EX-10.1



 






Exhibit 10.1




SETTLEMENT AGREEMENT




     This Settlement Agreement (the “Settlement Agreement”) is made as of January 4, 2008 by,
between, and among PHH Corporation (the “Company”), on the one hand, and Pearl Mortgage Acquisition
2 L.L.C. (“Pearl”) and Blackstone Capital Partners V. L.P. (“BCP V” and, with Pearl, the
“Blackstone Entities”), on the other hand.



     WHEREAS, the Company, Jade Merger Sub, Inc. (“Merger Sub”), and General Electric Capital
Corporation (“GECC”) entered into an Agreement and Plan of Merger dated as of March 15, 2007 (the
“Merger Agreement”) pursuant to which, subject to the terms and conditions stated therein, Merger
Sub was to merge with and into the Company and the Company was to continue as the surviving
corporation and a wholly-owned subsidiary of GECC (the “Merger”);



     WHEREAS, GECC, Merger Sub, and Pearl entered into a Purchase and Sale Agreement dated as of
March 15, 2007 (the “Mortgage Business Sale Agreement”) pursuant to which, subject to the terms and
conditions stated therein, Pearl would acquire the Company’s mortgage loan origination and
servicing and related businesses from GECC concurrent with consummation of the Merger;



     WHEREAS, BCP V provided a Limited Guarantee dated as of March 15, 2007 in favor of the Company
concerning the transactions contemplated by the Mortgage Business Sale Agreement (the “Limited
Guarantee,” and together with the Merger Agreement and the Mortgage Business Sale Agreement, the
“Agreements”);



     WHEREAS, Section 8.1(b)(ii) of the Merger Agreement provides that the Merger Agreement may be
terminated if the Effective Time (as defined in the Merger Agreement) shall not have occurred on or
before December 31, 2007, subject to the terms and conditions stated therein;



     WHEREAS, by letter dated January 1, 2008, PHH terminated the Merger Agreement pursuant to
Section 8.1(b)(ii) thereof;



     WHEREAS, Section 12.01(b)(2) of the Mortgage Business Sale Agreement provides that the
Mortgage Business Sale Agreement may be terminated if the Merger Agreement shall have been
terminated;



     WHEREAS, by letter dated January 2, 2008, Pearl terminated the Mortgage Business Sale
Agreement pursuant to Section 12.01(b)(2) thereof;



     WHEREAS, by letter dated January 1, 2008, PHH has requested that the Blackstone Entities pay
to PHH the $50 million “Reverse Termination Fee” contemplated by Section 6.03 of the Mortgage
Business Sale Agreement, and the Blackstone Entities are willing to make such payment subject to
the terms of this Settlement Agreement;



     NOW, THEREFORE, IT IS AGREED by and between the Company and the Blackstone Entities (together,
the “Parties”), intending to be legally bound, fully aware of all legal rights and remedies
available to them, in consideration of the mutual covenants and agreements set forth in



 









 




this Settlement Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, AS FOLLOWS:




     1. The Settlement Payment. In consideration of the agreements made by the Company
under this Settlement Agreement, BCP V shall pay, or cause to be paid, to the Company, in
accordance with the Limited Guarantee, an aggregate amount of $50 million (collectively, the
“Payment”) no later than January 4, 2008 (the “Payment Date”) in the form of bank-wired funds, sent
as follows:



JP Morgan Chase NY

Account name—PHH Corporation

ABA #

Account #




     2. The Third-Party Advisor Payment. In consideration of the agreements made by the
Blackstone Entities under this Settlement Agreement, the Company shall pay, or cause to be paid, to
BCP V, or as directed by BCP V, up to an aggregate amount of $4.5 million in payment of the fees of
third-party advisors retained by the Blackstone Entities in connection with the transactions
contemplated by the Agreements, including McKinsey & Company and others, provided that the
Blackstone Entities provide PHH with invoices reflecting such fees and with analyses, reports,
conclusions, recommendations or findings generated by the third-party advisors and provided to the
Blackstone Entities. The Company shall make this payment, or cause this payment to be paid, no
later than 2 business days after receipt of these invoices and analyses, reports, conclusions,
recommendations or findings, in the form of bank-wired funds, as directed by BCP V. In the event
the Blackstone Entities subsequently recover in excess of $30 million from JPMorgan Chase Bank,
N.A., J.P. Morgan Securities Inc., Lehman Commercial Paper Inc., Lehman Brothers Commercial Bank,
and/or Lehman Brothers Inc. in connection with the Commitment Letter dated as of March 15, 2007
related to the financing of the transactions contemplated by the Mortgage Business Sale Agreement,
the Blackstone Entities shall promptly pay 50% (fifty percent) of the amount over $30 million to
the Company until the Company has recovered the full amount of any fees that it has paid pursuant
to this paragraph.



