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[LOGO]Capital One
Capital One Financial Corporation
2980 Fairview Park Drive, Suite 1300
Falls Church, Virginia 22042-4500
NOTICE OF ANNUAL STOCKHOLDER MEETING
To be held April 25, 2002
Dear Stockholder:
It is our pleasure to invite you to the annual stockholder meeting of
Capital One Financial Corporation ("Capital One"). The meeting will be held at
10:00 a.m. on Thursday, April 25, 2002 at the Fairview Park Marriott Hotel,
3111 Fairview Park Drive, Falls Church, Virginia 22042-4500.
At our annual meeting you will be asked to:
. Elect three directors;
. Approve the appointment of Ernst & Young LLP as independent auditors
for 2002; and
. Conduct any other business properly brought before the meeting.
We will discuss Capital One's business and financial results for 2001 and
answer any questions you may have. We have also enclosed the 2001 Annual
Report, including our financial statements, with this Notice and Proxy
Statement. You may also access the 2001 Annual Report and the Proxy Statement
at Capital One's website at www.capitalone.com.
If you were a stockholder of record at the close of business on February 28,
2002, you are entitled to vote at our annual meeting.
Your vote is important. Record holders of Capital One common stock can vote
their shares by sending in a signed and dated proxy card by mail, by using a
toll-free telephone number, or via the Internet. Instructions for using these
services can be found on the enclosed proxy card. By following the instructions
on the proxy card, your shares will be voted even if you are unable to attend
the meeting. If you attend the meeting and prefer to vote in person or change
your proxy vote, you may of course do so.
We look forward to seeing you at the meeting.
By Order of the Board of Directors,
/s/ John G. Finneran, Jr.
John G. Finneran, Jr.
Corporate Secretary
March 18, 2002
TABLE OF CONTENTS
Page
----
VOTING MATTERS AND PROCEDURES................................................................. 1
What is the purpose of the annual meeting?................................................. 1
Who can attend the annual meeting?......................................................... 1
Who is requesting my vote?................................................................. 1
Who is entitled to vote?................................................................... 1
Will a list of stockholders be made available?............................................. 1
What constitutes a quorum?................................................................. 1
How do I vote?............................................................................. 1
Can I vote by telephone or via the Internet?............................................... 2
How do I vote my 401(k) Shares?............................................................ 2
Can I get Capital One's annual meeting materials delivered to me electronically next year?. 2
What vote is necessary to approve each item?............................................... 2
What are the Board's recommendations?...................................................... 3
INFORMATION ABOUT CAPITAL ONE'S COMMON STOCK OWNERSHIP........................................ 4
Certain Beneficial Owners.................................................................. 4
Directors and Named Executive Officers..................................................... 5
Section 16(a) Beneficial Ownership Reporting Compliance.................................... 6
INFORMATION ABOUT OUR DIRECTORS AND EXECUTIVE OFFICERS........................................ 7
Introductions.............................................................................. 7
Board Meetings............................................................................. 9
Committee Meetings......................................................................... 9
Compensation of the Board.................................................................. 10
Related Party Transactions................................................................. 12
COMPENSATION OF EXECUTIVE OFFICERS............................................................ 13
Summary Compensation Table................................................................. 13
Option Grant Table......................................................................... 15
Option Exercise and Option Value Table..................................................... 17
Company Arrangements with Executive Officers............................................... 18
Pension Plans.............................................................................. 19
Performance Graph.......................................................................... 20
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION................................ 21
Compensation Philosophy.................................................................... 21
Methodology for Determining Compensation................................................... 21
Components of the Executive Compensation Program........................................... 22
Deductibility of Compensation Expenses..................................................... 24
REPORT OF THE AUDIT COMMITTEE................................................................. 26
ELECTION OF DIRECTORS......................................................................... 27
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS............................................. 28
OTHER BUSINESS................................................................................ 29
ANNUAL REPORT TO STOCKHOLDERS................................................................. 29
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING................................................. 29
INTERNET AND TELEPHONE VOTING................................................................. 29
"HOUSEHOLDING" OF PROXY STATEMENTS AND ANNUAL REPORTS......................................... 30
ELECTRONIC DELIVERY OF FUTURE ANNUAL MEETING MATERIALS........................................ 30
[LOGO]Capital One
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PROXY STATEMENT
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VOTING MATTERS AND PROCEDURES
What is the purpose of the annual meeting?
At Capital One's annual meeting, stockholders will act upon the matters
outlined in the accompanying Notice of Annual Stockholder Meeting. In addition,
Capital One's management will report on our performance during 2001 and respond
to questions from stockholders.
Who can attend the annual meeting?
There are no restrictions on who may attend the meeting or any formal
requirements to attend the meeting. The members of the Board of Directors and
senior management of Capital One, as well as representatives of Ernst & Young
LLP, Capital One's independent auditors during 2001, will attend the meeting.
Who is requesting my vote?
This proxy statement and the proxy card are being mailed and made available
on the Internet at Capital One's website (www.capitalone.com) on or about March
19, 2002. The Board of Directors of Capital One is requesting your vote on the
matters presented in this proxy. The cost of preparing, assembling and mailing
the proxy card, this proxy statement, and other enclosed materials, and all
clerical and other expenses of solicitations will be at the expense of Capital
One. We have retained Innisfree M&A Incorporated to assist us in the
solicitation of proxies for an aggregate fee of $9,000, plus reasonable
out-of-pocket expenses.
Who is entitled to vote?
All holders of record of Capital One's common stock at the close of business
on February 28, 2002 are entitled to vote. All stockholders are entitled to one
vote for each share of common stock held by them for all matters submitted for
a vote at the meeting. Cumulative voting for the election of directors is not
permitted. On February 28, 2002, there were 219,516,887 shares of Capital One's
common stock issued and outstanding.
Will a list of stockholders be made available?
We will make a list of stockholders available at the annual meeting and, for
ten days prior to the meeting, at our Northern Virginia offices located at 2980
Fairview Park Drive, Suite 1300, Falls Church, Virginia 22042-4500. Please
contact Capital One's Corporate Secretary at (703) 205-1000 if you wish to
inspect the stockholders list prior to the annual meeting.
What constitutes a quorum?
A quorum of stockholders is necessary to transact business at the annual
meeting. A quorum exists if the holders of a majority of the shares entitled to
vote are present in person or represented by proxy, including proxies on which
abstentions (withholding authority to vote) are indicated.
How do I vote?
You can vote by either:
. Signing and returning the enclosed proxy card or following the
directions on the card for telephone or Internet voting (see below);
or
. Casting your vote in person at the annual meeting.
1
The individuals identified on the proxy card will vote your shares as you
designate when you cast your vote by signing and mailing the proxy card, by
telephone or via the Internet. If you submit a duly executed proxy card but do
not specify how you wish to vote your shares, the proxy holders will vote your
shares in favor of Items 1 and 2 on the proxy card and at their discretion for
any other matters properly submitted to a vote at the meeting.
If you vote by proxy, you may revoke your proxy or change your vote at any
time prior to the final tallying of votes by (1) delivering a written notice to
Capital One's Corporate Secretary at the address on the Notice of Annual
Stockholder Meeting, (2) executing and delivering a later-dated proxy or (3)
attending the meeting and voting in person.
If you hold Capital One stock in "street name" through a broker, bank or
other nominee, you will need to obtain a proxy form from the institution that
holds your shares if you wish to vote in person at the annual meeting.
Can I vote by telephone or via the Internet?
Instead of submitting your vote on the enclosed paper proxy card, you can
vote by telephone or electronically via the Internet. See "Internet and
Telephone Voting" on page 29 of this proxy statement for additional
information. The telephone and Internet voting procedures are designed to
authenticate your identity, to allow you to vote your shares or give voting
instructions, and to confirm that your instructions have been properly
recorded. Please note that there are separate telephone and Internet voting
arrangements depending upon whether your shares are registered in your own name
through Capital One's stock transfer agent, EquiServe Trust Company, N.A.
("EquiServe"), or held in "street name" through a broker, bank or other nominee.
How do I vote my 401(k) shares?
If you participate in the Capital One Associate Savings Plan (the "Savings
Plan"), you may vote the number of shares of common stock equivalent to your
interest in the Capital One Pooled Stock Fund as credited to your account on
the record date. You may vote by giving instructions to American Express Trust
Company, the trustee, via the voting instruction card being mailed with this
proxy statement to plan participants, by telephone or via the Internet. The
trustee will vote your shares in accordance with your duly executed
instructions received by April 23, 2002. If you do not send instructions, the
trustee will not vote the share equivalents credited to your account.
Can I get Capital One's annual meeting materials delivered to me electronically
next year?
If you vote electronically via the Internet, you can consent to electronic
delivery of future Capital One proxy statements, proxy cards and annual reports
by responding affirmatively to the request for your consent when prompted. See
"Electronic Delivery of Future Annual Meeting Materials" on page 30 of this
proxy statement for additional information. If you consent and Capital One
delivers some or all of its future annual meeting materials to you by
electronic mail or by posting materials to the Internet, you will not receive
paper copies of these materials through the mail. Because electronic delivery
could save Capital One a significant portion of the costs associated with
printing and mailing materials, we encourage you to consent to electronic
delivery.
What vote is necessary to approve each item?
Votes will be tabulated by the Inspector of Elections. The Board of
Directors has appointed a representative of EquiServe to serve as the Inspector
of Elections.
Item 1 on the proxy card requests your vote for the three directors who are
up for re-election this year. You may cast or withhold your vote for each of
the nominees. The affirmative vote of a plurality of the votes cast at the
meeting is required to elect directors. An abstention, therefore, will not be
voted with respect to the director indicated, although it will be counted for
purposes of determining whether there is a quorum.
2
Item 2, the ratification of the selection of Ernst & Young LLP as
independent auditors for 2002, will be approved if the holders of a majority of
the shares present at the annual meeting in person or represented by proxy vote
in favor of Item 2. Abstentions, therefore, have the same effect as a vote
"against" the proposal.
Under New York Stock Exchange rules, if you hold your shares through a
broker and you do not submit a proxy, your broker will have discretionary
authority to vote your shares according to the recommendations of Capital One's
Board of Directors for each Item presented at the annual meeting.
What are the Board's recommendations?
