Document:

EX-10.1

 

Exhibit 10.1

PHH CORPORATION

U.S.$220,000,000 4.00 % Convertible Senior Notes Due 2012*

Purchase Agreement

March 27, 2008

Citigroup Global Markets Inc.

J.P. Morgan Securities Inc.

Wachovia Capital Markets, LLC

As Representatives of the Initial Purchasers

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Ladies and Gentlemen:

          PHH Corporation, a corporation organized under the laws of Maryland (the “Company”), proposes
to issue and sell to the several parties named in Schedule I hereto (the “Initial Purchasers”), for
whom you (the “Representatives”) are acting as representatives, U.S.$220,000,000 principal amount
of its 4.00% Convertible Senior Notes due 2012 (the “Firm Securities”). The Company also proposes
to grant to the Initial Purchasers an option to purchase up to U.S.$30,000,000 additional principal
amount of such Senior Notes to cover over-allotments, if any (the “Option Securities” and, together
with the Firm Securities, the “Securities”). The Securities are convertible into shares of Common
Stock, par value U.S.$0.01 per share (the “Common Stock”), of the Company at the conversion price
set forth herein. The Securities are to be issued under an indenture (the “Indenture”), to be
dated as of the Closing Date, between the Company and The Bank of New York, as trustee (the
“Trustee”). To the extent there are no additional parties listed on Schedule I other than you, the
term Representatives as used herein shall mean you as the Initial Purchasers, and the terms
Representatives and Initial Purchasers shall mean either the singular or plural as the context
requires. The use of the neuter in this Agreement shall include the feminine and masculine
wherever appropriate. Certain terms used herein are defined in Section 25 hereof.

          The sale of the Securities to the Initial Purchasers will be made without registration of the
Securities or the Common Stock issuable upon conversion thereof under the Act in reliance upon
exemptions from the registration requirements of the Act.

          In connection with the sale of the Securities, the Company has prepared a preliminary offering
memorandum, dated March 27, 2008 (as amended or supplemented through

 

			
	*	 	Plus an option to purchase up to U.S.$30,000,000
additional principal amount from the Company to cover over-allotments.

 

 

the date hereof, including any and all exhibits thereto and any information incorporated by
reference therein, the “Preliminary Memorandum”), and a final offering memorandum, to be dated
March 28, 2008 (as amended or supplemented through the Execution Time, including any and all
exhibits thereto and any information incorporated by reference therein, the “Final Memorandum”).
Each of the Preliminary Memorandum and the Final Memorandum sets forth certain information
concerning the Company, the Securities and the Common Stock issuable upon conversion thereof. The
Company hereby confirms that it has authorized the use of the Disclosure Package, the Preliminary
Memorandum and the Final Memorandum, and any amendment or supplement thereto, in connection with
the offer and sale of the Securities by the Initial Purchasers. Unless stated to the contrary, any
references herein to the terms “amend”, “amendment” or “supplement” with respect to the Final
Memorandum shall be deemed to refer to and include any information filed under the Exchange Act
subsequent to the Execution Time that is incorporated by reference therein.

          1. Representations and Warranties. The Company represents and warrants to, and agrees
with, each Initial Purchaser as set forth below in this Section 1.

          (a) The Preliminary Memorandum, at the date thereof, did not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading. At the Execution Time, on
the Closing Date and on any settlement date, the Final Memorandum did not and will not (and any
amendment or supplement thereto, at the date thereof, at the Closing Date and on any settlement
date, will not) contain any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no representation
or warranty as to the information contained in or omitted from the Preliminary Memorandum or the
Final Memorandum, or any amendment or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the Initial Purchasers through
the Representatives specifically for inclusion therein, it being understood and agreed that the
only such information furnished by or on behalf of any Initial Purchaser consists of the
information described as such in Section 8(b) hereof.

          (b) The Disclosure Package, as of the Execution Time, does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in or omissions from the Disclosure Package based
upon and in conformity with written information furnished to the Company by any Initial Purchaser
through the Representatives specifically for use therein, it being understood and agreed that the
only such information furnished by or on behalf of any Initial Purchaser consists of the
information described as such in Section 8(b) hereof.

          (c) None of the Company, its Affiliates, or any person acting on its or their behalf has
directly or indirectly, made offers or sales of any security, or solicited offers to buy, any
security under circumstances that would require the registration of the Securities or the Common
Stock issuable upon conversion thereof under the Act.

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          (d) None of the Company, its Affiliates, or any person acting on its or their behalf has: (i)
engaged in any form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of the Securities or (ii) engaged in any
directed selling efforts (within the meaning of Regulation S) with respect to the Securities or the
Common Stock issuable upon conversion thereof.

          (e) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Act.

          (f) The Company has been advised by the FINRA’s PORTAL Market that the Securities have been
designated PORTAL-eligible securities in accordance with the rules and regulations of the FINRA.

          (g) Assuming the accuracy of the representations and warranties of the Initial Purchasers
contained in Section 4 and their compliance with their agreements set forth herein, no registration
under the Act of the Securities or the Common Stock issuable upon conversion thereof is required
for the offer and sale of the Securities to or by the Initial Purchasers in the manner contemplated
herein, in the Disclosure Package and the Final Memorandum.

          (h) The Company is not, and after giving effect to the offering and sale of the Securities and
the application of the proceeds thereof as described in the Disclosure Package and the Final
Memorandum will not be, an “investment company” as defined in the Investment Company Act.

          (i) The Company is subject to and in compliance in all material respects with the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act.

          (j) The Company has not paid or agreed to pay to any person any compensation for soliciting
another to purchase any of the Securities (except as contemplated in this Agreement).

          (k) The Company has not taken, directly or indirectly, any action designed to or that has
constituted or that might reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.

          (l) Each of the Company and its significant subsidiaries (as listed in Annex A hereto) has
been duly incorporated and is validly existing as a corporation or other entity in good standing
under the laws of the jurisdiction in which it is incorporated or formed with full corporate or
other power and authority to own or lease, as the case may be, and to operate its properties and
conduct its business as described in the Disclosure Package and the Final Memorandum, and is duly
qualified to do business as a foreign corporation and is in good standing under the laws of each
jurisdiction that requires such qualification, except for such jurisdictions where the failure to
so qualify or to be in good standing would not result in a Material Adverse Effect (as defined
below in Section 1(t)).

          (m) All the outstanding shares of capital stock or other equity or ownership interests of each
significant subsidiary have been duly authorized and validly issued and are fully

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paid and nonassessable, and, except as otherwise set forth in the Disclosure Package and the
Final Memorandum and except for the equity or ownership interests of our significant subsidiaries
with Securitization Indebtedness (as defined in the Preliminary Memorandum and Final Memorandum),
all outstanding shares of capital stock or other equity or ownership interests of the significant
subsidiaries that are owned by the Company either directly or through a subsidiary controlled by
the Company are free and clear of any security interest, claim, lien or encumbrance.

          (n) The Company’s authorized capital stock is as set forth in the Disclosure Package and the
Final Memorandum as of the dates set forth therein; the capital stock of the Company conforms to
the description thereof contained in the Disclosure Package and the Final Memorandum; the
outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable; the shares of Common Stock initially issuable upon conversion of the Securities
have been duly authorized and, when issued upon conversion of the Securities, will be validly
issued, fully paid and nonassessable; the Board of Directors of the Company has duly and validly
adopted resolutions reserving such shares of Common Stock for issuance upon conversion of the
Securities; the holders of outstanding shares of capital stock of the Company are not entitled to
preemptive or other rights to subscribe for the Securities or the shares of Common Stock issuable
upon conversion thereof; and, except as set forth in the Disclosure Package and the Final
Memorandum, no options, warrants or other rights to purchase, agreements or other obligations to
issue, or rights to convert any obligations into or exchange any securities for, shares of capital
stock of or ownership interests in the Company are outstanding other than for subsequent issuances,
if any, pursuant to employee benefit plans described in the Disclosure Package and the Final
Memorandum or upon exercise of outstanding options described in the Disclosure Package and the
Final Memorandum.

          (o) Intentionally omitted.

          (p) This Agreement has been duly authorized, executed and delivered by the Company; the
Indenture has been duly authorized and, assuming due authorization, execution and delivery thereof
by the Trustee, when executed and delivered by the Company, will constitute a legal, valid, binding
instrument enforceable against the Company in accordance with its terms (subject to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights
generally from time to time in effect and to general principles of equity); the Securities have
been duly authorized, and, when executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers as provided herein, will have
been duly executed and delivered by the Company and will constitute the legal, valid and binding
obligations of the Company entitled to the benefits of the Indenture (subject, as to enforcement,
to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’
rights generally from time to time in effect and to general principles of equity) and will be
convertible into Common Stock in accordance with their terms;

          (q) No consent, approval, authorization, filing with or order of any court or governmental
agency or body is required in connection with the transactions contemplated herein or in the
Indenture, except (i) such as may be required under the Act, the Trust Indenture Act and the rules
and regulations promulgated thereunder and (ii) such as have been obtained or made by

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the Company and are in full force and effect under the Act, applicable state securities or
blue sky laws and from FINRA.

          (r) None of the execution and delivery of the Indenture or this Agreement, the issuance and
sale of the Securities or the issuance of the Common Stock upon conversion thereof, or the
consummation of any other of the transactions herein or therein contemplated, or the fulfillment of
the terms hereof or thereof will conflict with, result in a breach or violation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, (i) the charter or by-laws or comparable constituting documents of the
Company or any of its subsidiaries; (ii) the terms of any material indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other material agreement, obligation,
condition, covenant or instrument to which the Company or any of its subsidiaries is a party or
bound or to which its or their property is subject; or (iii) any statute, law, rule, regulation,
judgment, order or decree of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or
any of its or their properties.

          (s) The consolidated historical financial statements and schedules of the Company and its
consolidated subsidiaries included or incorporated by reference in the Disclosure Package and the
Final Memorandum present fairly in all material respects the financial condition, results of
operations and cash flows of the Company and its consolidated subsidiaries as of the dates and for
the periods indicated, comply as to form with the applicable accounting requirements of Regulation
S-X and have been prepared in conformity with generally accepted accounting principles in the
United States (U.S. GAAP) applied on a consistent basis throughout the periods involved (except as
otherwise noted therein); and the selected financial data set forth under the caption “Selected
Consolidated Financial Data” in the Preliminary Memorandum and the Final Memorandum fairly present,
on the basis stated in the Preliminary Memorandum and the Final Memorandum, the information
included or incorporated by reference therein.

          (t) No action, suit or proceeding by or before any court or governmental agency, authority or
body or any arbitrator involving the Company or any of its subsidiaries or its or their property is
pending or, to the knowledge of the Company, threatened that (i) could reasonably be expected to
have a material adverse effect on the performance of this Agreement or the Indenture, or the
consummation of any of the transactions contemplated hereby or thereby or (ii) could reasonably be
expected to have a material adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or
not arising from transactions in the ordinary course of business (a “Material Adverse Effect”),
except as set forth in or contemplated in the Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto).

          (u) Each of the Company and its significant subsidiaries owns or leases all such properties as
are necessary to the conduct of its operations as presently conducted.

          (v) Neither the Company nor any of its significant subsidiaries is in violation or default of
(i) any provision of its charter or bylaws or comparable constituting documents; (ii) the terms of
any indenture, contract, lease, mortgage, deed of trust, note agreement, loan

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agreement or other agreement, obligation, condition, covenant or instrument to which the
Company or any of its significant subsidiaries is a party or bound or to which its or their
property is subject; or (iii) any statute, law, rule, regulation, judgment, order or decree
applicable to the Company or any of its significant subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator having jurisdiction over the Company or such
significant subsidiary or any of its properties, as applicable, except, with respect to clauses
(ii) and (iii), as would not result in a Material Adverse Effect.

          (w) Deloitte & Touche LLP, which has audited certain financial statements of the Company and
its consolidated subsidiaries and delivered their report with respect to the audited consolidated
financial statements and schedules included or incorporated by reference in the Disclosure Package
and the Final Memorandum, is an independent registered public accounting firm with respect to the
Company within the meaning of the Act.

          (x) There are no stamp or other issuance or transfer taxes or duties or other similar fees or
charges required to be paid in connection with the execution and delivery of this Agreement or the
issuance or sale of the Securities or upon the issuance of Common Stock upon the conversion
thereof.

          (y) The Company has filed all applicable tax returns that are required to be filed or has
requested extensions thereof (except in any case in which the failure so to file would not have a
Material Adverse Effect and except as set forth in or contemplated in the Disclosure Package and
the Final Memorandum (exclusive of any amendment or supplement thereto)) and has paid all taxes
shown to be paid by it on such tax return and any other assessment, fine or penalty levied against
it, to the extent that any of the foregoing is due and payable, except for any such tax or
assessment, fine or penalty that is currently being contested in good faith or as would not have a
Material Adverse Effect or except as set forth in or contemplated in the Disclosure Package and the
Final Memorandum (exclusive of any amendment or supplement thereto).

          (z) No labor problem or dispute with the employees of the Company or any of its subsidiaries
exists or, to the Company’s knowledge, is threatened, except as would not have a Material Adverse
Effect, and except as set forth in or contemplated in the Disclosure Package and the Final
Memorandum (exclusive of any amendment or supplement thereto).

          (aa) The Company and each of its subsidiaries is insured against such losses and risks and in
such amounts as are customary in the businesses in which they are engaged; all material policies of
insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their
respective businesses, assets, employees, officers and directors are in full force and effect; the
Company and its subsidiaries are in compliance in all material respects with the terms of such
policies and instruments; there are no material claims by the Company or any of its significant
subsidiaries under any such policy or instrument as to which any insurance company is denying
liability or defending under a reservation of rights clause; neither the Company nor any of its
subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company
nor any of its subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect except as set forth in or contemplated in the

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Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement
thereto).

          (bb) Except for generally applicable restrictions arising under applicable corporate law, no
subsidiary of the Company is currently prohibited, directly or indirectly, from paying any
dividends to the Company, from making any other distribution on such subsidiary’s capital stock,
from repaying to the Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of
the Company, except as described in or contemplated in the Disclosure Package and the Final
Memorandum (exclusive of any amendment or supplement thereto).

          (cc) The Company and its subsidiaries possess all licenses, certificates, permits and other
authorizations issued by all applicable authorities necessary to conduct their respective
businesses, except as would not result in a Material Adverse Effect or as set forth in or
contemplated in the Disclosure Package and the Final Memorandum. Neither the Company nor any of
its subsidiaries has received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a Material Adverse Effect, except as set
forth in or contemplated in the Disclosure Package and the Final Memorandum (exclusive of any
amendment or supplement thereto).

          (dd) The Company and each of its subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with U.S. GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company and its subsidiaries’ internal controls over financial
reporting were effective as of December 31, 2007, and to the Company’s knowledge, are effective as
of the date hereof and the Company is not aware of any material weakness in their internal control
over financial reporting.

          (ee) The Company and its subsidiaries maintain “disclosure controls and procedures” (as such
term is defined in Rule 13a-15(e) under the Exchange Act); such disclosure controls and procedures
were effective as of December 31, 2007, and, to the Company’s knowledge, are effective as of the
date hereof.

          (ff) The Company and its subsidiaries are (i) in compliance with any and all applicable laws
and regulations relating to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”); (ii) have
received and are in compliance with all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses; and (iii) have not received
notice of any actual or potential liability under any Environmental Law, except where such
non-compliance with Environmental Laws, failure to receive required permits, licenses or other
approvals, or liability would not, individually or in the aggregate, have a Material Adverse
Effect, except as set forth in or contemplated in the

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Disclosure Package and the Final Memorandum (exclusive of any amendment or supplement
thereto). Except as set forth in the Disclosure Package and the Final Memorandum, neither the
Company nor any of its subsidiaries has been named as a “potentially responsible party” under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.

          (gg) Intentionally omitted.

          (hh) The subsidiaries listed on Annex A attached hereto are the only “significant
subsidiaries” of the Company (as defined in Rule 1-02 of Regulation S-X).

          (ii) None of the Company, its subsidiaries or, to the knowledge of the Company, any director,
officer, agent, employee or Affiliate of the Company or any of its subsidiaries is aware of or has
taken any action, directly or indirectly, that would result in a violation by such persons of the
Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the
“FCPA”), including, without limitation, making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization
of the payment of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any
foreign political party or official thereof or any candidate for foreign political office, in
contravention of the FCPA.

