Exhibit 10.3
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“Agreement”), made this 16th day of March 2007, is
entered into by Capital One Financial Corporation, a Delaware
corporation, with its principal place of business at 1680 Capital
One Drive, McLean, Virginia, together with its subsidiaries and
affiliates, (the “Company” or “Capital
One”), and Lynn Pike (the “Executive” or
“her”).
The Company desires to employ the
Executive, and the Executive desires to be employed by the Company.
In consideration of the mutual covenants and promises contained
herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the
parties agree as follows:
1. Effective Date, Coverage and
Definitions.
1.1 Effective Date. This
Agreement shall become effective on the first day of the
Executive’s employment at Capital One (the “Effective
Date”).
1.2 Coverage . For purposes
of this Agreement, “Capital One” or “the
Company” shall mean Capital One Financial Corporation along
with its direct and indirect affiliates and
subsidiaries.
2. Term of Employment . The
Company hereby agrees to employ the Executive, and the Executive
hereby accepts employment with the Company, upon the terms set
forth in this Agreement, for the period commencing on the Effective
Date and continuing until termination of employment, at either the
Executive or the Employer’s election (the “Employment
Period”). The Executive shall be employed at-will, and may be
terminated at any time for any reason, with or without cause,
subject to the terms of this Agreement. Likewise, the Executive may
resign at any time, with or without good reason, subject to the
terms of this Agreement.
3. Capacity . The Executive
shall initially serve as Chief Operating Officer of Capital
One’s Banking Segment and will transition over the first year
of the Employment Period to the role of President of Capital
One’s Banking Segment once the current President of the
Banking Segment ceases to hold such title. The Executive shall have
the rights, duties, and
responsibilities commensurate with her position
as determined by Capital One’s Chief Executive Officer (the
“CEO”), Capital One’s Board of Directors (the
“Board”) or their designee. During the Employment
Period, the Executive shall be subject to, and shall act in
accordance with, all reasonable instructions and directions of the
CEO, the Board or their designee and all applicable policies and
rules of the Company.
3.1 Duties. The Executive
hereby accepts such employment and agrees to undertake the duties
and responsibilities inherent in such position and such other
duties and responsibilities as the CEO, the Board or their designee
shall from time to time reasonably assign to the Executive,
commensurate with such position. The Executive agrees to devote her
entire business time, attention and energies to the business and
interests of the Company during the Employment Period. The
Executive agrees to abide by the rules, regulations, instructions,
personnel practices and policies of the Company and any changes
therein which may be adopted from time to time by the
Company.
3.2 Other Employment . During
the Employment Period, the Executive may not, without the prior
written consent of the Board or its designee, operate, participate
in the management, operations or control of, or act as an employee,
officer, consultant, agent or representative of, any type of
business or service (other than as an executive of the Company),
provided that it shall not be a violation of the foregoing for the
Executive to (i) act or serve as a director, trustee or
committee member of any civic or charitable organization,
(ii) act or serve as a director or committee member of another
business to the extent the Executive serves such business in such
capacity as of the Effective Date, provided that such activities
are disclosed to the CEO and do not compete against Capital One or
otherwise present any conflict of interest with the Company, and
(iii) manage her personal, financial and legal affairs, so
long as such activities do not interfere with the performance of
her duties and responsibilities to the employer as provided
hereunder.
3.3 Definitions . The term
“Banking Segment” shall mean the consumer, commercial
and other banking business of the Company in the United States,
including any such business that is acquired by the Company after
the Effective Date and including any such business of any other
entity with which the Company enters into a business
combination,
whether by reason of merger or otherwise;
provided that the Banking Segment does not include any Non-Banking
Business (defined below), except that the Banking Segment may
conduct the same types of businesses as those conducted by a
Non-Banking Business until such time as the Company, in its
discretion after consultation with the Executive, determines to
consolidate such business or product of the Banking Segment with
any business conducted by the Company outside of the Banking
Segment. The term “Non-Banking Business” means any of
the following businesses which may be conducted by the Company:
automobile lending business, credit card lending business, home
mortgage lending business, home equity lending business, insurance
brokerage business, direct small business lending business,
point-of-sale healthcare or home improvement lending business or
installment loan business.
4. Compensation and Benefits
.