Unless you give other instructions on your proxy card, the people named as
proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors as follows:
. for election of the nominated slate of directors (see page 27); and
. for ratification of the selection of Ernst & Young LLP as Capital
One's independent auditors for 2002 (see page 28).
With respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, at their own discretion.
3
INFORMATION ABOUT CAPITAL ONE'S COMMON STOCK OWNERSHIP
Certain Beneficial Owners
The following lists stockholders that are known to the company to own
beneficially more than 5% of Capital One's common stock.
Amount and Nature of Percent of
Name and Address Beneficial Ownership(1) Class(2)
---------------- ----------------------- ----------
J.P. Morgan Chase & Co.(3)... 12,839,630 5.9%
270 Park Avenue
New York, New York 10017...
Putnam Investments LLC(4).... 12,769,417 5.8%
One Post Office Square
Boston, Massachusetts 02109
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(1) Beneficial ownership is a term broadly defined under Securities and
Exchange Commission ("SEC") rules and regulations. The information
contained in this table is based on Schedule 13G reports filed with the SEC
and the ownership interests indicated are current only as of the dates of
filing with the SEC, as indicated below.
(2) All percentage calculations are based on the number of shares of common
stock issued and outstanding on February 28, 2002, which was 219,516,887.
(3) On a Schedule 13G filed on February 14, 2002, J.P. Morgan Chase & Co.
reported beneficial ownership of 12,839,630 shares of Capital One's common
stock. J.P. Morgan Chase & Co. filed the report on behalf of itself and the
following wholly owned subsidiaries: JP Morgan Chase Bank; J.P. Morgan
Investment Management, Inc.; JP Morgan Trust Co., N.A.; Chase Manhattan,
N.A.; and Robert Fleming Holdings, Ltd. J.P. Morgan Chase & Co. certified
in its Schedule 13G that the shares of common stock were not acquired and
are not held for the purpose of or with the effect of changing or
influencing the control of the issuer of the securities and were not
acquired and are not held in connection with or as a participant in any
transaction having that purpose or effect.
(4) On a Schedule 13G filed on February 13, 2002, Putnam Investments LLC
reported beneficial ownership of 12,769,417 shares of Capital One's common
stock. Putnam Investments LLC, a registered investment adviser, filed the
report on behalf of itself, its parent holding company, Marsh & McLennan
Companies, Inc., and two affiliated registered investment advisers named
Putnam Investment Management, LLC and The Putnam Advisory Company, LLC.
Putnam Investments LLC reported that it shared voting and dispositive power
for the shares with the other two named affiliated investment advisers.
Putnam Investments LLC certified in its Schedule 13G that the shares of
common stock were acquired in the ordinary course of business, were not
acquired for the purpose of and do not have the effect of changing or
influencing the control of the issuer of such securities and were not
acquired in connection with or as a participant in any transaction having
such purposes or effect.
4
Directors and Named Executive Officers
The following table lists the beneficial ownership of Capital One's common
stock, as of February 28, 2002, by our directors and the Named Executive
Officers (as defined herein).
Amount and Nature of Percent of
Name and Address* Beneficial Ownership(1) Class(2)
----------------- ----------------------- ----------
Richard D. Fairbank.......................................... 7,479,530(3)(4) 3.30%
Nigel W. Morris.............................................. 4,033,582(3)(5) 1.80%
John G. Finneran, Jr......................................... 146,704(6) **
Dennis H. Liberson........................................... 264,001(7) **
David M. Willey.............................................. 202,075(8) **
W. Ronald Dietz.............................................. 93,676(9)(10) **
James A. Flick, Jr........................................... 76,500(11) **
Patrick W. Gross............................................. 91,539(9) **
James V. Kimsey.............................................. 154,584(9) **
Stanley I. Westreich......................................... 1,223,269(9)(12) 0.56%
All directors and executive officers as a group (16 persons). 14,390,607(13) 6.21%
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* All addresses are c/o Capital One Financial Corporation, 2980 Fairview
Park Drive, Suite 1300, Falls Church, Virginia 22042-4500.
** Less than .5% of the outstanding shares of common stock.
(1) To Capital One's knowledge, all executive officers and directors
beneficially own the shares shown next to their names either in their sole
names or jointly with their spouses, unless we have indicated otherwise.
The totals include shares of common stock (i) subject to options held by
each person granted under Capital One's 1994 Stock Incentive Plan (the
"1994 Stock Incentive Plan"), Capital One's 1999 Stock Incentive Plan (the
"1999 Stock Incentive Plan") or Capital One's 1995 Non-Employee Directors
Stock Incentive Plan (the "1995 Directors Plan"), that are or will become
exercisable within 60 days of February 28, 2002, and (ii) held by the
executive officer under Capital One's 1994 Associate Stock Purchase Plan
(the "Stock Purchase Plan").
(2) All percentage calculations are based on the number of shares of common
stock issued and outstanding on February 28, 2002, which was 219,516,887.
(3) Includes 107,502 shares owned by Fairbank Morris, Inc. Messrs. Fairbank
and Morris share voting and investment power for these shares.
(4) Includes 6,800,287 shares issuable upon the exercise of options.
(5) Includes 3,924,211 shares issuable upon the exercise of options.
(6) Includes 119,652 shares issuable upon the exercise of options.
(7) Includes 208,240 shares issuable upon the exercise of options.
(8) Includes 151,198 shares issuable upon the exercise of options. Does not
include 8,145 shares and 67,336 shares issuable upon the exercise of
options held by Mr. Willey's spouse and of which Mr. Willey disclaims
beneficial ownership.
(9) Includes 84,000 shares issuable upon the exercise of options.
(10) Does not include 3,555 shares held by Mr. Dietz's spouse and of which Mr.
Dietz disclaims beneficial ownership.
(11) Includes 63,000 shares issuable upon the exercise of options.
(12) Includes 156,000 shares held in a trust, for which Mr. Westreich is the
trustee and ultimate beneficiary. Does not include 7,590 shares held by
Mr. Westreich's spouse and of which Mr. Westreich disclaims beneficial
ownership.
(13) Includes 12,171,777 shares issuable upon the exercise of options for all
directors and executive officers as a group. Does not include the shares
held or issuable upon the exercise of options by others set forth in
footnotes (8), (10) and (12) above.
5
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that Capital
One's executive officers and directors, and persons that beneficially own more
than 10% of Capital One's common stock, file certain reports of beneficial
ownership of the common stock and changes in such ownership with the SEC and
provide copies of these reports to Capital One. Based solely on our review of
these reports and written representations furnished to us, we believe that in
2001 each of the reporting persons complied with these filing requirements,
except for Dennis H. Liberson and Marjorie M. Connelly, who each filed one late
report concerning an exercise of Capital One stock options. Mr. Liberson also
filed a late report regarding the sale of Capital One's common stock.
6
INFORMATION ABOUT OUR DIRECTORS AND EXECUTIVE OFFICERS
Introductions
Capital One's directors and current executive officers are listed with a
brief description of their business experience for the past five years.
Richard D. Fairbank Chairman and Chief Executive Officer Age 51
Mr. Fairbank has been Chairman of the Board of Directors of Capital One
since February 28, 1995. He has been Chief Executive Officer and a director
since July 26, 1994. Mr. Fairbank is also Chairman of the Board of Directors of
MasterCard International, Inc., and is Chairman of the Board of Directors of
Capital One's two principal subsidiaries, Capital One Bank (the "Bank") and
Capital One, F.S.B. (the "Savings Bank"). Mr. Fairbank is also Chief Executive
Officer of the Bank.
Nigel W. Morris President, Chief Operating Officer and Director Age 43
Mr. Morris has been a director of Capital One since February 28, 1995. He
has been President and Chief Operating Officer since July 26, 1994. Mr. Morris
is a director of Covance Inc. He is also a director of the Bank and the Savings
Bank, and is President and Chief Operating Officer of the Bank.
Gregor Bailar Executive Vice President and Chief Information Officer Age 38
Mr. Bailar joined Capital One in November 2001 as Executive Vice President
and Chief Information Officer and is responsible for all technology activities
for Capital One's businesses globally. Prior to joining Capital One, Mr. Bailar
served as Chief Information Officer and Executive Vice President for Operations
and Technology for the National Association of Securities Dealers, Inc./The
Nasdaq Stock Market, from January 1998 until October 2001. From May 1997
through January 1998, Mr. Bailar was Managing Director of the Advanced
Development Group, Global Corporate Banking, for Citicorp, N.A. Mr. Bailar
served as Chief Technology Architect and Director of Enterprise Technology, and
Division Executive of Global Relationship Banking for Citicorp, N.A. from May
1994 through April 1997. Since 2001, Mr. Bailar has also served as a director
of Digitas, Inc.
Marjorie M. Connelly Executive Vice President, Enterprise Services Group Age 40
Ms. Connelly joined Capital One in March 1994. She is Executive Vice
President of the Enterprise Services Group, and is responsible for the
management of the shared operational services supporting multiple lines of
business. These services include direct marketing support, credit processing,
back-office operations (statements, payments, embossing), fraud management,
internet servicing, procurement and outsource management. Ms. Connelly is also
responsible for operations supporting international activities. Ms. Connelly is
currently a member of the VISA USA Card Operations Advisors Committee, VISA
International Risk Advisors Committee, and Banking Industry Technology
Secretariat. Ms. Connelly is also a director of the CJW Medical Center.
John G. Finneran, Jr. Executive Vice President, General Counsel and Corporate Secretary Age 52
Mr. Finneran joined Capital One in September 1994. He is Executive Vice
President, General Counsel and Corporate Secretary and is responsible for
overseeing Capital One's legal and governmental affairs, compliance programs
and internal audit functions.
Larry Klane Executive Vice President, Corporate Development Age 41
Mr. Klane joined Capital One in June 2000. He is Executive Vice President,
Corporate Development, responsible for corporate acquisitions and managing
Amerifee Corporation and PeopleFirst, Inc., two of Capital One's subsidiaries.
From October 1997 to May 2000, Mr. Klane served as Managing Director, Corporate
Trust and Agency Services at DeutscheBank/Bankers Trust, where he was
responsible for managing the global business. From September 1994 to October
1997, Mr. Klane served as Managing Director, Strategy and Business
7
Development at DeutscheBank/Bankers Trust, where he was responsible for
developing and implementing strategy, including mergers and acquisitions and
divestitures, for Global Institutional Services.
