EXHIBIT 10.3



 






Exhibit 10.3



SEPARATION AGREEMENT




between




CENDANT CORPORATION




and




PHH CORPORATION






 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	ARTICLE I COVENANTS AND OTHER MATTERS

	 
	 	 	 	 	 	 
	Section 1.1

	 	Other Agreements
	 	 	1	 
	 
	 	 	 	 	 	 
	Section 1.2

	 	Further Instruments
	 	 	1	 
	 
	 	 	 	 	 	 
	Section 1.3

	 	Agreement For Exchange Of Information
	 	 	2	 
	 
	 	 	 	 	 	 
	Section 1.4

	 	Auditors And Audits; Financial Statements; Accounting Matters
	 	 	4	 
	 
	 	 	 	 	 	 
	Section 1.5

	 	Confidentiality
	 	 	7	 
	 
	 	 	 	 	 	 
	Section 1.6

	 	Privileged Matters
	 	 	8	 
	 
	 	 	 	 	 	 
	Section 1.7

	 	Mail And Other Communications
	 	 	10	 
	 
	 	 	 	 	 	 
	Section 1.8

	 	Payment Of Expenses
	 	 	10	 
	 
	 	 	 	 	 	 
	Section 1.9

	 	Dispute Resolution
	 	 	11	 
	 
	 	 	 	 	 	 
	Section 1.10

	 	Governmental Approvals
	 	 	11	 
	 
	 	 	 	 	 	 
	Section 1.11

	 	No Representation Or Warranty
	 	 	11	 
	 
	 	 	 	 	 	 
	Section 1.12

	 	Employee Solicitation
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 1.13

	 	Public Announcements
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 1.14

	 	Pension Plan
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 1.15

	 	401(k) Plan
	 	 	14	 
	 
	 	 	 	 	 	 
	Section 1.16

	 	Retiree Medical Plan
	 	 	14	 
	 
	 	 	 	 	 	 
	Section 1.17

	 	Deferred Compensation Plans
	 	 	15	 
	 
	 	 	 	 	 	 
	Section 1.18

	 	Equity Awards
	 	 	15	 
	 
	 	 	 	 	 	 
	Section 1.19

	 	Certain Transactions
	 	 	15	 
	 
	 	 	 	 	 	 
	Section 1.20

	 	Release
	 	 	16	 
	 
	 	 	 	 	 	 
	Section 1.21

	 	Use of Cendant Name
	 	 	16	 
	 
	 	 	 	 	 	 
	ARTICLE II MUTUAL RELEASES; INDEMNIFICATION

	 
	 	 	 	 	 	 
	Section 2.1

	 	Release Of Pre-Distribution Date Claims
	 	 	16	 
	 
	 	 	 	 	 	 
	Section 2.2

	 	Indemnification By PHH
	 	 	17	 






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	Section 2.3

	 	Indemnification By Cendant
	 	 	18	 
	 
	 	 	 	 	 	 
	Section 2.4

	 	Contribution
	 	 	19	 
	 
	 	 	 	 	 	 
	Section 2.5

	 	Ancillary Agreement Liabilities
	 	 	19	 
	 
	 	 	 	 	 	 
	Section 2.6

	 	Other Agreements Evidencing Indemnification Obligations
	 	 	19	 
	 
	 	 	 	 	 	 
	Section 2.7

	 	Reductions For Insurance Proceeds And Other Recoveries
	 	 	19	 
	 
	 	 	 	 	 	 
	Section 2.8

	 	Procedures For Defense, Settlement And Indemnification Of
Third Party Claims
	 	 	21	 
	 
	 	 	 	 	 	 
	Section 2.9

	 	Additional Matters
	 	 	22	 
	 
	 	 	 	 	 	 
	Section 2.10

	 	Survival Of Indemnities
	 	 	23	 
	 
	 	 	 	 	 	 
	ARTICLE III INSURANCE MATTERS

	 
	 	 	 	 	 	 
	Section 3.1

	 	Cooperation; Payment Of Insurance Proceeds To PHH; Agreement
Not To
Release Carriers
	 	 	23	 
	 
	 	 	 	 	 	 
	Section 3.2

	 	PHH Insurance Coverage After The Distribution
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 3.3

	 	Responsibilities For Deductibles And/Or Self-Insured Obligations
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 3.4

	 	Procedures With Respect To Insured PHH Liabilities
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 3.5

	 	Cooperation
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 3.6

	 	No Assignment Or Waiver
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 3.7

	 	No Liability
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 3.8

	 	Additional Or Alternate Insurance
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 3.9

	 	Further Agreements
	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE IV MISCELLANEOUS

	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Section 4.1

	 	LIMITATION OF LIABILITY
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 4.2

	 	Entire Agreement
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 4.3

	 	Governing Law And Jurisdiction
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 4.4

	 	Termination; Amendment
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 4.5

	 	Notices
	 	 	26	 






ii









 






	 	 	 	 	 	 	 
	Section 4.6

	 	Counterparts
	 	 	27	 
	 
	 	 	 	 	 	 
	Section 4.7

	 	Binding Effect; Assignment
	 	 	27	 
	 
	 	 	 	 	 	 
	Section 4.8

	 	Severability
	 	 	27	 
	 
	 	 	 	 	 	 
	Section 4.9

	 	Failure Or Indulgence Not Waiver; Remedies Cumulative
	 	 	28	 
	 
	 	 	 	 	 	 
	Section 4.10

	 	Authority
	 	 	28	 
	 
	 	 	 	 	 	 
	Section 4.11

	 	Interpretation
	 	 	28	 
	 
	 	 	 	 	 	 
	Section 4.12

	 	Conflicting Agreements
	 	 	28	 
	 
	 	 	 	 	 	 
	Section 4.13

	 	Third Party Beneficiaries
	 	 	28	 
	 
	 	 	 	 	 	 
	Section 4.14

	 	Waiver of Jury Trial
	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE V DEFINITIONS

	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Section 5.1

	 	Defined Terms
	 	 	29	 






iii









 






	 	 	 
	EXHIBITS
	 	 
	 
	 	 
	Exhibit A

	 	Tax Sharing Agreement
	 
	 	 
	Exhibit B

	 	Transition Services Agreement
	 
	 	 
	Exhibit C

	 	Cendant Portions
	 
	 	 
	Exhibit D

	 	Certain Indemnified Matters






iv









 






SEPARATION AGREEMENT



This Separation Agreement (this “Agreement”) is dated as of January 31, 2005, between CENDANT
CORPORATION, a Delaware corporation (“Cendant”), and PHH CORPORATION, a Maryland corporation
(“PHH,” and together with Cendant, each a “Party,” and together, the “Parties”). Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to such terms in ARTICLE V
hereof.



RECITALS



WHEREAS, Cendant is the beneficial owner of all the issued and outstanding common stock of
PHH;


WHEREAS, Cendant, through its wholly-owned subsidiary, PHH, is engaged in the business of home
mortgage lending and commercial fleet management services;


WHEREAS, the Boards of Directors of Cendant and PHH have each determined that it would be
appropriate and desirable to separate the PHH Business from Cendant by means of the Distribution
(as defined herein);


WHEREAS, PHH has registered shares of PHH common stock pursuant to a registration statement on
Form 8-A pursuant to the Securities Exchange Act of 1934 (the “Registration Statement”); and


WHEREAS, the Parties intend in this Agreement, including the Exhibits and Schedules hereto, to
set forth the principal arrangements between them regarding the separation of the PHH Business from
Cendant;


NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants and
provisions of this Agreement, Cendant and PHH mutually covenant and agree as follows:



ARTICLE I




COVENANTS AND OTHER MATTERS



Section 1.1       Other Agreements.


Cendant and PHH agree to execute or cause to be executed by the appropriate parties and
deliver, as appropriate, such other agreements, instruments and other documents as may be necessary
or desirable in order to effect the purposes of this Agreement and the Ancillary Agreements.


Section 1.2       Further Instruments.


At the request of Cendant and without further consideration, PHH will execute and deliver, and
will cause its applicable Subsidiaries to execute and deliver, to Cendant and its Subsidiaries all
instruments, assumptions, novations, undertakings, substitutions



1









 






or other documents and take such
other action as Cendant may reasonably deem necessary or desirable in order to have PHH fully and
unconditionally assume and discharge the Liabilities contemplated to be assumed by PHH under this
Agreement or any document in connection herewith and to relieve Cendant or any Cendant Affiliate of
any Liability or obligation with respect thereto and evidence the same to third parties. Neither
Party shall be obligated, in connection with the foregoing, to expend money other than reasonable
out-of-pocket expenses, attorneys’ fees and recording or similar fees on the behalf of the other
Party, unless reimbursed by the other Party. Furthermore, each Party, at the request of the other
Party hereto, shall execute and deliver such other instruments and do and perform such other acts
and things as may be necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.


Section 1.3       Agreement For Exchange Of Information.


(a)          Generally. Each of Cendant and PHH agrees to provide, or cause to be provided, to
the other, at any time, as soon as reasonably practicable after written request therefor, all
reports and other Information regularly provided by PHH or any PHH Affiliate to Cendant prior to
the Distribution Date and any Information in the possession or under the control of such Party that
the requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other
requirements imposed on the requesting Party (including under applicable securities laws) by a
Governmental Authority having jurisdiction over the requesting Party, (ii) to comply with any
judicial, regulatory, administrative or other proceeding or order or to satisfy audit, accounting,
claims, regulatory, litigation, stock exchange or other similar requirements (except in the case of
a legal or other proceeding by one Party against the other Party), or (iii) to comply with its
obligations under this Agreement or any Ancillary Agreement; provided, however,
that in the event that any Party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any attorney-client privilege, the
Parties shall take all reasonable measures to permit the compliance with such obligations in a
manner that avoids any such harm or consequence. Each of Cendant and PHH agree to make their
respective personnel available, at reasonable times and upon the provision of reasonable advance
written notice, to discuss the Information exchanged pursuant to this Section 1.3.


(b)         Internal Accounting Controls; Financial Information. After the Distribution Date
and until the first Cendant fiscal year end occurring after the Distribution Date (and for a
reasonable period thereafter as required to fulfill the Parties’ respective reporting and tax
obligations), (i) each Party shall maintain in effect at its own cost and expense adequate systems
and controls for its business to the extent reasonably necessary to enable the other Party to
satisfy its reporting, tax return, accounting, audit and other obligations, and (ii) each Party
shall provide, or cause to be provided, to the
other Party and its Subsidiaries, in such form as the Party has previously provided such
information or, if not previously provided, as such requesting Party shall reasonably request, at
no charge to the requesting Party, all financial and other data and information as the requesting
Party reasonably determines necessary or advisable in order to prepare its financial statements and
reports or filings with any Governmental Authority.



2









 




(c)          Ownership Of Information. Any Information owned by a Party that is provided to a
requesting Party pursuant to this Section 1.3 shall be deemed to remain the property of the
providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall
be construed as granting or conferring rights of license or otherwise in any such Information.


(d)          Record Retention. To facilitate the possible exchange of Information pursuant to
this Section 1.3 and other provisions of this Agreement after the Distribution Date, each Party
agrees to use its commercially reasonable best efforts until the Distribution Date to retain all
Information in its respective possession or control substantially in accordance with its respective
record retention policies as in effect on the Distribution Date. However, at any time after the
Distribution Date, each Party may amend its respective record retention policies at such Party’s
discretion; provided, however, that if a Party desires to effect the amendment within seven (7)
years after the Distribution Date, the amending Party must give thirty (30) days prior written
notice of such change in the policy to the other Party to this Agreement. No Party will destroy,
or permit any of its Subsidiaries to destroy, any Information that exists on the Distribution Date
(other than Information that is permitted to be destroyed under the current respective record
retention policies of each Party) and that falls under the categories listed in Section 1.3(a),
without first notifying the other Party of the proposed destruction and giving the other Party the
opportunity to take possession or make copies of such Information prior to such destruction.