4.1 Salary . The Company
shall pay the Executive, in periodic installments in accordance
with the Company’s customary payroll practices, an annual
base salary of $600,000 (the “Base Salary”) for the
one-year period commencing on the Effective Date. Such salary shall
be subject to adjustment thereafter as determined by the Board or
its designee.
4.2 Front End Bonus . As soon
as practical after the Effective Date, the Company shall pay the
Executive a lump sum payment of $500,000, less applicable tax
withholdings. If the Executive voluntarily terminates her
employment without Good Reason within one year of the Effective
Date, she shall be obligated to repay this full amount to the
Company.
4.3 Incentives. During the
Employment Period, the Executive may be eligible to earn certain
annual cash incentives and long-term incentives under applicable
Company plans or policies, as such plans or policies may be amended
from time to time. The actual incentives will be determined by the
Board or its designee, and will be based, among other things, on
individual and Company performance. The long-term incentive award
may include stock options, restricted stock, or other award types
allowed under Capital One’s 2004 Stock Incentive Plan, as
amended and restated, or any successor plan. For fiscal years 2007
and 2008, the target annual cash incentive award shall be no less
than 233% of the Executive’s Base Salary. For fiscal years
2007 and 2008, the target long-term incentive award shall be no
less than 334% of the Executive’s Base Salary.
4.4 Special
Equity Grant . Subject to approval by the Board’s
Compensation Committee (the “Compensation Committee”)
at the first scheduled meeting after the Effective Date and
pursuant to the 2004 Stock Incentive Plan, as amended and restated,
or any successor plan, the Executive shall be awarded nineteen
thousand four hundred eighty-one (19,481) shares of restricted
stock, twenty-five percent (25%) of which shall vest one year
after the grant date, twenty-five percent (25%) of which shall
vest two years after the grant date, and fifty percent
(50%) of which shall vest three years after the grant date.
The terms of the restricted stock grant will be set out in a
separate agreement, which agreement shall supersede the terms of
this Agreement as to the grant. In addition, subject to approval by
the Compensation Committee at the first scheduled meeting after the
Effective Date and pursuant to the 2004 Stock Incentive Plan, as
amended and restated, or any successor plan, the Executive shall be
awarded one hundred two thousand five hundred eighty-three
(102,583) stock options, thirty-three and a third percent
(33 1 / 3 %) of which shall vest one year
after the grant date, thirty-three and a third percent (33
1 / 3 %) of which shall vest two years
after the grant day and thirty-three and a third percent (33
1 / 3 %) of which shall vest three
years after the grant date. The terms of the stock option grant
will be set out in a separate agreement, which agreement shall
supersede the terms of this Agreement as to the grant.
4.5 Benefits and Perquisites
. The Executive will be eligible to participate in Company benefits
and perquisites commensurate with those typically made available to
similarly situated Executives of the Company under applicable plans
or policies of the Company, as such plans or policies may be
amended from time to time, to the extent that the Executive’s
position, tenure, salary, age, and other qualifications make her
eligible to participate. The Executive shall be entitled to four
(4) weeks paid vacation per year, to be taken at such times as
may be approved by the Board or its designee. In addition, for the
first twelve months of the Employment Period, Capital One shall
(i) reimburse the Executive for the cost of the Executive to
maintain a temporary residence in New York City, in an amount not
to exceed fifteen thousand dollars ($15,000) per month, and
(ii) shall reimburse the Executive for the cost of reasonable
commercial air travel expenses for a monthly trip to and from her
current residence in California.
4.6 Reimbursement of Expenses
. The Company shall reimburse the Executive for all reasonable
travel, entertainment and other expenses incurred or paid by the
Executive in connection with, or related to, the performance of her
duties, responsibilities or services under this Agreement, in
accordance with policies and procedures, and subject to
limitations, adopted by the Company from time to time.
4.7 Withholding . All salary,
bonus and other compensation payable to the Executive shall be
subject to applicable taxes, and Capital One may withhold from any
amounts payable to the Executive hereunder all federal, state,
local or other taxes that it may reasonably determine are required
or advisable to be withheld pursuant to any applicable law or
regulation.