     3. Press Release and Non-Disparagement. Upon execution of this Settlement Agreement,
the Company shall issue a press release in the form attached hereto as Exhibit A, and any comments
that the Blackstone Entities or the Company shall make in the future concerning the termination of
the Merger Agreement or the Mortgage Business Sale Agreement or the subject matter of this
Settlement Agreement shall be consistent therewith. In addition, for a period of three years from
the execution of this Settlement Agreement, neither the Blackstone Entities nor the Company shall
make any statement about any matter that has occurred prior to the date of this Settlement
Agreement, public or private, written or oral, that could reasonably be understood as disparaging
the business or conduct of the other.



     4. Release by the Company.



          (a) For good and sufficient consideration, the Company accepts the Payment as full performance
by the Blackstone Entities of their obligations under Section 6.03 of the Mortgage Business Sale
Agreement and accordingly PHH does hereby on its behalf and on



 









 






behalf of its former, current or future officers, directors, agents, advisors, representatives,
managers, members, partners, shareholders, employees, subsidiaries, financing sources, affiliates
(including, without limitation, controlling persons), employees of affiliates, principals, and any
heirs, executors, administrators, successors or assigns of any said person or entity, and any other
person claiming (now or in the future) for the Company through or on behalf of the Company,
unequivocally release and discharge, and hold harmless, the Blackstone Entities, and any of their
respective former, current or future officers, directors, agents, advisors, representatives,
managers, members, partners, shareholders, employees, subsidiaries, financing sources, affiliates
(including, without limitation, controlling persons), employees of affiliates, principals, and any
heirs, executors, administrators, successors or assigns of any said person or entity (the “Released
Blackstone Parties”), from any and all past, present, direct, indirect and derivative liabilities,
claims, rights, actions, counts, causes of action, obligations, sums of money due, attorneys’ fees,
suits, debts, covenants, agreements, promises, demands, and damages of every kind and nature, in
law or in equity, asserted or that could have been asserted, under federal or state statute, or
common law, known and unknown, suspected or unsuspected, foreseen or unforeseen, anticipated or
unanticipated, whether or not concealed or hidden, from the beginning of time until date of
execution of this Settlement Agreement, that in any way arise from or out of, are based upon, or
are in connection with or relate to any breach, non-performance, action or failure to act under the
Agreements (the “Released Blackstone Claims”); provided, however, that the Blackstone Entities
shall not be released from any claim for breach, non-performance, action or failure to act under
(i) this Settlement Agreement or (ii) the Confidentiality Agreement between BCP V and the Company
dated October 26, 2006.




          (b) It is understood and agreed that, except as provided in the last clause of the preceding
paragraph, the preceding paragraph is a full and final release covering all known as well as
unknown or unanticipated debts, claims or damages of the Company relating to or arising out of any
breach, non-performance, action or failure to act under the Agreements. Therefore, the Company
expressly waives any rights it may have under statute or common law principle under which a general
release does not extend to claims which the Company does not know or suspect to exist in its favor
at the time of executing the release, which if known by the Company must have affected the
Company’s settlement with the Blackstone Entities. In connection with such waiver and
relinquishment, the Company acknowledges that it or its attorneys or agents may hereafter discover
claims or facts in addition to or different from those which they now know or believe to exist with
respect to the Released Blackstone Claims, but that it is the Company’s intention hereby fully,
finally and forever to settle and release all of the Released Blackstone Claims. In furtherance of
this intention, the releases herein given shall be and remain in effect as full and complete
releases with regard to the Released Blackstone Claims notwithstanding the discovery or existence
of any such additional or different claim or fact.




          (c) California Civil Code Section 1542. The Company acknowledges that it has been
advised by legal counsel and is familiar with the provisions of California Civil Code Section 1542,
which provides as follows:





A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.



 









 




The Company, being aware of said code section, agrees to expressly waive any rights it may have
thereunder, as well as under any other statute or common law principles of similar effect, with
respect to any other Party under the Agreements; provided, however, that no Party releases any
other Party from any obligations, liabilities or claims arising under any representation or
warranty, or in connection with the performance of any covenant or obligation, under this
Settlement Agreement.