          (jj) The operations of the Company and its subsidiaries are and have been conducted at all
times in compliance with applicable financial recordkeeping and reporting requirements and money
laundering statutes and the rules and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator involving the Company or any of
its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.

          (kk) None of the Company, any of its subsidiaries or, to the knowledge of the Company, any
director, officer, agent, employee or Affiliate of the Company or any of its subsidiaries is
currently subject to any sanctions administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury (“OFAC”); and the Company will not directly or indirectly use the
proceeds of the offering of the Securities hereunder, or lend, contribute or otherwise make
available such proceeds to any subsidiary, joint venture partner or other person or entity, for the
purpose of financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.

          (ll) There is and has been no failure on the part of the Company and any of the Company’s
directors or officers, in their capacities as such, to comply with any provision of the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the
“Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302 and 906 related to
certifications.

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          (mm) Prior to the date hereof, the Company has furnished to the Representatives letters, each
substantially in the form of Exhibit A hereto, duly executed by each officer and director of the
Company listed in Annex B and addressed to the Representatives.

Any certificate signed by any officer of the Company and delivered to the Representatives or
counsel for the Initial Purchasers in connection with the offering of the Securities shall be
deemed a representation and warranty by the Company, as to matters covered thereby, to each Initial
Purchaser.

          2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Company agrees to sell to each Initial
Purchaser, and each Initial Purchaser agrees, severally and not jointly, to purchase from the
Company, at a purchase price of 97.0% of the principal amount thereof, plus accrued interest, if
any, from April 2, 2008 to the Closing Date, the principal amount of Firm Securities set forth
opposite such Initial Purchaser’s name in Schedule I hereto.

          (b) Subject to the terms and conditions and in reliance upon the representations and
warranties herein set forth, the Company hereby grants an option to the several Initial Purchasers
to purchase, severally and not jointly, the Option Securities at the same purchase price as Initial
Purchasers shall pay for the Firm Securities, plus accrued interest, if any, from April 2, 2008 to
the settlement date for the Option Securities. The option may be exercised only to cover
over-allotments in the sale of the Firm Securities by the Initial Purchasers. The option may be
exercised in whole or in part at any time (but not more than once) on or before the 30th day after
the date on which the first Firm Security is issued to a person other than a bond house, broker, or
similar person or organization acting in the capacity of an underwriter, placement agent, or
wholesaler (the “Firm Security Date”) upon written or telegraphic notice by the Representatives to
the Company setting forth the principal amount of Option Securities as to which the several Initial
Purchasers are exercising the option and the settlement date; provided, however, that
either (i) the Option Securities settle no later than the 12th day after the Firm Security Date or
(ii) the Option Securities settle at a price that would not cause the Option Securities to have
more than a “de minimis” amount of original issue discount (determined under Section 1273 of the
Internal Revenue Code of 1986, as amended, and applicable Treasury Department regulations) if the
Option Securities were a separate issue for such purposes. Delivery of the Option Securities, and
payment therefor, shall be made as provided in Section 3 hereof. The principal amount of Option
Securities to be purchased by each Initial Purchaser shall be the same percentage of the total
principal amount of Option Securities to be purchased by the several Initial Purchasers as such
Initial Purchaser is purchasing of the Firm Securities, subject to such adjustments as you in your
absolute discretion shall make to eliminate any fractional Securities.

          3. Delivery and Payment. (a) Delivery of and payment for the Firm Securities and the
Option Securities (if the option provided for in Section 2(b) hereof shall have been exercised on
or before the first Business Day immediately preceding the Closing Date) shall be made at 10:00
A.M., New York City time, on April 2, 2008, or at such time on such later date not more than three
Business Days after the foregoing date as the Representatives shall designate, which date and time
may be postponed by agreement between the Representatives and the Company or as provided in Section
9 hereof (such date and time of delivery and payment for

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the Securities being herein called the “Closing Date”). Delivery of the Securities shall be
made to the Representatives for the respective accounts of the several Initial Purchasers against
payment by the several Initial Purchasers through the Representatives of the purchase price thereof
to or upon the order of the Company by wire transfer payable in same-day funds to the account
specified by the Company. Delivery of the Securities shall be made through the facilities of The
Depository Trust Company unless the Representatives shall otherwise instruct.

          (b) If the option provided for in Section 2(b) hereof is exercised after the first Business
Day immediately preceding the Closing Date, the Company will deliver the Option Securities (at the
expense of the Company) to the Representatives on the date specified by the Representatives (which
shall be within three Business Days after exercise of said option) for the respective accounts of
the several Initial Purchasers, against payment by the several Initial Purchasers through the
Representatives of the purchase price thereof to or upon the order of the Company by wire transfer
payable in same-day funds to the account specified by the Company. If settlement for the Option
Securities occurs after the Closing Date, the Company will deliver to the Representatives on the
settlement date for the Option Securities, and the obligation of the Initial Purchasers to purchase
the Option Securities shall be conditioned upon receipt of, supplemental opinions, certificates and
letters confirming as of such date the opinions, certificates and letters delivered on the Closing
Date pursuant to Section 6 hereof.

          4. Offering by Initial Purchasers. (a) Each Initial Purchaser acknowledges that the
Securities and the Common Stock issuable upon conversion thereof have not been and will not be
registered under the Act and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Act.

          (b) Each Initial Purchaser, severally and not jointly, represents and warrants to and agrees
with the Company that:

     (i) it has not offered or sold, and will not offer or sell, any Securities
within the United States except to those it reasonably believes to be “qualified
institutional buyers” (as defined in Rule 144A under the Act);

     (ii) neither it nor any person acting on its behalf has made or will make
offers or sales of the Securities in the United States by means of any form of
general solicitation or general advertising (within the meaning of Regulation D) in
the United States;

     (iii) in connection with each sale pursuant to Section 4(b)(i)(A), it has taken
or will take reasonable steps to ensure that the purchaser of such Securities is
aware that such sale may be made in reliance on Rule 144A;

     (iv) it is an “accredited investor” (as defined in Rule 501(a) of Regulation
D);

     (v) neither it nor any person acting on its behalf, without the prior written
consent of the Company, has given or will give to any prospective purchaser of the
Securities any written information concerning the offering of the

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Securities other than materials contained in the Disclosure Package, the Final
Memorandum or any other offering materials consented to in writing by the Company.

          5. Agreements. The Company agrees with each Initial Purchaser that:

          (a) The Company will furnish to each Initial Purchaser and to counsel for the Initial
Purchasers, without charge, during the period referred to in Section 5(c) below, as many copies of
the materials contained in the Disclosure Package and the Final Memorandum and any amendments and
supplements thereto as they may reasonably request.

          (b) The Company will not amend or supplement the Disclosure Package or the Final Memorandum,
other than by filing documents under the Exchange Act that are incorporated by reference therein,
without the prior written consent of the Representatives, which shall not be unreasonably withheld,
delayed or conditioned; provided, however, that prior to the completion of the
distribution of the Securities by the Initial Purchasers (as reasonably determined by the Initial
Purchasers), the Company will not file any document under the Exchange Act that is incorporated by
reference in the Disclosure Package or the Final Memorandum unless, prior to such proposed filing,
the Company has furnished the Representatives with a copy of such document for their review and the
Representatives have not reasonably objected to the filing of such document. The Company will
promptly advise the Representatives when any document filed under the Exchange Act that is
incorporated by reference in the Disclosure Package or the Final Memorandum shall have been filed
with the Commission.

          (c) If at any time prior to the completion of the sale of the Securities by the Initial
Purchasers (as determined by the Representatives), any event occurs as a result of which the
Disclosure Package or the Final Memorandum, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made or the
circumstances then prevailing, not misleading, or if it should be necessary to amend or supplement
the Disclosure Package or the Final Memorandum to comply with applicable law, the Company will
promptly (i) notify the Representatives of any such event; (ii) subject to the requirements of
Section 5(b), prepare an amendment or supplement that will correct such statement or omission or
effect such compliance; and (iii) supply any supplemented or amended Disclosure Package or Final
Memorandum to the several Initial Purchasers and counsel for the Initial Purchasers without charge
in such quantities as they may reasonably request.

          (d) Without the prior written consent of the Representatives, the Company has not given and,
during the period referred to in Section 5(c) above, will not give to any prospective purchaser of
the Securities any written information concerning the offering of the Securities other than
materials contained in the Disclosure Package, the Final Memorandum or any other offering materials
prepared by or with the prior written consent of the Representatives.

          (e) The Company will arrange, if necessary, for the qualification of the Securities for sale
by the Initial Purchasers under the laws of such jurisdictions as the Representatives may designate
and will maintain such qualifications in effect so long as required for the sale of the

11

 

Securities; provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits, other than those arising out of the offering or sale of
the Securities, in any jurisdiction where it is not now so subject. The Company will promptly
advise the Representatives of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.

          (f) The Company will not, and will not permit any of its Affiliates to, resell any Securities
or Shares of Common Stock issued upon conversion thereof that have been acquired by any of them.

          (g) None of the Company, its Affiliates, or any person acting on its or their behalf will,
directly or indirectly, make offers or sales of any security, or solicit offers to buy any
security, under circumstances that would require the registration of the Securities or Common Stock
issuable upon conversion thereof under the Act.

          (h) Any information provided by the Company, its Affiliates or any person acting on its or
their behalf to publishers of publicly available databases about the terms of the Securities shall
include a statement that the Securities have not been registered under the Act and are subject to
restrictions under Rule 144A under the Act and Regulation S;

          (i) None of the Company, its Affiliates, or any person acting on its or their behalf will
engage in any form of general solicitation or general advertising (within the meaning of Regulation
D) in connection with any offer or sale of the Securities in the United States.

          (j) For so long as any of the Securities or the Common Stock issuable upon the conversion
thereof are “restricted securities” within the meaning of Rule 144(a)(3) under the Act, the Company
will, during any period in which it is not subject to and in compliance with Section 13 or 15(d) of
the Exchange Act, provide to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities, upon the request of such
holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under
the Act. This covenant is intended to be for the benefit of the holders, and the prospective
purchasers designated by such holders, from time to time of such restricted securities.

          (k) None of the Company, its Affiliates, or any person acting on its or their behalf will
engage in any directed selling efforts with respect to the Securities. Terms used in this
paragraph have the meanings given to them by Regulation S.

          (l) The Company will cooperate with the Representatives and use its reasonable best efforts to
permit the Securities to be eligible for clearance and settlement through The Depository Trust
Company.

          (m) The Company will reserve and keep available at all times, free of pre-emptive rights, the
full number of shares of Common Stock issuable upon conversion of the Securities.

12

 

          (n) Each of the Securities and the shares of Common Stock issuable upon conversion thereof
will bear, to the extent applicable, the legend contained in “Notice to Investors” in the
Preliminary Memorandum and the Final Offering Memorandum for the time period and upon the other
terms stated therein.

          (o) The Company will not for a period of 90 days following the Execution Time, without the
prior written consent of Citigroup, directly or indirectly, offer, sell, contract to sell, pledge,
otherwise dispose of, enter into any transaction which is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any Affiliate of the Company or
any person in privity with the Company or any Affiliate of the Company of, file (or participate in
the filing of) a registration statement with the Commission in respect of, or establish or increase
a put equivalent position or liquidate or decrease a call equivalent position within the meaning of
Section 16 of the Exchange Act in respect of, any shares of capital stock of the Company or any
securities convertible into, or exercisable or exchangeable for, shares of capital stock of the
Company (other than the Securities), or publicly announce an intention to effect any such
transaction (other than as contemplated by this Agreement); provided, however, that
the Company may issue and sell Common Stock or securities convertible into or exchangeable for
Common Stock pursuant to any employee benefit plan, stock ownership plan or dividend reinvestment
plan of the Company described in the Disclosure Package and the Final Memorandum and in effect at
the Execution Time, and the Company may issue Common Stock issuable upon the conversion of
securities or the exercise of warrants outstanding at the Execution Time and described in the
Disclosure Package and the Final Memorandum.

          (p) The Company will not take, directly or indirectly, any action designed to or that has
constituted, or that might reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.

          (q) Between the date hereof and the Closing Date, the Company will not do or authorize any act
or thing that would result in an adjustment of the conversion price of the Securities.

          (r) The Company will, for a period of twelve months following the Execution Time, furnish to
the Representatives all reports or other communications (financial or other) generally made
available to stockholders, and deliver such reports and communications to the Representatives as
soon as they are available, unless such documents are furnished to or filed with the Commission or
any securities exchange on which any class of securities of the Company is listed and generally
made available to the public.

          (s) Prior to the completion of the distribution of the Securities by the Initial Purchasers,
the Company will comply with all applicable securities and other laws, rules and regulations,
including, without limitation, the Sarbanes-Oxley Act, and use its best efforts to cause the
Company’s directors and officers, in their capacities as such, to comply with such laws, rules and
regulations, including, without limitation, the provisions of the Sarbanes-Oxley Act.

13

 

          (t) The Company will prepare a final term sheet, containing solely a description of the
Securities and the offering thereof, in the form approved by you and attached as Schedule II
hereto.

          (u) Prior to the completion of the distribution of the Securities by the Initial Purchasers,
the Company agrees to pay the reasonable costs and expenses relating to the following matters: (i)
the preparation of the Indenture, the issuance of the Securities, the fees of the Trustee and the
issuance of the Common Stock upon conversion of the Securities; (ii) the preparation, printing or
reproduction of the materials contained in the Disclosure Package and the Final Memorandum and each
amendment or supplement to either of them; (iii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging) of such copies of
the materials contained in the Disclosure Package and the Final Memorandum, and all amendments or
supplements to either of them, as may, in each case, be reasonably requested for use in connection
with the offering and sale of the Securities; (iv) the preparation, printing, authentication,
issuance and delivery of the Securities; (v) any stamp or transfer taxes in connection with the
original issuance and sale of the Securities; (vi) the printing (or reproduction) and delivery of
this Agreement, any blue sky memorandum and all other agreements or documents printed (or
reproduced) and delivered in connection with the offering of the Securities; (vii) any registration
or qualification of the Securities for offer and sale under the securities or blue sky laws of the
several states and any other jurisdictions specified pursuant to Section 5(e) (including filing
fees and the reasonable fees and expenses of counsel for the Initial Purchasers relating to such
registration and qualification); (viii) admitting the Securities for trading in the PORTAL Market;
(ix) the transportation and other expenses incurred by or on behalf of Company representatives in
connection with presentations to prospective purchasers of the Securities; (x) the fees and
expenses of the Company’s accountants and the fees and expenses of counsel (including local and
special counsel) for the Company; and (xi) all other costs and expenses incident to the performance
by the Company of its obligations hereunder. Except as provided in this Section 5, Section 7 and
Section 8 hereof, the Initial Purchasers shall pay their own expenses, including the fees and
disbursements of counsel.

