By its own admission, Ocwen Financial (OCN) is facing 21 pending investigations in 15 different states, is currently facing delisting by New York Stock Exchange for delaying the release of its annual report, and has run afoul of investors and homeowners alike.
Either in spite of or because of those issues, Ocwen said Thursday that it is offering indemnification agreements to each of the company’s directors and executive officers.
Ocwen disclosed the pending indemnification agreements in a filing with the Securities and Exchange Commission.
According to the filing, the company began offering indemnification agreements to its directors and executive officers on March 21. The filing states that the indemnification agreements are required by the company’s governing documents and are “consistent with common practice among public companies.”
The SEC filing states that Ocwen “will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as a director or officer.”
Ocwen also said that it will indemnify its directors and executive officers for any “service at the company's request for another corporation or entity and to advance reasonable expenses incurred as a result of any proceeding against them as to which they could be indemnified.”
Ocwen also disclosed that as part of the indemnification agreements, any director or executive officer that receives an indemnification payment also agrees to repay “any amounts paid, advanced or reimbursed by the company to the extent it is ultimately determined the director or executive officer was not entitled to indemnification,” either by the rule of law or according to the company’s governing documents.
Ocwen also stated that it may enter into similar agreement with any future directors or executive officers.
Ocwen provided a copy of its indemnification agreement in the SEC filing, and the language may provide some indications as to Ocwen’s motivation in offering the indemnification agreements.
According to the SEC filing, “directors, officers and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the company or business enterprise itself.”
Because of that, “highly competent persons have become more reluctant to serve and to continue to serve corporations as directors, officers and in other capacities,” unless they are provided with “adequate indemnification and adequate protection through insurance against inordinate risks of claims and actions against them.”
Ocwen notes that its board determined that the “increased difficulty in attracting and retaining such persons is detrimental to the best interests of the company’s shareholders,” adding that the company “should act to assure such persons that there will be increased certainty of such protection” moving forward.
“It is reasonable, prudent and necessary for the company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the company free from undue concern that they will not be so indemnified,” Ocwen’s indemnification agreement states.