Capital One 2006 Annual Report Download - page 108

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90
Cash equity units vesting during the years end ended December 31, 2006 and 2005 resulted in cash payments to associates of
$18.7 million and $0.1 million, respectively. These cash payments reflect the number of units vesting priced at the
Companys stock price as of the vest date. At December 31, 2006 there was unrecognized compensation cost for unvested
cash equity units of $64.3 million, based on the stock price at that date. That cost is expected to be recognized over the next 3
years.
2007 CEO Grant
In December 2006, the Companys Board of Directors approved a compensation package for the Companys Chief Executive
Officer (CEO). This package included 595,000 stock options which were granted at the fair market value at the grant date.
These options will vest upon the fifth anniversary date of the grant or upon departure from employment with Capital One for
reasons other than retirement. Upon retirement, these options will continue to vest in accordance with the original vesting
schedule. Compensation expense of $18.0 million for these options was recorded in 2006 in accordance with the retirement
eligibility provisions of SFAS 123(R).
2006 CEO Grant
In December 2005, the Companys Board of Directors approved a compensation package for the Companys CEO. This
package included 573,000 stock options which were granted at the fair market value at the grant date. These options will vest
upon the fifth anniversary date of the grant or upon departure from employment with Capital One for reasons other than
retirement. Upon retirement, these options will continue to vest in accordance with the original vesting schedule.
Compensation expense was recorded in accordance with SFAS 123.
2005 CEO Grant
In December 2004, the Companys Board of Directors approved a compensation package for the Companys CEO. This
package included 566,000 stock options which were granted at the fair market value at the date of grant. These options will
vest upon the fifth anniversary date of the grant or upon his retirement or other departure from employment with Capital One.
Compensation expense was recorded in accordance with SFAS 123.
Accelerated Vesting Option Grants
EntrepreneurGrant IV
In April 1999, the Companys Board of Directors approved a stock option grant to senior management (Entrepreneur Grant
IV). This grant was originally composed of 7,636,107 options to certain key managers (including 1,884,435 options to the
Companys CEO and former COO) with an exercise price equal to the fair market value on the date of grant. The CEO and
former COO gave up their salaries for the year 2001 and their annual cash incentives, annual option grants and Senior
Executive Retirement Plan contributions for the years 2000 and 2001 in exchange for their Entrepreneur Grant IV options.
Other members of senior management had the opportunity to give up all potential annual stock option grants for 1999 and
2000 in exchange for this one-time grant. All performance-based option accelerated vesting provisions lapsed during 2004; as
such the options will now vest in accordance with the ultimate vesting provisions. 50% of the stock options held by middle
management vested on April 29, 2005, and the remainder will vest on April 29, 2008, or upon a change in control of the
Company. In 2003, the former COOs options associated with Entrepreneur Grant IV were forfeited in accordance with the
terms of the employment agreement between the former COO and the Corporation. Options under this grant qualify as fixed
as defined by APB 25, accordingly no compensation expense was recognized.
Associate Stock Purchase Plan
The Company maintains an Associate Stock Purchase Plan (the Purchase Plan). The Purchase Plan is a compensatory plan
under SFAS 123(R); accordingly the Company recognized $4.8 million, $5.4 million and $4.4 million in compensation
expense for the years ended December 31, 2006, 2005 and 2004, respectively.
Under the Purchase Plan, associates of the Company are eligible to purchase common stock through monthly salary
deductions of a maximum of 15% and a minimum of 1% of monthly base pay. To date, the amounts deducted are applied to
the purchase of unissued common or treasury stock of the Company at 85% of the current market price. Shares may also be
acquired on the market. An aggregate of 3.0 million common shares has been authorized for issuance under the 2002
Associate Stock Purchase Plan, of which 0.9 million shares were available for issuance as of December 31, 2006.