          6. Conditions to the Obligations of the Initial Purchasers. The obligations of the
Initial Purchasers to purchase the Firm Securities and the Option Securities, as the case may be,
shall be subject to the accuracy of the representations and warranties of the Company contained
herein at the Execution Time, the Closing Date and any settlement date pursuant to Section 3
hereof, to the accuracy of the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations hereunder and to the
following additional conditions:

          (a) The Company shall have requested and caused DLA Piper, counsel for the Company, to furnish
to the Representatives its opinion, dated the Closing Date and addressed to the Representatives, to
the effect that:

     (i) such counsel has had no facts come to its attention that lead it to believe
that the Disclosure Package, as amended or supplemented at the Execution Time
contained any untrue statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in each

14

 

case, other than the financial statements, the related schedules and other
financial information contained therein, as to which such counsel need express no
opinion);

     (ii) such counsel has had no facts come to its attention that lead it to
believe that the Final Memorandum, as of its date or on the Closing Date, contained
or contains any untrue statement of a material fact or omitted or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in each case, other than
the financial statements, the related schedules and other financial information
contained therein, as to which such counsel need express no opinion);

     (iii) assuming the accuracy of the representations and warranties and
compliance with the agreements contained herein (without regard to the
representation found in Section 1(h)), no registration under the Act of the
Securities or the Common Stock issuable upon conversion thereof, and no
qualification of an indenture under the Trust Indenture Act, are required for the
sale and delivery of the Securities by the Company to the Initial Purchasers or the
offer and sale by the Initial Purchasers of the Securities in the manner
contemplated herein, in the Disclosure Package and in the Final Memorandum;

     (iv) the Company is not and, after giving effect to the offering and sale of
the Securities and the application of the proceeds thereof as described in the
Disclosure Package and the Final Memorandum, will not be an “investment company” as
defined in the Investment Company Act;

     (v) there is no pending or, to the knowledge of such counsel, threatened
action, suit or proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company or any of its subsidiaries or its or
their property that is not disclosed in the Disclosure Package and the Final
Memorandum, except in each case for such proceedings that, if the subject of an
unfavorable decision, ruling or finding would not individually or in the aggregate,
have a Material Adverse Effect; and the statements in the Preliminary Memorandum and
the Final Memorandum under the headings “MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES”, “DESCRIPTION OF THE NOTES”, “DESCRIPTION OF THE CONVERTIBLE NOTE
HEDGE WARRANT TRANSACTIONS” and “DESCRIPTION OF CAPITAL STOCK” in so far as such
statements constitute matters of law, summaries of legal matters, the charter or
bylaws of the Company or documents or legal proceedings or legal conclusions, have
been reviewed by us and fairly present and summarize, in all material respects, the
matters referred to therein;

     (vi) each of the Company and the subsidiaries listed on Annex A attached hereto
(individually, a “Subsidiary” and collectively, the “Subsidiaries”) has been duly
incorporated and, based solely on a good standing certificate from the applicable
government authority of the jurisdiction in which it was incorporated or formed, is
validly existing as a corporation or limited liability

15

 

company in good standing under the laws of the jurisdiction in which it is
incorporated or formed, with full corporate or other power and authority to own or
lease, as the case may be, and to operate its properties and conduct its business as
and if described in the Disclosure Package and the Final Memorandum;

     (vii) the Company’s authorized capital stock is as set forth in the Disclosure
Package and the Final Memorandum and the capital stock of the Company conforms in
all material respects to the description thereof contained in the Disclosure Package
and the Final Memorandum; the Securities conform in all material respects to the
description thereof contained in the Disclosure Package and the Final Memorandum;
the outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable; the shares of Common Stock initially issuable
upon conversion of the Securities have been duly authorized and, when issued upon
conversion of the Securities in accordance with the terms of the Securities, will be
validly issued, fully paid and nonassessable; the Board of Directors of the Company
has duly and validly adopted resolutions reserving such shares of Common Stock for
issuance upon conversion of the Securities; the holders of outstanding shares of
capital stock of the Company are not entitled to any preemptive or other rights to
subscribe for the Securities or the shares of Common Stock issuable upon conversion
thereof pursuant to the charter or bylaws of the Company;

     (viii) the execution and delivery of the Indenture, this Agreement and the
Master Confirmation and the issuance and sale of the Securities by the Company and
the performance by the Company of its obligations under the Indenture, this
Agreement, the Master Confirmation and the Securities, will not conflict with,
result in a breach or violation of, or imposition of any lien, charge or encumbrance
upon any property or asset of the Company or of any of its subsidiaries pursuant to,
(i) the charter or by-laws of the Company or any of its Subsidiaries; (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to which
the Company or any of its subsidiaries is a party or bound or to which its or their
property is subject that is listed on the exhibit index to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2007; or (iii) any statute, law,
rule, regulation, or, to the knowledge of such counsel, judgment, order or decree
applicable to the Company or any of its Subsidiaries of any federal or Maryland
court, regulatory body, administrative agency, governmental body, arbitrator or
other governmental authority having jurisdiction over the Company, any of its
subsidiaries or any of their respective properties;

     (ix) this Agreement has been duly authorized, executed and delivered by the
Company; each of the Indenture and the Master Confirmations has been duly
authorized, executed and delivered by the Company, and, assuming the due
authorization, execution and delivery thereof by the other parties thereto, and each
constitutes a legal, valid and binding instrument enforceable against the Company in
accordance with its terms (subject to applicable bankruptcy, reorganization,

16

 

insolvency, moratorium or other laws affecting creditors’ rights generally from
time to time in effect and to general principles of equity); the Securities have
been duly authorized and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial Purchasers
under this Agreement, will constitute legal, valid, binding and enforceable
obligations of the Company entitled to the benefits of the Indenture (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors’ rights generally from time to time in effect and to general
principles of equity) and will be convertible into Common Stock in accordance with
their terms;

     (x) no consent, approval, authorization, filing with or order of any federal or
Maryland court or governmental agency or authority is required in connection with
the transactions contemplated herein, in the Indenture or in the Master
Confirmations, except such as may be required under the Act, the blue sky or
securities laws of any jurisdiction in which the Securities are offered or sold (as
to which such counsel need express no opinion beyond that set forth in paragraph
(iii) above), FINRA and such other approvals (specified in such opinion) as have
been obtained;

     (xi) the Company has the corporate power to execute the Master Confirmations
and any other documentation relating to the Master Confirmations to which it is a
party, to deliver the Master Confirmations and any other documentation relating to
the Master Confirmations that it is required by the Master Confirmations to deliver
and to perform its obligations under the Master Confirmations and has taken all
necessary corporate action to authorize such execution, delivery and performance;

     (xii) the shares of Common Stock initially issuable upon exercise of the
Warrants (the “Warrant Shares”) have been duly authorized and, when issued upon
exercise of the Warrants in accordance with the terms of the Warrants and upon the
settlement of such Warrants in accordance with their terms, will be validly issued,
fully paid and nonassessable; the holders of outstanding shares of capital stock of
the Company are not entitled to any preemptive or other rights to subscribe for the
Warrant Shares issuable upon exercise of the Warrants pursuant to the charter or
bylaws of the Company or the Maryland General Corporation Law; and

     (xiii) the Board of Directors of the Company has duly and validly adopted
resolutions reserving such Warrant Shares for issuance upon exercise of the
Warrants.

          In rendering such opinion, such counsel may rely (A) as to matters involving the application
of laws of any jurisdiction other than the jurisdiction of incorporation of the Company, the State
of New York or the federal laws of the United States, to the extent they deem proper and specified
in such opinion, upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Initial Purchasers

17

 

and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. Such counsel shall not render any opinion as to any
regulatory matters nor the opinions contemplated in paragraph (vi) and clauses (i) and (iii) of
paragraph (viii) as to PHH Vehicle Management Services, Inc., which opinions shall be rendered by
Blake, Cassels & Graydon LLP and shall be limited to the laws of the Province of Ontario and the
laws of Canada applicable therein. Accordingly, the Company shall have requested and caused Blake,
Cassels & Graydon LLP, counsel for the Company and for PHH Vehicle Management Services, Inc., to
furnish to the Representatives its opinion, dated the Closing Date and addressed to the
Representatives to the effect of the opinions contemplated in paragraph (vi) or clauses (i) and
(iii) of paragraph (viii) as to PHH Vehicle Management Services, Inc., which may rely, as to
matters of fact, to the extent they deem proper, on certificates of responsible officers of the
Company, PHH Vehicle Management Services, Inc. and public officials.

          (b) The Representatives shall have received from Davis Polk & Wardwell, counsel for the
Initial Purchasers, such opinion or opinions, dated the Closing Date and addressed to the
Representatives, with respect to the issuance and sale of the Securities, the Indenture, the
Disclosure Package, the Final Memorandum (as amended or supplemented at the Closing Date) and other
related matters as the Representatives may reasonably require, and the Company shall have furnished
to such counsel such documents as they request for the purpose of enabling them to pass upon such
matters.

          (c) The Company shall have furnished to the Representatives a certificate of the Company,
signed by (x) the Chairman of the Board or the Chief Executive Officer and (y) the principal
financial or accounting officer of the Company, dated the Closing Date, to the effect that:

     (i) the representations and warranties of the Company in this Agreement are
true and correct on and as of the Closing Date in all material respects with the
same effect as if made on the Closing Date, and the Company has complied with all
the agreements and satisfied all the conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date; and

     (ii) since the date of the most recent financial statements included or
incorporated by reference in the Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto), there has been no material
adverse change in the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto).

          (d) At the Execution Time and at the Closing Date, the Company shall have requested and caused
Deloitte & Touche LLP to furnish to the Representatives letters, dated respectively as of the
Execution Time and as of the Closing Date, in substantially the form previously delivered to the
Representatives, which is in form and substance satisfactory to the Representatives.

18

 

          All references in this Section 6(d) to the Preliminary Memorandum and the Final Memorandum
include any amendment or supplement thereto at the date of the applicable letter.

          (e) Subsequent to the Execution Time or, if earlier, the dates as of which information is
given in the Disclosure Package (exclusive of any amendment or supplement thereto) and the Final
Memorandum (exclusive of any amendment or supplement thereto), there shall not have been (i) any
change or decrease specified in the letter or letters referred to in paragraph (d) of this Section
6; or (ii) any change, or any development involving a prospective change, in or affecting the
condition (financial or otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the Disclosure Package and the Final
Memorandum (exclusive of any amendment or supplement thereto), the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated in the Disclosure Package and the Final Memorandum
(exclusive of any amendment or supplement thereto).

          (f) The Securities shall have been designated as PORTAL-eligible securities in accordance with
the rules and regulations of the FINRA and the Securities shall be eligible for clearance and
settlement through The Depository Trust Company.

          (g) Subsequent to the Execution Time, there shall not have been any decrease in the rating of
any of the Company’s debt securities by any “nationally recognized statistical rating organization”
(as defined for purposes of Rule 436(g) under the Act) or any notice given of any intended or
potential decrease in any such rating or of a possible change in any such rating that does not
indicate the direction of the possible change.

          (h) Prior to the Execution Time, the Company shall have furnished to the Representatives a
letter substantially in the form of Exhibit A hereto from each officer and director of the Company
and addressed to the Representatives.

          (i) Each Representative shall have received the relevant counterpart of each of the Bond Hedge
Confirm and the Warrant Confirm that has been executed by a duly authorized officer of the Company;
and

          (j) Prior to the Closing Date, the Company shall have furnished to the Representatives such
further information, certificates and documents as the Representatives may reasonably request.

          If any of the conditions specified in this Section 6 shall not have been fulfilled when and as
provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere
in this Agreement shall not be reasonably satisfactory in form and substance to the Representatives
and counsel for the Initial Purchasers, this Agreement and all obligations of the Initial
Purchasers hereunder may be cancelled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company in writing or by
telephone or facsimile confirmed in writing.

19

 

          The documents required to be delivered by this Section 6 will be delivered at the office of
counsel for the Initial Purchasers, at Davis Polk & Wardwell, 450 Lexington Avenue New York, NY
10017, on the Closing Date.

          7. Reimbursement of Expenses. If the sale of the Securities provided for herein is
not consummated because any condition to the obligations of the Initial Purchasers set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or
because of any refusal, inability or failure on the part of the Company to perform any agreement
herein or comply with any provision hereof other than by reason of a default by any of the Initial
Purchasers, the Company will reimburse the Initial Purchasers severally through Citigroup on demand
for all expenses (including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the Securities.

          8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold
harmless each Initial Purchaser, the directors, officers, employees, Affiliates and agents of each
Initial Purchaser and each person who controls any Initial Purchaser within the meaning of either
the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the Exchange Act or other
U.S. federal or state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum, the Disclosure Package, the Final Memorandum or any other written
information used by or on behalf of the Company in connection with the offer or sale of the
Securities, or in any amendment or supplement thereto or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party, as incurred, for any
legal or other expenses reasonably incurred by it in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made in the Preliminary Memorandum, the Disclosure Package, the Final Memorandum,
or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Initial Purchaser through the
Representatives specifically for inclusion therein. This indemnity agreement will be in addition
to any liability that the Company may otherwise have.

          (b) Each Initial Purchaser severally, and not jointly, agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing
indemnity to each Initial Purchaser, but only with reference to written information relating to
such Initial Purchaser furnished to the Company by or on behalf of such Initial Purchaser through
the Representatives specifically for inclusion in the Preliminary Memorandum, the Disclosure
Package, the Final Memorandum or in any amendment or supplement thereto. This indemnity agreement
will be in addition to any liability that any Initial Purchaser may otherwise have. The Company
acknowledges that (i) the statements set forth in the 13th paragraph of the cover page
regarding delivery of the Securities and (ii), under the

20

 

heading “Plan of Distribution”, (A) the 1st sentence of the 10th
paragraph regarding the delivery of the Securities, and (B) the 11th paragraph related
to stabilization, syndicate covering transactions and penalty bids in the Preliminary Memorandum
and the Final Memorandum constitute the only information furnished in writing by or on behalf of
the Initial Purchasers for inclusion in the Preliminary Memorandum, the Disclosure Package, the
Final Memorandum or in any amendment or supplement thereto.

          (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, such indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8, notify the indemnifying party in writing
of the commencement thereof; but the failure so to notify the indemnifying party (i) will not
relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel (including
local counsel) of the indemnifying party’s choice at the indemnifying party’s expense to represent
the indemnified party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses of any separate
counsel, other than local counsel if not appointed by the indemnifying party, retained by the
indemnified party or parties except as set forth below); provided, however, that
such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying
party’s election to appoint counsel (including local counsel) to represent the indemnified party in
an action, the indemnified party shall have the right to employ separate counsel (including local
counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the
indemnified party would present such counsel with a conflict of interest; (ii) the actual or
potential defendants in, or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties that are different from or
additional to those available to the indemnifying party; (iii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action; or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding.

          (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company
and the Initial Purchasers severally agree to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in connection with
investigating or defending any loss, claim, damage, liability or action) (collectively “Losses”) to
which the Company and one or more of the Initial Purchasers may be subject in such proportion

21

 

as is appropriate to reflect the relative benefits received by the Company on the one hand and
by the Initial Purchasers on the other from the offering of the Securities; provided,
however, that in no case shall any Initial Purchaser be responsible for any amount in
excess of the purchase discount or commission applicable to the Securities purchased by such
Initial Purchaser hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Initial Purchasers severally shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Initial Purchasers on the other in connection with the
statements or omissions that resulted in such Losses, as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses) received by it, and benefits received by the
Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions.
Relative fault shall be determined by reference to, among other things, whether any untrue or
alleged untrue statement of a material fact or the omission or alleged omission to state a material
fact relates to information provided by the Company on the one hand or the Initial Purchasers on
the other, the intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contribution were determined by pro
rata allocation or any other method of allocation that does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 8, each person who controls an Initial Purchaser within the meaning of
either the Act or the Exchange Act and each director, officer, employee, Affiliate and agent of an
Initial Purchaser shall have the same rights to contribution as such Initial Purchaser, and each
person who controls the Company within the meaning of either the Act or the Exchange Act and each
officer and director of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph (d).

          9. Default by an Initial Purchaser. If any one or more Initial Purchasers shall fail
to purchase and pay for any of the Securities agreed to be purchased by such Initial Purchaser
hereunder at the Closing Date or any settlement date and such failure to purchase shall constitute
a default in the performance of its or their obligations under this Agreement, the remaining
Initial Purchasers shall be obligated severally to take up and pay for (in the respective
proportions which the principal amount of Securities set forth opposite their names in Schedule I
hereto bears to the aggregate principal amount of Securities set forth opposite the names of all
the remaining Initial Purchasers) the Securities which the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase; provided, however, that in the event that
the aggregate principal amount of Securities which the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase shall exceed 10% of the aggregate principal amount of
Securities set forth in Schedule I hereto, the remaining Initial Purchasers shall have the right to
purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such
nondefaulting Initial Purchasers do not purchase all the Securities, this Agreement will terminate
without liability to any nondefaulting Initial Purchaser or the Company. In the event of a default
by any Initial Purchaser as set forth in this Section 9, the Closing Date or any such settlement
date shall be postponed for such period, not exceeding five Business Days, as the Representatives
shall

22

 

determine in order that the required changes in the Final Memorandum or in any other documents
or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Company or any nondefaulting Initial Purchaser
for damages occasioned by its default hereunder.

          10. Termination. This Agreement shall be subject to termination in the reasonable
discretion of the Representatives, by notice given to the Company prior to delivery of, and payment
for, the Securities, if at any time prior to such delivery and payment (i) trading in the Company’s
Common Stock shall have been suspended by the Commission or trading in securities generally on the
New York Stock Exchange shall have been suspended or limited or minimum prices shall have been
established on such exchange; (ii) a banking moratorium shall have been declared either by U.S.
federal or New York State authorities or by the authorities of Maryland; or (iii) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with
the offering or delivery of the Securities as contemplated in the Disclosure Package and the Final
Memorandum (exclusive of any amendment or supplement thereto).