Dennis H. Liberson Executive Vice President, Human Resources Age 46
Mr. Liberson joined Capital One in February 1995. He is Executive Vice
President in charge of Human Resources and Corporate Real Estate and is
responsible for the development and implementation of human resources programs,
including programs related to compensation, benefits, recruitment, employee
development, corporate real estate and capacity planning.
William J. McDonald Executive Vice President, Brand Management Age 45
Mr. McDonald joined Capital One in September 1998. He is Executive Vice
President for Brand Management, responsible for the marketing, advertising and
global brand positioning of Capital One's businesses. Prior to joining Capital
One, Mr. McDonald took a 15-month sabbatical. From March 1993 to June 1997, Mr.
McDonald served as Executive Vice President and Chief Marketing Officer at
Boston Chicken, Inc., where he was responsible for marketing and research and
new product development functions, including brand growth strategies for Boston
Market.
Peter A. Schnall Executive Vice President Age 38
Mr. Schnall joined Capital One in August 1996. He is an Executive Vice
President and is responsible for the marketing, credit policy and portfolio
management of Capital One's Prime Plus card businesses in the United States. In
addition, Mr. Schnall oversees credit risk management across the company.
David M. Willey Executive Vice President and Chief Financial Officer Age 41
Mr. Willey is Capital One's Executive Vice President and Chief Financial
Officer. He has been employed in various capacities by Capital One and its
predecessor since September 1989. Mr. Willey is responsible for all financial
business line finance groups, including treasury and financial risk management,
corporate accounting and reporting, planning, and corporate communications. Mr.
Willey is also a director of the Bank and a director and President of the
Savings Bank.
Catherine West Executive Vice President, U.S. Consumer Operations Age 42
Ms. West joined Capital One in March 2000. She is Executive Vice President,
U.S. Consumer Operations, and is responsible for customer relations,
collections and recoveries and customer contract operations in the United
States. Prior to joining Capital One, Ms. West was Executive Vice President of
Marketing Services and Operations for First USA Bank, where she was responsible
for managing and growing inbound operations, retention, loyalty, sales and
proactive servicing operations. From 1995 to 1998, Ms. West was Executive Vice
President, Cardmember Operations at First USA Bank, where she directed the
operations of six sites.
W. Ronald Dietz Director Age 59
Mr. Dietz has been Managing Partner of Customer Contact Solutions, LLC, an
advisory firm offering services in a broad range of customer handling and call
center performance areas, since January 1999. As of January 1, 2002, Mr. Dietz
has also become President of W.M. Putnam Company, a nationwide provider of both
outsourced facilities management services to companies with networks of smaller
offices as well as the outsourced supply and internal distribution of office
consumables to large companies. He has been a director of Capital One since
February 28, 1995. From September 1996 to September 1997 and from May 1998 to
December 1998, he was President of Charter Associates, Ltd., a firm engaged in
a variety of consulting and venture management activities. From September 1997
to May 1998, Mr. Dietz was the Chief Executive Officer of Technical Assistance
Research Program in Rosslyn, Virginia, a call center and customer service
advisory firm. Mr. Dietz is also a director of the Savings Bank.
8
James A. Flick, Jr. Director Age 67
Mr. Flick has been President and Chief Executive Officer of Winnow, Inc., a
management consulting firm, since May 1994. From May 1994 until April 2001, he
was also President and CEO of Dome Corporation, Baltimore, Maryland, a real
estate development and management services company. He has been a director of
Capital One since February 28, 1995. Mr. Flick is also a director of FTI
Consulting, Inc. In addition, Mr. Flick is a director of the Bank and the
Savings Bank.
Patrick W. Gross Director Age 57
Mr. Gross is a founder of American Management Systems, Inc., Fairfax,
Virginia, an information technology consulting, software development, and
systems integration firm, and is currently Chairman of its Executive Committee.
He has served as a Principal Executive Officer and Managing Director of AMS
since its incorporation in 1970. Mr. Gross is also Chairman of the board of
directors of Baker and Taylor Holdings, Inc., Charlotte, North Carolina, a
private company, and a director of Computer Network Technology Corporation,
Minneapolis, Minnesota, Landmark Systems Corporation, Reston, Virginia, and
Mobius Management Systems, Inc., all public companies. He has been a director
of Capital One since February 28, 1995. Mr. Gross is also a director of the
Savings Bank.
James V. Kimsey Director Age 62
Mr. Kimsey is the founding Chief Executive Officer and is currently Chairman
Emeritus of America Online, Inc., Dulles, Virginia, and Chairman of the Kimsey
Foundation. He is a director of Batterson Venture Partners and is on the Board
of Advisors of Carousel Capital Partners. He has been a director of Capital One
since February 28, 1995. Mr. Kimsey is also a director of the Bank.
Stanley I. Westreich Director Age 65
Mr. Westreich has been President of Westfield Realty, Inc., Arlington,
Virginia, a real estate development and construction company, since 1965. He
has been a director of Capital One since July 26, 1994. Mr. Westreich is also a
director of the Bank.
Board Meetings
The Board of Directors oversees Capital One's business and directs its
management. The Board does not involve itself with the day-to-day operations
and implementation of the business. Instead, the Board meets periodically with
management to review Capital One's performance and its future business
strategy. Members of the Board also regularly consult with management to keep
informed about Capital One's progress. The full Board of Directors met seven
times during 2001. Each director attended at least 75% of the aggregate of the
meetings of the Board and the committees on which he served during the year.
Committee Meetings
The Board also conducts business through two committees: the Audit Committee
and the Compensation Committee. The Compensation Committee met seven times and
the Audit Committee met six times during 2001.
The Audit Committee Members: Messrs. Dietz (Chairman), Flick and Gross. The
Audit Committee recommends the selection of independent
auditors, approves the scope of the audits by the
independent auditors and our internal auditors, and
reviews audit findings, accounting policies and
compliance matters. The Audit Committee investigates any
audit or compliance matter brought to its attention. The
Audit Committee also reviews all reports of examination
and management's responses and any transactions between
Capital One and any of its directors, executive officers
or their affiliates. All of the members of the Audit
Committee are independent, financially literate and have
accounting or related financial management experience, as
such qualifications are defined in the listing standards
of the New York Stock Exchange and interpreted by the
Board of Directors in its business judgment. The Board of
Directors and the Audit Committee have adopted a Charter
for the Audit Committee.
9
The Compensation Members: Messrs. Westreich (Chairman), Kimsey and
Committee Dietz. The Compensation Committee recommends officers
for election or re-election and approves all salary
levels and incentive awards for executive officers,
subject to the Board's approval of compensation for
Messrs. Fairbank and Morris. The Compensation Committee
also administers Capital One's 1994 Stock Incentive Plan,
1999 Stock Incentive Plan, 2002 Non-Executive Officers
Stock Incentive Plan and Associate Stock Purchase Plan.
The Compensation Committee is composed entirely of
directors who are not employees of Capital One and who
are free from any relationships that in the opinion of
the Board of Directors would interfere with their
exercise of independent judgment.
Compensation of the Board
Annual Fees and Directors who are not employees of Capital One receive a
Option Grants retainer of $35,000 each year, options to purchase 21,900
shares every three years, and reimbursement of their
expenses to attend meetings. They do not receive any
additional fees for attending meetings or for being
members of the Audit Committee or the Compensation
Committee, other than reimbursement of taxes arising from
certain income attributable to them in connection with
the Board's annual offsite meeting.
Each non-employee director has elected to give up their
retainer and options for the years 1999, 2000 and 2001 in
exchange for a one-time grant of performance-based
options to purchase 99,498 shares of Capital One's common
stock under Capital One's 1999 Non-Employee Directors
Stock Incentive Plan (the "1999 Directors Plan"). These
options were granted on April 29, 1999 and have an
exercise price of $56.4583, which was the common stock's
fair market value on that date (determined on the basis
of the average of the high and low sales prices as
reported by the New York Stock Exchange Composite
Transaction Tape). These options will vest if Capital
One's stock price reaches and remains at or above $100
for at least 10 trading days in any 30 calendar-day
period on or before June 15, 2002. If the options do not
reach this vesting target, they will terminate. The
options will also vest immediately upon a change of
control of Capital One on or before June 15, 2002. If a
director ceases to serve as a director before the annual
stockholder meeting in 2002, he will relinquish a pro
rata portion of any unvested options based on the number
of full years he has served as a director since April
1999. If these options vest, they will be generally
exercisable until the earlier of April 29, 2009 or three
years after the director ceases to serve as a director,
but may terminate sooner if the director dies or ceases
to serve as a director before the options become
exercisable.
In addition, each non-employee director agreed to give up
his retainer and stock options for the years 2002, 2003
and 2004 in exchange for a one-time grant of
performance-based options to purchase 61,000 shares of
Capital One's common stock under the 1999 Directors Plan.
These options were granted on October 18, 2001 and have
an exercise price of $48.535, which was the common
stock's fair market value on that date (determined on the
basis of the average of the high and low sales prices as
reported by the New York Stock Exchange Composite
Transaction Tape). These options will vest on October 18,
2010, or earlier under the following circumstances: (i)
immediately upon a change of control of Capital
10
One; (ii) 20 days after Capital One achieves cumulative
earnings per share of $5.03 or more in four consecutive
fiscal quarters on or before December 31, 2004, or (iii)
if Capital One's common stock achieves the following fair
market value for any five (5) trading days on or before
the following dates:
October 18, 2004 $ 83.87
October 18, 2005 $100.64
October 18, 2006 $120.77
October 18, 2007 $144.92
October 18, 2008 $173.91
October 18, 2009 $208.70
October 18, 2010 $250.43
If a director ceases to serve as a director before the
annual stockholder meeting in 2005, he will relinquish a
pro rata portion of any unvested options based on the
number of full years he has served as a director since
April 2002. The options are generally exercisable until
the earlier of October 18, 2011 or three years after the
director ceases to serve as a director, but may terminate
sooner if the director dies or ceases to serve as a
director before the options become exercisable.
Directors who are employees of Capital One receive no
additional compensation for their service as directors.