(e)          Limitation Of Liability. Each Party will use its commercially reasonable best
efforts to ensure that Information provided to the other Party hereunder is accurate and complete;
provided, however, no Party shall have any Liability to any other Party in the event that any
Information exchanged or provided pursuant to this Section 1.3 is found to be inaccurate, in the
absence of gross negligence or willful misconduct by the party providing such Information. No
Party shall have any Liability to any other Party if any Information is destroyed or lost after the
relevant Party has complied with the provisions of Section 1.3(d).


(f)          Other Agreements Providing For Exchange Of Information. The rights and
obligations granted under this Section 1.3 are subject to any specific limitations, qualifications
or additional provisions on the sharing, exchange or confidential treatment of Information set
forth in this Agreement and any Ancillary Agreement.


(g)          Production Of Witnesses; Records; Cooperation. After the Distribution Date,
except in the case of a legal or other proceeding by one Party against another Party, each Party
hereto shall use its commercially reasonable efforts to make
available to each other Party, at reasonable times and upon the provision of reasonable
advance written notice, the former, current and future directors, officers, employees, other
personnel and agents of such Party as witnesses and any books, records or other documents within
its control or which it otherwise has the ability to make available, to the extent that any such
person (giving consideration to business demands of such directors, officers, employees, other
personnel and agents) or books, records or other



3









 






documents may reasonably be required in connection
with any legal, administrative or other proceeding in which the requesting Party may from time to
time be involved, regardless of whether such legal, administrative or other proceeding is a matter
with respect to which indemnification may be sought hereunder. The requesting Party shall bear all
costs and expenses in connection therewith.


Section 1.4       Auditors And Audits; Financial Statements; Accounting Matters. Each Party agrees
that:


(a)            Date Of Auditors’ Opinion And Quarterly Reviews. Until the first Cendant fiscal
year end occurring after the Distribution Date (and for a reasonable period thereafter as required
to prepare consolidated financial statements or to complete a financial statement audit for the
fiscal year during which the Distribution occurs), PHH shall use its best efforts to enable its
independent certified public accountants (“PHH’s Auditors”) to complete their audit such that they
will date their opinion on PHH’s audited annual financial statements on the same date that
Cendant’s independent certified public accountants (“Cendant’s Auditors”) date their opinion on
Cendant’s audited annual financial statements, and to enable Cendant to meet its timetable for the
printing, filing and public dissemination of Cendant’s annual financial statements, which for 2005
shall be March 1, 2005. Until the first Cendant fiscal year end occurring after the Distribution
Date (and for a reasonable period thereafter as required to prepare consolidated financial
statements or to complete a financial statement audit for the fiscal year during which the
Distribution occurs), PHH shall use its best efforts to enable the PHH Auditors to complete their
annual audit and quarterly review procedures such that they will provide clearance on PHH’s annual
and quarterly financial statements on the same date that Cendant’s Auditors provide clearance on
Cendant’s annual and quarterly financial statements. To the extent necessary to fulfill its
obligations under this Section 1.4(a), PHH acknowledges and agrees that it will file any quarterly
and annual reports required to be filed by it under the Exchange Act on an accelerated basis,
consistent with the “accelerated filer” (as defined in Exchange Act Rule 12b-2) filing schedule
applicable to Cendant.


(b)            Annual And Quarterly Financial Statements. PHH shall not change its fiscal year
until the Cendant fiscal year end first occurring after the Distribution Date and thereafter to the
extent necessary for the purpose of preparing consolidated financial statements or completing a
financial statement audit. PHH shall provide to Cendant on a timely basis all Information that
Cendant reasonably requires to meet its schedule for the preparation, printing, filing, and public
dissemination of Cendant’s annual, quarterly and monthly financial statements; provided that
Cendant shall
give PHH reasonable prior notice of the Information that will be required so that PHH can
satisfy its obligations hereunder. Without limiting the generality of the foregoing, PHH will
provide all required financial Information with respect to PHH and its Subsidiaries to PHH’s
Auditors in a sufficient and reasonable time and in sufficient detail to permit PHH’s Auditors to
take all steps and perform all reviews necessary to provide sufficient assistance to Cendant’s
Auditors with respect to financial Information to be included or contained in Cendant’s annual,
quarterly and monthly financial statements. Similarly, Cendant shall provide to PHH on a timely
basis all financial Information that



4









 






PHH reasonably requires to meet its schedule for the
preparation, printing, filing, and public dissemination of PHH’s annual, quarterly and monthly
financial statements; provided that PHH shall give Cendant reasonable prior notice of the
Information that will be required so that Cendant can satisfy its obligations hereunder. Without
limiting the generality of the foregoing, Cendant will provide all required financial Information
with respect to Cendant and its Subsidiaries to PHH’s Auditors in a sufficient and reasonable time
and in sufficient detail to permit PHH’s Auditors to take all steps and perform all reviews
necessary to provide sufficient assistance to PHH’s Auditors with respect to Information to be
included or contained in PHH’s annual and quarterly financial statements.


(c)            Access to Personnel Performing The Annual Audit And Quarterly Reviews. Until
March 15, 2006 and thereafter to the extent such information and cooperation is necessary for the
preparation of consolidated financial statements or completing a financial statements audit, PHH
shall authorize PHH’s Auditors to make available to Cendant’s Auditors, at reasonable times and
upon the provision of reasonable advance written notice, both the personnel who performed or will
perform the annual audits and quarterly reviews of PHH and work papers related to the annual audits
and quarterly reviews of PHH, in all cases within a reasonable time prior to Cendant’s Auditors’
opinion date, so that Cendant’s Auditors are able to perform the procedures they consider necessary
to take responsibility for the work of PHH’s Auditors as it relates to Cendant’s Auditors’ report
on Cendant’s financial statements, all within sufficient time to enable Cendant to meet its
timetable for the printing, filing and public dissemination of Cendant’s annual and quarterly
statements. Similarly, Cendant shall authorize Cendant’s Auditors to make available to PHH’s
Auditors, at reasonable times and upon the provision of reasonable advance written notice, both the
personnel who performed or will perform the annual audits and quarterly reviews of Cendant and work
papers related to the annual audits and quarterly reviews of Cendant, in all cases within a
reasonable time prior to PHH’s Auditors’ opinion date, so that PHH’s Auditors are able to perform
the procedures they consider necessary to take responsibility for the work of Cendant’s Auditors as
it relates to PHH’s Auditors’ report on PHH’s statements, all within sufficient time to enable PHH
to meet its timetable for the printing, filing and public dissemination of PHH’s annual and
quarterly financial statements.


(d)            Controls and Procedures. PHH and the PHH Affiliates agree to provide any
assistance reasonably requested by Cendant to enable Cendant to comply with the Sarbanes-Oxley Act
of 2002, the rules of the Public Company Accounting Oversight Board and rules of the Securities and
Exchange Commission (the “SEC”) relating to (i) disclosure controls and procedures (as such act or
rules may be amended
from time to time, the “Control Rules”) and (ii) inquiries by the SEC, including, but not
limited to, comment letters. Such assistance shall include but shall not be limited to:


(i)       documenting PHH’s controls and procedures related to the PHH Business;


(ii)       cooperating with Cendant’s Auditors in connection with the testing of such
controls and procedures;



5









 




(iii)       making quarterly representations to Cendant regarding any material changes to
such controls and procedures;


(iv)       remediating any material weakness or significant deficiency as defined by the
Control Rules or any other deficiency that would prevent Cendant from complying with the
Control Rules; and


(v)       providing an unqualified “Type 2” SAS 70 Report issued by an auditing firm
acceptable to Cendant in connection with its obligations under the Control Rules with
respect to the PHH Business.


(e)            Access To Books And Records. Until the first Cendant fiscal year end occurring
after the Distribution Date and thereafter to the extent such information and cooperation is
necessary for the preparation of consolidated financial statements or completing a financial
statements audit, and until all governmental audits are complete and the applicable statute of
limitations for tax matters has expired, PHH shall provide Cendant’s internal auditors, counsel and
other designated representatives of Cendant access during normal business hours to (i) the premises
of PHH and its Subsidiaries and all Information (and duplicating rights) within the knowledge,
possession or control of PHH and its Subsidiaries and (ii) the officers and employees of PHH and
its Subsidiaries, so that Cendant or Cendant’s Auditors may conduct reasonable audit procedures
with respect to the financial information provided by PHH pursuant hereto as well as to the
internal accounting controls and operations of PHH and its Subsidiaries. Similarly, Cendant shall
provide PHH’s internal auditors, counsel and other designated representatives of PHH access during
normal business hours to (i) the premises of Cendant and its Subsidiaries and all Information (and
duplicating rights with respect thereto) within the knowledge, possession or control of Cendant and
its Subsidiaries and (ii) the officers and employees of Cendant and its Subsidiaries, so that PHH
or PHH’s Auditors may conduct reasonable audit procedures with respect to the financial information
provided by Cendant pursuant hereto as well as to the internal accounting controls and operations
of Cendant and its Subsidiaries. This Section 1.4(e) shall survive termination of this Agreement
for a period of seven (7) years after such termination.


(f)            Notice Of Change In Accounting Principles. Until the first Cendant fiscal year
end occurring after the Distribution Date and thereafter if a change in accounting principles by a
Party hereto would affect the historical financial statements of the other Party, neither Party
shall make or adopt any significant changes in its
accounting estimates or accounting principles from those in effect on the Distribution Date
without first consulting with the other Party, and if requested by the other Party, such Party’s
independent public accountants with respect thereto. Cendant shall give PHH, and PHH shall give
Cendant, as much prior notice as reasonably practical of any proposed determination of, or any
significant changes in, its accounting estimates or accounting principles from those in effect on
the Distribution Date. Cendant will consult with PHH and, if requested by PHH, Cendant will
consult with PHH’s independent public auditors with respect thereto. This Section 1.4(f) shall not
apply to any changes made by a Party in its accounting estimates or accounting principles which are
required to be made



6









 






by such Party as result of changes in Generally Accepted Accounting Principles
in the United States after the date of this Agreement.


(g)            Conflict With Third-Party Agreements. Nothing in Section 1.3 or Section 1.4 shall
require PHH or Cendant to violate any agreement with any third party regarding the confidentiality
of confidential and proprietary information relating to that third party or its business;
provided, however, that in the event that PHH or Cendant is required under Section
1.3 or Section 1.4 to disclose any such Information, PHH or Cendant, as applicable, shall use its
commercially reasonable best efforts to seek to obtain such third party’s consent to the disclosure
of such information.


Section 1.5       Confidentiality.