          11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company or its officers and of
the Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force
and effect, regardless of any investigation made by or on behalf of the Initial Purchasers or the
Company or any of the indemnified persons referred to in Section 8 hereof, and will survive
delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.

          12. Notices. All communications hereunder will be in writing and effective only on
receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the
Citigroup General Counsel (fax no.: (212) 816-7912) and confirmed to Citigroup at 388 Greenwich
Street, New York, New York 10013, Attention: General Counsel; or, if sent to the Company, will be
mailed, delivered or telefaxed to (856) 917-0950 and confirmed to it at PHH Corporation, 3000
Leadenhall Road, Mt. Laurel New Jersey 08054. Attention: General Counsel, with a copy (which copy
shall not constitute notice) to Wm. David Chalk, Esq., DLA Piper US LLP 6225 Smith Avenue,
Baltimore, Maryland 21209-3600, (410) 580-3120.

          13. Successors. This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and the indemnified persons referred to in Section 8
hereof and their respective successors, and, except as expressly set forth in Section 5(j) hereof,
no other person will have any right or obligation hereunder.

          14. Jurisdiction. The Company agrees that any suit, action or proceeding against the
Company brought by any Initial Purchaser, the directors, officers, employees and agents of any
Initial Purchaser, or by any person who controls any Initial Purchaser, arising out of or based
upon this Agreement or the transactions contemplated hereby may be instituted in any State or U.S.
federal court in The City of New York and County of New York, and waives any objection which it may
now or hereafter have to the laying of venue of any such proceeding, and

23

 

irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or
proceeding. The Company hereby appoints William F. Brown, PHH Corporation, 3000 Leadenhall Road,
Mt. Laurel, New Jersey 08054 as its authorized agent (the “Authorized Agent”) upon whom process may
be served in any suit, action or proceeding arising out of or based upon this Agreement or the
transactions contemplated herein that may be instituted in any State or U.S. federal court in The
City of New York and County of New York, by any Initial Purchaser, the directors, officers,
employees, Affiliates and agents of any Initial Purchaser, or by any person who controls any
Initial Purchaser, and expressly accepts the non-exclusive jurisdiction of any such court in
respect of any such suit, action or proceeding. The Company hereby represents and warrants that
the Authorized Agent has accepted such appointment and has agreed to act as said agent for service
of process, and the Company agrees to take any and all action, including the filing of any and all
documents that may be necessary to continue such appointment in full force and effect as aforesaid.
Service of process upon the Authorized Agent shall be deemed, in every respect, effective service
of process upon the Company. Notwithstanding the foregoing, any action arising out of or based
upon this Agreement may be instituted by any Initial Purchaser, the directors, officers, employees,
Affiliates and agents of any Initial Purchaser, or by any person who controls any Initial
Purchaser, in any court of competent jurisdiction in Maryland.

          15. Internet Document Service. The Company hereby agrees that Citigroup may provide
copies of the Preliminary Memorandum and Final Memorandum and any other agreement or document
relating to the offer and sale of the Securities, including, without limitation, the Indenture, to
Xtract Research LLC (“Xtract”) following the Closing Date for inclusion in an online research
service sponsored by Xtract, access to which is restricted to “qualified institutional buyers” (as
defined in Rule 144A under the Act).

          16. Integration. This Agreement supersedes all prior agreements and understandings
(whether written or oral) between the Company and the Initial Purchasers, or any of them, with
respect to the subject matter hereof.

          17. Applicable Law. This Agreement will be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be performed within the
State of New York.

          18. Waiver of Jury Trial. The Company hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby.

          19. No Fiduciary Duty. The Company hereby acknowledges that (a) the purchase and sale
of the Securities pursuant to this Agreement is an arm’s-length commercial transaction between the
Company, on the one hand, and the Initial Purchasers and any Affiliate through which it may be
acting, on the other, (b) the Initial Purchasers are acting as principal and not as an agent or
fiduciary of the Company and (c) the Company’s engagement of the Initial Purchasers in connection
with the offering and the process leading up to the offering is as independent contractors and not
in any other capacity. Furthermore, the Company agrees that it is solely responsible for making
its own judgments in connection with the offering (irrespective of whether any of the Initial
Purchasers has advised or is currently advising the Company on

24

 

related or other matters). The Company agrees that it will not claim that the Initial
Purchasers have rendered advisory services of any nature or respect, or owe an agency, fiduciary or
similar duty to the Company in connection with such transaction or the process leading thereto.

          20. Waiver of Immunity. To the extent that the Company has or hereafter may acquire
any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction
of any court or from set-off or any legal process (whether service or notice, attachment in aid or
otherwise) with respect to itself or any of its property, the Company hereby irrevocably waives and
agrees not to plead or claim such immunity in respect of its obligations under this Agreement.

          21. Waiver of Tax Confidentiality. Notwithstanding anything herein to the contrary,
purchasers of the Securities (and each employee, representative or other agent of a purchaser) may
disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S.
tax structure of any transaction contemplated herein and all materials of any kind (including
opinions or other tax analyses) that are provided to the purchasers of the Securities relating to
such U.S. tax treatment and U.S tax structure, other than any information for which nondisclosure
is reasonably necessary in order to comply with applicable securities laws.

          22. Counterparts. This Agreement may be signed in one or more counterparts, each of
which shall constitute an original and all of which together shall constitute one and the same
agreement.

          23. Headings. The section headings used herein are for convenience only and shall not
affect the construction hereof.

          24. Definitions. The terms that follow, when used in this Agreement, shall have the
meanings indicated.

          “Act” shall mean the U.S. Securities Act of 1933, as amended, and the rules and regulations of
the Commission promulgated thereunder.

          “Affiliate” shall have the meaning specified in Rule 501(b) of Regulation D.

          “Bond Hedge Confirm” shall mean the master terms and conditions for convertible bond hedging
transactions and related confirmations between the Company and each of the Representatives, dated
March 27, 2008.

          “Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day
on which banking institutions or trust companies are authorized or obligated by law to close in The
City of New York.

          “Citigroup” shall mean Citigroup Global Markets Inc.

          “Commission” shall mean the Securities and Exchange Commission.

25

 

          “Disclosure Package” shall mean (i) the Preliminary Memorandum, as amended or supplemented at
the Execution Time, and (ii) the final term sheet prepared pursuant to Section 5(t) hereto and in
the form attached as Schedule II hereto.

          “Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission promulgated thereunder.

          “Execution Time” shall mean the date and time that this Agreement is executed and delivered by
the parties hereto.

          “FINRA” shall mean the Financial Industry Regulatory Authority, Inc.

          “Investment Company Act” shall mean the U.S. Investment Company Act of 1940, as amended, and
the rules and regulations of the Commission promulgated thereunder.

          “Master Confirmations” shall mean the Bond Hedge Confirm and the Warrant Confirm.

          “Maximum Delivery Amount” shall have the meaning specified in the Warrant Confirm.

          “PORTAL” shall mean the Private Offerings, Resales and Trading through Automated Linkages
system of FINRA.

          “Regulation D” shall mean Regulation D under the Act.

          “Regulation S” shall mean Regulation S under the Act.

          “Regulation S-X” shall mean Regulation S-X under the Act.

          “Trust Indenture Act” shall mean the U.S. Trust Indenture Act of 1939, as amended, and the
rules and regulations of the Commission promulgated thereunder.

          “Warrant Confirm” shall mean the master terms and conditions for warrants and related
confirmations between the Company and each of the Representatives, dated March 27, 2008.

26

 

          If the foregoing is in accordance with your understanding of our agreement, please sign and
return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall
represent a binding agreement between the Company and the several Initial Purchasers.

	 	 	 	 	 
	 	Very truly yours,

PHH Corporation

 	 
	 	By:  	/s/  Mark E. Johnson
 	 
	 	 	Name:  	Mark E. Johnson 	 
	 	 	Title:  	Vice President & Treasurer 	 
	 

	 	 	 	 	 
	The foregoing Agreement is hereby confirmed

and accepted as of the date first above written.

Citigroup Global Markets Inc.

J.P. Morgan Securities Inc.

Wachovia Capital Markets, LLC

By: Citigroup Global Markets Inc.

 	 	 
	By:  	/s/ Guy Seebohm
 	 	 
	 	Name:  	Guy Seebohm 	 	 
	 	Title:  	 	 	 
	 
	By: J.P. Morgan Securities Inc.

 	 	 
	By:  	/s/ Santosh Sreenivasan
 	 	 
	 	Name:  	Santosh Sreenivasan 	 	 
	 	Title:  	Executive Director 	 	 
	 
	By: Wachovia Capital Markets, LLC

 	 	 
	By:  	/s/ David Herman
 	 	 
	 	Name:  	David Herman 	 	 
	 	Title:  	Director 	 	 
	 
	For themselves and the other several

Initial Purchasers named in Schedule I

to the foregoing Agreement.

 	 	 
	 	 	 
	 	 	 
	 	 	 
	 

27

 

SCHEDULE I

	 	 	 	 	 
	 	 	Principal Amount	 
	 	 	of Firm	 
	 	 	Securities to be	 
	Initial Purchasers	 	Purchased	 
	Citigroup Global Markets Inc.
	 	U.S. $	73,480,000	 
	J.P. Morgan Securities Inc.
	 	 	73,260,000	 
	Wachovia Capital Markets, LLC.
	 	 	73,260,000	 
	Total
	 	U.S. $	220,000,000	 
	 
	 	 	 

28

 

SCHEDULE II

PHH Corporation

4.00% Convertible Senior Notes due 2012

Pricing Term Sheet

	 	 	 
	Issuer:

	 	PHH Corporation (“PHH”)
	 
	 	 
	Ticker / Exchange:

	 	PHH / The New York Stock exchange (“NYSE”)
	 
	 	 
	Title of securities:

	 	4.00% Convertible Senior Notes Due 2012 (the “Notes”)
	 
	 	 
	Aggregate principal 

amount offered:

	 	$220,000,000
	 
	 	 
	Offering price:

	 	Each Note will be issued at a price of 100% of its principal amount plus
accrued interest, if any, from April 2, 2008
	 
	 	 
	Over-allotment option:

	 	$30,000,000 of Notes
	 
	 	 
	Annual interest rate:

	 	The Notes will bear interest at an annual rate equal to 4.00% per annum
from April 2, 2008.
	 
	 	 
	Reference Price:

	 	$17.00
	 
	 	 
	Conversion premium:

	 	Approximately 20.59% of the Reference Price
	 
	 	 
	Initial conversion price:

	 	Approximately $20.50 for the Notes per share of PHH common stock
	 
	 	 
	Initial conversion rate:

	 	48.7805 shares of PHH common stock per $1,000 principal amount of Notes
	 
	 	 
	Interest payment dates:

	 	April 15 and October 15, commencing on October 15, 2008
	 
	 	 
	Maturity date:

	 	April 15, 2012
	 
	 	 
	Call dates:

	 	The Notes are not redeemable prior to maturity.
	 
	 	 
	Put dates:

	 	Holders have the option to require the repurchase of their Notes as
described under “Repurchase at the Option of the Holder upon a Fundamental
Change,” as described below.
	 
	 	 
	Dividend protection:

	 	The conversion rate will be adjusted for any distribution of cash to all or
substantially all holders of PHH common stock by a formula based on the
amount per share of such distribution, as set forth in the Preliminary
Offering Memorandum.
	 
	 	 
	Repurchase at the
Option of the Holder
upon a Fundamental
Change:

	 	Upon a “fundamental change” as defined in the Preliminary Offering
Memorandum the holders may require the Issuer to repurchase for cash all or
a portion of their Notes at a repurchase price equal to 100% of the
principal amount of the Notes to be repurchased, plus accrued and unpaid
interest, if any.
	 
	 	 
	Ranking:

	 	The Notes will be general senior unsecured obligations of the Issuer.
	 
	 	 
	Listing:

	 	None
	 
	 	 
	Trade date:

	 	March 27, 2008
	 
	 	 
	Settlement date:

	 	April 2, 2008
	 
	 	 
	CUSIP:

	 	693320 AG8

 

 

	 	 	 
	ISIN NUMBER:

	 	US693320AG80
	 
	 	 
	Convertible Note Hedge
and Warrant
Transactions

	 	In connection with the offering of the Notes, the Issuer intends to enter
into one or more convertible note hedge transactions with one or more
counterparties, which may include one or more of the Initial Purchasers or
their respective affiliates. The convertible note hedge transactions will
cover, subject to anti-dilution adjustments substantially similar to those
in the Notes, approximately 10,731,710 shares of PHH common stock.
Concurrently with entering into the convertible note hedge transactions,
the Issuer also intends to enter into one or more warrant transactions
whereby it will sell to the counterparties warrants to purchase, subject to
anti-dilution adjustments, up to approximately 10,731,710 shares of PHH
common stock. The Issuer intends to use approximately $24.407 million of
the net proceeds of this offering to pay the net cost of the convertible
note hedge and warrant transactions. If the Initial Purchasers exercise
their over-allotment option to purchase additional Notes, the Issuer agrees
to sell additional warrants and use a portion of the proceeds from the sale
of the additional Notes and from the sale of additional warrants to enter
into additional convertible note hedge transactions. See the Preliminary
Offering Memorandum for further details.
	 
	 	 
	Use of proceeds:

	 	The Issuer estimates that the net proceeds to it from this offering will be
approximately $212 million (or approximately $241 million if the Initial
Purchasers exercise their over-allotment option in full), after deducting
the Initial Purchasers’ discounts or commissions and estimated fees and
expenses of the offering payable by the Issuer.
	 
	 	 
	 

	 	The Issuer intends to use a portion of the net proceeds of this offering,
and of the warrants that it agrees to sell to one or more counterparties
that may include the Initial Purchasers or their affiliates, to pay the
cost of the convertible note hedge transactions that the Issuer agrees to
enter into with the same counterparties. The Issuer estimates that the net
cost of the convertible note hedge and warrant transactions will be
approximately $24.407 million. If the Initial Purchasers exercise their
over-allotment option to purchase additional Notes solely to cover over
allotments, the Issuer intends to sell additional warrants and to use a
portion of the net proceeds from the sale of the additional Notes and from
the sale of additional warrants to increase the size of the convertible
note hedge transactions.
	 
	 	 
	 

	 	The Issuer will use the remainder of the proceeds of the offering to reduce
the principal balance under its Amended Credit Facility.

	 	 	 	 	 	 	 
	Initial Purchasers:

	 	Citigroup Global Markets Inc.
	 	Principal Amount of Notes

$73,480,000

	 

	 	J.P. Morgan Securities Inc.
	 	$	73,260,000	 
	 

	 	Wachovia Capital Markets, LLC
	 	$	73,260,000	 

2

 

	 	 	 
	Adjustment to conversion rate upon a
Make-Whole
Fundamental Change:

	 	The following table sets forth the
number of additional shares to be
added to the conversion rate per
$1,000 principal amount of the Notes
in connection with a Make-Whole
Fundamental Change as described in
the Preliminary Offering Memorandum,
based on the stock price and
effective date of the Make-Whole
Fundamental Change.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Effective Date
	Stock Price	 	April 2, 2008	 	April 15, 2009	 	April 15, 2010	 	April 15, 2011	 	April 15, 2012
	$17.00
	 	 	10.0430	 	 	 	10.0430	 	 	 	10.0430	 	 	 	10.0430	 	 	 	10.0430	 
	$18.50
	 	 	8.6243	 	 	 	8.2734	 	 	 	7.7885	 	 	 	6.9685	 	 	 	5.2736	 
	$20.00
	 	 	7.5008	 	 	 	7.0306	 	 	 	6.3583	 	 	 	5.2038	 	 	 	1.2195	 
	$21.50
	 	 	6.5980	 	 	 	6.0518	 	 	 	5.2634	 	 	 	3.9198	 	 	 	0.0000	 
	$23.00
	 	 	5.8623	 	 	 	5.2704	 	 	 	4.4163	 	 	 	2.9848	 	 	 	0.0000	 
	$24.50
	 	 	5.2550	 	 	 	4.6390	 	 	 	3.7539	 	 	 	2.3030	 	 	 	0.0000	 
	$26.00
	 	 	4.7478	 	 	 	4.1227	 	 	 	3.2308	 	 	 	1.8044	 	 	 	0.0000	 
	$33.50
	 	 	3.1319	 	 	 	2.5652	 	 	 	1.7923	 	 	 	0.7037	 	 	 	0.0000	 
	$41.00
	 	 	2.2915	 	 	 	1.8239	 	 	 	1.2106	 	 	 	0.4206	 	 	 	0.0000	 
	$48.50
	 	 	1.7847	 	 	 	1.4039	 	 	 	0.9169	 	 	 	0.3159	 	 	 	0.0000	 
	$56.00
	 	 	1.4462	 	 	 	1.1338	 	 	 	0.7397	 	 	 	0.2589	 	 	 	0.0000	 
	$63.50
	 	 	1.2034	 	 	 	0.9441	 	 	 	0.6186	 	 	 	0.2197	 	 	 	0.0000	 

     The exact stock prices and effective dates may not be set forth in the table above, in which
case:

	 	•	 	if the stock price is between two stock price amounts in the table or the effective date
is between two effective dates in the table, the number of additional shares will be
determined by straight-line interpolation between the number of additional shares set forth
for the higher and lower stock prices and the earlier and later effective dates, as
applicable, based on a 365-day year;
	 
	 	•	 	if the stock price is in excess of $63.50 per share (subject to adjustment), no
additional shares will be added to the conversion rate;
	 
	 	•	 	if the stock price is less than $17.00 per share (subject to adjustment), no additional
shares will be added to the conversion rate.