     5. Release by the Blackstone Entities.



          (a) For good and sufficient consideration, the Blackstone Entities do hereby on their behalf
and on behalf of their former, current or future officers, directors, agents, advisors,
representatives, managers, members, partners, shareholders, employees, subsidiaries, financing
sources, affiliates (including, without limitation, controlling persons), employees of affiliates,
principals, and any heirs, executors, administrators, successors or assigns of any said person or
entity, and any other person claiming (now or in the future) for the Blackstone Entities through or
on behalf of the Blackstone Entities, unequivocally release and discharge, and hold harmless, the
Company and any of its respective former, current or future officers, directors, agents, advisors,
representatives, managers, members, partners, shareholders, employees, subsidiaries, financing
sources, affiliates (including, without limitation, controlling persons), employees of affiliates,
principals, and any heirs, executors, administrators, successors or assigns of any said person or
entity (the “Released Company Parties”), from any and all past, present, direct, indirect and
derivative liabilities, claims, rights, actions, counts, causes of action, obligations, sums of
money due, attorneys’ fees, suits, debts, covenants, agreements, promises, demands, and damages of
every kind and nature, in law or in equity, asserted or that could have been asserted, under
federal or state statute, or common law, known and unknown, suspected or unsuspected, foreseen or
unforeseen, anticipated or unanticipated, whether or not concealed or hidden, from the beginning of
time until date of execution of this Settlement Agreement, that in any way arise from or out of,
are based upon, or are in connection with or relate to any breach, non-performance, action or
failure to act under the Agreements (the “Released Company Claims”); provided, however, that the
Company shall not be released from any claim for breach, non-performance, action or failure to act
under (i) this Settlement Agreement or (ii) the Confidentiality Agreement between BCP V and the
Company dated October 26, 2006.




          (b) It is understood and agreed that, except as provided in the last clause of the preceding
paragraph, the preceding paragraph is a full and final release covering all known as well as
unknown or unanticipated debts, claims or damages of the Blackstone Entities relating to or arising
out of any breach, non-performance, action or failure to act under the Agreements. Therefore, the
Blackstone Entities expressly waive any rights they may have under statute or common law principle
under which a general release does not extend to claims which the Blackstone Entities do not know
or suspect to exist in their favor at the time of executing the release, which if known by the
Blackstone Entities must have affected the Blackstone Entities’ settlement with the Company. In
connection with such waiver and relinquishment, the Blackstone Entities acknowledge that they or
their attorneys or agents may hereafter discover claims or facts in addition to or different from
those which they now know or believe to exist with respect to the Released Company Claims, but that
it is the Blackstone Entities’ intention hereby fully, finally and forever to settle and release
all of the Released Company Claims. In furtherance of this intention, the releases herein given
shall be and remain in effect as full and




 









 




complete releases with regard to the Released Company Claims notwithstanding the discovery or
existence of any such additional or different claim or fact.




          (c) California Civil Code Section 1542. The Blackstone Entities acknowledge that they
have been advised by legal counsel and are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:





A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.


The Blackstone Entities, being aware of said code section, agree to expressly waive any rights they
may have thereunder, as well as under any other statute or common law principles of similar effect,
with respect to any other Party under the Agreements; provided, however, that no Party releases any
other Party from any obligations, liabilities or claims arising under any representation or
warranty, or in connection with the performance of any covenant or obligation, under this
Settlement Agreement.




     6. No Wrongdoing. It is expressly understood and agreed that this Settlement
Agreement, and any negotiations or proceedings in connection herewith, do not constitute and may
not be construed as, or deemed to be, either evidence or an admission or concession on the part of
any Party of any liability or wrongdoing whatsoever. The act of entering into or carrying out the
Settlement Agreement and any negotiations or proceedings related thereto shall not be used, offered
or received into evidence in any action or proceeding in any court, administrative agency or other
tribunal for any purpose whatsoever other than to enforce the provisions of the Settlement
Agreement, provided that the Settlement Agreement may be filed or submitted by the Parties to
support a claim of res judicata, collateral estoppel, other theory of claim or issue preclusion,
release, discharge or satisfaction.