(a)            Notwithstanding any termination of this Agreement, for a period of ten (10) years from the
Distribution Date, Cendant and PHH shall hold, and shall cause each of their respective
Subsidiaries to hold, and shall each cause their respective officers, employees, agents,
consultants and advisors to hold, in strict confidence, and not to disclose or release or use,
without the prior written consent of the other Party, any and all Confidential Information (as
defined herein) concerning the other Party; provided, that the Parties may disclose, or may permit
disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial
advisors, bankers and other appropriate consultants and advisors who have a need to know such
information and are informed of their obligation to hold such information confidential to the same
extent as is applicable to the Parties hereto and in respect of whose failure to comply with such
obligations, PHH or Cendant, as the case may be, will be responsible, (ii) if the Parties or any of
their respective Subsidiaries are required or compelled to disclose any such Confidential
Information by judicial or administrative process or by other requirements of law or stock exchange
rule, (iii) as required in connection with any legal or other proceeding by one Party against
another Party, or (iv) as necessary in order to permit a Party to prepare and disclose its
financial statements. Notwithstanding the foregoing, in the event that any demand or request for
disclosure of Confidential Information is made pursuant to clause (ii) above, Cendant or PHH, as
the case may be, shall promptly notify the other of the existence of such request or demand and
shall provide the other a reasonable opportunity to seek an appropriate protective order or other
remedy, which both Parties will cooperate in obtaining. In the event that such appropriate
protective order or other remedy is not obtained, the Party whose
Confidential Information is required to be disclosed shall or shall cause the other Party to
furnish, or cause to be furnished, only that portion of the Confidential Information that is
legally required to be disclosed and shall take commercially reasonable steps to ensure that
confidential treatment is accorded such information. As used in this Section 1.5:


(i)      “Confidential Information” shall mean Confidential Business Information and
Confidential Operational Information concerning one Party which, prior to or following the
Distribution Date, has been disclosed by Cendant or its Subsidiaries on the one hand, or
PHH or its Subsidiaries, on the other hand, in written, oral (including by recording),
electronic, or visual form to, or otherwise has come into the possession of, the other,
including pursuant to the




7









 







access provisions of Section 1.3 or Section 1.4 hereof or any
other provision of this Agreement (except to the extent that such Information can be shown
to have been (x) in the public domain through no fault of such Party (or such Party’s
Subsidiary) or (y) lawfully acquired from other sources by the Party (or such Party’s
Subsidiary) to which it was furnished; provided, however, in the case of
(y) that, to the furnished Party’s knowledge, such sources did not provide such Information
in breach of any confidentiality obligations).


(ii)       “Confidential Operational Information” shall mean all proprietary operational
information, data or material including, without limitation, (a) specifications, ideas and
concepts for products and services, (b) quality assurance policies, procedures and
specifications, (c) customer information, (d) computer software and derivatives thereof,
(e) training materials and information and (f) all other know-how, methodology, procedures,
techniques and trade secrets related to design and development.


(iii)       “Confidential Business Information” shall mean all proprietary information, data
or material other than Confidential Operational Information, including, but not limited to
(a) proprietary earnings reports and forecasts, (b) proprietary macro-economic reports and
forecasts, (c) proprietary business plans, (d) proprietary general market evaluations and
surveys and (e) proprietary financing and credit-related information.


(b)            Notwithstanding anything to the contrary set forth herein, (i) Cendant and its
Subsidiaries, on the one hand, and PHH and its Subsidiaries, on the other hand, shall be deemed to
have satisfied their obligations hereunder with respect to Confidential Information if they
exercise the same degree of care (but no less than a reasonable degree of care) as they take to
preserve confidentiality for their own similar Information and (ii) confidentiality obligations
provided for in any agreement between Cendant or its Subsidiaries, or PHH or any of its
Subsidiaries, on the one hand, and any employee of Cendant or any of its Subsidiaries, or PHH or
any of its Subsidiaries, on the other hand shall remain in full force and effect. Notwithstanding
anything contained to the contrary set forth herein, Confidential Information of Cendant and its
Subsidiaries, on the one hand, or PHH and its Subsidiaries, on the other hand, in the possession of
and used by the other as of the Distribution Date may continue to be used by such Person in
possession of the Confidential Information in and only in the operation of the business of
Cendant or the PHH Business, as the case may be, provided that such use is not competitive in
nature, and may be used only so long as the Confidential Information is maintained in confidence
and not disclosed in violation of Section 1.5(a). Such continued right to use may not be
transferred to any third party without the prior written consent of the applicable Party.


Section 1.6       Privileged Matters.


(a)            Cendant and PHH agree that their respective rights and obligations to maintain, preserve,
assert or waive any or all privileges belonging to either Party or their Subsidiaries with respect
to the PHH Business or the business of Cendant,



8









 






including but not limited to the attorney-client
and work product privileges (collectively, “Privileges”), shall be governed by the provisions of
this Section 1.6. With respect to Privileged Information of Cendant (as defined below), Cendant
shall have sole authority in perpetuity to determine whether to assert or waive any or all
Privileges, and PHH shall take no action (nor permit any of its Subsidiaries to take action)
without the prior written consent of Cendant that could result in any waiver of any Privilege that
could be asserted by Cendant or any of its Subsidiaries under applicable law and this Agreement.
With respect to Privileged Information of PHH (as defined below), PHH shall have sole authority in
perpetuity to determine whether to assert or waive any or all Privileges, and Cendant shall take no
action (nor permit any of its Subsidiaries to take action) without the prior written consent of PHH
that could result in any waiver of any Privilege that could be asserted by PHH or any of its
Subsidiaries under applicable law and this Agreement. The rights and obligations created by this
Section 1.6 shall apply to all Information as to which Cendant or PHH or their respective
Subsidiaries would be entitled to assert or has asserted a Privilege without regard to the effect,
if any, of the Distribution (“Privileged Information”). Privileged Information of Cendant includes
but is not limited to (i) any and all Privileged Information regarding the business of Cendant and
its Subsidiaries (other than the PHH Business; provided that PHH has assumed and will be
liable on or after the Distribution Date for any Liability or claim arising with respect to such
Information), whether or not it is in the possession of PHH or any of its Subsidiaries; (ii) all
communications subject to a Privilege between counsel for Cendant (including in-house counsel) and
any person who, at the time of the communication, was an employee of Cendant, regardless of whether
such employee is or becomes an employee of PHH or any of its Subsidiaries and (iii) all Information
that refers or relates to Privileged Information of Cendant. Privileged Information of PHH
includes but is not limited to (x) any and all Privileged Information regarding the PHH Business,
whether or not it is in the possession of Cendant or any of its Subsidiaries; provided that
PHH has assumed and will be liable on or after the Distribution Date for any Liability or claim
arising with respect to such Information; (y) all communications subject to a Privilege between
counsel for the PHH Business (including in-house counsel and former in-house counsel who are
employees of Cendant) and any person who, at the time of the communication, was an employee of PHH,
regardless of whether such employee was, is or becomes an employee of Cendant or any of its
Subsidiaries and (z) all Information that refers or relates to Privileged Information of PHH.


(b)            Upon receipt by Cendant or PHH, as the case may be, of any subpoena, discovery or other
request from any third party that actually or arguably calls for the production or disclosure of
Privileged Information of the other, or if Cendant or PHH, as the case may be, obtains knowledge
that any current or former employee of Cendant or PHH, as the case may be, has received any
subpoena, discovery or other request from any third party that actually or arguably calls for the
production or disclosure of Privileged Information of the other, Cendant or PHH, as the case may
be, shall promptly notify the other of the existence of the request and shall provide the other a
reasonable opportunity to review the Information and to assert any rights it may have under this
Section 1.6 or otherwise to prevent the production or disclosure of Privileged Information.
Cendant or PHH, as the case may be, will not produce or disclose to any third party any of the
other’s Privileged Information under this Section 1.6 unless (a) the



9









 






other has provided its express
written consent to such production or disclosure or (b) a court of competent jurisdiction has
entered an order not subject to interlocutory appeal or review finding that the Information is not
entitled to protection from disclosure under any applicable privilege, doctrine or rule.


(c)            Cendant’s transfer of books and records pertaining to the PHH Business and other
Information to PHH, Cendant’s agreement to permit PHH to obtain Information existing prior to the
Distribution Date, PHH’s transfer of books and records pertaining to Cendant, if any, and other
Information and PHH’s agreement to permit Cendant to obtain Information existing prior to the
Distribution Date are made in reliance on Cendant’s and PHH’s respective agreements, as set forth
in Section 1.5 and this Section 1.6, to maintain the confidentiality of such Information and to
take the steps provided herein for the preservation of all Privileges that may belong to or be
asserted by Cendant or PHH, as the case may be. The access to Information, witnesses and
individuals being granted pursuant to Section 1.3 and Section 1.4 and the disclosure to PHH and
Cendant of Privileged Information relating to the PHH Business or the business of Cendant pursuant
to this Agreement shall not be asserted by Cendant or PHH to constitute, or otherwise deemed, a
waiver of any Privilege that has been or may be asserted under this Section 1.6 or otherwise.
Nothing in this Agreement shall operate to reduce, minimize or condition the rights granted to
Cendant and PHH in, or the obligations imposed upon Cendant and PHH by, this Section 1.6.


Section 1.7       Mail And Other Communications. After the Distribution Date, each of Cendant and
PHH may receive mail, facsimiles, packages and other communications properly belonging to the
other. Accordingly, at all times after the Distribution Date, each of Cendant and PHH authorizes
the other to receive and open all mail, telegrams, packages and other communications received by it
and not unambiguously intended for the other Party or any of the other Party’s officers or
directors, and to retain the same to the extent that they relate to the business of the receiving
Party or, to the extent that they do not relate to the business of the receiving Party, the
receiving Party shall promptly deliver such mail, telegrams, packages or other communications,
including, without limitation, notices of any liens or encumbrances on any asset transferred to PHH
in connection with its separation from Cendant (or, in case the same relate to both businesses,
copies thereof), to the other Party
as provided for in Section 4.5 hereof. The provisions of this Section 1.7 are not intended
to, and shall not, be deemed to, constitute an authorization by either Cendant or PHH to permit the
other to accept service of process on its behalf and neither Party is or shall be deemed to be the
agent of the other for service of process purposes.


Section 1.8       Payment Of Expenses. Except as otherwise provided in this Agreement, the
Ancillary Agreements or any other agreement between the Parties relating to the Distribution, the
Parties agree that all out-of-pocket fees and expenses incurred, or to be incurred, and directly
related to the transactions contemplated hereby shall be paid by Cendant; provided, however, that
Cendant shall not be obligated to pay any such expenses incurred by PHH unless such expenses shall
have had the prior written approval of an officer of Cendant. Notwithstanding the foregoing, PHH
and Cendant



10









 






shall each be responsible for their own internal fees, costs and expenses (e.g.,
salaries of personnel) incurred in connection with the Distribution.


Section 1.9       Dispute Resolution.


(a)            Negotiation. In the event of any dispute, controversy or claim arising out of or
relating to this Agreement or the breach, termination or validity thereof, or the transactions
contemplated hereby (a “Dispute”), upon the written notice of any Party hereto, the Parties shall
attempt in good faith to negotiate a resolution of the Dispute. If the Parties are unable for any
reason to resolve a Dispute within 30 days after the receipt of such notice, the Dispute shall be
submitted to mediation in accordance with Section 1.9(b) hereof.