Notwithstanding the foregoing, in no event will the conversion rate exceed 58.8235 per $1,000
principal amount of the Notes, subject to adjustments in the same manner as the conversion rate as
described in the Preliminary Offering Memorandum.

This communication is intended for the sole use of the person to whom it is provided by the sender.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy
securities nor shall there be any sale of these securities in any state in which such solicitation
or sale would be unlawful prior to registration or qualification of these securities under the laws
of any such state.

The Notes and the PHH common stock issuable upon conversion of the Notes have not been registered
under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws.
Accordingly, the Notes are being offered and sold only to “qualified institutional buyers” as
defined in Rule 144A promulgated under the Securities Act. The Notes and the PHH common stock
issuable upon conversion of the Notes, if any, are not transferable except in accordance with the
restrictions described under “Notice to Investors” in the Preliminary Offering Memorandum.

3

 

The information in this pricing term sheet supplements the Issuer’s Preliminary Offering
Memorandum, dated March 27, 2008. This pricing term sheet is qualified in its entirety by
reference to the Preliminary Offering Memorandum. Terms used herein but not defined herein shall
have the respective meanings as set forth in the Preliminary Offering Memorandum.

ANY DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS COMMUNICATION AND
SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT
OF THIS COMMUNICATION BEING SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.

4

 

EXHIBIT A

March 27, 2008

Citigroup Global Markets Inc.

J.P. Morgan Securities Inc.

Wachovia Capital Markets, LLC

As Representatives of the Initial Purchasers

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Ladies and Gentlemen:

          This letter is being delivered to you in connection with a proposed Purchase Agreement (the
“Purchase Agreement”) between PHH Corporation , a Maryland corporation (the “Company”) and each of
you as representatives of a group of Initial Purchasers named therein, relating to an offering of
4.00% Convertible Senior Notes due 2012, which will be convertible into common stock, $0.01 par
value (the “Common Stock”), of the Company.

          In order to induce you and the other Initial Purchasers to enter into the Purchase Agreement,
the undersigned will not, without the prior written consent of Citigroup Global Markets Inc.,
directly or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of, enter into
any transaction which is designed to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to cash settlement or
otherwise) by the undersigned or any affiliate of the undersigned or any person in privity with the
undersigned or any affiliate of the undersigned of, file (or participate in the filing of) a
registration statement with the U.S. Securities and Exchange Commission in respect of, or establish
or increase a put equivalent position or liquidate or decrease a call equivalent position within
the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the U.S. Securities and Exchange Commission promulgated thereunder in respect of,
any shares of capital stock of the Company or any securities convertible into, or exercisable or
exchangeable for such capital stock, or publicly announce an intention to effect any such
transaction, for a period of 90 days after the date of the Purchase Agreement, other than (a)
shares of Common Stock disposed of as bona fide gifts approved by Citigroup Global Markets Inc.,
which approval shall not be unreasonably withheld, delayed or conditioned, (b) transfers of Common
Stock by will or intestacy, including, without limitation, transfers by will or intestacy to your
family members or to a settlement trust established under the laws of any country (provided that
the transferee shall enter into a lock-up agreement substantially in the form of this letter
covering the remainder of the 90-day period referred to herein), or (c) the exercise by you of
options or other rights to purchase Common Stock held by you (provided, however, that shares of
Common Stock acquired upon such exercise shall be subject to this letter).

5

 

          If for any reason the Purchase Agreement shall be terminated prior to the Closing Date (as
defined in the Purchase Agreement), the agreement set forth above shall likewise be terminated.

	 	 	 	 	 
	 	Very truly yours,

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

6

 

	 	 	 	 	 

ANNEX A

Significant Subsidiaries

Atrium Insurance Corporation

Chesapeake Finance Holdings LLC

Chesapeake Funding LLC

D. L. Peterson Trust

PHH Broker Partner Corporation

PHH Corporate Services, Inc.

PHH Mortgage Corporation

PHH Solutions and Technologies, LLC

PHH Vehicle Management Services, Inc.

PHH Vehicle Management Services, LLC (d/b/a PHH Arval)

Speedy Title and Appraisal Review Services, LLC

A-1

 

ANNEX B

Terence W. Edwards

Clair M. Raubenstine

George J. Kilroy

Mark R. Danahy

William F. Brown

James W. Brinkley

A.B. Krongard

Ann D. Logan

Jonathan D. Mariner

Francis J. Van Kirk

B-1EX-10.2

 

Exhibit 10.2

MASTER TERMS AND CONDITIONS FOR CONVERTIBLE BOND HEDGING TRANSACTIONS

BETWEEN JPMORGAN CHASE BANK, NATIONAL ASSOCIATION AND PHH CORPORATION

          The purpose of this Master Terms and Conditions for Convertible Bond Hedging Transactions
(this “Master Confirmation”), dated as of March 27, 2008, is to set forth certain terms and
conditions for convertible bond hedging transactions to be entered into between JPMorgan Chase
Bank, National Association (“JPMorgan”) and PHH Corporation (“Counterparty”). Each such
transaction (a “Transaction”) entered into between JPMorgan and Counterparty that is to be
subject to this Master Confirmation shall be evidenced by a written confirmation substantially in
the form of Exhibit A hereto, with such modifications thereto as to which Counterparty and JPMorgan
mutually agree (a “Confirmation”). This Master Confirmation and each Confirmation together
constitute a “Confirmation” as referred to in the Agreement specified below.

          This Master Confirmation and a Confirmation evidence a complete binding agreement between you
and us as to the terms of the Transaction to which this Master Confirmation and such Confirmation
relates. This Master Confirmation and each Confirmation hereunder shall supplement, form a part of,
and be subject to an agreement in the form of the 1992 ISDA Master Agreement (Multicurrency-Cross
Border) as if we had executed an agreement in such form on the Trade Date of the first such
Transaction (but without any Schedule except for the election of (i) the laws of the State of New
York as the governing law and (ii) United States dollars as the Termination Currency) between
JPMorgan and Counterparty, and such agreement shall be considered the “Agreement”
hereunder.

          The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Definitions”) as published by ISDA are incorporated into this Master Confirmation. For
the purposes of the Definitions, each reference herein or in any Confirmation hereunder to a Unit
shall be deemed to be a reference to a Call Option or an Option, as context requires.

          THIS MASTER CONFIRMATION WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE. THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND
WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO,
THESE COURTS.

          The Transactions under this Master Confirmation shall be the sole Transactions under the
Agreement. If there exists any ISDA Master Agreement between JPMorgan and Counterparty or any
confirmation or other between JPMorgan and Counterparty pursuant to which an ISDA Master Agreement
is deemed to exist between JPMorgan and Counterparty, then notwithstanding anything to the contrary
in such ISDA Master Agreement, such confirmation or agreement or any other agreement to which
JPMorgan and Counterparty are parties, the Transactions under this Master Confirmation and the
Agreement shall not be considered Transactions under, or otherwise governed by, such existing or
deemed ISDA Master Agreement.

          1. In the event of any inconsistency between this Master Confirmation, on the one hand, and
the Definitions or the Agreement, on the other hand, this Master Confirmation will control for the
purpose of the Transaction to which a Confirmation relates. In the event of any inconsistency
between the Definitions, the Agreement and this Master Confirmation, on the one hand, and a
Confirmation, on the other hand, the Confirmation will govern. With respect to a Transaction,
capitalized terms used herein that are not otherwise defined shall have the meaning assigned to
them in the Confirmation relating to such Transaction.

          2. Each party will make each payment specified in this Master Confirmation or a Confirmation
as being payable by such party, not later than the due date for value on that date in the place of
the account specified

 

 

below or otherwise specified in writing, in freely transferable funds and in a manner
customary for payments in the required currency.

          3. Confirmations and General Terms:

          This Master Confirmation and the Agreement, together with the Confirmation relating to a
Transaction, shall constitute the written agreement between Counterparty and JPMorgan with respect
to such Transaction.

          Each Transaction to which a Confirmation relates is a Convertible Bond Hedging Transaction,
which shall be considered a Share Option Transaction for purposes of the Definitions, and shall
have the following terms:

	 	 	 
	Trade Date:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Effective Date:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Option Type:

	 	Call
	 
	 	 
	Option Style:

	 	Modified American (as described below)
	 
	 	 
	Seller:

	 	JPMorgan
	 
	 	 
	Buyer:

	 	Counterparty
	 
	 	 
	Shares:

	 	The Common Stock of Counterparty, par value USD 0.0001 per share (Ticker Symbol: “PHH”).
	 
	 	 
	Convertible Notes:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Indenture:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Number of Units:

	 	As set forth in the Confirmation for such Transaction.
	 
	 	 
	Unit Entitlement:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Strike Price:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Applicable Percentage:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Number of Shares:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Premium:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Premium Payment Date:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Exchange:

	 	New York Stock Exchange
	 
	 	 
	Related Exchange:

	 	All Exchanges
	 
	 	 
	Calculation Agent:

	 	JPMorgan.

          4. Procedure for Exercise:

	 	 	 
	Potential Exercise Dates:

	 	Each Conversion Date.
	 
	 	 
	Conversion Date:

	 	Each “Conversion Date”, as defined in the Indenture, of Convertible Notes,
subject to the provisions of Section 11(e)(ii) hereof; provided that in no
event shall a Conversion Date be deemed to occur hereunder (and no exercise of any

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	 	Units shall occur) with respect to Convertible Notes
as to which Counterparty makes the election to
designate a financial institution as described in
Section 5.17 of the Indenture, and such financial
institution accepts such Convertible Notes
(regardless of whether such financial institution
delivers any required amounts due upon exchange, or
whether such Convertible Notes are resubmitted to
Counterparty for conversion following a failure by
such financial institution to deliver amounts due
upon exchange or otherwise), unless on or prior to
the fifth Exchange Business Day following such
acceptance, such financial institution informs
Counterparty that it will not honor such exchange and
Counterparty shall be obligated, pursuant to the
Indenture, to deliver the amounts due upon
conversion, in which case such Conversion Date shall
be a Conversion Date hereunder upon the
Counterparty’s delivery of a Notice of Exercise as
described below (but with the Notice Deadline being,
for this purpose, such fifth Exchange Business Day)
and the Calculation Agent shall have the right to
adjust the Delivery Obligation as appropriate to
reflect the additional costs (including, but not
limited to, hedging mismatches and market losses) and
expenses incurred by JPMorgan in connection with its
hedging activities (including the unwind of any hedge
position).
	 
	 	 
	Required Exercise on 

Conversion Dates:

	 	On each Conversion Date, a number of Units equal to the number of
Convertible Notes in denominations of USD1,000 principal amount satisfying all of the
requirements for conversion on such Conversion Date in accordance with the terms of the
Indenture shall be automatically exercised, subject to “Notice of Exercise” below.
	 
	 	 
	Expiration Date:

	 	As set forth in the Confirmation for such Transaction
	 
	 	 
	Multiple Exercise:

	 	Applicable, as provided above under “Required Exercise on Conversion
Dates”.
	 
	 	 
	Minimum Number of Units:

	 	Zero
	 
	 	 
	Maximum Number of Units:

	 	Number of Units
	 
	 	 
	Integral Multiple:

	 	Not Applicable
	 
	 	 
	Automatic Exercise:

	 	As provided above under “Required Exercise on Conversion Dates”.
	 
	 	 
	Notice of Exercise:

	 	Notwithstanding anything to the contrary in the Definitions, in order to
exercise any Units, Counterparty must notify Seller in writing prior to 5:00 PM, New
York City time, on the Scheduled Trading Day prior to the first day of the “Observation
Period”, as defined in the Indenture, relating to the Convertible Notes converted on
the Conversion Date relating to the relevant Exercise Date (the “Notice
Deadline”) of (i) the number of Units being exercised on such Exercise Date, (ii)
the scheduled settlement date under the Indenture for the Convertible Notes converted
on the Conversion Date

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	 	corresponding to such Exercise Date and (iii) the
“Cash Percentage” (as such term is defined in the
Indenture) for the Convertible Notes converted on the
Conversion Date relating to the relevant Exercise
Date; provided that if the Conversion Date
for such Units occurs on or after the 65th
Scheduled Trading Day (as defined in the Indenture)
immediately preceding the Expiration Date, the Notice
Deadline solely with respect to the information
described in clause (i) and clause (ii) above shall
be 5:00 PM, New York City time, on the Scheduled
Trading Day (as defined in the Indenture) immediately
preceding the Expiration Date (it being understood
and agreed that Counterparty shall, subject to the
immediately succeeding paragraph, be required to
notify JPMorgan in writing prior to 5:00 PM, New York
City time, on the Scheduled Trading Day prior to the
first day of the relevant “Observation Period” of the
information described in clause (iii) above);
provided, further, that,
notwithstanding the foregoing (except in the case of
an Observation Period that commences on or after the
65th Scheduled Trading Day immediately
preceding the Expiration Date), such notice shall be
effective so long the notice is given after the
Notice Deadline but prior to 5:00 PM (New York City
time) on the fifth Exchange Business Day of such
“Observation Period”, in which event the Calculation
Agent shall have the right to adjust the Delivery
Obligation as appropriate to reflect the additional
costs (including, but not limited to, hedging
mismatches and market losses) and expenses incurred
by JPMorgan in connection with its hedging activities
(including the unwinding of any hedge position) as a
result of its not having received such notice prior
to the Notice Deadline.
	 
	 	 
	 

	 	Notwithstanding anything to the contrary in the
Indenture or the Notice of Exercise, for purposes of
the Transactions hereunder, Counterparty shall be
deemed to have designated a “Cash Percentage” (as
such term is defined in the Indenture) for the
Convertible Notes pursuant to clause (iii) above
equal to 100%, unless on the date of its election of
something other than “Cash Percentage” under the
Indenture equal to 100%, Counterparty shall represent
to JPMorgan that, as of such date, (i) it is not in
possession of any material non-public information
with respect to itself or the Shares and (ii) it has
obtained the requisite shareholder vote for the
issuance of any Shares in settlement of such
Convertible Notes pursuant to the Indenture.

          5. Settlement Terms:

	 	 	 
	Settlement Date:

	 	In respect of an Exercise Date occurring on a Conversion Date, the
settlement date for the Shares to be delivered under the Convertible Notes converted on
such Conversion Date under the terms of the Indenture; provided that the
Settlement Date will not be prior to the date one Settlement Cycle

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	 	following the final day of the “Observation Period”,
as defined in the Indenture.
	 
	 	 
	Delivery Obligation:

	 	In lieu of the obligations set forth in Sections 8.1 and 9.1 of the
Definitions, and subject to “Notice of Exercise” above, in respect of an Exercise Date
occurring on a Conversion Date, Seller will deliver to Counterparty, on the related
Settlement Date, the product of the Applicable Percentage and a number of Shares and/or
amount of cash in USD equal to the aggregate number of Shares and/or amount of cash in
USD that Counterparty is obligated to deliver to the holder(s) of the Convertible Notes
converted on such Conversion Date pursuant to the Net Share Provision of the Indenture
(the “Convertible Obligation”); provided that such obligation shall be
determined excluding any Shares (or cash) that Counterparty is obligated to deliver to
holder(s) of the Convertible Notes as a result of any adjustments to the Conversion
Rate pursuant to the Excluded Provisions of the Indenture and the Seller shall have no
delivery obligation hereunder with respect to the “Daily Principal Return” (as defined
in the Indenture). For the avoidance of doubt, if the aggregate “Daily Conversion
Value” (as defined in the Indenture) in respect of each USD1,000 principal amount of
Convertible Notes is less than or equal to USD1,000, Seller will have no delivery
obligation hereunder.
	 
