XML 18 R33.htm IDEA: XBRL DOCUMENT
v2.4.0.6

NOTE 26 EMPLOYEE COMPENSATION AND BENEFIT PLANS | 12 Months Ended
--- | ---
Dec. 31, 2011
Compensation and Employee Benefit Plans [Text Block] | NOTE 26 EMPLOYEE COMPENSATION AND BENEFIT PLANS We maintain a defined contribution plan to provide post retirement benefits to our eligible employees. We also maintain additional compensation plans for certain employees. We designed these plans to facilitate a pay-for-performance policy, further align the interests of our officers and key employees with the interests of our shareholders and assist in attracting and retaining employees vital to our long-term success. These plans are summarized below. Retirement Plan We maintain a defined contribution 401(k) plan. We match 50% of each employee’s contributions, limited to 2% of the employee’s compensation. Our contributions to the 401(k) plan were $238, $233 and $403 for the years ended December 31, 2011, 2010 and 2009, respectively. Annual Incentive Plan The Ocwen Financial Corporation Amended 1998 Annual Incentive Plan (the AIP) is our primary incentive compensation plan for executives and other key employees. Under the terms of the AIP, participants can earn cash and equity-based awards as determined by the Compensation Committee of the Board of Directors. The awards are generally based on objective performance criteria established by the Committee which includes corporate profitability, growth in our core businesses, meeting budget objectives and achieving cost savings through Six Sigma initiatives. The Committee may at its discretion adjust performance measurements to reflect significant unforeseen events. In 2007, the stockholders approved the 2007 Equity Incentive Plan (the 2007 Equity Plan) to replace the 1991 Non-Qualified Stock Option Plan. The 2007 Equity Plan authorizes the grant of stock options, restricted stock or other equity-based awards to employees. At December 31, 2011, there were 11,073,599 shares of common stock remaining available for future issuance under the 2007 Equity Plan. For the past five years we have awarded annual incentive compensation entirely in cash. However, in July 2008, November 2009 and October 2011, we awarded stock options to members of senior management under the 2007 Equity Plan. These awards had the following characteristics in common:
Type of Award |  | Percent of Options Awarded |  |  | Vesting Period
Service Condition: |  |  |  |  |
Time-Based |  |  | 25 | % |  | Ratably over four years (¼ on each of the four anniversaries of the grant date)
Market Condition: |  |  |  |  |  |
Performance-Based |  |  | 50 |  |  | Over three years beginning with ¼ vesting on the date that the stock price has at least doubled over the exercise price and the compounded annual gain over the exercise price is at least 20% and then ratably over three years (¼ on the next three anniversaries of the achievement of the market condition)
Extraordinary Performance-Based |  |  | 25 |  |  | Over three years beginning with ¼ vesting on the date that the stock price has at least tripled over the exercise price and the compounded annual gain over the exercise price is at least 25% and then ratably over three years (¼ on the next three anniversaries of the achievement of the market condition)
Total award |  |  | 100 | % |  |
Stock options awarded prior to 2008 generally vest ratably over a five–year period including the award year. The contractual term of all options granted is ten years from the grant date, except where employment terminates by reason of retirement, in which case the time-based options will terminate no later than three years after such retirement or the end of the option term, whichever is earlier. The terms of the market-based options do not include a retirement provision. Stock option activity for the years ended December 31:
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | Number of Options |  |  | Weighted Average Exercise Price |  |  | Number of Options |  |  | Weighted Average Exercise Price |  |  | Number of Options |  |  | Weighted Average Exercise Price |
Outstanding at beginning of year |  |  | 8,084,953 |  |  | $ | 5.03 |  |  |  | 9,278,581 |  |  | $ | 4.97 |  |  |  | 9,428,952 |  |  | $ | 8.14 |
Granted |  |  | 545,000 |  |  |  | 12.83 |  |  |  | — |  |  |  | — |  |  |  | 415,000 |  |  |  | 8.68 |
Exercised (1) (2) |  |  | (735,225 | ) |  |  | 6.01 |  |  |  | (774,345 | ) |  |  | 4.19 |  |  |  | (526,749 | ) |  |  | 6.37 |
Forfeited |  |  | — |  |  |  | — |  |  |  | (419,283 | ) |  |  | 5.21 |  |  |  | (38,622 | ) |  |  | 12.12 |
Outstanding at end of year (3) |  |  | 7,894,728 |  |  |  | 5.48 |  |  |  | 8,084,953 |  |  |  | 5.03 |  |  |  | 9,278,581 |  |  |  | 4.97 |
Exercisable at end of year (3) (4) |  |  | 4,947,228 |  |  |  | 4.91 |  |  |  | 4,122,453 |  |  |  | 5.13 |  |  |  | 3,486,405 |  |  |  | 4.98 |
(1) | The total intrinsic value of stock options exercised, which is defined as the amount by which the market value of the stock on the date of exercise exceeds the exercise price, was $4,114, $4,265 and $2,306 for 2011, 2010 and 2009, respectively.