5. Termination of Employment
. The employment of the Executive by the Company pursuant to this
Agreement shall terminate on the day any of the following occur
(the “Termination Date”):
5.1 At the election of the Company,
for Cause, immediately upon written notice by the Company to the
Executive, which notice shall identify the Cause upon which the
termination is based. “Cause” shall mean the
Executive:
(a) has committed an intentional act
of fraud, embezzlement or theft in the course of her employment or
otherwise engaged in any intentional misconduct which is materially
injurious to the financial condition or business reputation of the
Company;
(b) has committed intentional damage
to the property of the Company or committed intentional wrongful
disclosure of Confidential Information which is materially
injurious to the financial condition or business reputation of the
Company;
(c) has been convicted with no
further possibility of appeal or entered a guilty or nolo
contendere plea with respect to a crime within the meaning of
Sections 5.1(a) and 5.1(b) or a crime involving moral
turpitude or been convicted with no further possibility of appeal
or entered a guilty pleas with respect to any felony;
(d) has engaged in willful and
substantial refusal to perform the essential duties of her position
(occasioned by reason other than Disability of the Executive) which
has not been cured within 30 days after written notice of the
breach by the Company to the Executive specifying the nature of the
breach;
(e) has committed a material breach
of her obligations under Sections 7 or 8 of this Agreement which
has not been cured within 30 days after written notice of the
breach by the Company to the Executive specifying the nature of the
breach;
(f) has intentionally, recklessly or
negligently violated any code of ethics, code of conduct, or
equivalent code or policy of the Company applicable to the
Executive; or
(g) has intentionally, recklessly or
negligently violated any provision of The Sarbanes-Oxley At of 2002
or any of the rules adopted by the Securities and Exchange
Commission implementing any such provisions.
No act or failure to act on the part
of the Executive will be deemed “intentional” if it was
due primarily to an error in judgment or negligence, but will be
deemed “intentional” only if done or omitted to be done
by the Executive in bad faith and without reasonable belief by the
Executive that her action or omission was in the best interest of
the Company. The Company may terminate the Executive’s
employment under this Agreement on account of Cause by action of
the Board, acting in good faith. The Board shall provide written
notice to the Executive of such termination, which notice shall
(1) include the specific termination provision in this
Agreement relied upon and (2) include a description of the
specific reasons for the determination of Cause. The Executive
shall have the opportunity to appear before the Board, with or
without legal representation, within 30 days after receipt of such
notice, to present arguments and evidence on her behalf. Following
such presentation (or upon Executive’s failure to appear at
such presentation following receipt of notice as provided herein),
the Board, by an affirmative vote of not less than 3/4 of its
members, shall confirm whether the actions or inactions of the
Executive constitute Cause hereunder and, if determined to be
Cause, the Date of Termination of the Executive for Cause shall be
the date on which such vote is obtained (or such later date as
determined by the Board). The Company, on action of the Board, may
suspend the Executive’s title an authority, but not the
Executive’s pay or benefits, pending the Executive’s
opportunity to appear before the Board; such suspension shall not
constitute Good Reason under Section 5.2 hereof.
5.2 At the election of the
Executive, for Good Reason, immediately upon written notice by the
Executive to the Company, which notice shall identify the Good
Reason upon which the termination is based. “Good
Reason” shall mean:
(a) any material reduction in the
Executive’s Base Salary, any material decrease in the
Executive’s job level or other material breach of
Section 3, including one which results in the Executive no
longer reporting to the President of Banking while she holds the
title of Chief Operating Officer of the Banking Segment or no
longer reporting to the CEO after she holds the title of President
of the Banking Segment, or the assignment of duties which are not
in the aggregate reasonably comparable to the duties of other
Executives in the Executive’s job level;
(b) Capital One’s failure to
appoint the Executive to the title of President of the Banking
Segment after the current President of the Banking Segment ceases
to hold such title; or
(c) any material breach by the
Company of the Agreement which the Company fails to cure within
thirty (30) days after the Executive delivers to the Company a
written notice that specifically identifies such
violation.
5.3 Upon the death or disability of
the Executive. As used in this Agreement, the term
“Disability” shall mean the inability of the Executive,
due to a physical or mental disability, for a period of 90 days,
whether or not consecutive, during any 360-day period to perform
the services contemplated under this Agreement, with or without
reasonable accommodation as that term is defined under applicable
federal law. A determination of disability shall be made by a
physician satisfactory to both the Executive and the Company,
provided that if the Executive and the Company do not agree on a
physician, the Executive and the Company shall each select a
physician and these two together shall select a third physician,
whose determination as to disability shall be binding on all
parties.