	 	 
	Net Share Provision:

	 	As set forth in the Confirmation for such Transaction.
	 
	 	 
	Excluded Provisions:

	 	As set forth in the Confirmation for such Transaction.
	 
	 	 
	Notice of Delivery Obligation:

	 	No later than the Scheduled Trading Day immediately following
the last day of the “Observation Period”, as defined in the Indenture, Counterparty
shall give Seller notice of the final number of Shares and/or amount of cash comprising
the Convertible Obligation; provided, that with respect to any Exercise Date
occurring on or after the 65th Scheduled Trading Day (as defined in the
Indenture) immediately preceding the Expiration Date, Counterparty may provide JPMorgan
with a single notice of the aggregate number of Shares and/or the amount of cash
comprising the Convertible Obligation for all Exercise Dates occurring on or after such
Scheduled Trading Day (it being understood, for the avoidance of doubt, that the
requirement of Counterparty to deliver such notice shall not limit Counterparty’s
obligations with respect to Notice of Exercise, as set forth above, in any way).
	 
	 	 
	Other Applicable Provisions:

	 	To the extent Seller is obligated to deliver Shares
hereunder, the provisions of Sections 9.1(c), 9.8, 9.9, 9.11 and 9.12 of the
Definitions will be applicable as if Physical Settlement were applicable to the
Transaction; provided that the Representation and Agreement contained in
Section 9.11 of the Definitions shall be modified by excluding any representations
therein relating to restrictions, obligations, limitations or requirements under
applicable securities laws arising as a result of the fact that Buyer is the issuer of
the Shares. In addition,

5

 

	 	 	 
	 

	 	notwithstanding anything to the contrary in the
Equity Definitions, Seller may, in whole or in part,
deliver Shares in certificated form representing the
Delivery Obligation to Counterparty in lieu of
delivery through the Clearance System.

          6. Adjustments:

	 	 	 
	Method of Adjustment:

	 	Notwithstanding Section 11.2 of the Definitions, upon the occurrence
of any event or condition set forth in the Dilution Provisions of the Indenture, the
Calculation Agent shall make the corresponding adjustment in respect of any one or
more of the Strike Price, Number of Units, the Unit Entitlement and any other variable
relevant to the exercise, settlement or payment of such Transaction, to the extent an
analogous adjustment is made under the Indenture. For the avoidance of doubt, in no
event shall there be any adjustment hereunder as a result of an adjustment to the
“Conversion Rate” (as defined in the Indenture) pursuant to the Excluded Provisions.

          7. Extraordinary Events:

	 	 	 
	Merger Events:

	 	Notwithstanding Section 12.1(b) of the Definitions, a “Merger Event” means
the occurrence of any event or condition set forth in the Merger Provision of the
Indenture.
	 
	 	 
	 

	 	Immediately upon the occurrence of any Merger Event,
Counterparty shall notify the Calculation Agent of
such Merger Event; and once the adjustments to be
made to the terms of the Indenture and the
Convertible Notes in respect of such Merger Event
have been determined, Counterparty shall immediately
notify the Calculation Agent in writing of the
details of such adjustments.
	 
	 	 
	Notice of Merger Consideration:

	 	Upon the occurrence of a Merger Event that causes the Shares
to be converted into the right to receive more than a single type of consideration
(determined based in part upon any form of stockholder election), Counterparty shall
promptly (but in any event prior to the Merger Date) notify the Calculation Agent of
the weighted average of the types and amounts of consideration received by the holders
of Shares entitled to receive cash, securities or other property or assets with respect
to or in exchange for such Shares in any Merger Event who affirmatively make such an
election or if no holders of Shares affirmatively make such an election, the types and
amount of consideration actually received by such holders.
	 
	 	 
	Tender Offer:

	 	Applicable. Notwithstanding Section 12.1(d) of the Definitions, a “Tender
Offer” means the occurrence of any event or condition set forth in the Tender Offer
Provision of the Indenture.
	 
	 	 
	Consequences of Merger Events and
	 	 

6

 

	 	 	 
	Tender Offers:

	 	Notwithstanding Sections 12.2 and 12.3 of the Definitions, upon the
occurrence of a Merger Event or Tender Offer, the Calculation Agent shall make a
corresponding adjustment in respect of any adjustment under the Indenture to any one or
more of the nature of the Shares, the Strike Price, the Number of Units, the Unit
Entitlement and any other variable relevant to the exercise, settlement or payment of
the Transaction, to the extent an analogous adjustment is made under the Indenture;
provided that (i) such adjustment shall be made without regard to any
adjustment to the Conversion Rate for the issuance of additional shares as set forth in
the Excluded Provisions of the Indenture; and (ii) if such adjustment would (but for
this clause (ii)) result in the Shares including (or, at the option of a holder of
Shares, may include) shares of an entity or person not organized under the laws of the
United States, any State thereof or the District of Columbia, no such adjustment shall
be made and instead such Merger Event or Tender Offer shall be an Additional
Termination Event with respect to which (1) the Transaction is the sole Affected
Transaction and (2) Counterparty shall be the sole Affected Party.
	 
	 	 
	Dilution Provisions:

	 	As set forth in the Confirmation for such Transaction.
	 
	 	 
	Merger Provision:

	 	As set forth in the Confirmation for such Transaction.
	 
	 	 
	Tender Offer Provision:

	 	As set forth in the Confirmation for such Transaction.
	 
	 	 
	Make-Whole Provisions:

	 	As set forth in the Confirmation for such Transaction.
	 
	 	 
	Nationalization, Insolvency 

or Delisting:

	 	Cancellation and Payment (Calculation Agent
Determination). In addition to the provisions of Section 12.6(a)(iii) of the
Definitions, it will also constitute a Delisting if the Exchange is located in the
United States and the Shares are not immediately re-listed or re-traded on any of the
New York Stock Exchange, the American Stock Exchange, The NASDAQ Global Select Market
or The NASDAQ Global Market (or their respective successors); if the Shares are
immediately re-listed or re-traded on any such exchange, such exchange shall thereafter
be deemed to be the Exchange and the Calculation Agent shall make any adjustments it
deems necessary to the terms of the Transaction, as if Modified Calculation Agent
Adjustment were applicable to such event.

          8. Additional Disruption Events:

	 	 	 
	Change in Law:

	 	Applicable; provided that Section 12.9(a)(ii) of the Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third line
thereof with the phrase “or public announcement of the formal or informal
interpretation” and (ii) immediately following the word “Transaction” in clause (X)
thereof, adding the phrase “in the manner contemplated by the Hedging Party on the
Trade Date”.
	 
	 	 
	Failure to Deliver:

	 	Applicable

7

 

	 	 	 
	Insolvency Filing:

	 	Applicable
	 
	 	 
	Hedging Disruption:

	 	Not Applicable
	 
	 	 
	Increased Cost of Hedging:

	 	Not Applicable
	 
	 	 
	Determining Party

	 	For all applicable Additional Disruption Events, JPMorgan.

          9. Acknowledgements:

	 	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and Acknowledgments
	 	 
	Regarding Hedging Activities:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable

          10. Representations, Warranties and Agreements:

          (a) In connection with this Master Confirmation, each Confirmation, each Transaction to which
a Confirmation relates and any other documentation relating to the Agreement, each party to this
Master Confirmation represents and warrants to, and agrees with, the other party that:

     (i) it is an “accredited investor” as defined in Section 2(a)(15)(ii) of the Securities
Act of 1933, as amended (the “Securities Act”); and

     (ii) it is an “eligible contract participant” as defined in Section 1a(12) of the
Commodity Exchange Act, as amended (the “CEA”), and this Master Confirmation and
each Transaction hereunder are subject to individual negotiation by the parties and have not
been executed or traded on a “trading facility” as defined in Section 1a(33) of the CEA.

          (b) Counterparty hereby repeats the representations and warranties of Counterparty set forth
in Section 1 of the Purchase Agreement (the “Purchase Agreement”) dated as of March 27,
2008 between, among others, Counterparty and JPMorgan as a representative of the Initial Purchasers
(as defined in the Purchase Agreement), and, in addition, represents and warrants to, and agrees
with, JPMorgan on the Trade Date of each Transaction that:

     (i) its financial condition is such that it has no need for liquidity with respect to
its investment in such Transaction and no need to dispose of any portion thereof to satisfy
any existing or contemplated undertaking or indebtedness;

     (ii) its investments in and liabilities in respect of such Transaction, which it
understands are not readily marketable, are not disproportionate to its net worth, and it is
able to bear any loss in connection with such Transaction, including the loss of its entire
investment in such Transaction;

     (iii) it understands that JPMorgan has no obligation or intention to register such
Transaction under the Securities Act or any state securities law or other applicable federal
securities law;

     (iv) it understands that no obligations of JPMorgan to it hereunder will be entitled to
the benefit of deposit insurance and that such obligations will not be guaranteed by any
Affiliate of JPMorgan or any governmental agency;

8

 

     (v) IT UNDERSTANDS THAT SUCH TRANSACTION IS SUBJECT TO COMPLEX RISKS THAT MAY ARISE
WITHOUT WARNING AND MAY AT TIMES BE VOLATILE AND THAT LOSSES MAY OCCUR QUICKLY AND IN
UNANTICIPATED MAGNITUDE AND IS WILLING TO ACCEPT SUCH TERMS AND CONDITIONS AND ASSUME
(FINANCIALLY AND OTHERWISE) SUCH RISKS;

     (vi) it is not on the date hereof, in possession of material non-public information
with respect to Counterparty or the Shares;

     (vii) it is not entering into any Transaction to create, and will not engage in any
other securities or derivatives transactions to create, actual or apparent trading activity
in the Shares (or any security convertible into or exchangeable for Shares) or to raise or
depress or to manipulate the price of the Shares (or any security convertible into or
exchangeable for Shares);

     (viii) it is not on the date hereof engaged in a distribution, as such term is used in
Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of
any securities of Counterparty, other than a distribution meeting the requirements of the
exception set forth in Rules 101(b)(10) and 102(b)(7) of Regulation M. Counterparty shall
not, until the sixth Scheduled Trading Day immediately following the Trade Date, engage in
any such distribution;

     (ix) on the Trade Date (A) its assets at their fair valuation exceed its liabilities,
including contingent liabilities, (B) its capital is adequate to conduct its business and
(C) it has the ability to pay its debts and obligations as such debts mature and does not
intend to, or does not believe that it will, incur debt beyond its ability to pay as such
debts mature;

     (x) such Transaction, any repurchase of the Shares by Counterparty in connection with
such Transaction and the issuance of Convertible Notes with respect to such Transaction were
approved by its board of directors and publicly announced, solely for the purposes stated in
such board resolution and public disclosure;

     (xi) there is no internal policy, whether written or oral, of Counterparty that would
prohibit it from entering into any aspect of such Transaction, including, but not limited
to, the purchases of Shares to be made pursuant thereto;

     (xii) it is not, and after giving effect to the transactions contemplated hereby will
not be, an “investment company” as such term is defined in the Investment Company Act of
1940, as amended;

     (xiii) without limiting the generality of Section 13.1 of the Definitions, Counterparty
acknowledges that JPMorgan is not making any representations or warranties with respect to
the treatment of the Transaction under FASB Statements 128, 133, as amended, 149 or 150,
EITF Issue No. 00-19, Issue No. 01-6, Issue No. 03-6 (or any successor issue statements) or
Issue No. 07-5 or under FASB’s Liabilities & Equity Project; and

     (xiv) without limiting the generality of Section 3(a)(iii) of the Agreement, the
Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

          (c) Counterparty shall deliver to JPMorgan an opinion of counsel, dated as of the Effective
Date for each Transaction hereunder and reasonably acceptable to JPMorgan in form and substance,
with respect to the matters set forth in Section 3(a) of the Agreement with respect to such
Transaction.

          11. Miscellaneous:

9

 

          (a) Early Termination. The parties agree that Second Method and Loss will apply to
each Transaction under this Master Confirmation as such terms are defined under the 1992 ISDA
Master Agreement (Multicurrency—Cross Border).

          (b) Alternative Calculations and JPMorgan Payment on Early Termination and on Certain
Extraordinary Events. If, JPMorgan owes Counterparty any amount in connection with a
Transaction hereunder pursuant to Section 12.7 or 12.9 of the Definitions (except in the case of an
Extraordinary Event in which the consideration or proceeds to be paid to holders of Shares as a
result of such event consists solely of cash) or pursuant to Section 6(d)(ii) of the Agreement
(except in the case of an Event of Default in which Counterparty is the Defaulting Party or a
Termination Event in which Counterparty is the Affected Party, other than an (x) Event of Default
of the type described in Section 5(a)(iii), (v), (vi) or (vii) of the Agreement or (y) a
Termination Event of the type described in Section 5(b) of the Agreement that in the case of either
(x) or (y) resulted from an event or events outside Counterparty’s control) (a “JPMorgan
Payment Obligation”), Counterparty shall have the right, in its sole discretion, to require
JPMorgan to satisfy any such JPMorgan Payment Obligation by delivery of Termination Delivery Units
(as defined below) by giving irrevocable telephonic notice to JPMorgan, confirmed in writing within
one Scheduled Trading Day, between the hours of 9:00 a.m. and 4:00 p.m. New York time on the Merger
Date, the Announcement Date (in the case of Nationalization, Insolvency or Delisting), Early
Termination Date or date of cancellation, as applicable (“Notice of JPMorgan Termination
Delivery”); provided that (i) if Counterparty does not validly request JPMorgan to
satisfy its JPMorgan Payment Obligation by Termination Delivery Units, JPMorgan shall have the
right, in its sole discretion, to satisfy its JPMorgan Payment Obligation by Termination Delivery
Units, notwithstanding Counterparty’s election to the contrary and (ii) Counterparty shall not have
the right, notwithstanding any notice to the contrary, to request JPMorgan to satisfy its JPMorgan
Payment Obligation by Termination Delivery Units unless on the date of any such notice,
Counterparty represents to JPMorgan that, as of such date, it is not in possession of any material
non-public information with respect to itself or the Shares. Within a commercially reasonable
period of time following receipt of a Notice of JPMorgan Termination Delivery, JPMorgan shall
deliver to Counterparty a number of Termination Delivery Units having a cash value equal to the
amount of such JPMorgan Payment Obligation (such number of Termination Delivery Units to be
delivered to be determined by the Calculation Agent as the number of whole Termination Delivery
Units that could be purchased over a commercially reasonable period of time with the cash
equivalent of such payment obligation).

“Termination Delivery Unit” means (i) in the case of a Termination Event, an Event
of Default or an Extraordinary Event (other than an Insolvency or Nationalization), one
Share or (ii) in the case of an Insolvency or Nationalization, a unit consisting of the
number or amount of each type of property received by a holder of one Share (without
consideration of any requirement to pay cash or other consideration in lieu of fractional
amounts of any securities) in such Insolvency or Nationalization. If a Termination Delivery
Unit consists of property other than cash and Counterparty provides irrevocable written
notice to the Calculation Agent on or prior to the Closing Date or the date of such
Termination Event, Event of Default or an Additional Disruption Event, as the case may be,
that it elects to have JPMorgan deliver cash in lieu of such other property, the Calculation
Agent will replace such property with cash as a component of a Termination Delivery Unit in
such amount, as determined by the Calculation Agent in its discretion by commercially
reasonable means, as shall have a value equal to the value of the property so replaced. If
such Insolvency or Nationalization involves a choice of consideration to be received by
holders, such holder shall be deemed to have elected to receive the maximum possible amount
of cash.

          (c) Set-Off and Netting. Neither party under any circumstances shall have the right
to set off or net any obligation that it may have to the other party under this Transaction against
any obligation such other party may have to it, whether arising under the Agreement, this Master
Confirmation or any other agreement between the parties hereto, by operation of law or otherwise.

