EXHIBIT 10.9
CAPITAL ONE FINANCIAL CORPORATION
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[_________________]
EMPLOYMENT AGREEMENT
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AGREEMENT by and between CAPITAL ONE FINANCIAL CORPORATION, a Delaware
corporation (the "Company"), and ________________(the "Executive"), dated as of
the 14th day of May 1996.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
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(a) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if the
Executive's employment with the Company is terminated or the terms and
conditions of the Executive's employment are adversely changed in a manner which
would constitute grounds for a termination of employment by the Executive for
Good Reason prior to the date on which a Change of Control occurs, and it is
reasonably demonstrated that such termination of employment or adverse change
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change of Control or (ii) otherwise arose within six
months of and in connection with or anticipation of the Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment or adverse
change.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the third anniversary of such date; provided, however,
that commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate three years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
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Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of
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Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% (or, if such
shares are purchased from the Company, 40%) or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election
of directors (the "Company Voting Securities"), provided, however, that any
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acquisition by (x) the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any of its subsidiaries or (y) any corporation with respect to which,
immediately following such acquisition, more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, in the aggregate by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Company
Voting Securities immediately prior to such acquisition in substantially
the same proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be, shall not constitute a Change of Control;
or
(b) Individuals who constitute the Board as of September 1, 1995 (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent
to September 1, 1995 whose
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appointment to fill a vacancy or to fill a new Board position or whose
nomination for election by the Company's shareholders was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such Business
Combination do not in the aggregate, immediately following such Business
Combination, beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination in substantially the
same proportion as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be; or
(d) (i) a complete liquidation or dissolution of the Company or (ii)
sale or other disposition of all or substantially all of the assets of the
Company other than to a
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corporation with respect to which, immediately following such sale or
disposition, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, in the aggregate by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Company
Voting Securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the Outstanding
Company Common Stock and Company Voting Securities, as the case may be,
immediately prior to such sale or disposition.
(e) Notwithstanding the foregoing, a Change of Control shall not occur
with respect to the Executive by reason of any event which would otherwise
constitute a Change of Control if, immediately after the occurrence of such
event, individuals including such Executive who were executive officers of
the Company immediately prior to the occurrence of such event, own,
directly or indirectly, on a fully diluted basis, (i) 15% or more of the
then outstanding shares of common stock of the Company or any acquiror or
successor to substantially all of the business of the Company or (ii) 15%
or more of the combined voting power of the then outstanding voting
securities of the Company or any acquiror or successor to substantially all
of the business of the Company entitled to vote generally in the election
of directors.
3. Employment Period. The Company hereby agrees to continue the Executive
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in its employ, and the Executive hereby agrees to remain in the employ of the
Company, for the period commencing on the Effective Date and ending on the
second anniversary of such date (the
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"Employment Period").
4. Terms of Employment.
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(a) Position and Duties.
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(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate
in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period
immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office or
location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation, sabbatical and sick or similar leave to which the Executive
is entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of the
Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's reasonable
best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's
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responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent
that any such activities have been conducted by the Executive prior to
the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent
to the Effective Date shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to the Company.
(b) Compensation.
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(i) Base Salary. During the Employment Period, the Executive
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shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the
highest monthly base salary paid or payable, including by reason of
deferral and before any reduction for the amount of such annual base
salary which the Executive may have agreed to forgo in consideration
for the receipt of stock options, to the Executive by the Company and
its affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs.
During the Employment Period, the Annual Base Salary shall be reviewed
at least annually and shall be increased at any time and from time to
time as shall be substantially consistent with increases in base
salary awarded in the ordinary course of business to other peer
executives of the Company and its affiliated companies. Any increase
in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary
shall not be reduced after
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any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term "affiliated companies" includes any
company controlled by, controlling or under common control with the
Company. Any payments of an Executive's Annual Base Salary made under
this Section 4(b)(i) may be reduced to the extent provided in an
election made by an Executive to forgo any or all base salary
otherwise payable in exchange for the receipt of stock options from
the Company. The Company shall maintain an account (the "Stock Option
Purchase Account"), the balance of which, as of any date, shall be
equal to the aggregate dollar amount of base salary and bonuses that
the Executive has agreed to forgo in exchange for the receipt of such
stock options, less the amount of such base salary or bonuses or other
compensation (including amounts payable upon termination of
employment) actually forgone.