(b)            Mediation. Any Dispute not resolved pursuant to Section 1.9(a) hereof shall, at
the request (the “Mediation Request”) of any Party (the “Disputing Party”), be submitted to
mediation in accordance with the then-prevailing Commercial Mediation Rules of the American
Arbitration Association, as modified herein (the “Rules”). The mediation shall be held in New
York, New York. The Parties shall have twenty (20) days from receipt by a party of a Mediation
Request to agree on a mediator. If no mediator has been agreed upon by the Parties within twenty
(20) days of receipt by a Disputing Party (or Parties) of a Mediation Request, then any Party may
request (on written notice to the other Party), that the American Arbitration Association appoint a
mediator in accordance with the Rules. All mediation pursuant to this Section 1.9(b) shall be
confidential and shall be treated as compromise and settlement negotiations, and no oral or
documentary representations made by the Parties during such mediation shall be admissible for any
purpose in any subsequent proceedings. Neither Party shall disclose or permit the disclosure of
any information about the evidence adduced or the documents produced by the other Party in the
mediation proceedings or about the existence, contents or results of the mediation award without
the prior written consent of such other Party except in the course of a judicial or regulatory
proceeding or as may be required by law, rule or regulation or requested by a governmental
authority or securities
exchange. Before making any disclosure permitted by the preceding sentence, the Party
intending to make such disclosure shall give the other Party a reasonable opportunity to protect
its interests. If the Dispute has not been resolved within sixty (60) days of the appointment of a
mediator, or within ninety (90) days of receipt by a Disputing Party of notice in accordance with
Section 4.5 (whichever occurs sooner) or within such longer period as the Parties may agree to in
writing, then any Party may file an action on the Dispute in any court having jurisdiction in
accordance with Section 4.3 herein.


Section 1.10       Governmental Approvals. To the extent that any of the transactions contemplated
by this Agreement requires any Governmental Approvals, the Parties will use their commercially
reasonable best efforts to obtain such Governmental Approvals.


Section 1.11       No Representation Or Warranty. Cendant does not, in this Agreement or any other
agreement, instrument or document contemplated by this Agreement, make any representation as to,
warranty of or covenant with respect to:



11









 




(a)      the value of any asset or thing of value transferred, or to be transferred, to PHH;


(b)      the freedom from encumbrance of any asset or thing of value transferred, or to be
transferred, to PHH; provided, however, that Cendant agrees to notify PHH promptly in the event
Cendant receives any notice or claim of any encumbrance on or against any asset or thing of value
transferred, or to be transferred, to PHH;


(c)      the absence of defenses or freedom from counterclaims with respect to any claim
transferred, or to be transferred, to PHH; provided, however, that neither Cendant nor its
Subsidiaries have any counterclaims with respect to any claim transferred, or to be transferred, to
PHH; or


(d)      the legal sufficiency of any assignment, document or instrument delivered hereunder to
convey title to any asset or thing of value upon its execution, delivery and filing.


Except as may expressly be set forth herein or in any Ancillary Agreement, all assets
transferred, or to be transferred, to PHH have been, or shall be, as the case may be, transferred
“AS IS, WHERE IS” and PHH shall bear the economic and legal risk that any conveyance shall prove to
be insufficient to vest in PHH good and marketable title, free and clear of any lien, claim, equity
or other encumbrance.


Section 1.12      Employee Solicitation. Neither Cendant nor any Cendant Affiliate on the one
hand, nor PHH nor any PHH Affiliate on the other hand, will, without the prior written consent of
the other Party,
either directly or indirectly, on their own behalf or in the service or on behalf of others,
hire as an employee or independent contractor (i) for a period of two years following the
Distribution Date, any person employed by the other Party whose then current annual base salary
plus then current target cash bonus exceeds $150,000 (excluding any equity-based compensation), or
(ii) for a period of two years following the Distribution Date, any person employed by the other
Party who provides information technology services whose then current annual base salary plus then
current target cash bonus exceeds $75,000 (excluding any equity-based compensation).


Section 1.13      Public Announcements. PHH shall not issue a press release or other public
announcement making reference to the transactions contemplated by this Agreement, other than as
required by law, unless it has received the prior written approval of Cendant with respect to the
proposed text of such press release or announcement, which approval shall not be unreasonably
withheld or delayed, nor shall it make or publish any statement that is, or may be reasonably
considered to be, disparaging of Cendant or any Cendant Affiliate, directors, employees, products
or services.


Section 1.14      Pension Plan.


(a)            As of the Distribution Date, PHH shall have adopted, approved and established the PHH
Corporation Pension Plan, which shall be substantially



12









 






identical in all material respects to the
Cendant Corporation Pension Plan, except that only those persons who (i) are actively employed by
PHH as of the Distribution Date and (ii) have accrued a benefit under the Cendant Corporation
Pension Plan as of the Distribution Date shall be eligible to participate therein (the “Eligible
PHH Participants”). The PHH Corporation Pension Plan shall be qualified under Section 401(a) of
the Code, and the trust under such plan shall be qualified under Section 501(a) of the Code. PHH
shall take such action to obtain a determination letter in respect of the PHH Corporation Pension
Plan.


(b)            As of the Distribution Date, the PHH Corporation Pension Plan shall assume all Liabilities
and obligations owed to the Eligible PHH Participants under the Cendant Corporation Pension Plan
(and all predecessor plans). In addition and notwithstanding the generality of the foregoing, as
of the Distribution Date, PHH shall retain or assume, as the case may be, all Liabilities and
obligations owed or accrued with respect to active employees of PHH (or any PHH Affiliate) as of
the Distribution Date under all non-qualified supplemental pension plans, including, without
limitation, any supplemental executive retirement plan or excess benefits plan, (collectively,
“Supplemental Plans”) which cover such active employees, or with respect to which any such employee
has an accrued benefit. Cendant and the Cendant Corporation Pension Plan, as applicable, shall
retain all Liabilities and obligations owed to all other participants (the “Eligible Cendant
Participants”) under the Cendant Corporation Pension Plan (and all predecessor plans, including
benefits of participants who are not active
employees of PHH or a PHH Affiliate as of the Distribution Date under Supplemental Plans).
Following the Distribution Date, Eligible PHH Participants shall continue to accrue additional
benefits under the PHH Corporation Pension Plan in accordance with the terms and conditions of the
PHH Corporation Pension Plan; provided, however, that, immediately following the Distribution, such
terms and conditions shall be identical to the terms and conditions of the Cendant Corporation
Pension Plan as in effect immediately prior to the Distribution Date, except that for all purposes
references to service performed after the Distribution Date with Cendant shall instead apply to
service with PHH; and; further, provided, that the foregoing shall in no way alter any right of PHH
to, subsequent to the Distribution Date, amend or terminate the PHH Corporation Pension Plan or any
Supplemental Plan in accordance with its terms and applicable law.


(c)            Notwithstanding any other provision set forth in this Agreement (i) PHH and the PHH
Corporation Pension Plan hereby agree to indemnify and hold harmless Cendant and the Cendant
Corporation Pension Plan (and each of their respective affiliates, Subsidiaries, officers,
employees, agents and fiduciaries) with respect to any and all claims, obligations and Liabilities
applicable to or brought by the Eligible PHH Participants relating to the provision of pension
benefits and the transactions contemplated hereunder, whether pursuant to the Cendant Corporation
Pension Plan, the PHH Corporation Pension Plan, any predecessor or Supplemental Plan or otherwise
and (ii) Cendant and the Cendant Corporation Pension Plan hereby agree to indemnify and hold
harmless PHH and the PHH Corporation Pension Plan (and each of their respective affiliates,
Subsidiaries, officers, employees, agents and fiduciaries) with respect to any and all claims,
obligations and Liabilities applicable to or brought by the Eligible Cendant Participants relating
to the provision of pension benefits and the



13









 






transactions contemplated hereunder, whether pursuant
to the PHH Corporation Pension Plan, the Cendant Corporation Pension Plan, any predecessor or
Supplemental Plan or otherwise.


(d)            In consideration of the PHH Corporation Pension Plan accepting and assuming the
Liabilities and obligations owed to Eligible PHH Participants, Cendant will cause the Cendant
Corporation Pension Plan to make a direct transfer of a portion of its assets held in trust to the
trust under the PHH Corporation Pension Plan (as soon as practicable but not earlier than 30 days
following the filing of Form 5310A with the Internal Revenue Service). The value of the assets to
be transferred from the Cendant Corporation Pension Plan to the PHH Corporation Plan will be
determined as of the Distribution Date, and such value will be determined based upon applicable
law, including under ERISA and IRS regulations, and as further reasonably agreed to by the
respective independent actuaries engaged by the respective plans. With respect to each Eligible
PHH Participant, the foregoing transfer and assumption of Liabilities shall be in accordance with
Section 414(l) of the Code.


(e)            PHH and Cendant will reasonably cooperate with each other in order to facilitate the
foregoing provisions of this Section 1.14.


Section 1.15       401(k) Plan.


(a)            As the Distribution Date, PHH shall have adopted, approved and established the PHH
Corporation Employee Savings Plan (the “PHH 401(k) Plan”), which shall be substantially identical
to the Cendant Corporation Employee Savings Plan (the “Cendant 401(k) Plan”), except that only
persons who are actively employed by PHH following the Distribution Date, shall, following the
Distribution Date, be eligible to participate therein. Following the Distribution Date (or, if
earlier, the implementation of the PHH 401(k) Plan), no active employees of PHH shall be eligible
to participate in the Cendant Corporation Employee Savings Plan. PHH shall promptly obtain a
favorable IRS Determination Letter in respect of the PHH 401(k) Plan.


(b)            Immediately following the Distribution Date, Cendant shall direct the trustee of the
Cendant 401(k) Plan to transfer to the PHH 401(k) Plan all of the assets relating to account
balances of all PHH 401(k) Plan participants as of the date of transfer, in kind, and including
loan balances and loan agreements. Upon such transfer, PHH and the PHH 401(k) Plan shall assume
all Liabilities under the Cendant 401(k) Plan with respect to all such PHH 401(k) Plan
participants.


(c)            PHH and Cendant will cooperate in order to accomplish the foregoing and to file any
required forms.


Section 1.16       Retiree Medical Plan. As of the Distribution Date, PHH shall have adopted,
approved and established the PHH Corporation Retiree Medical Plan, and Cendant shall have adopted
the Cendant corporation Retiree Medical Plan, in such forms substantially as previously disclosed
to each other. Following the Distribution Date (i) PHH shall assume any and all retiree medical
and retiree insurance obligations, to the extent in existence immediately prior to the Distribution
Date, related to any person who is actively employed by PHH immediately following the Distribution
Date and (ii) Cendant shall retain any and all retiree medical and retiree insurance obligations,



14









 






to the extent in existence immediately prior to the Distribution Date, related to both (A) any
person who was formerly employed by PHH and has retired by either PHH or Cendant prior to the
Distribution Date and (B) any person who does not become an employee of PHH immediately following
the Distribution Date.


Section 1.17       Deferred Compensation Plans. As of the Distribution Date, PHH shall have taken
all steps necessary and appropriate to transfer and assign to Cendant sponsorship of the PHH
Corporation Directors Deferred Compensation Plan and the PHH Corporation Directors Deferred Stock
Plan (collectively, the “Director Plans”) and all liabilities and obligations thereunder (the
“Director Plan Liabilities”). Such transfer and assignment shall be subject to and contingent upon
(i) Cendant’s agreement to assume the Director Plans and the Director Plan Liabilities (which
agreement shall not be unreasonably withheld) and (ii) the transfer by PHH to Cendant of all
assets, trusts and other funding vehicles relating to
the Director Plans and the Director Plan Liabilities, which assets, trusts and vehicles shall
be at least equal in value to the Director Liabilities as of the date of actual transfer.