     7. Covenant Not to Sue.



          (a) Except as provided in the last clause of Paragraph 4(a), the Company hereby covenants to
the Released Blackstone Parties not to, with respect to any Released Blackstone Claim, directly or
indirectly encourage or solicit or voluntarily assist or participate in any way in the filing,
reporting or prosecution by a Party, Parties or any third party of a suit, arbitration, mediation,
or claim (including a third party or derivative claim) against any Released Blackstone Party
relating to any Released Blackstone Claim. The covenants contained in this Paragraph 7(a) shall
survive this Settlement Agreement indefinitely regardless of any statute of limitations.




          (b) Except as provided in the last clause of Paragraph 5(a), the Blackstone Entities hereby
covenant to the Released Company Parties not to, with respect to any Released Company Claim,
directly or indirectly encourage or solicit or voluntarily assist or participate in any way in the
filing, reporting or prosecution by a Party, Parties or any third party of a suit, arbitration,
mediation, or claim (including a third party or derivative claim) against any Released Company
Party relating to any Released Company Claim. The covenants contained in this



 









 






Paragraph 7(b) shall survive this Settlement Agreement indefinitely regardless of any statute of
limitations.




     8. Waiver. Any term of this Settlement Agreement may be waived at any time by the
Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set
forth in a written instrument duly executed by or on behalf of the Party waiving such term or
condition. No waiver by any Party of any term or condition of this Settlement Agreement, in any
one or more instances, shall be deemed to be a waiver of any other term or condition nor construed
as a waiver of the same or any other term or condition of this Settlement Agreement on any future
occasion. All remedies, either under this Settlement Agreement or by any laws or otherwise
afforded, will be cumulative and not alternative.



     9. No Assignment. Neither this Settlement Agreement nor any right, interest or
obligation hereunder may be assigned by any Party hereto without the prior written consent of the
other Parties hereto and any attempt to do so will be void, except for assignments and transfers by
operation of any laws. Subject to the preceding sentence and Paragraph 11 below, the rights,
duties and obligations set forth in this Settlement Agreement shall be binding upon and inure to
the benefit of any and all former, current or future officers, directors, agents, advisors,
representatives, managers, members, partners, shareholders, employees, subsidiaries, financing
sources, affiliates (including, without limitation, controlling persons), employees of affiliates,
principals, and any heirs, executors, administrators, successors or assigns of any said person or
entity, and any other person claiming (now or in the future) through or on behalf of them.



     10. Entire Agreement. The Parties each separately intend the settlement set forth in
the Settlement Agreement to be a final and complete resolution of all disputes between them. This
Settlement Agreement contains the entire agreement between the Parties as respects its subject
matter. All discussions and agreement previously entertained or entered into between the Parties
concerning the subject matter of the Settlement Agreement are superseded in their entirety by the
Settlement Agreement and are of no further force or effect. The Settlement Agreement may not be
modified or amended, nor any of its terms or provisions waived, except by an instrument in writing
signed by all Parties hereto.



     11. Third Party Beneficiaries. The Parties acknowledge and agree that the Company’s
and the Blackstone Entities’ former, current or future officers, directors, agents, advisors,
representatives, managers, members, partners, shareholders, employees, subsidiaries, financing
sources, affiliates (including, without limitation, controlling persons), employees of affiliates,
principals, and any heirs, executors, administrators, successors or assigns of any said person or
entity are express third party beneficiaries of the releases contained in Paragraphs 4 and 5 of the
Settlement Agreement (as applicable) and the covenants not to sue contained in Paragraph 7 of this
Settlement Agreement and are entitled to enforce rights under such sections to the same extent that
such persons and entities could enforce such rights if they were a party to this Settlement
Agreement. Except as set forth in this paragraph, the Parties agree that this Settlement Agreement
is not intended to, and does not, confer rights upon any other third party.



     12. Notice. All notices and other communications to any Party shall be in writing
(including facsimile transmission) and shall be given,



 









 




if to the Blackstone Entities, to:




Blackstone Management Associates V L.L.C.

345 Park Avenue

New York, New York 10154

Attention: Chinh Chu

Facsimile: 212.583.5712



with a copy to:




Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention: Wilson S. Neely

Facsimile: 212.455.2502



if to the Company:




PHH Corporation

3000 Leadenhall Road

Mt. Laurel, New Jersey 08054

Attention: William F. Brown

Facsimile: 856.917.7295



with a copy to:




DLA Piper US LLP

6225 Smith Avenue

Baltimore, Maryland 21215

Attention: Wm. David Chalk

Facsimile: 410.580.3120




     13. Captions. The captions and headings used herein are included for convenience of
reference only and shall be ignored in the construction and interpretation hereof.