Other Benefits Under our 1994 Deferred Compensation Plan, directors who
are not employees of Capital One may voluntarily defer
all of their annual fees and receive deferred income
benefits. Director's accounts are credited monthly with
an interest equivalent in an amount determined from time
to time by Capital One. Directors electing this deferral
will begin to receive their deferred income benefits in
cash when they cease to be directors, or earlier if
authorized by the Compensation Committee. Benefits are
generally payable in monthly installments beginning
within 90 days after retirement and extending no later
than the date the individual reaches age 80. If a
director dies before he receives these benefits, they
will be paid to his beneficiaries or estates. Upon a
change of control of Capital One and unless otherwise
directed by a director, Capital One shall pay to each
director within thirty days of the change of control, a
lump sum cash payment equal to such director's account
balance as of the date of the change of control.
11
Related Party
Transactions From time to time, Capital One has retained American
Management Systems, Inc. ("AMS"), a consulting company
specializing in information technology, applications and
systems integration, to provide certain services. Mr.
Gross, a director of Capital One, is also a director and
principal executive officer of AMS. Capital One and its
subsidiaries entered into an agreement with AMS on April
5, 1995. Under this agreement, AMS agreed to perform
general consulting and other tasks agreed to through work
orders. During 2001, Capital One paid AMS a total of $1.4
million for services under this agreement. Capital One
intends to continue its relationship with AMS in the
future and believes that the terms of existing AMS
agreements are, and that any future arrangements will be,
fair and reasonable and no less favorable to Capital One
than those we could obtain from unrelated third parties.
The Board of Directors has reviewed the arrangement
between Capital One and AMS and has determined in its
business judgment that it does not interfere with Mr.
Gross' exercise of independent judgment as a member of
the Audit Committee. In discharging its responsibility
for making this determination under the New York Stock
Exchange listing standards, the Board of Directors
considered, among other factors, the materiality of the
relationship to Capital One, to Mr. Gross, and to AMS.
12
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation awarded to, earned by or paid to
our Chief Executive Officer and the other four most highly compensated
executive officers for the year ended December 31, 2001 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
---------------------------- ------------
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus(1) Options Compensation
------------------ ---- -------- -------- ------------ ------------
RICHARD D. FAIRBANK...................... 2001 $ 0(2) $ 0(2) 3,560,206(3) $ 0
Chairman of the Board 2000 $ 0(4) $ 0(2) 71,342 $ 0
and Chief Executive Officer 1999 $ 0(4) $ 0(5) 1,130,661(2) $ 0
NIGEL W. MORRIS.......................... 2001 $ 0(2) $ 0(2) 2,304,000(3) $ 0
President, Chief Operating 2000 $ 0(4) $ 0(2) 0 $ 0
Officer and Director 1999 $ 0(4) $ 0(5) 753,774(2) $ 0
JOHN G. FINNERAN, JR..................... 2001 $363,333 $940,000 378,585(3) $70,995(8)
Executive Vice President, General 2000 $348,000 $254,580(6) 41,309(7) $20,722
Counsel and Corporate Secretary 1999 $284,667 $252,360(6) 133,906(7) $11,702
DENNIS H. LIBERSON....................... 2001 $312,917 $810,750 389,326(3) $65,417(8)
Executive Vice President, Human Resources 2000 $290,000 $227,864(6) 48,670(7) $17,243
1999 $226,875 $203,274(6) 135,345(7) $11,307
DAVID M. WILLEY.......................... 2001(9) $335,083 $893,000 379,870(3) $69,353(8)
Executive Vice President and 2000 $315,500 $239,650(6) 61,229(7) $16,277
Chief Financial Officer 1999 $254,167 $227,066(6) 143,055(7) $16,743
--------
(1) Bonuses earned and reported for each calendar year are paid during the
following calendar year.
(2) Under a compensation package approved by the Board of Directors on April
29, 1999 (EntrepreneurGrant IV), Messrs. Fairbank and Morris agreed to
forego all salary and any benefits under Capital One's Associate Stock
Purchase Plan ("Stock Purchase Plan"), Associate Savings Plan ("Savings
Plan"), and Unfunded Excess Savings Plan ("Excess Savings Plan") for the
year 2001 and all potential annual cash incentives, annual stock option
grants and Senior Executive Retirement Plan contributions for the years
2000 and 2001 in exchange for an award of performance-based options. The
base salaries that Messrs. Fairbank and Morris would otherwise have
received in 2001 were $1,000,000 and $700,000, respectively. At the time of
the EntrepreneurGrant IV, estimated 2001 cash incentive bonuses for Messrs.
Fairbank and Morris were $1,488,375 and $1,157,625, respectively. Capital
One's EntrepreneurGrant programs are more fully described on pages 23-24 of
the "Report of the Compensation Committee on Executive Compensation".
(3) Includes new stock options and reload options under the 1994 Stock
Incentive Plan. Under a compensation package approved by the Board of
Directors on October 18, 2001 (EntrepreneurGrant V), Messrs. Fairbank and
Morris agreed to give up their entire salary and all benefits under the
Stock Purchase Plan, the Savings Plan and the Excess Savings Plan, plus all
potential annual cash incentives, annual stock option grants and Senior
Executive Retirement Plan contributions for the years 2002 and 2003 in
exchange for an award of stock options. Under this agreement, Messrs.
Fairbank and Morris were granted 2,121,000 and 1,414,000 performance-based
stock options, respectively, and 1,335,000 and 890,000 time-based stock
options, respectively. Also under EntrepreneurGrant V, Messrs. Finneran,
Liberson and Willey elected to forgo up
13
to 50% of their expected annual cash incentives for compensation years 2002,
2003 and 2004 in exchange for performance-based stock options. The number of
stock options indicated next to their names for 2001 includes the following:
Mr. Finneran 98,585; Mr. Liberson 84,892; and Mr. Willey 90,643. Capital
One's EntrepreneurGrant programs are more fully described on pages 23-24 of
the "Report of the Compensation Committee on Executive Compensation."
(4) Under a compensation package approved by the Board of Directors on December
18, 1997 (EntrepreneurGrant II), Messrs. Fairbank and Morris agreed to give
up their entire salary and all benefits under the Stock Purchase Plan, the
Savings Plan and the Excess Savings Plan for 1998, 1999 and 2000 in
exchange for an award of performance-based options. Under this agreement,
Messrs. Fairbank and Morris were granted 1,234,359 and 822,906 options,
respectively. Capital One achieved the performance targets in 1998 and all
of these options became exercisable.
(5) Under a compensation package approved by the Board of Directors on
September 15, 1995 (EntrepeneurGrant I), Messrs. Fairbank and Morris agreed
to give up all incentive compensation (other than salary and contributions
under the Stock Purchase Plan, the Savings Plan and the Excess Savings
Plan) for a period of five years beginning with the 1995 calendar year in
exchange for performance-based options. Capital One achieved the
performance targets and all of these options are exercisable.
(6) Under Capital One's EntrepreneurGrant II program, Messrs. Finneran,
Liberson and Willey elected to forego a portion of their cash bonuses for
three years beginning in 1998, in amounts equal to up to 50% of their
annual target bonuses, in exchange for performance-based stock options
granted in 1997. Under Capital One's EntrepreneurGrant III program, Messrs.
Finneran, Liberson and Willey elected to forego an additional part of their
cash bonuses for three years beginning in 1998, in amounts equal to up to
50% of their annual target bonuses (in addition to amounts previously
foregone under EntrepreneurGrant II) in exchange for performance-based
options granted in 1998. Capital One has achieved both the
EntrepreneurGrant II and the EntrepreneurGrant III performance targets and
all of these options are exercisable. Capital One's EntrepreneurGrant
programs are more fully described on pages 23-24 of the "Report of the
Compensation Committee on Executive Compensation." The amounts shown in
this table are cash bonuses awarded, net of amounts foregone. Cash bonuses
otherwise payable to Messrs. Finneran, Liberson and Willey were reduced for
1999 and 2000, as follows:
Bonuses Foregone for Stock Option Grants
-----------------------------------------
Executive 1999 2000
--------- -------- --------
Mr. Finneran.... $135,720 $141,420
Mr. Liberson.... $108,576 $113,136
Mr. Willey...... $119,434 $124,450
(7) Includes new stock options and reload options under the 1994 Stock
Incentive Plan and the 1999 Stock Incentive Plan. Under Capital One's
EntrepreneurGrant IV program, in 1999 Messrs. Finneran, Liberson and Willey
elected to forego annual stock option grants from Capital One for
compensation years 1999 and 2000 in exchange for an award of stock options.
The number of stock options indicated next to their names for 1999 includes
132,708 options awarded pursuant to EntrepreneurGrant IV. Capital One's
EntrepreneurGrant programs are more fully described on pages 23-24 of the
"Report of the Compensation Committee on Executive Compensation."
(8) All other compensation consists of the amount of contributions Capital One
made under the Stock Purchase Plan and the Savings Plan and credits to the
account of the associate under the Excess Savings Plan. For 2001, matching
company contributions equal to 17.65% of the associate contributions under
the Stock Purchase Plan were: Mr. Finneran $0; Mr. Liberson $2,762; and Mr.
Willey $0. For 2001, Capital One's contributions to the Savings Plan were:
Mr. Finneran $15,300; Mr. Liberson $15,300; and Mr. Willey $15,300. The
amounts of matching credits under the Excess Savings Plan during 2001 were:
Mr. Finneran $40,312; Mr. Liberson $33,370; and Mr. Willey $36,426.
(9) Does not include compensation paid to Mr. Willey's spouse, who has been
employed by Capital One or its predecessor since 1990 and is a Vice
President. During 2001, Mr. Willey's spouse earned a total salary and
14
bonus of approximately $413,067. She also received 76,427 options to
purchase stock, including reload options, 2,580 shares of restricted stock,
a special retention grant received by all Vice Presidents of Capital One,
and options from participation in Entrepreneur Grant V. From time to time,
Mr. Willey's spouse also exercises stock options that have been granted to
her during the course of her career with Capital One. Capital One believes
that she has been compensated fairly and reasonably for her services as
compared to similarly situated executives at Capital One.
Option Grant Table
The following table sets forth information concerning grants of stock
options made to the Named Executive Officers in 2001.