Section 1.18       Equity Awards. In accordance with such terms as the Cendant Compensation
Committee shall determine in connection with the Distribution, Cendant shall adjust some or all of
the Cendant equity-based incentive awards held by employees of PHH such that they are converted
into awards based on or relating to PHH common stock. Following such adjustment and conversion,
PHH shall assume all such awards relating to PHH common stock and all Liabilities and obligations
therefor.


Section 1.19       Certain Transactions


(a)            Prior to Distribution Date, Cendant and PHH shall, and shall cause each of their
respective affiliates to, as applicable, (i) implement each of the following transactions: (a) the
distribution by Cendant Mobility Services Corporation, a Delaware corporation (“Mobility”), to PHH
of $100 million in cash, (b) the distribution by PHH to Cendant of all of the outstanding stock of
Mobility (which, at such time, will own all the other entities comprising the relocation and fuel
card businesses previously owned by PHH, directly and indirectly) and (c) the contribution by
Cendant Finance Holdings Corporation, a Delaware corporation, to PHH of all of the membership
interests of Speedy Title and Appraisal Review Services, LLC and (ii) issue the redemption notices
in connection with the prepayment by PHH of $443 million of aggregate principal amount of
outstanding unsecured indebtedness pursuant to the Note Purchase Agreement, dated May 3, 2002,
between PHH and each of the purchasers named in Schedule A thereto.


(b)            Prior to the Distribution Date, Cendant and PHH shall, and shall cause each of their
respective affiliates to, as applicable (to the extent not previously effected) eliminate (whether
by repayment, capital contribution, discharge or otherwise)



15









 






all intercompany accounts between
Cendant and any Cendant Affiliates, on the one hand, and PHH and any PHH Affiliates, on the other
hand.


Section 1.20       Release. PHH shall terminate the following agreements at the earliest date possible
pursuant to the terms of each agreement, respectively, (i) the Alliance Agreement dated as of June
30, 2000, between Avis Group Holdings, Inc.(“Avis”) and BNP Paribas, a French societe anonyme
(“Paribas”), entered into on behalf of certain of PHH’s Subsidiaries (the “Alliance Agreement”) and
(ii) the Technology Agreement dated August 9, 2000 among Avis, Paribas and certain PHH
Subsidiaries, as amended (the “Technology Agreement”), unless PHH shall have obtained the prior
written release from Paribas, in a form reasonably satisfactory to Cendant, releasing Avis and
Wright Express LLC from any liability or obligations in connection with the Alliance Agreement and
the Technology Agreement (the “Paribas Release”). In connection with obtaining the Paribas
Release,
Avis and Cendant agree to execute the Paribas Release and such other documents as, in the
reasonable opinion of Cendant, may be necessary to effect the Paribas Release.


Section 1.21       Use of Cendant Name. Except as otherwise provided pursuant to (x) the Trademark
License Agreement dated as of January 31, 2005 between TM Acquisition Corp., Century 21 Real Estate
LLC, Coldwell Banker Real Estate Corporation, ERA Franchise Systems, Inc. and PHH Home Loans, LLC
or (y) the Trademark License Agreement dated as of January 31, 2005 between TM Acquisition Corp.,
Coldwell Banker Real Estate Corporation, ERA Franchise Systems, Inc. and PHH Mortgage Corporation,
PHH agrees that it shall, and shall cause all PHH Affiliates to, as soon as reasonably practicable
after the Distribution Date and in any event within ninety (90) days after the Distribution Date,
(i) cease to make any use of the name “Cendant” and any trademarks related thereto or containing or
comprising the foregoing, including any name or mark confusingly similar thereto or dilutive
thereof (the “Cendant Marks”), (ii) terminate any license with Cendant or any Cendant Affiliates
with respect to the use of any Cendant Marks, (iii) take all steps necessary, and fully cooperate
with Cendant and any Cendant Affiliate, to remove the Cendant Marks from any corporate, trade, and
assumed names and cancel any recordation of such names with any Governmental Authority, and change
any corporate, trade, and assumed name that uses the Cendant Marks to a name that does not include
the Cendant Marks or any variation, derivation, or colorable imitation thereof and (iv) remove,
strike over or otherwise obliterate all Cendant Marks from (or otherwise not use) in all materials
owned by PHH or any PHH Affiliate, including without limitation, any business cards, stationary,
packaging materials, displays, signs, promotional and advertising materials, and other materials or
media including any Internet usage or domain names that include the Cendant Marks.



ARTICLE II




MUTUAL RELEASES; INDEMNIFICATION



Section 2.1       Release Of Pre-Distribution Date Claims.


(a)            PHH Release. Except as provided in Section 2.1(c), as of the Distribution Date,
PHH does hereby, for itself and as agent for each PHH Affiliate,



16









 






remise, release and forever
discharge the Cendant Indemnitees from any and all Liabilities whatsoever, whether at law or in
equity (including any right of contribution), whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from any past acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any conditions existing
or alleged to have existed on or before the Distribution Date, including in connection with the
transactions and all other activities to implement the Distribution.


(b)            Cendant Release. Except as provided in Section 2.1(c), as of the Distribution
Date, Cendant does hereby, for itself and as agent for each Cendant
Affiliate, remise, release and forever discharge the PHH Indemnitees from any and all
Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether
arising under any contract or agreement, by operation of law or otherwise, existing or arising from
any past acts or events occurring or failing to occur or alleged to have occurred or to have failed
to occur or any conditions existing or alleged to have existed on or before the Distribution Date,
including in connection with the transactions and all other activities to implement the
Distribution.


(c)            No Impairment. Nothing contained in Section 2.1(a) or Section 2.1(b) shall limit
or otherwise affect any Party’s rights or obligations pursuant to or contemplated by this Agreement
or any Ancillary Agreement, in each case in accordance with its terms, including, without
limitation, any obligations relating to indemnification, including indemnification pursuant to
Section 2.2 and Section 2.3 of this Agreement, and any Insurance Proceeds under any Cendant
Insurance Policies relating to the PHH Business which PHH is entitled to be paid.


(d)            No Actions As To Released Pre-Distribution Date Claims. PHH agrees, for itself
and as agent for each PHH Affiliate, not to make any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any indemnification, against
Cendant or any Cendant Affiliate, or any other Person released pursuant to Section 2.1(a), with
respect to any Liabilities released pursuant to Section 2.1(a). Cendant agrees, for itself and as
agent for each Cendant Affiliate, not to make any claim or demand, or commence any Action asserting
any claim or demand, including any claim of contribution or any indemnification, against PHH or any
PHH Affiliate, or any other Person released pursuant to Section 2.1(b), with respect to any
Liabilities released pursuant to Section 2.1(b).


(e)            Further Instruments. At any time, at the request of any other Party, each Party
and the Cendant Affiliates or PHH Affiliates, as applicable, shall execute and deliver releases
reflecting the provisions hereof.


Section 2.2       Indemnification By PHH. Except as otherwise provided in this Agreement, PHH
shall, for itself and as agent for each PHH Affiliate, indemnify, defend (or, where applicable, pay
the defense costs for) and hold harmless the Cendant Indemnitees from and against, and shall
reimburse such Cendant Indemnitees with respect to, any and all Losses that any third party seeks
to impose upon the Cendant Indemnitees, or which are imposed upon the Cendant Indemnitees, and that
relate to,



17









 






arise or result from, whether prior to or following the Distribution Date, any of the
following items (without duplication):


(a)            any PHH Liability;


(b)            any breach by PHH or any PHH Affiliate of this Agreement or any of the Ancillary
Agreements; and


(c)            any Liabilities relating to the Registration Statement, the Information Statement or the
Investor Presentation, in each case, other than the Cendant Portions.


Except for any payment by PHH or any PHH Affiliate relating to the Escheatment Matter, in the event
that PHH or any PHH Affiliate makes a payment to the Cendant Indemnitees hereunder, and any of the
Cendant Indemnitees subsequently diminishes the Liability on account of which such payment was
made, either directly or through a third-party recovery (other than a recovery indirectly from
Cendant), Cendant will promptly repay (or will procure a Cendant Indemnitee to promptly repay) such
PHH Affiliate the amount by which the payment made by such PHH Affiliate exceeds the actual cost of
the associated indemnified Liability.


Section 2.3       Indemnification By Cendant. Except as otherwise provided in this Agreement,
Cendant shall, for itself and as agent for each Cendant Affiliate, indemnify, defend (or, where
applicable, pay the defense costs for) and hold harmless the PHH Indemnitees from and against, and
shall reimburse such PHH Indemnitee with respect to, any and all Losses that any third party seeks
to impose upon the PHH Indemnitees, or which are imposed upon the PHH Indemnitees, and that relate
to, arise or result from, whether prior to or following the Distribution Date, any of the following
items (without duplication):


(a)            any Liability of Cendant or any Cendant Affiliate arising out of the operation or conduct
of the Cendant Business prior to, on or after the Distribution Date;


(b)            any breach by Cendant or any Cendant Affiliate of this Agreement or any of the Ancillary
Agreements;


(c)            any Liabilities relating to Cendant Portions; and


(d)            any Liabilities for the matters set forth in Exhibit D.


In the event that Cendant or any Cendant Affiliate makes a payment to the PHH Indemnitees
hereunder, and any of the PHH Indemnitees subsequently diminishes the Liability on account of which
such payment was made, either directly or through a third-party recovery (other than a recovery
indirectly from PHH), PHH will promptly repay (or will procure a PHH Indemnitee to promptly repay)
such Cendant Affiliate the amount by which the payment made by such Cendant Affiliate exceeds the
actual cost of the indemnified Liability.



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Section 2.4       Contribution.


(a)            If the indemnification provided for in Section 2.2(c) or Section 2.3(c) is unavailable to
an indemnified party in respect of any Losses referred to
therein, then an Indemnifying Party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result of such Losses in
such proportion as is appropriate to reflect the relative fault of PHH or any PHH Affiliate on the
one hand and Cendant or any Cendant Affiliate on the other in connection with the statements or
omissions that resulted in such Losses.


(b)            No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.


Section 2.5       Ancillary Agreement Liabilities. Notwithstanding any other provision in this
Agreement to the contrary, any Liability specifically assumed by, or allocated to, a Party in any
of the Ancillary Agreements shall be governed exclusively by the terms of such Ancillary Agreement.
Moreover, notwithstanding anything in this Agreement to the contrary, this Agreement shall have no
application to any matter that is governed by the Tax Sharing Agreement.


Section 2.6       Other Agreements Evidencing Indemnification Obligations. Cendant hereby agrees to
execute, for the benefit of any PHH Indemnitee, such documents as may be reasonably requested by
such PHH Indemnitee, evidencing Cendant’s agreement that the indemnification obligations of Cendant
set forth in this Agreement inure to the benefit of and are enforceable by such PHH Indemnitee.
PHH hereby agrees to execute, for the benefit of any Cendant Indemnitee, such documents as may be
reasonably requested by such Cendant Indemnitee, evidencing PHH’s agreement that the
indemnification obligations of PHH set forth in this Agreement inure to the benefit of and are
enforceable by such Cendant Indemnitee.


Section 2.7       Reductions For Insurance Proceeds And Other Recoveries.