     14. Severability. In the event that any provision of this Settlement Agreement, or
the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal,
void or unenforceable, the remainder of this Settlement Agreement will continue in full force and
effect and the application of such provision to other persons or circumstances will be interpreted
so as reasonably to effect the intent of the parties hereto. The Parties agree to replace such
void or unenforceable provision of this Settlement Agreement with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and other purposes of
such void or unenforceable provision.



     15. Injunctive Relief. The Parties agree that irreparable damage would occur in the
event that any of the provisions of this Settlement Agreement are not performed in accordance with
their specified terms or are otherwise breached in any material respect. It is accordingly



 









 




agreed that a Party shall be entitled to seek a temporary restraining order or preliminary
injunction from any court of competent jurisdiction to maintain the status quo or otherwise to
prevent a material breach of this Settlement Agreement and to enforce specifically the terms and
provisions hereof until an action to enforce this Settlement Agreement can be commenced or an
injunction hearing held.




     16. Governing Law. This Settlement Agreement shall be governed by and construed and
interpreted in accordance with the law of the State of New York, without regard to the conflicts of
law provisions.



     17. Jurisdiction. The Parties submit to the jurisdiction of the United States
District Court for the Southern District of New York or any New York State court sitting in the
County of New York for the purposes of enforcement and interpretation of this Settlement Agreement.
The Parties agree that process may be served upon them in any manner authorized by the laws of the
State of New York for such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction, venue and process. Each Party hereto hereby
agrees not to commence any legal proceedings relating to or arising out of this Agreement or the
transactions contemplated hereby in any jurisdiction or courts other than as provided herein.



     18. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.



     19. Representations of the Parties. Each Party represents and warrants to the other
Parties as follows:



          (a) Such Party is duly organized and validly existing under the laws of the jurisdiction of
its organization and is in good standing in such jurisdiction.




          (b) Such Party has all requisite legal and corporate power and authority to execute, deliver
and perform the obligations under this Settlement Agreement and has taken all necessary action to
authorize such execution, delivery and performance of this Settlement Agreement.




          (c) This Agreement constitutes a valid and binding obligation of such Party, enforceable
against such Party in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.




          (d) The execution and delivery of this Settlement Agreement by such Party does not, and the
performance by such Party of the transactions contemplated by this Settlement Agreement do not: (i)
conflict with, or result in a violation or breach of, any provision of its charter or bylaws (or
equivalent organizational documents), (ii) conflict with, or result in any violation or breach of,
or constitute (with our without notice of lapse of time, or both) a default under or require a
consent or waiver under, any of the terms, conditions or provisions of any




 









 




contractual restriction binding on such Party or affecting such Party or any of its assets; or
(iii) conflict with or violate any order or judgment of any court or other agency of government
applicable to such Party or any of its assets.




          (e) All governmental and other consents that are required to have been obtained by it with
respect to this Settlement Agreement have been obtained and are in full force and effect and all
conditions of any such consents have been complied with.




     20. Representation of Signatories. The persons signing this Settlement Agreement
represent and warrant that they are duly authorized to do so on behalf of the Party for whom they
are signing.



     21. Counterparts. This Settlement Agreement may be executed in counterparts by any of
the signatories hereto, and as so executed shall constitute one agreement.



 









 





	 	 	 	 	 	 	 
	AGREED TO BY:	 	 
	 
	 	 	 	 	 	 
	PHH CORPORATION	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/
	 	Terence W. Edwards	 	 
	 	 	 	 	 
	 

	 	 	 	Name: Terence W. Edwards
	 	 
	 

	 	 	 	Title: President and CEO	 	 
	 
	 	 	 	 	 	 
	PEARL MORTGAGE ACQUISITION 2 L.L.C.	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/
	 	Chinh Chu	 	 
	 	 	 	 	 
	 

	 	 	 	Name: Chinh Chu	 	 
	 

	 	 	 	Title: Senior Managing Director	 	 
	 
	 	 	 	 	 	 
	BLACKSTONE CAPITAL PARTNERS V L.P.	 	 
	 
	 	 	 	 	 	 
	By:

	 	 	 	Blackstone Management Associates V L.L.C.,	 	 
	 

	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 
	By:

	 	 	 	BMA V L.L.C., its sole member	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/
	 	Chinh Chu	 	 
	 	 	 	 	 
	 

	 	 	 	Name: Chinh Chu	 	 
	 

	 	 	 	Title: Senior Managing Director