(2) | In connection with the exercise of stock options during 2011 and 2010, employees delivered 324,248 and 21,750 shares, respectively, of common stock to Ocwen as payment for the exercise price and the income tax withholdings on the compensation. As a result, a total of 410,977 and 752,595 net shares of stock were issued in 2011 and 2010, respectively, related to the exercise of stock options.
(3) | Excluding 468,750 market-based options that have not met their performance criteria, the net aggregate intrinsic value of stock options outstanding and stock options exercisable at December 31, 2011 was $70,152 and $47,358, respectively.
(4) | The total fair value of stock options that vested and became exercisable during 2011, 2010 and 2009, based on grant-date fair value, was $1,342, $1,948 and $2,294, respectively.
Stock options outstanding at December 31, 2011:
|  |  |  |  | Options Outstanding |  | Options Exercisable |
Award Year |  | Exercise Price Range |  |  | Number (1) |  |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life (2) |  | Number (1) |  |  | Weighted Average Exercise Price |
2011 |  | $ | 12.83 |  |  |  | 545,000 |  |  | $ | 12.83 |  | 10 years |  |  | — |  |  | $ | — |
2009 |  |  | 4.82 – 10.67 |  |  |  | 215,625 |  |  |  | 6.99 |  | 7 years |  |  | 29,375 |  |  |  | 6.81 |
2008 |  |  | 4.82 |  |  |  | 5,872,000 |  |  |  | 4.82 |  | 7 years |  |  | 3,655,750 |  |  |  | 4.82 |
2006 |  |  | 7.16 |  |  |  | 308,753 |  |  |  | 7.16 |  | 5 years |  |  | 308,753 |  |  |  | 7.16 |
2005 |  |  | 5.81 |  |  |  | 245,420 |  |  |  | 5.81 |  | 4 years |  |  | 245,420 |  |  |  | 5.81 |
2004 |  |  | 4.84 |  |  |  | 173,546 |  |  |  | 4.84 |  | 3 years |  |  | 173,546 |  |  |  | 4.84 |
2003 |  |  | 3.72–6.47 |  |  |  | 191,812 |  |  |  | 5.97 |  | 2 years |  |  | 191,812 |  |  |  | 5.97 |
2002 |  |  | 1.13–1.69 |  |  |  | 201,097 |  |  |  | 1.49 |  | 1 year |  |  | 201,097 |  |  |  | 1.49 |
2001 |  |  | 3.49–4.22 |  |  |  | 141,475 |  |  |  | 3.78 |  | (3) |  |  | 141,475 |  |  |  | 3.78 |
|  |  |  |  |  |  | 7,894,728 |  |  |  |  |  |  |  |  | 4,947,228 |  |  |  |  |
(1) | A total of 4,992,312 market-based options were outstanding at December 31, 2011, of which 2,579,813 were exercisable. None of the market performance criteria have been met for the 60,000 market-based options granted in 2009 at an exercise price of $10.67 or the 408,750 market-based options granted in 2011 at exercise price of $12.83. For all other market-based options, which were granted at an exercise price of $4.82, the two levels of market performance criteria were met in August 2009 and October 2011.