(a)            Insurance Proceeds. The amount that any Indemnifying Party is or may be required
to provide indemnification to or on behalf of any Indemnitee pursuant to Section 2.2 or Section
2.3, as applicable, shall be reduced (retroactively or prospectively) by any Insurance Proceeds or
other amounts actually recovered from third parties by or on behalf of such Indemnitee in respect
of the related Loss. The existence of a claim by an Indemnitee for monies from an insurer or
against a third party in respect of any indemnifiable Loss shall not, however, delay any payment
pursuant to the indemnification provisions contained herein and otherwise determined to be due and
owing by an Indemnifying Party. Rather, the Indemnifying Party shall make payment in full of the
amount determined to be due and owing by it against an assignment by the Indemnitee to the
Indemnifying Party of the entire claim of the Indemnitee for Insurance Proceeds or against such
third party. Notwithstanding any other provisions of this Agreement, it is the intention of the
Parties that no insurer or any other third party shall



19









 






be (i) entitled to a benefit it would not be entitled to receive in the absence of the
foregoing indemnification provisions, or (ii) relieved of the responsibility to pay any claims for
which it is obligated. If an Indemnitee has received the payment required by this Agreement from
an Indemnifying Party in respect of any indemnifiable Loss and later receives Insurance Proceeds or
other amounts in respect of such indemnifiable Loss, then such Indemnitee shall hold such Insurance
Proceeds or other amounts in trust for the benefit of the Indemnifying Party (or Indemnifying
Parties) and shall pay to the Indemnifying Party, as promptly as practicable after receipt, a sum
equal to the amount of such Insurance Proceeds or other amounts received, up to the aggregate
amount of any payments received from the Indemnifying Party pursuant to this Agreement in respect
of such indemnifiable Loss (or, if there is more than one Indemnifying Party, the Indemnitee shall
pay each Indemnifying Party, its proportionate share (based on payments received from the
Indemnifying Parties) of such Insurance Proceeds).


(b)            Tax Cost/Tax Benefit. The amount that any Indemnifying Party is or may be
required to provide indemnification to or on behalf of any Indemnitee pursuant to Section 2.2 or
Section 2.3, as applicable, shall be (i) increased to take account of any net Tax cost incurred by
the Indemnitee arising from the receipt or accrual of an indemnification payment hereunder (grossed
up for such increase) and (ii) reduced to take account of any net Tax benefit realized by the
Indemnitee arising from incurring or paying such loss or other Liability. In computing the amount
of any such Tax cost or Tax benefit, the Indemnitee shall be deemed to recognize all other items of
income, gain, loss, deduction or credit before recognizing any item arising from the receipt or
accrual of any indemnification payment hereunder or incurring or paying any indemnified Loss. Any
indemnification payment hereunder shall initially be made without regard to this Section 2.7(b) and
shall be increased or reduced to reflect any such net Tax cost (including gross-up) or net Tax
benefit only after the Indemnitee has actually realized such cost or benefit. For purposes of this
Agreement, an Indemnitee shall be deemed to have “actually realized” a net Tax cost or a net Tax
benefit to the extent that, and at such time as, the amount of Taxes payable by such Indemnitee is
increased above or reduced below, as the case may be, the amount of Taxes that such Indemnitee
would be required to pay but for the receipt or accrual of the indemnification payment or the
incurrence or payment of such Loss, as the case may be. The amount of any increase or reduction
hereunder shall be adjusted to reflect any Final Determination with respect to the Indemnitee’s
Liability for Taxes, and payments between such indemnified parties to reflect such adjustment shall
be made if necessary. Notwithstanding any other provision of this Agreement, to the extent
permitted by applicable law and unless otherwise required by any Final Determination, the Parties
hereto agree that any Indemnity Payment made hereunder shall be treated as a capital contribution
or dividend distribution, as the case may be, made immediately prior to the Distribution and,
accordingly, as not includible in the taxable income of the recipient or deductible by the payor.



20









 




Section 2.8       Procedures For Defense, Settlement And Indemnification Of Third Party Claims.
Except as provided in Exhibit D, the Parties agree as follows:


(a)            Notice Of Claims. If an Indemnitee shall receive notice or otherwise learn of the
assertion by a Person (including any Governmental Authority) who is not a Cendant Affiliate or a
PHH Affiliate of any claim or of the commencement by any such Person of any Action (collectively, a
“Third Party Claim”) with respect to which an Indemnifying Party may be obligated to provide
indemnification, Cendant and PHH (as applicable) will ensure that such Indemnitee shall give such
Indemnifying Party written notice thereof as soon as reasonably practicable, but no later than
thirty (30) days, after becoming aware of such Third Party Claim. Any such notice shall describe
the Third Party Claim in reasonable detail. Notwithstanding the foregoing, the delay or failure of
any Indemnitee or other Person to give notice as provided in this Section 2.8 shall not relieve the
related Indemnifying Party of its obligations under this ARTICLE II, except to the extent that such
Indemnifying Party is actually and substantially prejudiced by such delay or failure to give
notice.


(b)            Defense By Indemnifying Party. An Indemnifying Party shall be entitled to
participate in the defense of any Third Party Claim and, to the extent that it wishes, at its cost,
risk and expense, to assume the defense thereof, with counsel reasonably satisfactory to the party
seeking indemnification. After timely notice from the Indemnifying Party to the Indemnitee of such
election to so assume the defense thereof, the Indemnifying Party shall not be liable to the party
seeking indemnification for any legal expenses of other counsel or any other expenses subsequently
incurred by the Indemnitee in connection with the defense thereof. The Indemnitee agrees to
cooperate in all reasonable respects with the Indemnifying Party and its counsel in the defense
against any Third Party Claim. The Indemnifying Party shall be entitled to compromise or settle
any Third Party Claim as to which it is providing indemnification, which compromise or settlement
shall be made only with the written consent of the Indemnitee, such consent not to be unreasonably
withheld or delayed.


(c)            Defense By Indemnitee. If an Indemnifying Party fails to assume the defense of a
Third Party Claim within thirty (30) calendar days after receipt of written notice in accordance
with Section 4.5 of such claim, the Indemnitee will, upon delivering notice to such effect to the
Indemnifying Party, have the right to undertake the defense, compromise or settlement of such Third
Party Claim on behalf of and for the account of the Indemnifying Party subject to the limitations
as set forth in this Section 2.8; provided, however, that such Third Party Claim
shall not be compromised or settled without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. If the Indemnitee assumes the defense of
any Third Party Claim, it shall keep the Indemnifying Party reasonably informed of the progress of
any such defense, compromise or settlement. The Indemnifying Party shall reimburse all such costs
and expenses of the Indemnitee in the event it is ultimately determined that the Indemnifying Party
is obligated to indemnify the Indemnitee with respect to such Third Party Claim. In no event shall
an Indemnifying Party be liable for any settlement effected without its consent, which consent will
not be unreasonably withheld or delayed.



21









 




Section 2.9       Additional Matters.


(a)            Cooperation In Defense And Settlement. With respect to any Third Party Claim that
implicates both PHH and Cendant in a material fashion due to the allocation of Liabilities,
responsibilities for management of defense and related indemnities set forth in this Agreement or
any of the Ancillary Agreements, the Parties agree to cooperate fully and maintain a joint defense
(in a manner that will preserve for both Parties the attorney-client privilege, joint defense or
other privilege with respect thereto) so as to minimize such Liabilities and defense costs
associated therewith. The Party that is not responsible for managing the defense of such Third
Party Claims shall, upon reasonable request, be consulted with respect to significant matters
relating thereto and may, if necessary or helpful, retain counsel to assist in the defense of such
claims.


(b)            Pre-Distribution Date Actions. Except with respect to matters pertaining solely
to, or solely in connection with, the PHH Business, Cendant may, in its sole discretion have
exclusive authority and control over the investigation, prosecution, defense and appeal of all
Actions pending at the Distribution Date relating to or arising in connection with, in any manner,
the PHH assets or the PHH Liabilities if Cendant or a Cendant Affiliate is named as a party
thereto; provided, however, that Cendant must obtain the prior written consent of
PHH, such consent not to be unreasonably withheld or delayed, to settle or compromise or consent to
the entry of judgment with respect to any such Action involving amounts in excess of the greater of
(i) $1,000,000 and (ii) the amount reserved on the accounting records of PHH at the time of the
Distribution with respect to such Action; provided, however, that Cendant shall not
settle any such Action without the prior written consent of PHH if the terms of such settlement
would materially restrict the conduct by PHH or any PHH Affiliate in any line of business in any
geographic area. After any such compromise, settlement, consent to entry of judgment or entry of
judgment, Cendant shall reasonably and fairly allocate to PHH, after reasonable consultation with
PHH, and PHH shall be responsible for PHH’s proportionate share of, any such compromise,
settlement, consent or judgment attributable to the PHH Business, the PHH assets and/or the PHH
Liabilities, including its proportionate share of the costs and expenses associated with defending
same.


(c)            Substitution. In the event of an Action in which the Indemnifying Party is not a
named defendant, if either the Indemnitee or the Indemnifying Party shall so request, the Parties
shall endeavor to substitute the Indemnifying Party for the named defendant. If such substitution
or addition cannot be achieved for any reason or is not requested, the rights and obligations of
the Parties regarding indemnification and the management of the defense of claims as set forth in
this ARTICLE II shall not be altered.


(d)            Subrogation. In the event of payment by or on behalf of any Indemnifying Party to
or on behalf of any Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee, in whole or in part based
upon whether the Indemnifying Party has paid all or only part of the Indemnitee’s Liability, as to
any events or circumstances in respect of which such Indemnitee may have any right, defense or
claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third



22









 






Party Claim or against any other person. Such Indemnitee shall cooperate with such Indemnifying
Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any
subrogated right, defense or claim.


(e)            Certain Pending Settlements. Notwithstanding any other provision in this
Agreement, Cendant may, in its sole discretion, have exclusive authority and control over the
investigation, prosecution, defense, settlement and appeal of all matters relating to any
investigation, claim or allegation by, or on behalf of, any federal, state, local, foreign or
international governmental authority, pending at the Distribution Date, relating to whether
Cendant, any Cendant Affiliate, PHH or any PHH Affiliate owe amounts with respect to unclaimed
property (the “Escheatment Matter”). If (i) Cendant enters into any compromise, settlement,
consent to entry of judgment or entry of judgment in connection with the Escheatment Matter and
(ii) Cendant elects, in its sole discretion, to include PHH or any PHH Affiliate in any such
compromise, settlement, consent to entry of judgment or entry of judgment in connection with the
Escheatment Matter, Cendant shall reasonably and fairly allocate to PHH, after reasonable
consultation with PHH, and PHH shall be responsible for PHH’s proportionate share of, any such
compromise, settlement, consent or judgment attributable to the PHH Business, the PHH assets and/or
the PHH Liabilities, including its proportionate share of the costs and expenses associated with
defending or settling same.


(f)            Assumption of Certain Agreements. PHH agrees to assume all rights and obligations
of Avis under (i) the Alliance Agreement, except those obligations pertaining to compliance by
Wright Express LLC with the provisions of Article 14 of the Alliance Agreement applicable to Wright
Express LLC, and (ii) the Technology Agreement.


Section 2.10       Survival Of Indemnities. Notwithstanding any other provision of this Agreement
to the contrary, the rights and obligations of the Cendant Affiliates and the PHH Affiliates under
this ARTICLE II shall survive indefinitely.



ARTICLE III




INSURANCE MATTERS



Section 3.1       Cooperation; Payment Of Insurance Proceeds To PHH; Agreement Not To Release
Carriers. Each of Cendant and PHH will share such information as is reasonably necessary in order
to permit the other to manage and conduct its insurance matters in an orderly fashion. Cendant, at
the request of PHH, shall cooperate with and use commercially reasonable efforts to assist PHH in
recovering Insurance Proceeds under Cendant Insurance Policies for claims relating to the PHH
Business, the PHH assets or the PHH Liabilities, whether such claims arise under any contract or
agreement, by operation of law or otherwise, existing or arising from any past acts or events
occurring or failing to occur or alleged to have occurred or to have failed to occur or any
conditions
existing or alleged to have existed before, on or after the Distribution Date, and shall
promptly pay any such recovered Insurance Proceeds to PHH.