          (d) Transfer or Assignment. (i) Counterparty shall have the right to transfer or
assign its rights and obligations hereunder to persons who are broker-dealers, banks, investment
advisors, investment banks or other persons in the derivatives industry with respect to all, but
not less than all, of the Options hereunder (such

10

 

Options, the “Transfer Options”); provided that such transfer or assignment shall be
subject to reasonable conditions that JPMorgan may impose, including but not limited, to the
following conditions:

          (A) With respect to any Transfer Options, Counterparty shall not be released from its notice
and indemnification obligations to JPMorgan pursuant to Section 11(o) or any obligations under
Section 11(q) of this Master Confirmation;

          (B) Any Transfer Options shall only be transferred or assigned to a third party that is a U.S.
person (as defined in the Internal Revenue Code of 1986, as amended);

          (C) Such transfer or assignment shall be effected on terms, including any reasonable
undertakings by such third party (including, but not limited to, an undertaking with respect to
compliance with applicable securities laws in a manner that, in the reasonable judgment of
JPMorgan, will not expose JPMorgan to material risks under applicable securities laws) and
execution of any documentation and delivery of legal opinions with respect to securities laws and
other matters by such third party and Counterparty, as are requested and reasonably satisfactory to
JPMorgan;

          (D) JPMorgan will not, as a result of such transfer and assignment, be required to pay the
transferee on any payment date an amount under Section 2(d)(i)(4) of the Agreement greater than an
amount that JPMorgan would have been required to pay to Counterparty in the absence of such
transfer and assignment;

          (E) An Event of Default, Potential Event of Default or Termination Event will not occur as a
result of such transfer and assignment;

          (F) Without limiting the generality of clause (B), Counterparty shall cause the transferee to
make such Payee Tax Representations and to provide such tax documentation as may be reasonably
requested by JPMorgan to permit JPMorgan to determine that results described in clauses (D) and (E)
will not occur upon or after such transfer and assignment; and

          (G) Counterparty shall be responsible for all reasonable costs and expenses, including
reasonable counsel fees, incurred by JPMorgan in connection with such transfer or assignment.

          (ii) JPMorgan may transfer or assign its rights and obligations hereunder and under the
Agreement, in whole or in part, to any of its affiliates without the consent of Counterparty,
provided that Counterparty shall have recourse to JPMorgan in the event of the failure by the
transferee to perform any of such obligations hereunder. If at any time at which (1) JPMorgan’s
“beneficial ownership” (within the meaning of Section 13 of the Exchange Act and rules promulgated
thereunder) exceeds 8.0% of Counterparty’s outstanding Shares, (2) the Units Equity Percentage (as
defined below) is at or exceeds 14.5%, or (3) the quotient of (x) the number of “control shares”
(as such term is used in Section 3-701(d) of the Maryland Control Share Acquisition Act) owned by
JPMorgan divided by (y) the number of Counterparty’s outstanding Shares (the “Control Share
Percentage”) exceeds 8.0%, JPMorgan, in its discretion, is unable to effect a transfer or
assignment to a third party after using commercially reasonable efforts on pricing terms reasonably
acceptable to JPMorgan and within a time period reasonably acceptable to JPMorgan such that (1)
JPMorgan’s “beneficial ownership” (within the meaning of Section 13 of the Exchange Act and rules
promulgated thereunder) is reduced to 8.0% of Counterparty’s outstanding Shares or less, (2) the
Units Equity Percentage is reduced to 14.5% or less or (3) the Control Share Percentage is reduced
to 8.0% or less, JPMorgan may designate any Scheduled Trading Day as an Early Termination Date with
respect to a portion (the “Terminated Portion”) of the Transaction, such that (1) its “beneficial
ownership” following such partial termination will be equal to or less than 8.0%, (2) the Units
Equity Percentage following such partial termination will be less than 14.5% or (3) the Control
Share Percentage following such partial termination will be equal to or less than 8.0%. In the
event that JPMorgan so designates an Early Termination Date with respect to a portion of the
Transaction, a payment or delivery shall be made pursuant to Section 6 of the Agreement and Section
11(b) of this Master Confirmation as if (i) an Early Termination Date had been designated in
respect of a Transaction having

11

 

terms identical to the Terminated Portion of the Transaction, (ii) Counterparty shall be the
sole Affected Party with respect to such partial termination and (iii) such portion of the
Transaction shall be the only Terminated Transaction.

          (e) Additional Termination Events. (i) For any Transaction, the occurrence of (A) an
event of default with respect to Counterparty under the terms of the Convertible Notes for such
Transaction that results in an acceleration of such Convertible Notes pursuant to the terms of the
Indenture or (B) an Amendment Event shall be an Additional Termination Event with respect to which
such Transaction is the sole Affected Transaction and Counterparty shall be the sole Affected
Party. In the case of clause (A), either party shall be entitled to designate an Early Termination
Date pursuant to Section 6(b) of the Agreement; provided that (1) Counterparty shall not be
entitled to designate an Early Termination Date unless it is has represented to Seller that, on the
date of its election, it is not in possession of any material non-public information with respect
to itself or the Shares and (2) no Early Termination Date designated by Counterparty shall be
effective unless it is at least 10 Exchange Business Days following notice from Counterparty or the
Trustee (as defined in the Indenture) of the occurrence of such event of default. In the case of
clause (B), Seller shall be the party entitled to designate an Early Termination Date pursuant to
Section 6(b) of the Agreement; provided that Seller may designate an Early Termination Date
following such Amendment Event only if (1) Seller provides prior written notice to Counterparty
proposing that for purposes of the Transactions hereunder “Indenture” shall mean the Indenture as
in effect immediately prior to the effectiveness of any such Amendment Event and (2) Counterparty
does not agree to such proposal (or does not provide a written response) within three Exchange
Business Days following such notice. If a Conversion Date occurs prior to such third Exchange
Business Day or prior to the Early Termination Date designated by Seller as a result of such
Amendment Event, the “Indenture” shall be deemed to be the Indenture as in effect immediately prior
to the effectiveness of any such Amendment Event.

     “Amendment Event” means, for any Transaction, that Counterparty amends,
modifies, supplements or waives any term of the Indenture for such Transaction or the
Convertible Notes for such Transaction governing the principal amount, coupon, maturity,
repurchase obligation of Counterparty, redemption right of Counterparty, any term relating
to conversion of the Convertible Notes for such Transaction (including changes to the
Conversion Rate, conversion price, conversion settlement dates or conversion conditions), or
any term that would require consent of the holders of not less than 100% of the principal
amount of the Convertible Notes for such Transaction to amend, in each case without the
prior consent of Seller, such consent not to be unreasonably withheld.

          (ii) Notwithstanding anything to the contrary in this Master Confirmation, for any
Transaction, in respect of the Convertible Notes that are converted in compliance with the
Make-Whole Provisions of the Indenture, the delivery of a “Conversion Notice” (as defined in the
Indenture) to Counterparty relating to such Convertible Notes shall constitute an Additional
Termination Event hereunder with respect to the number of Units relating to such number of
Convertible Notes in USD 1,000 principal amount set forth in such “Conversion Notice.” Upon
receipt of such “Conversion Notice”, Counterparty shall promptly (but in any event no later than
the Notice Deadline of such “Conversion Notice”) forward such “Conversion Notice” (along with
information with respect to such conversion described above opposite the caption “Notice of
Exercise” above) to JPMorgan and upon receipt thereof, JPMorgan shall promptly designate an
Exchange Business Day as an Early Termination Date (such date to occur on or as closely as
practicable, in the Calculation Agent’s commercially reasonable judgment, to the final day of the
“Observation Period” for the conversion of the relevant Convertible Notes) with respect to all or a
portion of such Transaction, as the case may be, corresponding to such number of Units. As a
result of the occurrence of an Additional Termination Event as described in this clause (ii), any
payment hereunder shall be calculated by the Calculation Agent pursuant to Section 6 of the
Agreement; provided that, for the purposes of such calculation, (A) Counterparty shall be
the sole Affected Party with respect to such Additional Termination Event, (B) JPMorgan shall be
the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the
Agreement; and (C) for the avoidance of doubt, in determining the amount payable pursuant to
Section 6 of the Agreement, the Calculation Agent shall take into account (i) the time value of
this Transaction assuming an Expiration Date occurring on the “Stated Maturity Date” (as defined in
the Indenture for such Transaction), without regard to any requirement for the occurrence of a
Conversion Date or delivery of a Notice of Exercise as conditions to the exercise

12

 

of the Units and (ii) shall not take into account any adjustments to the Unit Entitlement that
result from corresponding adjustments to the Conversion Rate pursuant to the Make-Whole Provisions
of the Indenture. Notwithstanding the foregoing, (x) in case of a partial termination, an Early
Termination Date shall be designated in respect of a Transaction having terms identical to this
Transaction and a number of Units equal to the terminated portion, and such Transaction shall be
the only Terminated Transaction, and (y) if any amount is payable by JPMorgan to Counterparty in
connection with such Additional Termination Event, payment of such amount shall be satisfied by
delivery by JPMorgan to Counterparty of an amount of cash and/or a number of Shares or Termination
Delivery Units, in such percentages as notified to JPMorgan in writing at the time the relevant
“Conversion Notice” is forwarded by Counterparty to JPMorgan, such that the aggregate value of such
cash, Shares and/or Termination Delivery Units, determined by the Calculation Agent in good faith
and in a commercially reasonable manner, is equal to the amount payable by JPMorgan to Counterparty
in connection with such Additional Termination Event.

          (f) Status of Claims in Bankruptcy. JPMorgan acknowledges and agrees that this Master
Confirmation, together with any Confirmation, is not intended to convey to JPMorgan rights with
respect to any Transaction that are senior to the claims of common stockholders in any U.S.
bankruptcy proceedings of Counterparty; provided that nothing herein shall limit or shall
be deemed to limit JPMorgan’s right to pursue remedies in the event of a breach by Counterparty of
its obligations and agreements with respect to any Transaction; and provided,
further, that nothing herein shall limit or shall be deemed to limit JPMorgan’s rights in
respect of any transactions other than the Transactions.

          (g) No Collateral. Notwithstanding any provision of this Master Confirmation, any
Confirmation or the Agreement, or any other agreement between the parties, to the contrary, the
obligations of Counterparty under the Transactions are not secured by any collateral. Without
limiting the generality of the foregoing, if this Master Confirmation, the Agreement or any other
agreement between the parties includes an ISDA Credit Support Annex or other agreement pursuant to
which Counterparty collateralizes obligations to JPMorgan, then the obligations of Counterparty
hereunder will not be considered to be obligations under such Credit Support Annex or other
agreement pursuant to which Counterparty collateralizes obligations to JPMorgan, and any
Transactions hereunder shall be disregarded for purposes of calculating any Exposure, Market Value
or similar term thereunder.

          (h) Delegation of Share Delivery to Affiliates. Notwithstanding any other provision
in this Master Confirmation to the contrary requiring or allowing JPMorgan to purchase, sell,
receive or deliver any shares or other securities to or from Counterparty, JPMorgan may designate
any of its affiliates to purchase, sell, receive or deliver such shares or other securities and
otherwise to perform JPMorgan’s obligations in respect of this Transaction and any such designee
may assume such obligations. JPMorgan shall be discharged of its obligations to Counterparty to
the extent of any such performance.

          (i) Severability; Illegality. If compliance by either party with any provision of a
Transaction would be unenforceable or illegal, (i) the parties shall negotiate in good faith to
resolve such unenforceability or illegality in a manner that preserves the economic benefits of the
transactions contemplated hereby and (ii) the other provisions of the Transaction shall not be
invalidated, but shall remain in full force and effect.

          (j) Waiver of Trial by Jury. EACH OF COUNTERPARTY AND JPMORGAN HEREBY IRREVOCABLY
WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS
STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY TRANSACTION HEREUNDER OR THE
ACTIONS OF JPMORGAN OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

          (k) Confidentiality. Notwithstanding any provision in this Master Confirmation, any
Confirmation or the Agreement, in connection with Section 1.6011-4 of the Treasury Regulations, the
parties hereby agree that each party (and each employee, representative, or other agent of such
party) may disclose to any and all

13

 

persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the
Transaction and all materials of any kind (including opinions or other tax analyses) that are
provided to such party relating to such U.S. tax treatment and U.S. tax structure, other than any
information for which nondisclosure is reasonably necessary in order to comply with applicable
securities laws.

          (l) Securities Contract; Swap Agreement. The parties hereto intend for: (i) each
Transaction hereunder to be a “securities contract” as defined in Section 741(7) of the Bankruptcy
Code (Title 11 of the United States Code, as amended) (the “Bankruptcy Code”) and a “swap
agreement” as defined in Section 101(53B) of the Bankruptcy Code, and the parties hereto to be
entitled to the protections afforded by, among other Sections, Sections 362(b)(6), 362(b)(27),
362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the Bankruptcy Code; (ii) the
Agreement to be a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code;
(iii) a party’s right to liquidate, terminate or accelerate any Transaction, offset, net or net out
termination values, payment amounts or other transfer obligations, and to exercise any other
remedies upon the occurrence of any Event of Default or Termination Event under the Agreement with
respect to the other party or any Extraordinary Event that results in the termination or
cancellation of any Transaction to constitute a “contractual right” within the meaning of Sections
555, 560 and 561 of the Bankruptcy Code; (iv) any cash, securities or other property provided as
performance assurance, credit support or collateral with respect to each Transaction to constitute
“margin payments” and “transfers” “under” or “in connection with” each Transaction and the
Agreement, in each case within the meaning of the Bankruptcy Code; and (v) all payments or
deliveries for, under or in connection with each Transaction, all payments for the Shares and the
transfer of such Shares to constitute “settlement payments” and “transfers” “under” or “in
connection with” each Transaction and the Agreement, in each case within the meaning of the
Bankruptcy Code.

          (m) Extension of Settlement. JPMorgan may postpone any Potential Exercise Date or any
other date of valuation or delivery by JPMorgan, with respect to some or all of the relevant Units
(in which event the Calculation Agent shall make appropriate adjustments to the Delivery
Obligation), if JPMorgan determines, in its reasonable discretion, that such extension is
reasonably necessary or advisable to preserve JPMorgan hedging activity hereunder in light of
existing liquidity conditions or to enable JPMorgan to effect purchases of Shares in connection
with its hedging or settlement activity hereunder in a manner that would, if JPMorgan were
Counterparty or an affiliated purchaser of Counterparty, be in compliance with applicable legal and
regulatory requirements or with related internal policies or procedures of JPMorgan.

          (n) Staggered Settlement. If upon advice of counsel with respect to applicable legal
and regulatory requirements, including any requirements relating to JPMorgan’s hedging activities
hereunder, JPMorgan reasonably determines that it would not be practicable or advisable to deliver,
or to acquire Shares to deliver, any or all of the Shares to be delivered by JPMorgan on the
Settlement Date for the Transaction, JPMorgan may, by notice to the Counterparty prior to any
Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares on two or more
dates (each, a “Staggered Settlement Date”) or at two or more times on the Nominal
Settlement Date as follows:

     (i) in such notice, JPMorgan will specify to Counterparty the related Staggered
Settlement Dates (each of which will be on or prior to such Nominal Settlement Date, but not
prior to the beginning of such “Observation Period,” as defined in the Indenture) or
delivery times and how it will allocate the Shares it is required to deliver under “Delivery
Obligation” (above) among the Staggered Settlement Dates or delivery times; and

     (ii) the aggregate number of Shares that JPMorgan will deliver to Counterparty
hereunder on all such Staggered Settlement Dates and delivery times will equal the number of
Shares that JPMorgan would otherwise be required to deliver on such Nominal Settlement Date.

          (o) Repurchase Notices. Counterparty shall, on any day on which Counterparty effects
any repurchase of Shares, promptly give JPMorgan a written notice of such repurchase (a
“Repurchase Notice”) on such

14

 

day if, following such repurchase, the Units Equity Percentage as determined on such day is
(i) equal to or greater than 8.0% and (ii) greater by 0.5% than the Units Equity Percentage
included in the immediately preceding Repurchase Notice (or, in the case of the first such
Repurchase Notice, greater by 0.5% than the Units Equity Percentage as of the date hereof). The
“Units Equity Percentage” as of any day is the fraction the numerator of which is the
aggregate Number of Shares for all Transactions hereunder and the denominator of which is the
number of Shares outstanding on such day. Counterparty agrees to indemnify and hold harmless
JPMorgan and its Affiliates and their respective officers, directors and controlling persons (each,
a “Section 16 Indemnified Person”) from and against any and all losses (including losses
relating to JPMorgan’s hedging activities as a consequence of becoming, or of the risk of becoming,
subject to the reporting and profit disgorgement provisions of Section 16 of the Exchange Act,
including without limitation, any forbearance from hedging activities or cessation of hedging
activities and any losses in connection therewith with respect to any Transaction), claims,
damages, judgments, liabilities and expenses (including reasonable attorney’s fees), joint or
several, to which a Section 16 Indemnified Person may become subject, as a result of Counterparty’s
failure to provide JPMorgan with a Repurchase Notice on the day and in the manner specified in this
paragraph (o), and to reimburse, upon written request, each such Section 16 Indemnified Person for
any reasonable legal or other expenses incurred in connection with investigating, preparing for,
providing testimony or other evidence in connection with or defending any of the foregoing. If any
suit, action, proceeding (including any governmental or regulatory investigation), claim or demand
shall be brought or asserted against any Section 16 Indemnified Person, such Section 16 Indemnified
Person shall promptly notify Counterparty in writing, and Counterparty, upon request of such
Section 16 Indemnified Person, shall retain counsel reasonably satisfactory to such Section 16
Indemnified Person to represent such Section 16 Indemnified Person and any others Counterparty may
designate in such proceeding and shall pay the fees and expenses of such counsel related to such
proceeding. Counterparty shall be relieved from liability to the extent that such Section 16
Indemnified Person fails to promptly notify Counterparty of any action commenced against it in
respect of which indemnity may be sought hereunder; provided, that failure to notify
Counterparty (i) shall not relieve Counterparty from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and (ii) shall not, in any event, relieve
Counterparty from any liability that it may have otherwise than on account of this paragraph (o).
Counterparty shall not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for the plaintiff,
Counterparty agrees to indemnify any Section 16 Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Counterparty shall not, without the prior
written consent of each Section 16 Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Section 16 Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by any such Section 16 Indemnified Person,
unless such settlement includes an unconditional release of each such Section 16 Indemnified Person
from all liability on claims that are the subject matter of such proceeding on terms reasonably
satisfactory to each such Section 
16 Indemnified Person. If the indemnification provided for in
this paragraph (o) is unavailable to a Section 16 Indemnified Person or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then Counterparty, in lieu of
indemnifying such Section 16 Indemnified Person thereunder, shall contribute to the amount paid or
payable by such Section 16 Indemnified Person as a result of such losses, claims, damages or
liabilities. The remedies provided for in this paragraph (o) are not exclusive and shall not limit
any rights or remedies that may otherwise be available to any Section 16 Indemnified Person at law
or in equity. The indemnity and contribution agreements contained in this paragraph (o) shall
remain operative and in full force and effect regardless of the termination of any Transaction.

          (p) Early Unwind. In the event the sale of Convertible Notes for any Transaction
hereunder is not consummated with the initial purchasers thereof for any reason by the close of
business in New York City on the Early Unwind Date set forth in the Confirmation for such
Transaction, such Transaction shall automatically terminate on such Early Unwind Date and (i) such
Transaction and all of the respective rights and obligations of JPMorgan and Counterparty under
such Transaction shall be cancelled and terminated and (ii) each party shall be released and
discharged by the other party from and agrees not to make any claim against the other party with
respect to any obligations or liabilities of the other party arising out of and to be performed in
connection with such Transaction either prior to or after such Early Unwind Date. The purchase
price paid by Counterparty shall be JPMorgan’s actual cost of such Shares and derivatives as
JPMorgan informs Counterparty and shall be paid in immediately available funds on such Early Unwind
Date.

15

 

          (q) Registration. Counterparty hereby agrees that if the Shares (the “Hedge
Shares”) acquired by JPMorgan for the purpose of hedging its obligations pursuant to the
Transaction, in JPMorgan’s good faith and reasonable judgment, cannot be sold in the U.S. public
market by JPMorgan without registration under the Securities Act, Counterparty shall, at its
election: (i) in order to allow JPMorgan to sell the Hedge Shares in a registered offering, make
available to JPMorgan an effective registration statement under the Securities Act to cover the
resale of such Hedge Shares and (A) enter into an agreement, in form and substance satisfactory to
JPMorgan and Counterparty, substantially in the form of an underwriting agreement for a registered
secondary offering, (B) provide accountant’s “comfort” letters in customary form for registered
offerings of equity securities, (C) provide disclosure opinions of nationally recognized outside
counsel to Counterparty reasonably acceptable to JPMorgan, (D) provide other customary opinions,
certificates and closing documents customary in form for registered offerings of equity securities
and (E) afford JPMorgan a reasonable opportunity to conduct a “due diligence” investigation with
respect to Counterparty customary in scope for underwritten offerings of equity securities;
provided that if JPMorgan, in its sole reasonable discretion, is not satisfied with access
to due diligence materials, the results of its due diligence investigation, or the procedures and
documentation for the registered offering referred to above, then clause (ii) of this section shall
apply at the election of Counterparty; (ii) in order to allow JPMorgan to sell the Hedge Shares in
a private placement, enter into a private placement agreement substantially similar to private
placement Underwriting Agreements customary for private placements of equity securities, in form
and substance satisfactory to JPMorgan and Counterparty, including customary representations,
covenants, blue sky and other governmental filings and/or registrations, indemnities to JPMorgan,
due diligence rights (for JPMorgan or any designated buyer of the Hedge Shares from JPMorgan),
opinions and certificates and such other documentation as is customary for private placements
agreements, all reasonably acceptable to JPMorgan (in which case, the Calculation Agent shall make
any adjustments to the terms of the Transaction that are necessary, in its reasonable judgment, to
compensate JPMorgan for any discount from the public market price of the Shares incurred on the
sale of Hedge Shares in a private placement); or (iii) purchase the Hedge Shares from JPMorgan at
the price displayed under the heading “Bloomberg VWAP” on Bloomberg page PHH.N <equity> AQR
(or any successor thereto) in respect of the period from the scheduled opening time of the Exchange
to the Scheduled Closing Time of the Exchange on such Valid Day (or if such volume-weighted average
price is unavailable, the market value of one Share on such Valid Day, as determined by the
Calculation Agent using a volume-weighted method) on such Exchange Business Days, and in the
amounts, requested by JPMorgan; provided, that, for the avoidance of doubt, Counterparty
shall not be required to purchase the Hedge Shares pursuant to this clause (iii) unless it makes
the election to do so hereunder.

          (r) Conversion Rate Adjustments. Counterparty shall provide to JPMorgan written
notice (such notice, a “Conversion Rate Adjustment Notice”), concurrently with a public
announcement of any transaction or event (a “Conversion Rate Adjustment Event”) (and at
least five Scheduled Trading Days (as such term is defined in the Indenture) prior to the date the
related adjustment to the Conversion Rate (as such term is defined in the Indenture) would be
effective under the Indenture) that is reasonably expected to lead to an increase in the Conversion
Rate (as such term is defined in the Indenture), which Conversion Rate Adjustment Notice shall set
forth the new, adjusted Conversion Rate after giving effect to such Conversion Rate Adjustment
Event (the “New Conversion Rate”). In connection with the delivery of any Conversion Rate
Adjustment Notice to JPMorgan, if prior to public announcement, (x) Counterparty shall,
concurrently with or prior to such delivery, publicly announce and disclose the Conversion Rate
Adjustment Event or (y) Counterparty shall, concurrently with such delivery, represent and warrant
that the information set forth in such Conversion Rate Adjustment Notice does not constitute
material non-public information with respect to Counterparty or the Shares.

          (s) Amendments to Equity Definitions. (i) Section 12.6(a)(ii) of the Equity
Definitions is hereby amended by (1) deleting from the fourth line thereof the word “or” after the
word “official” and inserting a comma therefor, and (2) deleting the semi-colon at the end of
subsection (B) thereof and inserting the following words therefor “or (C) at JPMorgan’s option, the
occurrence of any of the events specified in Section 5(a)(vii)(1) through (9) of the ISDA Master
Agreement with respect to that Issuer.”

16

 

          (ii) Section 12.9(b)(i) of the Equity Definitions is hereby amended by (1) replacing “either
party may elect” with “JPMorgan may elect” and (2) replacing “notice to the other party” with
“notice to Counterparty” in the first sentence of such section.

          (t) Amendment. If the Initial Purchasers (as defined in the Purchase Agreement)
exercise their right to purchase additional Convertible Notes as set forth therein (the
“Additional Convertible Notes”), then on the closing date for the purchase and sale of the
Additional Convertible Notes, (i) the Number of Units will be automatically increased by additional
Units (the “Additional Units”) equal to the number of Additional Convertible Notes in
denominations of USD 1,000 principal amount purchased pursuant to such exercise by the Initial
Purchaser affiliated with JPMorgan; and (ii) Counterparty shall pay to JPMorgan, on the closing
date for such Additional Convertible Notes, an additional premium in USD equal to the product of
the Additional Units and a fraction, the numerator of which is the Premium and the denominator of
which is the Number of Units (prior to any such increase).

          (u) Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan Securities
Inc., an affiliate of JPMorgan (“JPMSI”), has acted solely as agent and not as principal
with respect to this Transaction and (ii) JPMSI has no obligation or liability, by way of guaranty,
endorsement or otherwise, in any manner in respect of this Transaction (including, if applicable,
in respect of the settlement thereof). Each party agrees it will look solely to the other party (or
any guarantor in respect thereof) for performance of such other party’s obligations under this
Transaction.

          12. Addresses for Notice:

	 	 	 	 	 
	 

	 	If to JPMorgan:
	 	JPMorgan Chase Bank, National Association

277 Park Avenue, 11th Floor

New York, NY 10172

Attention: Mariusz Kwasnik

Title: Operations Analyst

EDG Corporate Marketing

Telephone No: (212) 622-6707

Facsimile No: (212) 622-8534
	 
	 	 	 	 
	 

	 	If to Counterparty:
	 	PHH Corporation

3000 Leadenhall Road,

Mt. Laurel New Jersey 08054

Fax: (856) 917-4278

Attention: Treasurer
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Wm. David Chalk, Esq.,

DLA Piper US LLP

6225 Smith Avenue

Baltimore, Maryland 21209-3600,

Fax: (410) 580-3120

          13. Accounts for Payment:

	 	 	 	 	 
	 

	 	To JPMorgan:
	 	JPMorgan Chase Bank, N.A., New York

ABA: 021 000 021

Favour: JPMorgan Chase Bank N.A., London

A/C: 0010962009

CHASUS33

17

 

	 	 	 	 	 
	 

	 	To Counterparty:
	 	JP Morgan Chase

ABA 021 000 021

PHH Corporation

Account number 323018688

          14. Delivery Instructions:

          Unless otherwise directed in writing, any Share to be delivered hereunder shall be
delivered as follows:

	 	 	 	 	 
	 

	 	To Counterparty:
	 	Counterparty to advise.

18

 

	 	 	 	 	 
	 	Yours sincerely,

J.P. MORGAN SECURITIES INC., AS AGENT FOR

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Santosh Sreenivasan
 	 
	 	 	Name:  	Santosh Sreenivasan 	 
	 	 	Title:  	Executive Director 	 
	 

Confirmed as of the

date first above written:

	 	 	 	 	 
	PHH CORPORATION

 	 	 
	By:  	/s/ Mark E. Johnson
 	 	 
	 	Name:  	Mark E. Johnson 	 	 
	 	Title:  	Vice President & Treasurer 	 	 

 

 

	 	 	 	 	 

EXHIBIT A

CONFIRMATION

	 	 	 
	Date:

	 	March 27, 2008
	 
	 	 
	To:

	 	PHH Corporation (“Counterparty”)
	 
	 	 
	Facsimile:

	 	(856) 917-4278
	 
	 	 
	Attention:

	 	Treasurer
	 
	 	 
	From:

	 	JPMorgan Chase Bank, National Association (“JPMorgan”)
	 
	 	 
	Facsimile:

	 	(212) 622-8534

Transaction Reference Number:

          The purpose of this communication (this “Confirmation”) is to set forth the terms and
conditions of the above-referenced Transaction entered into on the Trade Date specified below
between you and us. This Confirmation supplements, forms a part of, and is subject to the Master
Terms and Conditions for Convertible Bond Hedging Transactions between JPMorgan Chase Bank,
National Association and PHH Corporation dated as of March 27, 2008 (as amended from time to time,
the “Master Confirmation”).

          1. The definitions and provisions contained in the Definitions (as such term is defined in the
Master Confirmation) and in the Master Confirmation are incorporated into this Confirmation. In
the event of any inconsistency between those definitions and provisions and this Confirmation, this
Confirmation will govern.

          2. The particular Transaction to which this Confirmation relates is entered into as part of an
integrated hedging transaction of the Convertible Notes pursuant to the provisions of Treasury
Regulation Section 1.1275-6.

          3. The particular Transaction to which this Confirmation relates shall have the following
terms:

	 	 	 
	Trade Date:

	 	March 27, 2008
	 
	 	 
	Effective Date:

	 	The closing date for the initial issuance of the Convertible Notes
	 
	 	 
	Premium:

	 	USD 13,587,900
	 
	 	 
	Premium Payment Date:

	 	The Effective Date
	 
	 	 
	Convertible Notes:

	 	4.0% Convertible Senior Notes due 2012, offered pursuant to an Offering Memorandum to be dated as of
March 27, 2008 and issued pursuant to the Indenture.
	 
	 	 
	Number of Units:

	 	The number of Convertible Notes in denominations of USD1,000 principal amount issued by Counterparty on
the closing date for the initial issuance of the Convertible Notes.

A-1 

 

	 	 	 
	Strike Price:

	 	As of any date, an amount in USD, rounded to the nearest cent (with 0.5 cents being rounded upwards),
equal to USD1,000 divided by the Unit Entitlement.
	 
	 	 
	Applicable Percentage:

	 	30%
	 
	 	 
	Number of Shares:

	 	The product of the Number of Units, the Unit Entitlement and the Applicable Percentage.
	 
	 	 
	Expiration Date:

	 	April 15, 2012
	 
	 	 
	Unit Entitlement:

	 	As of any date, a number of Shares per Unit equal to the Conversion Rate (as defined in the Indenture,
but without regard to any adjustments to the Conversion Rate pursuant to the Excluded Provisions of the
Indenture).
	 
	 	 
	Indenture:

	 	Indenture to be dated as of April 2, 2008 by and between Counterparty and The Bank of New York, as
trustee, pursuant to which the Convertible Notes are to be issued. For the avoidance of doubt,
references herein to sections of the Indenture are based on the draft of the Indenture most recently
reviewed by the parties at the time of execution of this Confirmation. If any relevant sections of the
Indenture are changed, added or renumbered following execution of this Confirmation but prior to the
execution of the Indenture, the parties will amend this Confirmation in good faith to preserve the
economic intent of the parties.
	 
	 	 
	Net Share Provision:

	 	Section 5.04(a)(ii) and Section 5.04(b) (without duplication) of the Indenture
	 
	 	 
	Excluded Provisions:

	 	Sections 5.06(g), 5.02 and 5.17 of the Indenture
	 
	 	 
	Dilution Provisions:

	 	Sections 5.06(a), (b), (c), (d), (e) and (i) of the Indenture
	 
	 	 
	Merger Provision:

	 	Section 5.12 of the Indenture
	 
	 	 
	Tender Offer Provision:

	 	Section 5.12 of the Indenture
	 
	 	 
	Make-Whole Provisions:

	 	Section 5.02(a) of the Indenture
	 
	 	 
	Early Unwind Date:

	 	April 2, 2008, or such later date as agreed by the parties hereto.

A-2 

 

          3. Counterparty hereby agrees (a) to check this Confirmation promptly upon receipt so that
errors or discrepancies can be promptly identified and rectified and (b) to confirm that the
foregoing correctly sets forth the terms of the agreement between us with respect to the particular
Transaction to which this Confirmation relates, by manually signing this Confirmation and providing
any other information requested herein or in the Master Confirmation and immediately returning an
executed copy to EDG Confirmation Group, J.P. Morgan Securities Inc., 277 Park Avenue, 11th Floor,
New York, NY 10172-3401, or by fax to (212) 622 8519.

	 	 	 	 	 
	 	Yours sincerely,

J.P. MORGAN SECURITIES INC., AS AGENT FOR

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Confirmed as of the

date first above written:

	 	 	 	 	 
	PHH CORPORATION

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:

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