5.4 At the election of either the
Company, without Cause, or the Executive, without Good
Reason.
6. Effect of Termination
.
6.1 Payments Upon Termination
.
(a) In the event the
Executive’s employment is terminated pursuant to
Section 5.1, Section 5.3 or by the Executive pursuant to
Section 5.4, the Company shall pay to the Executive the
compensation and benefits otherwise payable to her under
Section 4 through the Termination Date.
(b) In the event the
Executive’s employment is terminated for Good Reason pursuant
to Section 5.2 or by the Company without Cause pursuant to
Section 5.4 within two (2) years of the Effective Date,
the Company shall provide the Executive with:
(i) a lump sum amount payable in
cash within 30 days of the Termination Date (or such later date as
may be required to comply with section 409A of the Internal Revenue
Code) which shall equal two times the sum of Executive’s Base
Salary, the target annual cash incentive established for the
Executive in the year of her termination and the cash equivalent of
the target long-term incentive established for the Executive in the
year of her termination, provided that the target annual cash
incentive shall not be less than 233% of the Executive’s Base
Salary and the target long-term incentive shall not be less than
334% of the Executive’s Base Salary; and
(ii) any unvested restricted stock
or stock option grants awarded as part of the Special Equity Grant
pursuant to Section 4.4 of this Agreement shall immediately
vest in full.
These payments and accelerated
vesting of restricted stock and stock option awards shall
constitute the sole remedy of the Executive in the event of a
termination of the Executive’s employment in the
circumstances set forth in this Section 6.1(b).
6.2 Payments Upon a Change Of
Control
(a) In the event that the a Change
of Control occurs within two (2) years of the Effective Date
and the Executive’s employment is terminated for Good Reason
pursuant to
Section 5.2 or by the Company without Cause
pursuant to Section 5.4 within two (2) years after the
Effective Date, the Company shall provide the Executive
with:
(i) a lump sum amount payable in
cash within 30 days of the Termination Date (or such later date as
may be required to comply with section 409A of the Internal Revenue
Code) which shall equal two times the sum of Executive’s Base
Salary, the target annual cash incentive established for the
Executive in the year of her termination and the cash equivalent of
the target long-term incentive established for the Executive in the
year of her termination provided that the target annual cash
incentive shall not be less than 233% of the Executive’s Base
Salary and the target long-term incentive shall not be less than
334% of the Executive’s Base Salary; and
(ii) any unvested restricted stock
or stock option grants awarded during her employment shall
immediately vest in full pursuant to the terms of the 2004 Stock
Incentive Plan as amended and restated, or any successor
plan.
These payments and accelerated
vesting of restricted stock and stock option awards, along with the
additional payments set forth in Section 6.2(b), shall
constitute the sole remedy of the Executive in the event of a
termination of the Executive’s employment in the
circumstances set forth in this Section 6.2(a).
(b) Certain Additional Change of
Control Payments by the Company.
(i) Anything in this Agreement to
the contrary notwithstanding, in the event 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 distributed or
distributable pursuant to the terms of this Agreement or otherwise
as a result of a Change of Control (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 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.
(ii) Subject to the provisions of
Section 6.2(b)(iii), all determinations required to be made
under this Section 6.2(b), including whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions not specified herein to be used in arriving at such
determinations, shall be made by the Company’s certified
public accounting firm immediately prior to the Change of Control
(the “Accounting Firm”). Such determination shall be
made within fifteen business days after request therefor by notice
from the Executive or the Company to such firm and to the other
party hereto. In making such determination with respect to any
matter which is uncertain, the Accounting Firm shall adopt the
position which it believes more likely than not would be adopted by
the Internal Revenue Service. The Accounting Firm shall provide
detailed supporting calculations with respect to its determination
both to the Company and the Executive within such fifteen business
day period. All fees and expenses of the Accounting Firm under this
Section 6.2(b)(ii) shall be borne solely by the Company. The
initial Gross-Up Payment, if any, as determined pursuant to this
Section 6.2(b)(ii), shall be paid by the Company to the
Executive 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 final,
binding and conclusive upon the Company and the Exe