2001 OPTION GRANTS
Individual Grants
----------------------------------------------------
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of Stock
Securities Options Price Appreciation For Option
Underlying Granted to Exercise Term(1)
Options Associates for the Price per Expiration -----------------------------
Name Granted 2001 Fiscal Year Share(2) Date 5% 10%
---- ---------- ------------------ --------- ---------- ----------- ------------
Richard D. Fairbank.......... 104,206(3) 0.49% $ 66.790 11/15/04 $ 1,431,392 $ 3,069,508
2,121,000(4) 10.05% $ 48.535 10/18/11 $64,740,131 $164,064,228
1,335,000(5) 6.32% $ 48.535 10/18/11 $40,748,739 $103,265,321
Nigel W. Morris.............. 1,414,000(4) 6.70% $ 48.535 10/18/11 $43,160,088 $109,376,138
890,000(5) 4.22% $ 48.535 10/18/11 $27,165,826 $ 68,843,547
John G. Finneran, Jr......... 98,585(4) 0.47% $ 48.535 10/18/11 $ 3,009,149 $ 7,625,776
175,000(5) 0.83% $ 48.535 10/18/06 $ 2,346,645 $ 5,185,443
105,000(5) 0.50% $ 49.065 12/13/11 $ 3,239,955 $ 8,210,682
Dennis H. Liberson........... 14,802(3) 0.07% $64.6875 01/23/07 $ 325,642 $ 738,774
9,411(3) 0.04% $64.6875 12/11/07 $ 244,357 $ 568,169
221(3) * $62.8375 12/11/07 $ 5,260 $ 12,121
84,892(4) 0.40% $ 48.535 10/18/11 $ 2,591,193 $ 6,566,591
175,000(5) 0.83% $ 48.535 10/18/06 $ 2,346,645 $ 5,185,443
105,000(5) 0.50% $ 49.065 12/13/11 $ 3,239,955 $ 8,210,682
David M. Willey.............. 9,227(3) 0.04% $ 67.485 12/11/07 $ 232,379 $ 534,281
90,643(4) 0.43% $ 48.535 10/18/11 $ 2,766,733 $ 7,011,444
175,000(5) 0.83% $ 48.535 10/18/06 $ 2,346,645 $ 5,185,443
105,000(5) 0.50% $ 49.065 12/13/11 $ 3,239,955 $ 8,210,682
--------
* Less than .01% of total options granted to associates in 2001.
(1) The dollar amounts under these columns are calculated based on assumed
rates of stock appreciation prescribed by the SEC and are not intended to
be a forecast of possible future stock price appreciation.
(2) Equal to the fair market value of the common stock on the date of grant
determined on the basis of the average of the high and low sales prices as
reported by the New York Stock Exchange Composite Transaction Tape.
(3) These options are reload options that were granted under the 1994 Stock
Incentive Plan. Reload options are granted at the time an executive officer
surrenders shares of common stock that have been owned for at least six
months as payment for the exercise price of a previously granted option.
One reload option with an exercise price equal to the fair market value on
the date of grant is issued for each such share surrendered. Rather than
enhance his or her holdings, reload options are intended to enable an
associate who exercises an option by tendering previously owned shares to
remain in the same economic position, or "equity position,"
15
with respect to potential appreciation in the common stock as if he or she
had continued to hold the original option unexercised. As such, reload
options meet Capital One's objective of fostering continued stock ownership
by our associates, but the receipt of reload options by an associate does
not result in a net increase in his or her equity position. Reload options
are exercisable, in full, six months after their grant date and immediately
upon a change of control. Reload options do not have a reload feature.
(4) On October 18, 2001, the Board of Directors approved awards of options to
Messrs. Fairbank, Morris, Finneran, Liberson and Willey under
EntrepreneurGrant V. Messrs. Fairbank and Morris were granted
performance-based and time-based awards in exchange for their agreement to
forgo all salary and any benefits under the Stock Purchase Plan, the
Savings Plan and the Excess Savings Plan, plus all potential annual cash
incentives, annual stock option grants and Senior Executive Retirement Plan
contributions, for the years 2002 and 2003. Messrs. Finneran, Liberson and
Willey were granted awards of performance-based options in exchange for
their election to forgo up to 50% of their expected annual cash incentives
for compensation years 2002, 2003 and 2004. All of these options vest on
October 18, 2007. Vesting of the performance-based options will be
accelerated if (i) the fair market value of Capital One's common stock
reaches and remains at or above $83.87, $100.64, $120.77 or $144.92 for at
least five trading days on or before October 18, 2004, 2005, 2006 or 2007,
respectively; (ii) 20 days after Capital One achieves cumulative earnings
per share of $5.03 or more in four consecutive fiscal quarters on or before
December 31, 2004; or (iii) upon a change of control of Capital One. These
options are transferable only to or for the benefit of immediate family
members. EntrepreneurGrant V is more fully described on pages 23-24 of the
"Report of the Compensation Committee on Executive Compensation."
(5) These options are time-based options that vest in equal annual increments
over three years, are transferable only to or for the benefit of immediate
family members and have a reload feature.
16
Option Exercise and Option Value Table
The following table sets forth information concerning exercises of stock
options made by the Named Executive Officers in 2001 and the values of
unexercised options held by the Named Executive Officers at 2001 year end.
2001 OPTION EXERCISES AND OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at 2001 In-the-Money Options
Acquired Year End at 2001 Year End
Name on Exercise Value Realized(1) Exercisable/Unexercisable Exercisable/Unexercisable(2)
--------------------- ----------- ----------------- ------------------------- ----------------------------
Richard D. Fairbank.. 2,342,647 $142,231,274 6,800,287/4,586,661 $262,394,872/$20,753,280
Nigel W. Morris...... 1,548,146 $ 89,546,398 3,924,211/3,057,774 $149,775,043/$13,835,520
John G. Finneran, Jr. 305,400 $ 15,530,142 119,652/535,293 $2,069,466/$2,413,712
Dennis H. Liberson... 131,954 $ 6,618,117 208,240/521,600 $4,397,297/$2,331,486
David M. Willey...... 137,637 $ 6,871,381 151,195/527,351 $1,957,060/$2,366,021
--------
(1) The value realized is the net value of the shares (market price less the
exercise price) received.
(2) In-the-Money Options are those for which the 2001 year-end market price of
the underlying shares of common stock exceeded the exercise price of the
option. The value of the In-the-Money Options is the difference between the
market price (determined on the basis of the average of the high and low
sales prices as reported by the New York Stock Exchange Composite
Transaction Tape on the last business day of 2001) of the common stock
($54.54 per share) and the exercise price of the option multiplied by the
number of shares underlying the option.
17
Company Arrangements with Executive Officers
Employment Agreements Capital One does not have employment agreements with any
of its executive officers. The compensation arrangements
with these officers, however, encourage their continued
employment with Capital One.
Change of Control All of the executive officers identified on pages 7-9 of
Employment Agreements "Information About Our Directors and Executive Officers"
have change of control employment agreements. The
agreements are designed to ensure that if a change of
control of Capital One occurs, our business will continue
with minimal disruption because these agreements provide
greater employment security to key operational and
management executives. A change of control will occur if
one or more of the following events take place: (i) an
acquisition of 20% (or, if shares are purchased from
Capital One, 40%) or more of Capital One's common stock
or the combined voting power of the voting securities by
a person or group, (ii) certain changes in the majority
of the Board of Directors, (iii) certain mergers
involving Capital One, or (iv) the liquidation,
dissolution or sale of all or substantially all of
Capital One's assets.
The agreements with Messrs. Fairbank, Morris and Finneran
entitle them to receive (i) their base salary and a pro
rata bonus through the date of termination, (ii) a lump
sum payment of three times their current annual salary
and highest recent bonus, (iii) any deferred compensation
and accrued vacation not yet paid and (iv) certain
retirement and welfare benefits, if within three years of
the change of control they are terminated without cause,
or if they voluntarily leave for good reason (which
includes leaving for any reason during the 30-day period
beginning one year after a change in control). Any cash
payments attributable to salary or bonus will be net of
amounts previously foregone (if any) in exchange for
Capital One stock options. The agreements also provide a
tax gross-up feature to cover excise or similar taxes
(including excise taxes and income taxes imposed upon the
gross-up payment) that the officer may have to pay
resulting from payments received or options that vest due
to a change of control.
All other executive officers identified on pages 7-9 of
"Information About Our Directors and Executive Officers"
have change of control agreements that entitle them to
receive (i) their base salary and a pro rata bonus
through the date of termination, (ii) a lump sum payment
of two times their current annual salary and highest
recent bonus, (iii) any deferred compensation and accrued
vacation not yet paid and (iv) certain retirement and
welfare benefits, if within two years of the change of
control they are terminated without cause, or if they
voluntarily leave for good reason. Any cash payments
attributable to salary or bonus will be net of amounts
previously foregone (if any) in exchange for Capital One
stock options. The agreements also provide a tax gross-up
feature to cover excise or similar taxes (including
excise taxes and income taxes imposed upon the gross-up
payment) that the officer may have to pay resulting from
payments received or options that vest due to a change of
control.
18
Pension Plans
General In 1995, Capital One made a number of changes to its
pension and deferred compensation plans. Among the
changes were that we stopped making further pay-based
contributions to Capital One's cash balance pension plan
(the "Cash Balance Pension Plan") and the related excess
cash balance pension plan (the "Excess Cash Balance
Plan"). Capital One also eliminated the Executive
Employees Supplemental Retirement Plan and the ability of
executive officers to defer compensation under the 1994
Deferred Compensation Plan.
Cash Balance Pension Before each was amended in November 1995, Capital One
Plan and Excess Cash offered a Cash Balance Pension Plan and an Excess Cash
Balance Plan Balance Pension Plan to all full-time salaried associates
and certain executive officers, respectively, of Capital
One and its subsidiaries. The Cash Balance Pension Plan
is a type of defined benefit plan intended to qualify
under Section 401(a) of the Internal Revenue Code, under
which participants were credited with certain pay-based
credits for all annual paid compensation up to $150,000,
as indexed for cost of living increases. The Excess Cash
Balance Plan provided additional benefits to participants
to the extent benefits under the Cash Balance Pension
Plan were restricted because of limitations imposed by
provisions of the Internal Revenue Code.
