr. Kilroy, $456,750 for Mr. Danahy, and $200,805 for Mr. Brown.

 

2010 Management Incentive Plan.  PHH is revising its executive and broad-based compensation programs to better align rewards with the Company’s strategic objectives and its transformation, and increase the culture of responsibility and risk management. The 2010 Management Incentive Plan was designed to begin this tighter

pay-for-performance alignment and culture change, as well as focus management on PHH’s key objectives. The 2010 Management Incentive Plan requires the Company to meet its Core Earnings (Pre-Tax) plan to fund any payouts for participants in order to focus all participants on ultimate stockholder value creation. Under the 2010 Management Incentive Plan, executive officers and other participants are generally required to meet individual objectives, with payouts reduced for non-achievement. Senior executives have Core Earnings (Pre-Tax) and transformation objectives included in the individual objectives to reinforce the team alignment on meeting the Company’s key objectives. Additionally, each senior executive, as appropriate, has growth, risk management and talent management goals, to focus them on creating sustainable stockholder value creation. Payouts are aligned with meeting the budgeted plan, which is considered by the management team to consist of aggressive goals, based on expected changes in the mortgage industry. Performance of 100% to 115% of plan will result in payouts of up to 125% of target incentive; performance of 115% to 125% of plan will result in payouts of up to 150% of target incentive. This enhanced leverage is considered appropriate given the desire to incentivize management to reach these difficult to achieve performance levels. The Compensation Committee, in recognition of the difficulty of achieving plan, also agreed to consider payouts of 50% of target for meeting 90% of plan, and 75% of target for meeting 95% of plan. The Management Incentive Plan will be further reviewed for potential changes in 2011 as part of the overall executive compensation program redesign.

 

Long-Term Incentive Awards.  Since the Compensation Committee has asked management to develop recommendations for an integrated executive compensation program, the Compensation Committee has determined that the nature and amount of long-term incentive awards in 2010 should be made only after the Compensation Committee has agreed upon the new executive compensation philosophy and program.

 

Retirement Benefits

 

Messrs. Edwards, Kilroy and Brown are participants in defined benefit plans that were available to all of the Company’s employees prior to the spin-off of the Company in 2005, including the PHH Corporation Pension Plan (the “PHH Pension Plan”) and PHH Corporation Retiree Medical Plan (the “PHH Retiree Medical Plan”) (collectively, the “Retirement Plans”). The benefits payable under these plans have been frozen for the Named Executive Officers and the other plan participants. See “— Pension Benefits” for more information regarding benefits available to the Named Executive Officers under these plans. In addition, all of the Company’s Named Executive Officers participate in the PHH Corporation Employee Savings Plan (the “PHH Savings Plan”) on the same basis as other employees. The PHH Savings Plan is a tax-qualified retirement savings plan that provides for employee contributions made on a pre-tax basis and matching contributions based on a portion of the employee’s compensation contributed to the PHH Savings Plan up to the statutory limit. The matching contribution percentage under the PHH Savings Plan was reduced effective January 1, 2009, from 6% to 4% of the employee’s compensation contributed to the PHH Savings Plan up to the statutory limit. See “All Other Compensation” in Footnote 7 under “— Summary Compensation Table” for more information regarding matching contributions to the PHH Savings Plan made on behalf of each Named Executive Officer.

 

Perquisites and Other Compensation

 

The Company provides only a limited number of perquisites to its Named Executive Officers. The Company’s Named Executive Officers generally are provided with or have use of company vehicles, financial planning services and tax reimbursements on the foregoing perquisites. In addition, Mr. Kilroy received fuel costs and tax reimbursements for his company vehicle. Considering PHH’s fleet management business, the provision of vehicles to senior executives is considered an appropriate perquisite; regardless, the Compensation Committee will be reviewing the appropriateness of these perquisites as part of PHH’s executive compensation program on an ongoing basis.