(2) | At December 31, 2011, the weighted average remaining contractual term of options outstanding and options exercisable was 6.2 years and 5.7 years, respectively.
(3) | These stock options were exercised in 2012 prior to their expiration date of January 31, 2012.
As a result of the Separation, OCN stock option awards are held by both Ocwen and Altisource employees as follows at December 31, 2011:
Held by Ocwen employees |  |  | 6,051,495 |
Held by Altisource employees |  |  | 1,843,233 |
Total outstanding |  |  | 7,894,728 |
In addition, at December 31, 2011, Ocwen employees held 1,701,312 options to purchase Altisource common stock. We are responsible for fulfilling all stock incentive awards related to OCN common stock, and Altisource is responsible for fulfilling all stock incentive awards related to Altisource common stock regardless of whether such stock incentive awards are held by our or Altisource’s employees. Notwithstanding the foregoing, our stock-based compensation expense, resulting from awards outstanding at the Separation date, is based on the stock incentive awards held by our employees regardless of whether such awards were issued by Ocwen or Altisource. Accordingly, stock-based compensation that we recognize as expense with respect to Altisource stock incentive awards is included in Additional paid-in capital on our Consolidated Balance Sheet. Compensation expense related to options is measured based on the grant-date fair value of the options using an appropriate valuation model based on the vesting condition of the award. The fair value of the time-based options was determined using the Black-Scholes options pricing model, while a lattice (binomial) model was used to determine the fair value of the market-based options. Lattice (binomial) models incorporate ranges of assumptions for inputs. The following assumptions were used to value the 2011 and 2009 stock option awards as of the grant dates.
|  | 2011 |  |  | 2009 |
|  | Black-Scholes |  |  | Binomial |  |  | Black-Scholes |  |  | Binomial |
Risk-free interest rate |  |  | 1.57 | % |  |  | 0.35% – 2.74 | % |  |  | 2.51 | % |  |  | 0.38% – 3.94 | %
Expected stock price volatility (1) |  |  | 41 | % |  |  | 30% - 41 | % |  |  | 38 | % |  |  | 38% – 46 | %
Expected dividend yield |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Expected option life (in years) (2) |  |  | 6.5 |  |  | 4.25 & 5.75 |  |  |  | 5 |  |  | 4.5 & 5.5 |
Contractual life (in years) |  |  | — |  |  |  | 10 |  |  |  | — |  |  |  | 10 |
Fair value |  | $ | 5.51 |  |  | $4.66 & $4.09 |  |  | $ | 3.96 |  |  | $3.99 & $3.40 |
(1) | We estimate volatility based on the historical volatility of OCN’s common stock over the most recent period that corresponds with the estimated expected life of the option.
(2) | For the options valued using the Black-Scholes model we determined the expected life based on historical experience with similar awards, giving consideration to the contractual term, exercise patterns and post vesting forfeitures. The expected term of the options valued using the lattice (binomial) model is derived from the output of the model. The lattice (binomial) model incorporates exercise assumptions based on analysis of historical data. For all options, the expected life represents the period of time that options granted were expected to be outstanding at the date of the award.
The following table sets forth equity-based compensation related to stock options and stock awards and the related excess tax benefit for the years ended December 31:
|  | 2011 |  |  | 2010 |  |  | 2009 |
Equity-based compensation expense: |  |  |  |  |  |  |  |  |
Stock option awards |  | $ | 926 |  |  | $ | 1,088 |  |  | $ | 1,802 |
Stock awards |  |  | — |  |  |  | — |  |  |  | 28 |
Excess tax benefit related to share-based awards |  |  | 2,142 |  |  |  | 3,157 |  |  |  | 551 |
As of December 31, 2011, unrecognized compensation costs related to non-vested stock options amounted to $2,927, which will be recognized over a weighted-average remaining requisite service period of approximately 2.27 years.

X
- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References No definition available. + Details
Name: | us-gaap_CompensationAndEmployeeBenefitPlansTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration