As filed with the Securities and Exchange Commission on March 20, 2002
Registration Nos. 333-82228
333-85227
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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CAPITAL ONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization of registrant)
54-1719854
(I.R.S. employer identification number)
2980 Fairview Park Drive
Falls Church, Virginia 22042-452
(703) 205-1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-----------------
John G. Finneran, Jr.
Executive Vice President,
General Counsel and Corporate Secretary
Capital One Financial Corporation
2980 Fairview Park Drive
Falls Church, Virginia 22042-4525
(703) 205-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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With copies to:
Kenneth L. Bachman, Jr.
Cleary, Gottlieb, Steen & Hamilton
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
(202) 974-1500
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Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this registration statement, as determined in
light of market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed
maximum Proposed
aggregate maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered(1) per unit(2) offering price(2) registration fee
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Debt Securities of Capital One
Financial Corporation..............
----------------------------------------------------------------------------------------------------------
Preferred Stock of Capital One
Financial Corporation..............
----------------------------------------------------------------------------------------------------------
Depositary Shares representing
Preferred Stock of Capital One
Financial Corporation(3)...........
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Common Stock of Capital One
Financial Corporation..............
----------------------------------------------------------------------------------------------------------
Stock Purchase Contracts of Capital
One Financial Corporation(4).......
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Equity Units of Capital One Financial
Corporation(5).....................
----------------------------------------------------------------------------------------------------------
Total........................... $1,500,000,000(6) 100% $1,500,000,000(6) $138,000(7)
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(1) The amount to be registered is not specified as to each class of securities
to be registered pursuant to General Instruction II.D of Form S-3.
(2) Estimated solely for the purpose of computing the registration fee.
(3) Such indeterminate number of Depositary Shares to be evidenced by
Depositary Receipts issued pursuant to a Deposit Agreement. In the event
Capital One elects to offer to the public fractional interests in shares of
the Preferred Stock registered hereunder, Depositary Receipts will be
distributed to those persons purchasing such fractional interests and the
shares of Preferred Stock will be issued to the Depositary under the
Deposit Agreement. No separate consideration will be received for the
Depositary Shares.
(4) There is being registered under this registration statement an
indeterminate number of stock purchase contracts of Capital One Financial
Corporation as may be sold from time to time.
(5) There is being registered under this registration statement an
indeterminate number of equity units of Capital One Financial Corporation
as may be sold from time to time. Each equity unit consists of (a) a stock
purchase contract under which the holder, upon settlement, will purchase an
indeterminate number of shares of common stock of Capital One Financial
Corporation and (b) either debt obligations of third parties, including
U.S. Treasury securities, or senior or subordinated debt securities of
Capital One Financial Corporation, that, in each case, secure the
obligation of such holder to purchase such shares of common stock. No
separate consideration will be received for the stock purchase contracts.
(6) Such amount represents (i) the principal amount of the Debt Securities
issued at their principal amount, and the issue price rather than the
principal amount of the Debt Securities issued at an original issue
discount, (ii) the liquidation preference of any Preferred Stock and (iii)
the initial offering price of any Common Stock.
(7) Previously paid.
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Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
included herein is a combined prospectus which also relates to up to
$287,000,000 of unissued debt securities, preferred stock, depositary shares
representing preferred stock and common stock registered under registration
statement no. 333-85227, for which the required filing fees have been paid.
This registration statement, which is a new registration statement, also
constitutes post-effective amendment no. 1 to registration statement no.
333-85227, and such post-effective amendment shall hereafter become effective
concurrently with the effectiveness of this registration statement in
accordance with Section 8(c) of the Securities Act of 1933.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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PROSPECTUS
$1,787,000,000
Capital One Financial Corporation
Debt Securities
Preferred Stock
Common Stock
Stock Purchase Contracts
Equity Units
-----------------
We will provide specific terms of these securities in supplements to this
prospectus. We urge you to read this prospectus and any prospectus supplement
carefully before you make your investment decision.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is March 21, 2002.
ABOUT THIS PROSPECTUS
In this prospectus, "Capital One," "we," "our" or "us" refers to Capital One
Financial Corporation.
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission, or the SEC, utilizing a "shelf"
registration process. Under this shelf process, we may from time to time issue
and sell any combination of the securities described in this prospectus in one
or more offerings up to a total dollar amount of $1,787,000,000. This
prospectus provides you with a general description of the securities we may
issue and sell. Each time we issue and sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. You should read both this prospectus and the prospectus
supplement applicable to any offering, together with the additional information
described under the heading "Where You Can Find More Information" below.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this
prospectus contain forward-looking statements. Forward-looking statements
include information relating to growth in earnings per share, return on equity,
growth in managed loans outstanding and customer accounts, net interest
margins, funding costs, operations costs and employment growth, marketing
expense, delinquencies and charge-offs. Forward-looking statements also include
statements using words such as "expect," "anticipate," "intend," "plan,"
"believe," "estimate" or similar expressions. We have based these
forward-looking statements on our current plans, estimates and projections, and
you should not unduly rely on them.
Numerous factors could cause our actual results to differ materially from
those described in forward-looking statements, including, among other things:
. continued intense competition from numerous providers of products and
services which compete with Capital One's businesses;
. an increase in credit losses (including increases due to worsening of
economic conditions);
. Capital One's ability to continue to securitize its credit cards and
consumer loans and to otherwise access the capital markets at attractive
rates and terms to fund its operations and future growth;
. losses associated with new products or services or expansion
internationally;
. our ability to recruit experienced personnel to assist in the management
and operations of new products and services; and
. other factors listed from time to time in reports we file with the SEC,
including, but not limited to, factors set forth under the caption "Risk
Factors" in any prospectus supplement and in Capital One's Annual Report
on Form 10-K for the year ended December 31, 2000.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
You should carefully consider the factors discussed above in evaluating these
forward-looking statements.
We caution you that any such forward-looking statements are not guarantees
of future performance. They involve risks, uncertainties and assumptions,
including the risk factors referred to above. Capital One's future performance
and actual results may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these
results and values are beyond Capital One's ability to control or predict.
1
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we have filed with the
SEC under the Securities Act of 1933, or the Securities Act. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about us and the securities described in this prospectus.
The SEC's rules and regulations allow us to omit certain information included
in the registration statement from this prospectus. The registration statement
may be inspected by anyone without charge at the SEC's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549.
In addition, Capital One files annual, quarterly and special reports, proxy
statements and other information with the SEC under the Securities Exchange Act
of 1934, or the Exchange Act. You may read and copy this information at the
following SEC location:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
You may also obtain copies of this information by mail from the SEC's Public
Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
rates determined by the SEC. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-732-0330. You may also
inspect reports, proxy statements and other information that Capital One has
filed electronically with the SEC at the SEC's web site at http://www.sec.gov.
These documents can also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows Capital One to "incorporate by reference" information into
this prospectus and any prospectus supplement. This means that Capital One can
disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
considered to be a part of this prospectus and any prospectus supplement.
Information that Capital One files later with the SEC and that is incorporated
by reference in any prospectus supplement will automatically update and
supercede information contained in this prospectus and any prospectus
supplement. Capital One's SEC file number is
001-13300.
The following documents contain important information about Capital One and
its financial condition. Capital One has previously filed these documents with
the SEC and incorporates them by reference into this prospectus:
. its Annual Report on Form 10-K for the fiscal year ended December 31,
2000, filed on March 29, 2001;
. its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001,
June 30, 2001 and September 30, 2001, filed on May 11, 2001, August 14,
2001 and November 14, 2001, respectively;
. its Current Reports on Form 8-K filed on January 17, 2001, January 19,
2001, April 17, 2001, July 18, 2001, July 26, 2001, September 21, 2001,
October 17, 2001, October 25, 2001, November 2, 2001 and January 16, 2002;
and
. its definitive proxy statement/1/ filed on March 18, 2002.
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/1/ The information referred to in Item (a)(8) of Regulation S-K and paragraph
(d)(3) of Item 7 of Regulation 14C promulgated by the SEC shall not be
deemed to be specifically incorporated by reference into this prospectus.
2
We also incorporate by reference in this prospectus additional documents
that Capital One may file with the SEC after the date of this prospectus. These
documents include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Documents incorporated by reference are available from Capital One without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this prospectus. You
can obtain documents incorporated by reference in this prospectus by requesting
them in writing or by telephone from us at Capital One Financial Corporation,
Investor Relations Department, 2980 Fairview Park Drive, Falls Church, Virginia
22042-4525, telephone (703) 205-1000.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of those documents.
CAPITAL ONE FINANCIAL CORPORATION
Overview
Capital One is a corporation incorporated in Delaware on July 21, 1994. Its
subsidiaries market a variety of financial products and services to consumers
using its proprietary information-based strategy, which we refer to as IBS and
which is described in more detail below. Its common stock is listed on the New
York Stock Exchange under the symbol "COF" and is included in the Standard &
Poor's 500 Index. Its principal executive office is located at 2980 Fairview
Park Drive, Suite 1300, Falls Church, Virginia 22042-4525, its telephone number
is (703) 205-1000 and its internet address is http://www.capitalone.com. The
information on our web site is not part of this prospectus.
Capital One's predecessor began operations in 1953, the same year as the
formation of what is now MasterCard International, and Capital One, through its
subsidiaries, is one of the oldest continually operating bank card issuers in
the United States. Capital One, through its subsidiaries, is one of the largest
issuers of MasterCard and Visa/2/ credit cards in the world. The success of its
IBS, which it initiated in 1998, in addition to credit card industry dynamics,
has been the foundation of its growth in terms of managed credit card loans and
accounts. As of December 31, 2001, Capital One had total reported assets of
$28.2 billion, total reported liabilities of $24.9 billion and total
stockholders' equity of $3.3 billion.
Capital One Bank
Capital One's principal subsidiary is Capital One Bank, which we call the
Bank. The Bank was incorporated in May 1994 and is a Virginia state-chartered
limited-purpose credit card bank that offers credit card products. Capital
One's principal asset is its equity interest in the Bank. As of December 31,
2001, the Bank constituted approximately 74% of Capital One's managed assets.
The Bank offers a variety of credit card products, including:
. Visa and MasterCard brands;
. Platinum and Gold premium label cards;
. secured and unsecured standard product cards; and
. United States and international offerings, with a current focus on the
United Kingdom, Canada and France.
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/2/ Mastercard and Visa are registered trademarks of Mastercard International
Incorporated and VISA USA, Inc., respectively.
3
Capital One, F.S.B.
Capital One also has a federally chartered savings bank subsidiary, Capital
One, F.S.B., which we call the Savings Bank. The Savings Bank was established
in June 1996 to offer consumer lending products and deposits. The Savings Bank
currently offers multiple financial products and services by using Capital
One's IBS and information technology systems.
Information-Based Strategy
Capital One's IBS allows it to differentiate among customers based on their
credit risk, credit card usage and other characteristics. Its IBS involves:
. developing sophisticated credit models;
. enhancing state of the art information systems;
. recruiting and keeping well-trained personnel to create a flexible working
culture; and
. segmenting potential customer lists based on credit scores, demographics,
customer behavioral characteristics and other criteria.
Capital One uses its IBS to design customized products and solicitations for
targeted customer segments. This leads to greater customer response levels and
eventually increased revenues within its risk models.
Capital One applies its IBS to all areas of its business, including
solicitations, account management, credit line management, pricing strategies,
usage stimulation, collections, recoveries, and account and balance retention.
Some examples of Capital One's use of its IBS in the credit card business
include, and are expected to continue to include, various low introductory and
intermediate-rate balance transfer products and other customized credit card
products. Capital One has expanded its IBS beyond its credit card business and
uses it in other financial and non-financial businesses to identify new product
opportunities and to make informed investment decisions regarding its existing
products. These products and services include selected non-credit card consumer
lending products, such as automobile financing and installment lending.
Supervision, Regulation and Other Matters
The following discussion describes some of the elements of the comprehensive
regulatory framework applicable to Capital One and its subsidiaries.
Capital One Bank. The Bank is a banking corporation chartered under
Virginia law and a member of the Federal Reserve System. The Bank's deposits
are insured by the Bank Insurance Fund, or the BIF, of the Federal Deposit
Insurance Corporation, or the FDIC. In addition to regulatory requirements
imposed as a result of the Bank's international operations (discussed below),
the Bank is subject to comprehensive regulation and periodic examination by the
Bureau of Financial Institutions of the Virginia State Corporation Commission,
or the Bureau of Financial Institutions, the Board of Governors of the Federal
Reserve System, or the FRB, the Federal Reserve Bank of Richmond and the FDIC.
The Bank is not a "bank" under the Bank Holding Company Act of 1956, as
amended, or the BHCA, because it:
. engages only in credit card operations;
. does not accept demand deposits or deposits that the depositor may
withdraw by check or similar means for payment to third parties or others;
. does not accept any savings or time deposits of less than $100,000, other
than as permitted as collateral for extensions of credit;
. maintains only one office that accepts deposits; and
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. does not engage in the business of making commercial loans.
Due to the Bank's status as a limited-purpose credit card bank, Capital
One's non-credit card operations must be conducted in other operating
subsidiaries of Capital One.
Capital One, F.S.B. The Savings Bank is a federal savings bank chartered by
the Office of Thrift Supervision, or the OTS, and is a member of the Federal
Home Loan Bank System. Its deposits are insured by the Savings Association
Insurance Fund of the FDIC. The Savings Bank is subject to comprehensive
regulation and periodic examination by the OTS and the FDIC.
Capital One Financial Corporation. Capital One is not a bank holding
company under the BHCA as a result of its ownership of the Bank because the
Bank is not a "bank" as defined under the BHCA. If the Bank failed to meet the
credit card bank exemption criteria described above, its status as an insured
depository institution would make Capital One subject to the provisions of the
BHCA, including certain restrictions as to the types of business activities in
which a bank holding company and its affiliates may engage. Becoming a bank
holding company under the BHCA would affect Capital One's ability to engage in
certain non-banking businesses. In addition, for purposes of the BHCA, if the
Bank failed to qualify for the credit card bank exemption, any entity that
acquired direct or indirect control of the Bank and also engaged in activities
not permitted for bank holding companies could be required either to
discontinue the impermissible activities or to divest itself of control of the
Bank.
As a result of Capital One's ownership of a single savings association, the
Savings Bank, Capital One is a unitary savings and loan holding company subject
to regulation by the OTS and the provisions of the Savings and Loan Holding
Company Act. As a unitary savings and loan holding company, Capital One
generally is not restricted under existing laws as to the types of business
activities in which it may engage as long as the Savings Bank continues to meet
the qualified thrift lender test, or the QTL Test. If Capital One ceased to be
a unitary savings and loan holding company as a result of its acquisition of an
additional savings institution, as a result of the failure of the Savings Bank
to meet the QTL Test or as a result of a change in control of the Savings Bank,
the types of activities that Capital One and its non-savings association
subsidiaries would be able to engage in would generally be limited to those
eligible for bank holding companies.
Under the Gramm-Leach-Bliley Financial Services Modernization Act of 1999,
or the Act, certain bank holding companies may engage in an expanded range of
activities, including the securities and insurance businesses. To do so, a bank
holding company must voluntarily elect to become a new type of company called a
"financial holding company." While these changes are significant in their
impact upon the traditional banking, securities and insurance industries, the
impact upon Capital One is less significant in light of the fact that Capital
One is regulated as a unitary thrift holding company and not as a bank holding
company or a financial holding company. As a result, Capital One may engage in
both the full range of activities authorized for bank or financial holding
companies and additional non-banking activities typically impermissible for
such entities. In addition, the Act permits a limited-purpose credit card bank
such as the Bank to establish one or more foreign banking subsidiaries that are
not subject to the business line limitations credit card banks face in the
United States. Therefore, such foreign banking subsidiaries could engage in
non-credit card lending and could accept retail deposits overseas.
While the Act does not impact the permissible range of the Bank's
activities, it does impose some limitations on the future activities of unitary
thrift holding companies. Existing unitary thrift holding companies such as
Capital One are "grandfathered" with full powers to continue and expand their
current activities. Grandfathered unitary thrift holding companies, however,
may not be acquired by non-financial companies and maintain their grandfathered
powers. In addition, if a grandfathered unitary thrift holding company is
acquired by a financial company that does not have such grandfather rights, it
may lose its ability to engage in certain non-banking activities otherwise
ineligible for bank holding companies or financial holding companies.
5
Capital One is also registered as a financial institution holding company
under Virginia law and as such is subject to periodic examination by the Bureau
of Financial Institutions.
The Bank has filed applications with the FRB and the Bureau of Financial
Institutions seeking to merge the Bank and the Savings Bank. If approved, the
Bank would be the surviving institution, and would, concurrently with the
merger, convert from a state-chartered limited-purpose credit card bank to a
state-chartered savings bank. The resulting institution would retain the name
"Capital One Bank," as well as its membership in the Federal Reserve System.
The merger would not change the regulatory status of Capital One, which would
remain a grandfathered unitary thrift holding company and would not be subject
to the activity limitations applicable to a bank holding company or a financial
holding company.
Capital One's automobile financing activities fall under the scrutiny of the
state agencies having supervisory authority under applicable sales finance laws
or consumer finance laws in most states.
Dividends and Transfers of Funds. Dividends to Capital One from its direct
and indirect subsidiaries represent a major source of funds for Capital One to
pay dividends on its stock, make payments on its debt securities and meet its
other obligations. There are various federal and Virginia law limitations on
the extent to which the Bank and the Savings Bank can finance or otherwise
supply funds to Capital One through dividends, loans or otherwise. These
limitations include minimum regulatory capital requirements, FRB, OTS and
Virginia law requirements concerning the payment of dividends out of net
profits or surplus, Sections 23A and 23B of the Federal Reserve Act governing
transactions between an insured depository institution and its affiliates and
general federal and Virginia regulatory oversight to prevent unsafe or unsound
practices. In general, federal banking laws prohibit an insured depository
institution, such as the Bank and the Savings Bank, from making dividend
distributions if the distributions are not paid out of available earnings or
would cause the institution to fail to meet applicable capital adequacy
standards. In addition, the Savings Bank is required to give the OTS at least
30 days' advance notice of any proposed dividend. Under OTS regulations, other
limitations apply to the Savings Bank's ability to pay dividends, the magnitude
of which depends upon the extent to which the Savings Bank meets its regulatory
capital requirements. In addition, under Virginia law, the Bureau of Financial
Institutions may limit the payment of dividends by the Bank if the Bureau of
Financial Institutions determines that a limitation would be in the public
interest and necessary for the Bank's safety and soundness.
Capital Adequacy. The Bank and the Savings Bank are currently subject to
capital adequacy guidelines adopted by the FRB and the OTS, respectively. For a
further discussion of the capital adequacy guidelines, see Capital One's Annual
Report on Form 10-K and its consolidated financial statements incorporated by
reference in this prospectus.
In January 2001, the Basel Committee on Banking Supervision issued for
public comment a proposal to revise significantly the current international
capital adequacy accord, the purpose of which is to ensure that banking
organizations maintain prudent levels of capital, to make regulatory capital
standards more reflective of banking risks, and to provide incentives for
organizations to enhance their risk management capabilities. If ultimately
adopted, this proposal may require some banks to increase their current capital
levels.
FDICIA. The Federal Deposit Insurance Corporation Improvement Act of 1991,
or FDICIA, provides for expanded regulation of banks and savings banks,
including expanded federal banking agency examinations, and requires federal
bank regulatory authorities to take "prompt corrective action," or PCA, in
respect of insured depository institutions that do not meet minimum capital
requirements. FDICIA establishes five capital ratio levels: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. The capital categories are determined solely for
the purposes of applying FDICIA's PCA provisions, as discussed below, and such
capital categories may not constitute an accurate representation of the overall
financial condition or prospects of the Bank or the Savings Bank.
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As of December 31, 2001, the Bank and the Savings Bank met the requirements
for a "well capitalized" institution. A "well capitalized" classification
should not necessarily be viewed as describing the condition or future
prospects of a depository institution, including the Bank and the Savings Bank.
Under FDICIA's PCA system, an insured depository institution in the
"undercapitalized category" must submit a capital restoration plan guaranteed
by its parent company. The liability of the parent company under this guarantee
is limited to the lesser of 5.00% of the insured depository institution's
assets at the time it became undercapitalized or the amount needed to comply
with the plan. An insured depository institution in the "undercapitalized
category" also is subject to limitations in numerous areas, including, but not
limited to, asset growth, acquisitions, branching, new business lines,
acceptance of brokered deposits and borrowings from the FRB. Progressively more
burdensome restrictions are applied to insured depository institutions in the
undercapitalized category that fail to submit or implement a capital plan and
to insured depository institutions that are in the significantly
undercapitalized or critically undercapitalized categories. In addition, an
insured depository institution's primary federal banking agency is authorized
to downgrade the institution's capital category to the next lower category upon
a determination that the institution is in an unsafe or unsound condition or is
engaged in an unsafe or unsound practice. An unsafe or unsound practice can
include receipt by the institution of a less than satisfactory rating on its
most recent examination with respect to its capital, asset quality, management,
earnings, liquidity and sensitivity to market risk.
"Critically undercapitalized" insured depository institutions (which are
defined to include institutions that still have a positive net worth) may not,
beginning 60 days after becoming "critically undercapitalized," make any
payment of principal or interest on their subordinated debt (subject to certain
limited exceptions). Thus, in the event an institution became "critically
undercapitalized," it would generally be prohibited from making payments on its
subordinated debt securities. In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator.
FDICIA also requires the FDIC to implement a system of risk-based premiums
for deposit insurance pursuant to which the premiums paid by a depository
institution will be based on the probability that the FDIC will incur a loss in
respect of that institution. The FDIC has since adopted a system that imposes
insurance premiums based upon a matrix that takes into account an institution's
capital level and supervisory rating.
The Bank and the Savings Bank may accept brokered deposits as part of their
funding. Under FDICIA, only "well capitalized" and "adequately capitalized"
institutions may accept brokered deposits. "Adequately capitalized"
institutions, however, must first obtain a waiver from the FDIC before
accepting brokered deposits, and these deposits may not pay rates that
significantly exceed the rates paid on deposits of similar maturity from the
institution's normal market area or the national rate on deposits of comparable
maturity, as determined by the FDIC, for deposits from outside the
institution's normal market area.
Liability for Commonly-Controlled Institutions. Under the "cross-guarantee"
provision of the Financial Institutions Reform, Recovery and Enforcement Act of
1989, or FIRREA, insured depository institutions such as the Bank and the
Savings Bank may be liable to the FDIC in respect of any loss or reasonably
anticipated loss incurred by the FDIC resulting from the default of, or FDIC
assistance to, any commonly-controlled insured depository institution. The Bank
and the Savings Bank are commonly controlled within the meaning of the FIRREA
cross-guarantee provision.
Investment Limitation and the QTL Test. Federally chartered savings banks
such as the Savings Bank are subject to certain investment limitations. For
example, federal savings banks are not permitted to make consumer loans, such
as certain open-end or closed-end loans for personal, family or household
purposes, excluding credit card loans, in excess of 35% of the savings bank's
assets. Federal savings banks are also required to meet the QTL Test, which
generally requires a savings bank to maintain at least 65% "portfolio assets"
(total assets less (i) specified liquid assets up to 20% of total assets,
(ii) intangibles, including goodwill and (iii) property used to conduct
business in certain "qualified thrift investments" (residential mortgages and
related investments,
7
including certain mortgage-backed and mortgage-related investments, small
business-related securities, certain state and federal housing investments,
education loans and credit card loans)) on a monthly basis in nine out of every
12 months. Failure to qualify under the QTL Test could subject the Savings Bank
to substantial restrictions on its activities, including the activity
restrictions that apply generally to bank holding companies and their
affiliates and potential loss of grandfathered rights under the Act. As of
December 31, 2001, 82% of the Savings Bank's portfolio assets were held in
qualified thrift investments, and the Savings Bank was in compliance with the
QTL Test.
Subprime Lending Guidelines. On January 31, 2001, the federal banking
agencies, including the FRB and the OTS, issued "Expanded Guidance for Subprime
Lending Programs," or the Guidelines. The Guidelines, while not constituting a
formal regulation, provide guidance to the federal bank examiners regarding the
adequacy of capital and loan loss reserves held by insured depository
institutions engaged in subprime lending. The Guidelines adopt a broad
definition of "subprime" loans which likely covers more than one-third of all
consumers in the United States. Because Capital One's business strategy is to
provide credit card products and other consumer loans to a wide range of
consumers, a portion of the Bank's loan assets may be viewed by the examiners
as "subprime." Thus, under the Guidelines, bank examiners could require the
Bank or the Savings Bank to hold additional capital (up to one and one-half to
three times the minimally required level of capital, as set forth in the
Guidelines), or additional loan loss reserves, against such assets. As
described above, at December 31, 2001, the Bank and the Savings Bank each met
the requirements for a "well-capitalized" institution, and management believes
that each institution is holding an appropriate amount of capital or loan loss
reserves against higher risk assets. Management also believes the Bank and the
Savings Bank have general risk management practices in place that are
appropriate in light of their business strategy. Significantly increased
capital or loan loss reserve requirements, if imposed, however, could have a
material impact on Capital One's consolidated financial statements.
Regulation of Lending Activities. The activities of the Bank and the
Savings Bank as consumer lenders also are subject to regulation under various
federal laws, including the Truth-in-Lending Act, the Equal Credit Opportunity
Act, the Fair Credit Reporting Act, the Community Reinvestment Act and the
Soldiers' and Sailors' Civil Relief Act, as well as under various state laws.
Depending on the underlying issue and applicable law, regulators are often
authorized to impose penalties for violations of these statutes and, in some
cases, to order the Bank and the Savings Bank to compensate injured borrowers.
Borrowers may also have a private right of action to bring actions for some
violations. Federal bankruptcy and state sales finance laws (in the area of
Capital One's automobile financing business) and state debtor relief and
collection laws also affect the ability of the Bank and the Savings Bank to
collect outstanding balances owed by borrowers.
Privacy. The Act requires a financial institution to disclose its privacy
policy to customers and consumers, and requires that such customers and
consumers be given a choice (through an opt-out notice) to forbid the sharing
of non-public personal information about them with non-affiliated third
persons. Capital One has a written privacy policy posted on its web site which
it will deliver to each of its customers when the customer relationship begins,
and annually thereafter, in compliance with the Act. Under that policy, Capital
One, the Bank and the Savings Bank protect the security of information about
their customers, educate their employees about the importance of protecting
customer privacy, and allow their customers to remove their names from the
solicitation lists they use and share with others. Capital One, the Bank and
the Savings Bank require business partners with whom they share such
information to abide by the redisclosure and reuse provisions of the Act.
Capital One, the Bank and the Savings Bank have developed and implemented
programs to fulfill the expressed requests of customers and consumers to opt
out of information sharing subject to the Act. With respect to Capital One's
newly acquired subsidiary, PeopleFirst, Inc., Capital One is in the process of
migrating PeopleFirst's privacy policy to be in accordance with Capital One's.
As Capital One's, the Bank's and the Savings Bank's regulators establish
further guidelines for addressing customer privacy issues, Capital One and the
Bank may need to amend their privacy policies and adapt their internal
procedures.
8
In addition to adopting federal requirements regarding privacy, the Act also
permits individual states to enact stricter laws relating to the use of
customer information. Vermont has done so by regulation, and many states,
notably California, are expected to consider such proposals which may impose
additional requirements or restrictions on Capital One, the Bank and the
Savings Bank.
Investment in Capital One, the Bank and the Savings Bank. Certain
acquisitions of Capital One's, the Bank's or the Savings Bank's capital stock
may be subject to regulatory approval or notice under federal or Virginia law.
Investors are responsible for ensuring that they do not, directly or
indirectly, acquire shares of Capital One's capital stock in excess of the
amount which can be acquired without regulatory approval.
The Bank and the Savings Bank are each "insured depository institutions"
within the meaning of the Change in Bank Control Act. Because of this, federal
law and regulations prohibit any person or company from acquiring control of
Capital One without, in most cases, prior written approval of the FRB or the
OTS, as applicable. Control is conclusively presumed if, among other things, a
person or company acquires more than 25% of any class of Capital One's voting
stock. A rebuttable presumption of control arises if a person or company
acquires more than 10% of any class of voting stock and is subject to any of a
number of specified "control factors" as set forth in the applicable
regulations.
Although the Bank is not a "bank" within the meaning of Virginia's
reciprocal interstate banking legislation (Chapter 15 of Title 6.1 of the Code
of Virginia), it is a "bank" within the meaning of Chapter 13 of Title 6.1 of
the Code of Virginia governing the acquisition of interests in Virginia
financial institutions, or the Financial Institution Holding Company Act. The
Financial Institution Holding Company Act prohibits any person or entity from
acquiring or making any public offer to acquire control of a Virginia financial
institution or its holding company without making application to and receiving
prior approval from the Bureau of Financial Institutions.
International Regulation. The Bank also faces regulation in certain foreign
jurisdictions where it currently, and may in the future, operate. Those
regulations may be similar to or substantially different from the regulatory
requirements the Bank faces in the United States. In the United Kingdom, the
Bank operates through the UK Bank, which was established in 2000. The UK Bank
is regulated by the Financial Services Authority, or the FSA, and licensed by
the Office of Fair Trading, or the OFT. The UK Bank is an "authorized deposit
taker" and thus is able to take consumer deposits in the UK. The UK Bank has
also been granted a full license by the OFT to issue consumer credit under the
UK's Consumer Credit Act - 1974. The FSA requires the UK Bank to maintain
certain capital ratios at all times. In addition, the UK Bank is limited by the
UK Companies Act - 1985 in its distribution of dividends to the Bank in that
such dividends may only be paid out of the UK Bank's "distributable profits."
In Canada, the Bank operates principally through a recently established
branch of the Bank, or the Canadian Branch, which, like the Bank is engaged
solely in the issuance of credit cards. Capital One's installment loan business
in Canada is conducted through a separately incorporated finance company
subsidiary of Capital One. The Canadian Branch is considered a federally
regulated financial institution under the Canadian Bank Act, and is authorized
and supervised by the Canadian Office of the Superintendent of Financial
Institutions.
In France, the Bank operates through a branch of the UK Bank that was
established under the European Union's passport authority. This branch issues
credit cards and installment loans.
Interstate Taxation. Several states have passed legislation which attempts
to tax the income from interstate financial activities, including credit cards,
derived from accounts held by local state residents. Based on the volume of
Capital One's business in these states and the nature of the legislation passed
to date, we currently believe that this development will not materially affect
Capital One's financial condition. The states may also consider legislation to
tax income derived from transactions conducted through the Internet. The Bank
and the Savings Bank currently solicit accounts and take account information
via the Internet. It is unclear at this time, however, whether and in what form
any such legislation will be adopted, or if adopted, what its impact on the
Bank and the Savings Bank would be.
9
Legislation. Legislation has been introduced requiring additional
disclosures for credit cards and other types of consumer lending. Such
legislation could place additional restrictions on the practices of credit card
issuers and consumer lenders generally. Additional proposals have been made to
change existing federal bankruptcy laws, to expand the privacy protections
afforded to customers of financial institutions, and to reform the federal
deposit insurance system. It is unclear at this time whether and in what form
any legislation will be adopted or, if adopted, what its impact on the Bank,
the Savings Bank or Capital One would be. Congress or individual states may in
the future consider other legislation that would materially affect the banking
or credit card industries.
USE OF PROCEEDS
Except as otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of our debt securities, equity
securities, stock purchase contracts and equity units for general corporate
purposes in the ordinary course of our business, including the reduction of
short-term debt, possible acquisitions, investments in, or extensions of credit
to, our subsidiaries and investments in securities.
We may temporarily invest any funds not required immediately for purposes
described above in short-term marketable securities. Based upon our historical
and anticipated future growth and our financial needs, we may engage in
additional financings (in addition to our funding activities in the ordinary
course of business) of a character and amount to be determined as the need
arises. For current information, look at our current filings with the SEC. See
"Where You Can Find More Information."
10
FINANCIAL RATIOS
Capital One's consolidated ratio of earnings to fixed charges and ratio of
earnings to combined fixed charges and preferred stock dividend requirements
are as follows:
Nine Months
Ended
September 30, Years Ended December 31,
------------- ------------------------
2001 2000 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
Earnings to Fixed Charges:
Including Interest on Deposits..... 1.86 1.95 1.91 2.05 2.02 1.87 1.83
Excluding Interest on Deposits..... 2.84 2.48 2.48 2.39 2.21 1.99 2.02
Earnings to Combined Fixed Charges and
Preferred Stock Dividends:
Including Interest on Deposits..... 1.86 1.95 1.91 2.05 2.02 1.87 1.83
Excluding Interest on Deposits..... 2.84 2.48 2.48 2.39 2.21 1.99 2.02
The ratio of earnings to fixed charges is computed by dividing income before
income taxes and fixed charges less interest capitalized during such period,
net of amortization of previously capitalized interest, by fixed charges. The
ratio of earnings to combined fixed charges and preferred stock dividends is
computed by dividing income before income taxes and fixed charges less interest
capitalized during such period, net of amortization of previously capitalized
interest, by fixed charges and preferred stock dividend requirements. Fixed
charges consist of interest, expensed or capitalized, on borrowings (including
or excluding deposits, as applicable), and the portion of rental expense which
is deemed representative.
DESCRIPTION OF DEBT SECURITIES
Capital One may from time to time issue and sell debt securities which will
be Capital One's direct unsecured general obligations. These debt securities
are described below and will be senior debt securities or subordinated debt
securities and any senior or subordinated debt securities that may be part of
an equity unit, all of which are called debt securities. The senior debt
securities and the subordinated debt securities will be issued under one or
more separate indentures between Capital One and BNY Midwest Trust Company (as
successor to Harris Trust and Savings Bank), as trustee, or another indenture
trustee named in the applicable prospectus supplement. Senior debt securities
will be issued under a senior indenture and subordinated debt securities will
be issued under a subordinated indenture. Together, the senior indenture and
the subordinated indenture are called the indentures, and the senior indenture
trustee and the subordinated indenture trustee are called the indenture
trustees.
We have summarized selected provisions of the indentures below. The summary
is not complete. A copy of the senior indenture and the form of subordinated
indenture have been incorporated by reference as exhibits to the registration
statement of which this prospectus is a part and have been qualified as
indentures under the Trust Indenture Act. You should read the indentures for
provisions that may be important to you. You should also consider applicable
provisions of the Trust Indenture Act. In the summary below, we have included
references to section numbers so that you can easily locate these provisions.
The particular terms of any debt securities Capital One offers will be
described in the related prospectus supplement, along with any applicable
modifications of or additions to the general terms of the debt securities
described below and in the indentures. For a description of the terms of any
series of debt securities, you should also review both the prospectus
supplement relating to that series and the description of the debt securities
set forth in this prospectus before making an investment decision. Capitalized
terms used in the summary have the meanings specified in the applicable
indenture.
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As of the date of this prospectus, Capital One has issued the following
notes under the senior indenture:
. notes with a maturity date of 2003, an aggregate principal amount of
$125,000,000 and an interest rate of 7 1/4%;
. notes with a maturity date of 2006, an aggregate principal amount of
$225,000,000 and an interest rate of 7 1/4%;
. notes with a maturity date of 2008, an aggregate principal amount of
$200,000,000 and an interest rate of 7 1/8%; and
. notes with a maturity date of 2007, an aggregate principal amount of
$300,000,000 and an interest rate of 8 3/4%.
As of the date of this prospectus, Capital One has not issued any series of
debt securities under the subordinated indenture.
General
The debt securities will be Capital One's direct unsecured obligations. The
indentures do not significantly limit Capital One's operations. In particular,
they do not:
. limit the amount of debt securities that Capital One can issue under the
indentures;
. limit the number of series of debt securities that Capital One can issue
from time to time;
. limit or otherwise restrict the total amount of debt that Capital One or
its subsidiaries may incur or the amount of other securities that Capital
One may issue;
. require Capital One or an acquiror to repurchase debt securities in the
event of a "change in control"; or
. contain any covenant or other provision that is specifically intended to
afford any holder of the debt securities any protection in the event of
highly leveraged transactions or similar transactions involving Capital
One or its subsidiaries.
The senior debt securities will rank equally with all of Capital One's other
unsecured unsubordinated indebtedness. The subordinated debt securities will
have a junior position to all of Capital One's senior indebtedness.
Because Capital One is a holding company, dividends and fees from its
subsidiaries are Capital One's principal source of revenues from which to repay
the debt securities. Capital One's subsidiaries engaged in the banking or
credit card business can only pay dividends if they are in compliance with
applicable United States federal and state regulatory requirements. Capital
One's right to participate in any asset distribution of any of its
subsidiaries, on liquidation, reorganization or otherwise, will rank junior to
the rights of all creditors of that subsidiary (except to the extent that
Capital One may itself be an unsubordinated creditor of that subsidiary). The
rights of holders of debt securities to benefit from those distributions will
also be junior to prior claims of the creditors of Capital One's subsidiaries.
Consequently, the debt securities will be effectively subordinated to all
liabilities of Capital One's subsidiaries.
Because Capital One is a holding company, its right to participate as a
stockholder in any distribution of assets of any subsidiary, including the Bank
and the Savings Bank, upon its liquidation, reorganization or winding-up, and
thus the ability of holders of the debt securities to benefit, as creditors of
Capital One, from the distribution, is subject to the prior claims of creditors
of the subsidiary. The Bank and the Savings Bank are subject to claims by
creditors for long-term and short-term debt obligations, including deposit
liabilities, obligations for federal funds purchased and securities sold under
repurchase agreements. There are also various
12
legal limitations on the extent to which they may pay dividends or otherwise
supply funds to Capital One or its affiliates. See "Capital One Financial
Corporation--Supervision, Regulation and Other Matters--Dividends and Transfers
of Funds."
Terms
A prospectus supplement relating to the offering of any series of debt
securities will include specific terms relating to the offering. These terms
will include some or all of the following:
. the title and type of the offered debt securities;
. any limit upon the aggregate principal amount of the offered debt
securities;
. the date or dates (including the maturity date) on which the principal
will be payable and any provisions relating to extending or shortening the
date on which the principal and premium, if any, of the debt securities of
the series is payable; the interest rate, or method of calculating the
interest rate, the date or dates from which interest will accrue and the
interest payment dates; the manner of paying principal of and interest on
the debt securities; and the place or places where principal, premium and
interest will be payable;
. the detailed terms and provisions of any optional or mandatory redemption
provision;
. any limit upon the currency of the offered debt securities;
. any changes to the covenants or additional events of default or covenants;
. any sinking fund or other provisions that would obligate Capital One to
repurchase or otherwise redeem the debt securities;
. whether the debt securities will be convertible into or exchangeable for
Capital One's common stock or other securities or property and, if so, the
terms of the conversion or exchange;
. the percentage of the principal amount (expressed as a percentage of the
aggregate principal amount) or price at which the debt securities will be
issued and, if an index, formula or other method is used, the method for
determining amounts of principal or interest;
. whether and upon what terms debt securities may be defeased (which means
that Capital One would be discharged from its obligations by depositing
sufficient cash or government securities to pay the principal, interest,
any premiums and other sums due to the stated maturity date or a
redemption date of the debt securities of the series); and
. any other terms not inconsistent with the provisions of the indentures,
including any covenants or other terms that may be required or advisable
under United States or other applicable laws or regulations, or advisable
in connection with the marketing of the debt securities. (Section 301)
Form of the Debt Securities
The indentures provide that Capital One may issue senior and subordinated
debt securities, respectively, in registered form, in bearer form or in both
registered and bearer form. Unless otherwise indicated in the applicable
prospectus supplement, each series of senior and subordinated debt securities
will be issued in registered form only, without coupons. Holders of "registered
form" securities do not receive a physical certificate but instead are listed
on the applicable indenture trustee's register for the applicable debt
securities. (Section 305)
The senior and subordinated debt securities may also be issued as original
issue discount debt securities. "Original issue discount debt securities" are
securities sold by Capital One for substantially less than their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any original issue discount debt securities will
be described in the applicable prospectus supplement. (Section 101)
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Unless otherwise indicated in the applicable prospectus supplement, Capital
One will issue senior and subordinated debt securities in registered form,
without coupons, in denominations of $1,000 or any whole number multiple of
$1,000. Capital One will issue senior and subordinated debt securities in
bearer form in denominations of $5,000 or any whole number of $5,000. (Section
302) There will be no service charge for any transfer, exchange or conversion
of senior and subordinated debt securities, but Capital One or the applicable
indenture trustee may require the holder to pay any tax or other governmental
charge payable upon a transfer, exchange or conversion.
If Capital One issues the debt securities in bearer form, the debt
securities will have interest coupons attached, unless issued as original issue
discount debt securities. "Bearer form" securities are payable to whomever
physically holds them from time to time. Debt securities in bearer form will
not be offered, sold, resold or delivered in connection with their original
issuance in the United States or to any United States person other than through
offices of certain United States financial institutions located outside the
United States. Purchasers of debt securities in bearer form will be subject to
certification procedures and may be affected by United States tax law
limitations. These procedures and limitations will be described in the
applicable prospectus supplement.
Registration, Transfer, Payment and Paying Agent
Unless otherwise described in the applicable prospectus supplement, payments
on the debt securities will be made at Capital One's office or agency
maintained for that purpose. We have appointed an agency in New York, New York
to make payments on the debt securities; however, we may change our agent from
time to time. (Section 1002) Any transfer of the debt securities will be
registerable at the same place. In addition, we may choose to pay interest by
check mailed to the address in the security register of the person in whose
name the debt security is registered at the close of business on the regular
record date. (Sections 305 and 307)
Unless otherwise indicated in the applicable prospectus supplement, payments
of principal, premium, if any, and interest on debt securities in bearer form
will be made at the office outside the United States specified in the
applicable prospectus supplement and as we may designate from time to time.
Payment can also be made by check or by transfer to an account maintained by
the payee with a bank located outside the United States. Unless otherwise
indicated in the applicable prospectus supplement, payment on debt securities
in bearer form will be made only if the holder surrenders the coupon relating
to the interest payment date. We will not make any payments on any debt
security in bearer form at any office or agency in the United States, by check
mailed to any address in the United States or by transfer to any account
maintained with a bank located in the United States, (Section 1002)
Global Debt Securities
The debt securities of a series may be issued in whole or in part in global
form, which means that Capital One will deposit with the depositary identified
in the applicable prospectus supplement one or more certificates representing
the entire series. Global debt securities may be issued in either registered or
bearer form and in either temporary or permanent form. Unless it is exchanged
in whole or in part for debt securities in definitive form, a global
certificate may generally be transferred only as a whole unless it is being
transferred to a nominee of the depositary. (Section 305)
The applicable prospectus supplement will describe the specific terms of the
depositary agreement governing a series of global senior or subordinated debt
securities and any limitations and restrictions relating to a series of global
senior or subordinated debt securities. (Section 305)
Covenants
Under the indentures, we agree to the following:
. Except as permitted under "--Consolidation, Merger and Sales of Assets,"
we will preserve and keep in full force and effect our corporate existence
and the corporate existence of each of our significant
14
subsidiaries, as defined below. We will also preserve and keep in full
force and effect our and our significant subsidiaries' charter rights,
statutory rights and franchises. Neither Capital One nor any significant
subsidiary will be required to preserve these rights or franchises if
Capital One or the significant subsidiary determines it is no longer
desirable and that the loss is not disadvantageous in any material respect
to the holder. (Section 1007)
. Each of the indentures contains a covenant by us limiting our ability to
dispose of the voting stock of a significant subsidiary. A "significant
subsidiary" is any of our subsidiaries that constitutes 20% or more of our
consolidated assets. This covenant generally provides that, as long as any
of the debt securities are outstanding, neither Capital One nor any of its
significant subsidiaries will, other than through a securitization of
assets:
. issue stock or securities convertible into stock of a significant
subsidiary unless Capital One will own at least 80% of the
subsidiary's voting stock after the issuance; or
. consolidate with or merge into any other corporation, or convey,
transfer or lease its property and assets substantially as an entity
to any person other than Capital One or one of its subsidiaries,
unless Capital One will own at least 80% of the surviving successor
or other person. (Section 1005)
. Neither Capital One nor its subsidiaries will pledge, encumber or grant a
lien on a significant subsidiary's voting stock to secure indebtedness for
borrowed money, unless the debt securities are equally and ratably secured
by this pledge, encumbrance or lien, and Capital One would continue to
control the subsidiary if the pledge, encumbrance or lien is exercised.
(Section 1006)
Subordination of Subordinated Debt Securities
Unless otherwise indicated in the applicable prospectus supplement, the
following provisions will apply to subordinated debt securities. Section
references are to sections of the subordinated indenture.
Subordinated debt securities will be subordinated in right of payment to all
Senior Indebtedness, as defined below. Payments on subordinated debt securities
will also be effectively subordinated if:
. Capital One is involved in insolvency, bankruptcy or similar proceedings;
or
. Capital One fails to pay the principal of, premium, interest or some types
of additional payments on or any sinking fund with respect to any Senior
Indebtedness when due. (Section 1601)
Because of this subordination, some of Capital One's creditors may receive
more, ratably, than holders of subordinated debt securities if Capital One is
insolvent.
After all payments have been made to the holders of Senior Indebtedness, any
holders of subordinated debt securities will be subrogated to the rights of
holders of Senior Indebtedness upon any distribution of assets in any
proceedings out of the distributive shares of subordinated debt securities.
(Sections 1601 and 1602)
"Senior Indebtedness" means the principal of and premium, if any, and
interest, on, whether outstanding now or incurred later, (a) all indebtedness
for money borrowed by Capital One, including indebtedness of others that
Capital One guarantees, other than the subordinated debt securities and the
junior subordinated debt securities and other indebtedness that is expressly
stated as not senior, and (b) any amendments, renewals, extensions,
modifications and refundings of any indebtedness, unless in either case the
instrument evidencing the indebtedness provides that it is not senior in right
of payment to the subordinated debt securities.
15
Consolidation, Merger and Sale of Assets
Each indenture generally permits a consolidation or merger between Capital
One and another corporation. Each also permits the sale by Capital One of all
or substantially all of its property or assets. These events do not require the
consent of the holders of any outstanding debt securities if:
. the successor or purchaser is a corporation organized under the laws of
the United States of America, any state or the District of Columbia and
expressly assumes Capital One's obligations on the debt securities under
each of the indentures;
. immediately after giving effect to the transaction, no event of default,
and no event which, after notice or lapse of time or both, would become an
event of default, will have occurred and be continuing; and
. Capital One has delivered to the applicable indenture trustee an officers'
certificate and an opinion of counsel stating compliance with these
provisions. (Section 801)
The successor shall be substituted for Capital One as if it had been an
original party to the indentures and the debt securities. Thereafter, the
successor may exercise Capital One's rights and powers under the indentures and
the debt securities and all of Capital One's obligations under those documents
will terminate. (Section 802)
Exchange of Debt Securities
Registered debt securities may be exchanged for an equal principal amount of
registered debt securities of the same series and date of maturity in
authorized denominations requested by the holders upon surrender of the
registered debt securities at an office or agency Capital One maintains for
that purpose and upon fulfillment of all other requirements set forth in the
indentures. (Section 305)
Conversion and Exchangeability
The holders of debt securities that are convertible into common stock or
other securities will be entitled to convert the debt securities in some
circumstances. The terms of any conversion will be described in the applicable
prospectus supplement. (Section 1602)
The holders of debt securities may be obligated to exchange them for common
stock or other securities of Capital One in some circumstances. The terms of
any exchange will be described in the applicable prospectus supplement.
(Section 305)
Events of Default
The indentures define an event of default for any series of senior or
subordinated debt securities as any of the following events, unless otherwise
provided in the applicable prospectus supplement:
. failure to pay the interest or any additional amounts payable on any
senior or subordinated debt securities when due and continuance of that
default for 30 days (in the case of the subordinated indenture, whether or
not payment is prohibited by the subordination provisions);
. failure to pay the principal of or any premium on any senior or
subordinated debt securities when due (in the case of the subordinated
indenture, whether or not payment is prohibited by the subordination
provisions);
. failure to deposit any sinking fund payment when due (in the case of the
subordinated indenture, whether or not payment is prohibited by the
subordination provisions);
. failure to perform any covenant or warranty in the applicable indenture,
other than a covenant or warranty applicable only to another series of
senior or subordinated debt securities, that continues for 60 days after
Capital One is given written notice;
16
. any event of default by Capital One, or any of its significant
subsidiaries, under any mortgage, indenture or other instrument under
which any indebtedness exceeding $10,000,000 becomes due and payable, if
the acceleration is not rescinded or annulled within 30 days after written
notice;
. certain events of bankruptcy, insolvency or reorganization of Capital One
or any of its significant subsidiaries; or
. any other event of default included in any indenture or supplemental
indenture. (Section 501)
If an event of default occurs with respect to any series of senior or
subordinated debt securities, the applicable indenture trustee will give the
holders of those debt securities notice of the default under the terms of the
applicable indenture. (Section 501)
If an event of default with respect to any series of senior or subordinated
debt securities occurs and continues, either the applicable indenture trustee
or the holders of at least 25% of the aggregate principal amount of the
outstanding senior or subordinated debt securities of that series may declare
the principal amount or, if the senior or subordinated debt securities of that
series are original issue discount debt securities, a specified portion of the
principal amount of all the senior or subordinated debt securities of that
series to be due and payable immediately. (Section 502)
Payment of the principal of subordinated debt securities may be accelerated
only in the case of certain events of bankruptcy, insolvency or reorganization.
Subordinated debt securities cannot be accelerated if Capital One defaults in
its performance of any other covenant, including payment of principal or
interest. Any time after a declaration of acceleration has been made, but
before a judgment or decree based on acceleration has been obtained, the
majority holders may, under certain circumstances, void the declaration.
"Majority holders" are the holders of a majority of the aggregate principal
amount of outstanding senior or subordinated debt securities of that series.
(Section 502)
Other than its duties in the case of a default, the applicable indenture
trustee is not obligated to exercise any of its rights or powers under any
senior or subordinated indenture at the request or direction of any of the
holders, unless those holders offer the applicable indenture trustee reasonable
indemnity. (Section 601) If the holders provide this reasonable
indemnification, the majority holders may direct the time, method and place of
conducting any proceeding for any remedy available to the applicable indenture
trustee, or exercising any trust or power conferred on the applicable indenture
trustee, for the senior or subordinated debt securities of that series.
(Section 512)
A holder does not have the right to institute a proceeding, appoint a
receiver or a trustee, or commence any other remedy, unless:
. the holder gives the applicable indenture trustee written notice of a
continuing event of default;
. the majority holders have made written request, and offered reasonable
indemnity, to the applicable indenture trustee to institute the proceeding
as trustee; and
. the applicable indenture trustee has not received an inconsistent request
from the majority holders and has failed to institute a proceeding within
60 days. (Section 507)
However, these limitations do not apply to a suit for the enforcement of
payment or conversion rights instituted on or after the respective due dates of
the senior and subordinated debt securities. (Section 508)
Waivers
The holders of at least 50% of the aggregate principal amount of the
outstanding senior and subordinated debt securities of each series may, on
behalf of all holders of that series, waive Capital One's compliance with
17
certain restrictive provisions of the applicable indenture. They may also waive
any past default under the applicable indenture, except a default in the
payment of principal, premium or interest or in the performance of certain
covenants. (Sections 513 and 1008)
Amendments
Unless provided otherwise in the applicable prospectus supplement, Capital
One and the applicable trustee may modify and amend an indenture with the
consent of the holders of at least 66 2/3% in aggregate principal amount of the
outstanding senior and subordinated debt securities of each series issued under
the applicable indenture and affected by the modification or amendment.
However, no modification or amendment may, without the consent of each holder
of debt securities affected by the modification or amendment:
. change the stated maturity of any debt security;
. reduce the principal amount of, or the premium, if any, or, except as
otherwise provided in the applicable prospectus supplement, interest on,
any debt security, including, in the case of an original issue discount
senior or subordinated debt security, the amount payable upon acceleration
of the maturity of that debt security;
. in the case of the subordinated indenture, modify the subordination
provisions in a manner adverse to the holders of those debt securities;
. reduce the percentage in principal amount of outstanding debt securities
of any series; or
. adversely affect the right of any holder of convertible debt securities or
exchangeable senior or subordinated debt securities to convert or
exchange. (Section 902)
Except as otherwise provided in the applicable prospectus supplement,
Capital One and the applicable indenture trustee may modify and amend an
indenture without the consent of any holder for any of the following purposes:
. to evidence the succession of another person to Capital One;
. to add to the covenants of Capital One for the benefit of the holders of
all or any series of debt securities;
. to add events of default;
. to add or change any provisions of the applicable indenture to facilitate
the issuance of bearer debt securities;
. to change the conditions, limitations and restrictions on the authorized
amount, terms or purposes of issue, authentication and delivery of debt
securities;
. to establish the form or terms of debt securities of any series and any
related coupons;
. to evidence and provide for the acceptance of appointment by a successor
trustee;
. to cure any ambiguity, defect or inconsistency in the applicable
indenture, provided the action does not materially adversely affect the
interests of the holders of any debt securities or related coupons;
. to supplement any of the provisions of the applicable indenture if
necessary to permit or facilitate the defeasance and discharge of any
series of debt securities, as long as the action does not materially
adversely affect the interests of the holders of any debt securities or
related coupons;
. to secure the debt securities; and
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. to amend or supplement any provision of the applicable indenture or any
supplemental indenture, provided that the amendment or supplement does not
materially adversely affect the interests of the holders of outstanding
debt securities. (Section 901)
Legal Defeasance and Covenant Defeasance
If the applicable prospectus supplement provides for defeasance, Capital One
may elect to pay and discharge its obligations on the applicable debt
securities if:
. no event of default has occurred and is continuing, or would occur upon
the giving of notice or lapse of time at the time of the satisfaction and
discharge;
. Capital One deposits with the applicable indenture trustee sufficient cash
or government securities to pay all the principal, any premium and any
other sums due through the stated maturity or redemption date of the
applicable debt securities of the series;
. Capital One pays all other sums due with respect to the outstanding debt
securities of the series;
. Capital One delivers an opinion of counsel to the effect that the holders
will have no federal income tax consequences as a result of the deposit or
defeasance; and
. Capital One delivers a certificate of its independent public accountants
as required by the applicable indenture. (Section 402)
If this happens, the holders of the applicable debt securities of the series
will not be entitled to the benefits of the applicable indenture, except for
the registration of transfer or exchange of applicable debt securities and the
replacement of stolen, lost or mutilated debt securities. (Section 306)
Determining the Outstanding Debt Securities
Capital One will consider the following factors in determining whether the
holders of the requisite principal amount of outstanding debt securities have
given the proper notice under the applicable indenture:
. the portion of the principal amount of an original issue discount debt
security that will be deemed to be outstanding will be the portion of the
principal amount that would be declared to be due and payable on that date;
. the principal amount of any indexed security will be the principal face
amount of the indexed security determined on the date of its original
issuance;
. the principal amount of any debt security denominated in one or more
foreign currency units shall be the U.S. dollar equivalent based on the
applicable exchange rate or rates at the time of sale; and
. any debt security owned by Capital One or any other obligor, or any of
their affiliates, will be treated as not outstanding. (Section 101)
Governing Law
The indentures will be governed by, and construed in accordance with, the
laws of the State of New York.
Regarding the Indenture Trustees
In the normal course of business, Capital One and its subsidiaries conduct
banking transactions with the indenture trustees, and the indenture trustees
conduct banking transactions with Capital One and its subsidiaries.
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DESCRIPTION OF PREFERRED STOCK
The following description summarizes the general terms and provisions of
Capital One's authorized preferred stock. If Capital One offers preferred
stock, it will describe the specific designations and rights of this stock in a
prospectus supplement and will file the description with the SEC. Terms which
could be included in a prospectus supplement include:
. the designation of the preferred stock and the number of shares offered;
. the amount of liquidation preference per share;
. the price at which the preferred stock will be issued;
. the dividend rate, or its method of calculation, and the dates on which
dividends will be payable;
. whether the dividends will be cumulative or non-cumulative, and, if
cumulative, the dates from which dividends will commence to cumulate;
. any redemption or sinking fund provisions of the preferred stock;
. whether Capital One has elected to offer depositary shares, as described
below;
. the terms and conditions, if any, upon which the preferred stock will be
convertible into common stock or other securities; and
. any additional voting, dividend, liquidation, redemption, sinking fund and
other rights, preferences, privileges, limitations and restrictions of the
preferred stock.
Preferred stock will have the dividend, liquidation, and voting rights
described below, unless otherwise provided in the applicable prospectus
supplement. You should read the prospectus supplement relating to any series of
preferred stock for the series' specific terms.
General
Capital One's Restated Certificate of Incorporation authorizes its Board of
Directors, or the Board, to issue one or more series of preferred stock, par
value $.01 per share, without the approval of Capital One's stockholders. The
Board can also determine the terms, including preferences, conversion and other
rights, voting power, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption, of any preferred stock.
Currently, 50,000,000 shares are classified as preferred stock under Capital
One's Restated Certificate of Incorporation and no shares of preferred stock
are outstanding. Capital One has designated 1,000,000 shares of the preferred
stock as cumulative participating junior preferred stock, which may be issued
upon the exercise and conversion of certain "Rights," as defined below, which
are attached to each share of its common stock. Before issuing a series of
preferred stock, the Board will adopt resolutions creating and designating the
series of preferred stock.
The preferred stock will, when issued, be fully paid and non-assessable and
have no preemptive rights. Unless otherwise specified in a prospectus
supplement, each series of the preferred stock will rank equally as to
dividends and liquidation rights in all respects with each other series of the
preferred stock. You should read the applicable prospectus supplement relating
to any series of preferred stock for that series' specific terms.
Dividend Rights
Holders of preferred stock will receive, when, as and if declared by the
Board, dividends at rates and on the dates described in the applicable
prospectus supplement. Each dividend will be payable to the holders of record
as they appear on the stock record books of Capital One or, if applicable, the
records of the depositary referred to under "--Depositary Shares," on the
record dates fixed by the Board or its committee. Dividends on any series of
preferred stock may be cumulative or non-cumulative. Capital One's ability to
pay dividends on the preferred
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stock depends on the ability of the Bank and the Savings Bank to pay dividends
to Capital One. The ability of Capital One, the Bank and the Savings Bank to
pay dividends in the future is subject to bank regulatory requirements and
capital guidelines and policies established by the FRB. See "Capital One
Financial Corporation--Supervision, Regulation and Other Matters."
Capital One will not declare or pay or set apart funds for the payment of
dividends on any securities which rank equally with the preferred stock unless
Capital One has paid or set apart funds for the payment of dividends on the
preferred stock. If full dividends are not paid, the preferred stock will share
dividends pro rata with any equally ranked securities.
Voting Rights
Unless indicated in the applicable prospectus supplement relating to a
particular series of preferred stock or expressly required by law, the holders
of the preferred stock will not have any voting rights.
Rights upon Liquidation
If Capital One liquidates, dissolves or winds up its affairs, either
voluntarily or involuntarily, the holders of each series of preferred stock
will be entitled to receive liquidating distributions. These will be in the
amounts set forth in the applicable prospectus supplement, plus accrued and
unpaid dividends and, if the series of the preferred stock is cumulative,
accrued and unpaid dividends for all prior dividend periods. If Capital One
does not pay in full all amounts payable on any series of preferred stock, the
holders of the preferred stock will share proportionately with any equally
ranked securities in any distribution of Capital One's assets. After the
holders of any series of preferred stock are paid in full, they will not have
any further claim to any of Capital One's remaining assets.
Because Capital One is a holding company, the rights of its stockholders to
participate in the assets of any subsidiary, including the Bank, upon the
subsidiary's liquidation or recapitalization may be subject to the prior claims
of the subsidiary's creditors, except to the extent that Capital One may itself
be a creditor with recognized claims against the subsidiary.
Redemption
A series of preferred stock may be redeemable, in whole or in part, at the
option of Capital One or the holder of the stock, and may be subject to
mandatory redemption pursuant to a sinking fund, under the terms included in
any applicable prospectus supplement.
In the event of partial redemptions of preferred stock, the Board or its
committee will determine the method for selecting the shares to be redeemed,
which may be by lot or pro rata or by any other method the Board or its
committee determines to be equitable.
On and after a redemption date, unless Capital One defaults in the payment
of the redemption price, dividends will cease to accrue on shares of preferred
stock which were called for redemption. In addition, all rights of holders of
the preferred shares will terminate except for the right to receive the
redemption price.
Conversion
The applicable prospectus supplement for any series of preferred stock will
state the terms and conditions, if any, on which shares of that series are
convertible into Capital One's common stock or other securities, including:
. the number of shares of common stock or other securities into which the
shares of preferred stock are convertible;
. the conversion price or manner of calculation;
. the conversion period;
21
. provisions as to whether conversion will be at the option of the holders
of the preferred stock or Capital One, if applicable;
. any events requiring an adjustment of the conversion price; and
. provisions affecting conversion in the event of the redemption of the
series of preferred stock.
Depositary Shares
Capital One may, at its option, elect to offer fractional shares of
preferred stock, or "depositary shares," rather than full shares of preferred
stock. In that event, Capital One will issue receipts for depositary shares,
each of which will represent a fraction of a share of a particular series of
preferred stock as described in the applicable prospectus supplement.
The shares of any series of preferred stock represented by depositary shares
will be deposited under a deposit agreement between Capital One and the
depositary named in the applicable prospectus supplement. Subject to the terms
of the deposit agreement, each owner of a depositary share will be entitled, in
proportion, to all the rights and preferences of the preferred stock, including
dividend, voting, redemption, subscription and liquidation rights. The terms of
any depositary shares will be set forth in the applicable prospectus supplement
and the provisions of the deposit agreement, which will be filed with the SEC.
DESCRIPTION OF COMMON STOCK
Capital One is authorized to issue 1,000,000,000 shares of common stock, par
value $.01 per share. As of December 31, 2001, 217,656,985 shares were issued
and outstanding. The common stock is traded on the New York Stock Exchange
under the symbol "COF." All outstanding shares of common stock are and will be
fully paid and non-assessable.
The following summary is not complete and you should refer to the applicable
provisions of the Delaware General Corporation Law and Capital One's Restated
Certificate of Incorporation and Bylaws for additional information. See "Where
You Can Find More Information."
Voting and Other Rights
Each share of common stock is entitled to one vote on all matters submitted
to a vote of stockholders. A majority vote is required for all actions to be
taken by stockholders, except that directors are elected by a plurality of the
votes cast. Stockholders do not have cumulative voting rights in the election
of directors, which means that the holders of more than 50% of the shares
voting in an election of directors can elect all of the directors. Shares of
common stock also do not have any preemptive, subscription, redemption, sinking
fund or conversion rights.
Distribution
Common stock dividends are subject to preferences, if any, on any
outstanding shares of preferred stock. Dividends must be declared by the Board
out of legally available funds. If Capital One liquidates, dissolves or winds
up its affairs, common stockholders are entitled to share proportionately in
the assets available for distribution to holders of common stock.
Anti-Takeover Legislation
Capital One is a Delaware corporation and is governed by Section 203 of the
Delaware General Corporation Law. This provision generally states that, subject
to some exceptions, a corporation cannot engage in any business combination
with any "interested stockholder" for three years after the time that the
stockholder became
22
an interested stockholder unless the corporation's stockholders approve the
business combination. Delaware law defines an interested stockholder to include
any person, and its affiliates and associates, that owns 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within three years prior to the relevant
date.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to enter into some business
combinations and transactions with a corporation for a three-year period.
Although stockholders may elect to exclude a corporation from Section 203's
restrictions, Capital One's Restated Certificate of Incorporation and Bylaws do
not exclude Capital One from Section 203's restrictions. The provisions of
Section 203 may encourage companies interested in acquiring Capital One to
negotiate in advance with the Board, since Section 203 permits the Board,
without stockholder approval, to approve a business combination with an
interested stockholder or the transaction which causes a person to become an
interested stockholder. Business combinations are discussed more fully below.
Capital One's Certificate of Incorporation and Bylaw Provisions
Certain provisions in Capital One's Restated Certificate of Incorporation
and Bylaws could make more difficult or discourage a tender offer, proxy
contest or other takeover attempt that is opposed by the Board but which might
be favored by the stockholders. The Restated Certificate of Incorporation and
Bylaws are filed as exhibits to the registration statement, and certain
provisions are summarized below.
Classified Board of Directors. Capital One's Board, other than directors
elected by any series of preferred stock, is divided into three classes of
directors, with the classes to be as nearly equal in number as possible. The
class of directors elected at each annual meeting is elected for a three-year
term. Some practical effects of these classification provisions are the
following:
. It will take at least two annual meetings of stockholders, instead of one,
to elect a majority of the Board. This delay ensures that Capital One's
directors, if confronted by a stockholder attempting to force a proxy
contest, a tender or exchange offer, or an extraordinary corporate
transaction, would have sufficient time to review the proposal and any
available alternatives before they act in what they believe to be the best
interests of the stockholders. However, even if a change in the
composition of the Board would be beneficial to Capital One and its
stockholders, it will take at least two annual meetings of stockholders to
make this change.
. A classified Board may discourage third-party proxy contests, tender
offers or attempts to obtain control of Capital One. This will happen even
if an attempt might be beneficial to Capital One and its stockholders.
Therefore, there is an increased likelihood that incumbent directors will
retain their positions.
. A classified Board discourages accumulations of large blocks of Capital
One's stock by purchasers whose objective is to take control of the Board.
This could reduce the likelihood of fluctuations in the market price of
the common stock that might result from accumulations of large blocks of
stock. Stockholders therefore might not have opportunities to sell their
shares of common stock at the higher market price that an accumulation of
stock could create.
Number of Directors; Removal; Filling Vacancies. Generally speaking,
Capital One's Board must consist of between three and seventeen directors and
vacancies will be filled only by the affirmative vote of a majority of the
remaining directors, even if less than a quorum remains in office. Therefore,
unless the Bylaws are amended, the Board could prevent any stockholder from
enlarging the Board of Directors and filling the new directorships with the
stockholder's own nominees.
Under Delaware law, unless otherwise provided in the certificate of
incorporation, directors serving on a classified board may only be removed by
the stockholders for cause. Capital One's Restated Certificate of
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Incorporation and Bylaws provide that, subject to the rights of holders of
preferred stock to elect directors under specified circumstances, directors may
be removed only for cause and only upon the affirmative vote of holders of at
least 80% of the voting power of all of the then outstanding shares of stock
entitled to vote generally in the election of directors.
No Stockholder Action by Written Consent; Special Meetings. Subject to the
rights of any holders of preferred stock to elect additional directors under
specified circumstances, stockholder action can be taken only at an annual or
special meeting of stockholders and cannot be taken by written consent. Under
circumstances described in the Bylaws, special meetings of stockholders can be
called by the Chairman of the Board or by the Board. Stockholders are not
permitted to call a special meeting or to require that the Board call a special
meeting. Moreover, any special meeting of stockholders is limited to the
business in the notice of the special meeting sent to the stockholders before
the meeting.
The provisions prohibiting stockholder action by written consent and
prohibiting stockholders from calling a special meeting could delay
consideration of a stockholder proposal until Capital One's next annual
meeting. This would prevent the holders of Capital One's stock from
unilaterally using the written consent procedure to take stockholder action.
Moreover, a stockholder cannot force stockholder consideration of a proposal
over the opposition of the Chairman and the Board by calling a special meeting
of stockholders.
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals. Only people who are nominated by, or at the direction of, the
Board, or by a stockholder who has given proper written notice prior to a
meeting at which directors are to be elected, will be eligible for election as
directors. Business conducted at an annual meeting is limited to the business
brought before the meeting by, or at the direction of, the Chairman, the Board
or a stockholder who has given proper notice. A stockholder's notice to Capital
One proposing to nominate a person for election as a director must also contain
certain information described in the Bylaws. You should refer to Capital One's
Bylaws for more information, including the process and timing requirements for
a stockholder notice.
Some of the effects of the provisions described above and in the Bylaws
include:
. the Board will have a longer period to consider the qualifications of the
proposed nominees and, if deemed necessary or desirable, to inform
stockholders about the qualifications;
. there will be an orderly procedure for conducting annual meetings of
stockholders and informing stockholders, prior to the meetings, of any
business proposed to be conducted at the meetings, including any Board
recommendations; and
. contests for the election of directors or the consideration of stockholder
proposals will be precluded if the procedures are not followed. Third
parties may therefore be discouraged from conducting a solicitation of
proxies to elect their own slate of directors or to approve their own
proposal.
Business Combinations. Certain mergers, share exchanges or sales of Capital
One's assets with or to interested stockholders, as defined below, must be
approved by the affirmative vote of the holders of at least 75% of the voting
stock of Capital One, voting together as a single class. Capital One's Restated
Certificate of Incorporation requires this affirmative vote even if no vote is
required, or a lesser percentage is specified, by law or any national
securities exchange or otherwise. This affirmative vote is not required in two
situations. First, it is not required if the business combination has been
approved by a majority of uninterested, continuing directors. Second, it is not
required if certain price and procedure requirements designed to ensure that
Capital One's stockholders receive a "fair price" for their common stock are
satisfied. Capital One's Restated Certificate of Incorporation defines an
interested stockholder as any person, other than Capital One or any subsidiary
of Capital One, who or which:
. beneficially owns, directly or indirectly, 5% or more of the voting power
of the outstanding voting stock;
24
. is an affiliate of Capital One and at any time within the two-year period
immediately prior to the date in question beneficially owned, directly or
indirectly, 5% or more of the voting power of the then outstanding voting
stock; or
. owns any shares of voting stock which were at any time within the two-year
period immediately prior to the date in question beneficially owned by any
interested stockholder, if the transfer of ownership occurred in the
course of a non-public transaction or series of transactions.
Liability of Directors; Indemnification. A director generally will not be
personally liable for monetary damages to Capital One or its stockholders for
breach of fiduciary duty as a director. A director may be held liable, however,
for the following:
. any breach of the director's duty of loyalty to Capital One or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. paying a dividend or approving a stock repurchase in violation of Delaware
law; or
. any transaction from which the director derived an improper personal
benefit.
Capital One indemnifies its officers and directors against lawsuits by third
parties to the fullest extent of the law. Capital One may agree with any person
to provide an indemnification greater than or different from the
indemnification provided by the Restated Certificate of Incorporation.
Amendments. The Restated Certificate of Incorporation and Bylaws generally
may be amended by a majority vote of the stockholders, but some provisions,
including some of the provisions discussed above, can only be amended by an 80%
vote of the stockholders. This 80% approval requirement prevents a stockholder
with only a majority of the common stock from circumventing the requirements of
these provisions by simply amending or repealing them. The Restated Certificate
of Incorporation further provides that the Bylaws may be amended by the Board.
Rights to Purchase Certain Preferred Shares
Each share of Capital One's common stock includes an attached "Right." The
Right entitles a holder of common stock to purchase from Capital One one
three-hundredth of a share of Capital One's cumulative participating junior
preferred stock, or the Junior Preferred Shares, at a price of $200 per one
three-hundredth of a share, subject to adjustment. Capital One has initially
authorized and reserved 1,000,000 Junior Preferred Shares for issuance upon
exercise of the Rights. Because of the nature of the Junior Preferred Shares'
dividend and liquidation rights, the value of the one three-hundredth interest
in a Junior Preferred Share that can be purchased on exercise of each Right
should approximate the value of one share of common stock. Initially, the
Rights are not exercisable and trade automatically with the common stock. The
Rights generally become exercisable, however, and separate certificates
representing the Rights will be distributed, if any person or group acquires
15% or more of Capital One's outstanding common stock or a tender offer or
exchange offer is announced for Capital One's common stock. The Rights expire
on November 29, 2005, unless earlier redeemed by Capital One at $0.01 per
Right. Capital One may only redeem the Rights prior to the time that any person
or group acquires 15% of the outstanding common stock. Until the Rights become
exercisable, the Rights have no dilutive effect on earnings per share. Prior to
exercise, a Right will not create any rights as a stockholder of Capital One.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire Capital One
on terms not approved by the Board, except pursuant to an offer conditioned on
a substantial number of Rights being acquired. The Rights should not interfere
with any merger or other business combination approved by the Board, since
Capital One may redeem the Rights prior to the time that a person or group
acquires 15% of the outstanding common stock.
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Dividend Reinvestment Plan
In January 1996, Capital One implemented a dividend reinvestment and stock
purchase plan. The plan provides stockholders with the opportunity to purchase
additional shares of Capital One's common stock by reinvesting all or a portion
of their dividends on shares of common stock. It also provides existing
stockholders with the option to make cash investments monthly, subject to a
minimum monthly limit of $50 and a maximum monthly limit of $5,000. Optional
cash investments in excess of $5,000 may be made with Capital One's permission
at a discount which will be from 0% to 3%. Capital One uses proceeds from this
plan for general corporate purposes.
Transfer Agent
The transfer agent and registrar for the common stock is First Chicago Trust
Company of New York.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND EQUITY UNITS
The applicable prospectus supplement will describe the particular terms of
the stock purchase contracts or equity units offered by that prospectus
supplement. If Capital One issues any stock purchase contracts or equity units,
it will file the form of stock purchase contract and equity unit as exhibits to
the registration statement of which this prospectus forms a part and you should
read these documents for provisions that may be important to you.
Capital One may issue stock purchase contracts, including contracts
obligating holders to purchase from Capital One, and obligating Capital One to
sell to the holders, a specified number of shares of Capital One common stock
or other securities at a future date or dates. Capital One may fix the price
and number of shares of common stock or other securities subject to the stock
purchase contracts at the time Capital One issues the stock purchase contracts
or it may provide that the price and number of securities will be determined
pursuant to a specific formula set forth in the stock purchase contracts. The
stock purchase contracts may be issued separately or as part of units
consisting of a stock purchase contract and senior or subordinated debt
securities or debt obligations of third parties, including U.S. treasury
securities, that secure the obligations of the holders of the units to purchase
the common stock or other securities under the stock purchase contracts. We
refer to these units as equity units. The stock purchase contracts will require
holders to secure their obligations under the stock purchase contracts in a
specified manner. The stock purchase contracts also may require Capital One to
make periodic payments to the holders of the equity units or vice versa, and
those payments may be unsecured or refunded on some basis.
PLAN OF DISTRIBUTION
The securities may be sold from time to time in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices. Each prospectus
supplement will describe the method of distribution of the securities offered
therein.
Capital One may sell the securities directly to purchasers from time to
time. Alternatively, it may from time to time offer the securities to or though
underwriters, broker/dealers or agents otherwise indicated in the prospectus
supplement acting on a best efforts basis for the period of appointment, who
may receive compensation in the form of underwriting discounts, concessions or
commissions from Capital One or the purchasers of such securities for whom they
may act as agents.
Each prospectus supplement will set forth the terms of the offering of the
securities being offered thereby, including the name or names of any
underwriters or agents with whom Capital One has entered into arrangements for
the sale of the securities, the public offering or purchase price of those
securities, the proceeds to Capital One from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any
discounts or concessions allowed or reallowed or paid to dealers, any
commissions allowed or paid to agents, and the name of any securities exchange
on which those securities may be listed. Only
26
underwriters so named in the applicable prospectus supplement are deemed to be
"underwriters" within the meaning of the Securities Act in connection with the
securities offered thereby, and any profit on the sale of such securities and
any discounts, commissions, concessions or other compensation received by those
underwriters may be deemed to be underwriting discounts and commissions under
the Securities Act.
The obligations of the underwriters to purchase those securities will be
subject to certain conditions precedent, and the underwriters will be obligated
to purchase all of the securities of the series offered by Capital One and
described in the applicable prospectus supplement if they purchase any of those
securities. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
Securities may also be offered and sold, if so indicated in the prospectus
supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, by one or more firms,
or remarketing firms, acting as principals for their own accounts or as agents
for either Capital One. Any remarketing firm will be identified and the terms
of its agreement, if any, with Capital One and its compensation will be
described in the prospectus supplement. Remarketing firms may be deemed to be
underwriters in connection with the securities remarketed thereby.
If indicated in the applicable prospectus supplement, Capital One may
authorize underwriters or other persons acting as its agents to solicit offers
by certain institutions to purchase securities from it pursuant to contracts
providing for payment and delivery on a future date. Institutions with which
these contracts may be made include: commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases these institutions must be approved
by Capital One. The obligations of any purchaser under any contract will be
subject to the condition that the purchase of the offered securities will not
at the time of delivery be prohibited under the laws of the purchaser's
jurisdiction. The underwriters and the other agents will not have any
responsibility for the validity or performance of the contracts.
If any underwriter or any selling group member intends to engage in
stabilizing, syndicate short covering transactions, penalty bids or any other
transaction in connection with the offering of securities that may stabilize,
maintain, or otherwise affect the price of those securities, such intention and
a description of such transactions will be described in the prospectus
supplement.
Underwriters and agents who participate in the distribution of the
securities may be entitled under agreements with Capital One to indemnification
by Capital One against certain civil liabilities, including liabilities under
the Securities Act, or to contribution in connection with payments which the
agents or underwriters may be required to make in respect thereof. Some of any
agents and underwriters, including their associates, may be customers of,
engage in transactions with, or perform services for, Capital One and its
subsidiaries in the ordinary course of business.
Unless indicated in the applicable prospectus supplement, Capital One does
not expect to list the securities on a securities exchange, except for the
common stock, which is listed on the New York Stock Exchange. Capital One will
not require underwriters or dealers to make a market in the securities. Capital
One cannot predict the activity or liquidity of any trading in the securities.
CERTAIN LEGAL MATTERS
Unless otherwise indicated in the applicable prospectus supplement, certain
legal matters in connection with the securities will be passed upon by John G.
Finneran, Jr., Capital One's Executive Vice President, General Counsel and
Corporate Secretary. As of January 15, 2002, Mr. Finneran owned 27,051 shares
of Capital One's common stock and held vested options to purchase 119,652
shares of Capital One's common stock issued under its 1994 Stock Incentive Plan
and unvested options to purchase 535,293 shares of Capital One's common stock
issued under its 1994 Stock Incentive Plan.
27
EXPERTS
Ernst & Young LLP, independent auditors, have audited Capital One's
consolidated financial statements incorporated by reference in its Annual
Report on Form 10-K for the year ended December 31, 2000, as set forth in their
report, which is incorporated by reference in this prospectus and elsewhere in
the registration statement. Capital One's financial statements are incorporated
by reference in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
28
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth the expenses in connection with the issuance and
distribution of the securities being registered other than underwriting
discounts and commissions. All such expenses will be borne by Capital One
Financial Corporation. All amounts set forth below are estimates, other than
the SEC registration fee.
Amount to
be paid
---------
SEC registration fee............. $138,000
Trustees' fees and expenses...... 45,000
Printing and engraving expenses.. 200,000
Legal fees and expenses.......... 100,000
Accountants' fees and expenses... 100,000
Rating agency fees............... 100,000
NYSE filing fees................. 75,000
Miscellaneous.................... 40,000
--------
Total........................ $798,000
========
Item 15. Indemnification of Directors and Officers
Section 145(a) of the General Corporation Law of the State of Delaware
("Delaware Corporation Law") provides, in general, that a corporation shall
have the power to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), because the person is or
was a director or officer of the corporation. Such indemnity may be against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding, if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and if, with respect to any criminal action or
proceeding, the person did not have reasonable cause to believe the person's
conduct was unlawful.
Section 145(b) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor because the person is or was a director or officer of the
corporation, against any expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145(g) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to purchase and maintain insurance on behalf
of any person who is or was a director or officer of the corporation against
any liability asserted against the person in any such capacity, or arising out
of the person's
II-1
status as such, whether or not the corporation would have the power to
indemnify the person against such liability under the provisions of the law.
Article XI of Capital One Financial Corporation's Restated Certificate of
Incorporation, as amended, and Section 6.7 of Capital One Financial
Corporation's Bylaws provide, in general, for mandatory indemnification of
directors and officers to the extent permitted by law, against liability
incurred by them in proceedings instituted or threatened against them by third
parties, or by or on behalf of Capital One Financial Corporation itself,
relating to the manner in which they performed their duties unless they have
been guilty of willful misconduct or of a knowing violation of the criminal law.
For the undertaking with respect to indemnification, see Item 17 below.
Reference is made to the underwriting agreements, which are filed as
Exhibits 1.1.1 and 1.1.2 to this registration statement, relating to Capital
One Financial Corporation's obligation to indemnify the underwriters.
Item 16. Exhibits
Exhibit
No. Description
------- -----------
1.1.1 Form of underwriting agreement (common stock, preferred stock, depositary shares and debt
securities) (incorporated by reference to Exhibit 1.1 of Capital One Financial Corporation's
registration statement on Form S-3, filed August 13, 1999, file no. 333-85277).
1.1.2 Form of underwriting agreement (stock purchase contracts and equity units).*
1.2 Form of preferred stock purchase agreement.*
3.1.1 Restated Certificate of Incorporation of Capital One Financial Corporation (incorporated by reference
to Exhibit 3.1.1 of Capital One Financial Corporation's current report on Form 8-K, filed January 17,
2001).
3.1.2 Certificate of Amendment to Restated Certificate of Incorporation of Capital One Financial
Corporation (incorporated by reference to Exhibit 3.1.2 of Capital One Financial Corporation's
Current Report on Form 8-K, filed January 17, 2001).
3.2 Amended and Restated Bylaws of Capital One Financial Corporation (as amended November 18,
1999) (incorporated by reference to Exhibit 3.2 of Capital One Financial Corporation's 1999 Annual
Report on Form 10-K/A-2, filed March 23, 2000).
4.1 Senior Indenture, dated as of November 1, 1996, between Capital One Financial Corporation and
BNY Midwest Trust Company (as successor to Harris Trust and Savings Bank), as trustee
(incorporated by reference to Exhibit 4.1 of Capital One Financial Corporation's current report on
Form 8-K, filed November 13, 1996).
4.2 Form of Subordinated Indenture, dated as of [______], between Capital One Financial Corporation
and [_____], as trustee (incorporated by reference to Exhibit 4.2 of Capital One Financial
Corporation's registration statement on Form S-3, filed September 19, 1996, file no. 333-03580).
4.3 Form of Certificate of Designation relating to each series of Preferred Stock.*
4.4 Form of Deposit Agreement.*
4.5 Form of Stock Purchase Contract.*
4.6 Form of Equity Unit Certificates.*
5.1 Opinion of John G. Finneran, Jr., Executive Vice President, General Counsel and Corporate Secretary
of Capital One Financial Corporation.
II-2
Exhibit
No. Description
------- -----------
12.1 Statement re: Computation of Ratios of Earnings to Fixed Charges.**
23.1 Consent of Ernst & Young LLP.
23.2 Consent of John G. Finneran, Jr., Executive Vice President, General Counsel and Corporate Secretary
of Capital One Financial Corporation (included in Exhibit 5.1).
24.1 Powers of Attorney.**
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of BNY
Midwest Trust Company (as successor to Harris Trust and Savings Bank) to act as Trustee under
the Senior Indenture (incorporated by reference to Exhibit 25.1 of Capital One Financial
Corporation's current report on Form 8-K, filed November 13, 1996).
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of [___] to act
as Trustee under the Subordinated Indenture.*
--------
* To be filed by amendment or incorporated by reference. Capital One Financial
Corporation will file as an Exhibit to a current report on Form 8-K any
related form utilized in the future and not previously filed by means of an
amendment.
** Previously filed.
II-3
Item 17. Undertakings
(a) Each of the undersigned registrants hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in this registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with the Securities
and Exchange Commission by a registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bonafide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each of the undersigned registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of a registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bonafide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1993 may be permitted to directors, officers and controlling persons of
each registrant pursuant to the provisions described under Item 15 above, or
otherwise, each registrant has been advised that in the opinion of Securities
and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by each
registrant of expenses incurred or paid by a director, officer or controlling
person of each registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, each registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Capital One Financial Corporation certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Falls
Church, Commonwealth of Virginia, on the 20th day of March, 2002.
CAPITAL ONE FINANCIAL CORPORATION
By: /s/ JOHN G. FINNERAN, JR.
-----------------------------
Name: John G. Finneran, Jr.
Title: Executive Vice
President, General
Counsel and Corporate
Secretary
II-5
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement or amendment thereto has been signed below by the
following persons in the capacities indicated below on the 20th day of March,
2002.
Signature Title
----------------------------- -----------------------------
/S/ RICHARD D. FAIRBANK* Chairman and Chief Executive
----------------------------- Officer (Principal Executive
Richard D. Fairbank Officer)
/S/ NIGEL W. MORRIS* Director, President and Chief
----------------------------- Operating Officer
Nigel W. Morris
/S/ DAVID M. WILLEY* Executive Vice President and
----------------------------- Chief Financial Officer
David M. Willey (Principal Accounting and
Financial Officer)
/S/ W. RONALD DIETZ* Director
-----------------------------
W. Ronald Dietz
/S/ JAMES A. FLICK, JR.* Director
-----------------------------
James A. Flick, Jr.
/S/ PATRICK W. GROSS* Director
-----------------------------
Patrick W. Gross
/S/ JAMES V. KIMSEY* Director
-----------------------------
James V. Kimsey
/S/ STANLEY I. WESTREICH* Director
-----------------------------
Stanley I. Westreich
*By: /s/ JOHN G. FINNERAN, JR.
------------------------------
Name: John G. Finneran, Jr.
Attorney-in-Fact
* Note: Powers of Attorney appointing John G. Finneran, Jr. and David M.
Willey, or either of them acting singly, to execute this registration
statement and any amendments thereto on behalf of the above-named individuals
previously were filed with the Securities and Exchange Commission.
II-6
Index to Exhibits
Exhibit
No. Description
------- -----------
1.1.1 Form of underwriting agreement (common stock, preferred stock, depositary shares and debt
securities) (incorporated by reference to Exhibit 1.1 of Capital One Financial Corporation's
registration statement on Form S-3, filed August 13, 1999, file no. 333-85277).
1.1.2 Form of underwriting agreement (stock purchase contracts and equity units).*
1.2 Form of preferred stock purchase agreement.*
3.1.1 Restated Certificate of Incorporation of Capital One Financial Corporation (incorporated by reference
to Exhibit 3.1.1 of Capital One Financial Corporation's current report on Form 8-K, filed January
17, 2001).
3.1.2 Certificate of Amendment to Restated Certificate of Incorporation of Capital One Financial
Corporation (incorporated by reference to Exhibit 3.1.2 of Capital One Financial Corporation's
Current Report on Form 8-K, filed January 17, 2001).
3.2 Amended and Restated Bylaws of Capital One Financial Corporation (as amended November 18,
1999) (incorporated by reference to Exhibit 3.2 of Capital One Financial Corporation's 1999
Annual Report on Form 10-K/A-2, filed March 23, 2000).
4.1 Senior Indenture, dated as of November 1, 1996, between Capital One Financial Corporation and
BNY Midwest Trust Company (as successor to Harris Trust and Savings Bank), as trustee
(incorporated by reference to Exhibit 4.1 of Capital One Financial Corporation's current report on
Form 8-K, filed November 13, 1996).
4.2 Form of Subordinated Indenture, dated as of [______], between Capital One Financial Corporation
and [_____], as trustee (incorporated by reference to Exhibit 4.2 of Capital One Financial
Corporation's registration statement on Form S-3, filed September 19, 1996, file no. 333-03580).
4.3 Form of Certificate of Designation relating to each series of Preferred Stock.*
4.4 Form of Deposit Agreement.*
4.5 Form of Stock Purchase Contract.*
4.6 Form of Equity Unit Certificates.*
5.1 Opinion of John G. Finneran, Jr., Executive Vice President, General Counsel and Corporate Secretary
of Capital One Financial Corporation.
12.1 Statement re: Computation of Ratios of Earnings to Fixed Charges.**
23.1 Consent of Ernst & Young LLP.
23.2 Consent of John G. Finneran, Jr., Executive Vice President, General Counsel and Corporate Secretary
of Capital One Financial Corporation (included in Exhibit 5.1).
24.1 Powers of Attorney.**
II-7
Exhibit
No. Description
------- -----------
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of BNY
Midwest Trust Company (as successor to Harris Trust and Savings Bank) to act as Trustee under
the Senior Indenture (incorporated by reference to Exhibit 25.1 of Capital One Financial
Corporation's current report on Form 8-K, filed November 13, 1996).
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of [___] to act
as Trustee under the Subordinated Indenture.*
--------
* To be filed by amendment or incorporated by reference. Capital One Financial
Corporation will file as an Exhibit to a current report on Form 8-K any
related form utilized in the future and not previously filed by means of an
amendment.
** Previously filed.
II-8