 

During 2009, in connection with Ms. Bell’s relocation as a term of her employment, the Company provided Ms. Bell a relocation allowance and reimbursed Ms. Bell or paid on Ms. Bell’s behalf relocation related expenses for transportation, parking, lodging, home purchase closing costs, and moving and storage expenses attributable to the transport of Ms. Bell’s household goods. The Company also paid on Ms. Bell’s behalf a down payment on her new residence, and arranged for the purchase and subsequent resale of Ms. Bell’s former residence at a loss to the Company, which loss represented imputed income to Ms. Bell. The Company also provided Ms. Bell a tax gross-up

for each of the foregoing relocation related benefits. Ms. Bell’s aggregate relocation related benefits of $677,859 and tax gross-up payments of $424,202 in respect of Ms. Bell’s relocation related benefits were partly attributable to the severely depressed state of the housing market at the time of Ms. Bell’s relocation and a desire to conclude Ms. Bell’s relocation as expeditiously as practicable. During 2009, in connection with Mr. Selitto’s relocation as a term of his employment, the Company reimbursed Mr. Selitto or paid on Mr. Selitto’s behalf $7,698 in expenses for transportation, parking, and lodging. See “— Summary Compensation Table” below for further information concerning Ms. Bell’s relocation related benefits and tax gross-up payments.

 

Change in Control and Other Severance Arrangements

 

The Company maintains a general severance program for its executives and other employees. In 2009, a number of PHH executives and other employees, including Ms. Bell and Messrs. Kilroy, Danahy and Brown, were subject to special severance agreements. Those agreements expired by their terms as of December 31, 2009, and the Compensation Committee determined not to renew such agreements. As a result, except for Mr. Selitto, whose employment agreement contains severance provisions, no employee has a special severance agreement. Under the 2005 Equity and Incentive Plan, unvested equity-based awards generally will become fully and immediately vested and, in the case of stock options, exercisable, upon the occurrence of a change in control transaction (as defined in the 2005 Equity and Incentive Plan). See “— Potential Payments upon Termination of Employment or Change in Control” below for additional information regarding payments in the event of a change in control or other termination of employment for each Named Executive Officer. The Company currently is working with the Compensation Committee’s independent compensation consultant to determine whether an executive severance program is consistent with stockholder value creation, and if so, appropriate market-competitive practice related to such severance.

 

During 2009, PHH entered into a Transition Services and Separation Agreement, as amended, with Mr. Edwards in connection with his separation of employment (the “Edwards Separation Agreement”). The Edwards Separation Agreement includes non-competition and other restrictive covenants, including a list of competitors with whom Mr. Edwards may not be associated during the non-competition period, and provisions requiring Mr. Edwards to assist in the transition to a new Chief Executive Officer given Mr. Edwards’ institutional knowledge of PHH, its business strategies, and the markets in which the Company operates. As consideration for the foregoing covenants and in light of Mr. Edwards’ dedicated service to the Company, the Edwards Separation Agreement provides for severance payments to Mr. Edwards in the form of salary continuance for two years, the modification and continued vesting of Mr. Edwards’ unvested equity-based compensation awards, which was intended to align his long-term interests with those of PHH’s stockholders, and certain other benefits. See “— Summary Compensation Table” and “— Grants of Plan-Based Awards” below for further information concerning the modification of Mr. Edwards’ unvested equity-based compensation awards. See “— Outstanding Equity Awards at Fiscal Year-End” below for further information concerning Mr. Edwards’ outstanding equity-based compensation awards as of December 31, 2009. See “— Potential Payments Upon Termination of Employment or Change in Control” below for further information concerning Mr. Edwards’ severance related benefits.

 

Mr. Selitto’s Employment Agreement

 

In October 2009, PHH hired a new President and Chief Executive Officer, Mr. Jerry Selitto. Mr. Selitto’s compensation package was designed to attract Mr. Selitto to the Company and to be performance-driven, linked to sustainable stockholder value creation and market-competitive. As a result, a substantial part of Mr. Selitto’s pay mix includes performance-based cash and equity compensation. Under Mr. Selitto’s employment agreement (the “Selitto Employment Agreement”), Mr. Selitto is subject to non-competition, non-solicitation, confidentiality, non-disparagement and certain other restrictive covenants and is entitled (i) to a minimum annual base salary of $800,000, (ii) to participate in the PHH Corporation Management Incentive Plan, (iii) to be granted 250,000 Stock Options (which grant was made on October 26, 2009, with vesting to occur in three equal annual installments beginning October 26, 2010), (iv) to be granted up to 50,000 RSUs based on the number of shares of PHH common stock purchased by Mr. Selitto during the first open window trading period after October 26, 2009 (which grant was made on December 21, 2009, in the amount of 17,500 RSUs that vest on December 21, 2010), (v) to be eligible to receive annual equity incentive grants as determined in the discretion of the Compensation Committee, and (vi) to

receive certain other fringe, relocation and, under certain circumstances, severance related benefits. See “— Potential Payments Upon Termination of Employment or Change in Control” below for further information concerning Mr. Selitto’s severance related benefits.