(ii) Annual Bonus. In addition to Annual Base Salary, the
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Executive shall be awarded, for each fiscal year beginning or ending
during the Employment Period, an annual bonus (the "Annual Bonus") in
cash at least equal to the sum of the target award under the Company's
Executive Annual Cash Incentive Plan and any other target awards under
any other similar annual incentive plans (or, if no such target award
is designated under the Company's Executive Annual Cash Incentive Plan
or any similar plan, the midpoint between the high and low bonus
payable to the Executive under such plan); provided, however, that
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such target or midpoint, as the case may be, shall not be less than
such target or midpoint under
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such plans in the year immediately preceding the Change of Control
(the "Recent Annual Bonus"). Each such Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded,
unless the Executive shall elect to defer the receipt of such Annual
Bonus. Any payments of an Executive's Annual Bonus made under this
Section 4(b)(ii) may be reduced to the extent provided in an election
made by an Executive to forgo any or all bonus amounts otherwise
payable in exchange for the receipt of stock options from the Company.
(iii) Incentive, Savings and Retirement Plans. In addition to
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Annual Base Salary and Annual Bonus payable as hereinabove provided,
the Executive shall be entitled to participate during the Employment
Period in all incentive, profit-sharing, savings and retirement plans,
practices, policies and programs (including any stock-based plans)
applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with incentive, savings
and retirement benefit opportunities (including under any stock-based
plans), in each case, less favorable, in the aggregate, except as
required to comply with statutory requirements of general application
which limit the level of benefit opportunity, than (x) the most
favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately
preceding the Effective Date or (y) if more favorable to the
Executive, those provided at any time after the
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Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period, the
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Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, split-dollar life insurance,
accidental death and travel accident insurance plans and programs) to
the extent generally applicable to other peer executives of the
Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than (x) the most
favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 90-day period immediately
preceding the Effective Date or (y) if more favorable to the
Executive, those provided at any time after the Effective Date
generally to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall
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be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or,
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if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
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shall be entitled to fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect for the Executive at any time
during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
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Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to personal secretarial and
other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated
companies at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.
(viii) Vacation and Other Paid Leave. During the Employment
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Period, the Executive shall be entitled to paid vacation and other
paid leave in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as
in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive,
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as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
5. Termination of Employment.
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(a) Death or Disability. The Executive's employment shall terminate
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automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 13(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment
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during the Employment Period for Cause. For purposes of this Agreement, "Cause"
means (i) an action taken by the Executive involving willful and wanton
malfeasance involving specifically a wholly wrongful and unlawful act, or (ii)
the Executive being convicted of a felony.
(c) Good Reason. The Executive's employment may be terminated during
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the
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Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means
(i) The assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) Any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(iii) The Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B)
hereof;
(iv) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) Any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
(d) Notice of Termination. Any termination by the Company for
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Cause or by the Executive for Good Reason shall be communicated by Notice of
Termination to theother
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party hereto given in accordance with Section 13(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than fifteen days after the
giving of such notice). In the case of a termination of the Executive's
employment for Cause, a Notice of Termination shall include a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board at a meeting of the Board called and held for
the purpose (after reasonable notice to the Executive and reasonable opportunity
for the Executive, together with the Executive's counsel, to be heard before the
Board prior to such vote), finding that in the good faith opinion of the Board
the Executive was guilty of conduct constituting Cause. No purported termination
of the Executive's employment for Cause shall be effective without a Notice of
Termination. The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) Date of Termination. "Date of Termination" means the date of
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receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that (i) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the
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Executive of such termination and (ii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
(f) Transition Period. "Transition Period" means the period
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commencing on the Date of Termination and ending on the twenty-four month
anniversary of the Date of Termination.
6. Obligations of the Company upon Termination.
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(a) Death. If the Executive's employment is terminated by reason of
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the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than the following obligations: (i) payment of the
Executive's Annual Base Salary through the Date of Termination to the extent not
theretofore paid, (ii) payment of the product of (x) the greater of (A) the
annual bonus paid or payable, including by reason of deferral and before any
reduction for the amount of such bonus which the Executive may have agreed to
forgo in consideration for the receipt of stock options, (and annualized for any
fiscal year consisting of less than twelve full months or for which the
Executive has been employed for less than twelve full months) for the most
recently completed fiscal year and (B) the Recent Annual Bonus (such greater
amount hereafter referred to as the "Highest Annual Bonus") and (y) a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and (iii) payment
of any compensation previously deferred by the Executive (together with any
accrued interest thereon) and not yet paid by the Company and any pay for
vacation and sabbatical earned but not yet taken (the amounts described in
paragraphs (i),
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(ii) and (iii) are hereafter referred to as "Accrued Obligations"). The amount
of the Company's payment obligations under paragraphs (i) and (ii) of the
Accrued Obligations shall be reduced by the amount of any such Annual Base
Salary or Annual Bonus, respectively, that the Executive had elected to forgo in
consideration of the grant of stock options (the "Net Accrued Obligations"). All
Net Accrued Obligations shall be paid to the Executive's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of the Date of Termination.
