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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
June 12, 1998
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(Date of earliest event reported)
Capital One Financial Corporation
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(Exact name of registrant as specified in its charter)
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Delaware 1-13300 54-1719854
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(State of incorporation (Commission File (IRS Employer
or organization) Number) Identification No.)
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2980 Fairview Park Drive
Suite 1300
Falls Church, Virginia 22042
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (703) 205-1000
Page 1 of 3 Pages
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Item 5. Other Events.
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On June 11, 1998, the Board of Directors of Capital One Financial
Corporation (the "Company") approved a compensation program (EntrepreneurGrant
III) under which senior management can give up fully vested in-the-money stock
options or future cash compensation in exchange for new performance-based stock
options. Under this new program, the Company's two top executives have agreed to
exchange options that have an exercise price of $48.75 per share for new options
at a significantly higher exercise price. This new program is in addition to the
earlier compensation plans, in which they gave up all salary, all cash bonuses,
annual stock option grants and supplemental executive retirement plan benefits
that otherwise would have been payable through 2000.
Richard Fairbank, the Company's Chairman and Chief Executive Officer, will
give up and the Company will cancel options to purchase 100,000 shares at $48.75
per share and Nigel Morris, the Company's President and Chief Operating Officer,
will give up and the Company will cancel options to purchase 66,670 shares at
$48.75 per share. In return, Mr. Fairbank will receive an option to purchase
400,000 shares, and Mr. Morris will receive an option to purchase 266,680
shares. The purchase price for all the shares under these option grants is
$101.3125 per share, based on the average of the high and low trading price of
the Company's common stock on June 11, 1998. These options will vest if the
stock price equals or exceeds $175 per share on or before the third anniversary
of the grant date (June 11, 2001). For this vesting criteria, the stock price
must be at or above $175 on at least ten trading days in any thirty calendar-day
period. The options also vest immediately upon any change of control of the
Company that occurs on or before June 11, 2001. In the event that these options
do not meet this vesting criteria on or before June 11, 2001, the options will
terminate.
The Board also approved a program under which the Company's senior
executives can elect to forego a fixed dollar amount of up to half their annual
bonus for the next three years, in exchange for new performance-based stock
options. This is in addition to elections made by senior executives in December
1997 to participate in a similar program (EntrepreneurGrant II) in which they
could forego up to half their annual bonus. Under this new program, the next two
levels of executives (24 executives, excluding Messrs. Fairbank and Morris) will
receive grants of options with an exercise price and the vesting criteria that
mirror the grants to Messrs. Fairbank and Morris. Under this program, options
to purchase up to a total of 240,093 shares could be awarded. The options also
vest immediately upon any change of control of the Company that occurs on or
before June 11, 2001. Executives will have until June 30, 1998 to make their
elections.
Because these options are performance-based options, the Company will be
required to recognize as compensation expense the difference between the
$101.3125 exercise price of the options and the $175 vesting target. This
expense should be approximately $58 million which will be recognized over the
estimated vesting period of the options, assuming the stock target price is met.
This expense is not expected to have a material effect on the Company's ability
to meet its long term earnings targets.
Page 2 of 3 Pages
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereto duly authorized.
CAPITAL ONE FINANCIAL CORPORATION
Dated: June 12, 1998 By: /s/ John G. Finneran, Jr.
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John G. Finneran, Jr.
Senior Vice President, General Counsel
and Secretary
Page 3 of 3 Pages