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Neither Cendant nor PHH, nor any of
their Subsidiaries, shall take any action which would intentionally jeopardize or otherwise
interfere with either Party’s ability to collect any proceeds payable pursuant to any Insurance
Policy. Except as otherwise contemplated by this Agreement or any Ancillary Agreement, after the
Distribution Date, neither Cendant nor PHH shall (and each Party shall ensure that no Cendant
Affiliate or PHH Affiliate, as applicable, shall), without the consent of the other, provide any
insurance carrier with a release, or amend, modify or waive any rights under any such policy or
agreement, if such release, amendment, modification or waiver would adversely affect any rights or
potential rights of any Cendant Affiliate or any PHH Affiliate thereunder. However, nothing in
this Section 3.1 shall (A) preclude any Cendant Affiliate or any PHH Affiliate from presenting any
claim or from exhausting any policy limit, (B) require any Cendant Affiliate or any PHH Affiliate
to pay any premium or other amount or to incur any Liability, or (C) require any Cendant Affiliate
or any PHH Affiliate to renew, extend or continue any policy in force.


Section 3.2       PHH Insurance Coverage After The Distribution. From and after the Distribution,
PHH shall be responsible for obtaining and maintaining insurance programs for its risk of loss and
such insurance arrangements shall be separate and apart from Cendant’s insurance programs.


Section 3.3       Responsibilities For Deductibles And/Or Self-Insured Obligations. PHH will
reimburse Cendant for all amounts necessary to exhaust or otherwise satisfy all applicable
self-insured retentions, amounts for fronted policies, deductibles and retrospective premium
adjustments and similar amounts not covered by Insurance Policies in connection with PHH
Liabilities and Insured PHH Liabilities to the extent that Cendant is required to pay any such
amounts.


Section 3.4       Procedures With Respect To Insured PHH Liabilities.


(a)            Reimbursement. PHH will reimburse Cendant for all out-of-pocket expenses
reasonably incurred by it to pursue insurance recoveries from Insurance Policies for Insured PHH
Liabilities.


(b)            Management Of Claims. The defense of claims, suits or actions giving rise to
potential or actual Insured PHH Liabilities will be managed (in conjunction with Cendant’s
insurers, as appropriate) by the Party that would have had responsibility for managing such claims,
suits or actions had such Insured PHH Liabilities been PHH Liabilities.


Section 3.5
      Cooperation. Cendant and PHH will cooperate with each other in all respects, and they shall execute any
additional documents which are reasonably necessary, to effectuate the provisions of this ARTICLE
III.


Section 3.6       No Assignment Or Waiver. This Agreement shall not be considered as an attempted
assignment of any policy of insurance or as a contract of insurance and shall not be construed to
waive any right or remedy of
Cendant or any



24









 






Cendant Affiliate in respect of any Insurance Policy or
any other contract or policy of insurance.


Section 3.7       No Liability. PHH does hereby, for itself and as agent for each PHH Affiliate,
agree that no Cendant Affiliate nor any Cendant Indemnitee shall have any Liability whatsoever as a
result of the insurance policies and practices of Cendant and its Subsidiaries as in effect at any
time prior to the Distribution, including as a result of the level or scope of any such insurance,
the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy
or timeliness of any notice to any insurance carrier with respect to any claim or potential claim
or otherwise, so long as Cendant complies with the provisions of, and maintains the coverages
required by, this ARTICLE III.


Section 3.8       Additional Or Alternate Insurance. Notwithstanding any provision of this
Agreement, Cendant and PHH shall work together to evaluate insurance options and secure additional
or alternate insurance for PHH and/or Cendant if desired by and cost effective for PHH and Cendant.
Nothing in this Agreement shall be deemed to restrict any PHH Affiliate from acquiring, at any
time, at its own expense any other insurance policy in respect of any Liabilities or covering any
period.


Section 3.9       Further Agreements. The Parties acknowledge that they intend to allocate
financial obligations without violating any laws regarding insurance, self-insurance or other
financial responsibility. If it is determined that any action undertaken pursuant to this
Agreement or any Ancillary Agreement is violative of any insurance, self-insurance or related
financial responsibility law or regulation, the Parties agree to work together to do whatever is
necessary to comply with such law or regulation while trying to accomplish, as much as possible,
the allocation of financial obligations as intended in this Agreement or any Ancillary Agreement.



ARTICLE IV




MISCELLANEOUS



Section 4.1       LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY CENDANT AFFILIATE OR ANY PHH AFFILIATE BE LIABLE TO ANY OTHER CENDANT
AFFILIATE OR ANY PHH AFFILIATE FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE
DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE)
ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, EXCEPT TO THE EXTENT THAT ANY SUCH DAMAGES RELATE TO A CLAIM FOR
INDEMNIFICATION PURSUANT TO SECTION 2.2 OR SECTION 2.3 OR A BREACH OF ANY OF THE CONFIDENTIALITY
PROVISIONS OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENTS.


Section 4.2       Entire Agreement. This Agreement, the Ancillary Agreements and the Exhibits and
Schedules referenced or attached hereto and thereto,



25









 






constitute the entire agreement between the
Parties with respect to the subject matter hereof and thereof and shall supersede all prior written
and oral and all contemporaneous oral agreements and understandings with respect to the subject
matter hereof and thereof.


Section 4.3       Governing Law And Jurisdiction. This Agreement shall be governed by, enforced
under and construed in accordance with the laws of the State of New York, without giving effect (to
the fullest extent provided by law) to any choice or conflict of law provision or rule thereof
which might result in the application of the laws of any other jurisdiction. Subject to Section
1.9, each of the Parties hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and of the United States of America in each
case located in the County of New York for any litigation arising out of or relating to this
Agreement (and agrees not to commence any litigation relating thereto except in such courts) and
further agrees that service of any process, summons, notice or document by U.S. registered mail to
its respective address set forth in Section 4.5 (or to such other address for notice that such
Party has given the other Party written notice of in accordance with Section 4.5) shall be
effective service of process for any litigation brought against it in any such court. Each Party
hereby irrevocably and unconditionally waives any objection to the laying of venue of any
litigation arising out of this Agreement in the courts of the State of New York or of the United
States of America in each case located in the County of New York and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that any such litigation
brought in any such court has been brought in an inconvenient forum.


Section 4.4       Termination; Amendment. This Agreement may be terminated at any time by mutual
consent of Cendant and PHH, evidenced by an instrument in writing signed on behalf of each of the
Parties. This Agreement may be amended only with the mutual consent of Cendant and PHH, evidenced
by an instrument in writing signed on behalf of each of the Parties.


Section 4.5       Notices. Notices, offers, requests or other communications required or permitted
to be given by either party pursuant to the terms of this Agreement shall be given in writing to
the respective Parties to the following addresses:


if to Cendant:


Cendant Corporation


9 West 57th Street

New York, New York 10021

Attention: Eric J. Bock,

          Executive Vice President-Law and

          Corporate
Secretary

Fax: (212) 413-1922



26









 




if to PHH:


PHH Corporation


3000 Leadenhall Road

Mt. Laurel, New Jersey 08054

Attention: William F. Brown

Fax: (856) 917-0950


or to such other address or facsimile number as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice involving
non-performance, termination, or renewal shall be sent by hand delivery, recognized overnight
courier or, within the United States, may also be sent via certified mail, return receipt
requested. All other notices may also be sent by facsimile, confirmed by first class mail. All
notices shall be deemed to have been given when received, if hand delivered; when transmitted, if
transmitted by facsimile or similar electronic transmission method; one working day after it is
sent, if sent by recognized overnight courier; and three days after it is postmarked, if mailed
first class mail or certified mail, return receipt requested, with postage prepaid.


Section 4.6       Counterparts. This Agreement, including the Ancillary Agreement and the Exhibits
and Schedules hereto and thereto and the other documents referred to herein or therein, may be
executed in two counterparts, each of which shall be deemed to be an original but both of which
shall constitute one and the same agreement.


Section 4.7       Binding Effect; Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and
their respective legal representatives and successors, and, nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of any nature
whatsoever under or by reason of this Agreement; provided that, any PHH Affiliate, the PHH
Indemnitees, any Cendant Affiliate and the Cendant Indemnitees shall be entitled to the benefits
and subject to the obligations of those provisions of this Agreement which expressly confer rights
and/or impose obligations upon them. Such provisions of this Agreement may be enforced separately
by each Cendant Affiliate, each Cendant Indemnitee, each PHH Affiliate and each PHH Indemnitee.
Except for an assignment from Cendant to any other Cendant Affiliate, Cendant may not assign this
Agreement or any rights or obligations hereunder, without the prior written consent of PHH, and any
such assignment shall be void. PHH may not assign this Agreement or any rights or obligations
hereunder, without the prior written consent of Cendant, and any such assignment shall be void.


Section 4.8       Severability. If any term or other provision of this Agreement or the Exhibits or
Schedules attached hereto is determined by a court, administrative agency or arbitrator to be
invalid, illegal or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated hereby is not affected in
any manner



27









 






materially adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the Parties as closely
as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled
to the fullest extent possible.


Section 4.9
        Failure Or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the
part of either party hereto in the exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or
agreement herein, nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing under this
Agreement or the Exhibits or Schedules attached hereto are cumulative to, and not exclusive of, any
rights or remedies otherwise available.


Section 4.10       Authority. Each of the Parties hereto represents to the other that (a) it has
the corporate or other requisite power and authority to execute, deliver and perform this
Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly
authorized by all necessary corporate or other actions, (c) it has duly and validly executed and
delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’
rights generally and general equity principles.


Section 4.11       Interpretation. The headings contained in this Agreement, in any Exhibit or
Schedule hereto and in the table of contents to this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized term
used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning assigned
to such term in this Agreement. When a reference is made in this Agreement to an Article or a
Section, Exhibit or Schedule, such reference shall be to an Article or Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated.


Section 4.12       Conflicting Agreements. None of the provisions of this Agreement are intended to
supersede any provision in any Ancillary Agreement or any other agreement with respect to the
respective subject matters thereof. In the event of conflict between this Agreement and any
Ancillary Agreement or other agreement executed in connection herewith, the provisions of such
other agreement shall prevail.


Section 4.13       Third Party Beneficiaries. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any third party, including any creditor of any Person. No such
third party shall obtain any right under any provision of this Agreement or shall by reasons of any
such provision make any claim in respect of any Liability (or otherwise) against either Party
hereto. Notwithstanding the foregoing to the contrary, any PHH Affiliate, the PHH Indemnitees, any
Cendant Affiliate and the Cendant Indemnitees shall be entitled to the benefits of those provisions
of this Agreement which expressly confer rights upon them.



28









 




Section 4.14       Waiver of Jury Trial.


TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO WAIVES ALL RIGHT OF TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR
ANY MATTER ARISING HEREUNDER.



ARTICLE V




DEFINITIONS



Section 5.1       Defined Terms. The following capitalized terms shall have the meanings given to them in this Section 5.1:


“Action” means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or
investigation by or before any federal, state, local, foreign or international governmental
authority or any arbitration or mediation tribunal, other than any demand, action, suit,
countersuit, arbitration, inquiry, proceeding or investigation relating to Taxes.