Anything in this Agreement to the contrary notwithstanding, the Executive's
estate and family shall be entitled to receive benefits at least equal to the
most favorable benefits provided generally by the Company and any of its
affiliated companies to the estates and surviving families of peer executives of
the Company and such affiliated companies under such plans, programs, practices
and policies relating to death benefits, if any, as in effect generally with
respect to other peer executives and their estates and families at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect on the
date of the Executive's death generally with respect to other peer executives of
the Company and its affiliated companies and their families.
(b) Disability. If the Executive's employment is terminated by reason
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of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for Net
Accrued Obligations. All Net Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination. Anything in
this Agreement to the contrary notwithstanding, the Executive shall be entitled
after the Disability Effective Date to receive disability and other benefits at
least equal to the most favorable of those generally provided by the Company and
its affiliated companies to
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disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
(c) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive Annual Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive, in each
case to the extent theretofore unpaid. The amount of the Company's payment of
such Annual Base Salary shall be reduced by the amount of any such Annual Base
Salary that the Executive had elected to forgo in consideration of the grant of
stock options. If the Executive terminates employment during the Employment
Period other than for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Net Accrued Obligations.
In such case, all Net Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause or Disability. If, during the
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Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or if the Executive shall terminate employment
under this Agreement for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash
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within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) All Net Accrued Obligations; and
(B) The product of (x) two and (y) the sum of (i) Annual
Base Salary and (ii) the Highest Annual Bonus; and
(C) an amount equal to any unvested account balance in any
defined contribution plan, and any supplemental and excess
retirement plans with respect thereto, that would have vested
had the Executive's employment with the Company continued for
the duration of the Transition Period;
(D) an amount equal to the contributions and accrued
earnings that would have been made under any defined
contribution plan, and any supplemental and excess retirement
plans with respect thereto, had the Executive's employment with
the Company continued for the duration of the Transition Period
and had the Executive contributed to such plans at the highest
rate permitted by such plans, calculated assuming that the
terms of such plans are no less favorable than those in effect
during the 90-day period immediately prior to the Effective
Date, or if more favorable to the Executive, those in effect
generally at any time thereafter with respect to such plans for
other peer executives of the Company and its affiliated
companies; and
(ii) For the duration of the Transition Period, or such longer
period as any
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plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at
least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described
in Section 4(b)(iv) of this Agreement if the Executive's employment
had not been terminated in accordance with the most favorable plans,
practices, programs or policies of the Company and its affiliated
companies applicable generally to other peer executives and their
families during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the
Company and its affiliated companies and their families. For purposes
of determining eligibility of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed for the
duration of the Transition Period and to have retired on the last day
of such period. In lieu of the benefits provided for in this Section
6(d)(ii), the Executive may elect within 60 days of the Date of
Termination to be paid an amount in cash equal to the present value of
such benefits on an after-tax basis. In determining present value, a
discount rate equal to the federal mid-term rate under Section 1274(d)
of the Internal Revenue Code of 1986, as amended (the "Code") shall be
utilized. The right to continued benefits granted to Executive and/or
his family pursuant to this Section 6(d)(ii) shall be in addition to
any right of continued coverage under any of the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement
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which Executive and/or his family may be entitled to under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") upon
any loss of coverage under such plans, programs, practices and
policies; and
(iii) The Company shall provide the Executive with outplacement
services (including office support and secretarial services), from a
vendor determined by the Company, at a cost not to exceed $30,000.
The amount payable by the Company to the Executive pursuant to Section
6(d)(i)(B) above will be reduced by any remaining balance in the Stock Option
Purchase Account.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
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limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices, provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program except as explicitly modified by this Agreement. Notwithstanding the
foregoing, payment of amounts pursuant to Section 6 of this Agreement shall be
in lieu of any severance benefits which would otherwise be paid or payable to
the Executive under the Capital One Financial Corporation Severance Pay Plan or
any successor thereto.
8. Full Settlement. The Company's obligation to make the payments
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provided for in
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this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of, and no amounts earned by the Executive at
such other employment or otherwise shall reduce, the amounts payable to the
Executive under any of the provisions of this Agreement. The Company agrees to
pay, to the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest in which there is a
reasonable basis for the claims or defenses asserted by the Executive and such
claims and defenses are asserted by the Executive in good faith (regardless of
the outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to Section 9 of this
Agreement), plus in each case interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that the Company shall
not be obligated to pay any such fees and expenses, and the Executive shall be
obligated to return any such fees and expenses that were advanced, if a court of
competent jurisdiction determines that the Executive was terminated for Cause.