In November 1995, Capital One amended the Cash Balance
Pension Plan and the Excess Cash Balance Plan to
eliminate further pay-based credits to participants as of
December 31, 1995, and to provide that there would be no
new participants in such plans on or after January 1,
1996. Interest credits continue to be credited on plan
balances on a quarterly basis. Based on account balances
as of January 1, 2002, the projected annual retirement
benefits under the Cash Balance Pension Plan and the
Excess Cash Balance Plan, respectively, are $278 and $685
for Mr. Fairbank; $401 and $526 for Mr. Morris; $193 and
$108 for Mr. Finneran; $173.34 and $7.20 for Mr.
Liberson; and $889 and $164 for Mr. Willey. Messrs.
Fairbank and Morris are currently credited with thirteen
years of service under the plans; Messrs. Finneran,
Liberson and Willey are currently credited with seven,
six and twelve years of service under the plans,
respectively. These projected benefits assume interest
credits under the Cash Balance Plan to be 4.77% per annum
and under the Excess Cash Balance Plan to be 4.75% per
annum.
In lieu of the pay-based credits under the Cash Balance
Pension Plan and the Excess Cash Balance Plan, beginning
January 1, 1996, Capital One began making automatic
contributions equal to 3% of an associate's eligible
compensation to the associate's account in the Savings
Plan and, if applicable, the Excess Savings Plan.
19
Performance Graph
The following graph compares cumulative total stockholder return on our
common stock with the S&P Composite 500 Stock Index and an industry index, the
S&P Financial Composite Index, for the period from December 31, 1996 to
December 31, 2001. The graph assumes that the value of the investment in the
common stock and each index was $100 at December 31, 1996 and that all
dividends were reinvested. The stock price performance on the graph below is
not necessarily indicative of future performance.
[CHART]
5 Year Indexed Total Return to Shareholders
S&P 500 Capital One S&P Financials
1996 100.00 100.00 100.00
1997 133.35 151.77 148.1
1998 171.46 323.27 165.03
1999 207.54 407.38 171.58
2000 188.65 557.63 216.33
2001 166.24 457.98 196.99
1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -------
S & P 500 $100.00 $133.35 $171.46 $207.54 $188.65 $166.24
Capital One $100.00 $151.77 $323.27 $407.38 $557.63 $457.98
S&P Financials Index $100.00 $148.10 $165.03 $171.58 $216.33 $196.99
20
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
As the Compensation Committee of the Board of Directors, we offer this
report to describe the compensation philosophy and policies underlying our
recommendations to the Board of Directors for the 2001 compensation package of
Capital One's senior management generally and the Chief Executive Officer and
the President and Chief Operating Officer more specifically.
Compensation Philosophy
We have designed and adopted a compensation strategy for Capital One's
senior management based on three underlying principles: recruitment and
retention of top executive talent, value creation and flexibility. Although we
believe that executive compensation should be market based, we also believe
that compensation packages have to provide our senior management with the
opportunity for compensation to exceed market standards to enable us to recruit
and retain top performers with the necessary skills and talent. Our senior
management compensation program is therefore heavily focused on equity-based
compensation and the resulting link to stockholder value. In 2001 we used stock
options and, primarily for non-executive officers, restricted stock as the
principal vehicles for our senior managers to achieve an above-market
compensation opportunity. As a result, our compensation packages reward the
accomplishments of senior management primarily to the extent such
accomplishments create stockholder wealth and earnings performance, which we
believe in the long run drives stockholder wealth. We believe that such a
stock-based program best aligns the interests of senior management with the
interests of stockholders and is in the best interests of Capital One and its
stockholders. We expect to continue to rely heavily on stock-based compensation
in 2002 and onward to the extent it is prudent in light of market and business
opportunities. We also believe that Capital One's compensation program must
maintain the flexibility to respond rapidly to market conditions. Accordingly,
from time to time we have adjusted both the cash and long-term incentive
components of our compensation program to maintain management's alignment with
stockholder interests, to enhance recruitment and retention and to promote
Capital One's business strategies.
Methodology for Determining Compensation
Compensation Comparators. In determining the overall amount of compensation
to be paid in 2001, we considered the compensation paid to similar executives
within (i) those organizations against whom Capital One competes to recruit
senior managers, (ii) companies in the financial services sector generally and
(iii) other credit card companies.
Surveys. We reviewed surveys, published by leading compensation consulting
firms, showing compensation levels for senior managers in the group of
comparable companies. In addition, with respect to the compensation of the
Chief Executive Officer, the President and Chief Operating Officer, and our
other named executive officers, we reviewed information presented by our
independent compensation consultants.
Entrepreneurial Approach. To support an entrepreneurial approach, we
developed a compensation package that emphasizes the use of stock-based
incentives. In making the decision on how to structure the compensation package
for all of our executives during 2001, we considered the balance between
vesting based on stock price performance and vesting based on time. We included
both components in our executive compensation in recognition of our sustained
and strong company performance since our initial public offering in 1994 as
well as to provide long-term performance incentives and believe that both
components enhance retention.
In 2001, we provided incentives in the form of stock options for our
executive officers and a combination of stock options and restricted stock for
other members of senior management. Stock options have been the only form of
compensation for our Chief Executive Officer and our President and Chief
Operating Officer since 1997, and they have agreed to forego all salary, bonus,
and annual option grants through 2003 in exchange for further
21
stock options. We believe that stock-based incentives serve to align the
interests of management with those of our stockholders and we periodically
re-evaluate our opportunities to enhance and refine that alignment through
stock-based compensation vehicles.
Tier Structure. Capital One uses management "Tiers" in determining the
overall compensation of its associates, including the executive officers, and
assigns each member of senior management to a designated Tier based on job
responsibility and such associate's contribution to the management of Capital
One. Our senior management comprises Tiers 1 through 4, with our executive
officers as Tier 1.
Components of the Executive Compensation Program
In 2001, senior management was eligible to receive compensation in three
forms:
. base salary;
. annual cash incentive awards that vary with performance; and
. stock-based incentives in the form of annual and special grants of stock
options and, for non-executive officers, restricted stock.
Each compensation component is offered to senior management in various
combinations, depending on the associate's Tier. Capital One targets the total
compensation (base salary, annual cash incentive and stock-based incentives)
for its senior management group at the 75th percentile of similar groups of
senior management at competing companies.
Base Salary. Each management Tier has a salary band. The salary band
defines the minimum and maximum salary levels for the Tier. Aggregate salaries
for the senior management group are based on the 50th percentile for the pool
of similar executives at competing companies. Individual salaries within the
band reflect the associate's scope of responsibility, prior experience and
accomplishments, and other individual factors, as well as market data on salary
levels for comparable positions. Base salaries are adjusted annually within the
salary bands depending on individual performance, and are determined based on
subjective evaluations of various factors, including recent performance and
time in the job. Capital One expects to adhere rigorously to the 50th
percentile level for aggregate senior management salaries and therefore
adjustments in targeted base salaries will be limited only to amounts necessary
to maintain such level.
Annual Cash Incentives. The compensation program also provides senior
management with annual cash incentive awards based on individual and corporate
performance criteria. Annual cash incentive targets in 2001 were a specified
percentage (between 33% and 87%) of the base salary amount for each Tier such
that expected total cash compensation (base salary and annual cash incentives)
for the senior management group is at approximately the 65th percentile of
similar groups of senior management at competing companies. Actual cash
incentive awards are determined based on a combination of corporate and
individual performance and may be greater or less than the targeted annual
incentive. Annual incentives can exceed 300% of the target levels when
performance exceeds the targeted criteria. Performance below the threshold
level results in no award.
Individual performance is based on subjective evaluations of factors similar
to the criteria specified above for adjustments in base salaries. Our
measurement of corporate performance has two components: one based on our
annual growth in earnings per share and another comparing this annual growth in
earnings per share to the median for the companies comprising the Standard &
Poor's 500 Index.
Stock-Based Awards. Senior management earns stock-based awards as part of
their long-term incentive compensation. Stock-based awards may from time to
time consist of stock options, restricted stock or stock appreciation rights.
In 2001, stock-based awards were made primarily in the form of stock options to
purchase Capital One common shares. For our Tier 2, 3 and 4 associates,
stock-based awards also included restricted
22
stock. We believe that stock options and restricted stock also provide senior
management with a strong economic interest to maximize stockholder value, and
align the interests of senior management with those of stockholders. Stock
options are granted with an exercise price equal to or greater than the market
price on the grant date and therefore have no economic value unless Capital
One's stock price increases. Typically, stock options become exercisable in
one-third increments on the first, second and third anniversaries of the grant
date. Restricted stock generally becomes freely transferable in full on the
third anniversary of the grant date. Given Capital One's emphasis on stock
options and restricted stock in the overall compensation package, a senior
manager's total compensation will be highly dependent on the performance of the
common stock. This compensation component is intended to encourage individual
commitment to corporate business strategies and to focus senior management on
improving stock performance.
Individual grants are determined by reference to competitively defined
stock-based award targets that are established for each Tier. Actual grant
levels are further influenced by individual performance. In evaluating
individual performance, we consider a senior manager's responsibilities, recent
performance and accomplishments and the expected future contribution of the
officer to Capital One's performance. We determine individual performance based
on a subjective evaluation of these factors.
In 2001, we recommended and the Board of Directors approved amendments to
the 1994 Stock Incentive Plan to increase the number of shares of common stock
that may be issued pursuant to the exercise of stock options and other
incentive awards by a total of 22,000,000 shares. We used these shares
primarily for annual stock option awards to Tiers 1 through 6,
EntrepreneurGrant V, and a special grant of stock options to all of our senior
managers other than the Chief Executive Officer and the President and Chief
Operating Officer designed to enhance retention and to ensure that the
compensation we pay to our senior management remained competitive. In January
2002, we also recommended and the Board of Directors approved Capital One's
2002 Non-Executive Officer Stock Incentive Plan with 8,500,000 shares of common
stock available for issuance through grants of stock options, restricted stock,
incentive stock and stock appreciation rights. All Capital One associates are
eligible to participate in the 2002 Non-Executive Officer Stock Incentive Plan
except for our Chief Executive Officer, President and Chief Operating Officer,
and the other executive officers.
EntrepreneurGrants. To link management's interest more closely with that of
Capital One's stockholders and to retain our senior management team, we have
developed a series of stock option grants to senior management under which
managers can elect to give up some form of compensation in exchange for an
additional stock option grant. These additional grants are generally referred
to as "EntrepreneurGrants." EntrepreneurGrants have been designed with the aid
of our independent consultants to resemble the compensation structures of
highly entrepreneurial companies and are highly dependent on the performance of
Capital One's common stock.
Capital One has sponsored five separate EntrepreneurGrant programs for its
senior management, beginning in 1995. Generally, senior managers have been
given the chance to forego a portion of their future salaries, cash bonuses or
annual stock option grants in exchange for stock options with an exercise price
not less than the fair market value of Capital One's stock on the date of
grant. In return, the executive received stock options with either an annual
vesting schedule, a cliff vest on a future date, performance-based vesting if
Capital One's stock price or earnings per share growth reached and remained at
a pre-determined level within a specified timeframe, or a combination of those
features. All of Capital One's stock options will vest immediately if a change
of control, as defined in the 1994 Stock Incentive Plan, occurs.
EntrepreneurGrants with performance-based vesting criteria have generally
set the target stock price or earnings per share growth to represent an average
increase of 20% annually from the date of grant through the vesting deadline.
Three of the five EntrepreneurGrant programs have achieved either their target
price or their final vesting date and have therefore vested. In 2001, we
amended an existing EntrepreneurGrant and created a new EntrepreneurGrant. In
May 2001, we modified the terms of the options granted under the
EntrepreneurGrant IV program to extend the performance-based vesting criteria
through 2004 and, for Tier 3 and
23
4 executives only, to add a fixed vesting date in 2005 for 50% of the options
for retention purposes. Under the new provisions, options granted under
EntrepreneurGrant IV will vest on April 29, 2008, or earlier under the
following circumstances: (i) immediately upon a change of control of Capital
One; (ii) on April 29, 2005 for 50% of the options for Tier 3 and 4 managers;
and (iii) if Capital One's common stock achieves the following fair market
value for at least ten (10) trading days in any thirty (30) consecutive
calendar day period on or before the following dates: $120.00 by June 15, 2002,
or $144.00 by June 15, 2004. In October 2001, executives in Tiers 1, 2 and 3
were given the opportunity to forego up to 50% of their anticipated cash
bonuses for 2002, 2003 and 2004 in exchange for performance-based stock options
in the program that we call EntrepreneurGrant V. As part of that program, our
Chief Executive Officer and our President and Chief Operating Officer also
agreed to forego all cash and annual stock option compensation for 2002 and
2003, in exchange for standard and performance-based options.
Participation rates in our EntrepreneurGrants have historically exceeded
85%, with an 89% participation rate in our most recent EntrepreneurGrant in
October 2001. Occasionally, we will offer new members of senior management the
opportunity to participate in a prior grant, with an exercise price reflecting
the higher of the original grant's exercise price or the fair market value of
Capital One's stock on the date of the catch-up grant. Participation rates are
generally slightly lower for catch-up grants.
Compensation of the Chief Executive Officer and the President and Chief
Operating Officer. Mr. Fairbank, our Chief Executive Officer, and Mr. Morris,
our President and Chief Operating Officer, received no cash salary, cash
incentive or annual stock-based incentive for their services during 2001.
Instead, Messrs. Fairbank and Morris have elected under our EntrepeneurGrant
programs to give up their entire salary and cash incentive for 1997 through
2003, and their annual stock option grants for 2000 through 2003, in exchange
for standard and performance-based stock options under the EntrepreneurGrants
described above. In this way, we believe that the interests of our top
executives have been aligned directly with the interests of our stockholders,
so that Messrs. Fairbank and Morris have the opportunity to receive
compensation for their services only if Capital One's stock price reaches and
exceeds pre-determined thresholds.
As with the philosophy discussed above for structuring the compensation
package for all of our executives, our decision regarding the 2001 compensation
for Messrs. Fairbank and Morris was made by valuing their overall incentives in
relation to the 75th percentile of our comparator group and balancing between
vesting based on stock price performance and vesting based on time. We believe
that this process not only ensures alignment with the interests of our
stockholders in the short-term, but also ensures that Messrs. Fairbank and
Morris have incentives that will motivate them to pursue future business growth
opportunities and operational goals that align them with shareholder interests
in the long-term.
Deductibility of Compensation Expenses
Section 162(m) of the Internal Revenue Code provides that compensation that
is paid to the chief executive officer or to any of the four most highly
compensated executive officers (other than the chief executive officer) in
excess of $1 million is generally not deductible by Capital One for federal
income tax purposes unless it qualifies as "performance-based" compensation. To
qualify as "performance-based" under Section 162(m), compensation payments must
be made from a plan that is administered by a committee of outside directors
and must be based on the achievement of objective performance goals. In
addition, the material terms of the plan must be disclosed to and approved by
stockholders, and the Committee must certify that the performance goals have
been achieved. Committee certification is not required, however, if the
compensation is attributable solely to the increase in the value of Capital
One's stock.
The Committee has considered the impact of this tax code provision in
designing Capital One's compensation plans. While certain amounts were
nondeductible in 2001 with respect to compensation paid to our Named Executive
Officers, we believe it is more important to have executive officers focused on
the business opportunities afforded by Capital One's information-based
strategies than to use inappropriate measures to
24
capture the benefits of the tax deduction. Accordingly, the Committee has and
intends in the future to take such steps as it deems reasonably practicable to
minimize the impact of Section 162(m).
The Compensation Committee
Stanley I. Westreich (Chairman)
James V. Kimsey
W. Ronald Dietz
The foregoing Report of the Compensation Committee on Executive Compensation
shall not be deemed to be incorporated by reference into any of Capital One's
previous or future filings with the Securities and Exchange Commission, except
as otherwise explicitly specified by Capital One in any such filing.
25
REPORT OF THE AUDIT COMMITTEE
The Audit Committee's charter was approved by the full Board of Directors on
April 27, 2000 and re-approved on April 26, 2001. A copy of the Audit
Committee's charter was attached as an appendix to Capital One's 2001 Proxy
Statement.
In accordance with its charter, the Audit Committee assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of
Capital One's accounting, auditing and financial reporting practices. As the
Audit Committee, its primary responsibilities can be classified into three
broad categories:
. first, the Audit Committee monitors the integrity of Capital One's
financial statements;
. second, the Audit Committee monitors Capital One's compliance with
legal and regulatory requirements; and
. third, the Audit Committee monitors the independence and performance
of Capital One's independent and internal auditors.
The Audit Committee has implemented procedures to ensure that it devotes the
attention it deems necessary or appropriate to each of the matters assigned to
it under its charter. In carrying out its responsibilities, the Audit Committee
met six times during 2001.
In discharging its oversight responsibility, the Audit Committee has
reviewed and discussed Capital One's audited financial statements for the
fiscal year ended December 31, 2001 with management and Ernst &Young LLP, our
independent auditors. The Audit Committee has also discussed with Ernst & Young
the matters required to be discussed by Statement on Auditing Standards No. 61
(Codification for Statements on Auditing Standards). In addition, the Audit
Committee has received the written disclosures and the letter from Ernst &
Young required by Independence Standards Board Statement No. 1 (Independence
Discussions with Audit Committees) and has discussed Ernst & Young's
independence with Ernst & Young. Based on its review and discussions with
management and Ernst & Young, and pursuant to a delegation of authority from
the Board of Directors, the Audit Committee has approved including the audited
financial statements in our annual report on Form 10-K for the fiscal year
ending December 31, 2001 for filing with the Securities and Exchange Commission.
The Audit Committee
W. Ronald Dietz (Chairman)
James A. Flick, Jr.
Patrick W. Gross
The foregoing Report of the Audit Committee shall not be deemed to be
incorporated by reference into any of Capital One's previous or future filings
with the Securities and Exchange Commission, except as otherwise explicitly
specified by Capital One in any such filing.
26
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The Board of Directors is divided into three classes. At each annual meeting
the term of one class expires. Directors in each class are elected to serve for
three-year terms. At the 2000 annual meeting, Richard D. Fairbank and Stanley
I. Westreich were elected to serve on the Board of Directors for three-year
terms expiring at the annual meeting to be held in 2003. At the 2001 annual
meeting, Nigel W. Morris and W. Ronald Dietz were elected to serve on the Board
of Directors for three-year terms expiring at the annual meeting to be held in
2004. All of the current directors began serving as directors as of the close
of business on February 28, 1995, except Mr. Fairbank and Mr. Westreich, who
have served as directors since July 26, 1994.
The nominees for re-election this year are James A. Flick, Jr., Patrick W.
Gross and James V. Kimsey. Each has consented to serve a three-year term.
Information about the three proposed nominees for election as directors, and
about each other current director whose term will continue after the annual
meeting, is set forth under "Information About Our Directors and Executive
Officers" starting on page 7 of this proxy statement.
In the event a nominee should not continue to be available for election, the
Board may designate a substitute as a nominee. Proxies will be voted for the
election of such substitute. As of the date of this proxy statement, the Board
of Directors has no reason to believe that any of the nominees will be unable
or unwilling to serve.
Directors will be elected by a plurality of the votes cast for the election
of directors at the meeting. Cumulative voting is not permitted.
The Board recommends a vote "FOR" each of these director nominees.
27
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(Item 2 on the Proxy Card)
The Audit Committee, pursuant to authority granted to it by the Board of
Directors, has selected the firm of Ernst & Young LLP as independent auditors
for 2002. The Board is submitting this proposal to the vote of the stockholders
in order to ratify the Audit Committee's selection. If stockholders do not
ratify the selection of Ernst & Young LLP, the Board of Directors will
reconsider the selection of independent auditors.
Capital One has paid or expects to pay the following fees to Ernst & Young
LLP for work performed in 2001 or attributable to Ernst & Young LLP's audit of
Capital One's 2001 financial statements: annual audit $598,000; financial
information system design and implementation $0; and all other fees $4,914,000,
including audit-related services of $2,055,000 and non-audit services of
$2,859,000. Audit-related services generally include fees for Securities and
Exchange Commission registration statements, securitization and other funding
transactions, internal control and compliance procedures related to
securitization trusts, employee benefit and statutory audits, internal audit
assistance and accounting consultations. Non-audit services relate principally
to tax services.
The Audit Committee has reviewed the fees paid to Ernst & Young LLP and has
considered whether the fees paid for non-audit services are compatible with
maintaining Ernst & Young LLP's independence.
Representatives of Ernst & Young LLP are expected to be present at the
annual meeting. They will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
The affirmative vote of a majority of the shares of common stock present in
person or represented by proxy and entitled to vote at the annual meeting is
required to ratify the selection of Ernst & Young LLP as independent auditors
for 2002. Therefore, abstentions effectively count as votes against this
proposal.
The Board recommends a vote "FOR" the ratification of Ernst & Young LLP as
the independent auditors for 2002.
28
OTHER BUSINESS
We know of no other business that will be presented for consideration at the
annual meeting. If other matters are properly brought before the meeting, the
persons named in the accompanying proxy card will vote such proxy at their
discretion.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders for the fiscal year ended December 31,
2001, including consolidated financial statements, is being furnished along
with this proxy statement to stockholders of record on February 28, 2002. The
Annual Report to Stockholders does not constitute a part of the proxy
soliciting material. A copy of our Annual Report on Form 10-K, which is filed
with the Securities and Exchange Commission, may be obtained at the annual
meeting, at the SEC's website at www.sec.gov, at our website at
www.capitalone.com, or by contacting our Investor Relations department at our
address on the Notice of Annual Stockholder Meeting.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
If you wish to present a stockholder proposal at the 2003 annual meeting and
wish to have such proposal considered for inclusion in our 2003 proxy
statement, you must send the proposal, along with any supporting statement, to
our Corporate Secretary, so that it is received at the address on the Notice of
Annual Stockholder Meeting on or before November 20, 2002. All proposals must
comply with applicable SEC regulations.
Under our bylaws, if you wish to nominate directors for election, or present
other business before the stockholders at the annual meeting, you must give
proper written notice of any such nomination or business to the Corporate
Secretary not before January 25, 2003 and not after February 14, 2003. If the
annual meeting for 2002 is not within thirty days before or seventy days after
April 25, 2003, the anniversary date of this year's annual meeting, you must
send notice within ten days following any notice or publication of the meeting.
Your notice must include certain information specified in our bylaws concerning
the nomination or the business. A copy of our bylaws may be obtained from the
Corporate Secretary at Capital One's address on the Notice of Annual
Stockholder Meeting.
INTERNET AND TELEPHONE VOTING
Shares Directly Registered in the Name of the Stockholder
Stockholders with shares registered directly with Capital One's transfer
agent, EquiServe Trust Company, N.A., may vote telephonically by calling
EquiServe at 877-PRX-VOTE (877-779-8683) or electronically via the Internet at
www.eproxyvote.com/cof. Votes submitted telephonically or via the Internet
through EquiServe's program must be received by 11:59 PM (EST) on April 24,
2002. The giving of a proxy by telephone or via the Internet will not affect
your right to vote in person if you decide to attend the annual meeting.
Shares Registered in the Name of a Brokerage Firm or Bank
A number of brokerage firms and banks participate in a program provided
through ADP Investor Communication Services that offers telephone and Internet
voting options. This program is different from the program provided by
EquiServe for shares registered in the name of the stockholder. If your shares
are held in an account at a brokerage firm or bank participating in the ADP
program, you may vote those shares telephonically by calling the telephone
number or via the Internet as set forth on your voting form. Votes submitted
via the Internet through the ADP program must be received by 11:59 PM (EST) on
April 24, 2002. The giving of a proxy by telephone or via the Internet will not
affect your right to vote in person if you decide to attend the annual meeting.
29
Proxies given pursuant to Internet and telephone voting are permitted under
applicable law. These telephone and Internet voting procedures are designed to
authenticate a stockholder's identity, to allow a stockholder to give his or
her voting instructions and to confirm that a stockholder's instructions have
been recorded properly. Stockholders voting via the Internet through either
EquiServe or ADP should understand that there may be costs associated with
electronic access, such as usage charges from Internet access providers and
telephone companies, that must be borne by the stockholder.
"HOUSEHOLDING" OF PROXY STATEMENTS AND ANNUAL REPORTS
Capital One may this year deliver only one copy of this proxy statement and
our 2001 Annual Report to multiple shareholders sharing the same address. This
delivery method, known as "householding," can save Capital One a significant
portion of our printing and mailing costs.
If you did not receive an individual copy of this proxy statement or Capital
One's 2001 Annual Report, and you would like separate copies, please contact
Capital One's Investor Relations department at our address on the front cover
of this proxy statement, or by telephone at (703) 205-1000.
If you would like to receive separate copies of future Capital One proxy
statements and annual reports, or if you are currently receiving multiple
copies and would like to request householding in the future, please contact
your broker or Capital One's Investor Relations department.
ELECTRONIC DELIVERY OF FUTURE ANNUAL MEETING MATERIALS
Capital One is offering its stockholders the opportunity to consent to
receiving Capital One's future proxy materials and annual reports
electronically by providing the appropriate information when you vote via the
Internet. Electronic delivery could save Capital One a significant portion of
the costs associated with printing and mailing its annual meeting materials,
and we hope that our stockholders find this service convenient and useful. If
you consent and Capital One elects to deliver future proxy materials and/or
annual reports to you electronically, then Capital One will send you a notice
(either by electronic mail or regular mail) explaining how to access these
materials but will not send you paper copies of these materials unless you
request them. Capital One may also choose to send one or more items to you in
paper form despite your consent to receive them electronically. Your consent
will be effective until you revoke it by terminating your registration at the
website www.InvestorDelivery.com if you hold shares at a brokerage firm or bank
participating in the ADP program or by contacting EquiServe if you hold shares
in your own name.
By consenting to electronic delivery, you are stating to Capital One that
you currently have access to the Internet and expect to have access in the
future. If you do not have access to the Internet, or do not expect to have
access in the future, please do not consent to electronic delivery because
Capital One may rely on your consent and not deliver paper copies of future
annual meeting materials. In addition, if you consent to electronic delivery,
you will be responsible for your usual Internet charges (e.g., online fees) in
connection with the electronic delivery of the proxy materials and annual
report.
By Order of the Board of Directors,
/s/ John G. Finneran, Jr.
John G. Finneran, Jr.
Corporate Secretary
March 18, 2002
30
[LOGO] Capital One
P
R
O CAPITAL ONE FINANCIAL CORPORATION
X
Y Annual Stockholder Meeting--April 25, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard D. Fairbank and John G. Finneran,
Jr., and either of them, proxies of the undersigned, with full power of
substitution, to vote all the shares of Common Stock of Capital One Financial
Corporation, a Delaware corporation (the "Corporation"), held of record by the
undersigned on February 28, 2002, at the Annual Stockholder Meeting to be held
April 25, 2002, and at any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED STOCKHOLDER. IF NO CHOICE IS SPECIFIED BY THE STOCKHOLDER, THIS
PROXY WILL BE VOTED "FOR" ALL PORTIONS OF ITEMS (1) AND (2), AND IN THE PROXIES'
DISCRETION ON ANY OTHER MATTERS COMING BEFORE THE MEETING.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to such stock and hereby ratifies and confirms all
that said proxies, their substitutes or any of them may lawfully do by virtue
hereof.
Nominees for the Election of Directors are:
01. James A. Flick, Jr. 02. Patrick W. Gross 03. James V. Kimsey
(Continued and to be dated and signed on reverse side)
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SEE REVERSE
SIDE
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o Fold and Detach Here If You Are Returning Your Proxy Solicitation/
Voting Instruction Card By Mail o
X Please mark your
votes as in this
example.
-------------------------------------------------------------------------------
Directors recommend a vote FOR items 1 and 2.
-------------------------------------------------------------------------------
FOR WITHHOLD AUTHORITY FOR AGAINST ABSTAIN
1. Election of 2. Ratification of Ernst In their discretion, the proxies
Directors & Young LLP as are authorized to vote upon such
(All nominees independent other matters as may come before
listed on auditors of the the meeting or any adjournment
reverse side.) Corporation thereof.
for 2002.
To withhold authority to vote for any individual nominee, write such nominee's name in the space provided below.
-------------------------------------- All as more particularly described in
Capital One's Proxy Statement for the
Annual Stockholder Meeting to be held on
April 25, 2002, receipt of which is
hereby acknowledged.
Please date this Proxy Card and sign
your name exactly as it appears hereon.
Where there is more than one owner, each
should sign. When signing as an
attorney, administrator, executor,
guardian or trustee, please add your
title as such. If executed by a
corporation, this Proxy Card should be
signed by a duly authorized officer
indicating such officer's authority. If
executed by a partnership, please sign
in partnership name by authorized
persons indicating such authority.
SIGNATURE(S)______________________________________ DATE_______________________
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o Fold and Detach Here If You Are Returning Your Proxy Solicitation/Voting Instruction Card By Mail o
CAPITAL ONE FINANCIAL CORPORATION
Annual Stockholder Meeting
Thursday, April 25, 2002, 10:00 a.m.
Fairview Park Marriott Hotel
3111 Fairview Park Drive
Falls Church, VA 22042-4500
Capital One Financial Corporation offers three convenient ways to vote your
shares: by mail, by telephone, or electronically via the Internet. Voting by
telephone or via the Internet will eliminate the need to mail voted cards. To
vote by telephone or via the Internet, please have this card and your social
security number available.
1. To vote by telephone:
o Using a touch-tone telephone, dial 1-877-PRX-VOTE (1-877-779-8683).
2. To vote by Internet:
o Log on to the Internet and go to the web site http://www.eproxyvote.
----------------------
com/cof.
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Both the telephone and the Internet voting systems preserve the confidentiality
of your vote and will confirm your voting instructions with you before
submission. If you vote online, you will have the opportunity to consent to
electronic delivery of next year's annual meeting materials.
In order to receive future proxy materials and annual reports electronically,
please visit www.econsent.com/cof to register. To complete the enrollment, you
--------------------
will need your U.S. taxpayer identification number and the account number which
appears on your check stub/Dividend Reinvestment and Stock Purchase Plan
statement.
YOUR VOTE IS IMPORTANT TO US. THANK YOU FOR VOTING.