Capital One 2007 Annual Report Download - page 109

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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; accordingly the Company recognized $5.2 million, $4.8 million and $5.4 million in compensation expense for the years
ended December 31, 2007, 2006 and 2005, 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
0.4 million shares were available for issuance as of December 31, 2007.
Dividend Reinvestment and Stock Purchase Plan
In 1997, the Company implemented its dividend reinvestment and stock purchase plan (1997 DRP), which allows participating
stockholders to purchase additional shares of the Companys common stock through automatic reinvestment of dividends or optional
cash investments. The Company has 3.6 million shares available for issuance under the 1997 DRP at December 31, 2007. The
Company also instituted an additional dividend reinvestment plan in 2002 (2002 DRP) with an additional 7.5 million shares
reserved, all of which were available for issuance at December 31, 2007.
Note 11
Employee Stock Ownership Plan
The Company has an internally leveraged employee stock ownership plan (ESOP) in which substantially all former employees of
Hibernia participate. In accordance with the merger agreement with Hibernia, assets of the ESOP trust were allocated solely for the
benefit of participants who were employees of Hibernia and its subsidiaries immediately prior to the merger date. The ESOP trust
owned 1,012,658 and 1,137,331 shares of COF Common Stock at December 31, 2007 and December 31, 2006, respectively. The
Company makes annual contributions to the ESOP in an amount determined by the Companys Board of Directors (or a committee
authorized by the Board of Directors), but at least equal to the ESOPs minimum debt service less dividends received by the ESOP.
Dividends received by the ESOP in 2007 were used to pay debt service, and it is anticipated this practice will continue in the future.
The ESOP shares were initially pledged as collateral for its debt. As the debt is repaid, shares are released from collateral and
allocated to active participants. The remaining collateral shares are reported as a reduction to paid-in capital in equity. As shares are
committed to be released, the Company reports compensation expense equal to the current market value of the shares, and the shares
become outstanding for earnings per share calculations. Dividends on allocated ESOP shares are recorded as a reduction of retained
earnings; dividends on unallocated ESOP shares are recorded as a reduction of contributions due to the ESOP.
Compensation expense of $6.2 million and $5.4 million relating to the ESOP was recorded by the Company for the years ended
December 31, 2007 and December 31, 2006, respectively. The ESOP held 842,751 and 876,907 allocated shares and 169,907 and
260,424 suspense shares at December 31, 2007 and December 31, 2006, respectively. The fair value of the suspense shares was $8.0
million and $20.0 million at December 31, 2007 and December 31, 2006, respectively.
Note 12
Retirement Plans
Defined Contribution Plans
The Company sponsors a contributory Associate Savings Plan in which substantially all full-time and certain part-time associates are
eligible to participate. The Company makes contributions to each eligible associates account, matches a portion of associate
contributions and makes discretionary contributions based upon the Company meeting a certain earnings per share target. The
Companys contributions to this plan amounted to $73.6 million, $70.9 million and $67.6 million for the years ended December 31,
2007, 2006 and 2005, respectively.
The Company sponsors other defined contribution plans that were assumed through recent acquisitions. Contributions of cash and
shares of the Companys common stock to these plans amounted to $35.6 million, $12.6 million and $0.9 million for the years ended
December 31, 2007, 2006 and 2005, respectively.
Defined Benefit Pension and Other Postretirement Benefit Plans
The Company sponsors defined benefit pension plans and other postretirement benefit plans. Pension plans include a legacy frozen
cash balance plan and plans assumed in the North Fork acquisition, including two qualified defined benefit pension plans and several
non-qualified defined benefit pension plans. The Companys legacy pension plan and the two qualified pension plans from the North
Fork acquisition were merged into a single plan effective December 31, 2007. Other postretirement benefit plans include a legacy plan
and plans assumed in the Hibernia and North Fork acquisitions, all of which provide medical and life insurance benefits.
The Companys pension plans and the other postretirement benefit plan assumed in the North Fork acquisition were valued using a
December 31 measurement date. The Companys other plans were valued using an October 1 measurement date.