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in the
event the Executive's employment is terminated during the Employment Period by
the Company without Cause or by the Executive for Good Reason and it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive, whether paid or payable or
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distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to elect (i) to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments or (ii) to have the Company reduce
any such Payments due hereunder to the extent and only to the extent necessary
to avoid the assessment of such Excise Tax (a "Payment Reduction"). If any
Payment Reduction is elected, the Payments shall be reduced in the order
specified by the Executive to the extent necessary to satisfy the requirements
of the preceding sentence.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up Payment
or a Payment Reduction is required and the amount of such Gross-Up Payment or
Payment Reduction and the assumptions to be used in arriving at such
determinations, shall be made by the Company's certified public accounting firm
immediately prior to the Effective Date (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen business days of the Date of Termination, if applicable, or such
earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. The initial Gross-Up
Payment or Payment Reduction, if any, as determined pursuant to this
-22-
Section 9(b), shall be made by the Company within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments or Payment Reductions which will not have been made by the Company
should have been made ("Underpayment" or, respectively, "Overpayment"),
consistent with the calculations required to be made hereunder. If it is
determined that any Overpayment has been made by the Company to the Executive,
the Executive shall be entitled to elect either to have the Company make a
further Payment Reduction or, in the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is required to
make a payment of any Excise Tax, to have the Company make a Gross-Up Payment
with regard to any Excise Tax incurred due to the original Overpayment. If it is
determined that any Underpayment has been made by the Company to the Executive,
in the event that the Company exhausts its remedies pursuant to Section 9(c) and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a
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Gross-Up Payment. Such notification shall be given as soon as practicable but no
later than ten business days after the Executive is informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which it
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) Give the Company any information reasonably requested by the
Company relating to such claim,
(ii) Take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) Cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) Permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
-24-
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and xxx for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the
-25-
requirements of Section 9(c)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
(e) Payments or distributions by the Company to or for the benefit of
the Executive pursuant to (i) any grants made under any performance-based plan
of the Company on or after the first meeting of the Company's shareholders after
September 16, 1995 or (ii) any "incentive stock options" (within the meaning of
Section 422 of the Code) granted to the Executive prior to September 16, 1995
shall be "Excluded Payments." In the event that Payments which include Excluded
Payments are subject to Excise Tax, the determinations made pursuant to Section
9(b) above shall be calculated with respect to all Payments (including any
Excluded Payments), but any resulting Gross-Up Payment required to be made by
the Company shall be reduced by the product of the Gross-Up Payment multiplied
by a fraction the numerator of which is the Excluded Payments and the
denominator of which is all Payments (including the Excluded Payments).
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have
-26-
been obtained by the Executive during the Executive's employment by the Company
or any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement. The obligations of this Section 10 are in
addition to and do not supersede any other confidentiality obligations of the
Executive to the Company.
11. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
-27-
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Funding. This Agreement constitutes an unfunded, unsecured obligation
-------
of the Company and any payments made hereunder shall be made from the general
assets of the Company. However, the Company either has established or will
establish within 90 days of the date hereof a trust pursuant to a trust
agreement in substantially the form of trust agreement attached hereto and shall
make contributions to such trust in accordance with the terms and conditions of
such trust agreement for the purpose of assisting the Company in meeting its
payment obligations under this Agreement.
13. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
--------------------
To the address shown on the Company's records for tax reporting
purposes.
If to the Company:
-----------------
Capital One Financial Corporation
0000 Xxxxxxxx Xxxx Xxxxx
-00-
Xxxxx Xxxxxx, Xxxxxxxx 00000
Attention: Officer-in-Charge,
Human Resources Division
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof or the failure to assert any right the Executive may have
hereunder, including, without limitation, the right to terminate employment for
Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver
of such provision or right or any other provision or right thereof.
(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof. Until the
Effective Date, subject to the terms of any other employment agreement between
the Executive and the Company, the Executive shall continue to be an "employee
at will".
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-29-
______________________________
CAPITAL ONE FINANCIAL CORPORATION
By: ____________________________
Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
-30-
Capital One Financial Corporation
---------------------------------
Change of Control Employment Agreement
--------------------------------------
Each of the following executive officers of Capital One Financial Corporation
has entered into a Change of Control Employment Agreement in the form filed
herewith:
Xxxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxxx
Xxxxxxx X. XxXxxxxx
Xxxxx Xxxxxxx
Xxxxx X. Xxxxxx
-31-