“Agreement” shall mean this Separation Agreement, together with the schedules and exhibits
hereto, as the same may be amended from time to time in accordance with the provisions hereof.


“Alliance Agreement” shall have the meaning set forth in Section 1.20.


“Ancillary Agreements” shall mean the Tax Sharing Agreement and the Transition Services
Agreement.


“Avis” shall have the meaning set forth in Section 1.20.


“Cendant” shall have the meaning set forth in the preamble to this Agreement.


“Cendant Affiliate” means any corporation or other entity directly or indirectly controlled by
Cendant, but excluding PHH and any PHH Affiliate.


“Cendant’s Auditors” shall have the meaning set forth in Section 1.4(a) of this Agreement.


“Cendant Business” means any business of Cendant other than the PHH Business.


“Cendant Indemnitees” means Cendant, each Cendant Affiliate and each of their respective
directors, officers and employees.


“Cendant Marks” shall have the meaning set forth in Section 1.21.


“Cendant Portions” means all information set forth in, or incorporated by reference into, the
Registration Statement, to the extent such information is set forth on Exhibit C.



29









 




“Cendant 401(k) Plan” shall have the meaning set forth in Section 1.15(a).


“Code” means the Internal Revenue Code of 1986 (or any successor statute), as amended from
time to time, and the regulations promulgated thereunder.


“Confidential Business Information” shall have the meaning set forth in Section 1.5(a)(iii) of
this Agreement.


“Confidential Information” shall have the meaning set forth in Section 1.5(a)(i) of this
Agreement.


“Confidential Operational Information” shall have the meaning set forth in Section 1.5(a)(ii)
of this Agreement.


“Contract” means any contract, agreement, lease, license, sales order, purchase order,
instrument or other commitment that is binding on any Person or any part of its property under
applicable law.


“Control Rules” shall have the meaning set forth in Section 1.4(d).


“Director Plans” shall have the meaning set forth in Section 1.17.


“Director Plan Liabilities” shall have the meaning set forth in Section 1.17.


“Dispute” shall have the meaning set forth in Section 1.9(a).


“Disputing Party” shall have the meaning set forth in Section 1.9(b).


“Distribution” means the distribution by Cendant of all of the shares of common stock of PHH
held by it to the holders of Cendant’s common stock on a pro rata basis.


“Distribution Date” means the date of the Distribution.


“Eligible PHH Participants” shall have the meaning set forth in Section 1.14(a).


“Eligible Cendant Participants” shall have the meaning set forth in Section 1.14(b).


“Escheatment Matter” shall have the meaning set forth in Section 2.9(e).


“Exchange Act” means the Securities Exchange Act of 1934.


“Final Determination” has the meaning set forth in the Tax Sharing Agreement.


“Governmental Approvals” means any notices, reports or other filings to be made, or any
consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental
Authority.



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“Governmental Authority” shall mean any federal, state, local, foreign or international court,
government, department, commission, board, bureau, agency, official or other regulatory,
administrative or governmental authority.


“Indemnifying Party” means any party which may be obligated to provide indemnification to an
Indemnitee pursuant to Section 2.2 or Section 2.3 hereof or any other section of this Agreement or
any Ancillary Agreement.


“Indemnitee” means any party which may be entitled to indemnification from an Indemnifying
Party pursuant to Section 2.2 or Section 2.3 hereof or any other section of this Agreement or any
Ancillary Agreement.


“Information” means information, whether or not patentable or copyrightable, in written, oral,
electronic or other tangible or intangible forms, stored in any medium, including studies, reports,
records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples,
flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software,
marketing plans, customer names, communications by or to attorneys (including attorney-client
privileged communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), communications and materials otherwise related to or
made or prepared in connection with or in preparation for any legal proceeding, and other
technical, financial, employee or business information or data.


“Information Statement” means that certain information statement filed by PHH on Form 8-K on
January 19, 2005.


“Insurance Policies” means insurance policies pursuant to which a Person makes a true risk
transfer to an insurer.


“Insurance Proceeds” means those monies: (a) received by an insured from an insurance carrier;
or (b) paid by an insurance carrier on behalf of the insured; or (c) from Insurance Policies.


“Insured PHH Liability” means any PHH Liability to the extent that (i) it is covered under the
terms of Cendant’s Insurance Policies in effect prior to the Distribution, and (ii) PHH is not a
named insured under, or otherwise entitled to the benefits of, such Insurance Policies.


“Investor Presentation” means that certain investor presentation of PHH Corporation furnished
on Form 8-K on January 19, 2005.


“Liabilities” means all claims, debts, liabilities, guarantees, assurances, commitments and
obligations, whether fixed, contingent or absolute, asserted or unasserted, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due,
whenever or however arising (including, without limitation, whether arising out of any Contract or
tort based on negligence or strict liability) and whether or not the same would be required by
generally accepted



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principles and accounting policies to be reflected in financial statements or
disclosed in the notes thereto.


“Loss” and “Losses” mean any and all damages, losses, deficiencies, Liabilities, obligations,
penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses
(including, without limitation, the costs and expenses of any and all Actions and demands,
assessments, judgments, settlements and compromises relating thereto and the reasonable costs and
expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses
incurred in the investigation or defense thereof or the enforcement of rights hereunder), excluding
special, consequential, indirect, incidental
and/or punitive damages (other than special, consequential, indirect, incidental and/or
punitive damages awarded to any third party against an indemnified party).


“Mediation Request” shall have the meaning set forth in Section 1.9(b).


“Mobility” shall have the meaning set forth in Section 1.19.


“Party” or “Parties” shall have the meaning set forth in the preamble to this Agreement.


“Paribas” shall have the meaning set forth in Section 1.20.


“Paribas Release” shall have the meaning set forth in Section 1.20.


“Person” means an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated organization or a
governmental entity or any department, agency or political subdivision thereof.


“PHH” shall have the meaning set forth in the preamble to this Agreement.


“PHH Affiliate” means any corporation or other entity directly or indirectly controlled by PHH
other than PHH Home Loans, LLC and any of its Subsidiaries.


“PHH’s Auditors” shall have the meaning set forth in Section 1.4(a) of this Agreement.


“PHH Balance Sheet” shall mean PHH’s Pro Forma Balance Sheet as of September 30, 2004.


“PHH Business” shall mean any business conducted by PHH or any of its Subsidiaries either
prior to or following the Distribution Date other than (i) PHH’s relocation business conducted by
Cendant Mobility Services Corporation and its Subsidiaries and PHH’s other Subsidiaries that
engaged in such relocation business and (ii) PHH’s fuel card business conducted by Wright Express
LLC and its Subsidiaries and PHH’s other subsidiaries that engaged in such fuel card business.



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“PHH Excluded Liability” shall mean any Liability for matters described in Exhibit D.


“PHH Indemnitees” means PHH, each PHH Affiliate and each of their respective directors,
officers and employees.


“PHH Liability” shall mean (without duplication) the following Liabilities other than any PHH
Excluded Liability:


(i)       all Liabilities reflected in the PHH Balance Sheet;


(ii)       all Liabilities of Cendant or its Subsidiaries that arise
after the date of the PHH Balance Sheet that would be reflected in a PHH balance sheet
as of the date of such Liabilities, if such balance sheet was prepared using the same
principles and accounting policies under which the PHH Balance Sheet was prepared;


(iii)       all Liabilities that should have been reflected in the PHH Balance Sheet but are
not reflected in the PHH Balance Sheet due to mistake or unintentional omission;


(iv)       all Liabilities whether arising before, on or after the Distribution Date, that
relate to, arise or result from:


(1)            the operation, or any of the assets, of the PHH Business, as conducted at any time
prior to, on or after the Distribution Date (including any Liability relating to, arising
out of or resulting from any act or failure to act by any director, officer, employee,
agent or representative (whether or not such act or failure to act is or was within such
Person’s authority)); or


(2)            the operation of any business conducted by any PHH Affiliate at any time after the
Distribution Date (including any Liability relating to, arising out of or resulting from
any act or failure to act by any director, officer, employee, agent or representative
(whether or not such act or failure to act is or was within such Person’s authority));


(v)       all Liabilities relating to, or arising from, any performance guaranty of Avis in
connection with indebtedness issued by Chesapeake Funding, LLC;


(vi)       all Liabilities in respect of any employee of PHH or any PHH Affiliate;


(vii)       all Liabilities of Cendant or any Cendant Affiliate, or PHH or any PHH Affiliate
that are not expressly contemplated by this Agreement or any other Ancillary Agreement (or
the Schedules hereto or thereto) as Liabilities to be assumed by Cendant or any Cendant
Affiliate;




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(viii)     all Liabilities arising out of or relating to (x) the Alliance Agreement,
except those obligations pertaining to compliance by Wright Express LLC with the provisions
of Article 14 of the Alliance Agreement applicable to Wright Express LLC, or (y) the
Technology Agreement; and


(ix)       all Liabilities that are expressly contemplated by this Agreement or any other
Ancillary Agreement (or the Schedules hereto or thereto) as Liabilities to be assumed or
retained by PHH or any PHH Affiliate (including, without limitation, the Liabilities
assumed or retained pursuant to Sections 1.14, 1.15, 1.16 and 1.18), and all agreements,
obligations and Liabilities of any PHH Affiliate under this Agreement or any of the
Ancillary Agreements.


“PHH 401(k) Plan” shall have the meaning set forth in Section 1.15(a).


“Privileges” shall have the meaning set forth in Section 1.6(a) of this Agreement.


“Privileged Information” shall have the meaning set forth in Section 1.6(a) of this Agreement.


“Registration Statement” shall have the meaning set forth in the recitals to this Agreement.


“Rules” shall have the meaning set forth in Section 1.9(b).


“SEC” shall have the meaning set forth in Section 1.4(d).


“Securities Act” means the Securities Act of 1933, as amended.


“Subsidiary” of any Person means a corporation or other organization whether incorporated or
unincorporated of which at least a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries; provided, however, that no Person that
is not directly or indirectly wholly-owned by any other Person shall be a Subsidiary of such other
Person unless such other Person controls, or has the right, power or ability to control, that
Person.


“Supplemental Plan” shall have the meaning set forth in Section 1.14(b) of this Agreement.


“Tax” and “Taxes” have the meaning set forth in the Tax Sharing Agreement.


“Tax Sharing Agreement” means the Tax Sharing Agreement, attached as Exhibit A to this
Agreement.


“Technology Agreement” shall have the meaning set forth in Section 1.20.



34 









 




“Transition Services Agreement” means the Transition Services Agreement, attached as Exhibit B
to this Agreement.


“Third Party Claim” has the meaning set forth in Section 2.8(a) of this Agreement.



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WHEREFORE, the Parties have signed this Separation Agreement effective as of the date first
set forth above.



	 	 	 	 	 
	 	 	CENDANT CORPORATION
	 
	 	 	 	 
	

	 	By:	 	/s/ Eric J. Bock
	

	 	 	 	 
	

	 	Name:
	 	Eric J. Bock
	

	 	Title:
	 	Executive Vice President, Law

and Corporate Secretary
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	PHH CORPORATION
	 
	 	 	 	 
	

	 	By:	 	/s/ Terence W. Edwards 
	

	 	 	 	 
	

	 	Name:
	 	Terence W. Edwards
	

	 	Title:
	 	President and Chief Executive Officer







36