15. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

Common Stock

Our Board of Directors has the power to issue shares of authorized but unissued common stock without further shareholder action subject to the requirements of applicable laws and stock exchanges. At December 31, 2013, we had 100.0 million shares authorized. At December 31, 2013, we had 22.6 million shares of common stock outstanding. The holders of shares of Altisource common stock are entitled to one vote for each share on all matters voted on by shareholders, and the holders of such shares will possess all voting power.

Stock Repurchase Plan

In May 2012, our shareholders approved a new stock repurchase program, which replaced the previous stock repurchase program. Under the program, we are authorized to purchase up to 3.5 million shares of our common stock in the open market in addition to amounts previously purchased under the prior program. From authorization of the previous program in May 2010 through December 31, 2013, we have purchased approximately 3.7 million shares of our common stock in the open market at an average price of $63.04 per share. We purchased 1.2 million shares of common stock at an average price of $116.99 per share during the year ended December 31, 2013 and 0.3 million shares at an average price of $63.25 per share during the year ended December 31, 2012. As of December 31, 2013, approximately 2.3 million shares of common stock remain available for repurchase under the program. Luxembourg law limits share repurchases to approximately the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings, less shares repurchased. As of December 31, 2013, approximately $14 million was available to repurchase our common stock under Luxembourg law. Our senior secured term loan also limits the amount we can spend on share repurchases in any year and may prevent repurchases in certain circumstances. As of December 31, 2013, approximately $55 million was available to repurchase our common stock under our senior secured term loan.

Equity Incentive Plan

Our 2009 Equity Incentive Plan (the “Plan”) provides for various types of equity awards, including stock options, stock appreciation rights, stock purchase rights, restricted shares and other awards, or a combination of any of the above. Under the Plan, we may grant up to 6.7 million Altisource share-based awards to officers, directors, key employees and to employees of our affiliates. As of December 31, 2013, 2.5 million share-based awards were available for future grant under the Plan. The shares will be issued from authorized and unissued shares of our common stock. Expired and forfeited awards are available for reissuance. Vesting and exercise of share-based awards are generally contingent on continued employment.

Share-Based Compensation

We issue share-based awards in the form of stock options and certain other equity-based awards for certain employees and officers. We recorded share-based compensation expense of $2.4 million, $3.6 million and $3.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. The amount for the year ended December 31, 2012 includes the reversal of $0.8 million of share-based compensation expense related to the departure of an executive officer in March 2012.

Outstanding share-based compensation currently consists primarily of stock option grants that are a combination of service-based and market-based options.

Service-Based Options. These options are granted at fair value on the date of grant. The options generally vest over four years with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or following termination of service. A total of 0.8 million service-based awards were outstanding at December 31, 2013.

Market-Based Options. These option grants have two components each of which vest only upon the achievement of certain criteria. The first component, which we refer to internally as “ordinary performance” grants, consists of two-thirds of the market-based grant and begins to vest if the stock price is at least double the exercise price, as long as the stock price realizes a compounded annual gain of at least 20% over the exercise price. The remaining third of the market-based options, which we refer to internally as “extraordinary performance” grants, begins to vest if the stock price is at least triple the exercise price, as long as the stock price realizes a compounded annual gain of at least 25% over the exercise price. The vesting schedule for all market-based awards is 25% upon achievement of the criteria and the remaining 75% in three equal annual installments. A total of 1.8 million market-based awards were outstanding at December 31, 2013.

The Company granted less than 0.1 million stock options (at a weighted average exercise price of $104.84 per share), 0.3 million stock options (at a weighted average exercise price of $69.48 per share) and 0.2 million stock options (at a weighted average exercise price of $33.15 per share) during the years ended December 31, 2013, 2012 and 2011, respectively.

The fair value of the service-based options was determined using the Black-Scholes option pricing model, and a lattice (binomial) model was used to determine the fair value of the market-based options, using the following assumptions as of the grant date:

	2013		2012		2011
	Black-Scholes	Binomial	Black-Scholes	Binomial	Black-Scholes	Binomial

Risk-free interest rate (%)	1.02 — 1.81	0.01 — 2.71	0.87 — 1.17	0.08 — 2.04	1.69 — 1.93	0.04 — 3.03
Expected stock price volatility (%)	36.35 — 36.76	36.40 — 36.80	34.22 — 34.65	34.20 — 34.60	48.00	55.70 — 55.80
Expected dividend yield	—	—	—	—	—	—
Expected option life (in years)	6.25	—	6.25	—	6.25	—
Contractual life (in years)	—	14	—	14	—	14

Fair value	$31.33 — $49.14	$16.12 — $41.72	$19.25 — $29.80	$9.98 — $22.76	$16.33 — $17.85	$16.91 — $20.39

The following table summarizes the weighted-average fair value of stock options granted and the total intrinsic value of stock options exercised for the years ended December 31:

		2013		2012		2011

Weighted average fair value at date of grant		$	32.59	$	20.77	$	17.66
Intrinsic value of options exercised	(in thousands)	40,761		17,598		4,966
Fair value of options vested	(in thousands)	3,156		2,790		3,536

Stock-based compensation expense is recorded net of estimated forfeiture rates ranging from 1% to 10%.

As of December 31, 2013, estimated unrecognized compensation costs related to share-based payments amounted to $2.5 million which we expect to recognize over a weighted average remaining requisite service period of approximately 2.9 years.

The following table summarizes activity of our stock options:

	Number of options		Weighted average exercise price		Weighted average contractual term (in years)	Aggregate intrinsic value (in thousands)

Outstanding at December 31, 2012	3,058,309		$	17.69	6.11	$	211,072
Granted	75,000		104.84
Exercised	(401,718	)	16.48
Forfeited	(142,248	)	55.35

Outstanding at December 31, 2013	2,589,343		18.33		5.20	363,293

Exercisable at December 31, 2013	2,194,755		12.68		4.79	320,326

The following table summarizes information about stock options outstanding and exercisable at December 31, 2013:

	Options outstanding				Options exercisable
Exercise price range	Number	Weighted average remaining contractual life	Weighted average exercise price		Number	Weighted average remaining contractual life	Weighted average exercise price

$0.00 — $10.00(a)	1,700,112	4.49	$	9.14	1,700,112	4.49	$	9.14
$10.01 — $20.00(a)	97,737	2.80	12.45		97,737	2.80	12.45
$20.01 — $30.00(a)	502,686	6.30	23.07		328,625	6.31	23.15
$30.01 — $40.00(a)	61,058	6.98	33.54		23,874	7.30	33.44
$50.01 — $60.00(a)	10,000	8.37	53.00		3,750	8.37	53.00
$60.01 — $70.00(a)	142,750	8.19	60.67		40,657	8.19	60.67
$80.01 — $90.00(a)	15,000	9.12	83.86		—	—	—
$90.01 — $100.00(a)	30,000	9.21	94.19		—	—	—
$120.01 — $130.00(a)	30,000	9.62	125.98		—	—	—

	2,589,343				2,194,755

(a) These options contain market-based components as described above. All other options are time-based awards.

The following table summarizes the market prices necessary in order for the market performance options to begin to vest:

	Market-based options
Vesting price	Ordinary performance		Extraordinary performance

$160.01 — $170.00	7,500		—
Over $170.00	22,500		52,125

	30,000		52,125

Weighted average share price	$	107.27	$	74.08