 

Deductibility of Executive Compensation

 

In accordance with Section 162(m) of the Internal Revenue Code, the deductibility for federal corporate income tax purposes of compensation paid to certain of the Company’s executive officers in excess of $1 million in any year may be restricted. The Compensation Committee believes that it is in the best interests of the Company’s stockholders to comply with such tax law, while still maintaining the goals of the Company’s compensation programs. Accordingly, where it is deemed necessary and in the Company’s best interests to attract and retain the best possible executive talent and to motivate such executives to achieve the goals inherent in the Company’s business strategy, the Compensation Committee may approve compensation to executive officers that may exceed the limits of deductibility imposed by Section 162(m). The 2010 Management Incentive Plan has been specifically designed, approved and implemented for compliance with Section 162(m).

 

The Company’s management, with the assistance of the Compensation Committee’s independent consultant, conducted a risk assessment of the Company’s compensation programs, to determine whether such programs are reasonably likely to have a material adverse effect on the Company. The risk assessment determined that the Company’s compensation programs do not encourage excessive or unnecessary risk-taking and are not reasonably likely to have a material adverse effect on the Company. While risk-taking is a necessary part of growing a business, the Compensation Committee has focused on aligning PHH’s compensation policies with the long-term interests of PHH and avoiding short-term rewards for management decisions that could pose long-term risks to PHH, as follows:

 

 

In sum, the Company’s compensation programs are structured so that a considerable amount of wealth of the Company’s executives is tied to the long-term health of PHH which encourages risk oversight. The compensation programs avoid the type of disproportionately large short-term incentives that could encourage executives and other employees to take risks that may not be in PHH’s long-term interests, explicitly include risk management in the individual objectives of executives and other key employees to align them with incentive payouts, and provide incentives to manage for long-term performance. The Compensation Committee believes this combination of factors encourages the Company’s executives and other employees to manage PHH in a prudent manner.

 

The Compensation Committee is currently comprised of Messrs. Loren, Brinkley and Parseghian. During 2009, Mr. Krongard and Ms. Logan served on the Compensation Committee during their respective service on the Board. Throughout 2009, the Compensation Committee consisted entirely of “outside directors” within the meaning of the regulations under Section 162(m) of the Internal Revenue Code of 1986, as amended, “non-

employee directors” under SEC Rule 16b-3, and “independent” directors as affirmatively determined by the Board pursuant to the NYSE Listing Standards and the Company’s categorical Independence Standards. The current members of the Compensation Committee are the individuals named as signatories to the Compensation Committee Report set forth above under “Compensation Committee Report.” None of the individuals that served on the Compensation Committee during 2009 and none of the current members of the Compensation Committee are former officers or employees of the Company.

 

The information below sets forth the compensation of our current and former Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers for the year ended December 31, 2009 (collectively referred to as our “Named Executive Officers”). The form and amount of the compensation paid or to be paid to our Named Executive Officers for the year ended December 31, 2009 was determined by the Compensation Committee of our Board. The amounts included in the “Stock Awards,” “Option Awards” and “Total” columns in the table below have been restated from prior years in accordance with recent SEC rule changes. Specifically, the amounts reported in the “Stock Awards” and “Option Awards” columns now reflect the aggregate grant date fair value of equity-based compensation awards made during a given year, as opposed to the amount of equity-based compensation expense recognized by us during such year, and the amounts in the “Total” column have been correspondingly adjusted. Accordingly, the amounts in the “Stock Awards,” “Option Awards” and “Total” columns are not comparable to amounts reported in prior fiscal years.

 

 

 

 

 

All Other Compensation

 

 

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During 2009, we entered into an Employment Agreement with Mr. Selitto (the “Selitto Employment Agreement”) and a Transition Services and Separation Agreement, as amended, with Mr. Edwards (the “Edwards Separation Agreement”). Pursuant to the Selitto Employment Agreement, Mr. Selitto was granted 250,000 Stock Options with an aggregate grant date fair value of $2,185,000 and 17,500 RSUs with an aggregate grant date fair value of $251,650 during 2009. Pursuant to the Edwards Separation Agreement, Mr. Edwards’ unvested equity awards were modified to generally permit Mr. Edwards to continue to vest in such awards and to align his long-term interests with those of our stockholders. Absent such modifications, such awards would have been forfeited. Included in the “Stock Awards” column of the Summary Compensation Table for Mr. Edwards for 2009 is $1,315,212 representing the aggregate grant date fair value attributable to the modification of Mr. Edwards’ unvested RSU awards, including $441,900 that is attributable to the modification of the 2009 Performance Units initially granted to Mr. Edwards on March 25, 2009. Included in the “Option Awards” column of the Summary Compensation Table for Mr. Edwards for 2009 is $729,730 representing the aggregate grant date fair value attributable to the modification of Mr. Edwards’ unvested Stock Option awards, including $476,256 that is attributable to the modification of Stock Options initially granted to Mr. Edwards on March 25, 2009. See “— Grants of Plan-Based Awards” below for further information concerning these awards to Mr. Selitto and the

modification of Mr. Edwards’ unvested equity-based awards, including Footnotes 2, 6, 7 and 8 to the Grants of Plan-Based Awards table.

 

During 2009, we provided certain relocation benefits and related tax gross-up payments to Ms. Bell in connection with her relocation to the Greater Philadelphia region as a term of her employment, which benefits and payments comprised a significant component of Ms. Bell’s total compensation during 2009. Such amounts are included in the “All Other Compensation” column of the Summary Compensation Table for 2009 for Ms. Bell. See also Footnote 7 to the Summary Compensation Table above for additional details. The amount of Ms. Bell’s relocation benefits and related tax gross-up payments was partly attributable to the severely depressed state of the housing market at the time of Ms. Bell’s relocation and a desire to conclude Ms. Bell’s relocation as expeditiously as practicable.

 

On March 25, 2009, Messrs. Edwards, Kilroy, Danahy and Brown and Ms. Bell were granted 2009 Performance Units with an aggregate grant date fair value of $310,275, $206,850, $206,850, $115,298, and $206,850, respectively. On August 5, 2009, the 2009 Performance Units that were initially granted to Mr. Edwards on March 25, 2009, were modified pursuant to the Edwards Separation Agreement resulting in such 2009 Performance Units being deemed re-granted at an aggregate grant date fair value of $441,900. These amounts, including the amounts attributable to Mr. Edwards’ modified 2009 Performance Units, are included in the “Stock Awards” column of the Summary Compensation Table and represent the aggregate grant date fair value of the 2009 Performance Units based on the probable outcome of the threshold level of achievement in accordance with SEC rules under the Exchange Act. If the probable outcome of the level of achievement had been determined to be less than the threshold level of achievement, as opposed to the threshold level of achievement, these amounts would be zero and the “Total” column would be reduced accordingly. If the probable outcome of the level of achievement had been determined to be the target level of achievement, as opposed to the threshold level of achievement, these amounts would be increased by 100% and the “Total” column would be increased accordingly. If the probable outcome of the level of achievement had been determined to be the maximum level of achievement, as opposed to the threshold level of achievement, these amounts would be increased by 140% and the “Total” column would be increased accordingly. See “— Grants of Plan-Based Awards” below and Footnote 2 to the Grants of Plan-Based Awards table for further information concerning the 2009 Performance Units and the amounts included in the Summary Compensation Table in respect of the 2009 Performance Units. See also “— Compensation Discussion and Analysis — 2009 Executive Compensation Program Design — Variable Annual Long-Term Incentive Awards — Performance-vested RSUs” for further information concerning the 2009 Performance Unit awards to Messrs. Edwards, Kilroy, Danahy and Brown and Ms. Bell.

 

The following table sets forth the grants of plan-based awards made during 2009 or deemed made during 2009 due to modifications during 2009 of awards made prior to or during 2009: